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Doctors will not see a 26.5% cut in Medicare payments this year. The fiscal cliff deal passed by Congress includes a one-year delay on planned cuts in Medicare payments to physicians. But, the fix is not free. Hospitals will be required to pick up the tab.

These planned cuts are the result of the 1997 law called the Balanced Budget Act which included a provision called the Sustainable Growth Rate (SGR) that has caused controversy over Medicare payments to physicians since 2002. Congress would like to repeal the whole thing, but can’t figure out how to find the $300 billion to do so, so they keep approving short term, one-year patches referred to each year as the “doc fix.”

So the SGR’s impact is again delayed for another year, at a cost of approximately $25 billion.

To pay for the “doc fix” in 2013, Mary Agnes Carey reports on the Kaiser Health News blog that lower payments to hospitals would account for about half of the $25 billion cost.

She writes:

The package would reduce hospital payments in two ways. First, it would cut $10.5 billion from projected Medicare hospital payments over 10 years for inpatient or overnight care through a downward adjustment in annual base payment increases. The Senate measure also would reduce Medicaid disproportionate share payments to hospitals by an additional $4.2 billion over the next decade. These cuts are on top of those made to hospitals as part of the 2010 health care law.

Groups representing hospitals said the new plans for reductions will hurt their ability to care for patients.

‘While fixing the physician payment formula is essential, it should not be done by jeopardizing hospitals’ ability to care for seniors and their communities,’ Rich Umbdenstock, president and chief executive officer of the American Hospital Association, said in a written statement.

The Federation of American Hospitals explained in a statement on December 31st that hospitals understand “the necessity for Congressional action to avoid a dive off the fiscal cliff. However, we are disappointed that in cliff avoidance, scarce hospital finances would be used to offset the Medicare physician payment fix. It is not in the best interest of patients or those who care for them to rob hospital Peter to pay for fiscal cliff Paul. These cuts could impact hospital services for those who need them the most.” Nevertheless, it would appear that hospitals will continue to be asked to bear the burdens of the health care fiscal crisis; will we soon see hospitals having to reduce operations or close due to these financial burdens? We previously discussed reimbursement cuts under health care reform, and this new “doc fix” is further evidence that providers are continually strained and put in a position to determine how best to absorb looming reimbursement cuts and to benefit from the different payment methodologies.