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Impact analysis: Enacted Medicare cuts

DATE: 03/12/2021

DataGen has completed its analysis of enacted Medicare cuts, the results of which are shared here. Please note that this analysis is intended for advocacy purposes only and should be used as an indication of the extent to which hospital providers nationwide have been impacted by existing Medicare provider payment cuts.

These cuts were enacted by Congress to achieve Medicare payment policy and long-term deficit reduction goals. This DataGen impact analysis includes major cuts enacted since 2010.

The enacted legislative cuts analyzed consist of:

  • Medicare marketbasket, Medicare Disproportionate Share Hospital and quality adjustments authorized by the Affordable Care Act of 2010; note that for the purposes of this analysis, quality adjustments are broken out into their own category;
  • the effect of the 2.0% across-the-board sequestration reduction to payments authorized by the Budget Control Act of 2011;
  • inpatient coding adjustment reductions authorized by the American Taxpayer Relief Act of 2012;
  • the reduction in bad debt payments authorized by the Middle Class Tax Relief and Job Creation Act of 2012;
  • payment adjustments for services paid for under the clinical laboratory fee schedule authorized by the Protecting Access to Medicare Act of 2014;
  • reduction of OPPS payments to nonexcepted off-campus sites to a level equivalent to that paid under the Medicare Physician Fee Schedule required by the Bipartisan Budget Act of 2015;
  • marketbasket adjustments authorized by the Medicare Access and CHIP Reauthorization Act of 2015;
  • change in Home Health Prospective Payment System payments resulting from the implementation of the Patient-Driven Grouping Model; and
  • payment reductions authorized by the Bipartisan Budget Act of 2018, including adding hospice to the Inpatient PPS short-stay post-acute care transfer policy.

The enacted regulatory cuts analyzed consist of:

  • regulatory coding adjustments implemented by CMS;
  • 2.0% reduction to the calendar year 2016 outpatient marketbasket update for rate inflation due to packaging of laboratory payments;
  • long-term care hospital site-neutral payment adjustment implemented in the federal fiscal year  2016 final rule;
  • net payment impacts resulting from CMS’ reduction in OPPS payments for 340B Program purchased drugs;
  • reduction in payments for Wholesale Acquisition Cost-based drugs from WAC+6% to WAC+3%;
  • change in Skilled Nursing Facility PPS payment methodology from the Resource Utilization Group-IV system to the Patient-Driven Payment Model; and
  • reduction of OPPS payments for clinic services provided at excepted off-campus sites to a level equivalent to that paid under the Medicare Physician Fee Schedule.

The quality cuts analyzed include estimated impacts from Medicare’s Value-Based Purchasing, Readmissions Reduction and Hospital-Acquired Conditions programs.

These cuts could have a major impact on hospital finances and operations in the coming years. To learn more about this impact and about how to thrive in alternative payment models, contact us today.