Wednesday, 

January 13, 2010 

Part II 

Department of 

Health and Human 

Services 

Centers for Medicare & Medicaid Services 

42 CFR Parts 412, et al. 

Medicare and Medicaid Programs; 

Electronic Health Record Incentive 

Program; Proposed Rule 


sroberts on DSKD5P82C1PROD with PROPOSALS
1844 Federal Register / Vol. 75, No. 8 / Wednesday, January 13, 2010 / Proposed Rules 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 412, 413, 422, and 495 

[CMS–0033–P] 

RIN 0938–AP78 

Medicare and Medicaid Programs; 

Electronic Health Record Incentive 

Program 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

implement the provisions of the 

American Recovery and Reinvestment 

Act of 2009 (ARRA) (Pub. L. 111–5) that 

provide incentive payments to eligible 

professionals (EPs) and eligible 

hospitals participating in Medicare and 

Medicaid programs that adopt and 

meaningfully use certified electronic 

health record (EHR) technology. The 

proposed rule would specify the—initial 

criteria an EP and eligible hospital must 

meet in order to qualify for the incentive 

payment; calculation of the incentive 

payment amounts; payment adjustments 

under Medicare for covered professional 

services and inpatient hospital services 

provided by EPs and eligible hospitals 

failing to meaningfully use certified 

EHR technology; and other program 

participation requirements. Also, as 

required by ARRA the Office of the 

National Coordinator for Health 

Information Technology (ONC) will be 

issuing a closely related interim final 

rule that specifies the Secretary’s 

adoption of an initial set of standards, 

implementation, specifications, and 

certification criteria for electronic health 

records. ONC will also be issuing a 

notice of proposed rulemaking on the 

process for organizations to conduct the 

certification of EHR technology. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. on March 15, 2010. 

ADDRESSES: In commenting, please refer 

to file code CMS–0033–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

to http://www.regulations.gov. Follow 

the instructions on the home page. 

2. By regular mail. You may mail 

written comments to the following 

address ONLY: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–0033–P, P.O. Box 8013, Baltimore, 

MD 21244–8013. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address only: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–0033–P, Mail 

Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments before the close 

of the comment period to either of the 

following addresses: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue, SW., 

Washington, DC 20201. 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, 

please call telephone number (410) 786– 

9994 in advance to schedule your 

arrival with one of our staff members. 

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period. 

Submission of comments on 

paperwork requirements. You may 

submit comments on this document’s 

paperwork requirements by following 

the instructions at the end of the 

‘‘Collection of Information 

Requirements’’ section in this document. 

In the event that CMS must limit the 

number of employees reporting for duty 

during an emergency or for other 

reasons, submitting comments on CMS 

regulations and Paperwork Reduction 

Act (PRA) notices via 

www.regulations.gov will ensure that 

CMS considers the comments promptly. 

Comments mailed or delivered to the 

CMS headquarters may not be readily 

accessible for review if CMS employees 

are not able to report to work at the CMS 

headquarters. CMS wishes to ensure 

that public comments on its regulations 

and PRA notices are promptly displayed 

on the regulations.gov Web site for the 

public to review. To ensure that 

comments are displayed as quickly as 

possible, we request that the public use 

only one public comment submission 

option. These efforts are intended to 

ensure that CMS operations continue 

even during an emergency and that 

consideration of public comments and 

access to those comments occur timely. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Elizabeth Holland, (410) 786–1309, EHR 

incentive program issues. Edward 

Gendron, (410) 786–1064, Medicaid 

incentive payment issues. Jim Hart, 

(410) 786–9520, Medicare fee for service 

payment issues. Terry Kay, (410) 786– 

4493, Medicare fee for service payment 

issues. 

SUPPLEMENTARY INFORMATION: 

Submitting Comments: We welcome 

comments from the public on all issues 

set forth in this proposed rule to assist 

us in fully considering issues and 

developing policies. You can assist us 

by referencing the file code (CMS–0033– 

P) and the specific ‘‘issue identifier’’ that 

precedes the section on which you 

choose to comment. 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http:// 

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 

a.m. to 4 p.m. To schedule an 

appointment to view public comments, 

phone 1–800–743–3951. 


sroberts on DSKD5P82C1PROD with PROPOSALS
Federal Register / Vol. 75, No. 8 / Wednesday, January 13, 2010 / Proposed Rules 1845 

Acronyms 

ARRA American Recovery and 

Reinvestment Act of 2009 

CAH Critical Access Hospital 

CAHPS Consumer Assessment of 

Healthcare Providers and Systems 

CCN CMS Certification Numbers 

CHIP Children’s Health Insurance Program 

CHIPRA Children’s Health Insurance 

Program Reauthorization Act of 2009 

CMS Centers for Medicare & Medicaid 

Services 

CY Calendar Year 

EHR Electronic Health Record 

EP Eligible Professionals 

EPO Exclusive Provider Organization 

FACA Federal Advisory Committee Act 

FFP Federal Financial Participation 

FFS Fee-For-Service 

FQHC Federally Qualified Health Center 

FTE Full-Time Equivalent 

FY Fiscal Year 

FFY Federal Fiscal Year 

HEDIS Healthcare Effectiveness Data and 

Information Set 

HHS Department of Health and Human 

Services 

HIE Health Information Exchanges 

HIT Health Information Technology 

HIPPA Health Insurance Portability and 

Accountability Act of 1996 

HITECH Health Information Technology for 

Economic and Clinical Health Act 

HMO Health Maintenance Organization 

HOS Health Outcomes Survey 

HPSA Health Professional Shortage Area 

HRSA Health Resource Services 

Administration 

IAPD Implementation Advanced Planning 

Document 

IPA Independent Practice Association 

IHS Indian Health Services 

IT Information Technology 

MA Medicare Advantage 

MAC Medicare Administrative Contractor 

MCO Medicaid Managed Care Organization 

MITA Medicaid Information Technology 

Architecture 

MMIS Medicaid Management Information 

Systems 

MSA Medical Savings Account 

NCQA National Committee for Quality 

Assurance 

NCVHS National Committee on Vital and 

Health Statistics 

NPI National Provider Identifier 

ONC Office of the National Coordinator for 

Health Information Technology 

PAHP Prepaid Ambulatory Health Plan 

PAPD Planning Advanced Planning 

Document 

PIHP Prepaid Inpatient Health Plan 

PFFS Private Fee-For-Service 

PHO Physician Hospital Organization 

PHS Public Health Service 

POS Place of Service 

PPO Preferred Provider Organization 

PSO Provider Sponsored Organization 

RHC Rural Health Clinic 

RPPO Regional Preferred Provider 

Organization 

SMHP State Medicaid Health Information 

Technology Plan 

TIN Tax Identification Number 

Table of Contents 

I. Background 

A. Overview of the HITECH Programs 

Created by the American Recovery and 

Reinvestment Act of 2009 

B. Statutory Basis for the Medicare & 

Medicaid EHR Incentive Programs 

II. Provisions of the Proposed Regulations 

A. Definitions Across the Medicare FFS, 

Medicare Advantage, and Medicaid 

Programs 

1. Definitions 

a. Certified Electronic Health Record (EHR) 

Technology 

b. Qualified Electronic Health Record 

c. Payment Year 

d. First, Second, Third, Fourth, Fifth and 

Sixth Payment Year 

e. EHR Reporting Period 

f. Meaningful EHR User 

2. Definition of Meaningful Use 

a. Background 

b. Common Definition of Meaningful Use 

Under Medicare and Medicaid 

c. Considerations in Defining Meaningful 

Use 

d. Stage 1 Criteria for Meaningful Use 

3. Sections 4101(a) and 4102(a)(1) of 

HITECH Act: Reporting on Clinical 

Quality Measures Using EHR by EPs and 

All Eligible Hospitals 

a. General 

b. Requirements for the Submission of 

Clinical Quality Measures by EPs and 

Eligible Hospitals 

c. Statutory Requirements and Other 

Considerations for the Proposed 

Selection of Clinical Quality Measures 

Proposed for Electronic Submission by 

EPs or Eligible Hospitals 

(1) Statutory Requirements for the 

Selection of Clinical Quality Measures 

Proposed for Electronic Submission by 

EPs and Eligible Hospitals 

(2) Other Considerations for the Proposed 

Selection of Clinical Quality Measures 

for Electronic Submission by EPs and 

Eligible Hospitals 

d. Proposed Clinical Quality Measures for 

Electronic Submission Using Certified 

EHR Technology by Eligible 

Professionals 

e. Clinical Quality Measures Reporting 

Criteria for Eligible Professionals 

f. Proposed Clinical Quality Measures for 

Electronic Submission by Eligible 

Hospitals 

g. Request for Public Comment on Potential 

Measures for Eligible Professionals and 

Eligible Hospitals in 2013 Payment Year 

and Subsequent Years 

h. Proposed Reporting Method for Clinical 

Quality Measures 

(1) Reporting Method for 2011 Payment 

Year 

(2) Reporting Method for 2012 

i. Alternative Reporting Methods for 

Clinical Quality Measures 

j. Proposed Reporting Criteria for Eligible 

Professionals and Eligible Hospitals 

k. Addressing Dually-Eligible Medicare/ 

Medicaid Beneficiaries Under HITECH 

4. Demonstration of Meaningful Use 

a. Common Methods of Demonstration in 

Medicare and Medicaid 

b. Methods for Demonstration of the Stage 

1 Criteria of Meaningful Use 

5. Data Collection for Online Posting, 

Program Coordination and Accurate 

Payments 

a. Online Posting 

b. Program Election Between Medicare 

FFS/MA and Medicaid for EPs 

c. Data To Be Collected 

6. Hospital-Based Eligible Professionals 

7. Interaction With Other Programs 

B. Medicare Fee-for-Service Incentives 

1. Incentive Payments for Eligible 

Professionals 

a. Definitions 

b. Incentive Payment Limits 

c. Increase in Incentive Payment for EPs 

who Predominantly Furnish Services in 

a Geographic Health Professional 

Shortage Area 

d. Form and Timing of Payment 

e. Payment Adjustment Effective in CY 

2015 and Subsequent Years for EPs Who 

Are Not Meaningful Users of Certified 

EHR Technology 

2. Incentive Payments for Hospitals 

a. Definition of Eligible Hospital for 

Medicare 

b. Incentive Payment Calculation for 

Eligible Hospitals 

c. Medicare Share 

d. Charity Care 

e. Transition Factor 

f. Duration and Timing of Incentive 

Payments 

g. Incentive Payment Adjustment Effective 

in Federal FY 2015 and Subsequent 

Years for Eligible Hospitals Who Are Not 

Meaningful EHR Users 

3. Incentive Payments for Critical Access 

Hospitals 

a. Definition of CAHs for Medicare 

b. Current Medicare Payment of 

Reasonable Cost for CAHs 

c. Changes made by the HITECH Act 

d. Incentive Payment Calculation for CAHs 

e. Reduction of Reasonable Cost Payment 

in FY 2015 and Subsequent Years for 

CAHs That Are Not Meaningful EHR 

Users 

4. Process for Making Incentive Payments 

Under the Medicare FFS Program 

a. Incentive Payments to EPs 

b. Incentive Payments to Eligible Hospitals 

c. Incentive Payments to CAHs 

d. Payment Accounting under Medicare 

C. Medicare Advantage Organization 

Incentive Payments 

1. Definitions 

a. Qualifying MA Organization 

b. Qualifying MA Eligible Professional 

c. Qualifying MA-Affiliated Eligible 

Hospital 

2. Identification of Qualifying MA 

Organizations, MA EPs, and MAAffiliated Eligible Hospitals 

3. Computation of Incentives to Qualifying 

MA Organizations for MA EPs and 

Hospitals 

4. Timeframe for Payment 

5. Avoiding Duplicate Payment 

6. Meaningful User Attestation 

7. Posting on Web site and Limitation on 

Review 

8. Limitation on Review 

9. Conforming Changes 


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10. Payment Adjustment and Future 

Rulemaking 

D. Medicaid Incentives 

1. Overview of Health Information 

Technology in Medicaid 

2. General Medicaid Provisions 

3. Identification of Qualifying Medicaid 

EPs and Eligible Hospitals 

a. Overview 

b. Program Participation 

1. Acute Care Hospitals 

2. Children’s Hospitals 

c. Medicaid Professionals Program 

Eligibility 

d. Calculating Patient Volume 

Requirements 

e. Entities Promoting the Adoption of 

Certified EHR Technology 

4. Computation of Amount Payable to 

Qualifying Medicaid EPs and Eligible 

Hospitals 

(1) General Overview 

(2) Average Allowable Costs 

(3) Net Average Allowable Costs 

(4) Payments for Medicaid Eligible 

Professionals 

(5) Basis for Medicaid EHR Incentive 

Program First Payment Year and 

Subsequent Payment Years 

(i) Medicaid EP Who Begins Adopting, 

Implementing or Upgrading Certified 

EHR Technology in the First Year 

(ii) Medicaid EP who has Already 

Adopted, Implemented or Upgraded 

Certified EHR Technology and 

Meaningfully Uses EHR Technology 

b. Payment Methodology for Eligible 

Hospitals 

c. Alternative and Optional Early State 

Implementation to Make Incentive 

Payments for Adopting, Implementing or 

Upgrading Certified EHR Technology 

d. Process for Making and Receiving 

Medicaid Incentive Payments 

e. Avoiding Duplicate Payment 

f. Flexibility to Alternate Between 

Medicare and Medicaid Incentive 

Payment Program One Time 

g. One State Selection 

5. National Level Repository and State Data 

Collection 

6. Collection of Information Related to the 

Eligible Professional’s National Provider 

Identifier and the Tax Identification 

Number (TIN) 

7. Activities Required to Receive Incentive 

Payments 

a. General Overview 

b. Definitions Related to Certified EHR 

Technology and Adopting, Implementing 

or Upgrading Such Technology 

(1) Certified EHR Technology 

(2) Adopting, Implementing or Upgrading 

c. Other General Terminology 

III. Collection of Information Requirements 

A. ICRs Regarding Demonstration of 

Meaningful Use Criteria (§ 495.8) 

B. ICRs Regarding Participation 

Requirements for EPs, Eligible Hospitals, 

and Qualifying CAHs (§ 495.10) 

C. ICRs Regarding Identification of 

Qualifying MA Organizations, MA–EPs 

and MA-Affiliated Eligible Hospitals 

(§ 495.202) 

D. ICRs Regarding Incentive Payments to 

Qualifying MA Organizations for MA– 

EPs and Hospitals (§ 495.204) 

E. ICRs Regarding Meaningful User 

Attestation (§ 495.210) 

F. ICRs Regarding Incentive Payments to 

Qualifying MA Organizations for MAEligible Professionals and Hospitals 

(§ 495.220) 

G. ICRs Regarding Process for Payments 

(§ 495.312) 

H. ICRs Regarding Activities Required to 

Receive an Incentive Payment 

(§ 495.314) 

I. ICRs Regarding State Monitoring and 

Reporting Regarding Activities Required 

To Receive an Incentive Payment 

(§ 495.316) 

J. ICRs Regarding State Responsibilities for 

Receiving FFP (§ 495.318) 

K. ICRs Regarding Prior Approval 

Conditions (§ 495.324) 

L. ICRs Regarding Termination of Federal 

Financial Participation (FFP) for Failure 

To Provide Access to Information 

(§ 495.330) 

M. ICRs Regarding State Medicaid Agency 

and Medicaid EP and Hospital Activities 

(§ 495.332 Through § 495.338) 

N. ICRs Regarding Access to Systems and 

Records (§ 495.342) 

O. ICRs Regarding Procurement Standards 

(§ 495.344) 

P. ICRs Regarding State Medicaid Agency 

Attestations (§ 495.346) 

Q. ICRs Regarding Reporting Requirements 

(§ 495.348) 

R. ICRs Regarding Retroactive Approval of 

FFP With an Effective Date of February 

18, 2009 (§ 495.358) 

S. ICRs Regarding Financial Oversight and 

Monitoring Expenditures (§ 495.362) 

T. ICRs Regarding Appeals Process for a 

Medicaid Provider Receiving Electronic 

Health Record Incentive Payments 

(§ 495.366) 

IV. Response to Comments 

V. Regulatory Impact Analysis 

A. Overall Impact 

B. Regulatory Flexibility Analysis 

C. Small Rural Hospitals 

D. Unfunded Mandates Reform Act 

E. Federalism 

F. Anticipated Effects 

G. HITECH Impact Analysis 

H. Accounting Statement 

I. Background 

A. Overview of the HITECH Programs 

Created by the American Recovery and 

Reinvestment Act of 2009 

The American Recovery and 

Reinvestment Act of 2009 (ARRA) (Pub. 

L. 111–5) was enacted on February 17, 

2009. ARRA includes many measures to 

modernize our nation’s infrastructure, 

enhance energy independence, expand 

educational opportunities, provide tax 

relief, and preserve and improve 

affordable health care. Title IV of 

Division B of ARRA amends Titles XVIII 

and XIX of the Social Security Act (the 

Act) by establishing incentive payments 

to eligible professionals (EPs) and 

eligible hospitals to promote the 

adoption and meaningful use of 

interoperable health information 

technology and qualified EHRs. 

Expanded use of health information 

technology (HIT) and EHRs will 

improve the quality and value of 

American health care. These provisions, 

together with Title XIII of Division A of 

ARRA, may be cited as the Health 

Information Technology for Economic 

and Clinical Health Act’’ or the ‘‘HITECH 

Act.’’ The incentive payments for 

adoption and meaningful use of HIT and 

qualified EHRs are part of a broader 

effort under the HITECH Act to 

accelerate the adoption of HIT and 

utilization of qualified EHRs. We are 

developing the incentive programs 

which are outlined in Division B, Title 

IV of the HITECH Act and these 

programs are the keys to inducing 

providers to actively utilize HIT. 

EPs and eligible hospitals qualify for 

the EHR incentive payments if, among 

other requirements, they meaningfully 

use certified EHR technology. This 

proposed rule sets forth a proposed 

definition of ‘‘meaningful use of 

certified EHR technology.’’ Section 

13101 of the HITECH Act adds a new 

section 3000 to the Public Health 

Service Act (PHSA), which defines 

‘‘certified EHR technology’’ as a 

qualified EHR that has been properly 

certified as meeting standards adopted 

under section 3004 of the PHSA. CMS 

and ONC have been working closely to 

ensure that the definition of meaningful 

use of certified EHR technology and the 

standards for certified EHR technology 

are coordinated. ‘‘Meaningful use’’ is a 

term defined by CMS and describes the 

use of HIT that furthers the goals of 

information exchange among health care 

professionals. In an upcoming interim 

final rule, ONC will identify the initial 

set of standards and implementation 

specifications that EHR technology must 

implement, as well as the certification 

criteria that will be used to certify EHR 

technology, and will further define the 

term ‘‘certified EHR technology.’’ In a 

related proposed rule, the Department 

will propose the development of a 

certification program for health IT. 

Specifically, we have sought to ensure 

that the definition of meaningful use of 

certified EHR technology does not 

require EPs and eligible hospitals to 

perform functionalities for which 

standards have not been recognized or 

established. Similarly, the functionality 

of certified EHR technology should 

enable and advance the definition of 

meaningful use. 

We urge those interested in this 

proposed rule to also review the ONC 

interim final rule with comment and the 

related proposed rule when they are 

published later this year and to visit 

http://healthit.hhs.gov and http:// 


sroberts on DSKD5P82C1PROD with PROPOSALS
Federal Register / Vol. 75, No. 8 / Wednesday, January 13, 2010 / Proposed Rules 1847 

www.cms.hhs.gov/Recovery/ 

11_HealthIT.asp#TopOfPage for more 

information on the efforts at the 

Department of Health and Human 

Services (HHS) to advance HIT 

initiatives. 

B. Statutory Basis for the Medicare & 

Medicaid EHR Incentive Programs 

Section 4101(a) of the HITECH Act 

adds a new subsection (o) to section 

1848 of the Act. Section 1848(o) of the 

Act establishes incentive payments for 

the meaningful use of certified EHR 

technology by EPs participating in the 

original Medicare program or 

hereinafter referred to as Medicare Feefor-Service (FFS) program beginning in 

calendar year (CY) 2011. Section 

4101(b) of the HITECH Act also adds a 

new paragraph (7) to section 1848(a) of 

the Act. Section 1848(a)(7) of the Act 

provides that beginning in CY 2015, EPs 

who are not meaningful users of 

certified EHR technology will receive 

less than 100 percent of the fee schedule 

for their professional services. Section 

4101(c) of the HITECH Act adds a new 

subsection (l) to section 1853 of the Act 

to provide incentive payments to 

Medicare Advantage (MA) organizations 

for their affiliated EPs who 

meaningfully use certified EHR 

technology and meet certain other 

requirements, and a requirement to 

make a downward adjustment to 

Medicare payments to MA organizations 

for professional services provided by 

any of their affiliated EPs who are not 

meaningful users of certified EHR 

technology, beginning in 2015, and 

avoids duplicate of payments from the 

MA EHR incentive program under this 

section and the FFS EHR incentive 

program under section 1848(o)(1)(A). 

Section 4102(a) of the HITECH Act 

adds a new subsection (n) to section 

1886 of the Act. Section 1886(n) of the 

Act establishes incentive payments for 

the meaningful use of certified EHR 

technology by subsection (d) hospitals, 

as defined under section 1886(d)(1)(B) 

of the Act, participating in Medicare 

FFS program beginning in Federal fiscal 

year (FY) 2011. Section 4102(b)(1) of the 

HITECH Act amends section 

1886(b)(3)(B) of the Act to provide that, 

beginning in FY 2015, subsection (d) 

hospitals that are not meaningful users 

of certified EHR technology will receive 

a reduced annual payment update. 

Section 4102(b)(2) of the HITECH Act 

amends section 1814(l) of the Act to 

provide an incentive payment to critical 

access hospitals (CAHs) who 

meaningfully use certified EHR 

technology based on the hospitals’ 

reasonable cost beginning in FY 2011. In 

addition, section 4102(a)(2) of the 

HITECH Act amends section 1814(l) of 

the Act to provide for a downward 

payment adjustment for hospital 

services provided by CAHs that are not 

meaningful users of certified EHR 

technology for cost reporting periods 

beginning in FY 2015. Section 4102(c) 

of the HITECH Act adds a new 

subsection (m) to section 1853 of the 

Act to provide incentive payments to 

MA organizations for certain affiliated 

hospitals that meaningfully use certified 

EHR technology to address avoidance of 

duplicate payments, and to make a 

downward adjustment to payments to 

MA organizations for inpatient hospital 

services provided by its affiliated 

hospitals that are not meaningful users 

of certified EHR technology beginning 

in FY 2015. 

Section 4103 of the HITECH Act 

provides for implementation funding for 

the EHR incentives program under 

Medicare. 

Section 4201 of the HITECH Act 

amends section 1903 of the Act to 

provide 100 percent Federal financial 

participation (FFP) to States for 

incentive payments to certain eligible 

providers participating in the Medicaid 

program to purchase, implement, and 

operate (including support services and 

training for staff) certified EHR 

technology and 90 percent FFP for State 

administrative expenses related to the 

program outlined in 1903(t) of the Act. 

Section 4201(a)(2) of the HITECH Act 

adds a new subsection (t) to section 

1903 of the Act to establish a program 

with input from the States to provide 

incentives for the adoption and 

subsequent meaningful use of certified 

EHR technology for providers 

participating in the Medicaid program. 

II. Provisions of the Proposed 

Regulations 

We propose to add a new part 495 to 

title 42 of the Code of Federal 

Regulations to implement the provisions 

discussed in this section of the 

proposed rule related to certified EHR 

technology for providers participating in 

either the Medicare program or the 

Medicaid program. 

The HITECH Act creates incentives in 

the Medicare Fee-for-Service (FFS), 

Medicare Advantage (MA), and 

Medicaid programs for demonstrating 

meaning EHR use and payment 

adjustments in the Medicare FFS and 

MA programs for not demonstrating 

meaningful EHR use. The three 

incentive programs contain many 

common elements and certain 

provisions of the HITECH Act encourage 

avoiding duplication of payments, 

reporting, and other requirements, 

particularly in the area of demonstrating 

meaningful use of certified EHR 

technology. Eligible hospitals may 

participate in either one of the Medicare 

(FFS or MA) programs and the Medicaid 

program, assuming they meet each 

program’s eligibility requirements, 

which vary across programs. In certain 

cases, the HITECH Act has used nearly 

identical or identical language in 

defining terms that are used in the 

Medicare FFS, MA, and Medicaid 

programs, including such terms as 

‘‘hospital-based EPs’’ and ‘‘certified EHR 

technology.’’ In these cases, we seek to 

create as much commonality between 

the three programs as possible and have 

structured this proposed rule based on 

that premise by beginning with those 

provisions that cut across the three 

programs before moving on to discuss 

the provisions specific to Medicare FFS, 

MA and Medicaid. 

A. Definitions Across the Medicare FFS, 

Medicare Advantage, and Medicaid 

Programs 

Title IV, Division B of the HITECH 

Act establishes incentive payments 

under the Medicare and Medicaid 

programs for certain professionals and 

hospitals that meaningfully use certified 

EHR technology. Under Medicare, these 

incentive payments may be made to 

qualifying professionals, hospitals, and 

Medicare Advantage (MA) organizations 

on behalf of certain MA affiliated 

physicians and hospitals. We refer to 

the incentive payments made under the 

original Medicare program as the 

Medicare FFS EHR incentive program. 

We refer to the incentive payments 

made to qualifying MA organizations as 

the MA EHR incentive program, and the 

incentive payments made under 

Medicaid as the Medicaid EHR 

incentive program. When referring to 

Medicare EHR incentive program, we 

are referring to both the Medicare FFS 

EHR and the MA EHR incentive 

programs. 

1. Definitions 

Sections 4101, 4102, and 4202 of the 

HITECH Act use many identical or 

similar terms. In this section of the 

preamble, we discuss terms for which 

we are proposing uniform definitions 

for the Medicare FFS, Medicare 

Advantage, and Medicaid EHR incentive 

programs. These definitions would be 

included in part 495 subpart A of the 

regulations. For definitions specific to 

an individual program, the definition is 

set forth and discussed in the applicable 

EHR incentive program section. 


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1848 Federal Register / Vol. 75, No. 8 / Wednesday, January 13, 2010 / Proposed Rules 

a. Certified Electronic Health Record 

(EHR) Technology 

The incentive payments are available 

to EPs (non-hospital-based physicians, 

as defined in section 1861(r) of the Act, 

who either receive reimbursement for 

services under the Medicare FFS 

program or have an employment or 

contractual relationship with a 

qualifying MA organization meeting the 

criteria under section 1853(l)(2) of the 

Act; or healthcare professionals meeting 

the definition of ‘‘eligible professional’’ 

under section 1903(t)(3)(B) of the Act as 

well as the patient-volume and nonhospital-based criteria of section 

1903(t)(2)(A) of the Act) and eligible 

hospitals (subsection (d) hospitals as 

defined under subsection 1886(d)(1)(B) 

of the Act that either receive 

reimbursement for services under the 

Medicare FFS program or are affiliated 

with a qualifying MA organization as 

described in section 1853(m)(2) of the 

Act; critical access hospitals (CAHs); or 

acute care or children’s hospitals 

described under section 1903(t)(2)(B) of 

the Act). Under all three EHR incentive 

programs, EPs and eligible hospitals 

must utilize ‘‘certified EHR technology’’ 

if they are to be considered eligible for 

the incentive payments. In the Medicare 

FFS EHR incentive program this 

requirement for EPs is found in section 

1848(o)(2)(A)(i) of the Act, as added by 

section 4101(a) of the HITECH Act, and 

for eligible hospitals and CAHs in 

section 1886(3)(A)(i) of the Act, as 

added by section 4102(a) of the HITECH 

Act. In the MA EHR incentive program 

this requirement for EPs is found in 

section 1853(l)(1) of the Act, as added 

by section 4101(c) of the HITECH Act, 

and for eligible hospitals and CAHs, in 

section 1853(m)(1) of the Act, as added 

by section 4201(c) of the HITECH Act. 

In the Medicaid EHR incentive program 

this requirement for EPs and Medicaid 

eligible hospitals is found throughout 

section 1903(t) of the Act, including in 

section 1903(t)(6)(C) of the Act, as 

added by section 4201(a)(2) of the 

HITECH Act. While certified EHR 

technology is a critical component of 

the EHR incentive programs, under the 

authority given to her in the HITECH 

Act, the Secretary has charged ONC 

with developing the criteria and 

mechanisms for certification of EHR 

technology. Therefore, ONC will be 

defining certified EHR technology in its 

upcoming interim final rule and we 

propose to use the definition of certified 

EHR technology adopted by ONC. 

b. Qualified Electronic Health Record 

In order for an EHR technology to be 

eligible for certification it must first 

meet the definition of a qualified 

electronic health record. This term will 

be defined by ONC in its upcoming 

interim final rule, and we propose to 

use the definition of qualified electronic 

health record adopted by ONC. 

c. Payment Year 

Under section 1848(o)(1)(A)(i) of the 

Act, as added by section 4101(a) of the 

HITECH Act, the Medicare FFS EHR 

incentive payment is available to EPs for 

a ‘‘payment year.’’ Section 1848(o)(1)(E) 

of the Act defines the term ‘‘payment 

year’’ as a year beginning with 2011. 

