Now that sequestration—a series of automatic federal program spending cuts that will total $1.2 trillion over the next nine years, $85 billion of which will happen by the end of fiscal 2013—is a reality, medical meeting professionals are left trying to tease out what potential effects it could have on their businesses.
Many travel and hospitality specialists expect that many meetings will be affected in some way, be they medical society conferences, pharmaceutical advisory board meetings, or events unrelated to healthcare. The American Hotel and Lodging Association predicts that federal agencies will put employee travel to conferences at the top of their cut list as they look for ways to reduce their budgets. Healthcare e-learning specialist Jeremy Lundberg, CEO, DLC Solutions and EthosCE LMS, says he already has heard from medical associations whose membership comprises a large percentage of federal employees who want his company’s help to move from live meetings to e-learning CME because of travel bans. “They are having a big increase in registrant cancellations for spring meetings, which can be their primary source of annual revenue. Sequestration named as the primary driver.”
John JD Juchniewicz, MCIS, CCMEP, president of the American Academy of CME, Inc., agrees. “Government travel is definitely being affected,” he says. “So if you conduct live CE-certified events with federal [healthcare professional] attendees, you're likely seeing an impact.”
Getting to events may also get a little more difficult and time-consuming for attendees who aren’t experiencing a travel ban as the sequestration cuts go into effect. Because most federal agencies are required to provide a 30-day furlough notice for widespread staffing cutbacks, the full effects of some of the budget reductions that took effect on March 1 won’t be felt until April. However, some airports are already experiencing longer lines at security checkpoints as the Transportation Security Administration reduces overtime for its staff, according to Janet Napolitano, secretary of Homeland Security, though airport officials disagree that it is affecting domestic travel already. The Federal Aviation Administration is planning to furlough many of its employees, which could cause flight delays and cancellations if airports have to shut down runways and cut shifts for their air traffic controllers, particularly at smaller and mid-sized airports.
Medical congresses with a high concentration of international attendees may also find their global guests facing longer wait times to get through customs and immigration. As Napolitano said recently, you can expect longer wait times at customs and immigration, as well as at Transportation Security Administration security checkpoints, as overtime, a hiring freeze, and furloughs go into effect at TSA and U.S. Customs and Border Protection.
Sequestration and CME Grants
Sequestration cuts to the federal healthcare-related organizations are on the table, but it doesn’t appear that these cuts will have too many direct effects on continuing medical education. As Andrew Rosenberg, partner, Thorn Run Partners and senior advisor with the Washington, D.C., lobbying group The CME Coalition, says, “There is no way to know whether or not cuts to [Health and Human Services] will result in any reductions in grant funding that may be used for government medical education campaigns, but I cannot see a significant or direct impact on CME.”
One director of CME at a state specialty society said on the Continuing Medical Education LinkedIn group that only those who are doing grant work for the government would feel the impact, since “It's a couple of percentage points off an increase from last year.” But Bill Bresser, marketing director at the Medical Technology Management Institute, counters that, saying, “While the percentage of dollars due to be cut is proportionally small, I think the effect will be a decrease in support for CME; it being one of the first line items to be cut from the budget.”
And for those who rely on government funding, the fallout could be harsh. New Jersey Academy of Family PhysiciansVice President Theresa Barrett reports that, according to a friend who handlesfor a major defense contractor, all of which is funded by government , “It is the family docs who work within the military who are going to suffer. If they cannot come to together for training, how are they going to learn new applications?”
Even CME providers who are not being directly affected by the sequestration cuts may find their programs being affected indirectly as cuts in federal healthcare programs trickle down to docs, who then have to make hard decisions about where to spend their shrinking income when it comes to education.
Trickle-Down Sequestration Effects
Medicare will start paying docs 2 percent less to treat beneficiaries if lawmakers don’t reach a different solution before this cut goes into effect on April 1. Physicians, already squeezed by a Medicare payment system that hasn’t kept pace with practice operating costs in recent years, along with rising insurance rates and other costs, may stop participating in optional continuing medical education, or cut down on the number of activities they participate in as a result. And the cuts, which come to about $11 billion for 2013, may also reduce the total number of people available to participate in healthcare CE. According to a September 2012 report from the American Medical Association, the American Hospital Association, and the American Nurses Association, that 2 percent Medicare cut could translate into 766,000 healthcare and related industry jobs being either lost or not created.
The National Institutes for Health also is facing a $2.4 billion cut, and it is expected that the cut will be felt across all 27 of the agency’s institutes and centers, according to Adam Dion, MSc, an analyst who covers the healthcare industry for GlobalData. The Office of Management and Budget estimates sequestration will result in the NIH issuing about 2,300 fewer grants to medical researchers in FY2013, representing almost a 25 percent reduction in the NIH’s competitive grant allocation.
As Dion says, “With the success rate for winning an NIH grant at its lowest levels in American history, this could be potentially devastating for biomedical researchers, who seek funding to continue their research programs or for first-time investigators who are starting new projects.” It will mean delays in existing research projects, and likely the elimination of thousands of research positions, according to a statement by HHS Secretary Kathleen Sebelius.
And it’s not just researchers and investigators who will suffer, says Lundberg—it’s healthcare providers in general, and their patients. “I think the real tragedy of sequestration is threefold: HCPs will be blocked from educational opportunities to advance their clinical skills, medical specialty associations will have to curb CME opportunities or potentially close their doors, and, ultimately, the quality of patient care will not evolve and suffer.”
Sequestration and Pharma Meetings
The Food and Drug Administration is facing $210 million in cuts this year—5 percent of fiscal 2013 budget. FDA said in a statement: “A sequestration of the magnitude contemplated, and this late in the budget year, will have public health consequences for an agency that is already making every dollar count. At this time, FDA does not anticipate having to furlough our employees. Other internal measures to absorb the cuts due to sequester will be taken, including reducing travel and training.”
The cuts also affect the FDA’s user fee programs under the Prescription Drug User Fee Act, which enables the agency to collect fees from pharma companies to fund the drug approval process. As it now stands, FDA can collect PDUFA fees, but it can’t spend them unless Congress rules these fees exempt from sequestration. The agency currently is sitting on $85 million in these fees.
According to a White House fact sheet, “The FDA's Center for Drug Evaluation and Research (CDER) would face delays in translating new science and technology into regulatory policy and decision-making, resulting in delays in new drug approvals. The FDA would likely also need to reduce operational support for meeting review performance goals, such as the recently negotiated user fee goals on new innovative prescription drugs and medical devices.” Delays in new drug approvals also mean delays in product launches.
Christopher Perez, CPC, president of the Alexander HealthCare Group, LLC, speaks for many when he says, “There is always a chilling effect of varying duration whenever a big program or policy like [sequestration] is implemented. It disrupts and complicates already complex market dynamics and creates many unintended consequences. Once again we find ourselves in a position of hunkering down and riding it out.”
Adds Lundberg, “The scary thing is appears to be that while sequestration was designed to force the political parties to negotiate, both seem to be easing into a comfort level with the cuts which could make this more permanent than temporary.”