Sequestration and doctors: What you need to know

Leaders from both sides of the aisle met with President Obama on March 1 to try and reach a deal to undo the sequestration budget cuts that went into effect later that night. Nothing happened at this or any subsequent meeting so far. The sequester could also be revised later this month when a new federal budget is required. Bill Gilbert
If no deal is made or no action is taken by Congress in March, the first cuts in Medicare payments will take effect for medical services delivered on or after April 1, 2013. Providers will see the 2 percent reduction in their Medicare payments starting in mid-April. The 2 percent also will apply to EHR Meaningful Use incentive payments. HHS has provided no other official information but has said that official notifications will be made in the near future.
Here’s what we know today about the current sequester impact.

Current sequester regulations
Under the current sequester rules, Medicare will be cut by $100 billion over the next 10 years, with $11 billion to be cut in 2013. This is a 2 percent cut to physicians and clinicians (estimated at $4.9 billion) and 2 percent taken from hospitals (estimated at $5.6 billion).
According to the Congressional Research Service, for Medicare Parts A and B, individual payments to providers (e.g., hospital and physician services) will be reduced by the sequestration percentage. For Parts C and D, reductions will be made to the monthly payments to the private plans that administer them.
For Part B services provided under assignment, the reduced payment would be considered payment in full and the Medicare beneficiary would not pay higher copayments to make up for the reduced amount.
For purposes of computing any adjustments to Medicare payment rates, sequestration reductions cannot be considered. In other words, annual provider and plan payment updates will be determined as if the reductions under sequestration had not taken place.
Sequestration background
The automatic spending cuts were supposed to take effect Jan. 1, but Congress delayed the move by 2 months as part of the “fiscal cliff” deal reached that day.
The $85 billion in cuts for fiscal 2013, which ends Sept. 30, are part of a large package of $1.2 trillion in planned cuts over the next decade. The cuts are split evenly between defense and nondefense spending. For most government programs, the sequester is a 5 to 7 percent cut. Medicaid was excluded from the cuts and Medicare cuts were capped at 2 percent.
Sequestration authorizes the Office of Management and Budget (OMB) to withhold money Congress has already authorized or appropriated in sufficient amounts to meet the yearly budget targets. According to the OMB’s Sequestration Transparency Act of 2012, $554.3 billion had been the projected amount to be spent on providers and insurance plans in 2013.

What now?
At this point, physicians with a significant Medicare patient population should review their 2013 budget and adjust the revenue forecast downward to reflect the 2 percent cut. If the sequester has a material impact on your practice, consider analyzing the costs and operations for possible offsets. And at this point, a review of coding and billing processes should be high priority if it hasn’t been done recently.

Physicians can also determine where additional patient volume can be generated, for example, through additional marketing or perhaps by reducing no-shows. And last but not least, if you have an opinion and you’d like it to be heard, add your voice to your medical society’s lobbying efforts with Congress. And if you have any questions, feel free to leave them in the comments section below.


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