Skip to main content

The DataGen Download: Dissecting Medicare Cuts

Another round of major healthcare financial cuts is possible—and their impact could be devastating.

As healthcare policymakers and analysts try to mitigate the high cost of healthcare in the United States, payment reform is already making an impact on the way provider organizations do business. DataGen recently released projections revealing the impact of cuts made in Medicare payments to hospitals and hospital systems across the nation over the last 16 years.

These cuts were partially offset by the coverage increases under the Affordable Care Act (ACA). As the new administration turns its attention to healthcare, however, there are more potential cuts on the table. If these cuts are enacted—and if done so while the coverage expansion provided by the ACA is repealed or changed—healthcare organizations face a major risk of a massive decrease in funding.

ENACTED CUTS

Nationally, of the funds allocated from Medicare to reimburse providers for the care of the elderly and disabled, 14% has already been cut—amounting to more than $500 billion in reductions between 2010 and 2026. These cuts can broadly be broken down into three categories: legislative, regulatory, and quality-based payment reform.

More than 40% of these cuts—$207 billion in all—include reductions in the cost of living adjustments that providers need to keep up with the increasing cost of providing care.

These particular reductions—generally called “ACA marketbasket cuts”—were initially intended to help pay for coverage expansion under ACA.

Medicare Disproportionate Share Hospital (DSH) payments, which represent 12%—$62.1 billion, were cut with the expectation that expanded coverage would ease some of the burden of caring for these vulnerable populations, representing payments to providers serving a higher mix of poor, uninsured, and underinsured patients.

PROPOSED CUTS

DataGen also released information on the potential impact of multiple additional cuts under consideration but not yet enacted. The ever-increasing national debt, combined with the fact that healthcare makes up over 25% of federal spending, leaves little room for doubt that at least some of these proposals for spending cuts will be adopted.

Hospitals that train medical residents face the possibility of $18.2 billion in reductions for that critical function over the next ten years—an issue that’s especially daunting with looming doctor shortages creating additional anxiety. While outpatient services have represented an increasing proportion of revenue as hospitals are pushed to provide more care without admitting patients, payments for those services could be cut by up to $18.7 billion.

Rural hospitals that provide care for patients who don’t have access to another hospital face potential reductions of up to $35.8 billion. In total, these and other proposals could add another $150 billion over the next ten years to the reductions already in place.

The healthcare community has already absorbed $500 billion in cuts—and the proposed cuts are making many providers wonder where it will ever stop. If coverage expansion goes away, as the initial replacement for ACA proposed, providers do have a real reason to worry about their financial sustainability. That doesn’t mean there’s nothing to be done about it, though.

Providers have already been lobbying their congressional representatives heavily to express the impact these cuts will have on day-to-day operations. While this effort seems to have gotten some traction, it’s important to keep the pressure on. We at DataGen believe that the new administration is beginning to understand the interconnected nature of healthcare policy and financial regulation—and is seeing that these cuts will cause reductions in the labor force, negatively impacting communities, employees, and patients. 

Click here for your copy of the DataGen Download: Dissecting Medicare Cuts. Contact DataGen to learn more about the impact these proposed cuts will have.

Also, visit our Resources page and follow us on LinkedIn for more learning on healthcare payment reform.

Popular posts from this blog

BPCI Advanced – take advantage of the model extension now

The Bundled Payment for Care Improvement (BPCI) Advanced Model is now open for applications until May 31, 2023. This model provides a unique opportunity to acute care hospitals and physician group practices who are looking to: evaluate their bundle performance; rejoin if they have previously dropped out due to being under a convener; or take advantage of the changes to the model. With a small window to sign the participation agreement, you’ll need experts to process data quickly and accurately for evaluation. BPCI Advanced Program Details The Centers for Medicare & Medicaid Services (CMS) announced in October 2022 that this program will extend from January 2024 to December 2025. Data used for evaluation will be taken from the baseline period between October 2018 and September 2022. A participation agreement will be sent out in September 2023 and needs to be signed by October 2023 in order to participate. Those who apply before the May 31 deadline will benefit

BPCI Advanced Model Extension

CMS recently made several major announcements about the Bundled Payments for Care Improvement Advanced Model.  The model, which was due to expire at the end of 2023 (Model Year 6), will be extended for an additional two years through Dec. 31, 2025.  New applications will be accepted in 2023 for the two-year extension. Participants still active in Model Year 6 can continue without reapplying by signing an amended and restated participation agreement for Model Year 7.  New methodological changes will be implemented for Model Year 6, which starts on Jan. 1, 2023. Methodological changes include that: the CMS Discount Factor for medical clinical episodes will be reduced from 3% to 2%;  the Peer Group Trend Factor Adjustment cap for all clinical episodes will be reduced from 10% to 5%; the Major Joint Replacement of the Upper Extremity clinical episode category will become a multi-setting episode category by allowing episodes to be triggered when the procedure is performed in the hospital ou

You’ve been accepted to the Enhancing Oncology Model. Now what?

The Centers for Medicare and Medicaid Services Innovation Center recently announced approved applicants for the new Enhancing Oncology Model. If your facility has been selected by CMS, are you still weighing your options during the current baseline evaluation period?  Two deciding factors may include the program data that CMS provides and whether EOM is enough of an improvement over the prior Oncology Care Model to make your investment worthwhile. Another factor to consider: Will you have the resources in place to conduct a baseline evaluation before EOM’s program start on July 1, 2023? How EOM differs from OCM EOM aims to improve the coordination of oncology care, drive practice transformation and reduce Medicare fee-for-service spending through episode-based payment. It includes three major updates: Fewer cancer types. Compared with OCM’s 21, EOM will be limited to seven common cancer types: breast, prostate, lung, small intestine/colorectal, multiple myeloma, lymphoma and chronic le