EHR Incentive Funding for Medicare and Medicaid

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1 EHR Incentive Funding for Medicare and Medicaid Implementing the American Reinvestment & Recovery Act of 2009 Mike Stigler, FHFMA, CPA Director

2 EHR Incentives EHR Incentive Legislation: American Recovery and Reinvestment Act of 2009 which included the Health Information Technology for Economic and Clinical Health Act ("HITECH Act") Proposed Rule issued 1/13/10 Final Rules issued 7/28/10 CMS - New Part 42 C.F.R. 495 (276 pages) DHHS HIT Standards adds to 42 C.F.R. 170 (66 pages) 3

3 Who is a Medicare FFS Eligible Provider? Eligible Providers in Medicare Eligible Professionals (EPs) Doctor of Medicine or Osteopathy Doctor of Dental Surgery or Dental Medicine Doctor of Podiatric Medicine Doctor of Optometry Chiropractor EP s receive payment from 1 program either Medicaid or Medicare Definition different for Medicare/Medicaid: Medicare = doctors, but not midlevels Medicaid = doctors & midlevels Excluded: Rural Health Clinics and Federally Qualified Health Centers However, these centers may qualify for Medicaid..

4 Who is a Medicare FFS Eligible Provider? Acute Care Hospitals Eligible Hospitals* IPPS/DRG Hospitals can receive Medicare AND Medicaid if they qualify Critical Access Hospitals (CAHs) Excluded: Psychiatric, Rehabilitation, ER, Children s & Cancer Hospitals Multiple, discrete campuses operating under 1 provider # would be recognized as 1 provider only Surgical and other specialty hospitals participating in IPPS are eligible for Medicare incentives *Subsection (d) hospitals that are paid under the PPS and are located in the 50 States or DC (including Maryland hospitals)

5 Who is a Medicaid Eligible Provider? Eligible Providers in Medicaid Eligible Professionals (EPs) Physicians (Pediatricians have special eligibility & payment rules) Nurse Practitioners (NPs) Certified Nurse-Midwives (CNMs) Dentists Physician Assistants (PAs) who lead a Federally Qualified Health Center (FQHC) or rural health clinic (RHC) that is directed by a PA Eligible Hospitals Acute Care Hospitals & Cancer Hospitals (>10% Medicaid) Children s Hospitals (Medicaid not tested)

6 Medicaid Eligibility: Patient Volume Entity Physicians - Pediatricians Dentists CNMs PAs when practicing at an FQHC/RHC that is so led by a PA NPs Acute care hospitals Children s hospitals Minimum Medicaid patient volume threshold 30% 20% 30% 30% 30% 30% 10% No requirement Or the Medicaid EP practices predominantly in an FQHC or RHC 30% needy individual patient volume threshold Not an option for hospitals

7 Meaningful Use Stages Meaningful Use will be defined in 3 stages through rulemaking First Payment Year * 2011 Stage Stage 1 Stage Stage 2 Stage 1 Stage Stage 2 Stage 2 Stage 2 Stage Stage 3 Stage 3 Stage 3 Stage 3 Stage Stage 3 Stage 3 Stage 3 Stage 3 *Stages 2 and 3 will be defined in future CMS rulemaking.

8 Meaningful Use Stage 1 Hospital & CAHs All 14 core objectives, w/ exceptions for N/A 5 of 10 set objectives Eligible Professional All 15 core objectives, w/ exceptions for N/A 5 of 10 set objectives EHR Reporting Period (when must be MU) EP = 1 st year any 90 days. Then full calendar year Hospital/CAH = 1 st year any 90 days. Then full FFY 11

9 Incentive Payments for EPs Eligible professionals (EPs) Calendar Year calculation (Medicare) Up to $44,000 over 5 years if meaningful EHR user (Medicaid) Up to $63,750 over 6 years 2015 and later If not meaningful EHR user up to 3% payment reduction in Medicare reimbursement EPs be allowed to change their program selection only once during payment years 2012 through 2014 Significant hardship exception for up to 5 years with CMS approval E.g. rural EP without significant internet access EP can receive Medicaid incentives from only 1 State No incentive after 2016

10 Incentive Payments for Medicare EPs -Based on 75% of Medicare Payments ($24,000 x 75% cap/yr) -Group Practice x # of EP Calendar Year 2011 First Calendar Year in which the EP receives an Incentive Payment CY 2011 CY 2012 CY 2013 CY 2014 CY 2015 $18,000 and later 2012 $12,000 $18, $8,000 $12,000 $15, $4,000 $2,000 $8,000 $4,000 $12,000 $8,000 $12,000 $8,000 $ $2,000 $4,000 $4,000 $0 TOTAL $44,000 $44,000 $39,000 $24,000 $0 *Single Annual Payment

