Congress Passes Fiscal Cliff, SGR Deal at Hospitals' Expense

Both the House of Representatives and Senate have passed legislation — the American Taxpayer Relief Act of 2012 (pdf) — which will temporarily avoid the long-discussed fiscal cliff of tax hikes and spending cuts.

One of the major tenets of the bill is an increase in taxes for individuals who make more than $400,000 per year and couples who earn more than $450,000 per year, while middle-class individuals and families will receive tax breaks, according to a report from CNN.

Congress also postponed the automatic, across-the-board "sequestration" cuts for two months, meaning lawmakers will have until the end of February to formulate a new deal to avoid billions of dollars in spending cuts. The approved legislation now heads to President Barack Obama's desk, who intends to sign the bill, according to reports from the White House.

For hospitals and other healthcare organizations, Congress' deal made a big impact. Several programs were extended, including the Medicare Dependent Hospital and Low-Volume Hospital programs, which provide additional funding to hundreds of rural hospitals that rely on large proportions of Medicare patients or are in a low-volume setting.

Yet again, the sustainable growth rate, which is the formula used to determine Medicare reimbursements to physicians, was temporarily delayed through 2013. Physicians would have seen a 26.5 percent reduction of their Medicare payments if the SGR had not been averted. Congress has temporarily patched the SGR cuts every year since 2003, and Congress again will have to address the issue before 2014.

Hospitals lose out
However, the SGR fix and other healthcare extensions — which cost $30 billion — were paid for by several provisions that will siphon federal funds away from hospitals and health systems. For example, providers stand to lose nearly $11 billion in MS-DRG documentation and coding adjustments. The law stated the adjustment is due to past overpayments the government made to hospitals as the country transitioned to MS-DRGs, according to a McGuireWoods Consulting report.

In addition, Medicaid disproportionate share hospital payments will decrease by $4.2 billion over the next decade on top of Medicaid DSH cuts already outlined in the healthcare reform law.

Other provisions that will affect various other healthcare providers include a rebasing of end-stage renal disease payments ($4.9 billion in savings) and reduced payments for therapies provided on the same day ($1.8 billion in savings).

The Consumer Operated and Oriented Plan program, part of the Patient Protection and Affordable Care Act, also took a major blow. All remaining funds that have not been used to start CO-OPs, which are non-profit health insurers that are governed by consumers and will compete in health insurance exchanges, have been rescinded, totaling $2.3 billion. The 24 CO-OPs that have signed loan agreements with HHS thus far will not be affected.

Several hospital industry advocates said the fiscal cliff package and SGR fix took a "harmful" approach.

"While fixing the physician payment formula is essential, it should not be done by jeopardizing hospitals' ability to care for seniors and their communities," said Rich Umbdenstock, president and CEO of the American Hospital Association, in a statement (pdf). "That's why we are very disappointed at the approach taken in this measure."

Bruce Siegel, MD, president and CEO of the National Association of Public Hospitals and Health Systems, also criticized how Congress handled certain healthcare issues in the negotiations.

"While this agreement averts severe economic hardships for the nation, it nonetheless puts at risk essential healthcare for millions of vulnerable people," Dr. Siegel said in a statement (pdf). "Solving one side of the provider equation must not come at the expense of the other — particularly the hospitals and health systems that care for a disproportionate share of Medicaid and other low-income patients."

Jeremy Lazarus, MD, president of the American Medical Association, said in a statement that while the SGR fix was a positive outcome, lawmakers must find a permanent solution to this recurring problem.

"Congress averted a drastic cut of 26.5 percent from hitting physicians who care for Medicare patients," Dr. Lazarus said. "This patch temporarily alleviates the problem, but Congress' work is not complete; it has simply delayed this massive, unsustainable cut for one year. Over the next months, it must act to eliminate this ongoing problem once and for all."

More Articles on the Fiscal Cliff:

Bracing for 'Cliff's' Fiscal Freefall, White House Hopes to Kill $10B Medicare Cut
Sequestration, Medicare Cuts: Likely Result From Fiscal Cliff Talks
If Congress Reaches a Fiscal Cliff Deal, What Would Hospitals Lose?

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