The Health Information Technology for Economic and Clinical Health Act (HITECH Act) under Title XIII of ARRA, provides incentives for the adoption and meaningful use of certified electronic health records (EHR) technology. Specifically, the HITECH Act contains financial incentives for physicians and hospitals to implement and adopt EHRs. The financial incentives are based on the concept of "meaningful use" of certified EHRs by physicians and hospitals. "Meaningful use" is broadly defined as follows: i) use of "EHR technology in a meaningful manner" (which for physician incentives shall include the use of e-prescribing); ii) electronic exchange of health information to improve the quality of care such as promoting coordination of care; and iii) reporting on clinical quality measures (which shall become more stringent over time).

Certified EHR technology is defined as a qualified electronic health record that is certified as meeting the standards for hospital settings as adopted by the Office of the National Coordinator for Health Information Technology (ONCHIT). Products certified by the Certification Commission for Health Information Technology (CCHIT) are likely to meet this definition. Notwithstanding the definitions, there has been much controversy and uncertainty regarding the more specific definition of "meaningful use" that will be detailed in a proposed regulation to be published in December 2009.

Medicare Hospital Incentives

Under ARRA, eligible hospitals will receive enhanced reimbursement starting in fiscal year (FY) 2011 and will be assessed penalties beginning in FY 2015 for hospitals that are not "meaningful users" of EHRs. The incentives are to be distributed over a four-year transition period through the formula described below. Unless hardship is demonstrated, hospitals that are not meaningful EHR users will see 75 percent of their market-basket update reduced by the following: 33.33 percent for 2015; 66 percent for 2016; and 100 percent for 2017 and beyond.

The incentive payment for each eligible hospital would be calculated based on the product of (1) an initial amount, (2) the Medicare share and (3) a transition factor.

  • The initial amount is the sum of a $2 million base-year amount plus a dollar amount based on the number of discharges for each eligible hospital.
  • The Medicare share is a fraction based on estimated Medicare fee-for-service and managed care inpatient bed days divided by estimated total inpatient bed days and modified by charges for charity care.
  • The transition factor phases down the incentive payments over the four-year period. The factor equals one for the first payment year, three-quarters for the second payment year, one-half for the third payment year, one-quarter for the fourth payment year and zero thereafter.

Medicare Physician Incentives

Non-hospital based physicians are eligible for incentive payments if they become meaningful users of certified EHRs starting in FY 2011. There is a total of $44,000 in Medicare payments available per eligible individual physician:

  • Year 1 - $18,000 (if the first payment year is 2011 or 2012)
  • Year 2 - $12,000
  • Year 3 - $8,000
  • Year 4 - $4,000
  • Year 5 - $2,000

There are no incentive payments for physicians that first adopt EHRS in 2014. It is currently unclear whether the incentive payments will be in the form of a single consolidated payment or in the form of periodic installments.

Fee schedule reductions will apply to physicians not using certified EHR technology starting in 2015 as follows:

  • 1 percent in 2015;
  • 2 percent in 2016; and
  • 3 percent in 2017 (and after)

The Secretary may exempt an eligible professional from the fee reductions if the requirement for being a meaningful EHR user would be a significant hardship.

Definition of Meaningful Use

The Office of the National Coordinator for Health Information Technology Health IT Policy Committee has submitted recommendations, including a matrix of what constitutes "meaningful use" of health information technology, in order for providers to obtain incentive payments from federal stimulus funds.

The Policy Committee recommended that incentives be paid according to an "adoption year" rather than a calendar year. This means the 2011 measures will apply to a provider's first adoption year even if that adoption occurs after 2011. For example, if a provider first adopts HIT in 2013, the 2011 measures (not the 2013 measures) would nevertheless apply under the Policy Committee's recommendation. Accordingly, in order to qualify for the first-year incentive payment, an eligible provider must meet the established 2011 measures, including the ability to report quality measures to CMS relating to diabetes, hypertension, cholesterol, smoking cessation and obesity, as well as reporting on the percentage of orders entered directly by physicians through computerized physician order entry (CPOE) and various screening measures.

The matrix measures that the Policy Committee has recommended be adopted in order to be considered a "meaningful user" of Health Information Technology (HIT) correspond with the HIT Policy Committee Health Outcomes Policy Priority Objectives. The 2011 and 2013 goal is to "electronically capture in coded format and to report health information and use that information to track key clinical conditions." The 2015 goal is to "achieve and improve performance and support care processes and on key health system outcomes." The matrix outlines the Policy Committee's recommended "meaningful use" requirements for both providers and hospitals. The criteria required in 2011 include the following:

  • using computerized physician order entry (computer-based entry required by 2011, but electronic interfaces are not required by 2011);
  • implementing drug-to-drug, drug-to-allergy and drug-to-formulary checks> maintain up-to-date problem list of current and active diagnoses based on ICD-9 or SNOME
  • e-prescribing capability;
  • maintain active medication lists;
  • maintain active medication allergy list;
  • record demographics;
  • record advance directives;
  • record vital signs;
  • record smoking status;
  • incorporate lab test results;
  • generate lists of patients by specific conditions to use for quality improvement;
  • report ambulatory quality measures to CMS;
  • send reminders to patients for follow-up care;
  • send reminders to patients for follow-up care;
  • implement one clinical decision rule;
  • document a progress note for each encounter;
  • check insurance eligibility;
  • submit claims electronically to payers;
  • provide patients with an electronic copy of their health record;
  • provide patients with electronic access to health information;
  • provide access to patient-specific education resources;
  • provide clinical summaries for patients for each encounter;
  • ability to exchange key clinical information;
  • perform medication reconciliation;
  • capability to send electronic data to immunization registries;
  • capability to provide electronic syndromic surveillance data to public health agencies;
  • compliance with HIPAA privacy and security rules; and
  • compliance with fair data sharing practices set forth in the Nationwide Privacy and Security Framework.

CMS will issue a proposed regulation by the year end and will issue a final rule in the spring of 2010. You can see the full "meaningful use" matrix here.