Under the meaningful use incentive program, the maximum Medicaid incentive payment for eligible professionals (EPs) is significantly more than the maximum Medicare incentive payment. The difference in incentive payments rewards Medicaid providers for treating a less favorable patient mix.
Until recently, the Medicaid incentives were based on the EP's costs of acquiring an electronic health record, resulting in a significant barrier to collecting the maximum allowable Medicaid incentive for a majority of Medicaid EPs who may have received EHR subsidies.
However, a recent amendment to the Medicaid incentive calculation for EPs makes every Medicaid EP eligible for the maximum Medicaid incentive payment.
Understanding Medicaid Incentives for EPs
The Medicaid EHR incentive program was established as part of the HITECH Act to provide incentives for EPs who adopt, implement or upgrade to certified EHRs and eventually meaningfully use EHRs for care delivery and information exchange.
The Medicaid EP incentives were based on "net average allowable costs" of the certified EHR as opposed to the Medicare incentives, which are based on the EP's Medicare allowable charges.
To collect the maximum Medicaid incentive of $63,750 across six years, EPs had to prove "net average allowable costs" of at least $25,000, alongside a minimum expense of $3,750 in EHR acquisition costs in Year 1, followed by at least $10,000 in annual maintenance and support costs for the remaining five years of incentive collection.
Background on Medicaid Incentives, Eligibility and Reporting Requirements for EPs
Incentives: Unlike eligible hospitals that can collect meaningful use incentives from both Medicare and Medicaid, EPs can participate in only one incentive program in any given year. The maximum Medicare incentive for EPs is $44,000, while the maximum Medicaid incentive for EPs is $63,750. The higher Medicaid incentives are tied to a less favorable patient mix, providing greater incentive for EPs who serve Medicaid patients to adopt EHRs. EPs are allowed to switch between the Medicare and Medicaid program once before 2014 (which happens to be the last year any EP can first demonstrate meaningful use under Medicare), but their total incentive collection across both programs will be capped at the Medicaid maximum of $63,750. Finally, the Medicare program imposes penalties on EPs who do not demonstrate meaningful use by 2014, but the Medicaid program has no such penalties.
Eligibility: To qualify for the Medicaid EHR incentives, Medicaid beneficiaries must account for at least 30% of EPs' volumes. For EPs practicing predominantly in federally qualified health centers or rural health clinics, 30% of their cases must be attributable to needy individual encounters over any representative continuous 90-day period in the most recent calendar year. Finally, Medicaid beneficiaries must make up 20% of pediatricians' volume to qualify for Medicaid incentives. (Note: there are no volume requirements for EPs to qualify for Medicare incentives.)
Reporting Requirements: In Year 1 of the Medicaid program, EPs do not have to demonstrate meaningful use requirements. Instead they can collect incentives for demonstrating tangible efforts to adopt, implement or upgrade to certified EHRs. In Year 2 of the program, EPs must demonstrate Stage 1 of meaningful use for 90 continuous days to collect incentives. In Year 3, health care providers must demonstrate Stage 1 of meaningful use for 365 days and continue this 365-day reporting period for all subsequent years and stages. Furthermore, unlike the Medicare EHR Incentive Program, the Medicaid program offers EPs the flexibility to skip years once they start collecting Medicaid incentives. The Medicaid program runs from 2011 through 2021, and EPs can collect incentives for any six years during this time frame, starting no later than 2016.
Previous Barrier to Maximizing Medicaid Incentives
Demonstrating adequate EHR acquisition costs is difficult for most hospital-employed EPs because the hospital foots the entire EHR bill and the hospital's per physician office EHR licensing fee is significantly lower than the $25,000 expense required to collect the maximum Medicaid incentive.
Similarly, hospital-affiliated physicians who might have received a hospital EHR subsidy also struggle to demonstrate the necessary expenses to qualify for the maximum Medicaid incentive. Even independent physicians who secured EHRs for significantly lower costs through subscription models (approximately $300 per physician per month) were unable to demonstrate adequate costs to qualify for the maximum Medicaid incentives.
In effect, the Medicaid incentive calculation as laid out in the HITECH Act failed to provide EPs a greater incentive for treating a less favorable patient mix. The 2010 Medicare and Medicaid Extender Act overrides the Medicaid incentive calculations from the HITECH Act and allows Medicaid EPs to collect the maximum Medicaid EHR incentives, irrespective of their acquisition costs.
A Recent Change in Medicaid Incentive Calculations for EPs
In a letter sent to state Medicaid directors on April 8, CMS highlighted a critical change introduced in December 2010 by the Medicare and Medicaid Extenders Act of 2010 that eliminates the need for Medicaid EPs to demonstrate EHR acquisition costs as a prerequisite for collecting Medicaid EHR incentives. Moving forward, EPs only need to document and attest that they have adopted, implemented, upgraded or meaningfully used certified EHR technology to collect the maximum Medicaid incentives.
This means that in Year 1, all Medicaid EPs can collect the maximum incentive of $21,250 for adopting, implementing or upgrading certified EHRs, followed by $8,500 each year for any five years before 2021 for demonstrating the appropriate meaningful use requirements -- for a sum total of $63,750 across six years.