Home 5 Articles 5 Hospitals Brace for, Seek to Stave Off Medicare Sequestration Cuts

Hospitals Brace for, Seek to Stave Off Medicare Sequestration Cuts

by | Jun 17, 2022 | Articles, News, Open Content

Combined with rising labor costs, COVID-19, and other challenges, stakeholders say the cuts will negatively impact patient care.

Tick tock. Those two percent Medicare sequester cuts to hospitals that have been put off twice before are scheduled to take effect on July 1. And the timing couldn’t be worse. Hospitals and health systems are reeling from the combined financial impact of COVID-19 admissions, supply chain challenges, and the highest inflation rate in decades. But the real bite is the rising costs of labor. At the end of 2021, hospital labor expenses per patient were 19.1 percent higher than pre-pandemic costs, according to the American Hospital Association (AHA).

The July 1 cuts are to be implemented under a wider federal budget sequestration bill imposing prescheduled automatic cuts to different government programs. The two percent Medicare cut was supposed to take effect in 2020 but Congress passed a bill delaying it until April 1, 2021. After another delay, a one percent cut took effect this April 1, and is scheduled to increase to 2 percent on July 1.

The AHA is urging Congress to delay the upcoming Medicare cuts, estimating that they’ll cost hospitals at least $3 billion by the end of the year. Hospitals and health systems are struggling and need relief from the cuts to maintain patients’ access to care, the organization wrote in an April 14 letter to Congressional leaders.