2% Medicare payment reductions begin today

The threat is over, and the reality of sequestration has arrived. Starting April 1, the federal budget sequestration cuts went into effect, including an automatic 2 percent reduction in Medicare reimbursements, risking millions in revenue for hospitals and long-term/post-acute care organizations.

The sequestration cuts will affect many skilled nursing centers (SNFs) deeply, some to the point of closure. Mt. Ascutney Hospital and Health Center, Windsor, Vt., will close its SNF in September, according to a hospital release. The sequestration will cut $500,000 from the facility’s income through this year, and shuttering the 25-bed SNF will save the hospital system about $1.2 million, said hospital CEO Kevin Donovan.

The sheer mathematics of sequestration had forced administrators into the decision months ago, Donovan told the (Barre-Montpelier) Times Argus. “We gave our employees five months notice that this is happening. We expect half of them will end up in vacant positions by the five month process but we’re going to try to fit people into other roles here as best as we can here at the hospital,” Donovan said.

Another casuality of the sequestration trigger may be the adoption of healthcare information technology, warned Farzad Mostashari, National Coordinator for Health IT, in a speech during the Healthcare Information and Management Systems Society annual meeting last month. The Office of the National Coordinator for Health Information Technology will have its own budget cut by $3 million, which will probably trickle down to the healthcare IT initiatives, he said. Forced to make difficult financial choices, many hospitals and health centers may postpone or cancel IT and medical data exchange projects due to lack of incentives, or to avoid having to make cuts elsewhere in their budgets.

Topics: Accountable Care Organizations (ACOs) , Executive Leadership , Medicare/Medicaid , Regulatory Compliance