Jay Grinney, president and CEO of HealthSouth, said some investors have misinterpreted the across-the-board cuts of 2% in Medicare that go into effect if Congress fails to approve a plan that cuts $1.5 trillion from deficits over 10 years. Those cuts come after Medicare rates have had their annual adjustments under existing laws and regulations, and they do not compound yearly, Grinney said.
The across-the-board cuts, which would go into effect Oct. 1, 2012, would have an estimated $32 million impact on both net operating revenue and adjusted earnings before interest, taxes, depreciation and amortization in 2013, the first full year they would be in effect, according to HealthSouth. If Congress adopts measures proposed by the National Commission on Fiscal Responsibility and Reform, commissioned by President Barack Obama and commonly known as the Simpson-Bowles commission, the impact in 2012 would be $4 million on net operating revenue and $7 million on adjusted EBITDA, according to the company.
By comparison, the company posted revenue of nearly $2 billion and adjusted EBITDA of $427.4 million for 2010.
Local HealthSouth facility executives are reporting that hospitals in their markets are considering wage freezes and other measures that may reduce the competition for healthcare workers, enabling the company to offer smaller merit increases that could offset about half of the impact of the across-the-board-cut scenario, Grinney said.
When the bill became law, Grinney added, “We didn’t panic. Make no mistake: We didn’t like the prospect of lower Medicare payments, because we already face lower payments under the Affordable Care Act, but we didn’t panic.”