While the HITECH Act does not use the 

term, ‘‘payment year,’’ for the Medicaid 

EHR incentive program, it does use the 

term ‘‘year of payment’’ throughout 

section 1903(t) of the Act, for example, 

at sections 1903(t)(3)(C), 1903(t)(4)(A), 

and 1903(t)(6)(C) of the Act. For all EPs, 

we are proposing a common definition 

for both ‘‘payment year’’ and ‘‘year of 

payment,’’ as ‘‘any calendar year 

beginning with 2011’’ at § 495.4. (The 

only exception to this rule, is that in 

certain cases, Medicaid EPs would be 

able to participate in the Medicaid EHR 

incentive program starting with CY 

2010, for adopting, implementing, or 

upgrading certified EHR technology. For 

further discussion of this early 

participation in the Medicaid EHR 

incentive program, we refer readers to 

section II.D.3.c. of this proposed rule.) 

This definition, which is consistent 

with the statutory definition of 

‘‘payment year’’ under Medicare FFS, 

will simplify the EHR incentive 

programs for EPs. As discussed later in 

this preamble, EPs may have the 

opportunity to participate in either the 

Medicare or Medicaid incentive 

programs, and once an EP has picked a 

program, they are permitted to make a 

one-time switch from one program to 

the other. A common definition will 

allow EPs to more easily understand 

both programs, and inform decisions 

regarding whether they are eligible for, 

and/or wish to participate in either 

program. Under section 1886(n)(1) of 

the Act, as added by section 4102(a) of 

the HITECH Act, the Medicare FFS EHR 

incentive payment is available to 

eligible hospitals and CAHs for a 

‘‘payment year.’’ Section 1886(n)(2)(G) of 

the Act defines the term ‘‘payment year’’ 

as a fiscal year (FY) beginning in 2011. 

As hospitals are paid based on the 12- 

month Federal fiscal year, we believe 

the reference to a ‘‘fiscal year’’ means the 

fiscal year beginning on October 1 of the 

prior year and extending to September 

30 of the relevant year. Again, for the 

Medicaid EHR incentive program, the 

HITECH Act uses the term, ‘‘year of 

payment’’ (see section 1903)(t)(5)(D)(ii) 

of the Act), rather than ‘‘payment year.’’ 

For the same reasons expressed above 

for EPs, and because hospitals will have 

the opportunity to simultaneously 

participate in both the Medicare and 

Medicaid EHR incentive programs, we 

propose a common definition of 

‘‘payment year’’ and ‘‘year of payment’’ 

for both programs. For purposes of the 

incentive payments made to eligible 

hospitals under the Medicare FFS, MA 

and Medicaid EHR incentive programs, 

we propose to define payment year and 

year of payment at § 495.4, consistent 

with the statutory definition, as ‘‘any 

fiscal year beginning with 2011’’. (The 

only exception to this rule, is that in 

certain cases, Medicaid eligible 

hospitals would be able to participate in 

the Medicaid EHR incentive program 

starting with FY 2010, for adopting, 

implementing, or upgrading certified 

EHR technology. For further discussion 

of this early participation in the 

Medicaid EHR incentive program, we 

refer readers to section II.D.3.c of this 

proposed rule.) 

The actual timing of the incentive 

payment for a given payment year varies 

depending on which EHR incentive 

program an EP or an eligible hospital is 

participating in. Details on the timing of 

incentive payments for a given payment 

year can be found in section II.B.of the 

proposed rule for Medicare FFS, section 

II.C. of the proposed rule for MA and 

section II.D. of the proposed rule for 

Medicaid. 

d. First, Second, Third, Fourth, Fifth, 

and Sixth Payment Year 

For EPs and eligible hospitals that 

qualify for EHR incentive payments in 

a payment year, the amount of the 

payment will depend in part on how 

many previous payment years, if any, an 

EP or eligible hospital received an 

incentive payment. We propose to 

define the first payment year to mean 

the first calendar or Federal fiscal year 

for which an EP or eligible hospital 

receives an incentive payment. 

Likewise, we propose to define the 

second, third, fourth, fifth, and sixth 

payment year, respectively, to mean the 

second, third, fourth, fifth, and sixth 

calendar or Federal fiscal year, 

respectively, for which an EP or eligible 

hospital receives an incentive payment. 

e. EHR Reporting Period 

In order to qualify for an incentive 

payment under the Medicare incentive 

payment program for a payment year, an 

EP or eligible hospital must 

meaningfully use certified EHR 

technology for the EHR reporting period 

of the relevant payment year. Similarly, 

a Medicaid EP or eligible hospital may 


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in the first payment year and must in 

subsequent payment years demonstrate 

meaningful use of such technology, in 

order to receive a payment. A Medicaid 

EP or eligible hospital may receive an 

incentive payment in their first payment 

year for the adoption, implementation, 

or upgrade of certified EHR technology. 

Although the Medicaid statute does not 

specifically use the term, ‘‘EHR 

reporting period,’’ we believe that the 

Secretary, pursuant to sections 

1903(t)(6)(C) and 1903(t)(8) of the Act, 

has the authority to define the period 

that would be used for demonstrating 

such adoption/implementation/upgrade 

or meaningful use. 

In this proposed rule, we propose a 

definition of EHR Reporting Period for 

purposes of the Medicare and Medicaid 

incentive payments under sections 

1848(o), 1853(l)(3), 1886(n), 1853(m)(3), 

1814(l) and 1903(t) of the Act. For these 

sections, the EHR reporting period may 

be any continuous 90-day period within 

the first payment year and the entire 

payment year for all subsequent 

payment years. In future rulemaking, we 

will propose a definition of EHR 

Reporting Period for purposes of 

Medicare incentive payment 

adjustments under sections 1848(a)(7), 

1853(l)(4), 1886(b)(3)(B)(ix), 1853(m)(4), 

and 1814(l)(4) of the Act. Unlike the 

former group of sections, meaningful 

EHR users that would not be subject to 

adjustments would have to be identified 

prior to the application of the latter 

group of sections. Therefore, these two 

groups of sections may have two 

different definitions of EHR Reporting 

Period. 

For the first payment year only, we 

propose to define the term EHR 

reporting period at § 495.4 to mean any 

continuous 90-day period within a 

payment year in which an EP or eligible 

hospital successfully demonstrates 

meaningful use of certified EHR 

technology. The EHR reporting period 

therefore could be any continuous 

period beginning and ending within the 

relevant payment year. For example, for 

payment year 2011, an EHR reporting 

period of March 13, 2011 to June 11, 

2011 would be just as valid as an EHR 

reporting period of January 1, 2011 to 

April 1, 2011. An example of an 

unallowable EHR reporting period 

would be for an EP to begin on 

November 1, 2011 and finish on January 

31, 2012. Starting with the second 

payment year and any subsequent 

payment years for a given EP or eligible 

hospital, we propose to define the term 

EHR reporting period at § 495.4 to mean 

the entire payment year. 

In defining the EHR reporting period, 

we considered three of its aspects: 

(1) Whether it should vary from one 

payment year to the next; (2) its length; 

and (3) starting point. We discuss these 

three aspects below. 

The first aspect of the EHR reporting 

period discussed is whether it should be 

the same for each payment year. We 

believe that there are considerations that 

distinguish the first payment year from 

the remaining payment years. The 

foremost being that once an EP or 

eligible hospital begins to meaningfully 

use certified EHR technology they are 

unlikely to stop. As discussed below, in 

the first payment year a shorter EHR 

reporting period would provide more 

flexibility for when an EP or eligible 

hospital begins to meaningfully use 

certified EHR technology and still 

qualify for the incentive in the same 

year. However, in subsequent years we 

do not see that flexibility still being 

required. Therefore, for purposes of the 

incentive payments under sections 

1848(o), 1853(l)(3), 1886(n), 1853(m)(3), 

1814(l), and 1903(t) of the Act, we 

propose that the length of the EHR 

reporting period be different for the first 

payment year than from all other 

payment years. We invite interested 

parties to comment on this proposal if 

they believe that the EHR reporting 

period should vary from payment year 

to payment year. 

With respect to the length of the EHR 

reporting period, we note that there is 

an inherent tradeoff between robust 

verification and time available to 

achieve compliance. A longer EHR 

reporting period provides a more robust 

verification that an EP or eligible 

hospital successfully met the definition 

of meaningful use of certified EHR 

technology than a shorter period. 

However, it reduces the time available 

for an EP or eligible hospital to reach 

the point of complying with meaningful 

use and still receive an incentive for a 

given payment year. For example, a 90- 

day period would allow an EP until 

October 1, 2011 to begin meaningful use 

of their certified EHR technology and 

receive an incentive for payment year 

2011. A 180-day period (6 months) 

would move the date upon which the 

EP must begin meaningful use of their 

certified EHR technology forward to July 

1, 2011. We are concerned that an EHR 

reporting period that is shorter than 90 

days would be insufficient time to 

ensure that EPs and eligible hospitals 

are truly using certified EHR technology 

in a meaningful manner consistent with 

our proposed criteria for meaningful 

use. Moreover, as discussed later in this 

proposed rule, we will require EPs and 

hospitals to demonstrate meaningful use 

by meeting certain performance 

thresholds (for example, EPs will need 

to use CPOE for 80 percent of all orders, 

and hospitals for 10 percent of all 

orders). We believe a period of fewer 

than 90 days would not be adequate to 

create an accurate rate for a given EP or 

eligible hospital. We believe that once 

an EP or hospital has implemented 

certified EHR technology to the point of 

being able to comply with our proposed 

meaningful use criteria for 90 days, it is 

unlikely that they would adjust their 

behavior just because the EHR reporting 

period has ended. Beginning in the 

second payment year, an EP or eligible 

hospital will already be meaningfully 

using certified EHR technology so there 

are no limitations on the time available 

for compliance. 

For the first payment year, therefore, 

we propose that the EHR reporting 

period will be any continuous 90-day 

period within the first payment year. 

However, beginning in the second 

payment year we see no compelling 

reason not to seek the most robust 

verification possible. Therefore for the 

second payment year and all subsequent 

payment years we propose the EHR 

reporting period be the entire payment 

year. As the length of the EHR reporting 

period is based on the discussed tradeoff, we remain open to alternative 

lengths of time. We invite comments on 

the appropriate length for the EHR 

reporting period. We urge those 

commenting to either endorse our 

proposed initial 90-day period followed 

by full year EHR reporting periods or to 

recommend a specific alternative. 

With respect to when the EHR 

reporting period for a payment year 

should begin, there are two 

considerations. The first is determining 

the earliest start date available, and the 

second is the flexibility given to EPs and 

eligible hospitals to choose their start 

date. This aspect is only applicable for 

the 90-day EHR reporting period for the 

first payment year. The length of the 

EHR reporting period for the second 

payment year and subsequent payment 

years dictate that the start date be the 

first day of the payment year. The 

earliest start date we considered was 

one which would allow an EP or eligible 

hospital to demonstrate successful 

meaningful use of certified EHR 

technology on the first day of the 

relevant payment year. For example, 

allowing an EHR reporting period to 

begin as early as July 3, 2010 would 

allow an eligible hospital to successfully 

demonstrate meaningful use on October 

1, 2010, the first day of FY 2011. We 

have chosen not to propose this as the 

earliest start date. There are significant 

barriers created by the timeline in the 

HITECH Act. We anticipate that we will 

not publish a final rule until after March 


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2010, with the final rule effective 60 

days after its publication. We do not 

believe this allows enough time for us, 

the vendor community, or the provider 

community to take advantage of this 

early start date. In addition, as 

discussed at sections 1848(o)(2)(B)(iii) 

and 1886(n)(3)(B)(iii) of the Act, the 

HITECH Act directs the Secretary to 

seek to avoid duplicative reporting of 

clinical quality and other measures 

under the Medicare EHR incentive 

program and other Medicare programs. 

If we were to allow EPs and hospitals to 

report these measures to CMS prior to 

the beginning of the FY, this reporting 

may be of questionable value to other 

Medicare programs requiring reporting 

of the same measures. For example, if 

and when the demonstration of 

meaningful use includes the submission 

of quality measures this submission 

could include measures currently in the 

RHQDAPU program. As discussed in 

section II.A.3. of this proposed rule, we 

do not desire to have a hospital report 

the same measure twice for two 

different programs. However, if a 

hospital reports these measures from 

July through September 2010 for 

payment year 2011 for Medicare and/or 

Medicaid EHR incentive program, they 

would not be relevant for FY 2011 

under the RHQDAPU. Due to the 

operational challenges presented and 

the statutory requirement to avoid 

duplication of payments to the extent 

possible, we are proposing that the 

earliest start date for EHR reporting 

period be the first day of the payment 

year. The second consideration for 

when the EHR reporting period should 

begin is whether to designate specific 

start dates. As we are not aware of any 

compelling reason to limit the start 

dates available to EPs or eligible 

hospitals within the payment year, we 

propose to allow EPs or eligible 

hospitals to begin their EHR reporting 

period on any date starting with the first 

day of the payment year and ending 

with the latest day in the payment year 

that allows for the EHR reporting period 

to be completed by the last day of the 

payment year. We believe that giving 

EPs and eligible hospitals flexibility as 

to the start date of the EHR reporting is 

important, as unforeseen circumstances, 

such as delays in implementation, 

higher than expected training needs and 

other unexpected hindrances, may 

cause an EP or eligible hospital to 

potentially miss a target start date. We 

invite comments on the proposed start 

dates for the EHR reporting period. 

We acknowledge that all three of 

these aspects will be affected by the 

need to determine which physicians, 

hospitals, critical access hospitals and 

managed care plans are meaningful 

users before application of the Medicare 

payment adjustments (provisions of 

sections 1848(a)(7), 1853(l)(4), 

1886(b)(3)(B)(ix), 1853(m)(4), and 

1814(l)(4) of the Act). We will specify 

the EHR reporting periods for these 

payment adjustment incentives in future 

rulemaking. 

f. Meaningful EHR User 

Section 1848(o)(1)(A)(i) of the Act, as 

added by section 4101(a) of the HITECH 

Act, limits incentive payments in the 

Medicare FFS EHR incentive program to 

an EP who is a ‘‘meaningful EHR user.’’ 

Section 1886(n)(1) of the Act, as added 

by section 4102(a) of the HITECH Act, 

limits incentive payments in the 

Medicare FFS EHR incentive program to 

hospitals described in section 1886(d) of 

the Act. Section 1814(l) of the Act limits 

incentive payments in the Medicare FFS 

EHR incentive program to CAHs who 

are ‘‘meaningful EHR users.’’ Section 

1903(t)(6)(C)(i)(II) of the Act, as added 

by section 4201(a)(2) of the HITECH 

Act, limits incentive payments for 

payment years other than the first 

payment year to a Medicaid provider 

who ‘‘demonstrates meaningful use of 

certified EHR technology.’’ We propose 

to define at § 495.4 the term ‘‘meaningful 

EHR user’’ as an EP or eligible hospital 

who, for an EHR reporting period for a 

payment year, demonstrates meaningful 

use of certified EHR technology in the 

form and manner consistent with our 

standards (discussed below). These 

standards would include use of certified 

EHR technology in a manner that is 

approved by us. 

2. Definition of Meaningful Use 

a. Background 

As discussed previously, an EP or 

eligible hospital must be a meaningful 

EHR user in order to receive the 

incentive payments available under the 

EHR incentive programs, except in the 

first payment year for certain Medicaid 

EPs or eligible hospitals. This section 

(II.A.2.) of this proposed rule discusses 

the definition of meaningful use. 

Section II.A.3. of this proposed rule, 

discusses the manner for demonstrating 

meaningful use. In Sections 

1848(o)(2)(A) and 1886(n)(3) of the Act, 

the Congress specified three types of 

requirements for meaningful use: (1) 

Use of certified EHR technology in a 

meaningful manner (for example, 

electronic prescribing); (2) that the 

certified EHR technology is connected 

in a manner that provides for the 

electronic exchange of health 

information to improve the quality of 

care; and (3) that, in using certified EHR 

technology, the provider submits to the 

Secretary information on clinical quality 

measures and such other measures 

selected by the Secretary. 

Over the last few months, CMS and 

ONC have solicited input on defining 

meaningful use from both other 

government agencies and the public 

through dialogue, public forums, and 

solicitation of written comments. Below 

we describe the work of the National 

Committee on Vital and Health 

Statistics (NCVHS), the HIT Standards 

Committee and the HIT Policy 

Committee, as well as the public input 

we have received on defining 

meaningful use. 

The NCVHS is the Department of 

Health and Human Services’ statutory 

public advisory body on health data, 

statistics, and national health 

information policy. NCVHS derives its 

authority from 42 U.S.C. 242k, section 

306(k) of the Public Health Service Act, 

which governs it along with the 

provisions of Public Law 92–463 

(5 U.S.C. App.2). The full charter and 

membership of the NCVHS is available 

electronically at http:// 

www.ncvhs.hhs.gov/. The NCVHS held 

a public hearing on April 28 and 29, 

2009 to learn from a broad spectrum of 

stakeholders their views of ‘‘meaningful 

use.’’ The NCVHS hearing brought 

together key healthcare and information 

technology stakeholder groups 

including: Representatives of patients, 

and more broadly consumers; providers; 

the public health community; public 

and private payers; vendors; and 

certifying entities. The hearing agenda 

and testimony supplied is available 

electronically at http:// 

www.ncvhs.hhs.gov/090428ag.htm. A 

report on the hearing was delivered May 

15, 2009 to the ONC. The report is 

available electronically at http:// 

www.ncvhs.hhs.gov/090518rpt.pdf. 

Written comments from interested 

stakeholders submitted timely to the 

NCVHS were also considered by the 

NCVHS Executive Sub-Committee in the 

drafting of the report. Subsequently, the 

National Coordinator for HIT requested 

NCVHS to reflect on the testimony by 

supplying observations. Those 

observations are available electronically 

at http://www.ncvhs.hhs.gov/ 

090428rpt.pdf. 

In addition to the work completed by 

the NCVHS, the HIT Policy Committee, 

a Federal Advisory Committee to the 

Department of Health and Human 

Services (HHS) created by the HITECH 

Act, also worked to inform the 

definition of meaningful use. The full 

charter and membership of the HIT 

Policy Committee can be found at 


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http://healthit.hhs.gov. The HIT Policy 

Committee formed a Meaningful Use 

workgroup. On June 16, 2009, the HIT 

Policy Committee heard and discussed 

the recommendations from their 

Meaningful Use workgroup, and 

subsequently submitted its own 

recommendations on meaningful use to 

the National Coordinator for Health IT. 

These recommendations are available 

electronically at http://healthit.hhs.gov. 

At the conclusion of the June 16 

meeting, ONC announced a public 

comment period to solicit stakeholder 

input on the recommendations and 

published a notice in the Federal 

Register (74 FR 28937). The public 

comment period lasted through June 26, 

2009. Over 700 public comments were 

received by the ONC. A summary, as 

well as the text of the comments, is 

available electronically at http:// 

healthit.hhs.gov. The Meaningful Use 

workgroup presented its revised 

recommendations to the full committee 

based on comments by the full HIT 

Policy Committee and by the public at 

the July 16, 2009 meeting. In developing 

its recommendations, the HIT Policy 

Committee considered a report entitled 

‘‘National Priorities and Goals’’ (http:// 

www.nationalprioritiespartnership.org/ 

uploadedFiles/NPP/08-253- 

NQF%20ReportLo%5b6%5d.pdf) 

generated by the National Priorities 

Partnership, convened by the National 

Quality Forum (NQF). Of the national 

health care priorities set forward by the 

NQF report, the HIT Policy Committee 

chose as priority areas patient 

engagement; reduction of racial 

disparities; improved safety; increased 

efficiency; coordination of care; and 

improved population health to drive 

their recommendations. Those 

recommendations are available 

electronically at http://healthit.hhs.gov. 

The HIT Standards Committee, 

another Federal Advisory Committee 

created by the HITECH Act, provided 

recommendations related to meaningful 

use to ONC. The HIT Standards 

Committee work focuses primarily on 

the standards surrounding certified EHR 

technology. Further information on the 

HIT Standards Committee role and 

recommendations can be found in a 

future rulemaking document to be 

provided by ONC for certification of 

EHR technology (HHS–0151–IFC) and at 

http://healthit.hhs.gov. 

Finally, from June 22 to June 26, 2009, 

the ONC and CMS hosted 21 

teleconference listening sessions with 

rural providers, small practices, small 

hospitals, CAHs, and urban safety net 

providers to hear their perspectives and 

obtain their input on the definition of 

meaningful use. Because of the 

documentation that these types of 

providers have below average adoption 

rates of HIT, we solicited comments 

directly from these communities. 

Section V. of this proposed rule 

discusses the current adoption rates of 

HIT. Over 200 representatives from 

these target audiences participated on 

the calls. The vast majority of callers 

were rural providers, although 

representatives from vendor 

organizations or provider associations 

also participated. One session was held 

to specifically hear from national 

organizations representing rural 

communities and providers. Summaries 

of these listening sessions are available 

at http://healthit.hhs.gov/ 

meaningfuluse. Both CMS and the ONC 

have reviewed input from these and 

additional sources to help inform the 

definition of meaningful use. 

b. Common Definition of Meaningful 

Use Under Medicare and Medicaid 

Under sections 1848(o)(1)(A)(i) and 

1886(n)(1) of the Act, as added by 

sections 4101(a) and 4102(a) of the 

HITECH Act, respectively, an EP or 

eligible hospital must be a meaningful 

EHR user for the relevant EHR reporting 

period in order to qualify for the 

incentive payment for a payment year. 

Sections 1848(o)(2)(A) and 

1886(n)(3)(A) of the Act provide that an 

EP and an eligible hospital shall be 

considered a meaningful EHR user for 

an EHR reporting period for a payment 

year if they meet the following three 

requirements: (1) Demonstrates use of 

certified EHR technology in a 

meaningful manner; (2) demonstrates to 

the satisfaction of the Secretary that 

certified EHR technology is connected 

in a manner that provides for the 

electronic exchange of health 

information to improve the quality of 

health care such as promoting care 

coordination, in accordance with all 

laws and standards applicable to the 

exchange of information; and (3) using 

its certified EHR technology, submits to 

the Secretary, in a form and manner 

specified by the Secretary, information 

on clinical quality measures and other 

measures specified by the Secretary. 

The HITECH Act requires that to receive 

a Medicaid incentive payment in the 

initial year of payment, an EP or eligible 

hospital may demonstrate that they have 

engaged in efforts to ‘‘adopt, implement, 

or upgrade certified EHR technology.’’ 

Details, including special timeframes, 

on how we define and implement 

‘‘adopt, implement, and upgrade’’ are 

proposed in section II.D.7.b.2 of this 

proposed rule. For subsequent payment 

years, or the first payment year if an EP 

or eligible hospital chooses, section 

1903(t)(6)(C)(i)(II) of the Act, as added 

by section 4201(a)(2) of HITECH, 

prohibits receipt of an incentive 

payment, unless ‘‘the Medicaid provider 

demonstrates meaningful use of 

certified EHR technology through a 

means that is approved by the State and 

acceptable to the Secretary, and that 

may be based upon the methodologies 

applied under section 1848(o) or 

1886(n).’’ (Sections 1848(o) and 1886(n) 

of the Act refer to the Medicare 

incentive programs for EPs and eligible 

hospitals respectively.) Under section 

1903(t)(8) of the Act to the maximum 

extent practicable, we are directed to 

avoid duplicative requirements from 

Federal and State governments to 

demonstrate meaningful use of certified 

EHR technology. Provisions included at 

section 1848(o)(1)(D)(iii) of the Act also 

contain a Congressional mandate to 

avoid duplicative requirements for 

meaningful use, to the extent 

practicable. Finally section 1903(t)(8) of 

the Act allows the Secretary to deem 

satisfaction of the requirements for 

meaningful use of certified EHR 

technology for a payment year under 

Medicare to qualify as meaningful use 

under Medicaid. 

We believe that given the strong level 

of interaction on meaningful use 

encouraged by the HITECH Act, there 

would need to be a compelling reason 

to create separate definitions for 

Medicare and Medicaid. We have found 

no such reasons for disparate definitions 

in our internal or external discussions. 

To the contrary, stakeholders have 

expressed strong preferences to link the 

Medicare and Medicaid EHR incentive 

programs wherever possible. Hospitals 

are entitled to participate in both 

programs, and we are proposing to offer 

EPs an opportunity to switch between 

the Medicare and Medicaid EHR 

incentive programs. Therefore, we 

propose to create a common definition 

of meaningful use that would serve as 

the definition for providers participating 

in the Medicare FFS and MA EHR 

incentive program, and the minimum 

standard for EPs and eligible hospitals 

participating in the Medicaid EHR 

incentive program. We clarify that 

under Medicaid this common definition 

would be the minimum standard. While 

we would allow States to add additional 

objectives to the definition of 

meaningful use or modify how the 

existing objectives are measured, the 

Secretary would not accept any State 

proposed alternative that does not 

further promote the use of EHRs and 

healthcare quality or that would require 

additional functionality beyond that of 

certified EHR technology. See section 


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II.D.7.b.2.of this proposed rule for 

further details on how a State may 

propose an alternative. 

For hospitals, we propose to exercise 

the option granted under section 

1903(t)(8) of the Act and deem any 

Medicare provider who is a meaningful 

EHR user under the Medicare EHR 

incentive program and is otherwise 

eligible for the Medicaid incentive 

payment to be classified as a meaningful 

EHR user under the Medicaid EHR 

incentive program. This is applicable 

only to eligible hospitals, as EPs cannot 

receive an incentive payment under 

both Medicare and Medicaid. 

We solicit comments as to whether 

there exist compelling reasons to give 

the states additional flexibility in 

creating disparate definitions beyond 

what is proposed. Also if commenting 

in favor of such disparate definitions, 

we ask that interested parties also 

comment on whether the proposal of 

deeming meeting Medicare as sufficient 

for meeting those of Medicaid remains 

appropriate under the disparate 

definitions. This is applicable only to 

hospitals eligible for both the Medicare 

and Medicaid incentive programs. 

Furthermore, if a State has CMSapproved additional meaningful use 

requirements, hospitals deemed as 

meaningful users by Medicare would 

not have to meet the State-specific 

additional meaningful use requirements 

in order to qualify for the Medicaid 

incentive payment. 

c. Considerations in Defining 

Meaningful Use 

In sections 1848(o)(2)(A) and 

1886(n)(3)(A) of the Act, as added by 

sections 4101(a) and 4102(a) of the 

HITECH Act, the Congress identifies the 

broad goal to be accomplished through 

the definition of meaningful use of 

certified EHR technology for expanding 

the use of EHRs. Certified EHR 

technology used in a meaningful way by 

providers is one piece of a broader HIT 

infrastructure needed to reform the 

health care system and improve health 

care quality, efficiency, and patient 

safety. Our goal is for this ultimate 

vision to drive the definition of 

meaningful use consistent with 

applicable provisions of Medicare and 

Medicaid law. 

In defining meaningful use through 

the creation of criteria, we have 

balanced competing considerations of 

proposing a definition that best ensures 

reform of health care and improved 

healthcare quality, encourages 

widespread EHR adoption, promotes 

innovation, and avoids imposing 

excessive or unnecessary burdens on 

healthcare providers, while at the same 

time recognizing the short time-frame 

available under the HITECH Act for 

providers to begin using certified EHR 

technology. 

Based on public and stakeholder 

input, we consider a phased approach to 

be most appropriate. Such a phased 

approach encompasses reasonable 

criteria for meaningful use based on 

currently available technology 

capabilities and provider practice 

experience, and builds up to a more 

robust definition of meaningful use, 

based on anticipated technology and 

capabilities development. The HITECH 

Act acknowledges the need for this 

balance by granting the Secretary the 

discretion to require more stringent 

measures of meaningful use over time. 

Ultimately, consistent with other 

provisions of law, meaningful use of 

certified EHR technology should result 

in health care that is patient-centered, 

evidence-based, prevention-oriented, 

efficient, and equitable. 

Under this phased approach to 

meaningful use, we intend to update the 

criteria of meaningful use through 

future rulemaking. We refer to the initial 

meaningful use criteria as ‘‘Stage 1.’’ We 

currently anticipate two additional 

updates, which we refer to as Stage 2 

and Stage 3, respectively. We are 

considering updating the meaningful 

use criteria on a biennial basis, with the 

Stage 2 criteria proposed by the end of 

2011 and the Stage 3 definition 

proposed by the end of 2013. The stages 

represent a graduated approach to 

arriving at the ultimate goal. Thus, our 

goals for ‘‘Stage 3’’ meaningful use 

criteria represent overarching goals 

which, we believe, are attainable by the 

end of the EHR incentive programs. We 

will continue to evaluate the 

progression of the meaningful use 

definition for consistency with 

legislative intent and new statutory 

requirements relating to quality 

measurement. We solicit comments on 

this proposed pathway of meaningful 

use. 

