Life Sciences and the Stimulus Act - Part I: Promotion of Health Information Technology

Click here to link to Part II of this article, “Life Sciences and the Stimulus Act - Part II: Changes to HIPAA Privacy and Security Standards”

By: ANN M. LADD, RYAN S. JOHNSON & KATHERINE J. DOUGLAS

March 6, 2009

On February 17, 2009, President Obama signed Title XIII of the American Recovery and Reinvestment Act of 2009 (the Act) into law. The Act includes a number of provisions that will affect health care providers and medical and educational institutions, including incentives and funding for the development, adoption, and upgrade of health information technology (HIT) and electronic health records.

Most of the funding programs can be implemented only pursuant to rulemaking by the Secretary of the Department of Health and Human Services (the Secretary) and accordingly will be subjected to the political process during the rulemaking period. Although there is some uncertainty as to the outcome of the rulemaking process, there is certain to be substantial funding of HIT initiatives over the next seven or eight years. Providers and institutions will need to stay abreast of developments and develop strategies for implementing measures to take advantage of the loans, grants, and incentives offered under the Act.

Office of the National Coordinator for Health Information Technology

The Act establishes The Office of the National Coordinator for Health Information Technology (ONCHIT) within the Department of Health and Human Services (HHS). ONCHIT will be led by a national coordinator who will be responsible for developing a nationwide HIT infrastructure to improve health care quality, reduce health care costs, and protect patient health information. The Act also establishes an HIT Policy Committee and an HIT Standards Committee to recommend standards, implementation specifications, and certification criteria to ONCHIT’s national coordinator. The standards adopted by the national coordinator will be used in determining whether hospitals and eligible professionals are meaningful electronic health record (EHR) users for purposes of the incentive payment programs described below.

The Act also requires the Secretary of HHS to adopt an initial set of standards, implementation specifications and certification criteria by Dec. 31, 2009, establishing or otherwise promoting the following:

• technologies that protect the privacy of health information and promote security in a qualified EHR;
• a nationwide HIT infrastructure that allows for the electronic use and accurate exchange of health information;
• the utilization of certified EHRs for each person in the United States by 2014;
• technologies that as a part of a qualified EHR allow for an accounting of disclosures made by a covered entity (as defined by HIPAA) for purposes of treatment, payment, and health care operations;
• use of certified EHRs to improve the quality of health care such as by promoting the coordination of health care and improving continuity of health care among health care providers, by reducing medical errors, by improving population health, by reducing health disparities, and by advancing research and education; and
• technologies that allow individually identifiable health information to be rendered unusable, unreadable, or indecipherable to unauthorized individuals when such information is transmitted in nationwide health information network or physically transported outside of the secured physical perimeter of a health care provider, health plan, or health care clearinghouse.

Under the Act, adoption of such standards, specifications, and criteria by private entities is voluntary. However, health care providers, health plans, or health insurance issuers who contract with certain federal agencies and acquire, implement, or update their HIT will be required to adopt and use HIT systems that meet standards and implementation criteria established by the Secretary.

Demonstration Program to Integrate Information Technology into Clinical Education

The Act gives the Secretary authority to award grants to certain educational institutions to develop academic curricula that integrates EHR technology in health professional clinical education. Eligible grant recipients include medical schools, dental schools, pharmacy schools, graduate health professional schools, and graduate programs in behavioral mental health. Institutions with graduate medical education programs in medicine, dentistry, pharmacy, nursing, or physician assistance studies are also eligible. Recipients must use grant funds in collaboration with two or more disciplines to integrate certified EHR technology into community-based clinical education. Grant funds are capped at fifty percent of the institution’s costs and may not be used to purchase hardware, software, or services.

Medicare Incentives and Disincentives for Physicians and Hospitals

The Act provides monetary incentives to health care professionals and hospitals for their adoption and use of certified EHR technology from 2011 to 2015. As described above, “certified EHR technology” means that the technology is certified by an independent body as meeting standards established by the Secretary. The Act also provides for the imposition of penalties on professionals and hospitals if they fail or are slow to adopt EHR technology.

Physician Incentives for EHR Use

Physicians who demonstrate that they are “meaningful EHR users” are eligible to receive annual incentive payments from 2011 to 2016, up to a maximum of $44,000 per physician. The Act defines what it means to be a meaningful EHR user, requiring the use of certified EHR technology for electronic prescribing, exchanging health information to improve the quality of health care, and reporting results on clinical quality and other measures. The annual incentive payments decrease over the five-year period and are structured so that early users of EHR systems receive larger incentive payments than late adopters; physicians who are meaningful EHR users in 2011 or 2012 may receive an initial annual payment up to $18,000, while physicians who first adopt EHR after 2014 receive no incentive payment. Hospital-based physicians, such as radiologists, pathologists, and emergency physicians, are ineligible for the physician incentive payments and incentive payments for physicians who practice in health professional shortage areas are increased by 10%. The Centers for Medicare and Medicaid Services (CMS) will publish on its website the names and contact information for all physicians receiving incentive payments.

