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Where are your Peers on Meaningful Use Payments?

2011 was the first year for receiving ARRA’s EHR Incentive Payments.  Just how much Meaningful Use money has CMS distributed, and how many providers got paid?    

Action item: Make it a priority to get Meaningful Use Funds in 2012  When Congress approved the appropriations for the EHR Incentive program, they provided for about $32 billion in gross payments, with $2 billion for program administration, leaving $30 billion in cash outflow to providers.  As of the end of November, CMS has paid out a little over $1.8 billion to providers under Medicare and Medicaid.  $1.8 billion down, $28.2 billion to go.  Is this a program success?   The incentive phase of this program is budgeted to pay out stimulus funds through 2016 for Medicare; the Medicaid incentives run a little longer, going through 2021 for Medicaid EP’s, and 2019 for Medicaid Hospitals.  Of course, payments are very front-end-loaded.  The first year is the biggest year for any provider, under any aspect of this program, and payments tend to dwindle down in later years.   It is also important to note that qualifying for payment is not a one-time deal.  Every year, providers must re-apply and re-qualify.  Of course we all get to qualify under the easiest set of Meaningful Use criteria (Stage 1) for at least the first two years, but even that is not a slam-dunk.  Second year qualification is harder if for no other reason that providers must maintain threshold values in each criterion for the entire year, rather than just any 90 day period.  So one of the first questions of interest in the payouts is “how many organizations have qualified as Meaningful Users of EHR Technology”.  The answer is surprisingly, “a small percentage”.   Here’s how the $1.8 billion has been paid out:

But these numbers do not in themselves tell us how many providers have actually been paid under Meaningful Use, as opposed to the Adopting, Implementing or Upgrading (AIU) provision of Medicaid, under which it is not necessary to achieve Meaningful Use.  CMS does not separate out those hospitals receiving AIU payments vs Meaningful Use Payments.  However, there is one interesting statistic that may help us impute this split.  Medicare made payments to 411 hospitals through November of 2011, and Medicaid made payments to 802 hospitals in that same period. 

A little analysis on these numbers leads us to the conclusion that a large percentage of hospitals paid under Medicaid are likely to be AIU alone.  Here’s the logic stream:

1. Of the 802 hospitals receiving Medicaid payments, most would qualify to receive Medicare stimulus payments (if they achieve Meaningful Use);
2. Medicare has no AIU provision, so all 411 hospitals receiving Medicare funds attested to Meaningful Use;
3. Therefore something close to 391 hospitals, or 48% of stimulus recipients (802 – 411 = 391), probably did so under AIU. 

 

So, by digging deeper into the numbers, we see that fewer that fewer than 14 percent of the country’s hospitals have received stimulus funds, and only about half of those have attested to Meaningful Use … after one full year’s program eligibility. 

 I don’t know about you, but I’m not sure I would call that a rousing success in “stimulating” the healthcare industry.  Not yet, anyway. 

 To keep track of CMS progress on EHR Stimulus Payments, click and bookmark: http://www.cms.gov/EHRIncentivePrograms/56_DataAndReports.asp

EP Stimulus Payment Calculations: Is there a minimum amount Medicaid EP’s must pay to receive incentives?

And, must they have paid the full amount in order to qualify for Adopting, Implementing and Upgrading in an initial year?

This should be a simple question, but requires quite a bit of research into the Final Rule and FAQ site to derive an answer.  Here are the sources, followed by our conclusion.  We derive several points en route, in the following extracts. 

1.  Incentive payments are not intended as direct reimbursement for purchase of technology

Source: Federal Register / Vol. 75, No. 144 / Wednesday, July 28, 2010 / Rules and Regulations Page 44482 (Near bottom of column 2)

Section 1903(a)(3)(F)(i) of the Act, as amended by section 4201 of the HITECH Act, establishes 100 percent FFP to States for providing incentive payments to eligible Medicaid providers (described in section 1903(t)(2) of the Act) to adopt, implement, upgrade, and meaningfully use certified EHR technology. The incentive payments are not direct reimbursement for the purchase and acquisition of such technology, but rather are intended to serve as incentives for EPs and eligible hospitals to adopt and meaningfully use certified EHR technology. 

