Sequestration will hit health care in Maryland

The chief financial officer at Anne Arundel Medical Center is watching the fight over federal spending closely.

If the federal government goes through with sequestration cuts beginning today, Maryland stands to lose millions of dollars in health-related funding that could leave hospitals such as Anne Arundel Medical Center looking for ways to make up lost revenue without weakening medical care.

"We're here for the community and, like all hospitals, we are here 24/7 and will not jeopardize the care of patients," said Bob Reilly, the Annapolis hospital's finance director. "We'll have to look elsewhere — back office or other support functions — and not impact patient care."

The cuts in Maryland could have widespread implications, compromising treatment of the state's youngest residents and pinching some of the area's largest employers.

In addition to health cuts, the state's medical systems and schools also face severe reductions in research dollars. At the National Institutes of Health, which is responsible for more than 80 percent of federal biomedical research funding, sequestration would slash $1.5 billion from the agency's $31 billion budget.

Hospitals, doctors and state health officials are bracing for the possible loss of federal dollars, delaying spending decisions and examining ways to make up the difference.

President Barack Obama said he will meet with congressional leaders to look for a resolution today, even as the cuts begin. Maryland and Virginia could be hit particularly hard because of their proximity to Washington. Federal spending represents 20 percent of Maryland's economy, according to a report by the Pew Center on the States.

"There is no question this will be felt in a lot of different ways," Health Secretary Joshua M. Sharfstein said. "It will degrade our ability to protect and serve the public."

Medicare reimbursements to hospitals and doctors would be slashed 2 percent under current plans. But federal health officials have given little indication how they plan to implement further cuts. The Department of Health and Human Services plans to cut $15.5 billion, with two-thirds coming from Medicare.

That makes it hard to know what to plan for, Sharfstein said, "because it is not clear how much each grant will be affected."

The lack of detail has put hospitals, health departments and doctors in limbo. Many are holding back on making major decisions and fretting over what might happen.

"It leaves hospitals in a very uncertain position," said Carmela Coyle, executive director of the Maryland Hospital Association, which represents 46 hospitals. "It is difficult to understand what level of hiring to do or what level of investment they will be able to afford to make."

Coyle said the cuts come as Maryland hospitals face financial pressure due to rising costs and several years of rate increases below the rate of inflation. The state approved a slight 0.3 percent rate increase for Maryland hospitals last summer.

Medicare makes up a hefty part of a hospital's business — an average of 41 percent of hospital revenue, according to the American Hospital Association. Coyle and other medical groups have warned Medicare cuts could lead to job losses.

"Some people may say 2 percent doesn't sound too significant," Coyle said. "But for Maryland hospitals, that is on top of three years of historically low rate increases."

In recent months, Anne Arundel Medical Center has implemented a plan to reduce costs and operate more efficiently, Reilly said. For instance, it negotiated better contracts for supplies and devised ways to more efficiently sterilize medical instruments. The hospital, where 40 percent of patients are on Medicare, hopes it is better prepared for the impending cuts, he said.

But there is a lot of uncertainty.

The Health Care Cost Services Review Commission, which sets hospital rates in Maryland, will discuss how Medicare cuts would be implemented at a meeting next week.

"The Commission has not made a decision on how the sequester effects will be handled for Maryland hospitals at this stage," Patrick Redmon, the commission's executive director, said in an email.

The White House has said that, under sequester cuts, Maryland would lose about $140,000 for children's vaccinations and about $551,000 for public health issues. Seniors wouldn't get needed meals because $877,000 would get cut from programs that provide nutrition assistance. An additional $1.6 million in grants for substance abuse services also would get wiped out.

Doctors are considering whether they will have to reduce the number of Medicare patients they treat, said Gene Ransom, executive director of the Maryland State Medical Society, or MedChi. They say the cutbacks come as they are spending more money to adopt electronic medical records and implement other facets of health care reform.

Ransom said doctors also worry that patients' pocketbooks may get dinged by cuts and that they will spend less on elective care and other procedures. The Obama administration has said that the cuts will threaten hundreds of thousands of middle-class jobs.

"Doctors are very nervous about this," Ransom said. "It's not like the cost of business has gone down."