News Updates – The Effects of Sequestration and the ACA’s Impact on Readmission Rates

Published March 12, 2013


Our bi-weekly news updates are designed to keep you up to date with current developments relating to the Acute Care Continuum. Feel free to share your perspective on these stories or link to articles that you have found relevant to today’s healthcare environment.

Healthcare Affected by Mandatory Budget Cuts

On Friday, March 1, President Obama reluctantly signed an order for $85 billion in spending cuts required by a legislative compromise originally crafted to avoid the “financial cliff.” Although most of the cuts are coming from the defense budget, a two-percent reduction (approximately $11 billion) in payments to Medicare providers is expected to occur on April 1 of this year. Medicaid was one of many government programs exempted from sequestration.

Public health agencies can also expect to be affected by the $26 billion reduction in discretionary domestic spending. The American Public Health Association (APHA) anticipates that the Centers for Disease Control & Prevention (CDC) and the Health Resources and Services Agency (HRSA) will feel the brunt of the impact.

Congress has until the end of March to avert the bulk of the spending cuts, but so far little headway has been made towards a legislative solution that is supported by both political parties.

EMR Payments in Question after Sequestration

A component of healthcare reform originally heralded as a key solution towards integrating care across settings is suddenly in question as sequestration cuts take effect. Included among the two-percent cut in Medicare payments are incentive payments to hospitals and providers that have implemented electronic medical record systems (EMR). The Medicare payments were originally designed to reduce the financial burden of implementing EMR; and now advocates are concerned about the potential impact now that the incentive plan is in jeopardy. Others, including the Center for Medicare & Medicaid Services’ (CMS) Acting Administrator Marilyn Tavenner, are cautiously optimistic that this will allow the incentive program to streamline processes while operating under limited resources.

The impact of EMR implementation has been explored in great detail on Perspectives of the Acute Care Continuum by Dr. Michael Aratow and Dr. Jason Ruben.

CMS Reports Decline in Readmission Rates

In our last News Update, we highlighted a study from the Robert Wood Johnson Foundation (RWJF) suggesting there has been no improvement in hospital readmission rates since 2008. However, a CMS official recently reported to the Senate Finance Committee that the rate of hospital readmissions within 30 days of discharge for Medicare beneficiaries declined by nearly two-percent since the passage of the Affordable Care Act. Officials believe “that the decline occurred as hospitals began focusing more on readmissions, in part because of a combination of carrots and sticks in the health-care law.”

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