President Obama Signs 2014 Budget Bill: What It Means for Hospitals

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President Barack Obama has signed into law the Bipartisan Budget Act of 2013, which will have several effects on the country's hospitals and health systems.

obamaThe House and Senate passed their versions of the bill this month, culminating in President Obama's signature from Hawaii, where he is vacationing with his family.

From a broad perspective, the deal will avert any government shutdown for two years. The House and Senate battled to a government shutdown in October, the first in 17 years. The bill also affects hospital and health system finances in several ways, some positively and some negatively. Here are the most pertinent aspects of the budget deal for healthcare leaders.

•    Medicaid disproportionate share hospital payments. Under the Patient Protection and Affordable Care Act, Medicaid DSH reductions were supposed to go into effect Oct. 1, 2013. DSH payments go to safety-net hospitals that treat high volumes of poor patients. The PPACA phases out Medicaid DSH payments because the law was supposed to expand Medicaid to all states. However, the Supreme Court ruled that provision was optional for states. The new budget deal delays all Medicaid DSH cuts until Oct. 1, 2015, or the beginning of fiscal year 2016. The shift in cuts means in 2016, hospitals will face double the DSH reductions, or $1.2 billion cumulatively. CMS will update DSH guidelines early next year.

•    Sequestration. The budget plan would provide $63 billion in sequestration relief — split evenly between defense and nondefense programs — by increasing discretionary spending limits in FY 2014 and 2015. In 2014, it would raise defense discretionary spending from $498.1 billion to $520.5 billion and increase nondefense discretionary spending from $469.4 billion to $491.8 billion. In fiscal year 2015, defense spending would go up from $512 billion to $521.3 billion, while nondefense funds would increase from $483.1 billion to $492.4 billion. Congress enacted sequestration, or automatic federal budget cuts, earlier this year after lawmakers could not agree on last year's budget deal. For hospitals and other providers, this meant a 2 percent cut to Medicare reimbursements.

•    Sustainable growth rate. Physicians will not experience a 24 percent Medicare reimbursement reduction required by the program's SGR, or the formula used to determine physician payments, and physicians will receive a 0.5 percent payment update through March 2014, giving lawmakers extra time to repeal and replace the SGR.

•    Medicare hospital programs. The budget deal extends the Low-Volume Hospital and Medicare-Dependent Hospital programs through April 1, 2014. Both programs result in supplemental Medicare payments for select hospitals.

•    Medicaid third-party liability. According to the newly signed law, states can delay Medicaid payments to providers for prenatal and preventive pediatric care for 90 days after the date providers initially submit a claim to the third-party payer.

More Articles on Hospitals and Federal Government:
38 Hospitals the OIG Tagged for Medicare Overpayments in 2013
Amid PPACA Exchange Rollout, Senate Pitches Single-Payer Bill
Hospital Advocacy Groups Vow to Lobby Against Budget Deal's Medicare Cuts

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