Health Care ADVISORY. The Meaningful Use of Electronic Health Records: New Incentives for Eligible Professionals and Hospitals
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1 The Meaningful Use of Electronic Health Records: New Incentives for Eligible Professionals and Hospitals On December 30, 2009, the Centers for Medicare & Medicaid Services (CMS) issued a Proposed Rule (the Proposed Rule ) 1 that sets forth the requirements for eligible professionals (EPs) and eligible hospitals to be considered meaningful users of electronic health records (EHRs) and, thereby, qualify for EHR incentive payments. The Health Information Technology for Economic and Clinical Health (HITECH) Act, which was passed as part of the American Recovery and Reinvestment Act (ARRA), created financial incentives within the Medicare Fee-for-Service (FFS), Medicare Advantage (MA) and Medicaid programs to encourage the use of EHRs. The Proposed Rule specifies the requirements for meaningful use, the calculation for incentive payments and penalties, and other requirements for the three incentive programs. The Office of the National Coordinator (ONC) issued an Interim Final Rule (the Interim Final Rule ) 2 that sets forth initial standards, implementation specifications and certification criteria for EHRs. The initial set of standards, implementation specifications and certification criteria adopted by the Secretary will support the achievement of Stage 1 meaningful use, as outlined in CMS Proposed Rule. ONC is also expected to issue a proposed rule in the near future on the certification process for organizations certifying EHRs. CMS and ONC will be accepting comments on the Proposed Rule and the Interim Final Rule until March 15, Both agencies strongly encourage interested stakeholders to participate in the public comment process to improve upon the proposed incentive programs and adopted standards and certification criteria. The Interim Final Rule is effective February 12, This advisory summarizes the key sections of the Proposed and Interim Final Rules. Meaningful Use Proposed Rule Medicare FFS Incentive Program How is Meaningful Use Defined? Health Care ADVISORY January 20, 2010 Incentive payments will only be available to EPs and eligible hospitals that are considered meaningful users of EHRs. The HITECH Act requires that meaningful users, at the very least, (1) demonstrate use of certified EHR technology in a meaningful manner; (2) demonstrate to the satisfaction of the Secretary that certified EHR technology is connected in a manner that provides for the electronic exchange of health information to improve Fed. Reg (Jan. 13, 2010). 75 Fed. Reg (Jan. 13, 2010). This advisory is published by Alston & Bird LLP to provide a summary of significant developments to our clients and friends. It is intended to be informational and does not constitute legal advice regarding any specific situation. This material may also be considered attorney advertising under court rules of certain jurisdictions.
2 the quality of health care, such as promoting care coordination, in accordance with all laws and standards applicable to the exchange of information; and (3) submit to the Secretary, in a form and manner specified by the Secretary, information on clinical quality measures and other measures specified by the Secretary. CMS proposes three stages for phasing in the meaningful use criteria Stages 1, 2 and 3 with the meaningful use definition becoming more stringent over time. CMS intends to update the meaningful use criteria on a biennial basis, with the Stage 2 criteria proposed by the end of 2011 and the Stage 3 criteria proposed by the end of Stage 1 will be the criteria for meaningful use for all payment years until updated by future rulemaking. CMS states the goals for these phases to be the following: Stage 1 (beginning in 2011): The Stage 1 meaningful use criteria focus on electronically capturing health information in a coded format; using that information to track key clinical conditions and communicating that information for care coordination purposes (whether that information is structured or unstructured, but in structured format whenever feasible); consistent with other provisions of Medicare and Medicaid law, implementing clinical decision support tools to facilitate disease and medication management; and reporting clinical quality measures and public health information. Stage 2 (beginning in 2013): The goals for the Stage 2 meaningful use criteria, consistent with other provisions of Medicare and Medicaid law, expand upon the Stage 1 criteria to encourage the use of health IT for continuous quality improvement at the point of care and the exchange of information in the most structured format possible, such as the electronic transmission of orders entered using computerized provider order entry (CPOE) and the electronic transmission of diagnostic test results (such as blood tests, microbiology, urinalysis, pathology tests, radiology, cardiac imaging, nuclear medicine tests, pulmonary function tests and other such data needed to diagnose and treat disease). Additionally, we may consider applying the criteria more broadly to both the inpatient and outpatient hospital settings. Stage 3 (beginning in 2015): Consistent with other provisions of Medicare and Medicaid law, the goals for the Stage 3 meaningful use criteria are to focus on promoting improvements in quality, safety and efficiency, focusing on decision support for national high priority conditions, patient access to self management tools, access to comprehensive patient data and improving population health. 3 What Are the Stage 1 Criteria for Meaningful Use? CMS proposes that, for 2011, an EP or eligible hospital must satisfy all five objectives and the associated measures, which are reflected below, to be a meaningful user of EHR Fed. Reg. at
