Hospitals were quick to assess a federal payroll tax bill that includes a short-term fix to Medicare's sustainable growth-rate formula, calling it another instance of cutting payments to providers rather than offering real reforms.

Richard Umbdenstock, American Hospital Association president and CEO, said in a statement that while the organization is glad that a number of expiring hospital provisions were extended, “we need to ensure that all of the policies are maintained for the remainder of 2012.”

Rick Pollack, executive vice president at the AHA, said the group is especially displeased with a provision in the bill regarding outpatient therapy caps. According to a summary, the bill would extend an exceptions process for the caps through Dec. 31, 2012, with some changes. For example, all claims above the spending cap that do not include the proper billing modifier would be rejected, and all claims for high-cost beneficiaries would trigger a manual review to make sure that only medically necessary services are provided.

But for hospitals, the bigger issue with the changes to the outpatient therapy caps is a provision that requires spending caps in effect since 2006 to be extended to hospital outpatient department settings “to prevent a shift in the site of service to higher-cost settings once enforcement of the current exceptions process begins.” The summary noted that exempting services in the hospital outpatient department setting made sense when a hard therapy cap was in place, but is no longer appropriate, given the exceptions process. “They're doing it because they think it will result in a reduction,” Pollack said, calling the decision to subject hospitals to the caps just “another ratcheting of payment.”

The agreement from lawmakers attempts to pay for the roughly $21 billion (over 10 years) of the Medicare spending in the bill through a host of measures, including about $11.6 billion in cuts to certain programs and provisions in the Patient Protection and Affordable Care Act.

For instance, one provision would reduce funding in the law's Prevention and Public Health Fund to cut spending by $5 billion, while another would rebase Medicaid disproportionate share hospital allotments—which is expected to reduce spending by $4.1 billion from 2012 through 2021.

The House is expected to vote on the bill Friday.