Providers Awaken to Day One of Sequestration

Standard & Poor's analyst Martin Arrick said in a report issued Thursday that most hospitals examined by the bond rating agency weren't unprepared by sequestration. "Most of the providers we rate have already budgeted for basically flat Medicare revenue for fiscal year 2013, and providers also have robust cost-containment strategies in place to meet these challenging cuts," Arrick said.

"Nonetheless, the sequestration reductions will, in our opinion, contribute to compressed earnings and cash flow immediately, which could impact credit ratings over time.";

That sentiment was echoed by Adam Rogers, an attorney at DLA Piper's Miami Health Care Practice.

"A lot of providers, even though they are starting to get worried, they are also taking a wait-and-see approach," said Rogers. "Everyone knows that when this administration and Congress are 'working together' things tend to happen, if at all, at the last minute. No one budges until they have to."

Rogers says many providers expect that President Obama and Republicans in Congress will strike some sort of deal, even if sequestration remains in effect after April, to retroactively reimburse Medicare for the cuts imposed in the sequestration period.

"A lot of providers are used to hearing about the sky falling with the sustainable growth rate cuts and then at the last minute or retroactively it always gets patched," Rogers says. "That is probably in people's minds that 'they really aren't going to let us go out of business.' But as hard as it's been for this Congress and administration to get something done, I am not sure that when they do get something done how user friendly it will be."