Who is Eligibile for HITECH Act Financial Incentives? Eligible Hospitals, Eligible Professionals and Mental Health Facilities

August 2010

Many healthcare providers have questions about their eligibility for monetary incentives -- and penalties -- under healthcare legislation passed by Congress last year and final rules issued by branches of the Department of Health and Human Services (HHS) in late July, relating to electronic health records (“EHR”).

The legislation is the Health Information Technology for Economic and Clinical Health Act – commonly referred to as the “HITECH Act” – enacted as part of the American Recovery and Reinvestment Act of 2009. The rule that specifies provider eligibility criteria for the incentives and penalties and other program participation requirements is the final rule on the meaningful use of certified EHR technology issued by the HHS Centers for Medicare and Medicaid Programs (CMS) on July 13, 2010 and published in the Federal Register on July 28, 2010.

The HHS Office of the National Coordinator for Health Information Technology (ONC) announced a closely related final rule on EHR technology standards and certification criteria on July 13, 2010, which was also published in the federal register on July 28, 2010. (We refer to the legislation and the CMS and ONC final rules together as the “EHR Law”.)

Eligible professionals that demonstrate “meaningful use” of “certified EHR”, as provided for in the EHR Law, may receive up to $44,000 under Medicare or $63,750 under Medicaid; eligible hospitals that meet the requirements for EHR incentives may receive millions of dollars in incentives under both programs. The incentives will be in the form of annual payments that could begin as early as 2011. On the flip side, eligible Medicare professionals and hospitals that fail to adopt and demonstrate meaningful use of EHR technology by 2015 will face downward adjustments in their Medicare reimbursement starting that year.

What types of entities are potentially eligible for incentive payments, and subject to payment adjustments, based on whether or not they adopt and demonstrate meaningful use of certified EHR? This Client Alert is meant to serve as a brief overview of provider eligibility under the EHR Law.

Types of Eligible Healthcare Providers

The EHR Law creates incentives under the Medicare Fee-for-Service (FFS), Medicare Advantage (MA) and Medicaid programs for “eligible professionals” (“EPs”), “eligible hospitals” and “critical access hospitals” (“CAHs”) to adopt and demonstrate meaningful use of certified EHR technology. The EHR Law also creates payment adjustments under the Medicare FFS and MA programs for EPs, eligible hospitals and CAHs that fail to adopt and demonstrate meaningful use of certified EHR technology by 2015.

What is an Eligible Professional?

The definition of an “eligible professional” varies between the Medicare FFS, MA and Medicaid EHR incentive programs:

• Medicare FFS program: For purposes of the Medicare FFS EHR program, an “eligible professional” is a physician as defined in § 1886(d)(1)(B) of the Social Security Act, which includes (i) doctors of medicine and osteopathy, (ii) dentists and dental surgeons, (iii) podiatrists, (iv) optometrists, and (v) chiropractors.

• “Hospital-based eligible professionals” are expressly excluded from eligibility for Medicare incentive payments. Such professionals are those who provide more than 90% of their services in two specific place of service codes: 21— Inpatient Hospital, and 23—Emergency Room.

• MA program: For purposes of the MA EHR program an “eligible professional” is a non-hospital based physician (as defined for purposes of the Medicare FFS program) who has an employment or contractual relationship with a qualifying MA organization. (Incentive payments for MA-affiliated EPs are paid to the EP’s MA organization.)

• Medicaid program: For purposes of the Medicaid EHR program, “eligible professionals” include (i) physicians, (ii) nurse practitioners, (iii) certified nurse-midwives, (iv) dentists, and (v) physician’s assistants (PAs). Medicaid EPs must have at least 30% of their patient volume attributable to individuals receiving Medicaid, with the exception of pediatricians whose requirement is at least 20%.

• Hospital-based Medicaid professionals (same criteria as under the Medicare FFS program) are not eligible for incentives unless they practice predominantly for a Federally Qualified Health Center (FQHC) or Rural Health Clinic (RHC). An eligible professional “practices predominantly” at an FQHC or an RHC when the clinical location for over 50 percent of his or her total patient encounters over a period of 6 months occurs at an FQHC or RHC.”

• PAs are only eligible professionals for purposes of the Medicaid EHR program if they are practicing predominantly in a FQHC or RHC that is led by a PA.

What is an Eligible Hospital?

The definition of an “eligible hospital” also varies between the Medicare FFS, MA and Medicaid EHR programs:

Medicare FFS program: For purposes of the Medicare FFS EHR program, an “eligible hospital” means a subsection (d) hospital, as defined in § 1886(d)(1)(B) of the Social Security Act (generally, these are short term acute care hospitals) participating in the Medicare FFS program. The definition of subsection (d) hospitals specifically excludes: (i) psychiatric hospitals, (ii) rehabilitation hospitals, (iii) children’s hospitals, (iv) long-term care facilities (average inpatient length of stay of greater than 25 days), and (v) cancer centers.

MA program: For purposes of the MA program an eligible hospital is a subsection (d) hospital (the same definition of such hospital as under the Medicare FFS program) that is under common corporate governance with the qualifying MA organization and primarily serves the qualifying MA organization’s members. (Incentive payments are paid to the eligible hospital’s MA organization.)

