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Sequester means looming revenue cuts for providers


With the federal budget sequester set to begin March 1 unless Democrats and Republicans come to a last-minute agreement, healthcare entities are wary of the impact on their industry.

Much remains to be seen about the effects of the sequester, which was negotiated between President Obama and congressional Republicans during the summer of 2011 as a way to curtail the federal budget deficit in the event the sides could not agree on a less severe approach. Since they have failed to reach any such agreement, the sequester is about to become a reality.

This much is known: Among the numerous federal agencies and programs facing a mandatory reduction in spending, Medicare is staring at a 2% reduction in provider payments. The total reduction for this year will be $11 billion, according to the White House. The sequester in theory lasts for 10 years, but could be replaced at any time by another negotiated agreement.

MedeAnalytics, a provider of healthcare management solutions, estimates that Medicare Part A will be cut by roughly $4.5 billion this year, Ken Perez, the company’s director of healthcare policy and senior vice president of marketing, said in a news release. Depending on how the cut is spread between hospitals, skilled nursing facilities and other providers, Perez said, the average hospital would be looking at a reduction of $0.8 million to $1.3 million.

Medicare Part B reductions could total as much as $4.1 billion, Perez said, translating into a 3% to 4% reduction in the Physician Fee Schedule, depending on how the cut is apportioned between physicians, the Hospital Outpatient Prospective Payment System and other providers.

The American Nurses Association, American Medical Association and American Heart Association commissioned a report last year that described the degree to which the sequester will lead to lost jobs and reduced care capacity. The number of jobs lost in the first year alone could total 496,000 in the healthcare industry and related professions, according to the report.

“Nurses have always strived to put patients at the center of a healthcare system that emphasizes prevention, wellness and coordination of care, the kinds of services that experts agree are essential to not only improving the health status of patients but also lowering overall healthcare costs,” Cindy R. Balsktra, RN, MS, CNS-BC, the ANA’s first vice president, said in a news release.

“Cutting Medicare spending in a way that eliminates healthcare jobs is an extremely short-sighted way to contain the high cost of healthcare.”

Other segments of healthcare will be affected as well. The Centers for Disease Control and Prevention plans to cut an unspecified number of jobs. Those losses could result in 424,000 fewer HIV tests by public health programs at the state and local levels, Kathleen Sebelius, secretary of the Department of Health and Human Services, wrote in a letter to Sen. Barbara Mikulski, D-Md.

Sebelius wrote that 373,000 “seriously mentally ill adults and seriously emotionally disturbed children” might not have access to needed mental health services, potentially leading to hospitalizations and homelessness. And as many as 91,000 fewer people could receive substance abuse treatment services.

Research grants funded by the National Institutes of Health will be diminished and in some cases eliminated. Cutbacks at the Food and Drug Administration could cause a delay in approvals of new drugs and medical devices, and 2,100 fewer food inspections this year, Sebelius said.

The National Association of Community Health Centers estimates 900,000 patients will lose access to care at CHCs, many of which will have to slash services or close because of funding reductions at the Health Resources & Services Administration.

“The impact of such an arbitrary cut will carry a ripple effect,” Gary Wiltz, MD, of the Teche Action Center health center in Franklin, La., and board chairman-elect of the National Association of Community Health Centers, said in a news release.

“People could lose access to basic healthcare services, and many of them cannot afford to go anywhere else. Every community that a health center serves will be adversely affected in some way. Current patients, many of whom have chronic conditions and need ongoing medical care, may lose access to the low-cost primary care they know, or low-income families who have been waiting for a health center to open its doors in their community might have to wait even longer, or they will just go to the local emergency room for care.”

Hospital groups have expressed concern that any replacement for the sequester may be as detrimental to their industry as the sequester itself. With healthcare spending significantly driving overall federal spending, Medicare figures to be a prime target of any push to bring down the deficit.


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