Electronic Health Records and Health Information Technology Under the New Federal Stimulus Act: How Are Healthcare Entities Affected?

March 3, 2009

The recently enacted federal stimulus package, the American Recovery and Reinvestment Act of 2009, contains a set of provisions known as the Health Information Technology for Economic and Clinical Health Act ("HITECH Act") that advance the use of technology in healthcare, principally by encouraging hospitals and physicians to adopt an electronic health record ("EHR") system before the end of 2015. The act also provides funding for, among other things, an EHR infrastructure and technologies to allow for the electronic flow of information; the support of regional and sub-national efforts toward health information exchange; the promotion of interoperable clinical data repositories performing comparative effectiveness research on how electronic data use impacts healthcare treatments and strategies; and the integration of health IT education in the training of healthcare professionals. In addition, the HITECH Act establishes new responsibilities for the U.S. Department of Health and Human Services ("HHS"), through the Office of the National Coordinator for Health Information Technology (the "National Coordinator"), to develop and adopt policies and standards, including new privacy standards, for EHRs and other forms of health information technology. Given the scope of the HITECH Act, and its mandate to HHS to act quickly, regulations and guidance are likely to be issued by the agency regarding the next steps for providers and others to take in the near future. Below are some preliminary questions that hospitals and physicians may want to consider.

How does the HITECH Act encourage physicians and hospitals to adopt EHRs?

Adopting an EHR system is "voluntary" - but there will be financial consequences for a hospital or physician participating in Medicare. For these providers, "meaningful EHR users" are eligible for Medicare incentive payments starting in 2011, and ending in 2015. After 2015, physicians and hospitals that are not "meaningful EHR users" will receive reduced Medicare payments. The HITECH Act also allows for an additional reimbursement of 10 percent for hospitals and physicians providing services in an area designated by the Secretary of HHS as a "health professional shortage area." Some exceptions to the payment rules exist. Also, Medicaid monies will be available to the states, certain hospitals and certain physicians to develop EHR systems.

In general, for "eligible professionals" who show "meaningful use" of an EHR system, the maximum Medicare incentive payment that a physician may receive for early use (i.e., 2011) is $48,400, which is available if the physician predominantly furnishes services in a health professional shortage area. Other physicians may receive up to $44,000 for early use. For each year after 2011 that the physician becomes a "meaningful EHR user," these incentive payments will be reduced. The incentive provision excludes "hospital-based eligible professionals," and special rules are established for "eligible professionals" affiliated with "qualified Medicare Advantage organizations."

"Qualified hospitals" that show "meaningful use" of an EHR will receive a Medicare incentive payment for early use of an EHR system calculated as the sum of a base amount ($2,000,000), added to its "discharge related amount" and then multiplied by its Medicare share. These payments will be reduced over a four-year transition period (using the formula of 100 percent - 75 percent - 50 percent - 25 percent). Starting in 2015, any "eligible hospitals" that do not turn in the required quality data will be subject to a 25-percent reduction in their annual update. Critical access hospitals have a more generous formula for incentive payments.

For Further Information

If you have any questions regarding the HITECH Act or would like more information, please contact John M. Neclerio, Lisa W. Clark, Kathleen Carver Cheney, any member of the Healthcare Information Technology Practice Group or the attorney in the firm with whom you are regularly in contact.

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