Analysis of the HITECH Act’s Incentives to Facilitate Adoption of Health Information Technology

Stimulus Update - Electronic Medical Records

The “Health Information Technology for Economic and Clinical Health Act’’ or the ‘‘HITECH Act” (as contained within the American Recovery and Reinvestment Act of 2009 [the “Stimulus”]) will expand the use of health information technology (HIT) and appropriates $250 million for this Fiscal Year for implementing the new HITECH provisions.1 Politicians are now convinced that health care expenditures can be tamed using HIT: Health care expenditures currently make up 16% of the U.S. gross domestic product and are projected to become about 20% of the gross domestic product by 2015.2 The HITECH Act thus offers significant financial incentives to providers for implementing HIT, in particular, electronic health records (EHR).

The Goals of the HITECH Act

The HITECH Act is intended to encourage more effective and efficient health care through the use of technology, thereby reducing the total cost of health care for all Americans and then using these savings to enable all Americans to have access to the health care system.  Savings are expected to come from efficiency gains and improved clinical guidelines, allowing treatments to be standardized for various medical conditions.3

The stated goals of the HITECH Act include implementation of:

• A national health technology infrastructure (including both hardware and software) to ensure the electronic exchange, use and integration of health information including comparative effectiveness data;
• An electronic health record for each person in the United States by 2014;
• A framework for coordination and flow of recommendations and policies among the Secretary, the National Coordinator, the HIT Policy Committee, the HIT Standards Committee, and other relevant entities;
• Mechanisms to foster the public understanding of health information technology;
• Strategies to enhance the use of health information technology with an eye towards improving the quality of health care, reducing medical errors, reducing health disparities, improving public health, increasing prevention and coordination with community resources; and
• Guidelines to improve the continuity of care among health care settings.

Title XIII—Health Information Technology

Part A – Promotion of Health Information Technology

The United States is set to invest significant resources into health information technology over the next seven years, with the expectation that every citizen will have an electronic medical record by the year 2014.  To accomplish this herculean effort, the HITECH Act implements a new administrative structure within HHS to manage the implementation of HIT technology at a national level. Key administrative persons and committees created by the HITECH Act are the National Coordinator for the Office of the National Coordinator for Health Information Technology (ONCHIT), the HIT Policy Committee responsible for defining key policies for the implementation of a national health information infrastructure, and the HIT Standards Committee to assess standards, implementation specifications, and certification criteria for HIT.

• The National Coordinator is responsible for coordinating HIT policies and programs, developing a voluntary HIT certification program, and setting milestones for utilization of EHRs for each person in the United States by 2014.
• The HIT Policy Committee is responsible for recommending areas where standards, implementation specifications and certification criteria are needed for the electronic exchange and use of health information.  The HIT Policy Committee sets the priority for the development, harmonization, and recognition of standards, specifications, and certification criteria.  This committee will also identify standards, architectures, and software schemes for maintaining the confidentiality of identifiable health information and to ensure a common solution across an array of different healthcare entities.
• The HIT Standards Committee is responsible for recommending to the National Coordinator standards, implementation specifications, and certification criteria for the electronic exchange and use of health information and to serve as Forum where key stakeholders can provide input on the development, harmonization, and recognition of standards, implementation specifications, and certification criteria for a nationwide health information technology infrastructure.  The HIT Standards Committee is responsible for ensuring that HIT standards and implementation specifications meet the policy goals set by the HIT Policy Committee.  Within 90 days after the enactment of the Stimulus, the HIT Standards Committee is required to release a schedule for the assessment of policy recommendations developed by the HIT Policy Committee pursuant to section 3002 of the HITECH Act.

Along with the creation of a new national HIT administrative structure to facilitate adoption of Health Information Technology, the HITECH Act also provides incentives to promote use of EHRs, telemedicine, and clinical data repositories.  These incentives are discussed below.  In many instances, previous government attempts to encourage EHR have been less than satisfactory.  Unlike earlier initiatives, the new program offers both a carrot and stick approach.

Part B – Testing of Health Information Technology

Part B directs coordination of testing of HIT standards and implementation specifications in cooperation with the National Institute of Standards and Technology (NIST).  NIST and the NSF are to establish a grant-funded research program to assist universities (and others) to establish Multidisciplinary Centers for HIT related research to be coordinated with the National Information Technology Research and Development Program.  Research areas include:

• Interfaces between human information and communications technology systems;
• Voice-recognition systems;
• Software that improves interoperability and connectivity among health information systems;
• Software dependability in systems critical to health care delivery;
• Measurement of the impact of information technologies on the quality and productivity of health care;
• Health information enterprise management;
• Health information technology security and integrity; and
• Relevant health information technology to reduce medical errors.

(Section 13202(4), Section 13202(5) of the Act.)