11 EHR Incentives HPSA Incentive 10% Increase in incentive (max $48,000 vs. $44,000) Provides services predominantly in HPSA Defined as >50% of covered services provided in HPSA January 1 December 31 of prior year No impact if HPSA lost during current year No impact if HPSA obtained during current year Applies ONLY to geographic HPSA Primary care, dental, mental health HPSAs NOT available to other kinds of HPSAs Population or Governor desig shortage Medically Underserved Areas (MUAs) 14

12 Stimulus Payments EP Single Consolidated Payment Ascertain professional has demonstrated MU Reaches maximum payment limit If maximum payment limit is not reached, payment is processed 2 months after relevant payment year Multiple Employers/Contractual Arrangements Assign incentive to 1 employer or entity

13 Stimulus Payments EP Failure to become a meaningful EHR user by % of applicable fee schedule % of applicable fee schedule % of applicable fee schedule 2018 Additional 1% reduction if less than 75% professionals are meaningful users. Subsequent year reductions capped at 95%

14 Medicaid EP Incentive payment to EP equals Net Average Allowable Costs for HER NAAC is Average Allowable Costs (capped at $25K in yr 1 and $10K in years 2-6) net of cash payments attributable to EHR technology or support services from sources other than state and local governments, subject to 15% EP responsibility

15 Hospital HIT Stimulus Payment Years Defined: CAH Cost Reporting Period First available payment year begins with the first cost report beginning on or after October 1, 2010 PPS Hospital Federal Fiscal Year Year beginning on October 1 and ending September 30 First available payment year begins October 1, 2010 EHR Reporting Period 1 st year Continuous 90 day period within first payment year Subsequent Entire payment year

16 Hospital Stimulus Payments Medicare Share Medicare Share Based on inpatient volume Numerator Medicare days + Medicare Advantage patient days IP, Specialty Care» Psych and Rehab are excluded in the final rule» Excludes Swing Bed Important Medicare Advantage based on no-pay bills

17 Hospital Stimulus Payments Medicare Share Based on inpatient volume Denominator Total inpatient days TIMES Hospital charges less charity care DIVIDED BY hospital charges» Worksheet C, Part I, Line 200, Column 8 Charity Care As identified on Worksheet S-10 of the Medicare cost report for PPS Hospitals New reporting requirement for CAHs

18 PPS Hospitals - Medicare Initial Amount Base payment for each PPS hospital = $2,000,000 Adjusted for discharges 1,150 to 23,000 $200 additional per discharge in the range Times Medicare Share Payment Process Hospital data last filed 12 month cost report Settled based on the first 12 month cost reporting period that begins after the start of the payment year

19 PPS Hospitals - Medicare Failure to become a meaningful EHR user by FFY 2015 Market Basket Adjustment reduction on 75% of the adjustment FFY Pct FFY Pct FFY Net Impact FFY Pct FFY Pct FFY Pct Pct

20 PPS Hospital Payment Example ELIGIBLE YEARS 2011/2012/2013 TOTAL CHARGES $ 50,000,000 CHARITY CARE CHARGES 1,000,000 NET CHARGES 49,000,000 TOTAL CHARGES 50,000,000 NET CHARGE FACTOR 0.98 TOTAL INPATIENT DAYS 10,000 TOTAL ADJUSTED DAYS 9,800 MEDICARE INPATIENT DAYS 6,000 MEDICARE PART C DAYS (MANAGED CARE) 2,000 TOTAL MEDICARE DAYS 8,000 TOTAL ADJUSTED DAYS 9,800 MEDICARE SHARE % 81.63% INITIAL AMOUNT $ 2,000,000 DISCHARGE ADD-ON: TOTAL DISCHARGES 2,000 Discharges in execss of 1, AMOUNT PER DISCHARGE FOR 1,150 TO 23,000 DISCHARGES $ TOTAL DISCHARGE ADD-ON 170,200 TOTAL INITIAL AMOUNT 2,170,200 MEDICARE SHARE 81.63% TRANSITION FACTOR % EHR INCENTIVE PAYMENT $ 1,771,592 Charity Care per Worksheet S-10, excludes courtesy allow. and discounts Discharge transfers not addressed if included in count

21 Incentive Payments for Eligible PPS Hospitals Fiscal Year 2011 Fiscal year that eligible hospital first receives the incentive payment FY 2011 FY 2012 FY 2013 FY 2014 FY and later

22 Critical Access Hospitals - Medicare Allowed to expense their costs associated with the purchase of certified EHR technology in a single year Versus depreciating costs on the cost report Current year and prior year purchases (undepreciated value) Includes only purchases for hospital specific EHR technology Reimbursement based on Medicare share + 20 percentage points (not to exceed 100%) Lump sum prompt payment subject to reconciliation Initial based on last 12 month cost report Final based on final cost report Payments up to 4 consecutive years Stages Replacement equipment

23 Critical Access Hospitals - Medicare Allowable expense Reasonable cost computers and associated hardware and software necessary to administer EHR technology Communicate with the Fiscal Intermediary with any questions Impact on Trade-ins? Review capitalization policies Incentive payment in lieu of depreciation AND interest FI to review cost reports to ensure that assets associated with the acquisition of certified EHR technology are expensed in a single period and that depreciation and interest expenses associated with the acquisition are not allowed Subject to reconciliation

