Fiscal cliff law shifts Medicare cuts to hospitals

The president today signed the American Taxpayer Relief Act of 2012 into law to stave off the fiscal cliff, the Associated Press reported, but the last-minute deal between Congress has left hospitals dismayed.

Although the legislation delays the Medicare cuts to physicians, it makes significant changes to Medicare hospitals. In short, the deal gives Medicare physicians some reprieve but leaves hospitals holding the bag, The Washington Post noted. The American Taxpayer Relief Act includes a "doc fix," which postpones the reductions to Medicare physician payments that were previously scheduled to start Jan. 1--for at least for 12 months.

Viewed as a short-term patch to a decades-old problem of Medicare's fee-for-service reimbursement model, the Act does little to fix a "flawed" sustainable group rate formula, as American College of Physicians President David L. Bronson called it in a HealthLeaders Media article. In addition, the law delays a 2 percent Medicare sequester by two months. The stopgap measure will be paid for by hospitals, according to the American Hospital Association, which expressed disappointment.

"While fixing the physician payment formula is essential, it should not be done by jeopardizing hospitals' ability to care for seniors and their communities," AHA President Richard Umbenstock said in a statement. "Hospitals are working to provide high-quality, innovative and effective care to seniors in their communities. Additional payment reductions will make it harder for patients to access the care they need and depend on."

Under the deal, IPPS hospitals face a documentation and coding adjustment to MS-DRGs. The provision is supposed to save $10.5 billion. The coding adjustment, effective from 2014 to 2018, will phase in recoupments of past overpayments and affect all hospitals, The Wall Street Journal reported.

In addition, a provision adjusts reimbursements for stereotactic radiosurgery services for hospital outpatients payments, aimed at saving another $40 million, Medicare News Group reported. An additional adjustment to equipment utilization rates will set payments for imaging services from 75 percent to 90 percent, aimed at saving $80 million.

Like AHA, the National Association of Public Hospitals and Health Systems said the deal puts millions of vulnerable people at risk. "Solving one side of the provider equation must not come at the expense of the other--particularly the hospitals and health systems that care for a disproportionate share of Medicaid and other low-income patients," NAPH President and CEO Bruce Siegel said in a statement.

"Hospital Medicare payments continue to be viewed as a big bucket you can take a little bit out of with without making a difference," Sean Hopkins, senior vice president of the New Jersey Hospital Association, told the Philadelphia Inquirer. "But you can die a death of a thousand cuts."

For more information:
- check out the American Taxpayer Relief Act (.pdf)
- see the AP article
- here's the Washington Post article
- read the HealthLeaders article
- read the WSJ blog post
- read the Medicare News Group article
- see the AHA statement and the NAPH statement (.pdfs)
- here's the Philadelphia Inquirer article

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