Hospitals across the United States are grappling with sustained increases in supply and drug expenditures driven by inflation, utilization pressures, and lingering disruptions in global Hospital Supply Chain. Southern providers may catch a momentary reprieve, but many regions remain under significant strain.
Rising Expenses Across the Board
According to Kaufman Hall’s National Hospital Flash Report, supply costs per calendar day climbed 9% year-over-year, with cumulative increases reaching 26% since 2022. Drug costs rose 7% year-over-year, stacking up to a 19% increase compared to 2022. When accounting for patient acuity (i.e., supplies per adjusted discharge), the increases are smaller but still notable: 4% YoY for supplies and 3% YoY for drugs, showing that inflation, not just utilization, is the main driver.
Region-by-Region Breakdown
Northeast / Mid-Atlantic: Highest regional increases supply and drug expenses up 14% YoY, with drug costs per adjusted discharge up 6% since 2022.
- Great Plains: Drug costs surging 15% YoY, 43% since 2022. Supply costs also rose 13% YoY, 32% since 2022.
- West: Supply costs up 10% YoY (22% since 2022), while drug costs rose 9% YoY.
- South & Midwest: The smallest increases Southern supply costs up 7% YoY (though showing a 2% decline vs 2022 when adjusted per discharge), while the Midwest saw 2% YoY growth and a 7% drop since 2022 per adjusted discharge.
What’s Fueling the Surge?
- Persistent Inflation & Supply Disruptions: Non-labor medical expenses—including supplies and drugs—have consistently outpaced inflation, contributing to mounting financial pressure.
- Tariffs and Global Trade Tensions: Proposed and existing tariffs—especially on Chinese and EU medical imports are poised to further inflate costs for medical goods and devices, putting added pressure on hospital budgets.
- Margin Compression: Hospital profit margins, already trending downward, are increasingly threatened by rising supply costs. Some reports note margins dwindling from a 7% average in 2019 to just 2.1% in 2024.
Why It Matters
Budget Strains: With operating margins tightening, increased supply and drug costs strain decision-making on staffing, equipment replacements, and capital investments.
Regional Vulnerabilities: Hospitals in the Northeast and Great Plains face disproportionate cost increases, necessitating targeted strategies to manage budget impacts.
Strategic Repricing & Negotiations: These persistent increases may compel systems to engage more aggressively with group purchasing organizations, streamline supply chains, and lobby for tariff relief.
Conclusion
Hospital Supply Chain pressures in U.S. hospitals remain high, driven by inflation, tariffs, and systemic disruption. While growth in supply and drug costs has tapered slightly on a per-patient basis, the widespread increases across regions continue to weigh on financial performance, particularly in the Northeast and Great Plains. Hospitals must take proactive steps in cost controls, procurement strategies, and policy advocacy to sustain operations amid continuing volatility.
