ACHIEVING MEANINGFUL USE OF ELECTRONIC HEALTH RECORDS AN UPDATE FROM THE POLSINELLI SHUGHART HEALTH CARE GROUP

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1 February 2010 Health Care Attorneys Janice A. Anderson Douglas K. Anning Mary Beth Blake Teresa A. Brooks Jared O. Brooner Anne M. Cooper Fredric J. Entin Kara M. Friedman Rebecca L. Frigy Randy S. Gerber (continued) ACHIEVING MEANINGFUL USE OF ELECTRONIC HEALTH RECORDS AN UPDATE FROM THE POLSINELLI SHUGHART HEALTH CARE GROUP T he Health Information Technology for Economic and Clinical Health Act (HITECH), which was included as part of the American Recovery and Reinvestment Act of 2009, created three incentive programs targeted at eligible health care professionals and hospitals that can demonstrate meaningful use of electronic health records (EHR). These programs provide payment incentives in the Medicare Fee for Service (FFS), Medicare Advantage (MA) and Medicaid programs. On January 13, 2010, the Centers for Medicare & Medicaid Services (CMS) published a proposed rule to establish the initial criteria that an eligible professional and eligible hospital must meet in order to qualify for the incentive payments, how the incentive payment amounts will be calculated and KANSAS CITY ST. LOUIS CHICAGO DENVER PHOENIX WASHINGTON DC NEW YORK WILMINGTON DE OVERLAND PARK ST. JOSEPH SPRINGFIELD TOPEKA EDWARDSVILLE

2 Health Care Attorneys (continued) C. Jason Hannagan Jay M. Howard Joan B. Killgore Jason T. Lundy Jane K. McCahill Matthew J. Murer Thomas P. O'Donnell Daniel S. Reinberg Randal L. Schultz Charles P. Sheets Sandy J. Smith Valerie S. Smith Carey Gehl Supple Mark R. Woodbury how payment adjustments will be made under Medicare for those failing to meet the meaningful use requirements. Eligible hospitals may begin to qualify for incentive payments as early as October 2010, and other eligible professionals may begin to qualify for incentive payments beginning January In order for hospitals and health care professionals to take full advantage of the EHR incentive programs, it is important to learn and understand the eligibility criteria and how to meet them. Topics covered in this e Newsletter: Achieving Meaningful Use Reporting Meaningful Use and Clinical Quality Measures Calculation and Receipt of Incentive Medicare FFS Incentives Medicare Eligible Professionals Medicare Eligible Hospitals Critical Access Hospitals Medicare Advantage Incentives MA Affiliated Eligible Professionals MA Affiliated Eligible Hospitals Incentive Payments Medicaid Incentives Conclusion Medicaid Eligible Professionals Medicaid Eligible Hospitals Incentive Payments Page 2 of 14

3 ACHIEVING MEANINGFUL USE To qualify for incentive payments under the incentive programs, eligible professionals (EPs) and hospitals, including critical access hospitals (CAHs) must establish that they are meaningful users of EHR. The term meaningful use describes the use of health information technology (HIT) to further the goals of information exchange among hospitals and health care professionals. According to HITECH, an EP or hospital is considered a meaningful user of EHR if, during the specified reporting period, it: 1. Demonstrates use of certified EHR technology in a meaningful manner 2. Demonstrates that the certified EHR technology is connected in a manner that provides for the electronic exchange of health information in order to improve the quality of health care, such as promoting care coordination 3. Uses certified EHR technology to submit information on specified clinical quality measures and other measures. CMS has proposed a phased in three stage approach to implement the requirements for a provider to demonstrate meaningful use. Initially, Stage 1 is proposed to establish reasonable criteria for meaningful use based on the capabilities of current HIT. This stage focuses 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, implementing clinical decision support tools to facilitate disease and medical management consistent with other provisions of Medicare and Medicaid, and reporting clinical quality measures and public health information. Stage 1 is proposed to apply to incentive payment years 2011 and The full criteria for Stage 1 differ for hospitals and EPs and are set forth here. Although CMS has not yet proposed criteria for Stages 2 and 3 (those criteria will be developed over time), Stage 2, which will apply in 2013, likely will expand on the Stage 1 to encourage the use of HIT for continuous quality improvement at the point of care and the exchange of information in the most 1 For purposes of incentive payments made to eligible hospitals, CMS has proposed to define a payment year and year of payment as any fiscal year beginning with For all EPs, CMS has proposed a common definition for both payment year and year of payment, as any calendar year beginning with Page 3 of 14