2.  Payment basis is “Net Average Allowable Cost”

Average allowable cost is determined by CMS via literature study to aid in setting their reimbursement ceilings, not the cost a provider will actually bear.  (Note the word “average” throughout the regulation, implying aggregation over a population.)

 Source: Federal Register /Vol. 75, No. 144 /Wednesday, July 28, 2010 /Rules and Regulations Page 44491 (Column 3) 

Payment Methodology for EPs  - General Overview Pursuant to section 1903(t)(1)(A) of the Act, payment for EPs equals 85 percent of ‘‘net average allowable costs.’’ While the Secretary is directed to determine ‘‘average allowable costs’’ based upon studies of the average costs of both purchasing and using EHR technology, the net average allowable costs that set payment are capped by statute. As discussed in more detail further on, generally stated, these caps equal $25,000 in the first year, and $10,000 for each of 5 subsequent years (there is an exception for pediatricians with under 30 percent Medicaid patient volume, whose caps are two-thirds of these amounts). Thus, the maximum incentive payment an EP could receive from Medicaid equals 85 percent of $75,000, or $63,750, over a period of 6 years.

3.  Individual  providers may need to adjust “Average Allowable Cost” by any payments they have received (from anyone other than state or local government) to reimburse their EHR purchase

Source: Federal Register /Vol. 75, No. 144 /Wednesday, July 28, 2010 /Rules and Regulations Pages 44492 (column 3) & 44493 (column 1)

Comment: Several commenters are concerned that States are required to develop a method to determine the payment amount for each provider. Commenters believed that incentive payments should be based on the maximum amount and that individual calculations are cumbersome and a difficult process for both States and eligible professionals.

Response: We would like to clarify the requirements in the statute and the process by which incentive payments will be established. Specifically, the Secretary is directed to study the average costs associated with the purchase, initial implementation, and upgrade of certified EHR technology, including support services, and integral related training. The Secretary is also directed to study the average costs of operating, maintaining, and using certified EHR technology. The statute permits the Secretary to use studies submitted by the States. CMS conducted a literature review of recent studies on EHR technology to determine the average allowable cost of implementing and using such technology. CMS reviewed the results from four recent, comprehensive studies and determined that these costs are $54,000 per professional. We recognize that this cost is variable and since the ONC is establishing certification criteria for EHR technology, we believe this cost is reasonable since we expect that current EHR technology will need to be upgraded in order to meet the new certification criteria.

Next, in accordance with the statute, in order to determine the net average allowable costs for each provider, average allowable costs for each provider must be adjusted in order to subtract any payment that is made to Medicaid eligible professionals and is directly attributable to payment for certified EHR technology or support services of such technology. The only exception to this requirement, as discussed above, is that payments from State, or local governments do not reduce the average allowable costs. The resulting figure is the net average allowable costs.

4.  After arriving at Net Average Allowable Cost, EP’s are responsible for 15% of the balance

Source: Federal Register /Vol. 75, No. 144 /Wednesday, July 28, 2010 /Rules and Regulations Pages 44492 44493 (column 1 continuation from above)

The statute further indicates that Medicaid eligible professionals can receive up to 85 percent of a maximum of the net average allowable cost. In year one the maximum net average allowable cost is $25,000 and in subsequent years is $10,000. Additionally, the statute indicates that Medicaid eligible professionals are responsible for the remaining 15 percent of the net average allowable cost (1903(t)(6)(B)).

We believe the commenters are concerned with the 85 percent of net average allowable cost maximum incentive payment amount and the responsibility of the Medicaid professional for the remaining 15 percent of the net average allowable cost. Since the statute is clear that to get to the net average allowable cost, payments made to the EP that are directly attributable to the payment for certified EHR technology or support services for such technology for each provider have to be subtracted from the average allowable cost, this must be an individual provider calculation. We do not believe we have discretion to change this netting process directed by the Congress. We have provided an example calculation so that in using the average allowable cost established by the Secretary of $54,000 professionals could receive as much as $29,000 in payments from outside sources and still receive 85 percent of the maximum capped net average allowable cost of $25,000.

