The economic recession aside, now a 23% Medicare and Medicaid physician payment cut looms (as of Dec. 1 and another 1.9% cut will take affect as of Jan. 1). Now they will need to treat more patients and be paid even less money to do so.
What’s makes this list of recommendations so infuriating to healthcare leaders is that if it takes effect, folks in healthcare will be swimming upstream against a very hard current. You see, the 18-member committee is suggesting that the Medicare and Medicaid situation be remedied by savings made through payment reforms, cost-sharing and malpractice reform and long-term measures to control healthcare cost increases. Translation: expect to be paid even less for Medicare and Medicaid.
While the “chairman’s mark” proposes a repeal of the sustainable growth rate formula (SGR), it also recommends that payments be gradually lowered over the next 10 years, including a pay freeze for the next two to three years. The savings for this change would be substantial for the government—$24 billion by 2020. But for health systems, hospitals and practices already operating on thin margins, this is a potentially devastating decline in reimbursements.
Unfortunately, the bad news doesn’t stop there, however. If the recommendations take affect, they will also accelerate cuts to the disproportionate share payment (DSH) to hospitals, and will cut Medicare Advantage and home health, as well as federal spending on graduate and indirect medical education. Moreover, CMS will need to establish a new payment system (commencing 2015) to reduce healthcare costs and improve quality—and no one knows exactly what that could mean for healthcare providers.
The American Hospital Association and nearly every other major healthcare organization released statements pooh-poohing this committee’s recommendations, which isn’t surprising. I suspect most healthcare financial leaders were distressed too. I reached out to one health system, to gauge their reaction:.
“Coupled with cuts we’re anticipated to incur over the next four years, even if we are fortunate enough to avoid penalties for readmissions, value-based purchasing and hospital acquired conditions, this [report] just boggles the mind,” says John W. Winfrey, vice president and CFO for DCH Health System.