HITECH Act Incentives for Electronic Health Records: Show Us the Money!!

1. HITECH Act Incentives for Electronic Health Records: Show Us the Money!! July 23, 2009 Georgia Healthcare Financial Management Association Richard D. Sanders rsanders@balch.com Balch & Bingham LLP 30 Ivan Allen Jr Blvd NW, Suite 700Atlanta, GA 30308

2. Objectives • Update on Obama Administration Healthcare Reform Efforts • Overview of Health Information Technology (“HIT”) Provisions in the Stimulus Bill

3. Overview American Recovery and Reinvestment Act of 2009 ("ARRA") a/k/a"stimulus bill" • Signed into law on February 17, 2009. • Passed by votes of: • House - 246 to 183 • Senate - 60 to 38

4. Overview (cont.) Infuses over $780 billion into an anemic economy. • $59 billion is allocated to healthcare projects. • Another $87 billion is attributable to funds set aside for State Medicaid programs.

5. Overview (cont.) Broken into two divisions. • Division A consists of appropriations. • Division B consists of other provisions, including changes to health, tax, and State fiscal relief. • Title XIII of Division A and Title IV of Division B are collectively referred to as the HITECH Act.

6. Grants • Healthcare-specific provisions contained in both Titles VIIl and XIII of Division A. • Grants will be administered through a number of agencies. • Some allocation amounts are specified.

7. Grants (cont.) • Specific examples include: • HRSA will administer grants totaling $2 billion to FQHCs. • NIH • $8.2 billion to fund new and ongoing research. • $1 billion for the support of construction and repairs to research facilities. • $300 million for shared instrumentation and capital equipment.

8. Grants (cont.) • Specific examples include: (continued) • Office of the National Coordinator • $300 million for supporting regional and sub-national efforts at health information exchange. • Academic medical institutions for integration of certified EHR technology into the clinical education of health professionals. • Development of regional "extension programs."

9. Grants (cont.) • Specific examples include: (continued) • Secretary of Health and Human Services • To work through ONC, HRSA, CMS, and others. • Purpose is to create a health information technology infrastructure. • Specified purposes include: • Development of certified EHRtechnology • Payment for adoption • Training • Telemedicine

10. If HIT is Successfully Used Across the Country, It Should: • Improve health care quality • Prevent medical errors • Reduce health care costs • Increase administrative efficiencies • Decrease paperwork • Expand access to affordable care (See Healthit.hhs.gov)

11. HIT Policy Committee • Advisory Committee established by ARRA • Goals: • Policy framework for development of nationwide HIT infrastructure • Identify areas where standards, implementation specifications, and certification criteria are needed (in order of priority)

12. HIT Policy Committee (cont.) • Required to make recommendations in 8 areas, including: • Privacy and security • Utilization of a certified EHR for everyone in the US by 2014 • Use of certified EHR to improve quality • Certified EHR? • Not yet defined • Know it must include e-prescribing capabilities

13. HIT Standards Committee • Advisory Committee established by ARRA • HIT Policy Committee Sets the Standards Committee's Priorities • Goal: recommend standards, implementation specifications, and certification criteria to National Coordinator

14. Where Are We with EHR Use Right Now? • Hospitals: • < 2% have fully implemented comprehensive EHRs in all units • < 8% have basic EHRs • <17% have CPOE fully implemented • 75% have electronic lab/image reports (Source: Blumenthal, NEJM, April 16, 2009)

15. Where Are We with EHR Use Right Now? • Ambulatory Settings: • 4% of physicians have fully-functional EHR • 13% have basic EHRs • 16% purchased but not implemented • 26% plan to purchase within 2 years (Source: Blumenthal, NEJM, June 18, 2008)

16. Medicare and Medicaid Funding • Medicare payments to hospitals. • Must be an "eligible hospital”. • Must be a "Meaningful EHR User”. Definition is still not finalized. At a minimum, it will include: • Must use certified EHR in a meaningful manner. • Must be connected in a way that allows for promoting care coordination and otherwise improving the quality of care. • Must use the certified EHR to report on quality data. • Rules may change over time.

17. Medicare and Medicaid Funding (cont.) • Medicare payments to hospitals. (continued) • Payment amount is the product of a sum comprised of a base amount and a per-discharge amount, multiplied by the "Medicare Share" and a "Transition Factor." • Base amount of $2 million plus $200 for every discharge between 1,150 and 23,000. • Medicare Share. • Numerator is total Part A and C inpatient days. • Denominator is total inpatient days, multiplied by a fraction of non-charity care charges over total charges.

18. Medicare and Medicaid Funding (cont.) • Medicare payments to hospitals.(continued) • Transition Factor. Depends on year of adoption. • 2011 to 2013. 100% for Year 1, 75% for Year 2, 50% for Year 3, and 25% for Year 4. • 2014. 75% for Year 1, 50% for Year 2, and 25% for Year 3. • 2015. 50% for Year 1, and 25% for Year 2. • After 2015. No incentives apply.

