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Sequester’s impact on hospitals – only CMS could come up with this

The budget sequester is going to cut reimbursement rates for many providers – starting today many will see a 2 percent reduction for Medicare.  That’s going to hurt, but there’s good news as well – for some providers.

According to CMS, the most recent guidance from Congress on implementation of the sequester for Medicare providers requires CMS to “ensure reductions in reimbursement are not based on any currently-in-force profiling, bonus, ACO, e-billing or other reimbursement-altering methodology or process…”  CMS’ Office of the General Counsel’s interpretation of this guidance is it prohibits any staff-based input into “determining, deciding, or selecting which or to what extent bills, providers, locations, or procedures” will be affected.

As a result, as of today, CMS will begin implementing the “random sequenced reimbursement reduction program”, or RSRRP.  While the final details of this have yet to be worked out, early indications are it involves setting reimbursement at zero for every fiftieth provider bill; bills so affected will be pended and routed to the “further action required” queue (typically utilized for bills with missing data elements or demographic.

In this instance, the RSRRP bills will be held until such time as “adequate funding exists to complete the adjudication and reimbursement process.” [emphasis added]

Hospital organizations are, understandably, up in arms over the cuts, asserting they are arbitrary, capricious, and will cause significant harm to many hospitals, including the most vulnerable safety-net institutions.  An American Hospital Association report indicates the sequester will reduce spending by some $10.7 billion in 2013 alone, noting: “Sequestration is a blunt and indiscriminate instrument. It is not the responsible way for our nation to achieve deficit reduction” An AHA spokesperson went further: “Hospitals will have to make tough choices about which services to maintain because of potential cuts since hospitals will maintain the highest quality for whatever services they provide…”

Responding to the criticism, HHS Sec Kathleen Sibelius noted that her hands were, in effect, tied as Congress “effectively prevented HHS from taking any action to ameliorate the effect of the sequester.  Quoting from the report, Sec. Sibelius said: “the “blunt and indiscriminate” effect of the sequester calls to mind an HL Mencken quote; “the people get the government they deserve, and they deserve it good and hard.”

When asked how long the RSRRP bills might be held in limbo, a spokesperson responded: “ask Congress, and encourage your readers to do the same.”
What does this mean for you?

Likely more cost-shifting from hospitals seeking to make up lost revenue.  

3 thoughts on “Sequester’s impact on hospitals – only CMS could come up with this”

  1. Please tell me this is an April Fools joke!?! If it is… well played Mr. Paduda, well played – you had me until “they deserve it good and hard.” If it’s not a joke… well… then I’m headed to the bank to withdraw my funds before our Cyprus-lite government decides to freeze 1 out of every 50 of our accounts.

  2. I like this approach because it shows CMS is standing up for providers by basically saying they cannot cut reimbursements and still have a properly functioning Medicare program. Instead, in order to be compliant with Budget Sequestration law, CMS is going to invent a problem (permanently pended claims) which will probably cause a lot of heat on Congress. And, the only way to solve the problem, is to restore funding for reimbursements. In my opinion: Kudos to CMS for trying to turn the tables on Congress. This is much better than having CMS simply re-make the Medicare fee schedule to lower provider reimbursement.

  3. Joe, I knew this was a joke when you used the term “budget sequester” as a noun, rather than “budget sequestration.” I’m sure everybody else caught that, as well.

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Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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