1. Implementing the American Reinvestment & Recovery Act of 2009 Mike Stigler, FHFMA, CPA Director 502.992.3510 mstigler@blueandco.com EHR Incentive Funding for Medicare and Medicaid

2. Eligible Providers/Hospitals - Defined Incentive payments –Prospective Payer Hospitals –Critical Access Hospitals –Eligible Physicians Donations – permissible transactions Agenda

3. EHR Incentives EHR Incentive Legislation: –American Recovery and Reinvestment Act of 2009 which included the –Health Information Technology for Economic and Clinical Health Act ("HITECH Act") Proposed Rule issued 1/13/10 Final Rules issued 7/28/10 –CMS - New Part 42 C.F.R. 495 – (276 pages) –DHHS – HIT Standards adds to 42 C.F.R. 170 (66 pages) 3

4. Who is a Medicare FFS Eligible Provider? Eligible Providers in Medicare Eligible Professionals (EPs) Doctor of Medicine or Osteopathy Doctor of Dental Surgery or Dental Medicine Doctor of Podiatric Medicine Doctor of Optometry Chiropractor EP’s receive payment from 1 program – either Medicaid or Medicare Definition different for Medicare/Medicaid: Medicare = doctors, but not midlevels Medicaid = doctors & midlevels Excluded: Rural Health Clinics and Federally Qualified Health Centers However, these centers may qualify for Medicaid ……..

5. Hospital-based EPs do not qualify for Medicare EHR incentive payments (est.. 27% of MD’s are hospital based) Defined as - furnishes 90% or more of their services in a hospital setting (inpatient or emergency room) –Uses place of service codes: 21 = inpatient hospital 23 = emergency room, hospital Calculation of the location percentage is based on the prior year claims submitted for the provider PIN Hospital-based EPs

6. Who is a Medicare FFS Eligible Provider? Eligible Hospitals* Acute Care Hospitals Critical Access Hospitals (CAHs) Excluded: Psychiatric, Rehabilitation, ER, Children’s & Cancer Hospitals Multiple, discrete campuses operating under 1 provider # would be recognized as 1 provider only IPPS/DRG Hospitals can receive Medicare AND Medicaid if they qualify *Subsection (d) hospitals that are paid under the PPS and are located in the 50 States or DC (including Maryland hospitals) Surgical and other specialty hospitals participating in IPPS are eligible for Medicare incentives

7. Eligible Providers in Medicaid Eligible Professionals (EPs) Physicians (Pediatricians have special eligibility & payment rules) Nurse Practitioners (NPs) Certified Nurse-Midwives (CNMs) Dentists Physician Assistants (PAs) who lead a Federally Qualified Health Center (FQHC) or rural health clinic (RHC) that is directed by a PA Eligible Hospitals Acute Care Hospitals & Cancer Hospitals (>10% Medicaid) Children’s Hospitals (Medicaid not tested) Who is a Medicaid Eligible Provider?

8. Entity Physicians - Pediatricians Dentists CNMs PAs when practicing at an FQHC/RHC that is so led by a PA NPs Acute care hospitals Minimum Medicaid patient volume threshold 30% 20% 30% 10% Or the Medicaid EP practices predominantly in an FQHC or RHC—30% needy individual patient volume threshold Not an option for hospitals No requirement Children’s hospitals Medicaid Eligibility: Patient Volume

9. EP is also eligible when practicing predominantly in FQHC/RHC providing care to needy individuals Proposes practicing predominantly is when FQHC/RHC is the clinical location for over 50% of total encounters over a period of 6 months in the most recent calendar year Needy individuals (specified in statute) include: –Medicaid or CHIP enrollees; –Patients furnished uncompensated care by the provider; or –furnished services at either no cost or on a sliding scale. Eligibility: “Practices Predominantly” & Needy Individuals

10. Meaningful Use will be defined in 3 stages through rulemaking Meaningful Use Stages *Stages 2 and 3 will be defined in future CMS rulemaking. First Payment Year20112012201320142015* 2011Stage 1 2012Stage 1 2013Stage 2Stage 1 2014Stage 2 Stage 1 2015Stage 3 2016Stage 3

11. Hospital & CAHs –All 14 core objectives, w/ exceptions for N/A –5 of 10 set objectives Eligible Professional –All 15 core objectives, w/ exceptions for N/A –5 of 10 set objectives EHR Reporting Period (when must be MU) –EP = 1 st year any 90 days. Then full calendar year –Hospital/CAH = 1 st year any 90 days. Then full FF Y 11 Meaningful Use – Stage 1

12. Eligible professionals (EPs) –Calendar Year calculation –2011-2016 (Medicare) – Up to $44,000 over 5 years if “meaningful EHR user” –2011-2021 (Medicaid) – Up to $63,750 over 6 years –2015 and later – If not “meaningful EHR user” up to 3% payment reduction in Medicare reimbursement –EPs be allowed to change their program selection only once during payment years 2012 through 2014 –Significant hardship exception for up to 5 years with CMS approval E.g. rural EP without significant internet access –EP can receive Medicaid incentives from only 1 State –No incentive after 2016 Incentive Payments for EPs

