On April 15, 2010, President Barack H. Obama signed into law the Continuing Extension Act of 2010 (Extension Act), which contains a significant clarification to the provisions of the Health Information Technology for Economic and Clinical Health Act (HITECH Act) related to “hospital-based eligible professionals.” This clarification (effective as of enactment of the HITECH Act) provides that physicians who practice in hospital outpatient settings (other than emergency rooms) will not be considered hospital-based eligible professionals and therefore will be eligible for electronic health record (EHR) incentive payments under the HITECH Act. Hospitals that employ or contract with such eligible professionals (EPs) may receive the EHR incentive payments earned by the professionals if there is a valid reassignment of the incentives to the hospitals.

As discussed in our previous alerts (Foley.com/EHR), the HITECH Act provides Medicare and Medicaid EHR incentives to eligible hospitals and professionals who make “meaningful use” of certified EHR technology. Under the HITECH Act, professionals who are hospital-based are ineligible to receive any incentive payments because they are deemed to be using the hospital's EHR technology. The HITECH Act previously defined a hospital-based eligible professional as a professional who furnished “substantially all … services in a hospital setting (whether inpatient or outpatient) and through the use of the facilities and equipment, including qualified electronic health records, of the hospital” (italics added). In its proposed regulations issued on January 13, 2010, the Centers for Medicare and Medicare Services (CMS) further defined hospital-based eligible professionals as professionals who furnish 90 percent or more of their covered professional services during the calendar year in a “hospital setting,” which CMS interpreted as including “all types of outpatient care settings in the main provider, on-campus and off-campus provider-based departments (PBDs) of the hospital, and entities having provider-based status… .” CMS proposed to use the place of service (POS) codes on physician claims (code 21 for Inpatient Department, 22 for Outpatient Department, and 23 for Emergency Room) to determine whether an EP is hospital-based.

Under the HITECH Act, an eligible hospital's Medicare and Medicaid incentive payments are based on its total inpatient services. The formula for eligible hospitals' incentive payments does not recognize the additional costs associated with the implementation and meaningful use of EHR systems in hospital outpatient departments, which creates disincentives for adoption of certified EHR technology in hospital outpatient departments. CMS acknowledged this potential issue in its proposed regulations: “[A] hospital with a large outpatient department will not receive a higher incentive payment as a result of their outpatient services … we are concerned that hospital investment in their outpatient primary care sites is likely to lag behind their investment in their inpatient EHR systems.” As a result of its concern, CMS specifically requested comment on this issue in its proposed regulations. The comment period for the CMS proposed regulations ended on March 15, 2010, and final regulations have not yet been issued.

Congress has now taken action on this issue. Section 5 of the Extension Act amends the HITECH Act to remove the “whether inpatient or outpatient” parenthetical. In its place, Congress has inserted “inpatient or emergency room setting.” The legislative summary of the Extension Act suggests that the amendment was intended to permit those EPs who practice in hospital outpatient settings (apart from emergency rooms) to qualify for Medicare or Medicaid incentive payments. Presumably, CMS' final regulations issued regarding EHR also will reflect this clarification.

The passage of the Extension Act's clarifications to the definition of hospital-based eligible professionals under the HITECH Act has resulted in significantly expanded access to EHR incentive payments. Hospital-based EPs who practice in outpatient settings, other than emergency rooms, are now eligible for EHR incentive payments provided that they make meaningful use of certified EHR technology. Hospitals desiring to take advantage of this opportunity for additional funding should take steps to ensure that their employed or contracted EPs providing services in outpatient sites assign their rights to receive the incentive payments to their employing or contracting hospitals.