5.  CMS has deferred to the States for a filing and audit process by which EP’s must verify the receipt of third party reimbursement, and verifying that EP’s have paid 15% of the statutory annual amounts

Note that this section also of the regulations identifies relevant types of reimbursement providers might receive from third parties.  See columns 2 & 3 of the cited Federal register for specific examples

Source: Federal Register /Vol. 75, No. 144 /Wednesday, July 28, 2010 /Rules and Regulations Page 44493 (column 1 & 2)

We have also required that States must have a process in place and a methodology for verifying that payment incentives are not paid at amounts higher than 85 percent of the net average allowable cost and a process in place and a methodology for verifying that professionals pay 15 percent of the net average allowable cost of the certified EHR technology. States may wish to establish a process whereby individuals attest to having completed their forms correctly and risk the circumstance of audit in the event the State has reason to believe individuals did not complete the forms appropriately. States could develop a process for providers to attest to having received no other sources of funding from other than State and local governments as payment that is directly attributable to the cost of the technology. States could select a random sample of providers to audit after the incentive payment has been paid. Additionally, States could determine that certain types of providers should be selected for a more extensive review since it may be true that this particular provider group was most likely to have received payment for certified EHR technology from sources other than State, or local governments. This process could eliminate some of the burden.

6.  Bottom line for Year 1: EP’s should expect to be required to prove that they spent $3,750 and received no more than $29,000 from other sources to help defray these costs. 

The $29,000 would need to come from sources other than the clinic in which they are employed, or state / local government.  Also, CMS directs states to consider a wide range of related costs in determining this expenditure by EP’s. 

Source: Federal Register / Vol. 75, No. 144 / Wednesday, July 28, 2010 / Rules and Regulations Page 44494 (Top of Page)

In those cases in which the professional himself must satisfy the responsibility for the 15 percent net average allowable costs, we believe in determining the calculation, States should consider costs  related to the providers’ efforts to address workflow redesign and training to facilitate meaningful use of EHRs as contributing to the providers’ 15 percent share. Considering the costs of training, preparing for, and installing or upgrading EHR technology, we believe the vast majority of EPs will spend, or receive funding from other sources in the amount of 15 percent of the maximum net average allowable cost (or $3,750 in the first year and $1,500 in subsequent years). We also believe that for providers’ first payment for having adopted, implemented or upgraded certified EHR technology, States should take into consideration providers’ verifiable contributions up through the date of attestation. For example, if a provider adopted EHR technology for $100 in January 2010 and then paid for the upgrade to the newly certified version for an additional $100 in December of 2010, the sum of both investments; that is, $200, should be applicable to their 15 percent of the net average allowable cost.

7.  To qualify for Adopting, Implementing and Upgrading, a signed contract will be sufficient

Source: CMS FAQ # 10100 updated 3/24/11

States should make clear to providers when they attest for AIU what documentation they must maintain, and for how long, in case of audit. If States determine that certain provider types are a high risk for potential fraud/abuse for AIU, then they can ask for some verification of adopting, implementation or upgrading but CMS encourages that this be done in a targeted manner, with the most electronic and simple means possible and not in such a way that would be burdensome to providers. For AIU, a provider does not have to have installed certified EHR technology. The definition of AIU in 42 CFR 495.302 allows the provider to demonstrate AIU through any of the following: (a) acquiring, purchasing or securing access to certified EHR technology; (b) installing or commencing utilization of certified EHR technology capable of meeting meaningful use requirements; or (c) expanding the available functionality of certified EHR technology capable of meeting meaningful use requirements at the practice site, including staffing, maintenance, and training, or upgrade from existing EHR technology to certified EHR technology per the EHR certification criteria published by the Office of the National Coordinator of Health Information Technology (ONC). Thus, a signed contract indicating that the provider has adopted or upgraded would be sufficient.

* * * * * * * * * * * * * * * *

Long story made short, EP’s will generally qualify for the full EHR Stimulus funds, as long as they have spent $3,750 of their own money in year 1, and $1,275 in subsequent years. 

