“Sequestration” is a process of automatic, largely across-the-board spending reductions under which budgetary resources are permanently canceled to enforce certain budget policy goals. The sequester began officially on March 1, 2013. However, some of its effects will not be felt immediately. The Centers for Medicare and Medicaid Service announced on March 8, 2013 that if Congress does not act to stop the spending cuts before April 1, payments for all Medicare services provided on or after that date will be reduced by 2 percent.

According to Jeffrey Cain, MD, president of the American Academy of Family Physicians, “Sequestration will slash thousands of dollars from family physicians’ practice revenue. Because private insurers base their payments on Medicare rates, family physicians will see a domino effect as private insurance payment reflects the cuts imposed by the sequester. As small businesses operating on a razor-thin margin, family physicians will face a stark choice between putting their practices at risk and reducing the number of elderly and disabled patients they can see. Rather than rein in costs, sequestration payment cuts to health care providers will reduce access to needed care, increase the risk that preventable health conditions will develop or will worsen, and increase the chance that patients will ultimately require more intensive and expensive care. Meanwhile, the cuts likely will encourage other providers to shift costs to private payers or patients.” The impending susceptibility doesn’t just prod at paychecks and patient dockets — it also detriments physician education grants and medical programs aimed at helping underserved communities.

Cain continued: “Sequestration even more severely cuts funding for health professions grants under Title VII, a program that focuses on primary care medical education programs; the National Health Service Corps, which encourages students to go into primary care and practice in underserved areas; and the Agency for Healthcare Research and Quality, which generates the evidence necessary to build a high-quality, high-value health care system. Cuts to graduate medical education funding will have a disproportionately negative impact on primary care physician residency training as teaching hospitals shift their limited number of training positions from primary care to more lucrative subspecialties.”

In addition to sequestration, Congress is also debating payments related to the Sustainable Growth Rate (SGR). The SGR updates Medicare payments to physicians.  Due to the flawed formula that Congress enacted over a decade ago, physician could see an across-the-board of 27.5 percent cuts to all Medicare Part B services.

The Heart Rhythm Society, the American Medical Association and 71 other medical societies sent a letter urging Congress to pass legislation nullifying the Medicare physician payment cuts called for under the BCA’s sequestration provision and the SGR formula. The Senate has indicated that it wants to see the negative update to payments frozen for the year.

According to Jeremy A. Lazarus, MD, President, American Medical Association, “……The across-the-board cut will hit physicians particularly hard because of the fundamentally flawed Medicare physician payment system. Since 2001 Medicare payments for physician services have only increased by four percent, while the cost of caring for patients has gone up by more than 20 percent. A two percent cut widens the already enormous gap between what Medicare pays and the actual cost of caring for seniors….”

Unfortunately, threats of payment cuts are nothing new in physician practices and a 2 percent cut may seem small compared to much larger cuts threatened each year due to the sustainable growth rate (SGR). However, under sequestration the “trickle down” effect may have deeper ramifications due to the other impacts patients may face, such as job losses and/or furloughs, hospitals having to reduce services due to payment cuts, and more.

Practices should keep an eye on payments from all sources and should consider adjusting their annual budget to account for possible revenue shortfalls. This is the time to ensure that the practice has the right tools to capture every piece of revenue coming in.

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