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Cooley Dickinson Hospital in Northampton braces for cuts in Medicare reimbursement

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The city’s largest employer said if Congress and President Barack Obama don’t reach a deal on automatic spending cuts, known as sequestration, by a March 1 deadline, the hospital would be looking at a hit of about $1.4 million annually.

Spokeswoman Dianne Cutillo said the hospital is working on measures it hopes will help offset the expected revenue drop without affecting the quality of care patients receive.

The hospital said it doesn’t yet know whether the cuts will result in layoffs, she said.

The cuts would result from the hospital and its affiliated physicians and hospice care programs being paid 2 percent less for each service provided to patients with Medicare, the federal health insurance program for seniors, according to Cutillo.

“Though it appears sequestration cuts will occur March 1, I remain optimistic that Congress will not allow to stand reductions that would harm hospitals, patients, and the people who provide care,” CEO and President Craig Melin said in a statement emailed to the Gazette in response to an interview request.

Melin expressed confidence that if sequestration happens, government leaders will act quickly to correct the impacts on health care that would result from drastic cuts that were not thoughtfully organized or implemented.

“I’m sure Congress is also mindful that hospitals have already contributed to reducing our federal budget through the Affordable Care Act, which will mean $5.7 billion in reduced reimbursement in Massachusetts over 10 years,” he wrote.

While sequestration remains in limbo, Cooley Dickinson is preparing for an already approved drop in revenue as a result of the fiscal cliff deal approved New Year’s Day. That deal is expected to eliminate about $2.7 million in Medicare reimbursements over a four-year period, or about $700,000 a year.

The change is a result of a new coding formula that compensates for past overbilling at medical facilities nationwide. Some of those cuts, about $275,000, are slated to begin this spring, but most will kick in Oct. 1, when the hospital begins fiscal 2014.

Statewide, the fiscal cliff deal already approved will cut an estimated $80 million to $90 million per year from hospital budgets from 2014–17, according to the Massachusetts Hospital Association.

The sequestration cuts, should Congress fail to work out a deal, are estimated to be twice as drastic for Cooley Dickinson as the fiscal cliff reductions.

Those cuts will mean a loss of $1.1 million a year for the hospital, and another $300,000 a year for its physician associates and its VNA & Hospice programs.

Cutillo said one cost-saving measure involves reviewing how to better use technology to streamline the patient admission and discharge process. That effort is one of the tools that may be used to make the processes more efficient, saving both time and money, she said.

The hospital is also relying on natural attrition, making careful decisions about whether to replace employees who retire or leave their positions.

These types of initiatives are things the hospital has been doing for some time as it grapples with loss of revenue, regardless of the recent changes in Medicare reimbursements, Cutillo said.

“It’s the nature of health care that we have been dealing with revenues going down for years,” she said. “This is the world that we live in.”

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