Jay Fisher | @JayRFisher

Stimulus Payments for Critical Access Hospitals

Over the past week or so, we’ve seen a couple interpretations of the Final Rule on the topic of calculation of Stimulus benefit to Critical Access Hospitals (CAHs).  Even across well-regarded professional organizations, these interpretations are sometimes in conflict, so we engaged Choua Vang, of Godfrey & Khan to help out.  (Godfrey & Kahn is a large, well respected law firm in Milwaukee, WI). 

 

Choua did a rigorous job of scouring the 800+ pages of Final Rule to answer the following key questions:

 

1.  The ARRA provides Medicare incentive payments for “subsection D” hospitals for the meaningful use of certified EHR technology under a base-plus-discharge formula specified in the law.  Are CAHs “subsection D” hospitals, and therefore eligible for Medicare incentive payments under this formula?

Choua: CAHs do not qualify as "subsection (d) hospitals" under the ARRA.  However, CAHs are eligible for Medicare incentive payments for the meaningful use of certified EHR technology under a provision in the ARRA that is specific to CAHs.

Final Rule Reference Pages: 75 Fed. Reg. 44,314 at 44,460- 44,461 (July 28, 2010)

 

 

2.    What formula is used to calculate Medicare incentive payments for CAHs?  Don’t CAHs already get their costs reimbursed? 

Choua: The applicable formula for calculating the Medicare incentive payment for CAHs is the product of (1) the "reasonable cost” incurred for the purchase of certified EHR technology, in that cost reporting period (including any similarly incurred costs from previous cost reporting periods to the extent they have not been fully depreciated as of the cost reporting period involved) and (2) the CAHs Medicare share, which equals the Medicare share as computed for qualifying “subsection (d) hospitals”, plus 20 percentage points.

In establishing this formula, the ARRA amended two provisions in the laws governing general Medicare payments to CAHs.  First is the additional 20 points referred to above.  This is added to the hospital’s Medicare percentage when applying against reasonable cost of EHR, giving the hospital extra reimbursement. Second, the costs associated with qualified EHR expenditures do not need to be capitalized, but can be expensed in the year incurred, effectively accelerating reimbursement.  In fact, hospitals can even include unamortized depreciation for qualified EHR expenditures from prior years, as part of their first year reimbursement.   This ARRA amendment gets CAHs their funding faster, and with an extra 20 percentage points added to their Medicare Patient mix (relative to EHR). 

This formula will be used in place of payment at 101% of reasonable costs typically applied under the cost-based reimbursement principles for CAHs. In other words, no other formula for calculating Medicare incentive payments for the meaningful use of certified EHR technology will apply in the case of a CAH.

Final Rule Reference Pages: 75 Fed. Reg. at 44,461 – 44,462

 

3.    Are CAHs eligible for Medicaid incentive payments?

Choua: Yes.  The ARRA provides for Medicaid incentive payments for hospitals that qualify as an  “acute care hospital.”  In the proposed rule, the definition of “acute care hospital” excluded CAHs.  In the Final Rule, CMS confirmed that CAHs should also qualify as “acute care hospitals.”  CMS accomplishes this by amending the definition of "acute care hospital" to include hospitals with CCNs in the range of 1300-1399, which are assigned to CAHs.

 

 

4. What formula is used to calculate Medicaid incentive payments to CAHs?

Medicaid incentive payments are calculated using a  “discharge based” formula, based on a $2,000,000 Base amount (with additional $200 for each discharge above 1,150 and up to 23,000), factored against the hospitals Medicaid percentage (which must be 10% or greater), and an annual “transition factor” for each of four years.  The Transition factor gives hospitals 100% of this calculation in year 1, 75% in year 2, 50% in year 3 and 25% in year 4. 

This formula is used for CAHs as well as all other hospitals qualifying as an “acute care hospital” under the Medicaid incentive program.

Final Rule Reference Pages: 75 Fed. Reg. at 44.579 – 44,580

 

5. The ARRA stated that hospitals could be eligible for both Medicare and Medicaid incentive payments.  Is this true for CAHs as well?