Part C – Grants and Loan Programs

Under the Stimulus, $2.1 billion has been allocated for the development of standards, investment in Health Information Exchange Technology, and grants distributed by the Office of the National Coordinator of Health IT (“ONCHIT”) to states to assist with the adoption of EHR technology.
The Secretary is directed to spend appropriated funds through various federal agencies, including ONCHIT, HRSA, AHRQ, CMS, CDC and the Indian Health Service to support:

• Development of the architecture for nationwide electronic exchange;
• Development and adoption of “certified EHR technology” (defined to require interoperability);
• Funding the adoption of EHR technology for certain providers not otherwise eligible for support under the Medicare or Medicaid Programs;
• Training and dissemination of information on best practices, telemedicine infrastructure, interoperability of clinical data repositories, promotion of privacy and security, and
• Expansion of personal health record use of HIT.

The Secretary of HHS is directed (by the HITECH Act) to support the development of HIT Regional Extension Centers, to be affiliated with US-based nonprofit organizations.  These centers will apply for and be awarded financial assistance under this part of the Act.  This financial assistance may be awarded for up to four years and may not exceed 50 percent of the capital and annual operating funds required to create and maintain the Center. (Section 13202 of the Act.)
The Secretary is also directed to establish a program to provide planning grants and implementation grants to a state or “qualified state designated entity” for the purpose of advancing the interoperable use of EHRs.  These grants will require matching cash or in-kind contributions from the host state as follows: in 2011, $1 state to $10 federal; in 2012, $1 state to $7 federal; and in 2013 and thereafter, $1 state to $3 federal. The Secretary has discretion to require a state match for grants awarded prior to 2011.

ONCHIT may also award competitive grants to states (and Indian Tribes) to seed “certified EHR Technology loan funds” for the purpose of facilitating the purchase and utilization of “certified EHR technology.” These grants will require private or state matching funds of not less than $1 for every $5 of federal funds.

Title IV – Medicare and Medicaid Health Information Technology; Miscellaneous Medicare Provisions

The HITECH Act provides incentives under either Medicare or Medicaid for providers who have adopted EHR systems determined to meet the Secretary’s relevant guidance and statutory requirements for meaningful use: those providers can receive bonus payments starting in 2011.  “Meaningful use” of an EHR includes three key components: (1) the EHR must be certified and include ePrescribing capabilities; (2) the technology must provide for the electronic exchange of personal health information with other systems (interoperability); and (3) the system must produce reports utilizing various (yet to be defined) clinical and quality metrics (Section 4101(a)(o)(2) of the HITECH Act).  Under the HITECH Act, $17 billion has been set aside for incentive payments to providers who implement a qualifying EHR under either Medicare or Medicaid.  However, the provider cannot double dip; a provider may only seek incentive payments under either Medicare or Medicaid but not both.

Certified EHR technology is defined to include EHRs which have been deemed qualified in accordance with the necessary standards and implementation specifications as established under the Act.  The National Coordinator is tasked with the development of qualified electronic health record technology (i.e. a certification system) for EHRs.  The criteria for certification are to be developed under Section 3001(c)(3) of the Act.

Professionals who are hospital-based are not eligible for the incentive payments.  Hospital-based professionals include pathologists, anesthesiologists, and emergency physicians who furnish substantially all of her/his services in a hospital setting (either inpatient or outpatient).  These physicians would use the hospital’s EHR.  Hospitals are also entitled to a separate set of incentive payments under the law. Whether an eligible professional is hospital-based is determined by the billing or employment arrangements between the provider and the hospital.

Medicare Incentives for Physicians

Unlike the Medicaid incentives, bonus payments under the HITECH Act for physicians seeking Medicare incentives are all the same flat amount based on the year in which the provider places in service a qualifying EHR.  No incentive payments will be provided before 2011 and after 2016 (Section 4101(a)(o)(2)(A)(ii) of the HITECH Act).
Table 1 – Physician Incentives under Medicare

Incentive payments will be increased by 10% if the provider predominantly serves beneficiaries in any area designated as a Health Professional Shortage Area (“HPSA”). If an eligible professional was not a meaningful user, then the fee schedule amount for such services furnished by the professional during the year shall be equal to the applicable percent of the fee schedule amount as follows. The discount amounts are as follows: for 2015, 99%; for 2016, 98%; and for 2017 and each subsequent year, 97%. The percentages can be decreased on and after 2018 based upon the proportion of eligible professionals who are meaningful users.

