Tim Wolters

CMS proposes three stages of meaningful use criteria, with Stage 1 effective in 2011 and 2012, Stage 2 in 2013 and 2014, and Stage 3 in 2015 and beyond. CMS publishes only the proposed Stage 1 requirements in this rule. Starting in 2011, hospitals and physicians are eligible for funding when they can demonstrate they are meaningful users of certified EHR technology. To be considered meaningful users, hospitals must meet a total of 23 objectives, while physicians must meet a total of 25 objectives. Seventeen of the objectives are common objectives to be met by hospitals and physicians. View Table 2 from the proposed rule, showing the proposed Stage 1 objectives. One of the more controversial objectives is for computerized provider order entry (CPOE), with hospitals required to have 10 percent of all orders given electronically.

Hospital Medicare Payment

To receive Medicare payment, hospitals must attest their compliance with the meaningful use criteria for each reporting period in a manner specified by CMS. The first reporting period must consist of a continuous 90-day period during the first payment year. Subsequent reporting periods would include the entire payment year. Payment years are based on federal fiscal years, with the earliest payment year being federal fiscal year 2011, starting October 1, 2010.

EHR payment to prospective payment system (PPS) hospitals will be a function of a base payment ($2 million) and a discharge payment ($200 per discharge for up to 23,000 discharges, excluding the first 1,149 discharges) combined together. This total will be multiplied by the Medicare percent of patient days, with 100 percent paid in the first year, 75 percent in the second year, 50 percent in the third year and 25 percent in the fourth year of meaningful EHR use. If the first payment year is 2014, the 100 percent payment factor is lost. The 75 percent payment factor is lost if the first payment year is 2015, and a PPS hospital receives no payments if meaningful use is not achieved until after federal fiscal year 2015.

The Medicare percent of patient days is proposed to include adults and pediatric, intensive care, rehabilitation and psychiatric unit patient days as reported on the Medicare cost report. Skilled nursing and nursery days are excluded from the proposed definition. Medicare Advantage days will be included in the computation, based on days reported on the cost report. CMS does not specify if these days will also be required to be billed as “no-pay” or “shadow” bills to the Medicare administrative contractor, though this may be clarified in the final rule.

The total patient days used in the denominator will be reduced by a hospital’s charity care as a percent of total charges, which will thus increase the Medicare percent and the total EHR payment received. Charity care will be based on the amount reported on Worksheet S-10 of the hospital Medicare cost report.

Interim payments will be paid based on data reported on the cost report ending during the federal fiscal year prior to the payment year. Final payments for a payment year will be based on data reported on the cost report ending during the payment year.

Critical access hospitals (CAHs) will receive cost reimbursement for EHR costs, with an enhanced payment for depreciation on EHR technology. The enhanced payment will be based on the Medicare percent of patient days plus 20 percent, times the depreciable cost of EHR technology. The first eligible payment year will be a CAH’s cost reporting period beginning on or after October 1, 2010. Other EHR costs besides depreciation will be reimbursed as normal through the cost report.

Hospital Medicaid Payment

PPS hospitals with at least 10 percent Medicaid utilization can receive Medicaid EHR payments. The aggregate Medicaid payment will be based on the four-year payment formula under Medicare, and then replacing the Medicare utilization with Medicaid utilization, including Medicaid managed care patient days. The actual period of payment will be at least three years and will be subject to rulemaking by each state Medicaid agency.

Children’s hospitals can receive the Medicaid incentive payments without meeting the 10 percent Medicaid utilization threshold. Unfortunately, CMS has excluded CAHs from eligibility for the Medicaid incentive payment. All CAHs with 10 percent or more Medicaid utilization are advised to consider submitting comments to CMS asking them to reconsider their decision to exclude CAHs from Medicaid EHR payment eligibility.

Physician Medicare Payment

Physicians will be reimbursed with an add-on to Medicare fee schedule amounts for services rendered after meaningful EHR use has been demonstrated, starting in calendar year 2011. However, physicians electing to receive Medicare incentive payments may not also receive Medicaid incentive payments. For Medicare purposes, a physician includes a:

• Doctor of medicine or osteopathy
• Doctor of dental surgery or dental medicine
• Doctor of podiatric medicine
• Doctor of optometry
• Chiropractor

The maximum add-on amount over a period of up to five years will be $44,000 if the first year of meaningful use is 2011 or 2012, $39,000 if the first year is 2013 and $24,000 if the first year is 2014. No payments will be made if meaningful use does not occur by the end of 2014. If the physician operates in a health professional shortage area (HPSA), an additional 10 percent bonus is added to the amounts noted above.

Hospital-based physicians are not eligible for these incentives. CMS proposes to define hospital-based physicians as physicians furnishing 90 percent or more of their professional services during a year with the following place of service codes:

• 21 – inpatient hospital
• 22 – outpatient hospital
• 23 – emergency room, hospital

Note that because physicians affiliated with provider-based clinics bill using place of service code 22, these services will count toward the 90 percent threshold of hospital-based services, making it harder for them to receive the Medicare (or Medicaid) incentive payments.

Physician Medicaid Payment

Physicians and other eligible professionals (EPs) may be eligible to receive Medicaid incentive payments. As noted above, a physician electing to receive Medicare incentive payments may not also receive Medicaid incentive payments. For Medicaid purposes, an EP includes a:

• Physician
• Dentist
• Certified nurse midwife
• Nurse practitioner
• Physician assistant, if practicing in a rural health clinic (RHC) or federally qualified health center (FQHC) led by a physician assistant

An EP must not be hospital-based, consistent with the Medicare requirements above, and the EP must also have a minimum 30 percent patient volume attributable to individuals receiving Medicaid. A pediatrician must have a minimum 20 percent Medicaid patient volume.

An EP is exempt from the hospital-based exclusion, and thus eligible for Medicaid incentive payments, if more than 50 percent of his or her patient encounters occur at an RHC or FQHC over a period of six months. Such an EP is also exempt from the 30 percent Medicaid patient volume requirement, instead needing to show 30 percent of his or her patients are needy individuals. Needy individuals would include Medicaid patients as well as patients furnished uncompensated care or furnished services based on a sliding scale determined by their ability to pay.

Medicaid payments are limited to $21,250 in the first year of meaningful use and $8,500 per year thereafter for up to five years. The first year must occur no later than calendar year 2016, and the maximum aggregate Medicaid payment per EP is $63,750.

Conclusion

To achieve meaningful use in time to receive the proposed payment incentives, hospitals and physicians should evaluate their existing systems and plan now to implement necessary technology enhancements. Frankly, hospitals that have not already begun this process may find it challenging to achieve meaningful use before the payment incentives begin to expire.

For both physicians and hospitals, slight penalties will be imposed beginning in 2015 if not meaningful EHR users, with the penalties growing over several years. Hardship exceptions are available in limited circumstances for up to five years.

By June 30, 2010, the Secretary of Health and Human Services is to issue a report to Congress concerning other providers not receiving payments under these provisions, such as skilled nursing facilities and home health agencies.

Contact your BKD National Health Care Group advisor for more details on the proposed regulations and the process of implementing EHR.