The nation’s healthcare system is undergoing a transformation in an effort to improve quality, safety and efficiency of care, from the upgrade to ICD-10 to information exchanges of EHR technology. To help facilitate this vision, the Health Information Technology for Economic and Clinical Health Act, or the "HITECH Act" established programs under Medicare and Medicaid to provide incentive payments for the "meaningful use" of certified EHR technology. The Medicare and Medicaid EHR incentive programs will provide incentive payments to eligible professionals and eligible hospitals as they adopt, implement, upgrade or demonstrate meaningful use of certified EHR technology. The programs begin in 2011. These incentive programs are designed to support providers in this period of Health IT transition and instill the use of EHRs in meaningful ways to help our nation to improve the quality, safety and efficiency of patient health care.

On Feb. 17, 2009, President Obama signed the American Recovery and Reinvestment Act of 2009 (Recovery Act), a critical measure to stimulate the economy. Among other provisions, the new law provides major opportunities for the Department of Health and Human Services (DHHS), its partner agencies, and the States to improve the nation’s health care through health information technology (HIT) by promoting the meaningful use of electronic health records (EHR) via incentives. For a copy of the full bill, go to: http://www.hhs.gov/recovery/overview/index.html
The HIT provisions of the Recovery Act are found primarily in Title XIII, Division A, Health Information Technology, and in Title IV of Division B, Medicare and Medicaid Health Information Technology. These titles together are cited as the Health Information Technology for Economic and Clinical Health Act or the HITECH Act. This fact sheet focuses on the provisions of Title IV only.
Under Title IV, funding is available to certain eligible professionals (EPs) and hospitals, as described below. Funds will be distributed through Medicare and Medicaid incentive payments to EPs, physicians, and hospitals who are “meaningful EHR users.” In addition, with regard to the Medicaid program, federal matching funds are also available to States to support their administrative costs associated with these provisions.
Criteria for Qualifying for an Incentive
The qualification criteria for incentives (i.e., meeting specified HIT standards, policies, implementation specifications, timeframes, and certification requirements) are still in development, and will be defined through regulation and additional guidance materials. However, CMS generally expects that under Medicare, “meaningful EHR users” would demonstrate each of the following: meaningful use of a certified EHR, the electronic exchange of health information to improve the quality of health care, and reporting on clinical quality and other measures using certified EHR technology. Medicaid programs will determine their own requirements in line with the Medicaid-related provisions of the Recovery Act. Funds will be distributed through Medicare and Medicaid incentive payments to EPs and hospitals who are “meaningful EHR users.” CMS intends to publish a proposed rule in late 2009 to propose a definition of meaningful use of certified Electronic Health Records (EHR) technology and establish criteria for the incentives programs. CMS is working extensively with the Office of the National Coordinator for Health Information Technology (ONC) to identify the proposed criteria.
Medicare Payment Incentives for Eligible Professionals
• The Recovery Act establishes financial incentives beginning in January 2011 for eligible professionals (EPs) who are meaningful EHR users. Beginning in 2015, payment adjustments will be imposed on EPs who are not meaningful EHR users.
• Hospital-based physicians who substantially furnish their services in a hospital setting are not eligible.
• Incentive Payments
• The incentive payment is equal to 75 percent of Medicare allowable charges for covered services furnished by the EP in a year, subject to a maximum payment in the first, second, third, fourth, and fifth years of $15,000; $12,000; $8,000; $4000; and $2,000, respectively. For early adopters whose first payment year is 2011 or 2012, the maximum payment is $18,000 in the first year.
• There will be no payments for meaningful EHR use after 2016.
• There would be no payments to EPs who first become meaningful EHR users in 2015 or thereafter.
• For EPs who predominantly furnish services in a health professional shortage area (HPSA), incentive payments would be increased by 10 percent. 
• Payment Adjustments
• The Medicare fee schedule amount for professional services provided by an EP who was not a meaningful EHR user for the year would be reduced by 1 percent in 2015, by 2 percent in 2016, by 3 percent for 2017 and by between 3 to 5 percent in subsequent years. 
• For 2018 and thereafter, if the Secretary finds that the proportion of EPs who are meaningful EHR users is less than 75 percent, then the reductions will be increased by 1 percentage point each year, but not more than 5 percent overall.
Medicare Payment Incentives for Hospitals
• Incentive payments are provided, beginning with October 2010, for eligible subsection (d) hospitals and critical access hospitals (CAHs) that are meaningful EHR users. Reduced payment updates beginning in FY 2015 will apply to eligible hospitals that are not meaningful EHR users.
• An eligible hospital that is a meaningful EHR user could receive up to four years of financial incentives payments, beginning with fiscal year 2011. There will be no payments to hospitals that become meaningful EHR users after 2015. 