24 Critical Access Hospitals - Medicare Failure to become a meaningful EHR user by FFY 2015 Reduction in 101% of cost FFY % of cost FFY % of cost FFY % of cost Strategy Place EHR assets in use and become meaningful user in the same fiscal year or consider construction in progress

25 Reasonable Acquisition Cost = Incurred for purchase of depreciable assets Computers, associated hardware and software Excludes depreciation and interest CAH Hospital Payment Example ELIGIBLE YEARS 2011 THROUGH 2015 TOTAL CHARGES $ 50,000,000 CHARITY CARE CHARGES 1,000,000 NET CHARGES 49,000,000 TOTAL CHARGES 50,000,000 NET CHARGE FACTOR 0.98 TOTAL INPATIENT DAYS 10,000 TOTAL ADJUSTED DAYS 9,800 MEDICARE INPATIENT DAYS 6,000 MEDICARE PART C DAYS (MANAGED CARE) 2,000 TOTAL MEDICARE DAYS 8,000 TOTAL ADJUSTED DAYS 9,800 MEDICARE SHARE % 81.63% CAH % ADD-ON 20% CAH MEDICARE SHARE % % TOTAL COSTS OF EHR SYSTEM $ 500,000 LESS: DEPRECIAITON IN PREVIOUS YEARS 100,000 NET COSTS 400,000 MEDICARE SHARE (MAX OF 100%) % EHR INCENTIVE PAYMENT $ 400,000

26 Medicaid Eligible Hospitals Acute care hospital (including CAH) must have at least 10% Medicaid Patient Volume based on patient encounters Inpatient Emergency room Any representative continuous 90-day period in most recent fiscal year Like other Medicaid Eligible Hospitals, CAHs may receive both Medicare and Medicaid EHR incentive payments

27 Medicaid Eligible Hospitals PPS and CAHs reimbursed under same methodology as Medicare PPS Medicaid Share versus Medicaid Share Calculate 4 year payment Discharges based on hospital s experience in past three years Payment made over 3-6 years No more than 50% of payment in 1 year No more than 90% of payment in 2 years Adopt, implement or upgrade certified EHR technology No meaningful use requirement in year 1 Meaningful use required for future years

28 Attestation for Medicare FFS Eligible providers demonstrate MU to CMS through attestation in 2011 and attestation and electronic reporting of clinical quality information in 2012 Providers may submit attestations as early as April 2011 to CMS Payment begins as early as May 2011 following attestation

29 EHR Donations The regulations permit the donation of certain technologies by certain donors to certain recipients on a cost sharing basis

30 Permitted Technology Software necessary and used predominantly for electronic health record purposes, such as creating, maintaining, sending and receiving electronic health records for clinical diagnosis and treatment for a broad array of clinical conditions must include e-prescribing functionality may include non-ehr functionality, so long as it doesn't predominate must be interoperable

31 Can be donated: Cannot be donated: Training on the Software Maintenance for the Software Help-Desk Services for the Software Hardware and related operating systems Storage devices Direct staffing and services necessary to migrate paper records to the EHR Software Staffing for the recipient s office

32 Selection of Recipients by Donor Donor may use any method of selection that does not directly take into account volume or value of referrals. Permissible criteria include: total number of prescriptions written total hours devoted to medical practice size of the physician practice (total patients, total patient encounters, etc) medical staff membership level of uncompensated care provided by the recipient

33 Recipient Requirements Donor cannot have actual knowledge, or act in reckless disregard or deliberate ignorance, of the fact that the recipient possesses or has obtained items or services equivalent to those being provided by the donor Donor cannot restrict the recipient's right to use the items or services for any patient

34 Value provided by Donor Donor may provide 85% of the total cost of the permissible donated items Recipient must pay 15% of the total cost of the permissible donated items Donor cannot finance Recipient's 15% cost allocation

35 Administrative Requirements Must be evidenced by a comprehensive written agreement, signed by both parties, containing a list of all items and services provided, the donor s cost for those items and services, and the amount of the physician's contribution Separate agreements permitted if crossreferenced Sunsets on December 31, 2013 All conditions must be met and transfer must occur on or before this date

36 In Summary Biggest Hurdles Additional initiatives impacting IT operations. Conversion to ICD-10 by 2013 X12 version 5010 for HIPAA transactions (700+ data elements from 300) Compliance Unrealistic timelines Certification guidelines not final Clinical system vendors not enough experience to support numerous new installers? Lack of HIT staff (est. 60,000 shortage) Timeline needed for implementation CPOE Functional issues e.g. Counting orders to determine the denominator for CPOE adoption % - manual chart reviews. Lack of national patient identifier to eliminate mistakes in monitoring patient records in HIE. Low adoption levels currently learning curve significant

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