Sequestration Medicare Cuts Take Full Effect, But Greater Revenue Cycle Risk Looms

Yesterday the Centers for Medicare and Medicaid (CMS) instituted the across-the-board 2 percent cut in Medicare reimbursements for fee-for-service claims, but a greater threat to the revenue cycle is about to burst out of Maryland: price controls.

For more than three decades Maryland is unique among all states in that it has had price-control authority over healthcare providers, insurers, and others in the healthcare supply chain. But now that authority will be aimed directly at hospitals by enacting strict spending controls beginning Jan. 1 should the state’s proposal win approval in Washington.

As reported by Kaiser Health News and the Washington Post, the proposal “would use Maryland’s unique rate-setting system to keep hospital spending from growing no faster than the overall economy — roughly half its recent rate of increase.”

Healthcare providers in the state, predictably, were less than enthusiastic about the proposal. Maryland Hospital Association CEO Carmel Coyle called the plan “the single most important event that’s affected Maryland hospitals in the last 40 years. The only thing that’s certain at this point in the application is the [spending] cap. We don’t know about the mechanisms that will actually get us there.”

President Barack Obama’s administration appears to have taken a keen interest in the Maryland proposal, according to the news report. “People who favor rate-setting only have Maryland as the example,” said Joseph Antos, a health economist at the American Enterprise Institute who sat on Maryland’s healthcare rate commission for several years. “The Obama administration believes that [such an approach] is an important strategy. I think this is the way they would want states to go in the future.”

Although Maryland’s plan at this time is ephemeral, yesterday’s cut in Medicare reimbursements was all too real. According to CMS:

In general, Medicare FFS claims with dates-of-service or dates-of-discharge on or after April 1, 2013, will incur a 2 percent reduction in Medicare payment. Claims for durable medical equipment (DME), prosthetics, orthotics, and supplies, including claims under the DME Competitive Bidding Program, will be reduced by 2 percent based upon whether the date-of-service, or the start date for rental equipment or multi-day supplies, is on or after April 1, 2013.

The claims payment adjustment shall be applied to all claims after determining coinsurance, any applicable deductible, and any applicable Medicare Secondary Payment adjustments. Though beneficiary payments for deductibles and coinsurance are not subject to the 2 percent payment reduction, Medicare’s payment to beneficiaries for unassigned claims is subject to the 2 percent reduction. The Centers for Medicare & Medicaid Services encourages Medicare physicians, practitioners, and suppliers who bill claims on an unassigned basis to discuss with beneficiaries the impact of sequestration on Medicare’s reimbursement.