13. First Calendar Year in which the EP receives an Incentive Payment Calendar Year CY 2011CY 2012CY 2013CY 2014 CY 2015 and later 2011 2012 2013 2014 2015 $18,000 $12,000 $8,000 $4,000 $2,000 $12,000 $8,000 $4,000 $15,000 $12,000 $8,000 $12,000 $8,000 $0 2016 TOTAL $44,000 $2,000 $44,000 $4,000 $39,000 $4,000 $24,000 $0 $18,000 Incentive Payments for Medicare EPs -Based on 75% of Medicare Payments ($24,000 x 75% cap/yr) -Group Practice x # of EP *Single Annual Payment

14. HPSA Incentive –10% Increase in incentive (max $48,000 vs. $44,000) Provides services predominantly in HPSA Defined as >50% of covered services provided in HPSA January 1 – December 31 of prior year –No impact if HPSA lost during current year –No impact if HPSA obtained during current year Applies ONLY to geographic HPSA –Primary care, dental, mental health HPSAs NOT available to “other” kinds of HPSAs –Population or Governor desig shortage –Medically Underserved Areas (MUAs) 14 EHR Incentives

15. Stimulus Payments – EP Single Consolidated Payment –Ascertain professional has demonstrated MU –Reaches maximum payment limit –If maximum payment limit is not reached, payment is processed 2 months after relevant payment year Multiple Employers/Contractual Arrangements –Assign incentive to 1 employer or entity

16. Stimulus Payments – EP Failure to become a meaningful EHR user by 2015 –2015 – 99% of applicable fee schedule –2016 – 98% of applicable fee schedule –2017 – 97% of applicable fee schedule –2018 – Additional 1% reduction if less than 75% professionals are meaningful users. Subsequent year reductions capped at 95%

17. Medicaid – EP Incentive payment to EP equals Net Average Allowable Costs for HER NAAC is Average Allowable Costs (capped at $25K in yr 1 and $10K in years 2-6) net of cash payments attributable to EHR technology or support services from sources other than state and local governments, subject to 15% EP responsibility

18. Hospital HIT Stimulus Payment Years Defined: –CAH – Cost Reporting Period First available payment year begins with the first cost report beginning on or after October 1, 2010 –PPS Hospital – Federal Fiscal Year Year beginning on October 1 and ending September 30 First available payment year begins October 1, 2010 –EHR Reporting Period 1 st year – Continuous 90 day period within first payment year Subsequent – Entire payment year

19. Hospital Stimulus Payments – Medicare Share Medicare Share –Based on inpatient volume –Numerator Medicare days + Medicare Advantage patient days –IP, Specialty Care »Psych and Rehab are excluded in the final rule »Excludes Swing Bed –Important – Medicare Advantage based on no-pay bills

20. Hospital Stimulus Payments – Medicare Share Based on inpatient volume –Denominator Total inpatient days TIMES –Hospital charges less charity care DIVIDED BY hospital charges »Worksheet C, Part I, Line 200, Column 8 Charity Care –As identified on Worksheet S-10 of the Medicare cost report for PPS Hospitals –New reporting requirement for CAHs

21. PPS Hospitals - Medicare Initial Amount –Base payment for each PPS hospital = $2,000,000 Adjusted for discharges 1,150 to 23,000 –$200 additional per discharge in the range –Times Medicare Share Payment Process –Hospital data last filed 12 month cost report –Settled based on the first 12 month cost reporting period that begins after the start of the payment year

22. PPS Hospitals - Medicare Failure to become a meaningful EHR user by FFY 2015 –Market Basket Adjustment reduction on 75% of the adjustment FFY 2015 – 33.33 Pct FFY 2016 – 66.67 Pct FFY 2017 – 100 Pct –Net Impact FFY 2015 – 25 Pct FFY 2016 – 50 Pct FFY 2017 – 75 Pct

23. PPS Hospital Payment Example Charity Care per Worksheet S-10, excludes courtesy allow. and discounts Discharge transfers not addressed if included in count IP days excludes rehab, psych and nursery

24. Fiscal year that eligible hospital first receives the incentive payment Fiscal Year FY 2011FY 2012FY 2013FY 2014 FY 2015 and later 2011 2012 2013 2014 2015 1.00 0.75 0.50 0.25 0.75 0.50 0.25 1.00 0.75 0.50 0.75 0.50 2016 0.25 1.00 Incentive Payments for Eligible PPS Hospitals

25. Critical Access Hospitals - Medicare Allowed to expense their costs associated with the purchase of certified EHR technology in a single year –Versus depreciating costs on the cost report –Current year and prior year purchases (undepreciated value) –Includes only purchases for hospital specific EHR technology –Reimbursement based on Medicare share + 20 percentage points (not to exceed 100%) –Lump sum prompt payment subject to reconciliation Initial based on last 12 month cost report Final based on final cost report –Payments up to 4 consecutive years Stages Replacement equipment

