Hospitals will lose billions today. Why isn't anyone talking about it?

One reason: Cuts have been pending for months

Dan Diamond, Managing Editor

It isn't an April Fool's joke, although hospitals may wish it were: Under the sequester, Medicare cuts totaling about $10 billion finally kick in today.

For months, providers had waged a lobbying battle trying to prevent this outcome. As part of that campaign, state and national associations released a flurry of dire reports, showing that facilities would see real pain from sequestration.

  • Wisconsin's hospitals will collectively lose $2 million per week.
  • In Florida, the average hospital will lose $8 million across the next decade.
  • And per the American Hospital Association, the sequester could even cost more than 750,000 health care jobs.

"Ten years out, we think the impact is about a 1.6% hit to your overall margins, assuming the sequester remains in place," according to the Advisory Board's Christopher Kerns.

Long lead time led to proactive planning

And yet…the reaction to today's cuts has been surprisingly muted. Hospital administrators that spoke with the Daily Briefing say they're resigned to sequestration's impact and are focused on cutting as many non-essential services as possible, like spending on laundry services. Rather than push back with another report on the sequester's pending pain, AHA's homepage teases its annual membership meeting.

Why the lack of urgency?

Chiefly, it's because sequestration has been slow to develop. "There’s been enough lead time that most hospital executives have been preparing for this for a while," Kerns says.

"And it’s a relatively straightforward cut that doesn’t lend itself to any interesting or creative responses," he added, with hospitals essentially just feeling the same margin pressures they expected—if a bit sooner than scheduled.

There's another reason why hospital executives may be settling for the sequester: It's preferable to other options, all things considered. As Frederick Isasi notes, President Obama's proposed alternative to sequestration included comprehensive entitlement reform that could have led to hundreds of billions of dollars in Medicare cuts.


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