Hospitals Bracing for Pay Cuts From Reform Law, Budget Sequestration
Hospitals are making preemptive moves to prepare for a series of reimbursement cuts from the Affordable Care Act and last year's budget sequestration that are slated to take effect next year, Crain's Detroit Business reports.
Because the 2011 Congressional debt supercommittee failed to reach a debt deal last year, Medicare spending will be cut by 2% next year, barring a new deal to reduce the deficit.
That cut is on top of already scheduled payment reductions mandated by the ACA, which include:
- A 0.9% reduction in the annual payment update to acute-care hospitals;
- Variable payment reductions for excess readmissions; and
- The new Medicare value-based purchasing program, which will reward or penalize hospitals based on care quality.
Detroit-Area Hospitals Preparing for Cuts
Crain's Detroit Business' Jay Greene interviewed hospital executives in the Detroit area to better understand how hospitals are planning ahead of the revenue decreases. He found that:
- St. John Providence CEO Pat McQuire says the three-hospital, Detroit-based system this summer implemented a new cost-containment program that reduces inappropriate care utilization;
- Henry Ford Health System COO Bob Riney says the Detroit-based hospital system has reduced hours for some workers, conducted targeted layoffs and might eliminate annual compensation incentive payments for executives if the system fails to meet budget projections;
- Beaumont Health System, a three-hospital system based in Royal Oak, Mich., is preparing for cuts "by significantly managing labor costs and consulting services," says CFO Nick Vitale; and
- Oakwood Healthcare, a four-hospital system based in Dearborn, Mich., has "a contingency plan to put into effect if volumes do meet budgeted expectations," says corporate controller Matt Elsey (Greene, Crain's Detroit Business, 8/20).