3 Stage 1 Criteria for Meaningful Use 4 4 Id. at
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8 Which Clinical Quality Measures Must Be Reported? As part of the meaningful use definition, the EP or eligible hospital is required to submit to the Secretary clinical quality measures and other measures as specified by the Secretary. CMS defines clinical quality measures as measures of processes, experience, and/or outcomes of patient care, observations or treatment that relate to one or more quality aims for health care such as effective, safe, efficient, patient-centered, equitable, and timely care. 5 For EPs and eligible hospitals, CMS gives preference to clinical quality measures endorsed by the National Quality Forum (NQF). In addition, CMS considers measures used under the Physician Quality Reporting Initiative (PQRI) Program for EPs, and measures that have been selected for the Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) program for eligible hospitals. Tables 3 through 21 found in the Proposed Rule list the clinical quality measures for both EPs and eligible hospitals. These tables also include different measures for various specialty providers. How Will EPs and Eligible Hospitals Prove They Are Meaningful Users? Following the EHR reporting period, CMS proposes that EPs and eligible hospitals provide a one-time attestation that identifies the certified EHR technology they are using and provides the results for each of the meaningful use measures. This attestation would be submitted through a secure mechanism, such as claimsbased reporting or an online portal. As technology advances, CMS believes demonstration of meaningful use will become more reliant on automated reporting, such as direct electronic reporting of measures and documentation of health information exchange (HIE) participation. In addition, CMS proposes that EPs and eligible hospitals use an attestation methodology to report summary information on the clinical quality measures in CMS plans to accept this data electronically by 2012, but will notify EPs and eligible hospitals if the attestation methodology is needed again in How Is a Payment Year Defined? For all EPs, CMS proposes that the payment year would be any calendar year beginning with 2011 (i.e., January 1, 2011 December 31, 2011). For eligible hospitals, CMS proposes that the payment year would be any fiscal year (FY) beginning with 2011 (i.e., October 1, 2010 September 30, 2011). What Is an EHR Reporting Period? To qualify under the incentive program, an EP or eligible hospital must demonstrate meaningful use of a certified EHR for the EHR reporting period of the relevant payment year. CMS proposes to define the EHR reporting period for the first payment year as any continuous 90-day period within that payment year. Thus, in order to qualify for the incentive payments during the first payment year, EPs and eligible hospitals would have to demonstrate meaningful use for a 90-day continuous reporting period. For subsequent payment years, the reporting period would be the entire payment year. 5 Id. at
9 How Will an Eligible Hospital s Incentive Payment Be Calculated? Eligible hospitals would be defined as subsection (d) hospitals identified by a unique CMS certification number (CCN). The formula for an eligible hospital s incentive payment would be the product of (1) an initial amount ($2 million plus $200 for the 1,150th through the 23,000th discharge); (2) the Medicare share; and (3) a transition factor applicable to that payment year. The Medicare share is calculated as a fraction based on estimated Medicare FFS and managed care inpatient bed days, divided by estimated total inpatient beddays, modified by charges for charity care. 6 To determine an eligible hospital s discharge related amount and its Medicare share, CMS proposes to make preliminary incentive payments based on data from the eligible hospital s FY that ends during the FY prior to the FY that serves as the payment year. Final payment would be made on the basis of the data from the eligible hospital [FY] that ends during the FY that serves as the payment year at the time of the settlement of the cost report for the latter period. 7 The transition factor would be scaled down for each subsequent year of an eligible hospital s meaningful use and would be lower for eligible hospitals beginning meaningful use in 2014 or No incentive payments would be made to eligible hospitals after Additionally, for FY 2015 and each subsequent FY, CMS proposes reductions to the hospital market basket update for eligible hospitals that are not yet meaningful users of EHRs. How Will Incentive Payments for EPs Be Calculated? Beginning in 2011, an EP who is considered a meaningful user of EHRs would receive an incentive payment equal to 75 percent of his or her Part B allowable charges subject to caps. 8 These caps are best summarized in the chart below Id. at Id. Hospital-based physicians are not eligible to receive incentive payments. CMS proposes that EPs that provide substantially all of their professional services in the inpatient hospital setting, in any type of outpatient hospital setting, or in any combination of inpatient and outpatient hospital settings, be considered hospital-based EPs. Id. at Furthermore, CMS states that it intends to define substantially all to mean 90 percent or more of a physician s services, which will be determined based upon place of service (POS) codes. The status of an EP would be reassessed each year based on the claims data from the preceding year. -9-