4 structured format possible. Stage 3 criteria, which would begin in payment year 2015, likely will center on promoting improvements in quality, safety and efficiency; improving decision support for conditions of national priority, patient access to self management tools, and access to comprehensive patient data; and improving health. As shown in the table below, the progression from Stage 1 through Stage 3 moves faster for EPs and eligible hospitals that adopt EHR technology after Therefore, it is imperative that hospitals and EPs who have not developed an EHR implementation plan should do so as soon as possible. First Payment Year Payment Year ** 2011 Stage 1 Stage 1 Stage 2 Stage 2 Stage Stage 1 Stage 1 Stage 2 Stage Stage 1 Stage 2 Stage Stage 1 Stage * Stage 3 * Avoids payment adjustments only for EPs in the Medicare EHR Incentive Program. ** Stage 3 criteria of meaningful use or a subsequent update to the criteria if one is established through rulemaking. An EP or eligible hospital must satisfy each objective and measure of the critieria applicable to that Stage in order to establish meaningful use for an applicable payment year. To qualify for an incentive payment in the first payment year only, the EP or eligible hospital need only satisfy the criteria of Stage 1for any continuous 90 day period during the payment year. After the initial payment year, however, the EP or eligible hospital must meet all of the Stage 1 criteria for the entire payment year. Page 4 of 14

5 REPORTING MEANINGFUL USE AND CLINICAL QUALITY MEASURES An EP or eligible hospital must report and demonstrate to CMS, or the applicable state, its compliance with the meaningful use requirements. This can be done for payment year 2011 through an attestation process. HITECH requires hospitals and EPs to electronically submit to CMS or the applicable state, through an EHR, information on clinical quality measures. While CMS proposes using only an attestation to demonstrate compliance with the electronic submission of quality measures in 2011, starting in 2012, clinical quality measures must be electronically reported to CMS or the states to meet the meaningful use requirements For all other criteria, however, CMS will continue to allow reporting through attestations only and encourages attestations to be submitted through claims based reporting or through an online portal. CMS will provide further instructions on the process for attestation in the future. CMS has proposed over 90 clinical quality measures which consist of 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. The National Quality Forum has endorsed all of the proposed measures; however, not all of the proposed quality measures are currently used in the pay forreporting programs, which may create significant challenges for providers in implementing the new measures should they be adopted in the final rule. Under the proposed rule, providers would be required to report on all required quality measures for all applicable patients, not just Medicare patients. A full list of the clinical quality measures may be found at: pdf/e pdf (see page 32). CALCULATION AND RECEIPT OF INCENTIVE MEDICARE FFS INCENTIVES Medicare Eligible Professionals A Medicare EP, who may qualify for the incentive by demonstrating meaningful use, is a doctor of medicine or osteopathy, a doctor of dental surgery or dental medicine, a doctor of podiatric medicine, a doctor of optometry, or a Page 5 of 14

6 chiropractor, who is legally authorized to practice under state law. Under HITECH, hospital based EPs (meaning an EP who furnishes 90 percent or more of his or her allowed services in a hospital, including all hospital inpatient, outpatient, and emergency department settings, including all settings that meet the definition of the main provider, department of a provider or having a provider based status) are not eligible to receive the Medicare incentive payments. Under the Medicare FFS incentive program: Qualifying EPs are entitled to receive incentives for up to five years, with payments beginning as early as 2011 No incentives will be paid after 2016 Incentive payments will be equal to 75 percent of Medicare allowable charges for covered professional services furnished by the EP in a payment year, subject to the incentive payment maximums The maximum amount of total incentive payments that an EP can receive under the Medicare FFS incentive program is $44,000 If the EP predominantly furnishes (i.e., over 50 percent of professional services) services in a Health Professional Shortage Area (HPSA), maximum annual incentive amounts are increased by 10%, for a total maximum incentive amount of $48,000 EPs who become meaningful users after 2014 will not be eligible to receive incentive payments. The following table shows the maximum incentive payment amounts available to EPs in a non HPSA each year under the Medicare FFS incentive program: Meaningful Incentive Payment Use Established $18,000 $12,000 $ 8,000 $ 4,000 $ 2,000 0 Total $44, $18,000 $12,000 $ 8,000 $ 4, $15,000 $12,000 $ 8, $12,000 $ 8, $ 2,000 $ 4,000 $ 4,000 0 $44,000 $39,000 $24,000 0 Page 6 of 14

