Sequestration Will Hurt New Jersey Patients and Health Providers

Andrew Kitchenman | March 4, 2013 | Health Care
Funding cuts will reduce everything from Medicare payments to drug treatment and HIV testing for thousand of patients

Eva Turbiner, president and CEO of Zufall Health Center in Dover.
New Jersey healthcare providers expect to lose millions of dollars as a result of the federal budget sequestration, which is expected to result in cuts in services to thousands of patients.

The reductions include a 2 percent drop in Medicare reimbursements to doctors and hospitals, as well as deeper gouges to federally qualified health centers (FQHCs) that serve many low-income residents. The sequestration was triggered on March 1 due a 2011 law that mandated automatic spending cuts if an agreement on raising the amount the federal government can borrow wasn’t reached.

Information about the cuts was still filtering down to providers late last week, leaving them uncertain as to what steps they should take. The FQHCs are examining the changes in services and staffing they will have to make, according to Kathy Grant Davis, head of the New Jersey Primary Care Association.

“We of course would try to minimize any disruption of service, but it will have an impact because that is our base funding and it pays for quite a few of our staff,” Davis said.

The effect of sequestration on individual health centers will depend on the mix of patients that they serve. Centers that largely treat patients who are insured through government-funded Medicaid programs like New Jersey FamilyCare, will see a smaller cut, since Medicaid was spared sequestration cuts.

Centers that serve uninsured residents, will feel more pain. This is particularly true of Zufall Health Center in Dover, Morris County. While 42 percent of FQHC patients in New Jersey are uninsured, 72 percent of Zufall patients don’t have insurance.

Zufall President and CEO Eva Turbiner expects to see an 8 percent cut in federal grant funding, equivalent to $100,000 in lost revenue this year.

Turbiner said her center’s current contingency plan is to eliminate any annual cost-of-living salary increases for its 125 staffers, who serve residents in Hunterdon, Morris, Sussex, and Warren counties.

“We are so committed to serving the population, I am really reluctant to actually lay anyone off or reduce hours,” Turbiner said.

While Turbiner expects having no pay increases to close the budget gap, that will put the center in poor competitive standing for recruiting and retaining employees, she said.

She noted that the cuts come at a time when patients’ demand for services from FQHCs has never been higher.

“They’re going to need more and more primary-care providers. Clearly, [this is] a time when we should be continuing to expand. That’s going to be more difficult with reduced funding,” Turbiner said.

The New Jersey Hospital Association has estimated that state hospitals would see a $71 million reduction in Medicare reimbursements from April to December under the sequestration, according to Sean Hopkins, association vice president of health economics.

Since the hospitals already are expecting a $21 million reduction in Medicare as part of a federal budget deal in December, the overall cut for the year would be $92 million, he said.

Hopkins noted that various budget proposals made to avoid the sequestration included even deeper cuts to Medicare.

“We could get bitten even more than the 2 percent that is coming our way,” Hopkins said. “It doesn’t look like there are a lot of good-case scenarios that are coming out of Washington as far as the debt ceiling is concerned.”

Dr. Mary F. Campagnolo, president of the Medical Society of New Jersey, said the 2 percent cut could contribute to fewer doctors accepting Medicare patients.

“I have real concerns about the long-term unintended consequences from this,” Campagnolo said.

She added that there might be one bright spot over current deliberations about Medicare cuts: the potential end to annual threats of deeper cuts to Medicare reimbursements.

“No one likes to have money cut out of their pay, but there’s a greater goal here,” said Campagnolo, whose association is the state’s largest doctors’ group. She said doctors are willing to work with federal officials to replace the current system that determines annual Medicare payments with one that is more consistent and transparent.

While federal officials haven’t detailed exactly how the cuts will affect different categories of healthcare providers, the White House did release numbers for some New Jersey services.

The White House expects that around 3,930 fewer children will receive vaccines for diseases such as measles, mumps, rubella, tetanus, whooping cough, influenza, and hepatitis B due to a $268,000 reduction in funding for vaccinations.

In addition, the state will lose $840,000 in funding to improve its ability to respond to public health threats, including infectious diseases; natural disasters; and biological, chemical, nuclear, and radiological events. New Jersey will lose about $2.33 million in substance-abuse prevention and treatment grants, which will lead to 3,100 fewer admissions to substance abuse programs, as well as $752,000 in lost HIV testing, resulting in 18,800 fewer tests.

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