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Home / News & IndustryManaged Care Insight and Analysis
Updated: March 2, 2010
EHR Incentive Program Establishes Eligibility And Payment Calculations

CMS partnered with the Office of National Coordinator for Health Information Technology (ONC) to establish the electronic health record (EHR) incentive program, defining "meaningful use" of HIT, eligible participants and payment calculations.

Another product of the American Recovery and Reinvestment Act of 2009, the EHR incentive program will provide payments over a six-year period specific to Medicare and Medicaid. If EHR has not been adopted, nor meaningful use achieved, all providers will be subjected to lower payment updates for services after 2015.

"The Medicare EHR incentive program will provide incentive payments to eligible professionals (EPs), eligible hospitals and critical access hospitals (CAHs) that are meaningful users of certified EHRs. The Medicaid EHR incentive program will provide incentive payments to EPs and hospitals for efforts to adopt, implement or upgrade certified EHR technology or for meaningful use in the first year and for up to another five years," CMS said.

CMS proposed to implement the definition of ‘meaningful use’ through three stages. The first stage designates the "criteria for meaningful use to focus on electronically capturing health information in a coded format, using that information to track key clinical conditions, communicating that information for care coordination purposes and initiating the reporting of clinical quality measures and public health information."

The first stage will begin in 2011; CMS proposed 25 measures for EPs and 23 for eligible hospitals. For the complete list, visit: http://edocket.access.gpo.gov/2010/pdf/E9-31216.pdf.

EPs must select which program to receive payments under, while hospitals can collect from both Medicare and Medicaid’s incentive program. EPs and hospitals under the Medicaid program must select which state to receive their payment from.

Medicare Incentive Program

To be an EP under the Medicare program, the participant must be: a doctor of medicine or osteopathy, a doctor of dental surgery or dental medicine, a doctor of podiatric medicine, a doctor of optometry or a chiropractor who is legally authorized to practice under state law.

A qualifying EP can receive up to $44,000; receiving payments beginning in 2011. For the first year enrolled in the program, an EP can receive $18,000 (in 2011 or 2012), for the following years incentive payments will be $15,000, $12,000, $8,000, $4,000 and $2,000. (See Table 1).

Calendar Year

Table1: First CY in which the EP Receives an Incentive Payment

2015 and subsequent years

2011

2012

2013

2014

2011

$18,000





2012

$12,000

$18,000




2013

$8,000

$12,000

$15,000



2014

$4,000

$8,000

$12,000

$12,000


2015

$2,000

$4,000

$8,000

$8,000

$0

2016


$2,000

$4,000

$4,000

$0

Total

$44,000

$44,000

$39,000

$24,000

$0

Source: Centers for Medicare and Medicaid Services.

CMS proposes the first year an EP applies and receives the incentive payment that the EHR reporting period will last a continuous 90-day period within that year. For every year after the first payment year the reporting period will be the entire year.

Other key points to a Medicare EP are:

  • A qualifying EP will receive an incentive payment equal to 75 percent of Medicare allowable charges for covered professional services furnished by the EP in a payment year, subject to maximum payments.
  • An EP who predominantly furnishes services in a geographic Health Professional Shortage Area is eligible for a 10 percent increase in the maximum incentive payment amount raising the total incentive payments that such an EP can receive to $48,400.
  • After the initial designation, EPs will be allowed to change their program from the Medicare to the Medicaid EHR incentive program once during the payment years 2010-2014.
  • Payments under Medicare will be disbursed through Medicare Administrative Contractors (MACs) or carriers to the Tax Identification Number provided by the qualifying EP.
  • Hospital-based EPs who furnish substantially (90 percent) all their services in a ‘hospital setting’ are not eligible for payments.

An eligible hospital for Medicare incentive payments is a ‘subsection (d) hospital’ paid under the hospital inpatient prospective system located within the 50 states or the District of Columbia.

The incentive payment is based on:

  • an initial amount which is the sum of a $2 million base amount and the product of a per discharge amount and the number of discharges;
  • the Medicare share which is the proportion of Medicare fee-for-service and managed care inpatient bed-days to the product of total inpatient days and by the hospital’s total charges that are not attributed to charity care; and
  • a transition factor which phases down the incentive payments over the four-year period.

The transition factor follows the same model as the EP payment does; 1.00 will be used for 2011, decreasing by a quarter increment each year. (See Table 2).

Fiscal Year

Table 2: Fiscal Year that Eligible Hospital First Receives the Incentive Payment

2011

2012

2013

2014

2015

2011

1.00





2012

0.75

1.00




2013

0.50

0.75

1.00



2014

0.25

0.50

0.75

0.75


2015


0.25

0.50

0.50

0.50

2016



.025

0.25

0.25

Source: Centers for Medicare and Medicaid Services.

"Incentive payments will be made to qualifying Medicare Advantage (MA) organizations for the adoption and meaningful use of EHR technology by their affiliated eligible hospitals ... an MA-affiliated hospital is an eligible hospital that is under common corporate governance with the MA organization and serves individuals enrolled by the MA plan," said CMS.

CAHs are held to the same eligibility requirements as other hospitals. However their payment calculation is different: "a qualifying CAH will receive an incentive payment amount equal to the product of its reasonable costs incurred for the purchase of certified EHR technology and its Medicare share percentage. The Medicare share percentage equals lesser of (1) 100 percent or (2) the sum of the Medicare share fraction for the CAH percentage points," said CMS.

Medicaid Incentive Program

"The Recovery Act amended the Medicaid statue to provide 100 percent Federal Financial Participation (FFP) for state expenditures for provider incentive payments to encourage Medicaid healthcare providers to adopt, implement and operate certified EHR technology. It also established a 90 percent FFP match for state expenses for administration of the incentive payments and for promoting EHR adoption," said CMS.

Providers in their first year under the Medicaid incentive program can qualify for payment "by demonstrating any of the following: that they have adopted (that is, acquired and installed), implemented (that is, trained staff, deployed tools, exchanged data) or upgraded (that is, expanded functionality or interoperability) a certified EHR," said CMS.

An EP under the Medicaid program are: physicians, dentists, nurse practitioners, certified nurse midwives and physician assistants practicing predominantly in a federally qualified health center or rural health clinic.

EPs can receive up to $63,750 over the six-year period; pediatricians with Medicaid patient volumes between 20-29 percent.

EPs must annually meet patient volumes thresholds, measured by a ratio where the numerator is the total number of Medicaid patient encounters over any representative continuous 90-day period in the most recent calendar year and the denominator is all patient encounters over that same 90-day period. For all EPs except pediatricians, the patient volume threshold is 30 percent; for pediatricians it’s 20 percent.

EPs can not be hospital-based; the same stipulation as under the Medicare program.

Eligible hospitals are acute care and children’s hospitals. An acute care hospital is a primary health facility where the average length of patient stay is 25 days or fewer; they must also meet a patient volume threshold of 10 percent being Medicaid patients. Also hospitals with a CMS Certification Number with the last four digits between 0001-0879 are eligible, including short term general hospitals and the 11 cancer hospitals in the U.S.

CMS defines a children’s hospital as a separately certified children’s hospital, either freestanding or hospital-within-hospital, that has a certification number with the last four digits in the series 3300-3399 and predominantly treats individuals under 21-years-old.

Calculation for hospital payment is the overall EHR amount times the Medicaid share.

Address: Centers for Medicare and Medicaid Services, 7500 Security Blvd., Baltimore, MD 21244; (877) 267-2323, www.cms.gov.


  This article was taken from:
Healthcare Reimbursement Monitor

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