December 5, 2011 | last updated April 19, 2012 1:54 pm

Scalpel? Or Cleaver? | Central Mass. health care sector could face funding cuts after committee's failure on deficit deal

"Sequestration" is the new buzzword in Congress and it has the health care sector in Massachusetts feeling a bit sick.

The word refers to $1.2 trillion in automatic budget cuts to be triggered in 2013 after a Congressional "super committee" failed to come to agreement last month on a deficit-cutting plan for the country.

The impacts could be felt disproportionately in Massachusetts, which brings in more National Institutes of Health funding than nearly all other states. And the Central Massachusetts health care sector, which employs about 20,000 at hospitals alone, could also take a big hit.

Since it's more than a year before the cuts would take effect, it leaves some hoping that their funding will be spared by a deal in 2012. But area institutions are nervous nonetheless.

Hospitals face the potential for Medicare reimbursement rates, already about 92 cents on the dollar, to worsen in 2013. The Massachusetts Hospital Association pegs potential losses for its members at $1.1 billion.

Timothy Gens, executive vice president and general counsel for the MHA, said that loss would come on top of $5 billion in Medicare spending reductions over 10 years that were implemented under the 2010 health care reform law.

Medicare and Medicaid funding together account for more than half of hospital revenues in the state, Gens said.

"We'd certainly hope that any changes to the sequestration formula would require that there would be equal scrutiny of other federal programs," he said.

He said full reimbursement for provided care is vital for hospitals to make gains in electronic medical records, payment reform and initiatives contained in the 2010 legislation. The law requires more reporting of hospital data and ties more incentives and penalties to hospital performance.

Impact On Medical Research

Hospitals aren't the only ones with something to lose from sequestration. Colleges and biotech companies that rely on National Institutes of Health funding to pay for their research could see a 7.4-percent drop in the number of research project grants, according to figures from the House Appropriations Committee.

The University of Massachusetts Medical School in Worcester received $152.3 million in NIH funding in 2010, according to government data, making it the largest recipient of NIH funds in Central Massachusetts.

Sherry Pagoto, an associate professor of medicine at the school, is concerned that NIH cuts could affect her ongoing research on depression, cancer and obesity, which is fueled by about $3.5 million in grants.

Pagoto said she has become accustomed to her NIH allocations being shaved a bit at the start of each year. Nationally, the grants have been nearly flat since 2003. She has lost staff in her laboratory and said NIH cuts in 2013 would almost certainly mean job cuts.

Pagoto traveled to Washington, D.C., several weeks ago with a group of researchers to meet with members of Congress and make the case for NIH funding. But she found that the focus in Washington is on short-term savings, not on long-term investments in medical breakthroughs that could lead to savings down the road.

Meanwhile, the rates of lifestyle diseases like diabetes are creeping up and are sure to stress the health care system in the future.

"What are we doing about that?" Pagoto asked. "Are we prepared from a health care system perspective and a financial perspective?"

She and her colleagues are constantly busy writing grants. The NIH funded roughly one in five grant applications in 2010, according to its data, so researchers have to be prepared to fail more often than not. Pagoto followed the super committee proceedings and said it seemed doomed to fail from the start.

"Everyone's very discouraged about it," she said. "We're definitely preparing for the worst."

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