• Stage 1: The Stage 1 meaningful use 

criteria focuses on electronically 

capturing health information in a coded 

format; using that information to track 

key clinical conditions and 

communicating that information for care 

coordination purposes (whether that 

information is structured or 

unstructured, but in structured format 

whenever feasible); consistent with 

other provisions of Medicare and 

Medicaid law, implementing clinical 

decision support tools to facilitate 

disease and medication management; 

and reporting clinical quality measures 

and public health information. 

• Stage 2: Our goals for the Stage 2 

meaningful use criteria, consistent with 

other provisions of Medicare and 

Medicaid law, expand upon the Stage 1 

criteria to encourage the use of health IT 

for continuous quality improvement at 

the point of care and the exchange of 

information in the most structured 

format possible, such as the electronic 

transmission of orders entered using 

computerized provider order entry 

(CPOE) and the electronic transmission 

of diagnostic test results (such as blood 

tests, microbiology, urinalysis, 

pathology tests, radiology, cardiac 

imaging, nuclear medicine tests, 

pulmonary function tests and other such 

data needed to diagnose and treat 

disease). Additionally we may consider 

applying the criteria more broadly to 

both the inpatient and outpatient 

hospital settings. 

• Stage 3: Our goals for the Stage 3 

meaningful use criteria are, consistent 

with other provisions of Medicare and 

Medicaid law, to focus on promoting 

improvements in quality, safety and 

efficiency, focusing on decision support 

for national high priority conditions, 

patient access to self management tools, 

access to comprehensive patient data 

and improving population health. 

We will continue to evaluate the 

progression of the meaningful use 

definition for consistency with 

legislative instructions and new 

statutory requirements relating to 

quality measurement and administrative 

simplification. We are aware that the 

appropriate approach raises complex 

questions and we solicit comments on 

the proposed approach and alternative 

possibilities. A different approach 

might, for example, move aspects of 

Stage 2 into Stage 3 or vice versa. We 

seek comments on how best to balance 

the relevant goals, including promoting 

adoption of EHRs, avoiding excessive or 

unnecessary burdens, and improving 

health care. 

As the purpose of these incentives is 

to encourage the adoption and 

meaningful use of certified EHR 

technology, we believe it is desirable to 

account for whether an EP or eligible 

hospital is in their first, second, third, 

fourth, fifth, or sixth payment year 

when deciding which definition of 

meaningful use to apply in the 

beginning years of the program. The HIT 

Policy Committee in its public meeting 

on July 16, 2009 also voiced its approval 

of this approach. However, we do not 

wish to create an additional burden on 

EPs or eligible hospitals for becoming a 

meaningful EHR user before 2015 by 

creating a higher standard for them 

relative to an EP or eligible hospital who 

first becomes a meaningful EHR user in 


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2015. The following paragraphs describe 

our intended alignment in the beginning 

years that brings all EPs and eligible 

hospitals to the same level of 

meaningful use by 2015. As we are only 

proposing criteria for Stage 1 of 

meaningful use in this notice of 

proposed rulemaking, Stage 1 will be 

the criteria for meaningful use for all 

payment years until updated by future 

rulemaking. Medicaid EHR incentive 

program EPs and eligible hospitals have 

the option to earn their incentive for 

their first payment year through the 

adoption, implementation or upgrade of 

certified EHR technology. Those EPs 

and eligible hospitals doing so will not 

have to demonstrate meaningful use in 

their first payment year. We intend for 

their progression to be the same as those 

who demonstrate meaningful use in 

their first payment year. In other words, 

the second payment year is the second 

payment year regardless of how the 

incentive was earned in the first 

payment year. 

We intend that Medicaid EPs and 

eligible hospitals who qualify for an 

incentive payment for adopting, 

implementing, or upgrading in their first 

payment year would follow the same 

meaningful use progression outlined 

below as if their second payment year 

was their first payment year. For 

instance a Medicaid EP who received an 

incentive for his or her first payment 

year in 2010 for adopting, 

implementing, or upgrading would 

follow the same guidance starting in 

their second payment year (2011) as a 

Medicare EP who received an incentive 

for their first payment year in 2011 for 

meaningful use of certified EHR 

technology. Another example would be 

a Medicaid eligible hospital that 

received an incentive for its first 

payment year in 2012 for adopting, 

implementing, and upgrading would 

follow the same guidance starting in 

their second payment year (2013) as a 

Medicare eligible hospital who received 

an incentive for their first payment year 

in 2013 for meaningful use of certified 

EHR technology. 

We propose that EPs and eligible 

hospitals whose first payment year is 

2011 must satisfy the requirements of 

the Stage 1 criteria of meaningful use in 

their first and second payment years 

(2011 and 2012) to receive the incentive 

payments. We anticipate updating the 

criteria of meaningful use to Stage 2 in 

time for the 2013 payment year and 

therefore anticipate for their third and 

fourth payment years (2013 and 2014), 

an EP or eligible hospital whose first 

payment year is 2011 would have to 

satisfy the Stage 2 criteria of meaningful 

use to receive the incentive payments. 

We anticipate updating the criteria of 

meaningful use to Stage 3 in time for the 

2015 payment year and therefore 

anticipate for their fifth payment year 

(2015), if applicable, an EP or eligible 

hospital whose first payment year is 

2011 would have to satisfy the Stage 3 

criteria of meaningful use to receive the 

incentive payments. For their sixth 

payment year (2016), if applicable, an 

EP or eligible hospital whose first 

payment year is 2011 would have to 

satisfy the Stage 3 criteria of meaningful 

use or a subsequent update to the 

criteria if one is established through 

rulemaking to receive the incentive 

payments. 

We propose that EPs and eligible 

hospitals whose first payment year is 

2012 must satisfy the Stage 1 criteria of 

meaningful use in their first and second 

payment years (2012 and 2013) to 

receive the incentive payments. We 

anticipate updating the criteria of 

meaningful use to Stage 2 in time for the 

2013 payment year and anticipate for 

their third payment year (2014), an EP 

or eligible hospital whose first payment 

year is 2012 would have to satisfy the 

Stage 2 criteria of meaningful use to 

receive the incentive payments. We 

anticipate updating the criteria of 

meaningful use to Stage 3 in time for the 

2015 payment year and therefore 

anticipate for their fourth payment year 

(2015), if applicable, an EP or eligible 

hospital whose first payment year is 

2012 would have to satisfy the Stage 3 

criteria of meaningful use to receive the 

incentive payments. For their fifth and 

sixth payment years (2016 and 2017), if 

applicable, an EP or eligible hospital 

whose first payment year is 2012 would 

have to satisfy the Stage 3 criteria of 

meaningful use or a subsequent update 

to the criteria if one is established 

through rulemaking to receive the 

incentive payments. 

We propose that EPs and eligible 

hospitals whose first payment year is 

2013 must satisfy the Stage 1 criteria of 

meaningful use in their first payment 

year (2013) to receive the incentive 

payments. We anticipate updating the 

criteria of meaningful use to Stage 2 in 

time for the 2013 payment year and 

therefore anticipate for their second 

payment year (2014), an EP or eligible 

hospital whose first payment year is 

2013 would have to satisfy the Stage 2 

criteria of meaningful use to receive the 

incentive payments. We anticipate 

updating the criteria of meaningful use 

to Stage 3 in time for the 2015 payment 

year and therefore anticipate for their 

third payment year (2015), if applicable, 

an EP or eligible hospital whose first 

payment year is 2013 would have to 

satisfy the Stage 3 criteria of meaningful 

use to receive the incentive payments. 

For their fourth, fifth, and sixth 

payment year (2016, 2017 and 2018), if 

applicable, an EP or eligible hospital 

whose first payment year is 2013 would 

have to satisfy the Stage 3 criteria of 

meaningful use or a subsequent update 

to the criteria if one is established 

through rulemaking to receive the 

incentive payments. 

We propose that EPs and eligible 

hospitals whose first payment year is 

2014 must satisfy the Stage 1 criteria of 

meaningful use in their first payment 

year (2014) to receive the incentive 

payments. We anticipate updating the 

criteria of meaningful use to Stage 3 in 

time for the 2015 payment year and 

therefore anticipate for their second 

payment year (2015), if applicable, an 

EP or eligible hospital whose first 

payment year is 2014 would have to 

satisfy the Stage 3 criteria of meaningful 

use to receive the incentive payments. 

For their third, fourth, fifth and sixth 

payment year (2016, 2017, 2018, and 

2019), if applicable, an EP or eligible 

hospital whose first payment year is 

2014 would have to satisfy the Stage 3 

criteria of meaningful use or a 

subsequent update to the criteria if one 

is established through rulemaking to 

receive the incentive payments. 

We anticipate updating the criteria of 

meaningful use to Stage 3 in time for the 

2015 payment year and therefore 

anticipate for all their payment years, an 

EP or eligible hospital whose first 

payment year is 2015 would have to 

satisfy the Stage 3 criteria of meaningful 

use for 2015. For all subsequent 

payment years, if applicable, an EP or 

eligible hospital whose first payment 

year is 2015 would have to satisfy the 

Stage 3 criteria of meaningful use or a 

subsequent update to the criteria if one 

is established through rulemaking to 

receive the incentive payments. 

In addition to the equitable concerns 

discussed earlier in the transition from 

incentive payments to payment 

adjustments, the primary reasoning for 

developing different stages of 

meaningful use is the current lack of 

HIT infrastructure and penetration of 

qualified EHRs necessary to support the 

ambitious goals of the Stage 3 criteria of 

meaningful use. Given the anticipated 

maturity of HIT infrastructure inherent 

in the strengthening criteria and the 

increased adoption of certified EHR 

technology predicted in section V. of 

this proposed rule, these barriers to 

meeting the Stage 3 criteria of 

meaningful use will be removed. 

Table 1 outlines our proposal to apply 

the respective criteria of meaningful use 

for each payment year (1st, 2nd, 3rd, 

etc.) for EPs and eligible hospitals that 


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become meaningful EHR users before 

2015. Please note that nothing in this 

discussion limits us to proposed 

changes to meaningful use beyond Stage 

3 through future rulemaking. 

TABLE 1—STAGE OF MEANINGFUL USE CRITERIA BY PAYMENT YEAR

First payment year 

Payment year 

2011 2012 2013 2014 2015 +** 

2011 ................................................................................................................... Stage 1 .... Stage 1 .... Stage 2 .... Stage 2 .... Stage 3. 

2012 ................................................................................................................... ............. Stage 1 .... Stage 1 .... Stage 2 .... Stage 3. 

2013 ................................................................................................................... .................. .................. Stage 1 .... Stage 2 .... Stage 3. 

2014 ................................................................................................................... .................. .................. .................. Stage 1 .... Stage 3. 

2015+ * ............................................................................................................... .................. .................. .................. .................. Stage 3. 

* Avoids payment adjustments only for EPs in the Medicare EHR Incentive Program. 

** Stage 3 criteria of meaningful use or a subsequent update to the criteria if one is established through rulemaking. 

Please note that the number of 

payment years available and the last 

payment year that can be the first 

payment year for an EP or eligible 

hospital varies between the EHR 

incentive programs. The applicable 

payment years for each program are 

discussed in section II.B. of this 

proposed rule for the Medicare FFS EHR 

incentive program, in section II.D. for 

the MA EHR incentive program, and in 

section II.E. for the Medicaid EHR 

incentive program. 

The stages of criteria of meaningful 

use and how they are demonstrated are 

described further in this proposed rule 

and will be updated in subsequent 

proposed rules to reflect advances in 

HIT products and infrastructure. This 

could include updates to the Stage 1 

criteria in future rulemaking. 

We invite comments on our alignment 

between payment year and the criteria 

of meaningful use particularly in regard 

to the need to create alignment across 

all EPs and eligible hospitals in all EHR 

incentive programs in 2015. 

d. Stage 1 Criteria for Meaningful Use 

To qualify as a meaningful EHR user 

for 2011, we propose that an EP or 

eligible hospital must demonstrate that 

they meet all of the objectives and their 

associated measures as set forth in 

§ 495.6. Except as otherwise indicated, 

each objective must be satisfied by an 

individual EP as determined by unique 

National Provider Identifiers (NPIs) and 

an individual hospital as determined by 

unique CMS certification numbers 

(CCN). Below we describe each 

objective and its associated measures in 

detail. While we welcome comments on 

all aspects of the Stage 1 criteria of 

meaningful use, we specifically 

encourage comments on the following 

considerations. 

While we believe that requiring 

satisfaction of all objectives is 

appropriate for the majority of 

providers, we are concerned that certain 

providers may have difficulty meeting 

one or more of the proposed objectives. 

We solicit comments on whether this 

may be the case, and invite commenters 

to identify the objectives and associated 

measures that may prove out of reach 

for certain provider types or specialties, 

and to suggest specific objective criteria 

we could use to determine whether an 

objective and associated measure is 

appropriate for different provider types 

or specialists. 

In discussing the objectives that 

constitute the stage 1 criteria of 

meaningful use, we adopted a structure 

derived from recommendations of the 

HIT Policy Committee of grouping the 

objectives under care goals, which are in 

turn grouped under health outcomes 

policy priorities. We believe this 

structural grouping provides context to 

the individual objectives; however, the 

grouping is not itself an aspect of 

meaningful use. The criteria for 

meaningful use are based on the 

objectives and their associated 

measures. CMS and ONC have carefully 

reviewed the objectives and measures 

proposed by the HIT Policy Committee. 

We found many objectives to be well 

suited to meaningful use, while others 

we found to require modification or 

clarification. In our discussion we will 

focus on those areas where our proposal 

is a modification of the recommendation 

of the HIT Policy Committee. For those 

areas where we elected not to propose 

a modification to the recommendation 

of the HIT Policy Committee, we note 

that there already has been extensive 

public debate and explanation of these 

recommendations, which can be 

accessed at http://healthit.hhs.gov/ 

meaningfuluse. Even if we do not 

propose to modify a specific 

recommendation of the HIT Policy 

Committee, we nevertheless welcome 

comment on whether to do so in the 

final rule. 

(1) Objectives 

The first health outcomes policy 

priority specified by the HIT Policy 

Committee is improving quality, safety, 

efficiency and reducing health 

disparities. The HIT Policy Committee 

identified the following care goals to 

address this priority: 

• Provide access to comprehensive 

patient health data for patient’s 

healthcare team. 

• Use evidence-based order sets and 

computerized provider order entry 

(CPOE). 

• Apply clinical decision support at 

the point of care. 

• Generate lists of patients who need 

care and use them to reach out to those 

patients. 

• Report information for quality 

improvement and public reporting. 

With respect to this last care goal, the 

HIT Policy Committee proposed a goal 

of ‘‘Report to patient registries for 

quality improvement, public reporting, 

etc.’’ We propose to modify this care 

goal because we believe that patient 

registries are too narrow a reporting 

requirement to accomplish the goals of 

quality improvement and public 

reporting. We note that the HIT Policy 

Committee’s recommended objectives 

include the reporting of quality 

measures to CMS. We do not believe 

that CMS would normally be considered 

a ‘‘patient registry.’’ We also removed 

the phrase ‘‘etc.’’ We believe that the 

level of ambiguity created by ‘‘etc.’’ is 

not appropriate for Federal regulations. 

For EPs, we propose the following 

objectives in the Stage 1 criteria of 

meaningful use to further the care goal 

of improving quality, safety, efficiency 

and reducing health disparities. 

• Use CPOE. We believe that the term 

‘‘CPOE’’ requires additional clarification. 

We propose to define CPOE as entailing 

the provider’s use of computer 

assistance to directly enter medical 

orders (for example, medications, 


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consultations with other providers, 

laboratory services, imaging studies, and 

other auxiliary services) from a 

computer or mobile device. The order is 

also documented or captured in a 

digital, structured, and computable 

format for use in improving safety and 

organization. For Stage 1 criteria, we 

propose that it will not include the 

electronic transmittal of that order to the 

pharmacy, laboratory, or diagnostic 

imaging center. We encourage 

comments on whether additional 

specificity is required on the types of 

orders encompassed within CPOE. 

• Implement drug-drug, drug-allergy, 

drug-formulary checks. 

• Maintain an up-to-date problem list 

of current and active diagnoses based on 

ICD–9–CM or SNOMED CT®. 

We believe the term ‘‘problem list’’ 

requires additional clarification. We 

describe a ‘‘problem list’’ as a list of 

current and active diagnoses as well as 

past diagnoses relevant to the current 

care of the patient. 

• Generate and transmit permissible 

prescriptions electronically (eRx). 

The concept of only permissible 

prescriptions refers to the current 

restrictions established by the 

Department of Justice on electronic 

prescribing for controlled substances. 

(The restrictions can be found at 

http://www.deadiversion.usdoj.gov/ 

schedules/schedules.htm.) 

• Maintain active medication list. 

• Maintain active medication allergy 

list. 

• Record the following demographics: 

Preferred language, insurance type, 

gender, race and ethnicity, and date of 

birth. 

We note that race and ethnicity codes 

should follow current federal standards 

published by the Office of Management 

and Budget (http:// 

www.whitehouse.gov/omb/ 

inforeg_statpolicy/#dr). 

• We do not propose to include the 

objective ‘‘Record Advance directives.’’ 

The HIT Policy Committee 

recommended that EPs ‘‘record advance 

directives.’’ It is unclear whether by this 

terminology they meant that the 

contents of the advance directive be 

recorded or merely the fact that a 

patient has an advance directive be 

noted. Depending on the interpretation, 

this objective could interfere with 

current State law which varies 

significantly from State to State in this 

matter. We also believe that this 

objective is only relevant to a limited 

and undefined patient population when 

compared to the patient populations to 

which other objectives listed here apply. 

The limits could be based on age, health 

status, whether a chronic condition is 

present, to patients scheduled for 

certain types of procedures or a host of 

other factors. Similarly, many EPs 

would not record this information under 

current standards of practice. Dentists, 

pediatricians, optometrists, 

chiropractors, dermatologists, and 

radiologists are just a few examples of 

EPs who would only in rare 

circumstances require information about 

a patient’s advance directive. For these 

reasons, we do not propose to include 

‘‘Record advance directives’’ as an 

objective of the Stage 1 criteria of 

meaningful use for EPs. 

• Record and chart changes in the 

following vital signs: Height, weight and 

blood pressure and calculate and 

display body mass index (BMI) for ages 

2 and over; plot and display growth 

charts for children 2–20 years, including 

BMI. 

This is a modification to the HIT Policy 

Committee recommendation to require 

eligible professionals to record vital 

signs: Height, weight, blood pressure 

and calculate BMI. We added ‘‘plot and 

display growth charts for children 2–20 

years, including BMI’’ to the objective 

recommended by the HIT Policy 

Committee, as BMI itself does not 

provide adequate information for 

children. Trends in height, weight, and 

BMI among children must be 

interpreted and understood in the 

context of expected parameters of 

children of the same age and sex to 

determine whether the child is growing 

appropriately. For example, a BMI of 18 

is normal for a 12-year-old boy, and a 

marker of obesity for a 5-year-old 

(http://www.cdc.gov/growthcharts/data/ 

set1clinical/cj411023.pdf). 

• Record smoking status for patients 

13 years old or older. 

The HIT Policy Committee 

recommended the objective of recording 

smoking status for patients. We propose 

to add ‘‘for patients 13 years old or 

older,’’ as we do not believe this 

objective is applicable to patients of all 

ages and there is not consensus in the 

health care community as to what the 

appropriate cut off age may be. We 

encourage comments on whether this 

age limit should be lowered or raised. 

• Incorporate clinical lab-test results 

into EHR as structured data. Structured 

data are data that have specified data 

type and response categories within an 

electronic record or file. 

• Generate lists of patients by specific 

conditions to use for quality 

improvement, reduction of disparities, 

research, and outreach. 

• Report ambulatory quality measures 

to CMS (or, for EPs seeking the 

Medicaid incentive payment, the 

States). The HIT Policy Committee did 

not include ‘‘or the States’’ in its 

recommended objective. We propose to 

add the option to report directly to the 

States for EPs participating in the 

Medicaid EHR incentive program. 

Additional discussion of this objective 

can be found in section II.A.3 of this 

proposed rule. 

• Send reminders to patients per 

patient preference for preventive/ 

follow-up care. Patient preference refers 

to the patient’s choice of delivery 

method between internet based delivery 

or delivery not requiring internet access. 

• Implement five clinical decision 

support rules relevant to specialty or 

high clinical priority, including for 

diagnostic test ordering, along with the 

ability to track compliance with those 

rules. 

This is a modification to the HIT 

Policy Committee recommendation to 

require EPs to implement one clinical 

decision support rule relevant to 

specialty or high clinical priority. We 

made this change to align with and 

support eligible professionals in 

reporting their clinical quality measures 

proposed in section II.A.3. of this 

proposed rule. We anticipate that EPs 

will report on at least five clinical 

quality measures. 

We propose to describe clinical 

decision support as health information 

technology functionality that builds 

upon the foundation of an EHR to 

provide persons involved in care 

processes with general and personspecific information, intelligently 

filtered and organized, at appropriate 

times, to enhance health and health 

care. 

• We do not propose to include the 

objective ‘‘Document a progress note for 

each encounter’’. Documentation of 

progress notes is a medical-legal 

requirement and a component of basic 

EHR functionality, and is not directly 

related to advanced processes of care or 

improvements in quality, safety, or 

efficiency. 

Finally, the HIT Policy Committee 

further recommended the following two 

objectives related to administrative 

simplification. Consistent with that 

recommendation—and consistent with 

any forthcoming statutory requirements 

regarding administrative 

simplifications—we propose the 

following objectives, with slight 

modification. 

• Check insurance eligibility 

electronically from public and private 

payers. Deleted ‘‘where possible’’ from 

the HIT Policy Committee 

recommendation. The checking for 


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eligibility electronically is already a 

HIPAA Standard Exchange. 

• Submit claims electronically to 

public and private payers. 

For eligible hospitals, we propose the 

following objectives in the stage 1 

criteria of meaningful use to further 

these care goals: 

• Use CPOE for orders (any type) 

directly entered by the authorizing 

provider (for example, MD, DO, RN, PA, 

NP). 

We believe that the term ‘‘CPOE’’ 

requires additional clarification. We 

propose to define CPOE as entailing the 

provider’s use of computer assistance to 

directly enter medical orders (for 

example, medications, consultations 

with other providers, laboratory 

services, imaging studies, and other 

auxiliary services) from a computer or 

mobile device. The order is also 

documented or captured in a digital, 

structured, and computable format for 

use in improving safety and 

organization. It does not include the 

electronic transmittal of that order to the 

pharmacy, laboratory, or diagnostic 

imaging center in 2011 or 2012. CPOE 

is the same as defined above for EPs. We 

welcome comment on whether use of 

CPOE varies between hospitals and EPs 

in ways that should be addressed. 

• Implement drug-drug, drug-allergy, 

drug-formulary checks. 

• Maintain an up-to-date problem list 

of current and active diagnoses based on 

ICD–9–CM or SNOMED CT®. 

We believe the term ‘‘problem list’’ 

requires additional clarification. We 

describe a ‘‘problem list’’ as a list of 

current and active diagnoses, as well as 

past diagnoses relevant to the current 

care of the patient. 

• Maintain active medication list. 

• Maintain active medication allergy 

list. 

• Record the following demographics: 

preferred language, insurance type, 

gender, race and ethnicity, date of birth, 

and date and cause of death in the event 

of mortality. 

We are interested in public comments 

on how States and hospitals could work 

together to facilitate linkage between the 

EHR and the full birth and death 

certificate information that States 

currently require hospitals to collect. 

We note that race and ethnicity codes 

should follow current federal standards 

published by the Office of Management 

and Budget (http:// 

www.whitehouse.gov/omb/ 

inforeg_statpolicy/#dr). 

• We do not propose to include the 

objective ‘‘Record Advance directives.’’ 

The HIT Policy Committee 

recommended that eligible hospitals 

‘‘record advance directives.’’ It is unclear 

whether by this terminology they meant 

that the contents of the advance 

directive be recorded or merely the fact 

that a patient has an advance directive 

be noted. Depending on the 

interpretation, this objective could 

interfere with current State law which 

varies significantly from state to state in 

this matter. We also believe that this 

objective is only relevant to a limited 

and undefined patient population when 

compared to the patient populations to 

which other objectives listed here apply. 

The limits could be based on age, health 

status, whether a chronic condition is 

present, to patients scheduled for 

certain types of procedures or a host of 

other factors. For these reasons, we do 

not propose to include ‘‘Record advance 

directives’’ as an objective of the Stage 

1 criteria of meaningful use for eligible 

hospitals. 

• Record the following vital signs: 

height, weight and blood pressure and 

calculate and display body mass index 

(BMI) for patients 2 and over; plot and 

display growth charts for children 2–20 

years, including BMI. 

We added ‘‘plot and display growth 

charts for children 2–20 years, including 

BMI’’ to the objective recommended by 

the HIT Policy Committee, as BMI itself 

does not provide adequate information 

for children. Trends in height, weight, 

and BMI among children must be 

interpreted and understood in the 

context of expected parameters of 

children of the same age and sex to 

determine whether the child is growing 

appropriately. For example, a BMI of 18 

is normal for a 12-year-old boy, and a 

marker of obesity for a 5-year-old (ref. 

http://www.cdc.gov/growthcharts/data/ 

set1clinical/cj41l023.pdf). 

• Record smoking status for patients 

13 years old or older. 

We added ‘‘for patients 13 years old or 

older’’ as this objective is not applicable 

to patients of all ages. The discussion as 

to why we chose 13 can be found under 

the EP objective for ‘‘Record smoking 

status’’. 

• Incorporate clinical lab-test results 

into EHR as structured data. Structured 

data are data that have specified data 

type and response categories within a 

record or file. 

• Generate lists of patients by specific 

conditions to use for quality 

improvement, reduction of disparities, 

and outreach. 

The HIT Policy Committee did not 

recommend the phrase ‘‘to use for 

quality improvement, reduction of 

disparities, and outreach’’ for eligible 

hospitals as they did for EPs. We believe 

this aspect of the objective is just as 

relevant to eligible hospitals as EPs and 

therefore includes it for both. We invite 

comments as to why this phrase may 

not be applicable to eligible hospitals. 

• Report ambulatory quality measures 

to CMS (or, for eligible hospitals seeking 

the Medicaid incentive payment, the 

States). The HIT Policy Committee did 

not include ‘‘or the States’’ in their 

recommended objective. We propose to 

add the option to report directly to the 

States for Medicaid eligible hospitals 

participating in the Medicaid EHR 

incentive program. Additional 

discussion can be found in section 

II.A.3. of this proposed rule. 

• Implement five clinical decision 

support rules relevant to specialty or 

high clinical priority, including for 

diagnostic test ordering, along with the 

ability to track compliance with those 

rules. 

This is a modification to the HIT 

Policy Committee recommendation to 

require eligible professionals to 

implement one clinical decision support 

rule relevant to specialty or high clinical 

priority. We made this change to align 

with and support eligible professionals 

in reporting their clinical quality 

measures proposed in section II.A.3. of 

this proposed rule. We anticipate that 

most EPs will report on at least five 

clinical quality measures from section 

II.A.3 of this proposed rule and eligible 

hospitals will all report on at least five. 

We believe greater clarification is 

required around the term clinical 

decision support. We propose to 

describe clinical decision support as 

health information technology 

functionality that builds upon the 

foundation of an EHR to provide 

persons involved in care processes with 

general and person-specific information, 

intelligently filtered and organized, at 

appropriate times, to enhance health 

and health care. 

Finally, the HIT Policy Committee 

further recommended the following two 

objectives related to administrative 

simplification. Consistent with that 

recommendation—and consistent with 

any forthcoming statutory requirements 

regarding administrative 

simplifications—we propose the 

following objectives, with slight 

modification. 

• Check insurance eligibility 

electronically from public and private 

payers. Deleted ‘‘where possible’’ from 

the HIT Policy Committee 

recommendation. The checking for 

eligibility electronically is already a 

HIPAA Standard Exchange. 

• Submit claims electronically to 

public and private payers. 

The second health outcomes policy 

priority identified by the HIT Policy 


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Committee is to engage patients and 

families in their healthcare. The 

following care goal for meaningful use 

addresses this priority: 

• Provide patients and families with 

timely access to data, knowledge, and 

tools to make informed decisions and to 

manage their health. We do not propose 

to preempt any existing Federal or State 

law regarding the disclosure of 

information to minors, their parents, or 

their guardians in setting the 

requirements for meaningful use. For 

this reason when it comes to 

information provided to the family, we 

let existing Federal and State laws 

dictate what is appropriate for 

disclosure to the patient or the family. 

For purposes of all objectives of the 

Stage 1 criteria of meaningful use 

involving the disclosure of information 

to a patient, a disclosure made to a 

family member or a patient’s guardian 

consistent with Federal and State law 

may substitute for a disclosure to the 

patient. 

For EPs, we propose the following 

objectives in the stage 1 criteria of 

meaningful use to further this care goal: 

• Provide patients with an electronic 

copy of their health information 

(including diagnostics test results, 

problem list, medication lists, allergies) 

upon request. 

Consistent with the HIT Policy 

Committee’s recommendations, we 

propose the following additional 

clarification of this objective. Electronic 

copies may be provided through a 

number of secure electronic methods 

(for example, personal health record 

(PHR), patient portal, CD, USB drive). 

