We have been hearing about the impact of health care reform and sequestration on academic medical centers---how are these conditions impacting Penn Medicine?

Keith Kasper
SVP and Chief Financial Officer, UPHS

There is no question—we are in a ‘squeeze play’ in health care. Like other academic medical centers, Penn Medicine is faced with projected cuts in funding, as detailed below:

• Congress passed a three year retrospective Medicare coding adjustment that will cost Penn Medicine $8M per year;
• Medicare provider payments are not exempt from sequestration, but the cut is expected to be capped at 2% impacting Penn Medicine up to $23 million annually;
• NIH funding is not protected from the overall across the board cut and is expected to be reduced by 5.1%—with an estimated impact on Penn Medicine’s NIH funding of approximately $20 million per year;
• Decreases in hospital payment updates are expected to continue—with an expected loss of revenue between $8.5-$9.5 million per year in 2013 and beyond;
• Currently there is a proposal under consideration to reduce indirect medical education—a 10% reduction would decrease funding up to $8.6 million per year for Penn Medicine.
• Other proposals under consideration include reducing payments for hospital outpatient evaluation and management services by as much as 80%—resulting in a loss of approximately $6.2 million per year under this plan.
• Further cuts to Medicare bad debt reimbursement could place Penn Medicine at risk for an additional $2.5 million per year.

These projected reductions coupled with accelerated costs in clinical information technology, climbing costs of health care benefits for our employees and consumer pressure to improve patient outcomes are all factors which contribute to the current economic pressures in health care. We are taking the necessary steps to ensure our costs do not exceed our revenues.

Our ability to sustain our core missions of patient care, research and education is dependent upon each of us to work together, to make informed, yet tough decisions—and deliver on our promise to provide better, accessible care at a lesser cost. And that’s what we are prepared to do.