As Sequester Cuts Kick In, Hospitals to See Less Revenue from Medicare Payments

Mar 29, 2013

Starting April 1, Medicare payments to hospitals, doctors and other health care providers will be reduced by 2 percent as sequestration cuts kick in.

These cuts come after a slew of other cuts and subsidy reductions for under- and un-compensated care in preparation for the full implementation of the Affordable Care Act.

The Center for Medicare and Medicaid Services (CMS) will implement the cut, reimbursing Medicare claims at 98 cents on the dollar. Medicare already reimburses less than most private health insurance plans.

There are 2.4 million Medicare beneficiaries in Pennsylvania.

The Hospital and Healthcare Association estimates that because of this reduction, Pennsylvania hospitals will see a loss of $126 million in 2013.

Andy Carter, president of the Hospital and Healthsystem Association of Pennsylvania, says in preparation for these cuts, hospitals are trying to find savings by looking for places to cut costs — such as laundry costs — before potentially cutting services or personnel that may affect patient care.

But, he warned, if hospitals cannot meet their bottom lines, they may begin to cut personnel.

“We did estimate that across the sector directly and indirectly, something across the order of 24,000 jobs at hospitals and organizations supporting hospital care could be lost,” Carter said. 

Some hospitals will be better positioned than others. Small community hospitals that serve a large senior citizen population such as Ohio Valley General Hospital in McKees Rocks, for example, may feel the burden of this 2 percent reduction more than larger hospital systems like UPMC.

“The expectations we have for our hospitals to be high-quality, top-performers are harder and harder to fulfill with these kinds of relentless payment reductions,” Carter said.