Physician Penalties for Failure to Use EHR

To further encourage early adoption of EHR, the Act penalizes those physicians who have not demonstrated meaningful use of EHR by 2015. The penalty is structured as a fee schedule payment reduction; if a physician cannot demonstrate meaningful use of EHR in a given year, the fee schedule payment to that physician is reduced by 1% in 2015, 2% in 2016, and 3% in 2017. If meaningful EHR users consist of only 75% of potential meaningful users in years beyond 2017, the Secretary may make further reductions to fee schedule payments. Physicians who prove that it would be a significant hardship to become a meaningful EHR user will be exempt from the fee schedule penalty.

Physicians Associated with Medicare Advantage Organizations

The Act provides similar incentives and disincentives for physicians who are employed by or otherwise closely associated with Medicare Advantage organizations that are organized as health maintenance organizations.

Hospital Incentives for EHR Use

As with physicians, hospitals that demonstrate meaningful use of EHR in the years 2011 through 2014 are eligible to receive incentive payments. The annual incentive payments decrease throughout the four-year period and are calculated pursuant to a formula that considers the hospital’s number of inpatient discharges and share of Medicare patients during the year. The payment methodology for critical access hospitals that demonstrate meaningful use of EHR is slightly different and is aimed at reimbursing critical access hospitals for acquisition costs of certified EHR.

Hospital Penalties for Failure to Use EHR

Hospitals that do not show meaningful use of EHR by 2015 will incur annual, increasing penalties through a reduction in Medicare payment. Similar to the exception for physician penalties, there is an exception for hospitals that would incur a significant hardship in becoming meaningful EHR users.

Hospitals Associated with Medicare Advantage Organizations

Hospitals that are under common corporate governance as Medicare Advantage organizations and are organized as health maintenance organizations are eligible to receive incentive payments and will face similar disincentives for failing to become meaningful EHR users.

Incentives for Medicaid Providers

In addition to providing incentives through the Medicare program, the Act allocates funds to states that implement programs to promote Medicaid providers’ adoption and use of EHR technology. If a state’s program meets the Act’s requirements, the state will be reimbursed for all of the amounts it provides to Medicaid providers and 90% of its costs in administering the program. The state must design its program to reimburse certain eligible professionals (defined as physicians, dentists, certified nurse mid-wives, nurse practitioners, and in some instances, physician assistants) and hospitals for the costs of EHR technology, subject to caps specified in the Act. Eligible professionals cannot be hospital-based and must have at least 30% of their patient volume attributable to Medicaid recipients. (For pediatricians, the required percentage of Medicaid patients is 20%.)  Children’s hospitals, hospitals that have at least 10% of their patient volume attributable to Medicaid recipients, and Federally qualified health centers and rural health clinics that have at least 30% of their patient volume attributable to needy patients must also be eligible for receiving payments under the state program. Program payments to professionals may be no more than 85% of the average allowable costs for certified EHR technology and payments to hospitals may not exceed 100% of such average allowable costs. For payments to most professionals, there is an additional cap of $25,000 in the first year and $10,000 in each subsequent year. Payments to hospitals are capped at 50% of the hospital’s actual costs in the first year and 90% of actual costs during any subsequent two-year period. Hospital payments are also capped pursuant to a formula that takes into account the hospital’s Medicaid patient volume.

Other Stimulus Provisions

The Act contains additional provisions that promote the research, acquisition, and implementation of HIT and EHR technology. These provisions include:

• grants for HIT/EHR research and development programs;
• funding to strengthen the nation’s HIT infrastructure;
• creation of regional centers to provide technical assistance for the implementation of HIT;
• grants to states and Native American tribes to promote the expansion of HIT; and
• grants to establish loan programs for health care providers to acquire and use EHR technology.

While these provisions are outside the scope of this article, they play an important role in the government’s plan to achieve widespread use of health information technology.

Conclusion

Health care providers, medical facilities, and academic institutions all stand to benefit from the Act’s stimulus measures that aim to advance the use of HIT/EHR. Although a significant portion of the Act’s funding provisions will need to go through the rulemaking process before implementation, interested parties must position themselves now to be prepared to take advantage of programs and incentives that place a priority on the acquisition and use of health information technology.

Please contact one of the authors if you would like more information on any of these measures.