United States: Health Reform Law Builds on Electronic Health Record Incentive Program

Adopting and using electronic health records in the healthcare setting is a key predicate to many provisions of the series of bills comprising national healthcare reform, the last of which was signed into law last week by President Obama. The implementation date for federal subsidies for electronic health records (EHRs) is coming fast. Beginning in 2011 physicians and hospitals will be eligible to receive financial incentives from the Medicare and Medicaid programs for adopting and engaging in "meaningful use" of EHRs. This funding was established by the American Recovery and Reinvestment Act of 2009 (ARRA).

The Medicare and Medicaid programs will each offer a separate incentive program starting in 2011. To become eligible for the funds, physicians need to elect participation in either the Medicare or the Medicaid program and demonstrate "meaningful use" of an EHR. Because the Medicare and Medicaid programs contain significant differences, physicians should begin the process of determining which incentive program would provide the maximum financial benefits for their practice.

Proposed Rule on "Meaningful Use"

Both programs require "meaningful use" of EHR technology. On Jan. 13, 2010 the federal Centers for Medicare & Medicaid Services (CMS) issued a proposed rule addressing "meaningful use." The comment period for that rule closed on March 15, 2010. The proposed rule takes a phased approach to "meaningful use" and contemplates that the initial final rule will constitute Stage 1, with plans to update these criteria in Stages 2 and 3 at a later date with increasing levels of stringency. It may be 2013 or later before CMS issues its full interpretation of "meaningful use." As a result, physicians must begin the process of EHR implementation before CMS fully defines the meaningful use criteria and EHR products will need to be flexible enough to be able to adapt to these standards as they evolve.

Generally, the proposed Stage 1 criteria focus on the capturing of health information in a coded format, implementing clinical decision support tools, and reporting clinical quality measures. In Stage 1, physicians must demonstrate that they can meet 25 specific objectives and measures. Some of the most significant requirements include:

• Using computerized physician order entry (CPOE) for at least 80 percent of all orders;
• Using electronic prescriptions for at least 75 percent of all permissible prescriptions;
• Incorporating 50 percent of all clinical lab test results into EHRs;
• Establishing the capability to exchange clinical information among providers;
• Performing medication reconciliations by comparing the EHR's list of all drugs currently taken by a patient with an external medication list at each relevant patient encounter; and
• Implementing five clinical decision support rules relevant to specialty to facilitate disease and medication management, including the ability to track compliance.

In order to demonstrate meaningful use under the proposed Stage 1 criteria, many physician practices will need to modify office processes and workflows.

The proposed rule also requires that only "certified" EHR technology will be eligible to meet meaningful use requirements, as described in a separate Interim Final Rule issued by the Office of the National Coordinator for Health Information Technology, Department of Health and Human Services on Jan. 13, 2010. Physicians should work with their EHR vendors to ensure that their selected EHRs meet certification criteria.

Medicare Incentive Program

The amount of available Medicare financial incentives is based on the physician's Part B billings and the date that the physician can demonstrate "meaningful use" of a certified EHR. According to the ARRA statute, the amount of incentive funds will be set at up to 75 percent of Medicare allowable charges for services furnished in a calendar year, subject to maximums per year and a maximum aggregate subsidy of up to $44,000 paid over 4 years. The payments are structured as annual payments and the amount decreases over a period of years. There is an incentive for early adoption, as the amount of funds available will decrease in 2013 and thereafter. Under the proposed rule, physicians who cannot demonstrate meaningful use of EHRs by 2015 will forfeit the financial incentives and face a one percent decrease in Medicare reimbursement. Potentially, reimbursement can be reduced even more in subsequent years, up to a maximum of 5 percent.

Each physician in a group practice is eligible to receive the full amount of financial incentives, and each employed physician can reassign the financial incentive payments to the group practice. Under the proposed rule, the incentive is not available to hospital-based physicians who perform 90 percent or more of their services in a hospital.

Medicaid Incentive Program

To qualify for the incentives under Medicaid, more than 30 percent of the physician's patient volume must be Medicaid. The Medicaid financial incentives are based on allowable costs of EHR, and the maximum incentive is $63,750. Because the Medicaid incentives are offered through 2021, a physician may still qualify for the maximum incentive even if the physician first demonstrates meaningful use as late as 2016. Also, unlike the Medicare program, nurse practitioners qualify for the Medicaid incentive.

Impact of Healthcare Reform on EHR Adoption; State Grants

Several components of the healthcare reform legislation will explicitly or implicitly require providers to use EHR technology in order to participate in new sources of revenue for quality reporting and other initiatives. For example, the reform bill requires the department of Health and Human Services (HHS) to build upon the "meaningful use" requirements in ARRA to integrate quality reporting requirements that will directly affect payment levels. "Meaningful use" of technology will also be a consideration of grants or contracts for quality measurement development.

On Feb. 12, 2010, HHS announced an award of almost $1 billion in grants to various state and private entities for expanding the adoption and meaningful use of EHRs. A key focus of the grants is to assist physicians in transitioning to EHRs. For example, Purdue University was awarded $12 million as part of the grants. The grant sponsors Purdue's Healthcare Information Technology Extension Center, which will provide assistance to primary care providers transitioning to EHRs, including education and training on workflow modifications and EHR implementation. Initially, assistance will be available starting in April, 2010 for practices with less than ten physicians.

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