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Fiscal cliff averted, but hospitals still face cuts

Wednesday January 2, 2013
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Congress approved legislation to keep the economy from going off the “fiscal cliff,” thereby sparing Medicare providers a 2% payment reduction that would have gone into effect Jan. 1.

The agreement eliminates scheduled tax-rate increases for most Americans and postpones spending cuts to Medicare and numerous other federal programs — but only for two months, at which point negotiations on ways to cut spending are expected to resume. Congress and the White House will be dealing not only with the spending sequester, but also the need to raise the federal debt limit.

While saluting Congress and the White House for reaching the agreement, Karen Daley, RN, PhD, FAAN, president of the American Nurses Association, voiced concern about the potential harm of the 2% payment reduction that still might take effect at some point: “Without a comprehensive solution, Medicare cuts triggered by the sequester will lead to job losses and put millions of vulnerable people at risk of not receiving the healthcare they need.”

Some cuts already in place

Even though overall Medicare spending remains unaffected for now, hospitals still face a long-term decrease in payments. The compromise legislation includes the “doc fix,” which negates a 26.5% decrease in Medicare payments to physicians that would have begun Jan. 1.

Hospitals must cover almost $15 billion over the next 10 years, or about half the total cost of the one-year fix. Most of the reduction will come from an adjustment in annual base payment increases for inpatient or overnight stays. Another portion will come from a decrease in Medicaid disproportionate share payments.

“Although we believe that we need to address the provider payment formula for Medicare reimbursement with a long-term solution, this short-term fix will likely result in a reduction of important healthcare services,” Daley said in a news release.

Rich Umbdenstock, president and CEO of the American Hospital Association, expressed a similar outlook: “While fixing the physician payment formula is essential, it should not be done by jeopardizing hospitals’ ability to care for seniors and their communities. That’s why we are very disappointed at the approach taken in this measure.

“Hospitals are working to provide high-quality, innovative and effective care to seniors and their communities. Additional payment reductions will make it harder for patients to access the care they need and depend on.”


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