Choua: Yes, like other acute care hospitals, CAHs may be eligible for both Medicare and Medicaid incentive payments for the meaningful use of certified EHR technology, provided the CAH meets all of the requirements under each incentive program.  

     Final Rule Reference Pages: 75 Fed. Reg. at 44,484

 

 

 

This should give you a definitive view.  In essence, CAH hospitals could potentially receive two types of reimbursement – a cost-based payment from Medicare, and a “discharge based” payment from Medicaid. 

 

Click this link to download a spreadsheet tool we built that models these predictions for you.  And let us know what you think!

 

 

Choua Vang

Godfrey & Kahn

 

 

Jay Fisher | @JayRFisher

C3 Partners

How much will my State Medicaid requirements differ from Medicare?

The general rule is that Medicare requirements provide a common definition by which hospitals will qualify as Meaningful Users of EHR Technology.  In some cases Medicare would define a "minimum standard", which states could modify for the Medicaid portion.  However, in no case can State mandates exceed functionality beyond that of certified EHR technology (the Medicare technology standard).  Also, the Secretary of DHHS has the authority to approve such functionality, and will not approve any State requirments unless those requirements "promote the use of EHRs and healthcare quality". 

In fact, CMS will only approve additional State level requirements related specifically to public health objectives and data registries.  Under Stage 1, the list of permissable "tailoring" would be under the followng specific requirements:

• Generate lists ofpatients by specific conditions;
• Capability to submit electronic data to immunization registries of Immunization Information Systems;
• Capability to submit electronic data on reportable lab results to public health agencies;
• Capability to submit electronic syndromic surveillance data to public health agencies;

There are specific examples of what is allowed under each of these. 

Having said all the above ... the Rule stipulates that "hospitals eligible for both Medicare and Medicaid incentive payments will be deemed for Medicaid if they have met the meaningful use definition through Medicare, even if a State has an approved State-specific definition of meaningful use.  States cannot withhold a Medicaid EHR incentive payment from dually eligible hospitals if they have met nall the eligibility criteria for Medicaid, and have met the Medicare definition for meaningful use".

As a practical matter, this seems to imply that States can set the interface specifications and data content where the State currently requires this data.  In doing so, hospitals will qualify for these submissions under both Medicare and Medicaid.  Clear, yes? 

Jay Fisher | @JayRFisher

What Role do States Have in Incentive Programs?

As Medicaid intermediaries, each State has a series of decisions they may make related the ARRA HITECH incentive programs. 

• Incentive amounts are not within a State's control, but the period of time over which a provider's payments could be disbursed are. (The formula is statutory, and identical to the Medicare formula, substituting "Medicaid" for "Medicare" where appropriate).  On page 1937 of the Federal Register, we see that a state may pay hospitals over a period ranging from three to six years, with some constraints. 
• Medicaid incentives can begin for initial payment years starting as late as 2016 (as opposed to 2013 for Medicare Incentives).  See column 1 on page 1938 of the Federal Register for this citation. 
• Medicaid has no statutory implementation date for making EHR incentive payments.  This means that states who are prepared to move quickly could begin making payments as soon as the final rule has been published, in 2010 (page 1939, Federal Register).  And, recall that to qualify for Medicaid, in its first year, a provider need not have fully achieved Meaningful Use, but only be in the process of adopting, implementing or upgrading Certified EHR Technology.  CMS makes it clear that this is intended to offer Medicaid providers an early opportunity for capital to "get started". 

States may vary from CMS / Medicare guidelines in these ways, only after having first obtained approval from CMS.  Providers in markets serving patients from multiple States, must choose one and only one State to administer their incentive program ... but it appears to be the right of the provider to make that choice (Paragraph g on page 1941 of the Federal Register)

Jay Fisher | @JayRFisher

How do Hospital Medicaid Requirements differ from Medicare ?