10 Professionals who predominantly furnish services in a geographic health professional shortage area (HPSA) would be eligible to receive the above payments plus 10 percent. CMS proposes predominantly to mean that more than 50 percent of the EP s Medicare covered professional services are furnished in a geographic HSPA. 9 The Proposed Rule also sets out how the penalties would be applied to the fee schedule beginning in 2015 for EPs that are not yet meaningful users of EHRs. CMS proposes to distribute the incentives through lump sum payments that would be made on a rolling basis as professionals demonstrate meaningful use. Medicare Advantage Incentive Program Incentives for Qualifying MA EPs Qualifying MA organizations (i.e., an MA organization that is organized as a health maintenance organization (HMO)) would be eligible to receive incentive payments for EPs who are either employed by the MA organization or are employed by, or a partner of, an entity that, through contract with the qualifying MA organization, furnishes at least 80 percent of the entity s Medicare patient care services to enrollees of the qualifying MA organization. The incentive payment to the qualifying MA organization would be calculated in the same way as under the Medicare FFS incentive program (i.e., 75 percent of the allowable Part B costs, subject to caps that are 10 percent higher for EPs predominantly furnishing services in geographic HPSAs). To determine the MA EP s costs under the MA program, CMS proposes that the revenue received by MA EPs for services provided to enrollees of the qualifying MA organization would serve as a proxy for the amount that would have been paid if the services were payable under Part B. 10 For MA EPs who are paid on a salary basis, CMS proposes that qualifying MA organizations develop a methodology for determining the portion of the EP s salary that is attributable to providing services that would otherwise be covered as professional services under Part B. 11 Additionally, for salaried physicians, where appropriate, CMS proposes to allow qualifying MA organizations to account for an additional amount related to overhead that can be added to the MA EP s estimated compensation. CMS proposes to make the incentive payments under the MA incentive program only after payments would be made under the Medicare FFS incentive program to avoid duplicate payments under Medicare. Thus, payments to MA organizations for EPs would not be made until the payment calculations for the FFS EHR incentive program are calculated, which would be early Similar to the Medicare FFS EHR incentive program, beginning in 2015, payment reductions would be applied to organizations that have MA EPs who are not meaningful users Id. at Id. at Id. 12 Id. at
11 Incentives for Qualifying Eligible Hospitals A qualifying MA organization may receive an incentive payment for a qualifying MA-affiliated eligible hospital that is a meaningful user of certified EHR, so long as the eligible hospital is under common corporate governance with the qualifying MA organization and more than two-thirds of the eligible hospital s discharges of Medicare patients are individuals enrolled under MA plans offered by the organization. CMS proposes, however, to reimburse all eligible hospitals, including MA-affiliated eligible hospitals, under the Medicare FFS hospital incentive program. 13 CMS states that this would be the most efficient way to administer the MA EHR incentive program, as there is a low volume of MA-affiliated eligible hospitals, and many of these eligible hospitals already submit cost-reporting data on which payments can be based. If sufficient data is not available to make payments under the Medicare FFS EHR incentive program, qualifying MA organizations would be required to submit additional data in order to be reimbursed. Beginning in 2015, CMS proposes market basket adjustments on the proportion of MA-affiliated eligible hospitals of a qualifying MA organization that are not meaningful users. Medicaid Incentive Program Under the Medicaid Incentive Program, state Medicaid programs would receive (1) 90 percent federal financial participation (FFP) for state expenditures related to the administration of the incentive program for certain Medicaid providers who adopt, implement, upgrade and meaningfully use certified EHR technology; and (2) 100 percent FFP for state expenditures for the incentive payments. To ensure the achievement of interoperability, CMS proposes that the same definition of meaningful use would be used for both the Medicare and Medicaid incentive programs. While states may add additional requirements for the Medicaid incentive program, the definition established by CMS would be considered a floor. Unlike EPs, eligible hospitals could receive incentive payments under both the Medicare and Medicaid incentive programs. As such, CMS proposes that eligible hospitals deemed to be meaningful users under the Medicare program also be considered meaningful users for purposes of the Medicaid incentive program, if otherwise eligible to receive the Medicaid incentive payment. EPs who would qualify under both the Medicare and Medicaid incentive programs must elect to receive incentives under one of the programs. An EP may change this election once, and the payment caps under the programs may not be exceeded. To avoid exceeding these limits, CMS proposes a number of rules that would ensure no provider receives more than what is intended under the HITECH Act. Multistate EPs and eligible hospitals would be required at the beginning of each year to elect a state from which to receive the Medicaid incentive payments. How Will Medicaid Incentive Payments Be Calculated? The following Medicaid providers would be eligible to receive incentive payments, if they meet certain Medicaid patient volume thresholds: physicians, dentists, certified nurse-midwives, nurse practitioners, physician assistants practicing in federally qualified health centers (FQHCs) or rural health clinics, acute care hospitals and children s hospitals. 13 Id. at
