On December 17, 2014, the Centers for Medicare and Medicaid Services ("CMS") announced that there would be reductions in Medicare reimbursement for health care providers who do not meet the CMS electronic health record ("EHR") incentive program's meaningful use requirements. This announcement comes in the wake of CMS' decision in October to extend the hardship exception deadline - an exception that allowed health care providers to avoid a payment adjustment in 2015, until November 30, 2014.

The EHR incentive program was implemented as part of the American Recovery and Reinvestment Act of 2009. Healthcare providers that implement EHR technology can receive incentive payments by demonstrating compliance with the meaningful use requirements established by CMS. The meaningful use requirements are a combination of patient and provider measurements that range from recording patient information to provider performance. However, the incentive structure built into the EHR incentive program states that healthcare providers that fail to meet the meaningful use requirements are subject to penalties in the form of payment adjustments.

Beginning on January 5, 2015, physicians who failed to adopt an EHR system and meet the meaningful use requirements in 2014 face a 1% reduction in their 2015 Medicare payments. In addition, physicians who failed to meet both the meaningful use and the electronic prescribing program requirements in 2014 face a 2% reduction in 2015. Approximately 285,000 physicians will experience a reduction in payment.

Healthcare facilities are not exempt from these reductions. On October 1, 2014, approximately 200 hospitals that failed to participate in the meaningful use program began to receive less Medicare dollars per patient. These payment adjustments apply to the percentage increase to the Inpatient Prospective Payment System ("IPPS") payment rate for those hospitals that are not meaningful EHR users. In 2015, hospitals face a 25% reduction, with the payment adjustment increasing to 50% in 2016.

The payment adjustments announced by CMS signals that healthcare providers may have a steeper hill to climb in order to meet the meaningful use requirements in later stages. The EHR incentive program is divided into three stages, and healthcare providers must demonstrate meaningful use of EHR technology during each stage. Given CMS' enforcement of payment adjustments in Stage 1, healthcare providers should brace for challenges from more binding requirements in Stage 2 and Stage 3.

Affected healthcare providers may appeal the proposed payment reduction on or before February 28, 2015. Details on how to file the appeal are contained within the CMS written notice of payment reduction distributed in mid-December.

As the EHR incentive program continues, Akerman is poised to assist physicians and hospitals in complying with the meaningful use requirements.