• Provide patients with timely 

electronic access to their health 

information (including lab results, 

problem list, medication lists, allergies) 

within 96 hours of the information 

being available to the EP. 

Also, consistent with the HIT Policy 

Committee recommendations, we 

propose the following additional 

clarification of this objective. Electronic 

access may be provided by a number of 

secure electronic methods (for example, 

PHR, patient portal, CD, USB drive). 

Timely is defined as within 96 hours of 

the information being available to the 

EP either through the receipt of final lab 

results or a patient interaction that 

updates the EP’s knowledge of the 

patient’s health. We judge 96 hours to 

be a reasonable amount of time to 

ensure that certified EHR technology is 

up to date. We welcome comment on if 

a shorter or longer time is advantageous. 

• We do not propose to include the 

objective ‘‘Provide access to patientspecific education resources upon 

request.’’ Providing patients with 

information and education that is 

relevant to their condition, actionable, 

culturally competent, and of the 

appropriate health literacy level is a 

critical component of patient 

engagement and empowerment. 

Unfortunately, there is currently a 

paucity of knowledge resources that are 

integrated within EHRs, that are widely 

available, and that meet these criteria, 

particularly in multiple languages. We 

intend to work with the policy 

committee, the National Library of 

Medicine (provider of Medline Plus), 

and experts in this area to ensure the 

feasibility of this measure in the future. 

• Provide clinical summaries for 

patients for each office visit. 

Changed from encounter to office 

visit. The HIT Policy Committee 

recommended the objective ‘‘Provide 

clinical summaries for patients for each 

encounter.’’ We believe this objective 

requires further clarification in order to 

make the distinction that it is not meant 

to apply to alternative encounters such 

as telephone or Web visits. As a result, 

we propose to revise this objective to 

‘‘Provide clinical summaries for patients 

for each office visit.’’ 

For eligible hospitals, we propose the 

following objectives in the stage 1 

criteria of meaningful use to further this 

care goal: 

• Provide patients with an electronic 

copy of their health information 

(including diagnostic test results, 

problem list, medication lists, allergies, 

discharge summary, procedures), upon 

request. Consistent with the HIT Policy 

Committee’s recommendations, we 

propose the following additional 

clarification of this objective. Electronic 

copies may be provided through a 

number of secure electronic methods 

(for example, Personal Health Record 

(PHR), patient portal, CD, USB drive). 

• Provide patients with an electronic 

copy of their discharge instructions and 

procedures at time of discharge, upon 

request. 

Also, consistent with the HIT Policy 

Committee recommendations, we 

propose the following additional 

clarification of this objective. Electronic 

access may be provided by a number of 

secure electronic methods (for example, 

PHR, patient portal, CD, USB drive). 

• We do not propose to include the 

objective ‘‘Provide access to patientspecific education resources upon 

request.’’ Providing patients with 

information and education that is 

relevant to their condition, actionable, 

culturally competent, and of the 

appropriate health literacy level is a 

critical component of patient 

engagement and empowerment. 

Unfortunately, there is currently a 

paucity of knowledge resources that are 

integrated within EHRs, that are widely 

available, and that meet these criteria, 

particularly in multiple languages. We 

intend to work with the policy 

committee, the National Library of 

Medicine (provider of Medline Plus), 

and experts in this area to ensure the 

feasibility of this measure in the future. 

The third health outcomes policy 

priority identified by the HIT Policy 

Committee is to improve care 

coordination. The HIT Policy 

Committee recommended the following 

care goals to address this priority: 

• Exchange meaningful clinical 

information among professional health 

care team. 

For EPs and eligible hospitals, we 

propose the following objectives in the 

stage 1 criteria of meaningful use to 

further this care goal: 

• Capability to exchange key clinical 

information (for example, problem list, 

medication list, allergies, and diagnostic 

test results), among providers of care 

and patient authorized entities 

electronically. 

By ‘‘diagnostic test results’’ we mean all 

data needed to diagnose and treat 

disease, such as blood tests, 

microbiology, urinalysis, pathology 

tests, radiology, cardiac imaging, 

nuclear medicine tests, and pulmonary 

function tests. Where available in 

structured electronic format (for 

example, drug and clinical lab data), we 

expect that this information would be 

exchanged in electronic format. 

However, where the information is 

available only in unstructured 

electronic formats (for example, free text 

and scanned images), we would allow 

the exchange of unstructured 

information. Patient authorized entities 

could include any individual or 

organization to which the patient has 

granted access to their clinical 

information. Examples would include 

an insurance company that covers the 

patient or a personal health record 

vendor identified by the patient. 

• Perform medication reconciliation 

at relevant encounters and each 

transition of care. 

We believe greater clarification is 

needed around the term ‘‘medication 

reconciliation’’. Public input received by 

the NCVHS Executive Subcommittee 

and the HIT Policy Committee and our 

prior experiences indicate confusion in 

the healthcare industry as to what 

constitutes medication reconciliation. 

We propose to describe medication 

reconciliation as the process of 

identifying the most accurate list of all 


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medications that the patient is taking, 

including name, dosage, frequency and 

route, by comparing the medical record 

to an external list of medications 

obtained from a patient, hospital or 

other provider. Also we would clarify 

transition of care as transfer of a patient 

from one clinical setting (inpatient, 

outpatient, physician office, home 

health, rehab, long-term care facility, 

etc.) to another or from one EP or 

eligible hospital (as defined by CCN) to 

another. A relevant encounter would be 

any encounter that the EP or eligible 

hospital judges performs a medication 

reconciliation due to new medication or 

long gaps in time between patient 

encounters or other reasons determined 

by the EP or eligible hospital. We 

encourage comments on whether our 

descriptions of ‘‘transition of care’’ and 

‘‘relevant encounter’’ are sufficiently 

clear and medically relevant. 

• Provide summary care record for 

each transition of care or referral. 

This objective was not explicitly 

included in the HIT Policy Committee’s 

recommended objectives. However, they 

did include a measure for the ‘‘percent 

of transitions in care for which 

summary care record is shared. We 

believe that in order for a measure to be 

relevant it must correspond to an 

objective in the definition of meaningful 

use. Therefore, we propose to add this 

objective in order to be able to include 

the recommended measure. 

Furthermore, we add referrals because 

the sharing of the patient care summary 

from one provider to another 

communicates important information 

that the patient may not have been able 

to provide, and can significantly 

improve the quality and safety of 

referral care, and reduce unnecessary 

and redundant testing. 

The fourth health outcomes policy 

priority identified by the HIT Policy 

Committee is improving population and 

public health. The HIT Policy 

Committee identified the following care 

goal to address this priority: 

• The patient’s health care team 

communicates with public health 

agencies. The goal as recommended by 

the HIT Policy Committee is 

‘‘communicate with public health 

agencies.’’ We found this goal to be 

somewhat ambiguous, as it does not 

specify who must communicate with 

public health agencies. We propose to 

specify ‘‘the patient’s health care team’’ 

as who would communicate with public 

health agencies. 

For EPs, we propose the following 

objectives in the stage 1 criteria of 

meaningful use to further this care goal: 

• Capability to submit electronic data 

to immunization registries and actual 

submission where possible and 

accepted. 

• Capability to provide electronic 

syndromic surveillance data to public 

health agencies and actual transmission 

according to applicable law and 

practice. 

For eligible hospitals, we propose the 

following objectives in the stage 1 

criteria of meaningful use to further this 

care goal: 

• Capability to submit electronic data 

to immunization registries and actual 

submission where required and 

accepted. 

• Capability to provide electronic 

submission of reportable (as required by 

state or local law) lab results to public 

health agencies and actual submission 

where it can be received. 

• Capability to provide electronic 

syndromic surveillance data to public 

health agencies and actual transmission 

according to applicable law and 

practice. 

The fifth health outcomes policy 

priority is to ensure adequate privacy 

and security protections for personal 

health information. The following care 

goals for meaningful use address this 

priority: 

• Ensure privacy and security 

protections for confidential information 

through operating policies, procedures, 

and technologies and compliance with 

applicable law. 

• Provide transparency of data 

sharing to patient. 

For EPs and eligible hospitals, we 

propose the following objective in the 

stage 1 criteria of meaningful use to 

further these care goals: 

• Protect electronic health 

information created or maintained by 

the certified EHR technology through 

the implementation of appropriate 

technical capabilities. 

This objective is different from the two 

objectives recommended by the HIT 

Policy Committee. Those objectives 

were ‘‘Compliance with HIPAA Privacy 

and Security Rules’’ and ‘‘Compliance 

with fair data sharing practices set forth 

in the Nationwide Privacy and Security 

Framework’’. While we presume that the 

HIT Policy Committee is referring to the 

certified EHR technology and its use 

being in compliance with the HIPAA 

Privacy and Security Rules, it is not 

explicit. Compliance with HIPAA 

privacy and security rules is required 

for all covered entities, regardless of 

whether they participate in the EHR 

incentive programs or not. Furthermore, 

compliance constitutes a wide range of 

activities, procedures, and 

infrastructure. We propose to rephrase 

the objective to ensure that meaningful 

use of the certified EHR technology 

supports compliance with the HIPAA 

Privacy and Security Rules and 

compliance with fair sharing data 

practices outlined in the Nationwide 

Privacy and Security Framework (http:// 

healthit.hhs.gov/portal/server.pt/ 

gateway/ 

PTARGS_0_10731_848088_0_0_18/ 

NationwidePS_Framework-5.pdf), but 

do not believe meaningful use of 

certified EHR technology is the 

appropriate regulatory tool to ensure 

such compliance with the HIPAA 

Privacy and Security Rules. 

(2) Health IT Functionality Measures 

In order for an EP or an eligible 

hospital to demonstrate that it meets 

these proposed objectives, we believe a 

measure is necessary for each objective. 

To provide structure to these measures, 

we group the measures into two 

categories: Health IT functionality 

measures and clinical quality measures. 

The health IT functionality measures are 

discussed in this section, while the 

clinical quality measures are discussed 

in section II.A.3 of this proposed rule. 

Without a measure for each objective, 

we believe that the definition of 

meaningful use becomes too ambiguous 

to fulfill its purpose. The use of 

measures also creates the flexibility to 

account for realities of current HIT 

products and infrastructure and the 

ability to account for future advances. 

The HIT Policy Committee did 

recommend some measures; however, 

they did not explicitly link each 

measure to an objective. Therefore, the 

proposed measures set forth below are 

a significant departure from the 

recommendation of the HIT Policy 

Committee. 

For each of these measures utilizing a 

percentage and the reporting of clinical 

quality measures, we propose at 

§ 495.10 that EPs and eligible hospitals 

submit numerator and denominator 

information to CMS. We invite comment 

on our burden estimates associated with 

reporting these measures (see section III. 

of this proposed rule). 

EP Objective: Use CPOE. 

EP Measure: CPOE is used for at least 

80 percent of all orders. 

CPOE is a capability included in the 

certification criteria for certified EHR 

technology (to be defined by the ONC in 

its upcoming interim final rule). We 

believe it is important to ensure that this 

capability is continuously utilized. 

Therefore, we believe in order to meet 

this objective it is not sufficient to 

demonstrate use of this capability once, 

but rather, an EP must utilize this 

capability as part of his or her daily 

work process. 


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We consider two methods of for 

measuring use of the CPOE 

functionality: the percentage of orders 

entered using CPOE or a count of orders 

entered using CPOE. To illustrate the 

difference, an example of measuring 

percentage use of the CPOE 

functionality would be 80 percent of all 

of an EP’s orders were entered using the 

CPOE functionality of certified EHR 

technology during the EHR reporting 

period. An example of counting orders 

using the CPOE functionality would be 

requiring that the EP entered at least 100 

orders using CPOE during the EHR 

reporting period. A count of orders 

entered using CPOE would be easier to 

document than a percentage of orders, 

as an EP would only have to count the 

number of times he or she entered an 

order using CPOE, as opposed to 

tabulating both when he or she did so 

and when he or she failed to do so. 

However, a count does not enable 

variations between EPs to be accounted 

for. For instance, a count-based 

measurement would not take into 

consideration differences in patient 

volume among EPs, which may be a 

concern to those EPs with a low patient 

volume. A percentage-based 

measurement would account for 

variations in volume and would allow 

for a more revealing measurement of an 

EP’s individual performance in meeting 

the objective. Therefore, we are 

proposing that an EP’s successful 

completion of this objective be based on 

a percentage. 

To calculate the percentage, CMS and 

ONC have worked together to define the 

following: 

• The numerator. 

• The denominator. 

• The required percentage for 

demonstrating successful attainment of 

an objective. 

The numerator for this objective is 

orders issued by the EP entered using 

the CPOE functionality of certified EHR 

technology during the EHR reporting 

period. The denominator for this 

objective is all orders issued by the EP 

during the EHR reporting period. These 

are orders issued by an EP for both their 

Medicare/Medicaid population and all 

other patients. We believe it is unlikely 

that an EP would use one record 

keeping system for one patient 

population and another system for 

another patient population at one 

location. Requiring reporting differences 

based on payers would actually increase 

the burden of meeting meaningful use. 

We are concerned about the application 

of this denominator for EPs who see 

patients in multiple practices or 

multiple locations. If an EP does not 

have certified EHR technology available 

at each location/practice where they see 

patients it could become impossible to 

reach the thresholds set for measuring 

the objectives. We do not seek to 

exclude EPs who meaningfully use 

certified EHR technology when it is 

available because they also provide care 

in another practice where certified EHR 

technology is not available. Therefore 

we are proposing all measures be 

limited to actions taken at practices/ 

locations equipped with certified EHR 

technology. A practice is equipped if 

certified EHR technology is available at 

the beginning of the EHR reporting 

period for a given location. Equipped 

does not mean the certified EHR 

technology is functioning on any given 

day in the EHR reporting period. 

Allowances for downtime and other 

technical issues with certified EHR 

technology are made in the 

establishment of the measure 

thresholds. We are concerned that 

seeing a patient without certified EHR 

technology available does not advance 

the health care policy priorities of the 

definition of meaningful use. We are 

also concerned about possible 

inequality between EPs receiving the 

same incentive, but using certified EHR 

technology for different proportions of 

their patient population. We believe that 

an EP would have the greatest control of 

whether certified EHR technology is 

available in the practice in which they 

see the greatest proportion of their 

patients. We are proposing that to be a 

meaningful EHR user an EP must have 

50 percent or more of their patient 

encounters during the EHR reporting 

period at a practice/location or 

practices/locations equipped with 

certified EHR technology. An EP for 

who does not conduct 50 percent of 

their patient encounters in any one 

practice/location would have to meet 

the 50 percent threshold through a 

combination of practices/locations. 

While control is less assured in this 

situation, CMS still needs to advance 

the health care priorities of the 

definition of meaningful use and 

provide some level of equity. We invite 

comments as to whether this 

denominator is feasible to obtain for 

EPs, whether this exclusion (the 

denominator for patients seen when 

certified EHR technology is not 

available) is appropriate, whether a 

minimum threshold is necessary and 

whether 50 percent is an appropriate 

threshold. We note that in evaluating 

the 50 percent threshold, our proposal 

is to review all locations/organizations 

at which an EP practices. So, for 

example, if the EP practices at both an 

FQHC and within his or her individual 

practice, we would include in our 

review both of these locations. 

As this objective relies solely on a 

capability included as part of certified 

EHR technology and is not, for purposes 

of Stage 1 criteria, reliant on the 

electronic exchange of information, we 

believe it would be appropriate to set a 

high percentage threshold. We therefore 

propose to set the percentage required 

for successful demonstration at 80 

percent. Though full compliance (that 

is, 100 percent) is the ultimate goal, 80 

percent seemed an appropriate standard 

for Stage 1 meaningful use as it creates 

a high standard, while still allowing 

room for technical hindrances and other 

barriers to reaching full compliance. 

For other objectives that are reliant on 

the electronic exchange of information, 

we are cognizant that in most areas of 

the country, the infrastructure necessary 

to support such exchange is not yet 

currently available. We anticipate 

raising the threshold for these objectives 

in future definitions of meaningful use 

as the capabilities of HIT infrastructure 

increases. The intent and policy goal 

with raising this threshold is to ensure 

that meaningful use encourages patientcentric, interoperable health 

information exchange across provider 

organizations regardless of provider’s 

business affiliation or EHR platform. 

Eligible Hospital Objective: Use of 

CPOE for orders (any type) directly 

entered by authorizing provider (for 

example, MD, DO, RN, PA, NP). 

Eligible Hospital Measure: CPOE is 

used for at least 10 percent of all orders. 

To calculate the percentage, CMS and 

ONC have worked together to define the 

following: 

• The numerator. 

• The denominator. 

• The required percentage for 

demonstrating successful attainment of 

an objective. 

The numerator for this objective is 

orders entered in an inpatient facility/ 

department that falls under the eligible 

hospital’s CCN and by an authorized 

provider using CPOE functionality of 

certified EHR technology during the 

EHR reporting period. Inpatient facility/ 

department is defined by the place of 

service code 21. Further discussion 

about POS 21 is available at section 

II.A.6. of this proposed rule and at 

http://www.cms.hhs.gov/ 

PlaceofServiceCodes/. The denominator 

for this objective is all orders entered in 

an inpatient facility/department that 

falls under the eligible hospital’s CCN 

and issued by the authorized providers 

in the hospital during the EHR reporting 

period. These are orders are those 

issued are for both their Medicare/ 

Medicaid population and all other 


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patients. The rationale for the 

establishment of this measure is 

identical to that of the EP, except in the 

establishment of the threshold 

percentage. In considering CPOE, the 

HIT Policy Committee did specify this 

lower percentage (10 percent) for 

eligible hospitals. Public input 

described previously in this proposed 

rule indicated that CPOE is traditionally 

one of the last capabilities implemented 

at hospitals. Also, many hospitals 

choose to implement one department at 

a time. Detailed comments can be found 

at http://healthit.hhs.gov/ 

meaningfuluse. For these reasons the 

HIT Policy Committee recommended 

this lower threshold. We agree with the 

lower threshold for the same reasons. 

EP/Eligible Hospital Objective: 

Implement drug-drug, drug-allergy, 

drug-formulary checks. 

EP/Eligible Hospital Measure: The EP/ 

eligible hospital has enabled this 

functionality. 

The capability of conducting 

automated drug-drug, drug-allergy, and 

drug-formulary checks is included in 

the certification criteria for certified 

EHR technology (to be determined by 

ONC in its upcoming interim final rule). 

This automated check provides 

information to advise the EP or eligible 

hospital’s decisions in prescribing drugs 

to a patient. The only action taken by 

the EP or eligible hospital is to consider 

this information. Many current EHR 

technologies have the option to disable 

these checks and the certification 

process does not require the removal of 

this option. Therefore, in order to meet 

this objective, an EP or eligible hospital 

would be required to enable this 

functionality. While this does not 

ensure that an EP or an eligible hospital 

is considering the information provided, 

it does ensure that the information is 

available. 

EP/Eligible Hospital Objective: 

Maintain an up-to-date problem list of 

current and active diagnoses based on 

ICD–9–CM or SNOMED CT®. 

EP/Eligible Hospital Measure: At least 

80 percent of all unique patients seen by 

the EP or admitted to the eligible 

hospital have at least one entry or an 

indication of none recorded as 

structured data. 

The capability to maintain an up-todate problem list of current and active 

diagnoses based on ICD–9–CM or 

SNOMED CT® is included in the 

certification criteria for certified EHR 

technology (to be defined by ONC in its 

upcoming interim final rule). 

Meaningful use seeks to ensure that 

those capabilities are utilized. 

Therefore, we believe in order to meet 

this objective it is not sufficient to 

demonstrate this capability once, but 

rather to comply with the objective, an 

EP or an eligible hospital must utilize 

this capability as part of the daily work 

process. 

As discussed under CPOE, we will 

use a percentage. To calculate the 

percentage, CMS and ONC have worked 

together to define the following for this 

objective: 

• The numerator. 

• The denominator. 

• The required percentage for 

demonstrating successful attainment of 

an objective. 

The numerator for this objective is the 

number of unique patients seen by an 

EP or admitted to an inpatient facility/ 

department (POS 21) that falls under the 

eligible hospital’s CCN during the EHR 

reporting period that have at least one 

ICD–9–CM or SNOMED CT® -coded 

entry or an indication of none in the 

problem list. A unique patient means 

that even if a patient is seen multiple 

times during the EHR reporting period 

they are only counted once. The reason 

we propose to base the measure on 

unique patients as opposed to every 

patient encounter, is that a problem list 

would not necessarily have to be 

updated at every visit. The denominator 

for this objective is the number of 

unique patients seen by the EP or 

admitted to an inpatient facility/ 

department (POS 21) that falls under the 

eligible hospital’s CCN during the EHR 

reporting period. As this objective relies 

solely on a capability included as part 

of certified EHR technology and is not 

reliant on the electronic exchange of 

information, we propose to set the 

percentage required for successful 

demonstration at 80 percent. The 

reasoning for this is the same as under 

CPOE for EPs. Though full compliance 

(that is, 100 percent) is the ultimate 

goal, 80 percent seemed an appropriate 

standard for Stage 1 meaningful use as 

it creates a high standard, while still 

allowing room for technical hindrances 

and other barriers to reaching full 

compliance. 

EP Objective: Generate and transmit 

permissible prescriptions electronically 

(eRx). 

EP Measure: At least 75 percent of all 

permissible prescriptions written by the 

EP are transmitted electronically using 

certified EHR technology. 

The capability to generate and 

transmit permissible prescriptions 

electronically is included in the 

certification criteria for certified EHR 

technology (to be defined by ONC in its 

upcoming interim final rule). 

Meaningful use seeks to ensure that 

those capabilities are utilized. 

Therefore, we believe in order to meet 

this objective it is not sufficient to 

demonstrate this capability once, but 

rather to comply with the objective, an 

EP must utilize this capability as part of 

the daily work process. 

As discussed under CPOE, we will 

use a percentage. To calculate the 

percentage, CMS and ONC have worked 

together to define the following for this 

objective: 

• The numerator. 

• The denominator. 

• The required percentage for 

demonstrating successful attainment of 

an objective. 

The numerator for this objective is the 

number of prescriptions for other than 

controlled substances generated and 

transmitted electronically during the 

EHR reporting period. The denominator 

for this objective is the number of 

prescriptions written for other than 

controlled substances during the EHR 

reporting period. While this measure 

does rely on the electronic exchange of 

information based on the public input 

previously discussed and our own 

experiences with e-Rx programs, we 

believe this is the most robust electronic 

exchange currently occurring and 

propose 75 percent as an achievable 

threshold for the Stage 1 criteria of 

meaningful use. Though full compliance 

(that is, 100 percent) is the ultimate 

goal, 75 percent seemed an appropriate 

standard for Stage 1 meaningful use as 

it creates a high standard, while still 

allowing room for technical hindrances 

and other barriers to reaching full 

compliance. 

EP/Eligible Hospital Objective: 

Maintain active medication list. 

EP/Eligible Hospital Measure: At least 

80 percent of all unique patients seen by 

the EP or admitted by the eligible 

hospital have at least one entry (or an 

indication of ‘‘none’’ if the patient is not 

currently prescribed any medication) 

recorded as structured data. 

The capability to maintain an active 

medication list is included in the 

certification standards for certified EHR 

technology (to be defined by ONC in its 

upcoming interim final rule). 

Meaningful use seeks to ensure that 

those capabilities are utilized. 

Therefore, we believe in order to meet 

this objective it is not sufficient to 

demonstrate this capability once, but 

rather to comply with the objective, an 

EP or eligible hospital must utilize this 

capability as part of the daily work 

process. 

As discussed under CPOE, we will 

use a percentage. To calculate the 

percentage, CMS and ONC have worked 

together to define the following for this 

objective: 

• The numerator. 


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• The denominator. 

• The required percentage for 

demonstrating successful attainment of 

an objective. 

The numerator for this objective is the 

number of unique patients seen by the 

EP or admitted to an inpatient facility/ 

department (POS 21) that falls under the 

eligible hospital’s CCN during the EHR 

reporting period who have at least one 

entry (or an indication of ‘‘none’’ if the 

patient is not currently prescribed any 

medication) recorded as structured data 

in their medication list. A unique 

patient is discussed under the objective 

of maintaining an up-to-date problem 

list. The denominator for this objective 

is the number of unique patients seen by 

the EP or admitted to an inpatient 

facility/department (POS 21) that falls 

under the eligible hospital’s CCN during 

the EHR reporting period. As this 

objective relies solely on a capability 

included as part of certified EHR 

technology and is not reliant on the 

electronic exchange of information, we 

propose to set the percentage required 

for successful demonstration at 80 

percent. The reasoning for this is the 

same as under CPOE for EPs. Though 

full compliance (that is, 100 percent) is 

the ultimate goal, 80 percent seemed an 

appropriate standard for Stage 1 

meaningful use as it creates a high 

standard, while still allowing room for 

technical hindrances and other barriers 

to reaching full compliance. 

EP/Eligible Hospital Objective: 

Maintain active medication allergy list. 

EP/Eligible Hospital Measure: At least 

80 percent of all unique patients seen by 

the EP or admitted to the eligible 

hospital have at least one entry (or an 

indication of ‘‘none’’ if the patient has no 

medication allergies) recorded as 

structured data. 

The capability to maintain an active 

medication allergy list using structured 

data is included in the certification 

standards for certified EHR technology 

(to be defined by ONC in its upcoming 

interim final rule). Meaningful use seeks 

to ensure that those capabilities are 

utilized. Therefore, we believe in order 

to meet this objective it is not sufficient 

to demonstrate this capability once, but 

rather to comply with the objective, an 

EP or eligible hospital must utilize this 

capability as part of the daily work 

process. 

As discussed under CPOE, we will 

use a percentage. To calculate the 

percentage, CMS and ONC have worked 

together to define the following for this 

objective: 

• The numerator. 

• The denominator. 

• The required percentage for 

demonstrating successful attainment of 

an objective. 

The numerator for this objective is the 

number of unique patients seen by the 

EP or admitted to an inpatient facility/ 

department (POS 21) that falls under the 

eligible hospital’s CCN during the EHR 

reporting period who have at least one 

entry (or an indication of ‘‘none’’) 

recorded as structured data in their 

medication allergy list. A unique patient 

is discussed under the objective of 

maintaining an up-to-date problem list. 

The denominator for this objective is the 

number of unique patients seen by the 

EP or admitted to an inpatient facility/ 

department (POS 21) that falls under the 

eligible hospital’s CCN during the EHR 

reporting period. As this objective relies 

solely on a capability included as part 

of certified EHR technology and is not 

reliant on the electronic exchange of 

information, we propose to set the 

percentage required for successful 

demonstration at 80 percent. The 

reasoning for this is the same as under 

CPOE for EPs. Though full compliance 

(that is, 100 percent) is the ultimate 

goal, 80 percent seemed an appropriate 

standard for Stage 1 meaningful use as 

it creates a high standard, while still 

allowing room for technical hindrances 

and other barriers to reaching full 

compliance. 

EP/Eligible Hospital Objective: Record 

demographics. 

EP/Eligible Hospital Measure: At least 

80 percent of all unique patients seen by 

the EP or admitted to the eligible 

hospital have demographics recorded as 

structured data. 

The capability to record 

demographics as structured data is 

included in the certification standards 

for certified EHR technology (to be 

defined by ONC in its upcoming interim 

final rule). Meaningful use seeks to 

ensure that those capabilities are 

utilized. Therefore, we believe in order 

to meet this objective it is not sufficient 

to demonstrate this capability once, but 

rather to comply with the objective, an 

EP or eligible hospital must utilize this 

capability as part of the daily work 

process. 

As discussed under CPOE, we will 

use a percentage. To calculate the 

percentage, CMS and ONC have worked 

together to define the following for this 

objective: 

• The numerator. 

• The denominator. 

• The required percentage for 

demonstrating successful attainment of 

an objective. 

The numerator for this objective is the 

number of unique patients seen by the 

EP or admitted to an inpatient facility/ 

department (POS 21) that falls under the 

eligible hospital’s CCN during the EHR 

reporting period who have all required 

demographic elements (preferred 

language, insurance type, gender, race, 

and ethnicity, date of birth and, for 

hospitals, date and cause of death in the 

case of mortality) recorded as structured 

data in their electronic record. A unique 

patient is discussed under the objective 

of maintaining an up-to-date problem 

list. The denominator for this objective 

is the number of unique patients seen by 

the EP or admitted to an inpatient 

facility/department (POS 21) that falls 

under the eligible hospital’s CCN during 

the EHR reporting period. As this 

objective relies solely on a capability 

included as part of certified EHR 

technology and is not, for purposes of 

Stage 1 criteria, reliant on the electronic 

exchange of information, we propose to 

set the percentage required for 

successful demonstration at 80 percent. 

The reasoning for this is the same as 

under CPOE for EPs. 

EP/Eligible Hospital Objective: Record 

and chart changes in vital signs. 

EP/Eligible Hospital Measure: For at 

least 80 percent of all unique patients 

age 2 and over seen by the EP or 

admitted to the eligible hospital, record 

blood pressure and BMI; additionally, 

plot growth chart for children age 2 to 

20. 

