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  • Tom Boyd

Someone has to pay

Over 45 firms plan to pass device tax to providers. 2/28/13

More than 45 medical supply and device manufacturers have informed hospitals that they plan to pass the cost of the medical-device excise tax on to providers, according to a list compiled by the Healthcare Supply Chain Association. The manufacturers either sent letters notifying providers of price increases as a result of the excise tax or added the cost of the tax to product invoices.

Device manufacturers are required to pay a 2.3% excise tax on the sales of certain devices. The tax is considered the industry’s contribution to financing the Patient Protection and Affordable Care Act (ACA).

The hospitals are outraged by the actions of the manufacturers. What did they expect? What would you expect? Every time a business receives an expense increase they have basically two options: increase revenue or reduce expenses elsewhere. Failure to do either or both will reduce their profit margin and can threaten their existence. It is the profit margin that pays for the improvements, technical updates, reserves, the risk of ownership, business expansion, and hopefully increased compensation and benefits for all employees.

The ACA also will result in new charges of about $66 each year for each employee regardless of company size or insurance. Should the employer charge the employee the new costs? Should they share the new expenses? Should they increase their rates to their customers to pay for the new costs?

Someone has to pay.

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