• Incentive Payments for Hospitals
The incentive payment for each eligible hospital would be calculated based on the product of 
(1) an initial amount, (2) the Medicare share, and (3) a transition factor. 
(a)The initial amount is the sum of a $2 million base year amount plus a dollar amount based on the number of discharges for each eligible hospital.
(b)The Medicare share is a fraction based on estimated Medicare fee-for-service and managed care inpatient bed days divided by estimated total inpatient bed-days and modified by charges for charity care.
(c)The transition factor phases down the incentive payments over the four-year period. The factor equals 1 for the first payment year, ¾ for the second payment year, ½ for the third payment year, and ¼ for the fourth payment year, and zero thereafter.
The Secretary has discretion to use other data if the required data to calculate the incentive payment formula does not exist. 
• The transition factor is modified for those eligible hospitals that first become meaningful EHR users beginning in 2014. Such hospitals would receive payments as if they became meaningful EHR users beginning in 2013 (i.e., if a hospital were to begin EHR meaningful use in 2014, the transition factor used for the year would be ¾ instead of 1, ½ for the second year, ¼ for the third year, and zero thereafter ).
• For CAHs that are meaningful EHR users, reasonable costs for the purchase of certified EHR technology would be computed by expensing such costs in a single payment year, rather than depreciating them over time. In addition, incentive payments for CAHs would be based on the Medicare share formula used for subsection (d) hospitals, plus 20 percentage points (not to exceed a total of 100 percent). CAHs would receive a prompt interim payment for the Medicare share of such costs (subject to reconciliation). Payments would not be made with respect to a cost reporting period beginning during a payment year after 2015, and in no case would a CAH receive payment with respect to more than 4 consecutive payment years.
• Market Basket Adjustments for Hospitals that are not Meaningful Users
• Eligible subsection (d) hospitals that are not meaningful users for a fiscal year would receive a net reduction of ¼, ½, and ¾ of the market basket update that would apply in 2015, 2016, 2017 and thereafter, respectively.
• The Secretary of HHS may, on a case-by-case basis, exempt a hospital if requiring the hospital to be a meaningful EHR user would result in a significant hardship.
• Eligible CAHs that are not meaningful EHR users for a fiscal year and otherwise would be paid at 101 percent of reasonable costs are subject to the following payment adjustments: in FY2015, reimbursement for inpatient services at 100.66 percent of reasonable costs; in FY2016, reimbursement for inpatient services at 100.33 percent of reasonable costs; and in FY2017 and each subsequent year, 100 percent of reasonable costs.
Medicaid Payment Incentives
The Recovery Act establishes 100 percent Federal Financial Participation (FFP) for States to provide incentive payments to eligible Medicaid providers to purchase, implement, and operate (including support services and training for staff) certified EHR technology. It also establishes 90 percent FFP for State administrative expenses related to carrying out this provision. 
Incentive Payments to Providers
• Certain classes of Medicaid professionals and hospitals are eligible for incentive payments to encourage the adoption and use of certified EHR technology. Eligible professionals include physicians, dentists, certified nurse-midwives, nurse practitioners, and physician assistants who are practicing in Federally Qualified Health Centers (FQHCs) or Rural Health Clinics (RHCs) led by a physician assistant. 
• Eligible professionals must meet minimum Medicaid patient volume percentages, and must waive rights to duplicative Medicare EHR incentive payments. Eligible professionals may receive up to 85 percent of the net average allowable costs for certified EHR technology, including support and training (determined on the basis of studies that the Secretary will undertake), up to a maximum level, and incentive payments are available for no more than a 6-year period. 
• Acute care hospitals with at least 10 percent Medicaid patient volume would also be eligible for payments, as would children's hospitals of any patient volume. Entities that promote the adoption of certified EHR technology, as designated by the State, are also eligible to receive incentive payments through arrangements with eligible professionals under certain conditions.
Medicaid Incentive Program Qualifications
To be eligible for incentive payments not associated with the initial adoption/implementation/upgrade of EHR technology, the provider must demonstrate meaningful use of the EHR technology through a means approved by the State and acceptable to the Secretary. In determining what is “meaningful use,” a State must ensure that populations with unique needs, such as children, are addressed. A State may also require providers to report clinical quality measures as part of the meaningful use demonstration. In addition, to the extent specified by the Secretary, the EHR technology must be compatible with State or Federal administrative management systems.
EPs may not receive an incentive under both Medicare and Medicaid in a given year. CMS and the States will develop means to prevent such duplicate payments. CMS expects that the prevention of duplicative payments will be addressed more fully through notice and comment rulemaking.