7 Beginning in 2015, if an EP has not established meaningful EHR use, the Medicare physician fee schedule amount for covered professional services furnished by the EP during the year will be reduced by applying a sliding scale percentage reduction to the fee schedule amount that would otherwise apply. For 2015, the non compliant EP would receive only 99 percent of the Medicare fee schedule amount (or if the EP is also not a successful e prescriber 98 percent); (ii) for 2016, only 98 percent of the fee schedule amount would be paid to non compliant EPs; and (iii) for 2017 and beyond, only 97 percent would be paid. CMS has proposed that payments made under the Medicare FFS incentive program will be made in a single, consolidated annual payment through Medicare Administrative Contractors (MAC) or carriers. The incentive payments will be made to the Tax Identification Number (TIN) provided by the EP. For EPs associated with more than one practice, CMS has proposed that the EP select one TIN to receive applicable EHR incentive payments. EPs would be allowed to reassign incentive payments to an employer or an entity with which they have a valid employment agreement or contract providing for such reassignment. CMS, however, has proposed to preclude an EP from reassigning incentive payments to more than one employer or entity. Unlike hospitals, which may participate in both the Medicare FFS and Medicaid programs, EPs may participate in only one program. CMS has proposed to allow each EP to designate its program of choice and to allow the EP to change its designation one time before Medicare Eligible Hospitals A hospital eligible for the Medicare FFS incentive payments is a hospital paid under the hospital inpatient prospective payment system (IPPS) and is located in one of the 50 states or the District of Columbia. Eligible hospitals do not include psychiatric, rehabilitation, long term care, children s or cancer hospitals, which are excluded from the IPPS. Under the Medicare FFS incentive program: A qualifying eligible hospital may receive incentive payments for up to four years, beginning October 2010 Fiscal year 2015 is the last year for which an eligible hospital can begin receiving incentive payments for meaningful EHR use Page 7 of 14

8 An eligible hospital can qualify to receive payments from both the Medicare and Medicaid incentive programs In determining incentive payment amounts, CMS has proposed that an eligible hospital s incentive payment be based on each hospital s Medicare Part A and MA inpatient bed days, total inpatient bed days and charges for charity care, in accordance with the following formula: Incentive Amount = [Initial Amount] x [Medicare Share] x [Transition Factor] Initial Amount = $2 million + [$200 for each discharge above 1,150 discharges not to exceed 23,000 discharges] Medicare Share = [(# Medicare Part A inpatient bed days) + (# MA inpatient bed days)] / [(# total inpatient bed days) / (ratio of total charges less charges for charity care to total charge)] Transition Factor = 1 for the first payment year, ¾ for the second payment year, ½ for the third payment year, ¼ for the fourth payment year, and 0 thereafter. The following table shows the applicable transition factors depending upon the year that an eligible hospital first qualifies for a Medicare FFS incentive payment: Fiscal Year Fiscal Year that Eligible Hospital First Receives Incentive Payment Like EPs, hospitals that are not meaningful users of certified EHR by 2015 and beyond will be subject to penalties in the form of reductions in IPPS payments. Page 8 of 14