The capability to record vital signs is 

included in the certification standards 

for certified EHR technology (to be 

defined by ONC in its upcoming interim 

final rule). Meaningful use seeks to 

ensure that those capabilities are 

utilized. Therefore, we believe in order 

to meet this objective it is not sufficient 

to demonstrate this capability once, but 

rather to comply with the objective, an 

EP or eligible hospital must utilize this 

capability as part of the daily work 

process. 

As discussed under CPOE, we will 

use a percentage. To calculate the 

percentage, CMS and ONC have worked 

together to define the following for this 

objective: 

• The numerator. 

• The denominator. 

• The required percentage for 

demonstrating successful attainment of 

an objective. 

The numerator for this objective is the 

number of unique patients age 2 and 

over seen by the EP or admitted to an 

inpatient facility/department (POS 21) 

that falls under the eligible hospital’s 

CCN during the EHR reporting period 

who have a record of their blood 

pressure, and BMI (growth chart for 

children 2–20) in their record. A unique 

patient is discussed under the objective 

of maintaining an up-to-date problem 


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list. The denominator for this objective 

is the number of unique patients age 2 

or over seen by the EP or admitted to an 

inpatient facility/department (POS 21) 

that falls under the eligible hospital’s 

CCN during the EHR reporting period. 

As this objective relies solely on a 

capability included as part of certified 

EHR technology and is not, for purposes 

of Stage 1 criteria, reliant on the 

electronic exchange of information, we 

propose to set the percentage required 

for successful demonstration at 80 

percent. The reasoning for this is the 

same as under CPOE for EPs. Though 

full compliance (that is, 100 percent) is 

the ultimate goal, 80 percent seemed an 

appropriate standard for Stage 1 

meaningful use as it creates a high 

standard, while still allowing room for 

technical hindrances and other barriers 

to reaching full compliance. 

EP/Eligible Hospital Objective: Record 

smoking status for patients 13 years old 

or older. 

EP/Eligible Hospital Measure: At least 

80 percent of all unique patients 13 

years old or older seen by the EP or 

admitted to the eligible hospital have 

‘‘smoking status’’ recorded. 

The capability to record smoking 

status is included in the certification 

standards for certified EHR technology 

(to be defined by ONC in its upcoming 

interim final rule). Meaningful use seeks 

to ensure that those capabilities are 

utilized. Therefore, we believe in order 

to meet this objective it is not sufficient 

to demonstrate this capability once, but 

rather to comply with the objective, an 

EP or eligible hospital must utilize this 

capability as part of the daily work 

process. 

As discussed under CPOE, we will 

use a percentage. To calculate the 

percentage, CMS and ONC have worked 

together to define the following for this 

objective: 

• The numerator. 

• The denominator. 

• The required percentage for 

demonstrating successful attainment of 

an objective. 

The numerator for this objective is the 

number of unique patients age 13 or 

older seen by the EP or admitted to an 

inpatient facility/department (POS 21) 

that falls under the eligible hospital’s 

CCN during the EHR reporting period 

who have a record of their smoking 

status. A unique patient is discussed 

under the objective of maintaining an 

up-to-date problem list. The 

denominator for this objective is the 

number of unique patients age 13 or 

older seen by the EP or admitted to an 

inpatient facility/department (POS 21) 

that falls under the eligible hospital’s 

CCN during the EHR reporting period. 

As this objective relies solely on a 

capability included as part of certified 

EHR technology and is not, for purposes 

of Stage 1 criteria, reliant on the 

electronic exchange of information, we 

propose to set the percentage required 

for successful demonstration at 80 

percent. The reasoning for this is the 

same as under CPOE by the EP. Though 

full compliance (that is, 100 percent) is 

the ultimate goal, 80 percent seemed an 

appropriate standard for Stage 1 

meaningful use as it creates a high 

standard, while still allowing room for 

technical hindrances and other barriers 

to reaching full compliance. 

EP/Eligible Hospital Objective: 

Incorporate clinical lab-test results into 

EHR as structured data. 

EP/Eligible Hospital Measure: At least 

50 percent of all clinical lab tests results 

ordered by the EP or by an authorized 

provider of the eligible hospital during 

the EHR reporting period whose results 

are in either in a positive/negative or 

numerical format are incorporated in 

certified EHR technology as structured 

data. 

The capability to incorporate lab-test 

results is included in the certification 

standards for certified EHR technology 

(to be defined by ONC in its upcoming 

interim final rule). Meaningful use seeks 

to ensure that those capabilities are 

utilized. Therefore, we believe in order 

to meet this objective it is not sufficient 

to demonstrate this capability once, but 

rather to comply with the objective, an 

EP or eligible hospital must utilize this 

capability as part of the daily work 

process. 

As discussed under CPOE, we will 

use a percentage. To calculate the 

percentage, CMS and ONC have worked 

together to define the following for this 

objective: 

• The numerator. 

• The denominator. 

• The required percentage for 

demonstrating successful attainment of 

an objective. 

The numerator for this objective is the 

number of lab tests ordered during the 

EHR reporting period by the EP or 

authorized providers of the eligible 

hospital for patients admitted to an 

inpatient facility/department (POS 21) 

that falls under the eligible hospital’s 

CCN whose results are expressed in a 

positive or negative affirmation or as a 

number and are incorporated as 

structured data into certified EHR 

technology. The denominator for this 

objective is the number of lab tests 

ordered during the EHR reporting 

period by the EP or authorized 

providers of the eligible hospital for 

patients admitted to an inpatient 

facility/department (POS 21) that falls 

under the eligible hospital’s CCN whose 

results are expressed in a positive or 

negative affirmation or as a number. 

This objective is reliant on the 

electronic exchange of information. We 

are cognizant that in most areas of the 

country, the infrastructure necessary to 

support such exchange is still being 

developed. Therefore, we believe that 80 

percent is too high a threshold for the 

Stage 1 criteria of meaningful use. We 

propose 50 percent as the threshold 

based on our discussions with EHR 

vendors, current EHR users, and 

laboratories. We invite comment on 

whether this 50 percent is feasible for 

the Stage 1 criteria of meaningful use. 

We anticipate raising the threshold for 

this objective in future stages of the 

criteria of meaningful use as the 

capabilities of HIT infrastructure 

increases. 

EP/Eligible Hospital Objective: 

Generate lists of patients by specific 

conditions to use for quality 

improvement, reduction of disparities, 

research, and outreach. 

EP/Eligible Hospital Measure: 

Generate at least one report listing 

patients of the EP or eligible hospital 

with a specific condition. 

The capability to generate lists of 

patients by specific conditions is 

included in the certification criteria for 

certified EHR technology (to be defined 

by ONC in its upcoming interim final 

rule). Meaningful use seeks to ensure 

that those capabilities are utilized. 

Therefore, we believe in order to meet 

this objective an EP or eligible hospital 

should utilize this capability at least 

once during the EHR reporting period so 

this information would be available to 

them for their use. An EP or eligible 

hospital is best positioned to determine 

which reports are most useful to their 

care efforts. Therefore, we do not 

propose to direct certain reports be 

created, but rather to require EPs and 

hospitals to attest to the ability of the EP 

or eligible hospital to do so and to attest 

that they have actually done so at least 

once. 

EP Objective: Report ambulatory 

quality measures to CMS or the States. 

EP Measure: For 2011, an EP would 

provide the aggregate numerator and 

denominator through attestation as 

discussed in section II.A.3 of this 

proposed rule. For 2012, an EP would 

electronically submit the measures are 

discussed in section II.A.3. of this 

proposed rule. 

Eligible Hospital Objective: Report 

hospital quality measures to CMS or the 

States. 

Eligible Hospital Measure: For 2011, 

an eligible hospital would provide the 

aggregate numerator and denominator 


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through attestation as discussed in 

section II.A.3 of this proposed rule. For 

2012, an eligible hospital would 

electronically submit the measures are 

discussed in section II.A.3. of this 

proposed rule. 

EP Objective: Send reminders to 

patients per patient preference for 

preventive/follow-up care. 

EP Measure: Reminder sent to at least 

50 percent of all unique patients seen by 

the EP or admitted to the eligible 

hospital that are 50 and over. 

The capability to generate reminders 

for preventive/follow-up care is 

included in the certification standards 

for certified EHR technology (to be 

defined by ONC in its upcoming interim 

final rule). Meaningful use seeks to 

ensure that those capabilities are 

utilized. Therefore, we believe in order 

to meet this objective it is not sufficient 

to demonstrate this capability once, but 

rather to comply with the objective an 

EP must utilize this capability as part of 

the daily work process. 

As discussed under CPOE, we will 

use a percentage. To calculate the 

percentage, CMS and ONC have worked 

together to define the following for this 

objective: 

• The numerator. 

• The denominator. 

• The required percentage for 

demonstrating successful attainment of 

an objective. 

The numerator for this objective is the 

number of unique patients age 50 or 

over seen by the EP during the EHR 

reporting period who are provided 

reminders. A unique patient is 

discussed under the objective of 

maintaining an up-to-date problem list. 

We propose to limit the patient 

population for this measure to patients 

age 50 or over as they are more likely 

than the norm to require additional 

preventive or follow-up care. The 

denominator for this objective is the 

number of unique patients seen by the 

EP during the EHR reporting period. We 

propose to set the percentage required 

for successful demonstration at 50 

percent. While the objective relies on a 

capability included as part of certified 

EHR technology there is still the added 

component of determining patient 

preference. Also while we believe we 

greatly increase the likelihood that 

additional preventive or follow up care 

will be required by limiting the patient 

population to age 50 or over, there may 

still be instances where there is not an 

additional preventive or follow up care 

step needed. For these reasons, we 

propose the lower threshold of 50 

percent. We specifically invite 

comments on whether limiting the 

patient population by age is the best 

approach. 

EP/Eligible Hospital Objective: 

Implement five clinical decision 

support rules relevant to specialty or 

high clinical priority, including for 

diagnostic test ordering, along with the 

ability to track compliance with those 

rules. 

EP/Eligible Hospital Measure: 

Implement five clinical decision 

support rules relevant to the clinical 

quality metrics the EP/Eligible Hospital 

is responsible for as described further in 

section II.A.3. 

The capability to provide clinical 

decision support is included in the 

certification standards for certified EHR 

technology (to be defined by ONC in its 

upcoming interim final rule). Clinical 

decision support at the point of care is 

a critical aspect of improving quality, 

safety, and efficiency. Research has 

shown that decision support must be 

targeted and actionable to be effective, 

and that ‘‘alert fatigue’’ must be avoided. 

Establishing decision supports for a 

small set of high priority conditions, 

ideally linked to quality measures being 

reported, is feasible and desirable. 

Meaningful use seeks to ensure that 

those capabilities are utilized. 

Therefore, we believe in order to meet 

this objective an EP or eligible hospital 

should implement five clinical decision 

support rules relevant to the clinical 

quality metrics described in section 

II.A.3 before the end of the EHR 

reporting period and attest to that 

implementation. 

EP/Eligible Hospital Objective: Check 

insurance eligibility electronically from 

public and private payers. 

EP/Eligible Hospital Measure: 

Insurance eligibility checked 

electronically for at least 80 percent of 

all unique patients seen by the EP or 

admitted to an eligible hospital. 

The capability to check insurance 

eligibility electronically is included in 

the certification criteria for certified 

EHR technology (to be defined by ONC 

in its upcoming interim final rule). 

Meaningful use seeks to ensure that 

those capabilities are utilized. 

Therefore, we believe in order to meet 

this objective it is not sufficient to 

demonstrate this capability once, but 

rather to comply with the objective an 

EP or eligible hospital must utilize this 

capability as part of the daily work 

process. 

As discussed under CPOE, we will 

use a percentage. To calculate the 

percentage, CMS and ONC have worked 

together to define the following for this 

objective: 

• The numerator. 

• The denominator. 

• The required percentage for 

demonstrating successful attainment of 

an objective. 

The numerator for this objective is the 

number of unique patients seen by the 

EP or admitted to an inpatient facility/ 

department (POS 21) that falls under the 

eligible hospital’s CCN during the EHR 

reporting period whose insurance 

eligibility is checked electronically. A 

unique patient is discussed under the 

objective of maintaining an up-to-date 

problem list. The denominator for this 

objective is the number of unique 

patients seen by the EP or admitted to 

an inpatient facility/department (POS 

21) that falls under the eligible 

hospital’s CCN during the EHR 

reporting period whose insurer allows 

for the electronic verification of 

eligibility. While this objective does rely 

on the electronic exchange of 

information this particular exchange is 

an established HIPAA standard 

transaction, therefore we propose to set 

the percentage required for successful 

demonstration at 80 percent. The 

additional reasoning for this is the same 

as under CPOE for EPs. Though full 

compliance (that is, 100 percent) is the 

ultimate goal, 80 percent seemed an 

appropriate standard for Stage 1 

meaningful use as it creates a high 

standard, while still allowing room for 

technical hindrances and other barriers 

to reaching full compliance. 

EP/Eligible Hospital Objective: Submit 

claims electronically to public and 

private payers. 

EP/Eligible Hospital Measure: At least 

80 percent of all claims filed 

electronically by the EP or the eligible 

hospital. 

The capability to submit claims 

electronically to public and private 

payers is included in the certification 

criteria for certified EHR technology (to 

be defined by ONC in its upcoming 

interim final rule). Meaningful use seeks 

to ensure that those capabilities are 

utilized. Therefore, we believe in order 

to meet this objective it is not sufficient 

to demonstrate this capability once, but 

rather to comply with the objective, an 

EP or eligible hospital must utilize this 

capability as part of the daily work 

process. 

As discussed under CPOE, we will 

use a percentage. To calculate the 

percentage, CMS and ONC have worked 

together to define the following for this 

objective: 

• The numerator. 

• The denominator. 

• The required percentage for 

demonstrating successful attainment of 

an objective. 

The numerator for this objective is the 

number of claims submitted 


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1864 Federal Register / Vol. 75, No. 8 / Wednesday, January 13, 2010 / Proposed Rules 

electronically using certified EHR 

technology for patients seen by the EP 

or admitted to an inpatient facility/ 

department (POS 21) that falls under the 

eligible hospital’s CCN during the EHR 

reporting period. The denominator for 

this objective is the number of claims 

filed seen by the EP or admitted to an 

inpatient facility/department (POS 21) 

that falls under the eligible hospital’s 

CCN during the EHR reporting period. 

While this objective relies on the 

electronic exchange of information, 

nearly all public and private payers 

accept electronic claims. Given the 

advance state of this aspect of electronic 

exchange of information, we propose to 

set the percentage required for 

successful demonstration at 80 percent. 

The additional reasoning for this is the 

same as under CPOE for EPs. Though 

full compliance (that is, 100 percent) is 

the ultimate goal, 80 percent seemed an 

appropriate standard for Stage 1 

meaningful use as it creates a high 

standard, while still allowing room for 

technical hindrances and other barriers 

to reaching full compliance. 

EP Objective: Provide patients with an 

electronic copy of their health 

information (including diagnostic test 

results, problem list, medication lists, 

and allergies) upon request. 

Eligible Hospital Objective: Provide 

patients with an electronic copy of their 

health information (including diagnostic 

test results, problem list, medication 

lists, allergies, discharge summary, and 

procedures), upon request. 

EP/Eligible Hospital Measure: At least 

80 percent of all patients who request an 

electronic copy of their health 

information are provided it within 48 

hours. 

The capability to create an electronic 

copy of a patient’s health information is 

included in the certification criteria for 

certified EHR technology (to be defined 

by ONC in its upcoming interim final 

rule). Meaningful use seeks to ensure 

that those capabilities are utilized. 

Therefore, we believe in order to meet 

this objective it is not sufficient to 

demonstrate this capability once, but 

rather to comply with the objective, an 

EP or eligible hospital must utilize this 

capability as part of the daily work 

process. In addition, all patients have a 

right under ARRA to an electronic copy 

of their health information. This 

measure seeks to ensure that this 

requirement is met in a timely fashion. 

Providing patients with an electronic 

copy of their health information 

demonstrates one of the many benefits 

health information technology can 

provide and we believe that it is an 

important part of becoming a 

meaningful EHR user. We also believe 

that certified EHR technology will 

provide EPs and eligible hospitals more 

efficient means of providing copies of 

health information to patients which is 

why we have proposed that a request for 

an electronic copy be provided to the 

patient within 48 hours. 

As discussed under CPOE, we will 

use a percentage. To calculate the 

percentage, CMS and ONC have worked 

together to define the following for this 

objective: 

• The numerator. 

• The denominator. 

• The required percentage for 

demonstrating successful attainment of 

an objective. 

The numerator for this objective is the 

number of patients seen by the EP or 

admitted to an inpatient facility/ 

department (POS 21) that falls under the 

eligible hospital’s CCN during the EHR 

reporting period that request an 

electronic copy of their health 

information and receive it within 48 

hours. The denominator for this 

objective is the number of patients seen 

by the EP or admitted to an inpatient 

facility/department (POS 21) that falls 

under the eligible hospital’s CCN who 

request an electronic copy of their 

health information during the EHR 

reporting period. As this objective relies 

solely on a capability included as part 

of certified EHR technology and is not, 

for purposes of Stage 1 criteria, reliant 

on the electronic exchange of structured 

information between health care 

providers, we propose to set the 

percentage required for successful 

demonstration at 80 percent. The 

reasoning for this is the same as under 

CPOE for EPs. Though full compliance 

(that is, 100 percent) is the ultimate 

goal, 80 percent seemed an appropriate 

standard for Stage 1 meaningful use as 

it creates a high standard, while still 

allowing room for technical hindrances 

and other barriers to reaching full 

compliance. 

Eligible Hospital Objective: Provide 

patients with an electronic copy of their 

discharge instructions and procedures at 

time of discharge, upon request. 

Eligible Hospital Measure: At least 80 

percent of all patients who are 

discharged from an eligible hospital and 

who request an electronic copy of their 

discharge instructions and procedures 

are provided it. 

The capability to produce an 

electronic copy of discharge instructions 

and procedures is included in the 

certification criteria for certified EHR 

technology (to be defined by ONC in its 

upcoming interim final rule). 

Meaningful use seeks to ensure that 

those capabilities are utilized. 

Therefore, we believe in order to meet 

this objective it is not sufficient to 

demonstrate this capability once, but 

rather to comply with the objective an 

eligible hospital must utilize this 

capability as part of the daily work 

process. 

As discussed under CPOE, we will 

use a percentage. To calculate the 

percentage, CMS and ONC have worked 

together to define the following for this 

objective: 

• The numerator. 

• The denominator. 

• The required percentage for 

demonstrating successful attainment of 

an objective. 

The numerator for this objective is the 

number of patients discharged from an 

inpatient facility/department (POS 21) 

that falls under the eligible hospital’s 

CCN during the EHR reporting period 

that request an electronic copy of their 

discharge instructions and procedures 

and receive it. The denominator for this 

objective is the number of patients 

discharged from an inpatient facility/ 

department (POS 21) that falls under the 

eligible hospital’s CCN who request an 

electronic copy of their discharge 

instructions and procedures during the 

EHR reporting period. As this objective 

relies solely on a capability included as 

part of certified EHR technology and is 

not, for purposes of Stage 1 criteria, 

reliant on the electronic exchange 

between health care providers of 

structured information, we propose to 

set the percentage required for 

successful demonstration at 80 percent. 

The reasoning for this is the same as 

under CPOE for EPs. Though full 

compliance (that is, 100 percent) is the 

ultimate goal, 80 percent seemed an 

appropriate standard for Stage 1 

meaningful use as it creates a high 

standard, while still allowing room for 

technical hindrances and other barriers 

to reaching full compliance. 

EP Objective: Provide patients with 

timely electronic access to their health 

information (including lab results, 

problem list, medication lists, allergies). 

EP Measure: At least 10 percent of all 

unique patients seen by the EP are 

provided timely electronic access to 

their health information 

The capability to provide timely 

electronic access to health information 

is included in the certification criteria 

for certified EHR technology (to be 

defined by ONC in its upcoming interim 

final rule). Meaningful use seeks to 

ensure that those capabilities are 

utilized. Therefore, we believe in order 

to meet this objective it is not sufficient 

to demonstrate this capability once, but 

rather to comply with the objective, an 

EP must utilize this capability as part of 

the daily work process. 


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As discussed under CPOE, we will 

use a percentage. To calculate the 

percentage, CMS and ONC have worked 

together to define the following for this 

objective: 

• The numerator. 

• The denominator. 

• The required percentage for 

demonstrating successful attainment of 

an objective. 

The numerator for this objective is the 

number of unique patients seen during 

the EHR reporting period who have 

timely, electronic access to their health 

information (for example, have 

established a user account and 

password on a patient portal). A unique 

patient is discussed under the objective 

of maintaining an up-to-date problem 

list. The denominator for this objective 

is the number of unique patients seen 

during the EHR reporting period. We 

recognize that many patients may not 

have internet access, may not be able or 

interested to use a patient portal. Health 

systems that have actively promoted 

such technologies have been able to 

achieve active use by over 30 percent of 

their patients, but this may not be 

realistic for many practices in the short 

term. 

EP Objective: Provide clinical 

summaries to patients for each office 

visit. 

EP Measure: Clinical summaries 

provided to patients for at least 80 

percent of all office visits. 

The capability to provide a clinical 

summary is included in the certification 

standards for certified EHR technology 

(to be defined by ONC in its upcoming 

interim final rule). Meaningful use seeks 

to ensure that those capabilities are 

utilized. Therefore, we believe in order 

to meet this objective it is not sufficient 

to demonstrate this capability once, but 

rather to comply with the objective, an 

EP must utilize this capability as part of 

the daily work process. 

As discussed under CPOE, we will 

use a percentage. To calculate the 

percentage, CMS and ONC have worked 

together to define the following for this 

objective: 

• The numerator. 

• The denominator. 

• The required percentage for 

demonstrating successful attainment of 

an objective. 

The numerator for this objective is the 

number of unique patients seen in the 

office during the EHR reporting period 

who are provided a clinical summary of 

their visit. A unique patient is discussed 

under the objective of maintaining an 

up-to-date problem list. The clinical 

summary can be provided through a 

PHR, patient portal on the Web site, 

secure e-mail, electronic media such as 

CD or USB fob, or printed copy. The 

after-visit clinical summary contains an 

updated medication list, laboratory and 

other diagnostic test orders, procedures 

and other instructions based on clinical 

discussions that took place during the 

office visit. The denominator for this 

objective is the number of unique 

patients seen in the office during the 

EHR reporting period. As this objective 

relies solely on a capability included as 

part of certified EHR technology and is 

not, for purposes of Stage 1 criteria, 

reliant on the electronic exchange of 

structured information, we propose to 

set the percentage required for 

successful demonstration at 80 percent. 

The reasoning for this is the same as 

under CPOE for EPs. Though full 

compliance (that is, 100 percent) is the 

ultimate goal, 80 percent seemed an 

appropriate standard for Stage 1 

meaningful use as it creates a high 

standard, while still allowing room for 

technical hindrances and other barriers 

to reaching full compliance. 

EP Objective: Capability to exchange 

key clinical information (for example, 

problem list, medication list, allergies, 

and diagnostic test results), among 

providers of care and patient authorized 

entities electronically. 

Eligible Hospital Objective: Capability 

to exchange key clinical information (for 

example, discharge summary, 

procedures, problem list, medication 

list, allergies, diagnostic test results), 

among providers of care and patient 

authorized entities electronically. 

EP/Eligible Hospital Measure: 

Performed at least one test of certified 

EHR technology’s capacity to 

electronically exchange key clinical 

information. 

The capability to send key clinical 

information electronically is included in 

the certification criteria for certified 

EHR technology (to be defined by ONC 

in its upcoming interim final rule). 

Meaningful use seeks to ensure that 

those capabilities are utilized. However, 

this objective is reliant on the electronic 

exchange of information. We are 

cognizant that in most areas of the 

country, the infrastructure necessary to 

support such exchange is still being 

developed. Therefore, for the Stage 1 

criteria of meaningful use we propose 

that EPs and eligible hospitals test their 

ability to send such information at least 

once prior to the end of the EHR 

reporting period. The testing could 

occur prior to the beginning of the EHR 

reporting period. If multiple EPs are 

using the same certified EHR technology 

in a shared physical setting, the testing 

would only have to occur once for a 

given certified EHR technology, as we 

do not see any value to running the 

same test multiple times just because 

multiple EPs use the same certified EHR 

technology. To be considered an 

‘‘exchange’’ in this section alone the 

clinical information must be sent 

between different clinical entities with 

distinct certified EHR technology and 

not between organizations that share a 

certified EHR. 

EP/Eligible Hospital Objective: 

Perform medication reconciliation at 

relevant encounters and each transition 

of care. 

EP/Eligible Hospital Measure: Perform 

medication reconciliation for at least 80 

percent of relevant encounters and 

transitions of care. 

The capability to perform medication 

reconciliation is included in the 

certification standards for certified EHR 

technology (to be defined by ONC in its 

upcoming interim final rule). 

Meaningful use seeks to ensure that 

those capabilities are utilized. 

Therefore, we believe in order to meet 

this objective it is not sufficient to 

demonstrate this capability once, but 

rather to comply with the objective, an 

EP or eligible hospital must utilize this 

capability as part of the daily work 

process. 

As discussed under CPOE, we will 

use a percentage. To calculate the 

percentage, CMS and ONC have worked 

together to define the following for this 

objective: 

• The numerator. 

• The denominator. 

• The required percentage for 

demonstrating successful attainment of 

an objective. 

The numerator for this objective is the 

number of relevant encounters and 

transitions of care for which the EP or 

an inpatient facility/department (POS 

21) that falls under the eligible 

hospital’s CCN was a participant during 

the EHR reporting period where 

medication reconciliation was 

performed. Relevant encounter and 

transition of care are defined in the 

previous discussion of this objective in 

this proposed rule. The denominator for 

this objective is the number of relevant 

encounters and transitions of care for 

which the EP or an inpatient facility/ 

department (POS 21) that falls under the 

eligible hospital’s CCN was a participant 

during the EHR reporting period. As this 

objective relies solely on a capability 

included as part of certified EHR 

technology and is not, for the purposes 

of Stage 1 criteria, reliant on the 

electronic exchange of information, we 

propose to set the percentage required 

for successful demonstration at 80 

percent. The reasoning for this is the 

same as under CPOE for EPs. Though 

full compliance (that is, 100 percent) is 


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the ultimate goal, 80 percent seemed an 

appropriate standard for Stage 1 

meaningful use as it creates a high 

standard, while still allowing room for 

technical hindrances and other barriers 

to reaching full compliance. 

EP/Eligible Hospital Objective: 

Provide summary care record for each 

transition of care and referral. 

EP/Eligible Hospital Measure: Provide 

summary of care record for at least 80 

percent of transitions of care and 

referrals. 

The capability to provide a summary 

of care record is included in the 

certification standards for certified EHR 

technology (to be defined by ONC in its 

upcoming interim final rule). 

Meaningful use seeks to ensure that 

those capabilities are utilized. 

Therefore, we believe in order to meet 

this objective it is not sufficient to 

demonstrate this capability once, but 

rather to comply with the objective an 

EP or eligible hospital must utilize this 

capability as part of the daily work 

process. 

As discussed under CPOE, we will 

use a percentage. To calculate the 

percentage, CMS and ONC have worked 

together to define the following for this 

objective: 

• The numerator. 

• The denominator. 

• The required percentage for 

demonstrating successful attainment of 

an objective. 

The numerator for this objective is the 

number of transitions of care and 

referrals for which the EP or an 

inpatient facility/department (POS 21) 

that falls under the eligible hospital’s 

CCN was the transferring or referring 

provider during the EHR reporting 

period where a summary of care record 

was provided. Summary of care record 

and transitions of care are defined in the 

discussion of this objective in this 

proposed rule. The summary of care 

record can be provided through an 

electronic exchange, accessed through a 

secure portal, secure e-mail, electronic 

media such as CD or USB fob, or printed 

copy. The denominator for this objective 

is the number of transitions of care for 

which the EP or an inpatient facility/ 

department (POS 21) that falls under the 

eligible hospital’s CCN was the 

transferring or referring provider during 

the EHR reporting period. As this 

objective can be completed with or 

without the use of electronic exchange 

of information, we propose to set the 

percentage required for successful 

demonstration at 80 percent. The 

reasoning for this is the same as under 

CPOE for EPs. Though full compliance 

(that is, 100 percent) is the ultimate 

goal, 80 percent seemed an appropriate 

standard for Stage 1 meaningful use as 

it creates a high standard, while still 

allowing room for technical hindrances 

and other barriers to reaching full 

compliance. 

EP/Eligible Hospital Objective: 

Capability to submit electronic data to 

immunization registries and actual 

submission where required and 

accepted. 

EP/Eligible Hospital Measure: 

Performed at least one test of certified 

EHR technology’s capacity to submit 

electronic data to immunization 

registries. 

The capability to send electronic data 

to immunization registries is included 

in the certification standards for 

certified EHR technology (to be defined 

by ONC in its upcoming interim final 

rule). Meaningful use seeks to ensure 

that those capabilities are utilized. 

