Implementing the American Reinvestment & Recovery Act of 2009

Mike Stigler, FHFMA, CPADirector502.992.3510mstigler@blueandco.com

EHR Incentive Funding for Medicare and Medicaid

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)

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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 ……..

Who is a Medicare FFS Eligible Provider?

Eligible Hospitals*

Acute Care Hospitals

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

IPPS/DRG Hospitals can receive Medicare AND Medicaid if they qualify

*Subsection (d) hospitals that are paid under the PPS and are located in the 50 States or DC (including Maryland hospitals)

Surgical and other specialty hospitals participating in IPPS are eligible for

Medicare incentives

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)

Who is a Medicaid Eligible Provider?

Entity

Physicians

- Pediatricians Dentists CNMs

PAs when practicing at an FQHC/RHC that is so led by a PA

NPs Acute care hospitals

Minimum Medicaid patient volume

threshold

30% 20% 30% 30% 30%

30% 10%

Or the Medicaid EP practices

predominantly in an FQHC or RHC—30% needy individual

patient volume threshold

Not an option for hospitals No requirement Children’s hospitals

Medicaid Eligibility: Patient Volume

• Meaningful Use will be defined in 3 stages through rulemaking

Meaningful Use Stages

*Stages 2 and 3 will be defined in future CMS rulemaking.

First Payment

Year 2011 2012 2013 2014 2015*

2011 Stage 1

2012 Stage 1 Stage 1

2013 Stage 2 Stage 1 Stage 1

2014 Stage 2 Stage 2 Stage 2 Stage 1

2015 Stage 3 Stage 3 Stage 3 Stage 3 Stage 3

2016 Stage 3 Stage 3 Stage 3 Stage 3

• 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 = 1st year any 90 days. Then full calendar year

– Hospital/CAH = 1st year any 90 days. Then full FFY

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Meaningful Use – Stage 1

• Eligible professionals (EPs) –Calendar Year calculation

–2011-2016 (Medicare) – Up to $44,000 over 5 years if “meaningful EHR user”

–2011-2021 (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

Incentive Payments for EPs

First Calendar Year in which the EP receives an Incentive Payment Calendar

Year

CY 2011 CY 2012 CY 2013 CY 2014 CY 2015

and later

2011

2012

2013

2014

2015

$18,000

$12,000

$8,000

$4,000

$2,000

$12,000

$8,000

$4,000

$15,000

$12,000

$8,000

$12,000

$8,000 $0

2016

TOTAL $44,000

$2,000

$44,000

$4,000

$39,000

$4,000

$24,000

$0

$0

$18,000

Incentive Payments for Medicare EPs- Based on 75% of Medicare Payments ($24,000 x 75% cap/yr)- Group Practice x # of EP

*Single Annual Payment

• 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)

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EHR Incentives

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

Stimulus Payments – EP

• Failure to become a meaningful EHR user by 2015– 2015 – 99% of applicable fee schedule– 2016 – 98% of applicable fee schedule– 2017 – 97% of applicable fee schedule– 2018 – Additional 1% reduction if less than 75% professionals

are meaningful users. Subsequent year reductions capped at 95%

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

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• 1st year – Continuous 90 day period within first payment

year• Subsequent – Entire payment year

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

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

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

PPS Hospitals - Medicare

• Failure to become a meaningful EHR user by FFY 2015– Market Basket Adjustment reduction on 75% of the adjustment

• FFY 2015 – 33.33 Pct• FFY 2016 – 66.67 Pct• FFY 2017 – 100 Pct

– Net Impact• FFY 2015 – 25 Pct• FFY 2016 – 50 Pct• FFY 2017 – 75 Pct

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 1,149 851 AMOUNT PER DISCHARGE FOR 1,150 TO 23,000 DISCHARGES 200.00$ TOTAL DISCHARGE ADD-ON 170,200 TOTAL INITIAL AMOUNT 2,170,200 MEDICARE SHARE 81.63%TRANSITION FACTOR 100.00%EHR INCENTIVE PAYMENT 1,771,592$

PPS Hospital Payment Example

• Charity Care per Worksheet S-10, excludes courtesy allow. and discounts• Discharge transfers not addressed if included in count • IP days excludes rehab, psych and nursery

Fiscal year that eligible hospital first receives the incentive payment

Fiscal

Year

FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

and later

2011

2012

2013

2014

2015

1.00

0.75

0.50

0.25

0.75

0.50

0.25

1.00

0.75

0.50

0.75

0.50 0.50

2016

0.25 0.25 0.25

1.00

Incentive Payments for Eligible PPS Hospitals

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

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

Critical Access Hospitals - Medicare

• Failure to become a meaningful EHR user by FFY 2015– Reduction in 101% of cost– FFY 2015 – 100.66% of cost– FFY 2016 – 100.33% of cost– FFY 2017 - 100.00% of cost

• Strategy– Place EHR assets in use and become meaningful user in the same

fiscal year or consider “construction in progress”

CAH Hospital Payment ExampleELIGIBLE 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 0.98TOTAL 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 % 101.63%

TOTAL COSTS OF EHR SYSTEM 500,000$ LESS: DEPRECIAITON IN PREVIOUS YEARS 100,000 NET COSTS 400,000 MEDICARE SHARE (MAX OF 100%) 100.00%EHR INCENTIVE PAYMENT 400,000$

Reasonable Acquisition Cost =• Incurred for purchase of depreciable assets• Computers, associated hardware and software• Excludes depreciation and interest

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

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

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

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

EHR Donations

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

Can be donated:

• Training on the Software• Maintenance for the

Software• Help-Desk Services for

the Software

Cannot be donated:

• 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

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 practicesize of the physician practice (total patients,

total patient encounters, etc)medical staff membership level of uncompensated care provided by the

recipient

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

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

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 cross-referenced

• Sunsets on December 31, 2013 All conditions must be met and transfer must occur on

or before this date

• Additional initiatives impacting IT operations.–Conversion to ICD-10 by 2013–X12 version 5010 for HIPAA transactions (700+ data elements from 300)

Compliance 1.1.2010•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

In Summary – Biggest Hurdles