Prepare for 4% Medicare Cuts: 5 Steps Clinics Must Take

Background on Medicare Cuts Under OBBBA

The One Big Beautiful Bill Act (OBBBA) is projected to increase federal deficits, triggering automatic spending reductions under the Statutory Pay-As-You-Go (PAYGO) Act. A key component of these reductions is a 4% sequestration cut to Medicare payments, scheduled to begin in 2026. Specialty clinics—including infusion centers, oncology practices, and other physician-administered drug providers—face significant financial risks due to these changes.

This article outlines five critical actions clinics can take to prepare for the impending reimbursement cuts.

1. Assess Medicare Revenue Exposure

Understanding the financial impact begins with an internal analysis of revenue streams.

• Identify:

  • The percentage of total revenue derived from Medicare patients.

  • The specific services and drugs most affected by Medicare reimbursement rates.

Why It Matters:

• Clinics heavily reliant on Medicare Part B payments for high-cost infusions may be most vulnerable.

• Knowing exposure helps forecast potential revenue reductions.

2. Strengthen Denial Management Processes

With reduced reimbursement rates, capturing every possible dollar becomes critical.

• Audit claims for:

  • Coding accuracy

  • Documentation completeness

• Track denial trends to identify systemic issues.

• Implement prompt appeal processes to recover denied payments.

Potential Benefits:

• Reducing denials can offset some revenue losses caused by the sequestration cuts.

3. Review Drug Purchasing Strategies

Infusion clinics manage expensive drug inventories under the “buy-and-bill” model.

• Evaluate:

  • Contract terms with drug suppliers.

  • Group purchasing organization (GPO) participation for better pricing.

• Monitor inventory closely to avoid costly wastage.

Considerations:

• Lower Medicare reimbursement rates may squeeze margins on high-cost drugs.

• Strategic purchasing can mitigate margin compression.

4. Enhance Audit Readiness

The OBBBA allocates funds for advanced technology to identify improper Medicare payments.

• Maintain detailed patient records:

  • Diagnosis justifications

  • Treatment rationale

  • Medication dosing and administration logs

• Stay current with Medicare coverage guidelines.

Importance:

• Proactive compliance can prevent payment delays and recoupment demands during audits.

5. Monitor Policy Developments and Plan Ahead

Medicare policies and budget proposals remain fluid.

• Stay informed through:

  • CMS updates

  • Healthcare industry publications

  • Professional associations

• Model various financial scenarios based on potential reimbursement changes.

Goal:

• Avoid last-minute reactions by building contingency plans early.

Conclusion

The projected 4% Medicare sequestration cut under the One Big Beautiful Bill Act represents a significant financial challenge for specialty clinics. By proactively assessing revenue exposure, refining operations, and strengthening compliance efforts, clinics can better navigate the evolving reimbursement environment. Early planning is essential to ensure continued financial viability and uninterrupted patient care as policy changes take effect in 2026.