19. Medicare and Medicaid Funding (cont.) • Medicare payments to hospitals. (continued) • Payment penalties. 75% of inpatient payment update at risk. • 2015. Reduction of 25%. • 2016. Reduction of 50%. • 2017 and beyond. Reduction of 75%.

20. Chart/Table

21. Example Assume: 20,000 discharges; 50,000 Part A & Part C days; 100,000 total days; charity care charges are 20% of total charges Year 1 of implementation is 2012 Base amount = $2 million + (20,000 x $200) = $2 million + $4 Million = $6 million Medicare Share = 50,000 / (100,000 x 80%) = 50,000 / 80,000 = .625 Transition Factor = 1 Total = $6 million x .625 x 1 = $3.75 million in Year 1

22. Medicare and Medicaid Funding (cont.) • Medicare payments to hospitals. (continued) • No judicial review of structure, but possible administrative appeal of individual items. • Special rules apply for CAHs and hospitals affiliated with MA organizations. • Summary of open issues. • Definition of "certified EHR technologies”. • EHR reporting period. • Definition of "charity care”.

23. Medicare and Medicaid Funding (cont.) • Medicare payments to hospitals. (continued) • Definition of "meaningful EHR user”. • Interoperability. • Data subject to quality reporting. • Interaction between meaningful EHR use and RHQDAPU program. • Multi-campus providers. • Hospital-based physician.

24. Medicare and Medicaid Funding (cont.) • Medicare payments to physicians. • Applies to "eligible professionals." • Must be a meaningful EHR user. • Payment incentives. Physicians are paid up to 75 percent of their Medicare payments for the reporting year, up to the cap, which varies by year of adoption. • 2011 or 2012. $18,000 for Year I, gradually decreasing to $2,000 over 5 years. • 2013. $15,000 for Year 1, gradually decreasing to $4,000 over 4 years. • 2014. $12,000 for Year 1, gradually decreasing to $4,000 over 3 years. • Adoption after 2014. No incentives apply.

25. Medicare and Medicaid Funding (cont.)

26. Medicare and Medicaid Funding (cont.) • Medicare payments to physicians. (continued) • Payment reductions. Failure to become a meaningful EHR user results in reductions of physician fee schedule payments. • 2015: 1%. • 2016: 2%. • 2017: 3%. • 2018 and beyond: between 3% and 5%.

27. Medicare and Medicaid Funding (cont.) • Medicare payments to physicians. (continued) • Hospital-based physicians (based on site of service, and not employment) do not qualify for payment. • No judicial review for methodology and standards for determining who is a meaningful EHR user. • Special rules apply to group practices and physicians affiliated with MA plans.

28. Medicare and Medicaid Funding (cont.) • Medicaid payments, generally. • 100% Federal funding. • Tremendous flexibility. • Less Stringent rules for "meaningful use”. • In Year 1, must show efforts aimed at adopting technology. • In Year 2, must show meaningful use.

29. Medicare and Medicaid Funding (cont.) • Medicaid payments to hospitals. • Hospital Medicaid payments are in addition to hospital Medicare payments. • Qualifying hospitals. • Children's hospitals. • Hospitals that have at least a 10 percent Medicaid patient base.

30. Medicare and Medicaid Funding (cont.) • Medicaid payments to hospitals. (continued) • Payment Amount is cumulative Medicare amount, but substitute Medicaid Share for Medicare Share. • Medicaid Share. The numerator is Medicaid fee for service inpatient days and Medicaid MCO inpatient days. Denominator is total days, adjusted for charity care. • Annual limits. • Only 50 percent of the cap can be paid out in any given year. • Only 90 percent can be paid out over 2 years. • 2016 deadline for adoption. • No payments can extend over a period longer than 6 years.

31. Medicare and Medicaid Funding (cont.) • Medicaid payments to physicians. • Physicians choose between Medicare and Medicaid incentives. • Recipients can be non-hospital based physicians, dentists, certified nurse midwives, nurse practitioners, or physicians assistants. • Patient base must be one of the following: • 30% Medicaid. • For pediatricians, 20% Medicaid. • For practitioners practicing predominately in an FQHC or an RHC, at least 30% "needy individuals”.

32. Medicare and Medicaid Funding (cont.) • Medicaid payments to physicians. (continued) • Payment amount. • Depends upon year. • In Year 1, can receive up to 85% of the average costs of purchasing and implementing certified HER technology. • Based on HHS survey. • Net of other payments. • Cannot exceed $25,000. • Cannot occur later than 2016. • In Year 2 and beyond, can receive up to 85% of the average costs for operation and maintenance of certified EHR technology. • Cannot exceed $10,000 per year. • Payments only until the earlier of 5 year term of 2021.

