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Averting Cuts to Physicians Paid for by Cuts to Hospitals

January 4, 2013—The president Jan. 2 signed into law the bipartisan compromise to avert the fiscal cliff, H.R. 8, The American Taxpayer Relief Act of 2012. The law makes permanent current income tax rates for all but the top earners; patches the sustainable growth rate (SGR) formula for one year, preventing a 26.5 percent decrease in Medicare physician payments; and delays, till March 27, the across-the-board spending cuts known as the sequester. However, half of the cost of the SGR patch and Medicare extenders were paid for by cuts to hospitals.

Though the law does not include cuts to Medicare graduate medical education (GME) funding or payments for evaluation and management (E/M) services in hospital outpatient departments (HOPD), to pay for the $25 billion SGR patch and extend several expiring Medicare provisions, H.R. 8 includes cuts to hospitals, such as:

  • Phasing in Documentation and Coding (DCI) adjustments which recoup past overpayments to hospitals made as a result of the transition to Medicare Severity Diagnosis Related Groups (MS‐DRGs) ($10.5 billion over 10 years);

  • Rebasing Medicaid disproportionate share hospital (DSH) payments for an additional year ($4.2 billion over 10 years);

  • Rebasing end stage renal disease (ESRD) payments ($4.9 billion over 10 years);

  • Reducing payments for subsequent therapies when therapies are provided on the same day ($1.8 billion over 10 years);

  • Equalizing payments for stereotactic radiosurgery services provided in HOPDs ($300 million over 10 years);

  • Adjusting equipment utilization rates for advanced imagining services ($800 million over 10 years); and

  • Increasing the statute of limitations to recover overpayments from three to five years ($500 million over 10 years).

Other provisions of interest to AAMC members include several extensions to expiring Medicare provision, such as:

  • The existing geographic practice cost indices (GPCI) 1.0 work floor through Dec. 31;

  • The Medicare inpatient hospital payment adjustment for low‐volume hospitals through Dec. 31;

  • Medicare‐dependent hospital (MDH) program through Oct. 1; and

  • The qualifying individual (QI) Program through Dec. 31.

AAMC President and CEO Darrell G. Kirch, M.D. said, “The AAMC is pleased that Congress was able reach an agreement to address the fiscal crisis facing the nation.” He added, “[T]he AAMC is troubled by the continued cuts to patient care included in H.R. 8, such as the documentation and coding (DCI) adjustment and the disproportionate share hospital (DSH) payments—provisions that impact the ability of medical schools and teaching hospitals to continue their critical work.”

H.R. 8 also included a temporary two-month delay of sequestration cuts that will now go into effect March 27. These cuts would include a 2 percent across-the-board cut to Medicare payments, as well as cuts to defense and non-defense discretionary funding [see related story].

Dr. Kirch pointed that while academic medicine was not disproportionately targeted for cuts in the bill to avoid the fiscal cliff, “Of greater concern is the failure to adequately address sequestration by simply delaying by two months implementation of potentially devastating cuts to Medicare funding and medical research supported by the National Institutes of Health.”  


Len Marquez
Director, Government Relations
Telephone: 202-862-6281


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