Medicaid program: For purposes of the Medicaid program, “eligible hospitals” are acute care hospitals with at least 10% Medicaid patient volume and children’s hospitals (which do not have volume requirements).

• An acute care hospital is “a health care facility (1) Where the average length of patient stay is 25 days or fewer; and (2) With a CMS certification number . . . that has the last four digits in the series 0001 – 0879 or 1300 – 1399.” This definition encompasses general short-term hospitals, cancer hospitals, and critical access hospitals that meet the Medicaid patient volume criteria.

• A children’s hospital is “a separately certified children’s hospital, either freestanding or hospital-within-hospital that (1) Has a CMS certification number . . .that has the last 4 digits in the series 3300 - 3399; and (2) Predominantly treats individuals under 21 years of age.”

What is a Critical Access Hospital (“CAH”)?

For purposes of both the Medicare and Medicaid EHR programs, a CAH is a facility that has been certified as a critical access hospital under § 1820(e) of the Social Security Act and receives cost-based reimbursement under Medicare. Typically, CAHs are small facilities (with no more than 25 acute care inpatient beds) located in isolated rural areas that are medically underserved or have a health professional shortage.

Can Eligible Providers Receive Incentives under Both Medicaid and Medicare?

Eligible hospitals can apply for funding through both Medicare and Medicaid so long as they meet the eligibility requirements for each program. Eligible professionals can receive incentive payments under either Medicare or Medicaid but not both. However, they can switch participation between the two programs once after the initial payment year.

Are the Same Types of Providers That Are Eligible for Incentive Payments Subject to Payment Adjustments?

A provider who is defined as an EP, CAH or eligible hospital for purposes of the Medicare FFS or MA EHR incentive programs is also subject to downward adjustments in the provider’s Medicare reimbursement if the provider is not a meaningful user of certified EHR by 2015. Medicaid reimbursement is not subject to downward adjustment under the EHR programs.

Must a Provider Already Be a Meaningful User of Certified EHR to Be Eligible to Receive an Incentive Payment?

Medicaid EPs, eligible hospitals and CAHs may receive an incentive if they have engaged in efforts to adopt, implement, or upgrade certified EHR technology in their first participation year, but must demonstrate meaningful use of EHR technology in subsequent years in order to receive further incentive payments. Medicare incentive payments are only made to EPs, eligible hospitals and CAHs for the demonstration of meaningful use of certified EHR technology. The CMS final rule sets forth criteria that eligible hospitals and eligible professionals must meet to be considered meaningful EHR users. Hospitals must meet 14 core requirements, while professionals must meet 15 core requirements. Additionally, each group has 10 menu options of which it must meet 5 to be a meaningful EHR user. This set of criteria is just the initial set; there are two more stages with the next set of criteria to be released in 2011.

Issues Regarding Multi-Campus Hospitals

Under the current regulatory framework, multi-campus hospitals that share a single Medicare provider number are limited to EHR incentives for only one hospital. On July 30, 2010, House lawmakers introduced the Electronic Health Record Incentives for Multi-Campus Hospitals Act of 2010, H.R. 6072, which would ensure that multicampus hospitals can receive larger incentives by clarifying that EHR incentives could go to each campus. As of this publication, the bill was referred to the House Ways and Means and Energy and Commerce Committees.

Issues Regarding Mental Care Facilities

Facilities providing services for mentally ill individuals will not fit within the definition of eligible hospital for either the Medicare or Medicaid EHR programs. They will therefore not be eligible for EHR incentives on their own behalf.

Mental health facilities could, however, receive EHR dollars through eligible professionals such as physicians and nurse practitioners. The Medicaid program may be a better choice for many facilities because they likely have more professionals fitting into the specified categories.

Mental health facilities wishing to gain access to the EHR Incentives through their eligible professionals must have a contract to allow for the reassignment of these payments. In the final rule on meaningful use, CMS specifically stated:

We are taking this opportunity to remind the public that if the EP wishes to reassign his or her incentive payment to the employer or entity with which the EP has a contractual arrangement, the parties should review their existing contract(s) to determine whether the contract(s) currently provides for reassignment of the incentive payment or if the contract(s) needs to be revised.

Some in Congress have recognized that the exclusion of metal health facilities is an oversight. The Health Information Technology Extension for Behavioral Health Services Act of 2010 (“BHSA”), H.R. 5040, currently pending before a subcommittee in the House, and a companion bill, S. 3709, currently pending before a subcommittee in the Senate, will make mental health facilities eligible for EHR Incentives if they fall within the covered categories:

- Medicare hospital EHR Incentives: inpatient psychiatric hospitals would qualify.
- Medicaid hospital EHR Incentives: (i) mental health treatment facilities, (ii) psychiatric hospitals, and (iii) substance abuse treatment facilities would qualify.

Further Information
For any questions you may have regarding implications of the HITECH Act, the Meaningful Use Requirements or Certification, please contact:

Craig A. Phillips is a member in the Troy
office and can be reached at 248.433.7231 or cphillips@

Neil B. Krugman is a member in the Nashville office
and can be reached at 615.620.1701 or nkrugman@

Tatiana Melnik is an associate in the Ann Arbor office
and can be reached at 734.623.1713 or tmelnik@