The Potential Impact of Tariffs on RPM
President Donald J. Trump was inaugurated this week and many in the medical device industry are waiting to see how he will implement his campaign promise of increased tariffs on Chinese goods. The vast majority of medical devices used in remote patient monitoring (RPM) are imported from China and Trump has indicated that increased tariffs could be as high as 60%. With reimbursement rates for RPM fixed by CMS, the new cost structure of devices could be problematic for practices providing RPM services.
Goldman Sachs chief economist Jan Hatzius made public comments earlier this month about his forecast for the economy and predictions on tariffs.
2025 economic predictions
Hatzius’ expert opinion is that the U.S. economy will see significant growth in 2025 at a rate of 2.5%. Tariffs do have the potential to increase inflation, but Hatzius believes the effective average increase of tariffs will be closer to 20% compared to the 60% Trump discussed during his campaign.
During his first term, Trump placed tariffs on $300 billion worth of Chinese goods, with the most significant increases on electric vehicles, solar panels, steel and aluminum products.
Hatzius elaborated, "I do think it's a significant risk because it is clearly something that Trump feels very strongly about and has done for many decades," Hatzius said. "You can document this going back to the 1980s, and it's something he has to a large extent under his control, so you have to take it quite seriously."
While there could be a universal tariff of 10 – 20%, Hatzius did single out consumer electronics, such as iPhones having an increased tariff rate as low as 5%. Medical devices could fall under a similar category.
Hatzius discussed how Trump closely watched stock-market reactions to his policies in his first administration and changed course on those that investors viewed negatively. "It's certainly possible we see a more significant tariff announcement than what we have in our baseline at some point, but then, if the reaction is negative, there also could be backtracking."
The potential impact on remote patient monitoring
With the US market so highly dependent on China for medical devices for RPM, high tariffs have the potential to significantly disrupt the market. Many medical device products are manufactured in China, even if the branding on the product is associated with a U.S. or European-owned company. Experts such as Hatzius believe Trump will follow through on his campaign promises quickly but at a lower rate than expected.
In many sectors, higher prices will be passed onto the consumer, which could fuel inflation. However, with RPM, most patients do not pay for their devices. Healthcare providers purchase the devices and are reimbursed by Medicare or commercial insurance. CMS is unlikely to increase reimbursement rates to cover the tariffs.
RPM companies could face a difficult dilemma – absorb the higher cost of devices or pass the cost onto providers. If providers feel unable to pay higher prices, they may limit the use of RPM.
Device companies will likely explore alternative manufacturing locations to avoid tariffs, but until the full extent of the tariffs is known, it may be difficult to establish cost-competitive options in the short term.
Navigating the device tariff complexity
The probable introduction of Chinese tariffs on medical devices presents significant implications for the affordability and accessibility of remote patient monitoring. RPM companies may want to consider new inventory strategies to weather the potential impact of tariffs, especially if Hatzius’ prediction of a larger short-term impact and then backtracking comes to fruition.
For example, RPM companies could choose to advance purchase more devices at the current prices before tariffs are implemented. Some healthcare practices may be interested and capable of taking on more inventory with potential price increases on the horizon. Alternatively, RPM companies can work with flexible device providers such as Continua Systems that can manage and store increased inventory levels on their behalf.
Continua can help with device management
While the timing and extent of the tariff increases are still unknown, increased prices for RPM devices seem likely. We encourage all RPM companies to evaluate their inventory strategy and device partners to understand how they can strategically adapt to these upcoming changes. Continua can help — contact us to learn more.