However, this objective is reliant on the 

electronic exchange of information. We 

are cognizant that in many areas of the 

country, the infrastructure necessary to 

support such exchange is still being 

developed. Therefore, for the Stage 1 

criteria of meaningful use we propose 

that EPs and eligible hospitals test their 

ability to send such information at least 

once prior to the end of the EHR 

reporting period. The testing could 

occur prior to the beginning of the EHR 

reporting period. EPs in a group setting 

using identical certified EHR technology 

would only need to conduct a single 

test, not one test per EP. More stringent 

requirements may be established for EPs 

and hospitals under the Medicaid 

program in states where this capability 

exists. This is just one example of a 

possible State proposed modification to 

meaningful use in the Medicaid EHR 

incentive program. States may propose 

any modification or addition to CMS in 

accordance with the discussion in 

II.A.2.c. of this proposed rule. 

Eligible Hospital Objective: Capability 

to provide electronic submission of 

reportable lab results to public health 

agencies and actual submission where it 

can be received. 

Eligible Hospital Measure: Performed 

at least one test of certified EHR 

technology capacity to provide 

electronic submission of reportable lab 

results to public health agencies (unless 

none of the public health agencies to 

which eligible hospital submits such 

information have the capacity to receive 

the information electronically). 

The capability to send reportable lab 

results is included in the certification 

standards for certified EHR technology 

(to be defined by ONC in its upcoming 

interim final rule). Meaningful use seeks 

to ensure that those capabilities are 

utilized. However, this objective is 

reliant on the electronic exchange of 

information. We are cognizant that in 

most areas of the country, the 

infrastructure necessary to support such 

exchange is still being developed. 

Therefore, for the Stage 1 criteria of 

meaningful use we propose that eligible 

hospitals test their ability to send such 

information at least once prior to the 

end of the EHR reporting period. The 

testing could occur prior to the 

beginning of the EHR reporting period. 

More stringent requirements may be 

established for hospitals under the 

Medicaid program in States where this 

capability exists. This is just one 

example of a possible State proposed 

modification to meaningful use in the 

Medicaid EHR incentive program. States 

may propose any modification or 

addition to CMS in accordance with the 

discussion in II.A.2.c. of this proposed 

rule. 

EP/Eligible Hospital Objective: 

Capability to provide electronic 

syndromic surveillance data to public 

health agencies and actual transmission 

according to applicable law and 

practice. 

EP/Eligible Hospital Measure: 

Performed at least one test of certified 

EHR technology’s capacity to provide 

electronic syndromic surveillance data 

to public health agencies (unless none 

of the public health agencies to which 

an EP or eligible hospital submits such 

information have the capacity to receive 

the information electronically). 

The capability to send electronic data 

to immunization registries is included 

in the certification standards for 

certified EHR technology (to be defined 

by ONC in its upcoming interim final 

rule). Meaningful use seeks to ensure 

that those capabilities are utilized. 

However, this objective is reliant on the 

electronic exchange of information. We 

are cognizant that in most areas of the 

country, the infrastructure necessary to 

support such exchange is still being 

developed. Therefore, for the Stage 1 

criteria of meaningful use we are 

proposing that EPs and eligible 

hospitals test their ability to send such 

information at least once prior to the 

end of the EHR reporting period. The 

testing could occur prior to the 

beginning of the EHR reporting period. 

EPs in a group setting using identical 

certified EHR technology would only 

need to conduct a single test, not one 

test per EP. More stringent requirements 

may be established for EPs and hospitals 

under the Medicaid program in States 

where this capability exists. This is just 

one example of a possible State 

proposed modification to meaningful 

use in the Medicaid EHR incentive 

program. States may propose any 


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modification or addition to CMS in 

accordance with the discussion in 

II.A.2.c. of this proposed rule. 

EP/Eligible Hospital Objective: Protect 

electronic health information 

maintained using certified EHR 

technology through the implementation 

of appropriate technical capabilities. 

EP/Eligible Hospital Measure: 

Conduct or review a security risk 

analysis in accordance with the 

requirements under 45 CFR 

164.308(a)(1) and implement security 

updates as necessary. 

The capability to protect electronic 

health information maintained using 

certified EHR technology is included in 

the certification standards for certified 

EHR technology (to be defined by ONC 

in its upcoming interim final rule). 

Meaningful use seeks to ensure that 

those capabilities are utilized. While 

certified EHR technology provides tools 

for protecting health information, it is 

not a full protection solution. Processes 

and possibly tools outside the scope of 

certified EHR technology are required. 

Therefore, for the Stage 1 criteria of 

meaningful use we propose that EPs and 

eligible hospitals conduct or review a 

security risk analysis of certified EHR 

technology and implement updates as 

necessary at least once prior to the end 

of the EHR reporting period and attest 

to that conduct or review. The testing 

could occur prior to the beginning of the 

EHR reporting period. This is to ensure 

that the certified EHR technology is 

playing its role in the overall strategy of 

the EP or eligible hospital in protecting 

health information. 

TABLE 2—STAGE 1 CRITERIA FOR MEANINGFUL USE

Health outcomes policy 

priority Care goals 

Stage 1 objectives 

Stage 1 measures 

Eligible professionals Hospitals 

Improving quality, safety, 

efficiency, and reducing health disparities.

Provide access to comprehensive patient 

health data for patient’s health care 

team.

Use CPOE ................... Use of CPOE for orders 

(any type) directly entered by authorizing 

provider (for example, MD, DO, RN, 

PA, NP).

For EPs, CPOE is used for at least 

80% of all orders. 

For eligible hospitals, CPOE is used 

for 10% of all orders. 

Use evidence-based 

order sets and CPOE.

Implement drug-drug, 

drug-allergy, drug-formulary checks.

Implement drug-drug, 

drug-allergy, drug-formulary checks.

The EP/eligible hospital has enabled 

this functionality. 

Apply clinical decision 

support at the point 

of care.

Generate lists of patients who need care 

and use them to 

reach out to patients.

Maintain an up-to-date 

problem list of current 

and active diagnoses 

based on ICD–9–CM 

or SNOMED CT®.

Maintain an up-to-date 

problem list of current 

and active diagnoses 

based on ICD–9–CM 

or SNOMED CT®.

At least 80% of all unique patients 

seen by the EP or admitted to the 

eligible hospital have at least one 

entry or an indication of none recorded as structured data. 

Report information for 

quality improvement 

and public reporting.

Generate and transmit 

permissible prescriptions electronically 

(eRx).

...................................... At least 75% of all permissible prescriptions written by the EP are 

transmitted electronically using certified EHR technology. 

Maintain active medication list.Maintain active medication list.At least 80% of all unique patients 

seen by the EP or admitted to the 

eligible hospital have at least one 

entry (or an indication of ‘‘none’’ if 

the patient is not currently prescribed any medication) recorded 

as structured data. 

Maintain active medication allergy list.Maintain active medication allergy list.At least 80% of all unique patients 

seen, by the EP or admitted to the 

eligible hospital have at least one 

entry or (an indication of ‘‘none’’ if 

the patient has no medication allergies) recorded as structured data. 

Record demographics ..

Æ preferred language 

Æ insurance type 

Æ gender 

Æ race 

Æ ethnicity 

Æ date of birth 

Record demographics ..

Æ preferred language 

Æ insurance type 

Æ gender 

Æ race 

Æ ethnicity 

Æ date of birth 

Æ date and cause of 

death in the event of 

mortality 

At least 80% of all unique patients 

seen by the EP or admitted to the 

eligible hospital have demographics 

recorded as structured data. 


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TABLE 2—STAGE 1 CRITERIA FOR MEANINGFUL USE—Continued 

Health outcomes policy 

priority Care goals 

Stage 1 objectives 

Stage 1 measures 

Eligible professionals Hospitals 

Record and chart 

changes in vital 

signs: 

Æ height 

Æ weight 

Æ blood pressure 

Æ Calculate and display: 

BMI. 

Æ Plot and display 

growth charts for children 2–20 years, including BMI. 

Record and chart 

changes in vital 

signs: 

Æ height 

Æ weight 

Æ blood pressure 

Æ Calculate and display: 

BMI. 

Æ Plot and display 

growth charts for children 2–20 years, including BMI. 

For at least 80% of all unique patients 

age 2 and over seen by the EP or 

admitted to eligible hospital, record 

blood pressure and BMI; additionally plot growth chart for children 

age 2–20. 

Record smoking status 

for patients 13 years 

old or older.

Record smoking status 

for patients 13 years 

old or older.

At least 80% of all unique patients 13 

years old or older seen by the EP 

or admitted to the eligible hospital 

have ‘‘smoking status’’ recorded. 

Incorporate clinical labtest results into EHR 

as structured data.

Incorporate clinical labtest results into EHR 

as structured data.

At least 50% of all clinical lab tests ordered whose results are in a positive/negative or numerical format 

are incorporated in certified EHR 

technology as structured data. 

Generate lists of patients by specific conditions to use for 

quality improvement, 

reduction of disparities, and outreach.

Generate lists of patients by specific conditions to use for 

quality improvement, 

reduction of disparities, and outreach.

Generate at least one report listing 

patients of the EP or eligible hospital with a specific condition. 

Report ambulatory 

quality measures to 

CMS or the States.

Report hospital quality 

measures to CMS or 

the States.

For 2011, provide aggregate numerator and denominator through attestation as discussed in section 

II(A)(3) of this proposed rule. 

For 2012, electronically submit the 

measures as discussed in section 

II(A)(3) of this proposed rule. 

Send reminders to patients per patient 

preference for preventive/follow up care.

...................................... Reminder sent to at least 50% of all 

unique patients seen by the EP that 

are age 50 or over. 

Implement 5 clinical decision support rules 

relevant to specialty 

or high clinical priority, including diagnostic test ordering, 

along with the ability 

to track compliance 

with those rules.

Implement 5 clinical decision support rules 

related to a high priority hospital condition, including diagnostic test ordering, 

along with the ability 

to track compliance 

with those rules.

Implement 5 clinical decision support 

rules relevant to the clinical quality 

metrics the EP/Eligible Hospital is 

responsible for as described further 

in section II(A)(3). 

Check insurance eligibility electronically 

from public and private payers.

Check insurance eligibility electronically 

from public and private payers.

Insurance eligibility checked electronically for at least 80% of all unique 

patients seen by the EP or admitted 

to the eligible hospital. 

Submit claims electronically to public and 

private payers.

Submit claims electronically to public and 

private payers.

At least 80% of all claims filed electronically by the EP or the eligible 

hospital. 

Engage patients and 

families in their health 

care.

Provide patients and 

families with timely 

access to data, 

knowledge, and tools 

to make informed decisions and to manage their health.

Provide patients with an 

electronic copy of 

their health information (including diagnostic test results, 

problem list, medication lists, allergies), 

upon request.

Provide patients with an 

electronic copy of 

their health information (including diagnostic test results, 

problem list, medication lists, allergies, 

discharge summary, 

procedures), upon request.

At least 80% of all patients who request an electronic copy of their 

health information are provided it 

within 48 hours. 


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TABLE 2—STAGE 1 CRITERIA FOR MEANINGFUL USE—Continued 

Health outcomes policy 

priority Care goals 

Stage 1 objectives 

Stage 1 measures 

Eligible professionals Hospitals 

Provide patients with an 

electronic copy of 

their discharge instructions and procedures at time of discharge, upon request.

At least 80% of all patients who are 

discharged from an eligible hospital 

and who request an electronic copy 

of their discharge instructions and 

procedures are provided it. 

Provide patients with 

timely electronic access to their health 

information (including 

lab results, problem 

list, medication lists, 

allergies) within 96 

hours of the information being available 

to the EP.

...................................... At least 10% of all unique patients 

seen by the EP are provided timely 

electronic access to their health information. 

Provide clinical summaries for patients 

for each office visit.

...................................... Clinical summaries are provided for at 

least 80% of all office visits. 

Improve care coordination.Exchange meaningful 

clinical information 

among professional 

health care team.

Capability to exchange 

key clinical information (for example, 

problem list, medication list, allergies, diagnostic test results), 

among providers of 

care and patient authorized entities electronically.

Capability to exchange 

key clinical information (for example, discharge summary, 

procedures, problem 

list, medication list, 

allergies, diagnostic 

test results), among 

providers of care and 

patient authorized entities electronically.

Performed at least one test of certified 

EHR technology’s capacity to electronically exchange key clinical information. 

Perform medication reconciliation at relevant 

encounters and each 

transition of care.

Perform medication reconciliation at relevant 

encounters and each 

transition of care.

Perform medication reconciliation for 

at least 80% of relevant encounters 

and transitions of care. 

Provide summary care 

record for each transition of care and referral.

Provide summary care 

record for each transition of care and referral.

Provide summary of care record for at 

least 80% of transitions of care and 

referrals. 

Improve population and 

public health.

Communicate with public health agencies.Capability to submit 

electronic data to immunization registries 

and actual submission where required 

and accepted.

Capability to submit 

electronic data to immunization registries 

and actual submission where required 

and accepted.

Performed at least one test of certified 

EHR technology’s capacity to submit electronic data to immunization 

registries. 

Capability to provide 

electronic submission 

of reportable lab results (as required by 

state or local law) to 

public health agencies and actual submission where it can 

be received.

Performed at least one test of the 

EHR system’s capacity to provide 

electronic submission of reportable 

lab results to public health agencies 

(unless none of the public health 

agencies to which eligible hospital 

submits such information have the 

capacity to receive the information 

electronically). 

Capability to provide 

electronic syndromic 

surveillance data to 

public health agencies and actual transmission according to 

applicable law and 

practice.

Capability to provide 

electronic syndromic 

surveillance data to 

public health agencies and actual transmission according to 

applicable law and 

practice.

Performed at least one test of certified 

EHR technology’s capacity to provide electronic syndromic surveillance data to public health agencies 

(unless none of the public health 

agencies to which an EP or eligible 

hospital submits such information 

have the capacity to receive the information electronically). 


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TABLE 2—STAGE 1 CRITERIA FOR MEANINGFUL USE—Continued 

Health outcomes policy 

priority Care goals 

Stage 1 objectives 

Stage 1 measures 

Eligible professionals Hospitals 

Ensure adequate privacy 

and security protections for personal 

health information.

Ensure privacy and security protections for 

confidential information through operating policies, procedures, and technologies and compliance with applicable 

law.

Provide transparency of 

data sharing to patient.

Protect electronic 

health information 

created or maintained 

by the certified EHR 

technology through 

the implementation of 

appropriate technical 

capabilities.

Protect electronic 

health information 

created or maintained 

by the certified EHR 

technology through 

the implementation of 

appropriate technical 

capabilities.

Conduct or review a security risk 

analysis per 45 CFR 164.308(a)(1) 

and implement security updates as 

necessary. 

e. Request for Public Comment on 

Potential Health IT Functionality 

Measures for Eligible Professionals and 

Eligible Hospitals in 2013 Payment Year 

and Subsequent Years 

As noted previously, we are cognizant 

that in most areas of the country, the 

infrastructure necessary to support the 

electronic exchange of structured 

information is not yet currently 

available. For that reason, we excluded 

the electronic exchange of structured 

information from many Stage 1 

objectives or set relatively low 

performance thresholds for measures 

that do rely on the electronic exchange 

of structured data. For example, we set 

the threshold at 50 percent for the 

incorporation of lab data in structured 

format, and we excluded other types of 

diagnostic test data (for example, 

radiology reports, pathology reports, 

etc.) from that measure. We also 

excluded the transmission of orders 

from the definition of ‘‘CPOE use’’ for 

Stage 1 criteria. 

In future rulemaking (for example, for 

Stage 2 and Stage 3 criteria), however, 

we anticipate raising the threshold for 

these objectives as the capabilities of 

HIT infrastructure increases. We also 

anticipate redefining our objectives to 

include not only the capturing of data 

in electronic format but also the 

exchange (both transmission and 

receipt) of that data in increasingly 

structured formats. The intent and 

policy goal with raising these thresholds 

and expectations is to ensure that 

meaningful use encourages patientcentric, interoperable health 

information exchange across provider 

organizations regardless of provider’s 

business affiliation or EHR platform. 

We specifically intend to build up the 

following health IT functionality 

measures for Stage 2 meaningful use 

criteria: 

• ‘‘CPOE use’’ will include not only 

the percentage of orders entered directly 

by providers through CPOEs but also the 

electronic transmission of those orders; 

• ‘‘Incorporate clinical lab-test results 

into EHR as structured data’’ will be 

expanded to include the full array of 

diagnostic test data used for the 

treatment and diagnosis of disease, 

where feasible, including blood tests, 

microbiology, urinalysis, pathology 

tests, radiology, cardiac imaging, 

nuclear medicine tests, and pulmonary 

function tests; 

• Measures that currently allow the 

provision and exchange of unstructured 

data (for example, the provision of 

clinical care summaries on paper) will 

require the provision and exchange of 

electronic and structured data, where 

feasible; 

• Measures that currently require the 

performance of a capability test (for 

example, capability to provide 

electronic syndromic surveillance data 

to public health agencies) will be 

revised to require the actual submission 

of that data; 

We invite comment on our intent to 

propose the above measure for Stage 2 

in future rulemaking and also invite 

comment on any other health IT 

functionality measures not included in 

this list. 

3. Sections 4101(a) and 4102(a)(1) of 

HITECH Act: Reporting on Clinical 

Quality Measures Using EHRs by EPs 

and Eligible Hospitals 

a. General 

As discussed in the meaningful use 

background section, there are three 

elements of meaningful use. In this 

section, we discuss the third 

requirement using its certified EHR 

technology, the EP or eligible hospital 

submits to the Secretary, in a form and 

manner specified by the Secretary, 

information for the EHR reporting 

period on clinical quality measures and 

other measures specified by the 

Secretary. The submission of other 

measures is discussed in section 

II.A.2.d.2 of this proposed rule and the 

other two requirements are discussed in 

section II.A.2.d.1 of this proposed rule. 

b. Requirements for the Submission of 

Clinical Quality Measures by EPs and 

Eligible Hospitals 

Sections 1848(o)(2)(B)(ii) and 

1886(n)(3)(B)(ii) of the Act provide that 

the Secretary may not require the 

electronic reporting of information on 

clinical quality measures unless the 

Secretary has the capacity to accept the 

information electronically, which may 

be on a pilot basis. 

We do not anticipate that HHS will 

complete the necessary steps for us to 

have the capacity to electronically 

accept data on clinical quality measures 

from EHRs for the 2011 payment year. 

It is unlikely that by 2011 there will be 

adequate testing and demonstration of 

the ability to receive the required 

transmitted information on a 

widespread basis. The capacity to 

accept information on clinical quality 

measures also depends upon the 

Secretary promulgating technical 

specifications for EHR vendors with 

respect to the transmission of 

information on clinical quality measures 

sufficiently in advance of the EHR 

reporting period for 2011, so that 

adequate time has been provided either 

for such specifications to be certified, or 

for EHR vendors to code such 

specifications into certified systems. 

Therefore, for 2011, we propose that EPs 

and eligible hospitals use an attestation 

methodology to submit summary 

information to CMS on clinical quality 

measures as a condition of 

demonstrating meaningful use of 

certified EHR technology. 

From the Medicaid perspective, 

delaying the onset of clinical quality 

measures reporting until 2012 addresses 

concerns about States having the ready 

infrastructure to receive and store 


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clinical quality measures data before 

then. More importantly, we recognize 

that since Medicaid providers are 

eligible to receive incentive payments 

for adopting, implementing, or 

upgrading certified EHR technology. 

Medicaid EPs may not be focused on 

demonstrating meaningful use until 

2012 or later. 

We anticipate that for the 2012 

payment year we will have completed 

the necessary steps to have the capacity 

to receive electronically information on 

clinical quality measures from EHRs 

including the promulgation of technical 

specifications for EHR vendors to use 

for obtaining certification of their 

systems. Therefore, for the Medicare 

EHR incentive program, we propose that 

beginning in CY 2012 an EP using a 

certified EHR technology or beginning 

in FY 2012 an eligible hospital using a 

certified EHR technology, as appropriate 

for clinical quality measures, must 

submit information on clinical quality 

measures electronically in addition to 

submitting other measures described in 

section II.2.d.2 of this proposed rule in 

order for the EP or eligible hospital to 

be a meaningful EHR user, regardless of 

whether CY 2012 is their first or second 

payment year. However, if the Secretary 

does not have the capacity to accept the 

information on clinical quality measures 

electronically in 2012, consistent with 

sections 1848(o)(2)(B)(ii) and 

1886(n)(3)(B)(ii) of the Act, we will 

continue to rely on an attestation 

methodology for reporting of clinical 

quality measures as a requirement for 

demonstrating meaningful use of 

certified EHR technology for payment 

year 2012. Should we not have the 

capacity to accept information on 

clinical quality measures electronically 

in 2012, we will inform the public of 

this fact by publishing a notice in the 

Federal Register and providing 

instructions on how this information 

should be submitted to us. 

For purposes of the requirements 

under sections 1848(o)(2)(A)(iii) and 

1886 (n)(3)(iii) of the Act, we define 

‘‘clinical quality measures’’ to consist of 

measures of processes, experience, and/ 

or outcomes of patient care, 

observations or treatment that relate to 

one or more quality aims for health care 

such as effective, safe, efficient, patientcentered, equitable, and timely care. We 

note that certain statutory limitations 

apply only to the reporting of clinical 

quality measures, such as the 

requirement discussed in the previous 

paragraph prohibiting the Secretary 

from requiring the electronic reporting 

of information on clinical quality 

measures unless the Secretary has the 

capacity to accept the information 

electronically, as well as other statutory 

requirements for clinical quality 

measures that are discussed below in 

section II.A.3.c.1 of this proposed rule. 

These limitations apply solely to the 

submission of clinical quality measures, 

and do not apply to other measures of 

meaningful EHR use. The proposed 

clinical quality measures on which EPs 

or eligible hospitals will be required to 

submit information using certified EHR 

technology, the statutory requirements 

and other considerations that were used 

to select these proposed measures, and 

the proposed reporting requirements are 

described below. 

With respect to Medicaid EPs and 

eligible hospitals, we note that section 

1903(t)(6) of the Act recognizes that the 

demonstration of meaningful use may 

also include the reporting of clinical 

quality measures to the States. In the 

interest of simplifying the program and 

guarding against duplication of 

meaningful use criteria, we propose that 

the clinical quality measures adopted 

for the Medicare EHR incentive 

program, listed in Tables 3 and 20, will 

also apply to EPs and eligible hospitals 

in the Medicaid EHR incentive program. 

However, we are including alternative 

Medicaid-specific measures for use by 

eligible hospitals as shown in Table 21. 

Despite the statutory limitation 

prohibiting the Secretary from requiring 

the electronic submission of clinical 

quality measures if HHS does not have 

the capacity to accept this information 

electronically, as previously discussed, 

the Secretary has broad discretion to 

establish requirements for meaningful 

use of certified EHR technology and for 

the demonstration of such use by EPs 

and eligible hospitals. Although we 

propose to first require the electronic 

submission of information on clinical 

quality measures in 2012, we do not 

desire this to delay the use of certified 

EHR technology by EPs and eligible 

hospitals to measure and improve 

clinical quality. Specifically, we believe 

that the use of those functionalities that 

support measurement of clinical quality 

is highly important to an overall goal of 

the HITECH Act, to improve health care 

quality. We believe that measurement 

and acting on the results of such 

measurement is an important aspect to 

improving quality. 

Accordingly, although we are not 

proposing under sections 

1848(o)(2)(A)(iii) and 1886(n)(3)(A)(iii) 

of the Act to require that for 2011 EPs 

and eligible hospitals report clinical 

quality measures to CMS or States 

electronically, we propose to require as 

an additional condition of 

demonstrating meaningful use of 

certified EHR technology under sections 

1848(o)(2)(A)(i) and 1886(n)(3)(A)(ii) of 

the Act that EPs and eligible hospitals 

use certified EHR technology to capture 

the data elements and calculate the 

results for the applicable clinical quality 

measures discussed below. We further 

propose that EPs and eligible hospitals 

demonstrate that they have satisfied this 

requirement during the EHR reporting 

period for 2011 through attestation. We 

further propose to require that Medicare 

EPs and eligible hospital attest to the 

accuracy and completeness of the 

numerators and denominators for each 

of the applicable measure. Finally, in 

accordance with our authority under 

sections 1848(o)(C)(i)(V) and 

1886(n)(3)(C)(i)(V) of the Act, which 

grants us broad discretion to specify the 

means through which EPs and eligible 

hospitals demonstrate compliance with 

the meaningful use criteria, we propose 

that EPs and eligible hospitals 

demonstrate their use of certified EHR 

technology to capture the data elements 

and calculate the results for the 

applicable clinical quality measures by 

reporting the results to CMS for all 

applicable patients. For the Medicaid 

incentive program, States may accept 

provider attestations in the same 

manner to demonstrate meaningful use 

in 2011. However, we expect that 

Medicaid providers will qualify for the 

incentive payment by adopting, 

implementing, or upgrading to certified 

EHR technology, and therefore; will not 

need to attest to meaningful use of EHRs 

in 2011, for their first payment year. 

We recognize that considerable work 

needs to be done by measure owners 

and developers with respect to the 

clinical quality measures included in 

this proposed rule. This includes 

completing electronic specifications for 

measures, implementing such 

specifications into EHR technology to 

capture and calculate the results, and 

implementing the systems, themselves. 

We also recognize that some measures 

are further developed than others, as 

discussed in the proposed measures 

section. Nevertheless, we believe that 

overall there is sufficient time to 

complete work on measures and 

measures specifications to allow 

vendors, and EPs and eligible hospitals 

to implement such systems. Should the 

necessary work on measure 

specification not be completed for 

particular measures according to the 

timetable we discuss below, it is our 

intent not to finalize those specific 

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c. Statutory Requirements and Other 

Considerations for the Proposed 

Selection of Clinical Quality Measures 

Proposed for Electronic Submission by 

EPs or Eligible Hospitals 

(1) Statutory Requirements for the 

Selection of Clinical Quality Measures 

Proposed for Electronic Submission by 

EPs and Eligible Hospitals 

Sections 1848(o)(2)(B)(i)(II) and 

1886(n)(3)(B)(i) of the Act also require 

that prior to any clinical quality 

measure being selected, the Secretary 

will publish in the Federal Register 

such measure and provide for a period 

of public comment on such measure. 

The proposed clinical quality measures 

for EPs and eligible hospitals for 2011 

and 2012 payment are listed in Tables 

3 through 21. 

For purposes of selecting clinical 

quality measures on which EPs will be 

required to submit information using 

certified EHR technology, section 

1848(o)(2)(B)(i)(I) of the Act, as added 

by section 4101 of the HITECH Act, 

states that the Secretary shall provide 

preference to clinical quality measures 

that have been endorsed by the entity 

with a contract with the Secretary under 

section1890(a) of the Act, as added by 

section 183 of the Medicare 

Improvement for Patients and Providers 

Act (MIPPA) of 2008. For submission of 

clinical quality measures by eligible 

hospitals, section 1886(n)(3)(B)(i)(I) of 

the Act, as added by section 4102(a) of 

the HITECH Act, requires the Secretary 

to provide preference to those clinical 

quality measures that have been 

endorsed by the entity with a contract 

with the Secretary under subsection 

1890(a) of the Act, as added by section 

183 of the MIPPA, or clinical quality 

measures that have been selected for the 

purpose of applying section 

1886(b)(3)(B)(viii) of the Act (that is, 

measures that have been selected for the 

Reporting Hospital Quality Data for 

Annual Payment Update (RHQDAPU) 

program. 

On January 14, 2009, the U.S. 

Department of Health and Human 

Services awarded the contract required 

under section 1890(a) of the Act to the 

National Quality Forum (NQF). 

Therefore, when selecting the clinical 

quality measures EPs must report in 

order to demonstrate meaningful use of 

certified EHR technology in accordance 

with section 1848(o)(2)(B)(i)(I) of the 

Act, we propose to give preference to 

the clinical quality measures endorsed 

by the NQF, including NQF endorsed 

measures that have previously been 

selected for the Physician Quality 

Reporting Initiative (PQRI) program. 

Similarly when selecting the clinical 

quality measures eligible hospitals must 

report in order to demonstrate 

meaningful use of certified EHR 

technology in accordance with section 

1886(n)(3)(B)(i)(I) of the Act, we propose 

to give preference to the clinical quality 

measures selected from those endorsed 

by the NQF or that have previously been 

selected for the RHQDAPU program. In 

some instances we have proposed 

measures for EPs and eligible hospitals 

that are not currently NQF endorsed in 

an effort to include a broader set of 

clinical quality measures. However, the 

HITECH Act does not require the use of 

NQF endorsed measures, nor limit the 

measures to those included in PQRI or 

RHQDAPU. If we, professional societies, 

or other stakeholders identify clinical 

quality measures which may be 

appropriate for the EHR incentive 

programs, we will consider those 

measures even if they are not endorsed 

by the NQF or have not been selected 

for the PQRI or RHQDAPU programs, 

subject to the requirement to publish in 

the Federal Register such measure(s) for 

a period of public comment. 