Medicare Incentives –Hospitals

Beginning in 2011, incentives payments are available for “eligible hospitals” that are making meaningful use of an EHR and that submit quality metrics based on criteria identified by HHS.  (Section 4102(n)(2)(G), Section 4102(n)(3))  Hospital payments are based on a $2 million base amount.  Added to the base amount is an additional discharge-related payment multiplied by the hospital’s Medicare share.  Incentive amounts are phased out beginning in 2015 for hospitals that not implemented a meaningful EHR and are not producing clinical quality data. The details of the actual bonus payment available to hospitals under this provision are complicated.  The incentive payment for an eligible hospital is equal to the sum of the $2 million base amount (Section 4102(n)(2) plus the product of discharge amount for a 12-month period and the hospital’s Medicare share.  The sum of the base amount and the product of the discharge amount and the Medicare share are then multiplied by a transition factor. (1 [year 1], .75 [year 2], .5 [year 3], and .25 [year 4]). (Section 4102(n)(2)(E))

• Calculating the Discharge Amount: The discharge amount is calculated by summing the total discharges beginning with the 1,150th discharge through the 23,000th discharge.  The sum of discharges above 1,150 but below 23,001 for the hospital is then multiplied by $200. (Section 4102(n)(2)(C))
• Calculating the Medicare Share: The Medicare share is calculated by summing the number of inpatient-bed-days attributable to individuals for whom payment is made under Medicare part A and under a Medicare Advantage plan part C.  (In the absence of Medicare specific in-patient data this amount is assumed to be zero.)  This sum is then divided by the product of:
  • The total number of inpatient-bed-days for the hospital during the 12-month period; and
  • The total amount of eligible hospital charges during the period (excluding charges that are attributable to charity care) divided by total amount of the hospital’s charges during the same period. (Section 4102(n)(2)(D)).  (In the absence of data for charges for Medicare patients this amount is  assumed to be one.)

Starting in 2015, any “eligible hospitals” failing to turn in the required quality data will also be subject to a reduction in their annual reimbursement rate updates.

Medicaid Incentives

Physicians who seek bonus payment under the Medicaid incentive program can potentially receive a maximum of $64,000. The Medicaid incentive structure is more complicated than Medicare and contains certain restrictions.
A health care provider is eligible for incentives under Medicaid if the provider:

• Is not hospital-based and his/her practice consists of at least 30% Medicaid patients by volume; and
• Is not hospital based, is a pediatrician and his/her practice consists of at least 20% Medicaid patients by volume;

Providers would be eligible for reimbursement of 85 percent of allowable EHR costs, not to exceed a maximum (per provider) of $63,750.  Note that hospitals with at least 10 percent Medicaid patient volume would be eligible for an incentive payment based on a formula similar to the calculation for incentive payments provided for under the Medicare economic incentive.

Cautious Approach When Adopting EHR

Because of the possibility of financial benefit, for small and large
providers alike, the implementation of an EHR likely will be a top
priority over the next two years; however, financial benefits will not
be realized without navigating a bureaucratic obstacle course and until
a critical mass of providers have adopted interoperable EHRs.. (See www.ischool.drexel.edu/faculty/ssilverstein/failurecases/?loc=cases&sloc=secrets for one physician’s experience and opinion).5

Recent studies highlight the need for a critical mass of provider adoption before benefits can be realized from EHRs. Some studies primarily done in smaller provider settings show that implemented EHR systems have serious issues. Some clinical studies that have looked at whether EHRs increase the quality of care for patients (within non-integrated providers) have raised concerns about the effectiveness of EHRs to create new efficiencies and increase the quality of care.  However, research done with larger integrated service providers found evidence of increased efficiency and quality of care:

• Properly implemented and widely adopted, Health Information Technology would save money and significantly improve healthcare quality;
• Annual savings from efficiency could be $77 billion or more;
• Health and safety benefits could double the savings while reducing illness and prolonging life; and
• To be effective implementation must be widespread to realize network effect efficiencies.

One study of particular note identified four classes of trajectory-changing events. The identification and management of such events was made possible in part by the use of health information technology. Four noted interventions that resulted in both efficiency and quality gains included:

• Computerized Physician Order Entry (CPOE) reduced adverse drug events (ADEs) thereby reducing the length of stays in the hospital;
• The provision of the influenza and pneumococcal vaccinations, as well as screening for breast, cervical, and colorectal cancer. Many hospitalizations can be avoided with proper vaccinations, while more pervasive screening identifies cancers earlier, improving both survival and allowing less costly treatments to be utilized;
• Enrolling people with chronic conditions (including asthma, chronic obstructive pulmonary disease (COPD), congestive heart failure (CHF), and diabetes) in disease management programs saves significant resources and improves the patient’s quality of care; and
• Monitoring and encouraging patients to control their weight, stop smoking, exercise, and control their blood pressure and cholesterol with medications.

The estimated effects of HIT on health care utilization are dependent on having a critical mass of providers. At the critical mass point, the value obtained from an EHR is greater than or equal to the cost. The failure to achieve a critical mass likely accounts for the differences between the utility of EHRs within integrated and non-integrated provider settings. Hopefully, the government’s incentives will spur a critical mass of providers to adopt EHRs; otherwise the financial incentives will not be sufficient—in and of themselves—to realize the promise of a national HIT infrastructure.