12 To receive Medicaid incentive payments in the first year, which may be as early as 2010, EPs and eligible hospitals must demonstrate that they have engaged in efforts to adopt, implement, or upgrade certified EHR technology. 14 CMS proposes that providers who have installed and initiated utilization of EHR technology capable of satisfying meaningful use requirements, or expanded the available functionality and begun utilization of such technology to satisfy meaningful use requirements, would be considered to have adopted, implemented or upgraded EHR technology. After the first payment year, these providers must demonstrate they are meaningful users of the technology. EPs could receive 85 percent of the net average allowable costs for purchasing and using EHRs, subject to a cap of $25,000 in the first payment year and $10,000 for the five subsequent years. 15 For EPs, the maximum payments each year can best be summarized by the chart below: Eligible hospitals could receive up to 100 percent of an aggregate Medicaid incentive payment amount, paid over a minimum three-year period or a maximum of a six-year period. The aggregate EHR amount, which is the total amount an eligible hospital could receive over four years of the program, is the product of the overall EHR amount and the Medicaid share. The overall EHR amount would be calculated in a manner similar to the Medicare hospital incentive payment. 14 Id. at Pediatricians who fall short of the patient volume threshold would be subject to lower maximum payment amounts. -12-
13 Standards, Implementation Specifications and Certification Criteria Interim Final Rule The Interim Final Rule sets forth the initial standards, implementation specifications and certification criteria to be used in determining whether EPs and eligible hospitals are, in fact, meaningfully using certified EHR technology under Stage 1 of the Medicare, MA and Medicaid incentive programs. ONC makes clear that the Interim Final Rule marks the first iteration of a longer process to enhance the interoperability, functionality, utility and security of health information technology (HIT). ONC defines certified EHR technology as a Complete EHR or a combination of EHR Modules, each of which (1) meets the requirements included in the definition of a Qualified EHR, and (2) has been tested and certified in accordance with the certification program to be established by the National Coordinator as having met all applicable certification criteria adopted by the Secretary. 16 ONC identifies eight goals used to guide its approach to adopting the standards, implementation specifications and certification criteria in the Interim Final Rule: Promote interoperability and where necessary be specific about certain content exchange and vocabulary standards to establish a path forward toward semantic interoperability; Support the evolution and timely maintenance of adopted standards; Promote technical innovation using adopted standards; Encourage participation and adoption by all vendors, including small businesses; Keep implementation costs as low as reasonably possible; Consider best practices, experiences, policies, frameworks and the input of the HIT Policy Committee and HIT Standards Committee in current and future standards; Enable mechanisms such as the Nationwide Health Information Network (NHIN) to serve as a test-bed for innovation and as an open-source reference implementation of best practices; and To the extent possible, adopt standards that are modular and not interdependent. 17 Keeping in line with these goals, the adopted standards include many currently in use by the HIT industry, such as those established and endorsed by Health Level Seven (HL7). The Interim Final Rule also relies heavily on existing classification and nomenclature systems, such as Logical Observation Identifiers Names and Codes (LOINC ) and Systematized Nomenclature of Medicine Clinical Terms (SNOMED CT ). Additionally, to accommodate new technologies and industry practices, ONC makes clear that certain types of standards adopted in the Interim Final Rule will be considered the floor for certification Fed. Reg. 2014, Id. at
14 Conclusion The Proposed Rule and the Interim Final Rule represent a pivotal regulatory step under the HITECH Act to incentivize the adoption of EHRs by providers. The proposed new incentive programs, coupled with the adopted certification criteria and standards for EHRs, will among many things, facilitate HIT interoperability, increase the use of clinical decision tools, and improve the reporting of clinical quality measures. Together these rules lay the groundwork for achieving one of Congress s primary goals for the HITECH Act the utilization of an EHR for each person in the country by
15 If you would like to receive future Health Care Advisories electronically, please forward your contact information including address to Be sure to put subscribe in the subject line. For further guidance please contact one of the attorneys or advisors listed below: Alston & Bird Health Information Technology (HIT) Task Force ATLANTA One Atlantic Center 1201 West Peachtree Street Atlanta, GA Catherine Hora Anderson Angela T. Burnette Jennifer L. Butler Martin J. Elgison Laura E. Holland Robert C. Jones Peter M. Kazon David C. Keating Robert C. Lower D Andrea J. Morning Colin T. Roskey Tiffani V. Williams Marilyn Yager Senior Public Policy Advisor CHARLOTTE Bank of America Plaza Suite South Tryon Street Charlotte, NC DALLAS Chase Tower Suite Ross Avenue Dallas, TX LOS ANGELES 333 South Hope Street 16th Floor Los Angeles, CA NEW YORK 90 Park Avenue New York, NY RESEARCH TRIANGLE Suite Beechleaf Court Raleigh, NC SILICON VALLEY Two Palo Alto Square Suite El Camino Real Palo Alto, CA VENTURA COUNTY Suite Townsgate Road Westlake Village, CA WASHINGTON, D.C. The Atlantic Building 950 F Street, NW Washington, DC Alston & Bird llp 2010
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