Hospitals implore Congress to punt Medicare payment cut slated for July

The American Hospital Association (AHA) penned a last-ditch letter to congressional leaders pleading for Medicare sequester cuts slated to take effect July 1 to be halted in light of the financial strain many of the nation’s hospitals are expected to face throughout 2022.

Congress had initially paused the 2% payment cut as part of the CARES Act when the COVID-19 pandemic began to threaten providers’ bottom lines. Sequestration cuts were continually punted downfield until last December, when a bill was signed to resume a 1% cut in April and the full 2% in July.

With half a month to go, AHA Executive Vice President Stacey Hughes warned majority and minority leaders Tuesday that financial relief from the pending cut is necessary for hospitals “to maintain access to care for the patients and communities they serve.”

Providers are still under the pressure of COVID-19 with higher expenses tied to labor costs and supply chain issues, Hughes wrote. Hospitals are also unable to absorb or deflect “historic inflation levels” as most of their payments come from Medicare and Medicaid’s nonnegotiable, fixed reimbursement rates, she said.

“All these factors have led to a historically poor first quarter financially for hospitals and health systems this year,” Hughes wrote. “And as recently as April, operating margins were down nearly 40% from the prior month.

“Without immediate action, the AHA estimates hospitals will lose at least $3 billion by the end of the year,” she wrote.

Hospital industry groups had hoped that another delay to the sequestration cuts could be included alongside other health priorities in omnibus spending bills passed earlier this year. In particular, the groups had noted that the decision to end the cuts came before hospitals faced their worst COVID-19 surge of the pandemic.

“When that passed [I am] not sure there was the first case of omicron, and the landscape has entirely changed,” Jonathan Jagoda, senior vice president of legislative affairs for the Federation of American Hospitals, said in January.

Hospital groups have previously proposed tying the cuts to the flexibilities of the public health emergency, which has also been on many lawmakers’ cutting blocks the past several months. The public health emergency is slated to run until July 16, although no word of a 60-day warning from the Department of Health and Human Services means that it is likely to be extended until at least the fall.