9 Critical Access Hospitals CAHs can qualify to receive payments from the Medicare EHR incentive program. Qualifying CAHs may receive incentive payments for up to four payment years beginning with cost reporting periods that begin in FY The year with a cost reporting period that begins in FY 2015 is the last payment year for which a qualifying CAH can receive incentive payments as a meaningful EHR user. Qualifying CAHs can receive incentive payments equal to the product of its reasonable costs incurred for the purchase of EHR technology, excluding any depreciation and interest expenses associated with the acquisition, and its Medicare share percentage which shall be equal to the lesser of (i) 100 percent, or (ii) the sum of the Medicare share fraction for the CAH and 20 percentage points. If beginning during the FY 2015 cost reporting period a CAH is not a meaningful user of EHR, its reimbursement will be reduced from 101 percent of its reasonable costs to percent for FY 2015, to percent for FY 2016, and to 100 percent for FY 2017 and beyond. MEDICARE ADVANTAGE INCENTIVES MA Affiliated Eligible Professionals Incentive payments may be made to qualifying MA organizations for certain EPs who are meaningful users of certified EHR technology during the relevant EHR reporting period. A qualifying MA organization is an organization that is organized as a HMO. A qualified MA organization may receive an incentive payment only for EPs who are deemed eligible professionals. An eligible professional is defined as either (i) employed by the qualifying MA organization or (ii) employed by or a partner of an entity that, through a contract with the qualified MA, furnishes at least 80 percent of the entity s Medicare patient care services to enrollees of the qualifying MA organization. Further, an EP must furnish (i) at least 80 percent of his or her professional services covered under Medicare to enrollees of qualified MA organizations, and (ii) on average, at least 20 hours/week of patient care services (the 20 hours includes both Medicare and non Medicare patient care services). Page 9 of 14

10 MA Affiliated Eligible Hospitals A qualified MA affiliated eligible hospital is a hospital that is a meaningful user of certified EHR technology and is under common corporate governance with a qualifying MA organization which serves individuals enrolled in MA plans offered by such organization. A MA organization that intends to ask for reimbursement under the MA EHR incentive payment program must indicate its intentions as part of the submission in its initial bid. Incentive Payments Before an incentive is released to MA organization affiliated EPs, CMS is required to ensure that such EPs did not receive the maximum EHR incentive payment for the relevant payment year under the Medicare FFS incentive program The maximum cumulative incentive payment over five years to a qualified MA organization for each of its qualified EPs that meaningfully use certified EHRs beginning on or before 2012 would be $44,000/qualifiying MA EP or hospital. MEDICAID INCENTIVES Medicaid Eligible Professionals Medicaid EPs are physicians, dentists, nurse practitioners, certified nurse midwives, and physician assistants practicing predominantly in FQHC or RHC (having more than 50 percent of their encounters over a six month period in the most recent calendar year occurring at an FQHC/RHC) that is directed by a physician assistant. Medicaid EPs also may not be hospital based professionals. To qualify for the Medicaid EHR incentive, an EP must have a minimum of 30 percent patient volume attributable to individuals receiving Medicaid; or, if the EP is a pediatrician, a minimum of 20 percent patient volume attributable to individuals receiving Medicaid. If a practice is predominantly in a FQHC or RHC, the practice must have a minimum 30 percent patient volume attributable to needy individuals. The incentive payment for EPs equals 85 percent net average allowable costs, subject to the following caps: Page 10 of 14

11 Year 1: $25,000 Subsequent five payment years: $10,000 The maximum incentive payment equals $63,750 over a period of six years with payments in alignment with the calendar year. The following table demonstrates the various maximum incentive payment amounts for Medicaid EPs: Cap on Net Average Allowable Costs, per the HITECH Act 85% Allowed for Eligible Professional Maximum Cumulative Incentive over a 6 Year Period $25,000 in Year 1 for most professionals $21,250 $10,000 in Years 2 6 for most professionals $8,500 $63,750 $16,667 in Year 1 for pediatricians with a minimum 20% patient volume, but less than 30% patient volume, Medicaid patients $6,667 in years 2 6 for pediatricians with a minimum 20% patient volume, but less than 30% patient volume, Medicaid patients $14,167 $5,667 $42,500 Medicaid Eligible Hospitals Both children s hospitals and acute care hospitals are eligible for the Medicaid incentive program payment. States may pay up to 100 percent of an aggregate EHR hospital incentive over a minimum three year period and maximum six year period. The aggregate EHR hospital incentive amount is calculated using an overall EHR amount multiplied by the Medicaid share. The aggregate Medicaid hospital incentive is the total amount the hospital could receive in Medicaid payments over four years of the program. In determining this amount, states Page 11 of 14

