As part of the American Taxpayer Relief Act of 2013, the nation’s hospitals are taking cuts and absorbing the costs of the Affordable Care Act. New Medicaid rates that took effect on January 1 will reduce the amount of federal money hospitals receive for treating Medicare patients. According to Becker’s Hospital Review, although physicians were also at risk of facing a 26.5 percent pay reduction, legislation included a fix. This patch, however, costs about $25 billion, and health providers are paying for it.

Sustainable growth rate, the formula that is used to determine Medicare payment rates to physicians, has consistently been an issue for healthcare professionals. Every year since 2003, Congress has overridden SGR so physicians would not have to endure sizable cuts to their Medicare pay. Although the one-year “doc fix” has technically been settled this year, the hospital sector is taking a large hit.

The bill included a documentation and coding adjustment, which allows the CMS to reduce future reimbursements to correct for Medicare severity diagnosis-related group overpayments that were allegedly made in the past. According to the fiscal cliff bill, the cost is nearly $11 billion and hospitals will lose an additional $4.2 billion over the next decade in Medicaid disproportionate share hospital payments.

In Florida, hospitals will have to absorb $759 million in lower Medicare payments during the next four fiscal years. Although experts say patients won’t pay additional money for services, the decrease in payments is causing hospitals to cut costs. Linda Quick, president of the South Florida Hospital and Healthcare Association, explained that the change shouldn’t affect patients Medicare payments at all.

The Centers for Medicare and Medicaid Services implemented hospital documentation and coding adjustments in 2008, and the government paid hospitals more than it had expected. Over the years, CMS made adjustments and recaptured overpayments, but hospitals were left with a one percent increase in documentation and coding adjustments. This increase was higher than initially proposed because CMS left out a negative 0.8 percent adjustment to correct overpayments in FY 2010.

Although CMS estimates that the overpayments amounts to $11 billion, Ken Perez, senior vice president of marketing for MedAnalytics, estimates that only $1.3 billion in adjustments remain. He explains that that while this pay-for to cover the doc fix is presented as a reasonable adjustment to rectify any overpayments, “this latest fiscal cliff patch nevertheless takes $11 billion from hospitals—eight times more than can be reasonably justified.”