Are you unaware of the reimbursement cuts you receive after submitting a Medicare claim? The Budget Control Act of 2011 authorized the administrative cut to Medicare payments to providers. Likewise, the provider receives a 2% payment cut from Medicare’s share of total fee-for-service reimbursement, known as sequestration in medical billing. The main goal is to balance the United States’ national deficit by reducing Medicare payments by 2%. However, outsourcing RCM billing services can help reduce the revenue gaps that occur due to reimbursement cuts.
It is a mandatory 2% reimbursement reduction from Medicare Fee-For-Service Part A & B payment. This reduction reduces the payment a provider receives after rendering services. Furthermore, the reduction is done only through Medicare’s payment.
Calculating sequestration in medical billing is necessary to ensure that the right amount has been cut. Unusual reduction leads to revenue gaps affecting the overall collection. Therefore, verify that the reimbursement cuts are accurate to achieve a consistent cash flow. Here’s how you can calculate it.
Total Billed Amount: $1500
Medicare Allowed Amount: $1200
Patient’s Responsibility: $200
Medicare’s Payment Portion: $1200 – $200 = $1000
Sequestration (CO-253): 2% of $1000 = $20
Medicare Reimbursed Amount after Sequestration: $1000 – $20 = $980
Provider’s Total Collection: $980 + $200 = $1180
So, the total amount a provider receives is $1180, with sequestration applied only to Medicare’s payment portion after patient responsibility.
Identify sequestration to understand its impact on the overall revenue. Before submitting the Medicare claim, you must include the Claim Adjustment Reason code (CARC) CO-253. Likewise, CARC appears on ERA and EOB in medical billing to ensure the federal payment reduction was applied for Fee-For-Service.
Sequestration in medical billing occurs due to Congress’s decision to balance the US healthcare budget. Likewise, its main goal is to balance the budget spent on various health programs. It is the reduction in the federal payment for providers with Medicare patients. Furthermore, the reduction ensures the budget is balanced and allocated to other regions requiring improvements.
Providers and medical service centers/institutions that bill Medicare for services rendered receive a 2% payment reduction. Here’s how it impacts the providers and financial health.
Continuous reductions in Medicare payments, especially when providers treat only Medicare patients, affect the overall revenue cycle. In addition, claim denials may occur, delaying payment. Repealing claims increases the administrative burden, which can be challenging for smaller practices.
A 2% sequestration in medical billing may seem minimal, but providers handling a large number of Medicare patients can face financial strain. Due to poor financial health, the medical staff fails to acquire advanced medical equipment. In addition, the failure to advance technology ultimately compromises patient care.
Due to continuous payment deductions, providers can limit the number of Medicare patients they accept. Likewise, limiting the patient can result in compromised medical care. Healthcare providers must manage both Medicare and non-Medicare patients to balance their financial health.
Sequestration in medical billing is a mandatory reimbursement cut for providers. Federal law has implemented this 2% reduction only on Medicare’s payment. The reason behind this reduction is to balance the healthcare budget. In addition, the provider who has multiple Medicare patients experiences a financial strain. It further affects the overall revenue cycle of the medical practice.
No, providers cannot appeal sequestration charges by submitting a claim because it is a mandatory federal reimbursement reduction.
Yes, sequestration is mandatory in medical billing because it is a federal payment reduction applied automatically to Medicare FFS claims.