12 may use auditable data sources to calculate the Medicaid EPs aggregate incentive amount sources include: Incentive Payments Medicare cost reports State specific Medicaid cost reports Payment and utilization information from the state s MMIS Hospital financial statements and accounting records. Before states disburse the Medicaid payments, there will need to be coordination between Medicare and Medicaid to avoid duplicate payments. While Medicaid EPs must waive their rights to duplicative incentive payments, eligible hospitals may receive payments from both Medicare and Medicaid. Further, CMS has proposed that for EPs and eligible hospitals with multi state Medicaid practice locations, the provider must annually pick only one state from which to receive Medicaid incentive payments. CONCLUSION As indicated above, incentive payments may begin as soon as October 2010 for eligible hospitals and January 2011 for other eligible professionals. In order for hospitals and health care professionals to take full advantage of the EHR incentive programs, it is important to learn and understand the eligibility criteria and how to meet them to maximize the incentive and avoid any reduction in reimbursement in the future. For further guidance on how to take full advantage of the EHR incentive programs, please contact any of the following members of the Polsinelli Shughart PC Health Care team: Janice Anderson janderson@polsinelli.com Tom O Donnell todonnell@polsinelli.com Valerie Smith vsmith@polsinelli.com Rebecca Frigy rfrigy@polsinelli.com Anne Cooper acooper@polsinelli.com Page 12 of 14

13 January 2010 Health Care Attorneys Mary Beth Blake, Chair Randal L. Schultz, Vice-Chair Janice A. Anderson Douglas K. Anning Teresa A. Brooks Washington, D.C Jared O. Brooner St. Joseph Anne M. Cooper Fredric J. Entin Kara M. Friedman Rebecca L. Frigy St. Louis Randy S. Gerber St. Louis C. Jason Hannagan Jay M. Howard Joan B. Killgore St. Louis Jason T. Lundy Jane K. McCahill Matthew J. Murer Thomas P. O Donnell todonnell@polsinelli.com Daniel S. Reinberg dreinberg@polsinelli.com Charles P. Sheets csheets@polsinelli.com Sandy J. Smith ssmith@polsinelli.com Valerie S. Smith vsmith@polsinelli.com Carey Gehl Supple cgehlsupple@polsinelli.com Mark R. Woodbury St. Joseph mwoodbury@polsinelli.com About Polsinelli Shughart s Health Care Group Our health care group has the depth and breadth of experience to provide a full spectrum of legal services for health care providers, including mergers and acquisitions, capital financing, facility licensing, accreditation and certification, compliance counseling, responding to fraud and abuse investigations, operational issues relating to patient care, HIPAA and health privacy, information systems, administrative hearings before state and federal agencies, EMTALA matters, third party payment and coverage disputes, and relationships between physician and affiliated institutions. Our clients include community hospitals, academic medical centers, integrated health systems, children s hospitals, behavioral health facilities, rehabilitative service facilities, longterm care facilities, as well as home health agencies, diagnostic facilities and more than 200 physician practice groups. To learn more about our services, visit us online at Page 13 of 14

14 If you know of anyone who you believe would like to receive our updates, or if you would like to be removed from our e-distribution list, please contact Sarah Blair via at Polsinelli Shughart PC provides this for informational purposes only. The material provided herein is general and is not intended to be legal advice. Nothing herein should be relied upon or used without consulting a lawyer to consider your specific circumstances, possible changes to applicable laws, rules and regulations and other legal issues. Receipt of this material does not establish an attorney-client relationship. Polsinelli Shughart is very proud of the results we obtain for our clients, but you should know that past results do not guarantee future results; that every case is different and must be judged on its own merits; and that the choice of a lawyer is an important decision and should not be based solely upon advertisements. Polsinelli Shughart is a registered trademark of Polsinelli Shughart PC. About Polsinelli Shughart PC With more than 470 attorneys, Polsinelli Shughart PC is a national law firm that is a recognized leader in the areas of business litigation, financial services, bankruptcy, real estate, business law, labor and employment, construction, life sciences and health care. Serving corporate, institutional and individual clients regionally, nationally and worldwide, Polsinelli Shughart is known for successfully applying forward-thinking strategies for both straightforward and complex legal matters. The firm can be found online at Page 14 of 14