March 29—The 2 percent cuts to Medicare payment that will go into effect as a result of sequestration in FY13 are expected to be manageable for not-for-profit hospitals, given their focus on operating efficiencies and their resilience throughout the recent recession, according to a Fitch Ratings report. Moody’s Investors Services agreed, stating the cuts would have “only a minor effect” on organizations that derive revenue from health care.
The Fitch Ratings report, Hospitals, Medicare, and Sequestration Cuts, released Thursday, examines the potential impact of sequestration cuts on hospitals. Not-for-profits could offset the impact of the cuts by enhancing operating efficiency, focusing on cost management and revenue-enhancement initiatives, and carefully considering ways to decrease personnel costs, according to the report.
Lower-rated hospitals could feel the impact of the cuts to a greater degree, due to their typically higher exposure to Medicare patients, Fitch says.
The report states that future, deeper cuts to Medicare that could result from deficit reduction initiatives could be more challenging for hospitals to absorb. Adjusting to these cuts could require clinical redesign and changes in the care delivery system, which will be more difficult to accomplish.
In the Moody’s Investors Service report, The Sequester Series: Limited Impact on U.S. Universities and Related Not-for-Profit Organizations, Moody’s states that, although research institutes and universities will be most affected by sequestration, they, too, are in a good position to manage the effect of Medicare payment reductions.
No rated entity in Moody’s portfolio faces more than 0.5 percent in estimated revenue loss due directly to reductions in Medicare payment, assuming a sample average of 34 percent of patient service revenue can be attributed to Medicare payment, according to the report.
Publication Date: Friday, March 29, 2013