Healthcare Update: Fiscal Cliff Deal Includes Temporary “Doc Fix” for 2013


    As all are aware, on New Year’s Day, the Senate and the House of Representatives approved a bill to avert the so-called fiscal cliff. The “American Taxpayer Relief Act of 2012” includes the latest in a series of one-year patches to prevent major cuts in physician Medicare fees. The proposed Medicare Physician Fee Schedule for calendar year 2013 had called for an overall 26.5% reduction in payment rates for physicians, nurse practitioners and physical therapists. President Obama hailed the bill and said that he would sign it into law.

    Fee Schedule payments are determined by a Sustainable Growth Rate (SGR) formula that was adopted in the Balanced Budget Act of 1997, which the Centers for Medicare & Medicaid Services (CMS) is required to follow. The payment cuts were avoided this time largely by offsetting reductions in payments to acute care hospitals and for end-stage renal disease care, among numerous other things. Hospitals that treat a “disproportionate share” of uninsured and Medicaid patients will be particularly hard-hit by the reductions. Fee Schedule payment rates will now be frozen at their current levels through December 31, 2013.

    Many healthcare organizations, including the American Medical Association, Medical Group Management Association and American Hospital Association, have urged Congress to find a permanent solution to the annual SGR problem, but a permanent fix is expected to cost the government $300 billion. In a statement, AMA President Jeremy Lazarus said, “This last-minute action on the part of Congress is a clear example of how the Medicare program is increasingly unreliable for physicians and patients. This instability stalls progress in moving Medicare toward new healthcare delivery models that can improve value for patients through better care coordination.”

    The one-year “doc fix” is estimated to cost the federal government $25.2 billion, of which $19.6 billion is expected to be offset by recovering past overpayments to hospitals ($10.5 billion), reducing payments for drugs for dialysis ($4.9 billion), and reducing Medicaid Disproportionate Share Hospital (DSH) payments ($4.2 billion). In a statement, Chip Kahn, President of the Federation of American Hospitals, complained that the cuts “rob hospital Peter to pay for fiscal cliff Paul.”

    The new bill postpones for 60 days, but does not eliminate, the “sequestration” cuts to discretionary government spending that would reduce Medicare payments by 2%. It also extends certain Medicare programs, payment adjustments and exceptions through June 30 or December 31, 2013.

    The bill does not provide for payment cuts for Medicare or Medicaid home health care services, or for the imposition of home health co-pays. Medicare payments for home health agencies would have been subject to 2% cuts annually for 10 years had the fiscal cliff not been averted. Various home health co-pay options had been considered, ranging from $100 to 600 per 60-day episode of care.


    Edwards Wildman’s Healthcare Practice Group will continue to monitor healthcare news from Capitol Hill, CMS, HHS, and other federal and state agencies and courts, and will bring you timely updates as new developments occur.

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