Understanding the Stimulus Act

President Barack Obama signed into law the American Recovery & Reinvestment Act on February 17, 2009, which included incentives for medical practitioners to implement Electronic Health Records (EHR.) The HITECH Act, which is the component of the American Recovery and Reinvestment Act that relates to information technology and health records, includes approximately $19.5 billion dollars of incentives to encourage healthcare organizations to adopt and utilize EHR. The Act requires exchanging of health information while ensuring that critical patient data is protected and safeguarded.

As of February 2009, it was estimated that only 20% of physicians were utilizing some form of electronic medical records in their practice. More recently, the Congressional Budget Office predicts that as a result of this new legislation, 90% of physicians will begin using a comprehensive Electronic Health Record system. It is anticipated that the country will save billions of dollars on total healthcare while patients receive better and more informed healthcare solutions through coordination of patient information among all healthcare providers.

There are two portions of the HITECH Act – one that provided $2 billion immediately to the Department of Health & Human Services (HHS) and its sub-agency, the Office of the National Coordinator for Health IT (ONC), and directs creation of standards and policy committees, as well as supportive programs; a second that allocates billions to be paid to healthcare providers who demonstrate use of Electronic Health Records. The net cost to the Federal government is anticipated to be approximately $20 billion after savings are achieved through efficiencies, tax revenue and Medicare fee reductions for non-adopters.


Incentive Payments to Physicians and Hospitals

The government is focused on two primary goals in this legislation: moving physicians who have been slow to adopt Electronic Health Records to a computerized environment, and ensuring that patient data no longer sits in silos within individual provider organizations but instead is actively and securely exchanged between healthcare professionals. Therefore, the vast majority of the funds within the HITECH Act are assigned to payments that will reward physicians and hospitals for effectively using a robust, connected EHR system. There is a program designed for those that see large volumes of Medicaid patients, and another for those that accept Medicare, and in order to qualify for the incentives, both physicians and hospitals have to demonstrate, at a high level, three things:

1. Use of a certified EHR product with ePrescribing capability that meets current HHS standards.
2. Connectivity to other providers to improve access to the full view of a patient’s health history.
3. Ability to report on their use of the technology to HHS.

Additionally, because the government wants to spur quick movement in this area, all of the incentives include payments for up to six years but provide the largest payments early in the program, and those that don’t demonstrate Meaningful Use of an EHR under the Medicare component of the program will eventually be penalized through lower payments. The incentive payments begin in 2011 to ensure the providers have time to adopt and learn to use the EHR; penalties begin in 2015.


There are two incentive programs for physicians: Medicare and Medicaid.

Medicaid: Physicians who see more than 30% of patients paying with Medicaid (20% for pediatricians) are eligible for payments of up to $64,000 over six years. The incentives will be calculated through a formula that multiplies 85% by amounts ranging from $25,000 in the first year to $10,000 in subsequent years. Additionally, those meeting the 30% threshold can begin earning the incentive payments even as they adopt, implement and upgrade their EHR software; they can begin proving Meaningful Use of the EHR in the second year of their program participation.

Medicare: Physicians who do not have a large Medicaid volume but do accept Medicare can earn up to $44,000 over the five years based on a calculation of submitted allowable charges multiplied by 75%, up to the cap for the year. Additionally, physicians operating in a "health provider shortage area" will be eligible for an incremental increase of 10%, and those delivering care entirely in a hospital environment, such as anesthesiologists, pathologists and ED physicians, are ineligible.

Fee reductions: Providers who do not demonstrate meaningful use in 2014 will see, in their 2015 fee schedules from Medicare, a decrease of 1%. An additional decrease will be affected in 2016 and 2017 down to a total of 97% of the regular fee schedule; it can further be reduced to 95% if the Secretary determines that total adoption is below 75% in 2018.

Even before the incentive payments or grants become available to qualifying healthcare organizations through the HITECH Act, there are already programs in place that will reward physicians who adopt technology now. By maximizing the ePrescribing incentives currently available through the Medicare Improvements for Patients and Providers Acts of 2008 and PQRI incentives, a qualified provider can earn between $6,000 and $8,000 prior to beginning participation in the Stimulus incentives programs.


What is Meaningful Use?

The Meaningful Use Rule, which was released in a proposed form at the end of 2009 and will be finalized in early Summer 2010, outlined in much greater detail what physicians and other participating providers will need to do to qualify for the HITECH incentive payments. The rules currently state:

  • Providers will need to prove Meaningful Use of their EHR for at least 90 continuous days in 2011 in order to earn an incentive, and then for the entire year each subsequent year.
  • Physicians need to prove that they have met 25 different functional objectives with their use of the EHR product to be considered “meaningful users”. These objectives include computerized physician order entry (CPOE), the use of clinical decision alerts, incorporation of lab results into their EHR as discrete data, ePrescribing and electronic information distribution to patients.
  • Clinical quality measures will need to be submitted by a provider on a Core set of measures, as well as a specialty-specific subgroup; providers will be able to file for an exception if none of the 89 proposed measures matches with their specialty.
  • Physicians will be paid on a rolling basis as soon as they have proven to CMS that they have met all the functional objectives of the Meaningful Use requirement and have hit the maximum amount for the year. CMS will then issue a single, annual, consolidated payment.
  • All reporting will be done by attestation in 2011, moving to an electronic form in later years.
  • The requirements related to Meaningful Use will get more challenging beginning in 2013.



  • Standards and Certification

    Qualified EHR technology means that the EHR is certified to meet standards and includes patient demographic and clinical health information, such as medical history and problem lists, and has the capacity to provide decision support for physician order entry, to capture and query healthcare quality information, and to exchange electronic health information with other sources.

    As part of HITECH’s requirements related to the review of all existing standards, the ONC released at the end of 2009 the initial set of standards that will affect the Meaningful Use criteria related to certified products, and implementation specifications.

    Expansion of HIPPA and Privacy rules

  • Defining which actions constitute a breach (including some inadvertent disclosures).
  • Imposing restrictions on certain disclosures, sales, and marketing of protected health information.
  • Requiring an accounting of disclosures to a patient upon request.
  • Physicians will be paid on a rolling basis as soon as they have proven to CMS that they have met all the functional objectives of the Meaningful Use requirement and have hit the maximum amount for the year. CMS will then issue a single, annual, consolidated payment.
  • Authorizing increased civil monetary penalties for HIPAA violations.
  • Granting authority to state attorneys general to enforce HIPAA.



  • Back to Electronic Medical Records