33. Medicare and Medicaid Funding (cont.) • Medicaid payments to physicians. (continued) • Payment caps for pediatricians are reduced by 33 percent • The physician or practitioner, or a State or local government, must incur the remaining 15%.

34. Key Events Since ARRA… • NCVHS Hearing on “Meaningful Use” (April 28-29) • Meetings of ONC Advisory committees • Policy Committee (May 11, June 16, July 16) • Standards Committee (May 15, June 23, July 21) • CMS released notice and request for comments on regional extension center program (May 28)

35. Work of the HIT Policy Committee • Purpose: make recommendations to National Coordinator on policy framework • Chair: David Blumenthal • Vice Chair: Paul Tang • Created 3 Workgroups I Subcommittees • Meaningful Use • Certification /Adoption • Exchange • Meaningful Use workgroup released first draft of definition of "meaningful use" (the "Meaningful Use Matrix") at second Committee meeting on June 16 • Comments were due June 26 • Workgroup revised draft and released at July 16 Policy Committee meeting

36. Meaningful Use Comments to Draft Definition of “Meaningful Use” • Medicare Payment Advisory Commission (“MedPac”) • American Hospital Association (“AHA”) • Healthcare Information and Management Systems Society(“HIMSS”)

37. Meaningful Use (cont.) • Strong public and industry endorsement of outcomes-focused framework for meaningful use • Although a clear stretch, meaningful use of HIT is critical to president’s and congress’s agenda for health reform, which drives the urgency of the timelines • Achieving the aggressive timelines will require more than financial incentives (e.g., education, regional extension centers, increased informatics workforce, product improvements, accelerated technical standards adoption) • While extremely ambitious, with robust alignment of incentives, the vision is achievable

38. Meaningful Use (cont.) General Themes • Majority concurred that the focus of meaningful use must be on objectively measurable improvement of health outcomes and actual effective use, not simply to promote the adoption of technology for its own sake. • Commenters generally applauded the emphasis on quality. • More than a third of commenters expressed general support for the initial guidance. • Some suggested more aggressive timeline; some suggested less aggressive timeline. • Many asked for clarification of terms.

39. 2009 2011 2013 2015 HIT-Enabled Health Reform Meaningful Use Criteria HITECH Policies 2011 Meaningful Use Criteria (Capture/share data) 2013 Meaningful Use Criteria (Advanced care processes with decision support) 2015 Meaningful Use Criteria (Improved Outcomes) Meaningful Use (cont.)

40. Meaningful Use (cont.)

41. Work of the HIT Standards Committee • Purpose: make recommendations to National Coordinator on standards, implementation specifications, and certification criteria • Initial focus is on policies developed by Policy Committee and recommended to Standards Committee by National Coordinator • Created 3 Workgroups/Subcommittees • Clinical Operations • Clinical Quality • Privacy & Security

42. Upcoming Dates to Keep in Mind • Auqust 14: Next HIT Policy Committee Meetings • Auqust 20: Next HIT Standards Committee Meetings • December 31: Deadline for HHS to publish rule (likely interim final) adopting an initial set of standards, implementation specifications, and certification criteria • "Late 2009": CMS planning to publish proposed rule with 60-day comment period regarding Medicare/Medicaid incentive payments • "Sometime in 2010": CMS planning to publish final rule regarding incentive payments • October 2010: Earliest CMS will start paying Medicare incentives • January 2011: Earliest CMS will start paying Medicaid incentives to hospitals and Medicare and Medicaid incentives to physicians • January 2015: Medicare penalties begin for hospitals and "eligible professionals" failing to meet definition of "meaningful-use"-

43. Some Things We Still Don't Know About the Rulemaking Process: • ONC vs. CMS - which details decided by whom? • When will CMS issue a proposed rule? A final rule?

44. “To Do” List • Get involved in the regulatory process. • Keep track of committee meetings and read minutes. • http:llaamc.org/members/gir/hitlstarthtm • http:l/rossmartinmd.comlf/blog.htm (for an HIT laugh) • Voice your opinion, either directly or through your trade associations. • Do a "gap analysis" when proposed standards are issued and submit comments if the standards are over-reaching.

45. “To Do” List (cont.) • Choose your EHR vendor wisely. • 1 Is the prospective vendor an active participant in the regulatory process? • What is their action plan for acting on new developments? • Will they indemnify you for failure to furnish a "certified EHR technology?“ • Keep checking for other funding. • Check Grants.gov and hhs.gov/recovery periodically. • Monitor opportunities in the Federal Register. • Be creative and proactive - take the initiative to present DHHS agencies with funding ideas.

46. THANK YOU!!! Richard D. Sanders Balch & Bingham LLP 30 Ivan Allen Jr Blvd NW, Suite 700 Atlanta, GA 30308 T: (404) 261-6020 F: (404) 261-3656 rsanders@balch.com