We propose the clinical quality 

measures for EPs and eligible hospitals 

in Tables 3 through 21 of this proposed 

rule for use in the 2011 and 2012 

payment years for the Medicare EHR 

incentive program will be effective 60 

days after the publication of the final 

rule in the Federal Register. No changes 

(that is, additions or deletions of clinical 

quality measures) will be made after 

publication of the final rule, except 

through further rulemaking. However, 

we may make administrative and/or 

technical modifications or refinements, 

such as revisions to the clinical quality 

measures titles and code additions, 

corrections, or revisions to the detailed 

specifications for the 2011 and 2012 

payment year measures. The 2011 

specifications for user submission of 

clinical quality measures will be 

available on our Web site when they are 

sufficiently developed or finalized. 

Specifications for the EHR incentive 

programs, even if already published as 

a part of another incentive payment 

programs, must be obtained only from 

the specifications documents for the 

EHR incentive program clinical quality 

measures. We note also that the final 

clinical quality measure specifications 

for eligible hospitals for any given 

clinical quality measure may be 

different from specifications for the 

same clinical quality measure used for 

the previously described testing of EHRbased data submission. We are targeting 

finalization and publication of the 

detailed specifications documents for all 

2011 payment year Medicare EHR 

incentive program clinical quality 

measures for eligible hospitals on the 

CMS Web site on or before April 1, 

2010. We intend that a detailed 

specifications document for all 2012 

payment year Medicare EHR incentive 

program clinical quality measures for 

EPs be posted on the our Web site on 

or before April 1, 2011. This would 

provide final specifications documents 

at least 9 months in advance of the start 

of the applicable payment year for 

clinical quality measure EHR reporting 

period. We invite comments on our 

proposed timelines to post specification 

documents for these clinical quality 

measures to the CMS Web site. 

(2) Other Considerations for the 

Proposed Selection of Clinical Quality 

Measures for Electronic Submission by 

EPs and Eligible Hospitals 

In addition to the requirements under 

sections 1848(o)(2)(B)(i)(I) and 

1886(n)(3)(B)(i)(I) of the Act and the 

other statutory requirements described 

above, other considerations that we 

applied to the selection of the proposed 

clinical quality measures for electronic 

submission under the Medicare and 

Medicaid EHR incentive programs 

include the following: 

• Clinical quality measures that are 

included in, facilitate alignment with, or 

allow determination of satisfactory 

reporting in other Medicare (for 

example, PQRI or the RHQDAPU 

program), Medicaid, and Children’s 

Health Insurance Program (CHIP) 

program priorities. 

• Clinical quality measures that are 

widely applicable to EPs and eligible 

hospitals based on the services provided 

for the population of patients seen. 

• Clinical quality measures that 

promote CMS and HHS policy priorities 

related to improved quality and 

efficiency of care for the Medicare and 

Medicaid populations that would allow 

us to track improvement in care over 

time. These current and long term 

priority topics include: Prevention; 

management of chronic conditions; high 

cost and high volume conditions; 

elimination of health disparities; 

healthcare-associated infections and 

other conditions; improved care 

coordination; improved efficiency; 

improved patient and family experience 

of care; improved end-of-life/palliative 

care; effective management of acute and 

chronic episodes of care; reduced 

unwarranted geographic variation in 

quality and efficiency; and adoption and 

use of interoperable HIT. 

• Clinical quality measures that 

address or relate to known gaps in the 

quality of care and measures that 


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through the PQRI program, performed at 

low or highly variable rates. 

• Clinical quality measures that have 

been recommended to CMS for 

inclusion in the EHR incentive by FACA 

committees, such as the HIT Policy 

Committee. 

In addition, we note that the statutory 

requirements under sections 1848(o) 

and 1886(n) of the Act discussed above 

do not provide guidance with respect to 

the development of the clinical quality 

measures which may then be submitted 

to the NQF for endorsement. The basic 

steps for developing clinical quality 

measures applicable to EPs may be 

carried out by a variety of different 

organizations. We do not believe there 

needs to be any special restrictions on 

the type or infrastructure of the 

organizations carrying out this basic 

development of EP or eligible hospital 

measures, such as restricting the initial 

development to EP or eligible hospital 

organizations. Any such restriction 

would unduly limit the basic 

development of clinical quality 

measures, and the scope and utility of 

such measures that may be considered 

for NQF endorsement as voluntary 

consensus standards. 

With respect to the Children’s Health 

Insurance Program Reauthorization Act 

(CHIPRA) of 2009 (Pub. L. 111–3) Title 

IV, section 401 requires that the 

Secretary publish a core set of clinical 

quality measures for the pediatric 

population. To the extent possible, we 

will align the clinical quality measures 

selected under this Medicaid EHR 

incentive program with the measures 

selected under the CHIPRA core 

measure set. Included in the proposed 

definition of meaningful use are nine 

proposed clinical quality measures that 

pertain to pediatric providers. Four of 

the nine measures are also on the list of 

CHIPRA initial core measures that were 

recommended to the Secretary by the 

Subcommittee to AHRQ’s National 

Advisory Committee (SNAC). Not all 

CHIPRA initial measures recommended 

to the Secretary are applicable to EHR 

technology or to the Medicaid EHR 

incentive payment program. For 

example, some of the measures are 

population-based, survey-derived, or 

not yet NQF-endorsed. New or 

additional measures for the next 

iteration of the CHIPRA core set will 

have EHR-extractability as a priority. 

The full CHIPRA core measure set will 

be published for comment in a 

forthcoming Federal Register notice that 

is expected out before the end of the 

year. 

However, as many providers, 

including primary care professionals, 

hospitals, dentists, and specialists 

provide care to the pediatric population 

in the Medicaid and CHIP programs. We 

saw consistency as paramount to avoid 

redundancy and duplication for these 

providers and States. 

Provider quality measure reporting 

under CHIPRA for this initial core 

measure set will initially be voluntary. 

The intent is to begin standardizing 

measurement data collection. Due to the 

concurrent CHIPRA and ARRA HIT 

implementation activities, we believe 

there is an exciting opportunity to align 

the two programs and strive to create 

efficiencies for States and pediatric 

providers, where applicable. As both 

programs move forward, we will 

continue to prioritize consistency in 

measure selection for pediatric 

providers when possible. 

We welcome comments on the 

inclusion or exclusion of any given 

clinical quality measure or measures 

proposed herein in the EHR incentive 

programs clinical quality measure set 

for EPs or eligible hospitals for the 2011 

and 2012 payment years, and to our 

approach in selecting clinical quality 

measures. Our goal is for EPs and 

eligible hospitals to use EHRs to 

transmit clinical quality measures to the 

Secretary that would allow 

determination of their satisfactory 

reporting under the PQRI and 

RHQDAPU programs. Even if the 

clinical quality measures are not the 

same for PQRI and RHQDAPU 

satisfactory reporting and EHR 

meaningful use, our aim is to encourage 

EPs and eligible hospitals to use EHRs 

as the mechanism to report PQRI and 

RHQDAPU measures rather than 

reporting measures on claims and other 

reporting mechanisms. We plan to move 

to this approach as soon as practicable. 

To the extent that the same clinical 

quality measures are used in the PQRI 

and RHQDAPU programs and for EHR 

meaningful use, we believe that this 

approach would be consistent with the 

statutory requirement to avoid duplicate 

reporting to the extent practicable. We 

believe that allowing the measures 

reporting for the PQRI and RHQDAPU 

program to be reported via EHRs would 

provide an added incentive for EPs and 

eligible hospitals to adopt EHRs. 

In addition, we do not intend to use 

notice and comment rulemaking as a 

means to update or modify clinical 

quality measure specifications. A 

clinical quality measure that has 

completed the consensus process 

through NQF has a designated party 

(usually, the measure developer/owner) 

who has accepted responsibility for 

maintenance of the clinical quality 

measure. In general, it is the role of the 

clinical quality measure owner, 

developer, or maintainer to make basic 

changes to a clinical quality measure in 

terms of the numerator, denominator, 

and exclusions. However, the clinical 

quality measures selected for the 2011 

and 2012 payment year will be 

supplemented by CMS technical 

specifications for EHR submission. As 

discussed earlier, we propose to post the 

complete clinical quality measures 

specifications including technical 

specifications on our Web site and 

solicit comment on our approach. 

d. Proposed Clinical Quality Measures 

for Electronic Submission Using 

Certified EHR Technology by EPs 

For the 2011 and 2012 EHR reporting 

periods, based upon the considerations 

for selecting clinical quality measures 

discussed above, we propose the set of 

clinical quality measures identified in 

Table 3. The Table 3 lists the applicable 

PQRI and NQF measure number, title, 

description, the owner/developer, and a 

link to existing electronic specifications 

where applicable. Tables 4 through 19 

describes further the reporting 

requirements of the Core and Specialty 

measure groups. 

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As previously stated, we believe that 

there is sufficient time to implement the 

measures in EHR systems for 2011 

through 2012. However, we recognize 

also that there are measures that we 

propose, which are in a lower state of 

readiness, for implementation in 

certified EHR’s and present a higher 

degree of risk in terms of completion of 

the necessary work. We would note that 

the purpose of this quality reporting is 

to begin the process of quality 

benchmarking and iterative 

improvements in the ability of providers 

to benchmark themselves against their 

peers. As part of the public comment 

process, we welcome comment on not 

only the clinical utility of the measures 

we have proposed, but also their state of 

readiness for use in the EHR incentive 

programs. For those measures where 

electronic specifications do not 

currently exist, we solicit comment on 

how quickly electronic specifications 

can be developed and the period of time 

that might be required for effective 

implementation from the time the 

electronic specifications of final 

measures are posted and made available 

to vendors. We intend to publish 

electronic specifications for the 

proposed clinical quality measures on 

the CMS Web site as soon as they 

become available from the measure 

developer(s). Electronic specifications 

may be developed concurrently with the 

development of measures themselves 

and potentially with the NQF 

endorsement processes. 

All of the PQRI measures included in 

the above clinical quality measures meet 

one or more of the criteria previously 

discussed. These measures have been 

through notice and comment 

rulemaking for PQRI. Nearly all 

proposed PQRI clinical quality 

measures are NQF endorsed. 

Additionally, they have broad 

applicability to the range of Medicare 

designated specialties, and the services 

provided by EPs who render services to 

Medicare and Medicaid beneficiaries 

and many others. Further, 9 of the 90 

clinical quality measures listed above 

(PQRI numbers 1, 2, 3, 5, 7, 110, 111, 

112, and 113) have specifications for the 

electronic submission of these clinical 

quality measures have already been 

developed for the purpose of testing the 

electronic submission of clinical quality 

data extracted from an EHR for the PQRI 

program. The user specifications for the 

electronic submission of these 9 clinical 

quality measures for the most current 

PQRI program year can be found on the 

PQRI section of the CMS Web site at 

http://www.cms.hhs.gov/PQRI/20_

AlternativeReportingMechanisms.asp#

TopOfPage. 

In terms of CMS and HHS healthcare 

quality priorities, clinical quality PQRI 

measures numbered 1, 2, 3, 5, and 7 

address high priority chronic 

conditions, namely diabetes, coronary 

artery disease, and heart disease. 

Clinical quality PQRI measures 

numbered 110, 111, 112, 113, 114, 115, 

and 128 support prevention which is a 

high CMS and HHS priority. The PQRI 

clinical quality measure specifications 

for claims-based or registry-based 

submission of these clinical quality 

measures for the most current PQRI 

program year can be found on the PQRI 

section of the CMS Web site at http:// 

www.cms.hhs.gov/PQRI/15_

MeasuresCodes.asp#TopOfPage. A 

description of the clinical quality 

measure, including the clinical quality 

measure’s numerator and denominator, 

can be found in the PQRI clinical 

quality measure specifications. 

The PQRI clinical quality measures 

that we have included largely align with 

the recommendations of the HIT 

Standards Committee. However, we 

have also included certain clinical 

quality measures not part of PQRI that 

we believe are of high importance to the 

overall population. These clinical 

quality measures are IVD: Use of 

Aspirin or another Antithrombotic; IVD: 

Complete Lipid Profile; IVD: Low 

Density Lipoprotein (LDL–C) Control, 

and Blood Pressure Management. 

Finally, we have included an array of 

other measures which address 

important aspects of clinical quality. 

In summary, we believe that this 

initial set of clinical quality measures is 

broad enough to allow for reporting for 

EPs and addresses high priority 

conditions. We recognize the 

importance of integrating the measures 

into certified EHR products for 

calculation of measures results, and that 

not all measures may be feasible for 

2011 and 2012. We invite comment on 

the advisability of including the 

measures proposed for payment years 

2011 and 2012. Although we recognize 

many other important clinical quality 

measures of health care provided by 

EPs, we anticipate expanding the set of 

clinical quality measures in future years 

and list a number of clinical quality 

measures for future consideration in 

section II.A.3.g of this preamble, on 

which we also invite comment. 

We invite comments on our proposed 

clinical quality measures for EPs. 

e. Clinical Quality Measures Reporting 

Criteria for EPs 

For the 2011 and 2012 EHR reporting 

periods, to satisfy the requirements for 

reporting on clinical quality measures 

for Medicare under section 

1848(o)(2)(A)(i) and (iii) of the Act and 

for Medicaid under section 1903(t)(6)(C) 

of the Act for the 2012 payment year, we 

propose to require each EP submit 

information on two measure groups, as 

shown in Table 4 and Tables 5 through 

19, of this proposed rule. These are the 

core measures group in Table 4, and the 

subset of clinical measures most 

appropriate given the EPs specialty as 

described further in Tables 5 through 19 

specialty group measures below. For the 

core measure group, in Table 4, we 

believe that the clinical quality 

measures are sufficiently general in 

application and of such importance to 

population health, we propose to 

require that all EPs treating Medicare 

and Medicaid patients in the 

ambulatory setting report on all of the 

core measures as applicable for their 

patients. 

TABLE 4—MEASURE GROUP: CORE FOR ALL EPS, MEDICARE OR MEDICAID

Measure No. Clinical quality measure title 

PQRI 114 ........................................

NQF 0028 .......................................

Title: Preventive Care and Screening: Inquiry Regarding Tobacco Use. 

NQF 0013 ....................................... Title: Blood pressure measurement. 

NQF 0022 ....................................... Title: Drugs to be avoided in the elderly: 

a. Patients who receive at least one drug to be avoided. 

b. Patients who receive at least two different drugs to be avoided. 

The second required measure set for 

each EP is to submit information on at 

least one of the sets listed in Tables 5 

and 19 as specialty groups. The 

specialty groups are Cardiology, 

Pulmonology, Endocrinology, Oncology, 


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Proceduralist/Surgery, Primary Care 

Physicians, Pediatrics, Obstetrics and 

Gynecology, Neurology, Psychiatry, 

Ophthalmology, Podiatry, Radiology, 

Gastroenterology, and Nephrology. 

We recognize that clinical quality 

measures as specified by measures 

developers and as endorsed by the NQF 

are not specialty specific. Rather, the 

denominator of clinical quality 

measures and the applicability of a 

measure is determined by the patient 

population to whom the measure 

applies and the services rendered by the 

particular EP. 

Nevertheless, we have grouped 

measures according to the types of 

patients commonly treated and services 

rendered by EPs of various specialties. 

We have done this for purposes similar 

to measures groups used in PQRI which, 

however, are based on clinical 

conditions, rather than specialty types. 

The general purpose of each type of 

measures grouping is to have 

standardized sets of measures all of 

which must be reported by the EP in 

order to meet the reporting 

requirements. We expect to narrow 

down each proposed set to a required 

subset of 3 to 5 measures based on the 

availability of electronic measure 

specifications and comments received. 

We propose to require for 2011 and 

2012 that EP’s will select a specialty 

measures group, on which to report on 

all applicable cases for each of the 

measures in the specialty group. The 

same specialty measures group selected 

for the first payment year would be 

required for reporting for the second 

payment year. We invite comment on 

whether there are EPs who believe no 

specialty group will be applicable to 

them. In accordance with public 

comments, we will specify in the final 

rule which EP specialties will be 

exempt from selecting and reporting on 

a specialty measures group. EPs that are 

so-designated will be required to attest, 

to CMS or the State, to the 

inapplicability of any of the specialty 

groups and will not be required to 

report information on clinical quality 

measures from a specialty group for 

2011 or 2012, though the EP will still be 

required to report information on all of 

the clinical quality measures listed in 

the core measure set in, Table 4, as 

applicable for their patients. 

TABLE 5—MEASURE GROUP: CARDIOLOGY

Measure No. Clinical quality measure title 

PQRI 5 ............................................

NQF 0081 

Title: Heart Failure: Angiotensin-Converting Enzyme (ACE) Inhibitor or Angiotensin Receptor Blocker 

(ARB) Therapy for Left Ventricular Systolic Dysfunction (LVSD). 

PQRI 6 ............................................

NQF 0067 

Title: Coronary Artery Disease (CAD): Oral Antiplatelet Therapy Prescribed for Patients with CAD. 

PQRI 7 ............................................

NQF 0070 

Title: Coronary Artery Disease (CAD): Beta-Blocker Therapy for CAD Patients with Prior Myocardial Infarction (MI). 

PQRI 8 ............................................

NQF 0083 

Title: Heart Failure: Beta-Blocker Therapy for Left Ventricular Systolic Dysfunction (LVSD). 

PQRI 118 ........................................

NQF 0066 

Title: Coronary Artery Disease (CAD): Angiotensin-Converting Enzyme (ACE) Inhibitor or Angiotensin Receptor Blocker (ARB) Therapy for Patients with CAD and Diabetes and/or Left Ventricular Systolic Dysfunction (LVSD). 

PQRI 128 ........................................

NQF 0421 

Title: Preventive Care and Screening: Body Mass Index (BMI) Screening and Follow-Up. 

PQRI 197 ........................................

NQF 0074 

Title: Coronary Artery Disease (CAD): Drug Therapy for Lowering LDL-Cholesterol. 

PQRI 200 ........................................

NQF 0084 

Title: Heart Failure: Warfarin Therapy Patients with Atrial Fibrillation. 

PQRI 204 ........................................

NQF 0068 

Title: Ischemic Vascular Disease (IVD): Use of Aspirin or Another Antithrombotic. 

Not applicable ................................. Title: Statin after Myocardial Infarction. 

TABLE 6—MEASURE GROUP: PULMONOLOGY

Measure No. Clinical quality measure title 

PQRI 52 ..........................................

NQF 0102 

Title: Chronic Obstructive Pulmonary Disease (COPD): Bronchodilator Therapy. 

PQRI 53 ..........................................

NQF 0047 

Title: Asthma: Pharmacologic Therapy. 

PQRI 111 ........................................

NQF 0043 

Title: Preventive Care and Screening: Pneumonia Vaccination for Patients 65 Years and Older. 

PQRI 114 ........................................

NQF 0028 

Title: Preventive Care and Screening: Inquiry Regarding Tobacco Use. 

PQRI 115 ........................................

NQF 0027 

Title: Preventive Care and Screening: Advising Smokers to Quit. 

NQF 0001 ....................................... Title: Asthma assessment. 

NQF 0036 ....................................... Title: Use of appropriate medications for people with asthma. 

Not applicable ................................. Title: Use of CT scans. 

TABLE 7—MEASURE GROUP: ENDOCRINOLOGY

Measure No. Clinical quality measure title 

PQRI 1 ............................................

NQF 0059 

Title: Diabetes Mellitus: Hemoglobin A1c Poor Control in Diabetes Mellitus. 

PQRI 2 ............................................

NQF 0064 

Title: Diabetes Mellitus: Low Density Lipoprotein (LDL–C) Control in Diabetes Mellitus. 


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TABLE 7—MEASURE GROUP: ENDOCRINOLOGY—Continued 

Measure No. Clinical quality measure title 

PQRI 3 ............................................

NQF 0061 

Title: Diabetes Mellitus: High Blood Pressure Control in Diabetes Mellitus. 

PQRI 117 ........................................

NQF 0055 

Title: Diabetes Mellitus: Dilated Eye Exam in Diabetic Patient. 

PQRI 119 ........................................

NQF 0062 

Title: Diabetes Mellitus: Urine Screening for Microalbumin or Medical Attention for Nephropathy in Diabetic 

Patients. 

PQRI 128 ........................................

NQF 0421 

Title: Preventive Care and Screening: Body Mass Index (BMI) Screening and Follow-Up. 

PQRI 204 ........................................

NQF 0068 

Title: Ischemic Vascular Disease (IVD): Use of Aspirin or Another Antithrombotic. 

NQF 0060 ....................................... Title: Hemoglobin A1c test for pediatric patients. 

Not applicable ................................. Title: Comprehensive Diabetes Care: HbA1c Control (< 8.0 percent). 

TABLE 8—MEASURE GROUP: ONCOLOGY

Measure No. Clinical quality measure title & description 

PQRI 71 ..........................................

NQF 0387 

Title: Breast Cancer: Hormonal Therapy for Stage IC–IIIC Estrogen Receptor/Progesterone Receptor (ER/ 

PR) Positive Breast Cancer. 

PQRI 72 ..........................................

NQF 0385 

Title: Colon Cancer: Chemotherapy for Stage III Colon Cancer Patients. 

PQRI 102 ........................................

NQF 0389 

Title: Prostate Cancer: Avoidance of Overuse of Bone Scan for Staging Low-Risk Prostate Cancer Patients. 

PQRI 112 ........................................

NQF 0031 

Title: Preventive Care and Screening: Screening Mammography. 

PQRI 113 ........................................

NQF 0034 

Title: Preventive Care and Screening: Colorectal Cancer Screening. 

NQF 0032 ....................................... Title: Cervical Cancer Screening. 

TABLE 9—MEASURE GROUP: PROCEDURALIST/SURGERY

Measure No. Clinical quality measure title & description 

PQRI 20 ..........................................

NQF 0270 

Title: Perioperative Care: Timing of Antibiotic Prophylaxis—Ordering Physician. 

PQRI 21 ..........................................

NQF 0268 

Title: Perioperative Care: Selection of Prophylactic Antibiotic—First OR Second Generation Cephalosporin. 

PQRI 22 ..........................................

NQF 0271 

Title: Perioperative Care: Discontinuation of Prophylactic Antibiotics (Non-Cardiac Procedures). 

PQRI 23 ..........................................

NQF 0239 

Title: Perioperative Care: Venous Thromboembolism (VTE) Prophylaxis (When Indicated in ALL Patients). 

NQF 0299 ....................................... Title: Surgical Site Infection Rate. 

Not Applicable ................................. Title: 30 day Readmission Rate. 

TABLE 10—MEASURE GROUP: PRIMARY CARE

Measure No. Clinical quality measure title & description 

PQRI 114 ........................................

NQF 0028 

Title: Preventive Care and Screening: Inquiry Regarding Tobacco Use. 

PQRI 115 ........................................

NQF 0027 

Title: Preventive Care and Screening: Advising Smokers to Quit. 

PQRI 202 ........................................

NQF 0075 

Title: Ischemic Vascular Disease (IVD): Complete Lipid Profile. 

PQRI 203 ........................................

NQF 0075 

Title: Ischemic Vascular Disease (IVD): Low Density Lipoprotein (LDL–C) Control. 

PQRI 204 ........................................

NQF 0068 

Title: Ischemic Vascular Disease (IVD): Use of Aspirin or Another Antithrombotic. 

NQF 0038 ....................................... Title: Childhood Immunization Status. 

PQRI 112 ........................................

NQF 0031 

Title: Preventive Care and Screening: Screening Mammography. 

PQRI 113 ........................................

NQF 0034 

Title: Preventive Care and Screening: Colorectal Cancer Screening. 

PQRI 1 ............................................

NQF 0059 

Title: Diabetes Mellitus: Hemoglobin A1c Poor Control in Diabetes Mellitus. 

NQF 0052 ....................................... Title: Low back pain: use of imaging studies. 

NQF 0018 ....................................... Title: Controlling High Blood Pressure. 

PQRI 128 ........................................

NQF 0421 

Title: Preventive Care and Screening: Body Mass Index (BMI) Screening and Follow-Up. 


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TABLE 10—MEASURE GROUP: PRIMARY CARE—Continued 

Measure No. Clinical quality measure title & description 

PQRI 65 ..........................................

NQF 0069 

Title: Treatment for Children with Upper Respiratory Infection (URI): Avoidance of Inappropriate Use. 

PQRI 66 ..........................................

NQF 0002 

Title: Appropriate Testing for Children with Pharyngitis. 

PQRI 110 ........................................

NQF 0041 

Title: Preventive Care and Screening: Influenza Immunization for Patients ≥ 50 Years Old. 

PQRI 197 ........................................

NQF 0074 

Title: Coronary Artery Disease (CAD): Drug Therapy for Lowering LDL-Cholesterol. 

NQF 0001 ....................................... Title: Asthma Assessment 

NQF 0004 ....................................... Title: Initiation and Engagement of Alcohol and Other Drug Dependence Treatment:

(a) Initiation, 

(b) Engagement. 

NQF 0024 ....................................... Title: Body Mass Index (BMI) 2 through 18 years of age. 

NQF 0032 ....................................... Title: Cervical Cancer Screening. 

NQF 0036 ....................................... Title: Use of appropriate medications for people with asthma. 

NQF 0060 ....................................... Title: Hemoglobin A1c test for pediatric patients. 

NQF 0105 ....................................... Title: New Episode of Depression: 

(a) Optimal Practitioner Contacts for Medication Management. 

(b) Effective Acute Phase Treatment. 

(c) Effective Continuation Phase Treatment. 

NQF 0106 ....................................... Title: Diagnosis of attention deficit hyperactivity disorder (ADHD) in primary care for school age children 

and adolescents. 

NQF 0107 ....................................... Title: Management of attention deficit hyperactivity disorder (ADHD) in primary care for school age children 

and adolescents. 

NQF 0108 ....................................... Title: ADHD: Follow-Up Care for Children Prescribed Attention-Deficit/Hyperactivity Disorder (ADHD) Medication. 

NQF 0110 ....................................... Title: Bipolar Disorder and Major Depression: Appraisal for alcohol or chemical substance use. 

Not applicable ................................. Title: Comprehensive Diabetes Care: HbA1c Control (< 8.0 percent). 

Not applicable ................................. Title: Appropriate antibiotic use for ear infections. 

TABLE 11—MEASURE GROUP: PEDIATRICS

Measure No. Clinical quality measure title & description 

PQRI 66 ..........................................

NQF 0002 

Title: Appropriate Testing for Children with Pharyngitis. 

NQF 0060 ....................................... Title: Hemoglobin A1c test for pediatric patients. 

NQF 0106 ....................................... Title: Diagnosis of attention deficit hyperactivity disorder (ADHD) in primary care for school age children 

and adolescents. 

NQF 0107 ....................................... Title: Management of attention deficit hyperactivity disorder (ADHD) in primary care for school age children 

and adolescents. 

NQF 0108 ....................................... Title: ADHD: Follow-Up Care for Children Prescribed Attention-Deficit/Hyperactivity Disorder (ADHD) Medication. 

NQF 0024 ....................................... Title: Body Mass Index (BMI) 2 through 18 years of age. 

NQF 0026 ....................................... Title: Measure pair— 

a. Tobacco use prevention for infants, children and adolescents, 

b. Tobacco use cessation for infants, children and adolescents. 

NQF 0038 ....................................... Title: Childhood Immunization Status. 

Not applicable ................................. Title: Appropriate antibiotic use for ear infections. 

TABLE 12—MEASURE GROUP: OBSTETRICS AND GYNECOLOGY

Measure No. Clinical quality measure title & description 

PQRI 112 ........................................

NQF 0031 

Title: Preventive Care and Screening: Screening Mammography. 

PQRI 128 ........................................

NQF 0421 

Title: Preventive Care and Screening: Body Mass Index (BMI) Screening and Follow-Up. 

NQF 0032 ....................................... Title: Cervical Cancer Screening. 

NQF 0033 ....................................... Title: Chlamydia screening in women. 

NQF 0471 ....................................... Title: Cesarean Rate for low-risk first birth women (aka NTSV CS rate). 

NQF 0012 ....................................... Title: Prenatal Screening for Human Immunodeficiency Virus (HIV). 

NQF 0014 ....................................... Title: Prenatal Anti-D Immune Globulin. 

Not applicable ................................. Title: Hysterectomy rates. 

Not applicable ................................. Title: 30 Readmission Rate following deliveries. 


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TABLE 13—MEASURE GROUP: NEUROLOGY

Measure No. Clinical quality measure title & description 

PQRI 33 ..........................................

NQF 0241 

Title: Stroke and Stroke Rehabilitation: Anticoagulant Therapy Prescribed for Atrial Fibrillation at Discharge. 

PQRI 201 ........................................

NQF 0073 

Title: Ischemic Vascular Disease (IVD): Blood Pressure Management Control. 

PQRI 202 ........................................

NQF 0075 

Title: Ischemic Vascular Disease (IVD): Complete Lipid Profile. 

PQRI 203 ........................................

NQF 0075 

Title: Ischemic Vascular Disease (IVD): Low Density Lipoprotein (LDL–C) Control. 

PQRI 204 ........................................

NQF 0068 

Title: Ischemic Vascular Disease (IVD): Use of Aspirin or Another Antithrombotic. 

TABLE 14—MEASURE GROUP: PSYCHIATRY

Measure No. Clinical quality measure title & description 

PQRI 9 ............................................

