As you probably know, Congress and President Obama were unable tocome to an agreement that would have avoided the automatic spending cuts knownas sequestration. Unless an agreement is reached soon, this will mean an $85billion reduction in spending for the remainder of the federal fiscal year,which ends on September 30th. About half of that amount would come from a fivepercent across-the-board cut in discretionary domestic spending. The other halfwould come from an eight percent reduction in defense spending.
Medicaid is exempt from the sequestration cuts, but two-percentcuts in Medicare provider payments and five-percent reductions in other federalhealth-care programs, including biomedical research, could soon begin to affecthospitals and health care organizations nationwide. Naturally, we at Penn arenot immune from the effects of such cuts and our hope is that they will bereversed.
But if they aren’t, the quality of carethat we provide to our patients will still remain exceptional. Because ofcareful planning and our continuing focus on using resources sensibly, we canweather the reductions triggered by sequestration. We’ve been working hard overthe past several months to develop a strategy for addressing potential cutbackssuch as the ones that have now been officially put into play. As a result --and because we’re a fiscally sound institution -- the Health System is wellprepared to continue delivering on its mission. Also, the Perelman School ofMedicine will continue providing world-class training of future physicians, andfaculty members will still perform high-caliber research that offers fresh hopeto patients worldwide.
To sustain our ability to address theramifications of sequestration, we are fully invested in a two-track approach.First, we’ll continue to refine our short-term plan for ensuring that coreactivities continue in an uninterrupted manner and at a high level. Second, we’reworking closely with our peer institutions and professional organizations tohelp Washington understand the potentially serious national consequences of thehealth care cuts.
Sequestration is taking place in the middle of a slowly recovering economy, continuinguncertainty surrounding health-care reform, rising costs, and lowerreimbursement rates. But, in spite of these difficulties, we will maintain ourcommitment to improving the well being of our patients and community whilemaking our health system even strongerfor the future.
These are dynamic times for PennMedicine, and the pace will only get faster. Expanding opportunities await usand we won’t be diverted by short-term crises. We recognize that events such assequestration are part of what it means to be a major health-care organizationin a highly complex macro-environment.
The contributions that each of you makes every day enable us towithstand such major external challenges, and for that I am grateful. Yourresourcefulness and commitment to efficiency have helped create the conditionsof fiscal strength that will allow us to absorb sequestration with littlenoticeable impact. I know that you will continue to be vigilant in seeking outways to do more with less. Working together, I am confident that we will comeout of this process an even stronger institution.