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House approves measure to keep government running as hospitals brace for Medicare cuts

February 22, 2013

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With funding for government agencies set to expire March 27, the House March 8 approved a measure to keep the government running through the end of the fiscal year on Sept. 30, and give the Pentagon and the Department of Veterans Affairs (VA) flexibility to manage the funding cuts that took effect on March 1. The measure otherwise keeps the $85 billion in fiscal year 2013 cuts in place, including the 2% automatic reduction in Medicare payments to hospitals and other providers.

The continuing resolution, H.R. 933, moves to the Senate, where Democrats and the White House are in negotiations with Republicans on changes that would give domestic agencies the same type of flexibility that the Pentagon and VA would receive in administering the cuts.

The provider payment cuts
won’t begin to take effect until April 1. They are the result of an unpopular budget tool known as the sequester, which was included in the 2011 “Budget Control Act.” The legislation required Congress to find $1.2 trillion in deficit reduction on their own.

Lawmakers’ failure to do so in December 2011 started a one-year countdown to the automatic cuts.

In the past year, Congress and the White House have been unable to come up with an alternative to the sequester, or reach a long-term budget deal that would allow them to turn it off. In total, the sequester will cut $1.2 trillion in spending across the federal government over the next decade if left untouched.

Just days before the sequester began, hospital leaders expressed their concern about the Medicare cuts with their legislators on Capitol Hill and urged them to protect payments for hospital care. Participating in the AHA’s Feb. 26 Advocacy Day meeting in person and via webcast, hospital leaders were briefed on the latest developments related to the sequester and other approaching fiscal deadlines. They later urged lawmakers and their staff to support targeted reforms, rather than arbitrarily ratcheting down provider payments, to achieve health care savings.

The AHA presented its case for targeted reforms in a report released today called “Ensuring a Healthier Tomorrow.” The report calls for strategies that promote and reward accountability – to patients, their families and community; and use limited health care dollars wisely – in ways that eliminate inefficiency and promote the quality of patient care (for more on the report, see pages 4-5).

That message is echoed by hospital and health system leaders across the country, who are bracing for Medicare cuts.

The $550,000 in sequester cuts facing Chicago’s 230-bed Norwegian American Hospital “could not have come at a worse time for our community,” said hospital President and CEO Jose Sanchez. He said the hospital has the nation’s highest incidence of diabetes, along with disproportionately high incidences of asthma, obesity, hypertension, cardiovascular disease, mental illness, substance abuse and HIV.

“Hospitals across the nation are going to be seriously affected by cuts to Medicare,” said Rod Boula, CEO of 25-bed Elizabethtown (NY) Community Hospital. He expects to lose about $200,000 annually under the sequestration.

“Hospitals will be paid less when caring for patients who have Medicare as their primary form of insurance; typically the older population,” he said. “The cost of providing an X-ray isn’t falling. The hospital will still be expected to maintain its equipment and staff quality, but the amount that the hospital will be paid for it will be reduced. From a practical stand- point, this is money that the hospital cannot put toward upgrading equipment, hiring staff or providing annual cost of living increases.”

Boula called on Congress to “commit to making changes that offer meaningful solutions,” and to work with hospitals and other providers on options that can bend the cost curve in health care, “rather than simply making sweeping cuts that do more damage than good.”

Aspirus Wausau (WI) Hospital is working to streamline its processes to ensure the quality of care remains unaffected by the Medicare budget cuts. It expects to see its annual Medicare payments reduced by about $1.5 million.

“There’s less utilization as we look at better ways to manage patient populations, trying to keep people out of the hospital, attempts to prevent readmissions of patients to the hospitals and use less ancillary testing where we can do that and still provide a quality product,” said Sidney Sczygelski, the chief financial officer of the 262-bed hospital, part of the Aspirus Network.

But he noted that “the federal government’s policy of continuing to ratchet down provider payments does nothing to help us in our efforts to improve patient care and to navigate a changing health care environment.”