- A House bill passed Friday that would extend the pause on Medicare sequester cuts through December still awaits Senate action, with a looming March 31 deadline before the cuts go back into effect.
- The American Hospital Association expects the Senate to vote this week, CEO Rick Pollack said during a Tuesday call with reporters, though the March 31 deadline could conflict with upcoming Easter recesses and House approval.
- The Senate bill would extend the Medicare sequester pause throughout the public health emergency, and excludes a provision from the House version to eschew budget rules that would have imposed additional cuts on Medicare payments to providers.
If the Senate takes action before leaving town, "it sends a very strong signal to CMS to essentially hold those claims for about a week or so until the House can come back and hopefully approve the Senate action," Pollack said Tuesday.
The hospital lobby has been pushing heavily for an extension on the cuts, which were part of a 2012 deal to offset deficits and cut most Medicare payments to providers by 2%. The Coronavirus Aid, Relief, and Economic Security Act suspended the cuts as providers grappled with pandemic-induced financial strains.
While many larger health systems turned a profit last year, and some even returned relief funds, others are still strained by depleted revenues and increased expenses, according to a new analysis from Kaufman Hall and AHA.
Under the most optimistic scenario, 39% of hospitals on average would operate in the red in 2021, a significant increase over pre-pandemic baselines, according to the report. That estimate assumes declining COVID-19 hospitalizations and a smooth vaccine roll-out, along with rates increasing at normal pre-pandemic levels, likely mirroring an extension on the Medicare sequester cuts, according to AHA.
In the most pessimistic scenario, 50% of hospitals on average would operate in the red in 2021. That scenario assumes the impact of the sequester going back into effect.
Extending the Medicare sequester cuts would help hospitals maintain financial solvency AHA said, though they would go back into effect eventually.
"If we incur Medicare cuts at this time, our recovery efforts would be significantly impacted," Cliff Megerian, CEO of University Hospitals Health System in Cleveland said during Tuesday's call.
"When operating income declines, which will no doubt happen with sequestration being reestablished, the rating agencies can even take action that will negatively affect our borrowing costs," Megerian said.
The House bill extends the cuts until Dec. 31, while the Senate version does so for the duration of the public health emergency. The Senate version would also extend the sequestration, scheduled to expire at the end of fiscal year 2030, through FY 2031.
At the same time, the House bill shields providers from an additional Medicare statutory pay-go cut of up to 4% that the budgetary impact projected under the newest relief package would have triggered.
Those cuts would amount to about $36 billion for 2022, according to an AHA estimate, though that provision is omitted from the Senate version of the bill.
Extending the Medicare sequester pause through the end of 2021 though would cost an estimated $10 billion, according to a report from the fiscal watchdog group Committee for a Responsible Federal Budget.
"Allowing further extensions without offsets could set the stage for a longer-term sequester repeal that would be significantly more costly," according to the report.