Was Sequestration the Best Option for Hospitals?

When President Barack Obama signed sequestration into law this past weekend, roughly $85 billion in across-the-board spending cuts went into effect for the rest of the federal government's 2013 fiscal year. But was it the best deal for hospitals and health systems?

According to an Associated Press report, the sequester reduces Medicare spending by roughly $100 billion over the next decade, but it could have been worse if President Obama or Republicans in Congress had met a deal. President Obama proposed roughly $400 billion in healthcare savings over the next decade, and hospitals would have taken on roughly half of those cuts. Republicans called for even further reductions to Medicare.

Currently, hospitals will absorb about 40 percent of the Medicare sequestration cuts due to a 2 percent cut to reimbursements. However, hospitals have still decried the budget crisis, which many have said was manufactured by Congress. In September, the American Hospital Association and other groups released a report saying that up to 766,000 healthcare and healthcare-related jobs could be eliminated by 2021 as a result of sequestration. Almost 500,000 healthcare jobs could be cut due to the sequester this year alone, according to the report.

Some state hospital associations have also criticized the sequester. The Indiana Hospital Association said all Indiana hospitals face $844 million in cuts over the next decade under sequestration, and roughly 16,500 jobs will be lost in the process. Critical access hospitals face the brunt of the cuts. According to an Indianapolis Business Journal report, CAHs' operating margins will fall 31 percent due to the sequester — from 1.58 percent to 1.09 percent.

However, many of the largest hospitals and health systems with high margins are still expected to survive the sequester with "healthy" margins because they had planned for the worst-case scenario, according to the IBJ. Many of the largest systems in Indianapolis should still post operating margins no less than 3.8 percent.

More Articles on Hospitals and Sequestration:

Which Health Programs Did the Sequester Cut?
7 Healthcare Leaders Share Thoughts on Sequestration
Sequestration Set to Kick in, Cut Medicare by Billions

Copyright © 2023 Becker's Healthcare. All Rights Reserved. Privacy Policy. Cookie Policy. Linking and Reprinting Policy.


Featured Whitepapers

Featured Webinars