Five Ways the Sequester Could Affect Physicians

March 29, 2013

What do the sequester cuts really mean to physician practices? Some potential aftershocks.

Most physicians have heard about the sequester - the term coined for the Budget Control Act of 2011’s automatic $1.2 trillion in spending cuts that went into effect on March 1- and that it translates to a 2 percent cut to Medicare payments, and, in turn, a 2 percent cut to meaningful use payments starting April 1.

But what is the ripple effect of these 2 percent cuts, and the potential 5 percent administrative cut to CMS and other federal healthcare agencies’ operational budgets?

Here are five ways the sequester cuts could affect physicians:  

CMS may require more accountability. Don’t be surprised if your practice sees a delay in payments. CMS announced earlier this month that between 5 percent and 10 percent of all eligible professionals attesting for meaningful use will be selected for prepayment audits. "Selections will be made both randomly and also based on protocols that identify suspicious or anomalous attestation data," said Elizabeth Holland, director of CMS' Health IT Initiative Group, as reported by the American Academy of Family Physicians. Post-payment audits will affect another 5 percent to 10 percent of physicians and other healthcare professionals. Though the announcement of the audits appears unrelated to the sequester, with budgets being slashed due to sequestration, every dollar counts for both CMS and providers, a report from EHR Intelligence noted.

Education and technology resources will be reduced. Under sequestration, ONC will receive a $3 million budget cut, reducing its funding to $57 million. Robert Tennant, senior policy advisor for the Medical Group Management Association, said this could translate into fewer resources for practices struggling to implement new technology, such as an EHR. “The sequester not only trims 2 percent from Medicare claim payments, but also 2 percent from all HIT incentive payments made after April 1,”  Tennant told Physicians Practice. “The operational budgets for CMS, ONC, and other HHS agencies will see cuts as well - perhaps 5 percent or more. This could potentially hamper government efforts to educate providers on the many federal programs and requirements and delay or eliminate the development of guidance, FAQs, and other provider resources.”

Jobs, and therefore opportunities for physicians, will go down. A report released jointly by the American Medical Association, the American Hospital Association, and the American Nurses Association found up to 766,000 healthcare and related jobs could be lost by 2021 as a result of this 2 percent cut. As reported by American Medical News, there will be nearly 500,000 fewer direct and indirect jobs in 2013 alone, according to the report compiled by the Pittsburgh research firm Tripp Umbach.

Fewer physicians will enter primary care. The cuts have a negative effect on funding for teaching hospitals, says Darrell G. Kirch, MD, president and CEO of the Association of American Medical Colleges,American Medical News reported. The financial loss will have a domino effect on the ability to invest in training future health professionals. “Cutting federal funding that supports doctor training at teaching hospitals will exacerbate looming shortages of physicians and other healthcare providers, and jeopardize the lifesaving care and critical services that teaching hospitals provide in their communities,” Kirch said.

Agencies will shift participation strategies. We may start to shift in how programs such as the EHR incentive are being sold to the public. It’s interesting that, during his keynote at HIMSS13 show in New Orleans, ONC National Coordinator for Health IT Farzad Mostashari indicated more than once that providers shouldn’t be primarily motivated by incentive money to adopt EHRs. The primary motivator should be improved patient care, he noted.

These are just a few potential sequester aftershocks, but how this all plays out at physician practices will become clearer in the coming months.

One change that Matthew Hawkins, CEO of Vitera Healthcare Solutions, said he does not expect to see is a slowdown in EHR adoption.

“I don’t think the 2 percent reduction will have a significant impact on EHR adoption itself,” said Hawkins, noting that the penalty for not enrolling in the EHR Incentive program by 2015 is still intact. “Some people are motivated by the carrot; other people are motivated by the stick.”

If your practice is already feeling the effects, please share your story by e-mailing marisa.torrieri@ubm.com or share your comments below.