26. Critical Access Hospitals - Medicare Allowable expense –Reasonable cost – “computers and associated hardware and software necessary to administer EHR technology” Communicate with the Fiscal Intermediary with any questions Impact on Trade-ins? Review capitalization policies –Incentive payment in lieu of depreciation AND interest –FI to review cost reports to ensure that assets associated with the acquisition of certified EHR technology are expensed in a single period and that depreciation and interest expenses associated with the acquisition are not allowed –Subject to reconciliation

27. Critical Access Hospitals - Medicare Failure to become a meaningful EHR user by FFY 2015 –Reduction in 101% of cost –FFY 2015 – 100.66% of cost –FFY 2016 – 100.33% of cost –FFY 2017 - 100.00% of cost Strategy –Place EHR assets in use and become meaningful user in the same fiscal year or consider “construction in progress”

28. CAH Hospital Payment Example Reasonable Acquisition Cost = Incurred for purchase of depreciable assets Computers, associated hardware and software Excludes depreciation and interest

29. Medicaid Eligible Hospitals Acute care hospital (including CAH) must have at least 10% Medicaid Patient Volume based on patient encounters –Inpatient –Emergency room –Any representative continuous 90-day period in most recent fiscal year Like other Medicaid Eligible Hospitals, CAHs may receive both Medicare and Medicaid EHR incentive payments

30. Medicaid Eligible Hospitals PPS and CAHs reimbursed under same methodology as Medicare PPS –Medicaid Share versus Medicaid Share –Calculate 4 year payment Discharges based on hospital’s experience in past three years –Payment made over 3-6 years No more than 50% of payment in 1 year No more than 90% of payment in 2 years –Adopt, implement or upgrade certified EHR technology No meaningful use requirement in year 1 Meaningful use required for future years

31. Attestation for Medicare FFS Eligible providers demonstrate MU to CMS through attestation in 2011 and attestation and electronic reporting of clinical quality information in 2012 Providers may submit attestations as early as April 2011 to CMS Payment begins as early as May 2011 following attestation

32. States and CMS must assure there is no duplication of payments to providers (between States and between States and Medicare) States are required to seek recoupment of erroneous payments and have an appeals process CMS/Medicaid has oversight/auditing role including how States implement the EHR Incentive Program (90% FFP) and how they make correct payments to the right providers for the right criteria (100% FFP). Financial Oversight & Program Integrity

33. The regulations permit the donation of certain technologies by certain donors to certain recipients on a cost sharing basis EHR Donations

34. Permitted Technology Software necessary and used predominantly for electronic health record purposes, such as creating, maintaining, sending and receiving electronic health records for clinical diagnosis and treatment for a broad array of clinical conditions must include e-Prescribing functionality may include non-EHR functionality, so long as it doesn't predominate must be interoperable

35. Can be donated: Training on the Software Maintenance for the Software Help-Desk Services for the Software Cannot be donated: Hardware and related operating systems Storage devices Direct staffing and services necessary to migrate paper records to the EHR Software Staffing for the recipient’s office

36. Selection of Recipients by Donor Donor may use any method of selection that does not directly take into account volume or value of referrals. Permissible criteria include: total number of prescriptions written total hours devoted to medical practice size of the physician practice (total patients, total patient encounters, etc) medical staff membership level of uncompensated care provided by the recipient

37. Recipient Requirements Donor cannot have actual knowledge, or act in reckless disregard or deliberate ignorance, of the fact that the recipient possesses or has obtained items or services equivalent to those being provided by the donor Donor cannot restrict the recipient's right to use the items or services for any patient

38. Value provided by Donor Donor may provide 85% of the total cost of the permissible donated items Recipient must pay 15% of the total cost of the permissible donated items Donor cannot finance Recipient's 15% cost allocation

39. Administrative Requirements Must be evidenced by a comprehensive written agreement, signed by both parties, containing a list of all items and services provided, the donor’s cost for those items and services, and the amount of the physician's contribution Separate agreements permitted if cross- referenced Sunsets on December 31, 2013 All conditions must be met and transfer must occur on or before this date

40. Additional initiatives impacting IT operations. –Conversion to ICD-10 by 2013 –X12 version 5010 for HIPAA transactions (700+ data elements from 300) Compliance 1.1.2010 Unrealistic timelines Certification guidelines not final Clinical system vendors – not enough experience to support numerous new installers? Lack of HIT staff (est. 60,000 shortage) Timeline needed for implementation CPOE Functional issues – e.g. Counting orders to determine the denominator for CPOE adoption % - manual chart reviews. Lack of national patient identifier to eliminate mistakes in monitoring patient records in HIE. Low adoption levels currently – learning curve significant In Summary – Biggest Hurdles