Fiscal Cliff Deal Includes Substantial Hospital Payment Cuts
The American Taxpayer Relief Act of 2012 (H.R. 8) was signed into law on January 2, 2013. The so-called “fiscal cliff deal” extends current Medicare physician payment rates through December 31, 2013 and thus averts the 26.5% Sustainable Growth Rate (“SGR”) cut. The deal also delays the 2% across-the-board spending cuts (sequester) until March 1, 2013.
To pay for the SGR extension, the deal includes approximately $30 billion in health care offsets with roughly $14 billion coming from hospitals. Significant cuts to hospitals include recouping overpayments made to some hospitals for how they coded services under a payment system called “Medicare Severity Diagnosis Related Groups” ($10.5 billion) and extending the reduction in Medicaid Disproportionate Share Hospital (“DSH”) payments for another year ($4.2 billion).
Despite the significant cuts, hospitals avoided looming cuts to evaluation and management that would result in hospitals and physicians’ offices getting the same payment for outpatient treatments, graduate medical education and “bad debt” payments. Each of these areas had been recommended for cuts in past deficit reduction proposals from Congress or MedPAC reports yet were not included in the new law.
With Congress having to produce significant savings in the next two months to avert sequestration and increase the debt limit, expect increased lobbying efforts from hospitals to avoid further reductions. In particular, graduate medical funding could be targeted, which has been zeroed out in all four of the Obama Administration’s budget requests.
Below is a summary of the key health care offsets and extenders included in the new law:
DSH Payments: The law extends Medicaid DSH cuts included in the Affordable Care Act and scheduled to end in 2021 for an additional year to 2022. The savings from this cut is $4.2 billion.
Increase Statute of Limitations for Recovering Overpayments: The law increases the statute of limitations to recover overpayments from three to five years.
Adjustment of Equipment Utilization Rate for Advance Imaging Services: This policy would increase the utilization factor used in the setting of payment for imaging services in Medicare from 75% to 90% beginning in 2014.
Reduce Payment Adjustment for Non-Emergency Ambulance Transports for ESRD Beneficiaries: This provision reduces the payment rates for ambulance services by 10% for individuals with End Stage Renal Disease (“ESRD”) obtaining non-emergency basic life support services involving transport.
Extension of Medicare Inpatient Hospital Payment Adjustment for Low-Volume Hospitals: Qualifying low-volume hospitals receive add-on payments based on the number of Medicare discharges. To qualify, the hospital must have less than 1,600 Medicare discharges and be 15 miles or greater from the nearest like-hospital. This provision extends the payment adjustment until December 31, 2013.
Extension of the MDH Program: The Medicare Dependent Hospital (“MDH”) program provides enhanced reimbursement to support rural health infrastructure and is intended to support small rural hospitals for which Medicare patients make up a significant percentage of inpatient days or discharges. This provision extends the MDH program until October 1, 2013.
Payment for Outpatient Therapy Services: Extends for one year the “medically necessary” exception to the annual per beneficiary limit of $1,880 for all outpatient therapy services provided by non-hospital providers. The provision also extends the cap to services received in hospital outpatient departments through December 31, 2013.
Next Week in Washington
The House and Senate return January 14 to begin the 113th Congress.
For more information, please contact John F. Williams, III at 317.977.1462 or jwilliams@hallrender.com.
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