Last winter, the pharmacy staff at a mid-sized Ohio hospital had to make an unforeseen call. A manufacturing delay linked to a Louisiana factory shutdown had caused their regular supplier of lidocaine IV bags to fall behind. They ultimately sourced an international version at almost three times the price because they had surgeries planned and no viable stock on hand. The substitute was effective, but each dose seemed like a financial risk.
Hospitals nationwide are increasingly encountering similar circumstances. Every day, medical professionals are adjusting to uncertain supply flows and rising costs rather than new treatments. Former background fixtures, such as IV tubing or sterile gloves, are now frequently tracked, monitored, and occasionally rationed.
| Issue | Details |
|---|---|
| Inflation Pressure | Hospital expenses rose 5.1% in 2024, outpacing the general inflation rate of 2.9% |
| Workforce Challenges | Labor costs account for 56% of hospital spending; RN wages rose 26.6% above inflation |
| Supply Chain Disruptions | Natural disasters, tariffs, and single-source suppliers cause critical shortages |
| Cost of Substitutes | Hospitals pay significantly higher prices for scarce or alternative supplies |
| Service Impact | Delayed procedures, canceled upgrades, and rationing of essential items are increasing |
| Reimbursement Gap | Medicare covered only 83¢ per $1 spent by hospitals in 2023, leading to $130B in underpayments |
Some facilities have been able to creatively stretch their limited inventories by utilizing crisis-level coordination strategies. The strain is still evident. One California hospital’s surgical staff started modifying procedure schedules to accommodate supply availability, giving priority to cases that could be finished using fewer consumables. Although it is an uncomfortable tactic, it is now notably required.
Hospital expenses have increased significantly over the last ten years due to a variety of factors, including increased patient acuity and ongoing labor shortages. The average hospital’s operating expenses increased by 5.1% in 2024 alone—much more quickly than overall inflation. In contrast, Medicare reimbursement rates increased by just 5.1% over the course of three years, while inflation increased by 14.1% during the same time frame.
These conflicting forces have resulted in a nearly constant balancing act for hospitals with narrow profit margins. Leaders have to decide whether to upgrade diagnostic software or stock premium medications, or whether to replace aging equipment or finance nursing coverage.
A startling number of health systems started delaying planned investments by the middle of 2025. According to a Florida emergency department director, stretchers purchased in 2008 are still being used. Many of them have cracked rails, but since they’re spending more than they should on generic antibiotics, replacing them is out of the question.
Administrators are attempting to maintain the quality of care by using strategic workarounds, such as changing brands, retraining employees, or reworking procedures. These remedies are rarely long-term viable, though.
Last spring, I had the opportunity to observe a supply room in a hospital in Michigan. The availability tiers were denoted by color-coded labels: orange for limited, red for critically low, and green for stocked. Red-marked items included saline flushes, pediatric nebulizers, and epinephrine. I became aware of how profoundly these shortages influence day-to-day choices when I saw a nurse discreetly pocket the final adult oxygen mask for a night shift.
Previously routine situations are now negotiated.
Many hospitals continue to be vulnerable to uncontrollable disruptions due to their heavy reliance on single-source suppliers. Whole supply chains can be disrupted by a single hurricane or port delay. In 2024, Hurricane Helene disrupted 60% of the nation’s output when it damaged an IV fluid production plant. Some facilities still haven’t fully recovered.
AI-powered inventory systems and other incredibly adaptable solutions have started to assist. Predictive analytics has been used by some larger systems to identify regional surpluses or forecast shortages. One Texas health system was able to drastically cut expired inventory and emergency supply orders by 22% by utilizing advanced analytics. However, these technologies come with an upfront cost, which many smaller hospitals just cannot afford.
The consequences spread. Higher supply usage results from longer hospital stays caused by sicker patients and discharge delays. Medicare Advantage plans put additional strain on already tight budgets because they pay out less than traditional Medicare. Medicare Advantage patients now remain in observation status 37% longer than those with traditional coverage, according to data, and hospitals bear a greater portion of the financial risk.
Professionals at the pharmacy level are spending more time finding alternatives than writing prescriptions. The staff at one facility tested three different substitutes during a recent nationwide shortage of injectable steroids before discovering one that satisfied dosage and administration requirements. The extra work hours quickly mounted up.
Many hospital administrators are still hopeful despite all of this, if cautiously so. They are reviewing vendor contracts, establishing regional partnerships, and reevaluating procurement tactics. Some systems have significantly increased their resilience through emergency preparedness plans and collective purchasing networks.
“We used to think of our supply chain like a faucet—turn it on, and it flows,” said a CEO of a community hospital in Georgia, characterizing these changes as a sort of cultural shift. We now handle it like a garden. We observe it. We keep it safe. We adjust to the changing seasons.
Not out of choice, but out of necessity, this quiet resolve has started to change the way hospitals function. The dedication to patient care has not wavered, despite the fact that expenses are still high and supply chains are still brittle.
Facilities are figuring out how to provide care in a safe and sustainable manner, from carefully reusing non-sterile items to repurposing equipment. Some hospitals are creating systems that are, if not stronger, then at least better prepared through innovative staffing, improved forecasting, and localized stockpiling.
Hospitals’ ability to continue adapting is not the question of the future. It’s how we can better assist them in terms of money, legislation, and logistics so they are not forced to make these compromises indefinitely.
