AHA Pleads with Congress to Stop Medicare Sequester Cuts

Hospitals are facing an additional payment cut to 2% slated for July 1 after a 1% cut took effect in April.

The American Hospital Association (AHA) has written a letter to Congress in the final weeks before additional Medicare sequester cuts are scheduled to go into effect, urging decision makers to provide financial relief as hospitals continue to deal with effects of the pandemic.

After a bill was signed in December 2021 to halt the sequestered cuts, it resumed in April with a 1% cut, which will increase to 2% on July 1 without action from Congress.

In a letter to majority and minority leaders, AHA executive vice president Stacey Hughes expresses concern over the ramifications of the additional cuts, citing expenses for labor, drugs, and supplies, as well as inflation in the economy as significant challenges facing hospitals.

"Hospitals and health systems need financial relief from this pending cut in order to maintain access to care for the patients and communities they serve, while they continue to face dire financial and workforce pressures brought on by the COVID-19 pandemic," Hughes writes.

The letter highlights a poor first quarter of the year financially for hospitals and health systems, as evidenced by operating margins declining 38.1% from March to April.

Hughes also cites how dependent many payments to hospitals and health systems are on Medicare and Medicaid, which are nonnegotiable, fixed reimbursement rates. According to AHA, 94% of hospitals have 50% or more of their inpatient days paid by Medicare or Medicaid, and more than 75% of hospitals have 67% or more Medicare or Medicaid inpatient days.

"Unlike other sectors of the economy, hospitals and health systems cannot deflect these increased costs," Hughes states.

"These fixed costs don’t allow hospitals to absorb or deflect the impact of the historic inflation levels."

After already dealing with the 1% sequester cut that took effect in April, AHA estimates hospitals will lose at least $3 billion by the end of the year if the cut increases to 2% in July.