Reporting contributed by Karen Minich-Pourshadi.
The Super Committee's abject failure to compile a plan that reduces spending by $1.2 trillion over 10 years was no surprise. But now, some healthcare leaders are looking with dread at the "sequester," a process by which hospitals and physicians will see automatic Medicare reimbursement cuts of 2% starting in 2013 through 2021.
Other health leaders are instead breathing a sigh of relief, saying that even though the panel's impasse means more delay and uncertainty for planning, the schemes the Super Committee could have come up with could have been a whole lot worse.
"Our sense is that the 2% cut – if it is, in fact, put in place over the coming years – may end up as a slightly better result than what the committee might have come up with as it grappled with $1.2 trillion in cuts over the next decade," says Dean Swindle, Executive Vice President, Business Services and Chief Financial Officer, Englewood, Colo.-based Catholic Health Initiatives.
Of course, any cuts will have a negative impact, he says, making it "more difficult for CHI to provide essential services in the many communities it serves."
Blair Childs, senior vice president for Premier Inc., says that smart hospital system CEOs and CFOs he talks with on a regular basis aren't waiting to see what happens. Instead, they are anticipating as much as a 3.5% cut, including the 2% sequester plus up to another 1.5% market basket/productivity reductions scheduled for 2012, not to mention the disproportionate share funding cuts of $22 billion for Medicare and $14 billion for Medicaid over 10 years, starting in 2014.
Hospitals Need to 'Reposition'
"This is the high watermark," Childs says. "If I were a hospital CEO," he says, I would be using this next year to really get in place excellent cost reduction programs because you know you're going to have your payments cut in 2013 and beyond." Hospitals need to "reposition themselves to cope in an environment of coordinated care." And hospitals are looking everywhere to cut.