Hospitals to eat Medicare budget's 'doc fix'

Posted: January 04, 2013

The budget package that Congress passed Tuesday to avert widespread tax increases and spending cuts blocked a 26.5 percent cut in Medicare payments to doctors, but hospitals and other health-care providers are paying for it.

Even so, the head of a local hospital group was glad that the new law prevented the reduction in doctor payments linked to a 1997 law.

"That's becoming increasingly relevant for hospitals" as they employ more physicians, said Curt Schroder, regional executive for the Delaware Valley Healthcare Council.

But Sean Hopkins, senior vice president of the New Jersey Hospital Association, was disappointed that money to pay for keeping doctor payments level came from hospitals, many of which are already struggling to break even.

"Hospital Medicare payments continue to be viewed as a big bucket you can take a little bit out of with without making a difference," said Hopkins. "But you can die a death of a thousand cuts."

As is always the case in federal budgeting, the numbers are like puzzle pieces that fit together in the long run, 10 years in this case, but not from year to year.

Fixing a flawed payment formula for doctors, the so-called doc fix that has been an annual rite for a decade, was estimated to cost $10.6 billion in the fiscal year ending Sept. 30, 2013. Over 10 years, through 2022, the cost was pegged by the Congressional Budget Office at $25.2 billion.

The fix is good for one year, but the savings to make up for it don't start in earnest until fiscal 2015.

The biggest chunk of trims falls in the five-year period from 2014 to 2018, when Medicare will reduce hospital payments by $10.5 billion. Medicare authorities will recoup what they consider overpayments to hospitals caused by a new system of diagnosing patients.

Federal officials have suspected that hospitals have been documenting care to ensure that they get higher reimbursements than are warranted by the condition of patients.

Hospitals that care for a significantly disproportionate number of low-income patients are also scheduled to see a $4.2 billion reduction in payments.

The bills for such patients are typically paid by government insurance that does not cover the hospital's full cost of care. Special payments are designed to compensate.

As more Americans gain insurance under the Affordable Care Act, those payments were already scheduled to decline by $18.1 billion over seven years, starting in 2014. The budget deal passed Tuesday - officially called the American Taxpayer Relief Act of 2012 - extends those cuts through 2022.

"The numbers continue to add up," Schroder said, putting additional pressure on hospitals' finances.


Contact Harold Brubaker at 215-854-4651 or hbrubaker@phillynews.com.

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