Good news, is that there are no penalties under Medicaid for non-compliance!  Take a look ... it is on page 1983 of the Federal Register.  As to flow of funds, Medicaid payments may begin as late as 2016 and are not reduced for starting after 2013 like Medicare payments are (Medicaid pays full amount regardless of start year)…also, they may be paid to hospitals over a 3-6 year period.

Now, to qualification requirements.  First of all, to qualify for Medicaid, a hospital needs to show that 10% of their patient volume in any 90 day period of the payment year is attributable to Medicaid (Federal Register Page 2002).  That's the door opener.  Next come the detail requirements. 

In reviewing pages 1851 and 1852 of the Federal Register, we conclude that it is CMS' intention to establish Medicare requirements as the minimum standard for Medicaid as well.  States may submit to CMS requests for additional requirements, as long as those requirements:

• Do not exceed the capabilities of certified EHR systems; and
• Promote further use of EHR's

However, States must first obtain CMS approval to create additional requirements ... which the tone of the Federal Register text implies will be met with rigorous scrutiny.  So the bottom line seems to be that there will be some, but not much "extra" effort to qualify under Meaningful Use (and related) guidelines. 

There is one paragraph that is a bit confusing, though:

"Furthermore, if a State has CMS approved additional meaningful use requirements, hospitals deemed as meaningful users by Medicare would not have to meet the State-specific additional meaningful use requirements in order to qualify for the Medicaid incentive payment."

It seems that the word "Medicaid" in the last line may be a typo?  Did they mean to say Medicare?  Else the meaning would be that States can create all the requirements they want, but that Medicaid reimbursement would be based on Medicare requirements.  If so, why would States bother with an approval process?

There is one other piece of Medicaid that we are trying to understand more fully, though.  In the Federal Register, Table 21, pages 1899-1900,  lists eight Alternative Quality Reports For Medicaid Hospitals.  I'm struggling with this one.  Three of the  reports are for pediatrics, which makes sense for children's hospitals, which could not fulfill some of the measures in Table 20 (those measures unique to adult care).   Others simply seem to represent additional measures.  I tried to tie table 21 measures to table 20, to try and identify the "Alternative" component, but the exercise produced no benefit for me.  As for those 5 items not pediatric related ... they may simply be extra quality reports required under Medicaid. 

Perhaps someone reading this blog entry might help to resolve the couple questions raised under Medicaid. 

Jay Fisher | @JayRFisher

How to get HITECH Funds without Qualifying for Meaningful Use (and get your money earlier, too)

Sound impossible?  Well, there is one small loophole.  First, you have to qualify as a Medicaid Provider.  Second, you have to be in the process of adopting, implementing or upgrading your EHR.  (Page 317 of the Proposed Rule, among other references) Of course, there are some further stipulations.  If you are a hospital, your Medicaid patient volume must be at least 10%; Children's Hospitals are exempt from this minimum.  Of course, this reimbursement is on the Medicaid side.  For Medicare all providers must first demonstrate meaningful use before getting any money. 

Remember how each years' reimbursement are not of equal amounts, and are front-loaded with dollar amounts that decline each year?  Ok ... let's say you decided to go for Medicaid reimbursement in 2011 under this idea.  You are in process of implementing your EMR, but not yet at Meaningful Use status.  Fine!  You qualify and get your money.  Now, let's assume bad news.  Your implementation project slipped and you are not ready to qualify in 2012, and slip to 2013 as your first Meaningful Use year.  Sadly, you know that you get no money in 2012.  But the question open to further research is this ... will 2013 be treated as your second payment year, or your third?????  

The good news, is that Medicaid does not penalize hospitals for starting late.  Medicaid incentives are paid out starting as late as 2016 (if you start after 2016 you don't get any incentives), and once you've started, you continue to receive the full amount. 

Oh, yeah ... the "earlier" part.  Well, under Medicare providers can't have a "first payment year" until 2011 (Fiscal for hospitals, Calendar for EP's).  But ... if your State applies with CMS, and is approved, you may be able to get "first payment year" in 2010.  So keep an eye on your State Medicaid Agency, if you think you might be able to qualify early.  They just might be able to funnel some cash your way a year early.  Good Luck!

Jay Fisher | @JayRFisher