NQF 0105 

Title: Major Depressive Disorder (MDD): Antidepressant Medication During Acute Phase for Patients with 

MDD. 

PQRI 106 ........................................

NQF 0103 

Title: Major Depressive Disorder (MDD): Diagnostic Evaluation. 

PQRI 107 ........................................

NQF 0104 

Title: Major Depressive Disorder (MDD): Suicide Risk Assessment. 

NQF 0004 ....................................... Title: Initiation and Engagement of Alcohol and Other Drug Dependence Treatment: (a) Initiation, (b) Engagement. 

NQF 0105 ....................................... Title: New Episode of Depression: (a) Optimal Practitioner Contacts for Medication Management, (b) Effective Acute Phase Treatment, (c) Effective Continuation Phase Treatment. 

NQF 0110 ....................................... Title: Bipolar Disorder and Major Depression: Appraisal for alcohol or chemical substance use. 

TABLE 15—MEASURE GROUP: OPHTHALMOLOGY

Measure No. Clinical quality measure title & description 

PQRI 12 ..........................................

NQF 0086 

Title: Primary Open Angle Glaucoma (POAG): Optic Nerve Evaluation. 

PQRI 18 ..........................................

NQF 0088 

Title: Diabetic Retinopathy: Documentation of Presence or Absence of Macular Edema and Level of Severity of Retinopathy. 

PQRI 19 ..........................................

NQF 0089 

Title: Diabetic Retinopathy: Communication with the Physician Managing On-going Diabetes Care. 

TABLE 16—MEASURE GROUP: PODIATRY

Measure No. Clinical quality measure title & description 

PQRI 127 ........................................

NQF 0416 

Title: Diabetes Mellitus: Diabetic Foot and Ankle Care, Ulcer Prevention—Evaluation of Footwear. 

PQRI 163 ........................................

NQF 0056 

Title: Diabetes Mellitus: Foot Exam. 

NQF 0519 ....................................... Title: Diabetic Foot Care and Patient Education Implemented. 

TABLE 17—MEASURE GROUP: RADIOLOGY

Measure No. Clinical quality measure title & description 

PQRI 10 ..........................................

NQF 0246 

Title: Stroke and Stroke Rehabilitation: Computed Tomography (CT) or Magnetic Resonance Imaging 

(MRI) Reports. 

PQRI 195 ........................................

NQF 0507 

Title: Stenosis Measurement in Carotid Imaging Studies. 

PQRI 145 ........................................

NQF 0510 

Title: Radiology: Exposure Time Reported for Procedures Using Fluoroscopy. 

PQRI 146 ........................................

NQF 0508 

Title: Radiology: Inappropriate Use of ‘‘Probably Benign’’ Assessment Category in Mammography Screening. 

PQRI 147 ........................................

NQF 0511 

Title: Nuclear Medicine: Correlation with Existing Imaging Studies for All Patients Undergoing Bone Scintigraphy. 

NQF 0052 ....................................... Title: Low back pain: use of imaging studies. 

NQF 0513 ....................................... Title: Use of Contrast: Thorax CT. 


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TABLE 18—MEASURE GROUP: GASTROENTEROLOGY

Measure No. Clinical quality measure title & description 

PQRI 86 ..........................................

NQF 0397 

Title: Hepatitis C: Antiviral Treatment Prescribed. 

PQRI 89 ..........................................

NQF 0401 

Title: Hepatitis C: Counseling Regarding Risk of Alcohol Consumption. 

PQRI 113 ........................................

NQF 0034 

Title: Preventive Care and Screening: Colorectal Cancer Screening. 

PQRI 183 ........................................

NQF 0399 

Title: Hepatitis C: Hepatitis A Vaccination in Patients with HCV. 

PQRI 184 ........................................

NQF 0400 

Title: Hepatitis C: Hepatitis B Vaccination in Patients with HCV. 

PQRI 185 ........................................

AQA adopted 

Title: Endoscopy & Polyp Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous 

Polyps—Avoidance of Inappropriate Use. 

TABLE 19—MEASURE GROUP: NEPHROLOGY

Measure No. Clinical quality measure title & description 

PQRI 81 ..........................................

NQF 0323 

Title: End Stage Renal Disease (ESRD): Plan of Care for Inadequate Hemodialysis in ESRD Patients. 

PQRI 82 ..........................................

NQF 0321 

Title: End Stage Renal Disease (ESRD): Plan of Care for Inadequate Peritoneal Dialysis. 

PQRI 121 ........................................

AQA adopted 

Title: Chronic Kidney Disease (CKD): Laboratory Testing (Calcium, Phosphorus, Intact Parathyroid Hormone (iPTH) and Lipid Profile). 

PQRI 122 ........................................

AQA adopted 

Title: Chronic Kidney Disease (CKD): Blood Pressure Management. 

PQRI 123 ........................................

AQA adopted 

Title: Chronic Kidney Disease (CKD): Plan of Care—Elevated Hemoglobin for Patients Receiving 

Erythropoiesis-Stimulating Agents (ESA). 

PQRI 153 ........................................

AQA adopted 

Title: Chronic Kidney Disease (CKD): Referral for Arteriovenous (AV) Fistula. 

With the inclusion of measures 

applicable to targeting children and 

adolescents and the wide applicability 

of the measures like Blood Pressure 

Management, we believe this core set of 

clinical quality measures and specialty 

measures is broad enough to enable 

reporting by all EPs. However, if the 

public believes that other EPs would not 

have sufficient patients in the 

denominator of these core measures, we 

encourage commenters to identify the 

EPs in question and propose specific 

remedies. 

Although we do not propose to 

require clinical quality measure 

reporting electronically until 2012, we 

propose to begin clinical quality 

reporting through attestation in the 2011 

payment year. We solicit comment on 

whether it may be more appropriate to 

defer some or all clinical quality 

reporting until the 2012 payment year. 

If reporting on some but not all 

measures in 2011 is feasible, we solicit 

comment on which key measures 

should be chosen for 2011 and which 

should be deferred until 2012 and why. 

We further propose that starting in 

payment year 2012, in addition to 

meeting requirements for measures on 

meaningful EHR use and other 

requirements, EPs would be required to 

electronically submit this quality 

reporting information directly to CMS 

and States using certified EHR 

technology. We encourage comments on 

these reporting criteria, particularly on 

the requirement that all EPs–would 

report on the set of ‘‘core measures.’’ We 

are also interested in comments as to 

whether some Medicare or Medicaid 

EPs may not be able to meet the 

proposed reporting requirements, why 

that might be the case, and whether 

commenters believe other alternative 

options are preferable. 

f. Proposed Clinical Quality Measures 

for Electronic Submission by Eligible 

Hospitals 

Based on the considerations for 

clinical quality measures previously 

discussed in this proposed rule, we 

propose that eligible hospitals will be 

required to report summary data to CMS 

on the set of clinical quality measures 

identified in Table 20 starting in the 

2011 payment year. We further propose 

that for the 2012 payment year, 

hospitals will be required to submit 

these measures to CMS electronically 

using certified EHR technology on a set 

of clinical quality measures identified in 

Table 20, which would be sufficient to 

meet the requirements for both the 

Medicare and the Medicaid EHR 

incentive (for hospitals eligible for both 

incentive programs), with respect to the 

requirement to report clinical quality 

measures. For hospitals eligible for only 

the Medicaid EHR incentive program, 

such reporting will be to States. For 

eligible hospitals to which the measures 

in Table 20 do not apply to their patient 

population, hospitals have the option to 

select clinical quality measures 

identified in Table 21 to meet the 

requirements for the reporting of 

clinical quality measures for the 

Medicaid program incentive. Tables 20 

and 21, convey the clinical quality 

measure’s title, number, owner/ 

developer and contact information, and 

a link to existing electronic 

specifications where applicable. 


sroberts on DSKD5P82C1PROD with PROPOSALS
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TABLE 20—PROPOSED CLINICAL QUALITY MEASURES FOR ELECTRONIC SUBMISSION BY ELIGIBLE HOSPITALS FOR

PAYMENT YEAR 2011–2012 

Measure No. identifier Measure title, description & measure developer Electronic measure 

specifications information 

ED–1 .................................... Title: Emergency Department Throughput—admitted patients. Median time from ED 

arrival to ED departure for admitted patients.

http://www.hitsp.org/ 

ConstructSet_Details.

aspx?&PrefixAlpha=5&

PrefixNumeric=906. 

NQF 0495 ............................ Description: Median time from emergency department arrival to time of departure 

from the emergency room for patients admitted to the facility from the emergency 

department. 

Measure Developer: CMS/Oklahoma Foundation for Medical Quality (OFMQC).

ED–2 .................................... Title: Emergency Department Throughput—admitted patients. Admission decision 

time to ED departure time for admitted patients.

http://www.hitsp.org/ 

ConstructSet_Details.

aspx?&Prefix

Alpha=5&Prefix

Numeric=906. 

NQF 0497 ............................ Description: Median time from admit decision time to time of departure from the 

emergency department of emergency department patients admitted to inpatient 

status. 

Measure Developer: CMS/OFMQ. 

ED–3 .................................... Title: Emergency Department Throughput—discharged patients. Median Time from 

ED Arrival to ED Departure for Discharged ED Patients. 

NQF 0496 ............................ Description: Median Time from ED arrival to time of departure from the ED for patients discharged from the ED. 

Measure Developer: CMS/OFMQ. 

Stroke-2 ................................ Title: Ischemic stroke—Discharge on anti-thrombotics ............................................... http://www.hitsp.org/ 

ConstructSet_Details.

aspx?&Prefix

Alpha=5&Prefix

Numeric=906. 

NQF 0435 ............................ Description: Ischemic stroke patients prescribed antithrombotic therapy at hospital 

discharge. 

Measure Developer: The Joint Commission. 

Stroke-3 ................................ Title: Ischemic stroke—Anticoagulation for A-fib/flutter ............................................... http://www.hitsp.org/ 

ConstructSet_Details.

aspx?&Prefix

Alpha=5&Prefix

Numeric=906. 

NQF 0436 ............................ Description: Ischemic stroke patients with atrial fibrillation/flutter who are prescribed 

anticoagulation therapy at hospital discharge. 

Measure Developer: The Joint Commission. 

Stroke-4 ................................ Title: Ischemic stroke—Thrombolytic therapy for patients arriving within 2 hours of 

symptom onset.

http://www.hitsp.org/ 

ConstructSet_Details.

aspx?&Prefix

Alpha=5&Prefix

Numeric=906. 

NQF 0437 ............................ Description: Acute ischemic stroke patients who arrive at this hospital within 2 

hours of time last known well and for whom IV t-PA was initiated at this hospital 

within 3 hours of time last known well. 

Measure Developer: The Joint Commission. 

Stroke-5 ................................ Title: Ischemic or hemorrhagic stroke—Antithrombotic therapy by day 2 ................... http://www.hitsp.org/ 

ConstructSet_Details.

aspx?&Prefix

Alpha=5&Prefix

Numeric=906. 

NQF 0438 ............................ Description: Ischemic stroke patients administered antithrombotic therapy by the 

end of hospital day 2. 

Measure Developer: The Joint Commission. 

Stroke-6 ................................ Title: Ischemic stroke—Discharge on statins ............................................................... http://www.hitsp.org/ 

ConstructSet_Details.

aspx?&Prefix

Alpha=5&Prefix

Numeric=906. 

NQF 0439 ............................ Description: Ischemic stroke patients with LDL > 100 mg/dL, or LDL not measured, 

or, who were on a lipid-lowering medication prior to hospital arrival are prescribed statin medication at hospital discharge. 

Measure Developer: The Joint Commission. 

Stroke-8 ................................ Title: Ischemic or hemorrhagic stroke—Stroke education ........................................... http://www.hitsp.org/ 

ConstructSet_Details.

aspx?&Prefix

Alpha=5&Prefix

Numeric=906. 


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TABLE 20—PROPOSED CLINICAL QUALITY MEASURES FOR ELECTRONIC SUBMISSION BY ELIGIBLE HOSPITALS FOR

PAYMENT YEAR 2011–2012—Continued 

Measure No. identifier Measure title, description & measure developer Electronic measure 

specifications information 

NQF 0440 ............................ Description: Ischemic or hemorrhagic stroke patients or their caregivers who were 

given educational materials during the hospital stay addressing all of the following: activation of emergency medical system, need for follow-up after discharge, medications prescribed at discharge, risk factors for stroke, and warning 

signs and symptoms of stroke. 

Measure Developer: The Joint Commission. 

Stroke-10 .............................. Title: Ischemic or hemorrhagic stroke—Rehabilitation assessment ............................ http://www.hitsp.org/ 

ConstructSet_Details.

aspx?&Prefix

Alpha=5&Prefix

Numeric=906. 

NQF 0441 ............................ Description: Ischemic or hemorrhagic stroke patients who were assessed for rehabilitation services. 

Measure Developer: The Joint Commission. 

VTE–1 .................................. Title: VTE prophylaxis within 24 hours of arrival ......................................................... http://www.hitsp.org/ 

ConstructSet_Details.

aspx?&Prefix

Alpha=5&Prefix

Numeric=906. 

NQF 0371 ............................ Description: This measure assesses the number of patients who received VTE prophylaxis or have documentation why no VTE prophylaxis was given the day of or 

the day after hospital admission or surgery end date for surgeries that start the 

day of or the day after hospital admission. 

Measure Developer: The Joint Commission. 

VTE–2 .................................. Title: ICU VTE prophylaxis ........................................................................................... http://www.hitsp.org/ 

ConstructSet_Details.

aspx?&Prefix

Alpha=5&Prefix

Numeric=906. 

NQF 0372 ............................ Description: This measure assesses the number of patients who received VTE prophylaxis or have documentation why no VTE prophylaxis was given the day of or 

the day after the initial admission (or transfer) to the Intensive Care Unit (ICU) or 

surgery end date for surgeries that start the day of or the day after ICU admission (or transfer). 

Measure Developer: The Joint Commission. 

VTE–3 .................................. Title: Anticoagulation overlap therapy .......................................................................... http://www.hitsp.org/ 

ConstructSet_Details.

aspx?&Prefix

Alpha=5&Prefix

Numeric=906. 

NQF 0373 ............................ Description: This measure assesses the number of patients diagnosed with confirmed VTE who received an overlap of parenteral (intravenous [IV] or subcutaneous [subcu]) anticoagulation and warfarin therapy. For patients who received 

less than five days of overlap therapy, they must be discharged on both medications. Overlap therapy must be administered for at least five days with an international normalized ratio (INR) ≥ 2 prior to discontinuation of the parenteral 

anticoagulation therapy or the patient must be discharged on both medications. 

Measure Developer: The Joint Commission. 

VTE–4 .................................. Title: Platelet monitoring on unfractionated heparin .................................................... http://www.hitsp.org/ 

ConstructSet_Details.

aspx?&Prefix

Alpha=5&Prefix

Numeric=906. 

NQF 0374 ............................ Description: This measure assesses the number of patients diagnosed with confirmed VTE who received intravenous (IV) UFH therapy dosages AND had their 

platelet counts monitored using defined parameters such as a nomogram or protocol. 

Measure Developer: The Joint Commission. 

VTE–5 .................................. Title: VTE discharge instructions ................................................................................. http://www.hitsp.org/ 

ConstructSet_Details.

aspx?&Prefix

Alpha=5&Prefix

Numeric=906. 

NQF 0375 ............................ Description: This measure assesses the number of patients diagnosed with confirmed VTE that are discharged to home, to home with home health, home hospice or discharged/transferred to court/law enforcement on warfarin with written 

discharge instructions that address all four criteria: compliance issues, dietary advice, follow-up monitoring, and information about the potential for adverse drug 

reactions/interactions. 


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TABLE 20—PROPOSED CLINICAL QUALITY MEASURES FOR ELECTRONIC SUBMISSION BY ELIGIBLE HOSPITALS FOR

PAYMENT YEAR 2011–2012—Continued 

Measure No. identifier Measure title, description & measure developer Electronic measure 

specifications information 

Measure Developer: The Joint Commission. 

VTE–6 .................................. Title: Incidence of potentially preventable VTE ........................................................... http://www.hitsp.org/ 

ConstructSet_Details.

aspx?&Prefix

Alpha=5&Prefix

Numeric=906. 

NQF 0376 ............................ Description: This measure assesses the number of patients diagnosed with confirmed VTE during hospitalization (not present on arrival) who did not receive 

VTE prophylaxis between hospital admission and the day before the VTE diagnostic testing order date. 

Measure Developer: The Joint Commission. 

RHQDAPU AMI–8a .............. Title: Primary PCI Received Within 90 Minutes of Hospital Arrival.

NQF 0163 ............................ Description: Acute myocardial infarction (AMI) patients with ST-segment elevation 

or LBBB on the ECG closest to arrival time receiving primary PCI during the hospital stay with a time from hospital arrival to PCI of 90 minutes or less. 

Measure Developer: CMS/OFMQ. 

RHQDAPU PN–3b ............... Title: Blood Cultures Performed in the Emergency Department Prior to Initial Antibiotic Received in Hospital.

NQF 0148 ............................ Description: Pneumonia patients whose initial emergency room blood culture specimen was collected prior to first hospital dose of antibiotics. This measure focuses 

on the treatment provided to Emergency Department patients prior to admission 

orders. 

Measure Developer: CMS/OFMQ. 

RHQDAPU AMI–2 ................ Title: Aspirin Prescribed at Discharge.

NQF 0142 ............................ Description: Acute myocardial infarction (AMI) patients who are prescribed aspirin 

at hospital discharge. 

Measure Developer: CMS/OFMQ. 

RHQDAPU AMI–3 ................ Title: Angiotensin Converting Enzyme Inhibitor (ACEI) or Angiotensin Receptor 

Blocker (ARB) for Left Ventricular Systolic Dysfunction (LVSD).

NQF 0137 ............................ Description: Acute myocardial infarction (AMI) patients with left ventricular systolic 

dysfunction (LVSD) who are prescribed an ACEI or ARB at hospital discharge. 

For purposes of this measure, LVSD is defined as chart documentation of a left 

ventricular ejection fraction (LVEF) less than 40% or a narrative description of left 

ventricular systolic (LVS) function consistent with moderate or severe systolic 

dysfunction. 

Measure Developer: CMS/OFMQ. 

RHQDAPU AMI–5 ................ Title: Beta-Blocker Prescribed at Discharge.

NQF 0160 ............................ Description: Acute myocardial infarction (AMI) patients who are prescribed a 

betablocker at hospital discharge. 

Measure Developer: CMS/OFMQ. 

RHQDAPU AMI–READ ........ Title & Description: Hospital Specific 30 day Risk-Standardized Readmission Rate 

following AMI admission.

NQF 0505 ............................ Measure Developer: CMS. 

Not applicable ...................... Title: Hospital Specific 30 day Rate following AMI admission. 

RHQDAPU HF–READ ......... Title & Description: Hospital Specific 30 day Risk-Standardized Readmission Rate 

following Heart Failure admission. 

NQF 0330 ............................ Measure Developer: CMS/OFMQ. 

Not applicable ...................... Title: Hospital Specific 30 day Rate following Heart Failure admission. 

RHQDAPU PNE–READ ....... Title & Description: Hospital Specific 30 day Risk-Standardized Readmission Rate 

following Pneumonia admission. 

NQF 0506 ............................ Measure Developer: CMS. 

Not applicable ...................... Title: Hospital Specific 30 day Rate following Pneumonia admission. 

NQF 0528 ............................ Title: Infection SCIP Inf-2 Prophylactic antibiotics consistent with current recommendations. 

Description: Surgical patients who received prophylactic antibiotics consistent with 

current guidelines (specific to each type of surgical procedure). 

Measure Developer: CMS/OFMQ. 

NQF 0302 ............................ Title: Ventilator Bundle. 

Description: Percentage of intensive care unit patients on mechanical ventilation at 

time of survey for whom all four elements of the ventilator bundle are documented and in place. The ventilator bundle elements are: 

• Head of bed (HOB) elevation 30 degrees or greater (unless medically contraindicated); noted on 2 different shifts within a 24 hour period.


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TABLE 20—PROPOSED CLINICAL QUALITY MEASURES FOR ELECTRONIC SUBMISSION BY ELIGIBLE HOSPITALS FOR

PAYMENT YEAR 2011–2012—Continued 

Measure No. identifier Measure title, description & measure developer Electronic measure 

specifications information 

• Daily ‘‘sedation interruption’’ and daily assessment of readiness to extubate; 

process includes interrupting sedation until patient follow commands and patient is assessed for discontinuation of mechanical ventilation; Parameters of 

discontinuation include: resolution of reason for intubation; inspired oxygen 

content roughly 40%; assessment of patients ability to defend airway after 

extubation due to heavy sedation; minute ventilation less than equal to 15 liters/minute; and respiratory rate/tidal volume less than or equal to 105/min/L 

(RR/TV < 105).

• SUD (peptic ulcer disease) prophylaxis DVT (deep venous thrombosis) prophylaxis.

Measure Developer: IHI. 

NQF 0298 ............................ Title: Central Line Bundle Compliance. 

Description: Percentage of intensive care patients with central lines for whom all 

elements of the central line bundle are documented and in place. The central line 

bundle elements include: 

• Hand hygiene.

• Maximal barrier precautions upon insertion.

• Chlorhexidine skin antisepsis.

• Optimal catheter site selection, with subclavian vein as the preferred site for 

non-tunneled catheters in patients 18 years and older.

• Daily review of line necessity with prompt removal of unnecessary lines.

Measure Developer: IHI. 

NQF 0140 ............................ Title: Ventilator-associated pneumonia for ICU and high-risk nursery (HRN) patients. 

Description: Percentage of ICU and HRN patients who over a certain amount of 

days have ventilator-associated pneumonia. 

Measure Developer: CDC. 

NQF 0138 ............................ Title: Urinary catheter-associated urinary tract infection for intensive care unit (ICU) 

patients. 

Description: Percentage of intensive care unit patients with urinary catheter-associated urinary tract infections. 

Measure Developer: CDC. 

NQF 0139 ............................ Title: Central line catheter-associated blood stream infection rate for ICU and highrisk nursery (HRN) patients. 

Description: Percentage of ICU and high-risk nursery patients, who over a certain 

amount of days acquired a central line catheter-associated blood stream infections over a specified amount of line-days. 

Measure Developer: CDC. 

NQF 0329 ............................ Title: All-Cause Readmission Index (risk adjusted). 

Description: Overall inpatient 30-day hospital readmission rate. 

Measure Developer: United Health Group. 

Not applicable ...................... Title: All-Cause Readmission Index. 

Description: Overall inpatient 30-day hospital readmission rate. 

TABLE 21—PROPOSED ALTERNATIVE MEDICAID CLINICAL QUALITY MEASURES FOR MEDICAID ELIGIBLE HOSPITALS

NQF No. Measure title, description & measure developer Electronic measure 

specifications information 

0341 ..................................... Title: PICU Pain Assessment on Admission. 

Description: Percentage of PICU patients receiving: 

a. Pain assessment on admission. 

b. Periodic pain assessment. 

Measure Developer: Vermont Oxford Network. 

0348 ..................................... Title: Iotrogenic pneumothorax in non-neonates (pediatric up to 17 years of age). 

Description: Percent of medical and surgical discharges, age under 18 years, with 

ICD–9–CM code of iatrogenic pneumothorax in any secondary diagnosis field. 

Measure Developer: AHRQ. 

0362 ..................................... Title: Foreign body left after procedure, age under 18 years. 

Description: Discharges with foreign body accidentally left in during procedure per 

1,000 discharges. 

Measure Developer: AHRQ. 

0151 ..................................... Title: Pneumonia Care PNE–5c Antibiotic. 

Description: Percentage of pneumonia patients 18 years of age and older who receive their first dose of antibiotics within 6 hours after arrival at the hospital. 

Measure Developer: CMS/OFMQ. 

0147 ..................................... Title: Pneumonia Care PN–6 Antibiotic selection. 

Description: Percentage of pneumonia patients 18 years of age or older selected 

for initial receipts of antibiotics for community-acquired pneumonia (CAP). 


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TABLE 21—PROPOSED ALTERNATIVE MEDICAID CLINICAL QUALITY MEASURES FOR MEDICAID ELIGIBLE HOSPITALS— 

Continued 

NQF No. Measure title, description & measure developer Electronic measure 

specifications information 

Measure Developer: CMS/OFMQ. 

0356 ..................................... Title: Pneumonia Care PN–3a Blood culture. 

Description: Percent of pneumonia patients, age 18 years or older, transferred or 

admitted to the ICU within 24 hours of hospital arrival who had blood cultures 

performed within 24 hours prior to or 24 hours after arrival at the hospital. 

Measure Developer: CMS/OFMQ. 

0527 ..................................... Title: Infection SCIP Inf-1 Prophylactic antibiotic received within 1 hour prior to surgical incision. 

Description: Surgical patients with prophylactic antibiotics initiated within 1 hour 

prior to surgical incision. Patients who received vancomycin or a fluoroquinolone 

for prophylactic antibiotics should have the antibiotics initiated within 2 hours 

prior to surgical incision. Due to the longer infusion time required for vancomycin 

or a fluoroquinolone, it is acceptable to start these antibiotics within 2 hours prior 

to incision time. 

Measure Developer: CMS/OFMQ. 

0529 ..................................... Title: Infection SCIP Inf-3 Prophylactic antibiotics discontinued within 24 hours after 

surgery end time. 

Description: Surgical patients whose prophylactic antibiotics were discontinued 

within 24 hours after Anesthesia End Time. 

Measure Developer: CMS/OFMQ. 

We have included in the hospital 

measures set several clinical quality 

measures which have undergone 

development of electronic 

specifications. These clinical quality 

measures have been developed for 

future RHQDAPU consideration. The 

electronic specifications were 

developed through an interagency 

agreement with ONC to develop 

interoperable standards for EHR 

submission of the ED throughput, 

stroke, and VTE clinical quality 

measures on Table 20, to be determined 

by a future rulemaking document 

provided by ONC. We also have 

planned to test the submission of these 

clinical quality measures in Medicare 

(see 74 FR 43893). The specifications for 

the RHQDAPU clinical quality measures 

for eligible hospitals that are being used 

for testing EHR-based submission of 

these clinical quality measures can be 

found at http://www.hitsp.org/

ConstructSet_Details.aspx?&

PrefixAlpha=5&PrefixNumeric=906. A 

description of the clinical quality 

measure, including the clinical quality 

measure’s numerator and denominator, 

can be found here as well. Other 

measures are currently in the 

RHQDAPU program or are measures of 

importance for measuring or preventing 

adverse outcomes. In addition to Risk 

Standardized readmission clinical 

quality measures, we have proposed 

Readmission rates to be reported which 

are not risk adjusted. We have also 

reviewed the recommendations of the 

HIT Standards Committee that apply to 

hospitals which include Atrial 

Fibrillation Receiving Anticoagulation 

Therapy. We note that Atrial Fibrillation 

Receiving Anticoagulation Therapy is 

one of the clinical quality measures 

included on Table 20, identified in the 

table as Stroke-3. We note that we have 

not included the HIT Standards 

Committee recommended clinical 

quality measure on surgery patients who 

received VTE prophylaxis within 24 

hours period to surgery to 24 hours after 

surgery end time because it is a current 

clinical quality measure collected in the 

RHQDAPU program through chart 

abstraction for all applicable patients 

(SCIP–VTE–2). The VTE–2 clinical 

quality measure in Table 20 is a parallel 

clinical quality measure to SCIP–VTE– 

2, includes non-surgical patients, and is 

a more feasible to implement because 

the electronic specifications have been 

completed. We have however added 

SCIP–VTE–2 for future consideration. 

To satisfy the requirements of 

reporting on clinical quality measures 

under sections 1886(n)(3)(A)(iii) and 

1903(t)(6)(C) of the Act for the 2011– 

2012 payment year, we propose to 

require eligible hospitals to report on all 

EHR incentive clinical quality measures 

for which they have applicable cases, 

without regard to payer. Medicare 

eligible hospitals, who are also 

participating in the Medicaid EHR 

incentive program, will also be required 

to report on all Medicaid clinical quality 

measures for which the eligible hospital 

has applicable cases. To demonstrate 

that it is an eligible meaningful EHR 

user, the eligible hospital is required to 

electronically submit information on 

each clinical quality measures for each 

patient to whom the clinical quality 

measure applies, regardless of payer, 

discharged from the hospital during the 

EHR reporting period and for whom the 

clinical quality measure is applicable. 

Although we do not propose to require 

clinical quality reporting electronically 

until 2012, we propose to begin clinical 

quality reporting though attestation in 

the 2011 payment year. We solicit 

comment on whether it may be more 

appropriate to defer some or all clinical 

quality reporting until the 2012 

payment year. If reporting on some but 

not all measures in 2011 is feasible, we 

solicit comment on which key measures 

should be chosen for 2011 and which 

should be deferred until 2012 and why. 

We invite comments on these 

proposed clinical quality measures for 

eligible hospitals and our proposed 

timelines to post specification 

documents for these clinical quality 

measures to the CMS Web site. 

g. Request for Public Comment on 

Potential Measures for EPs and Eligible 

Hospitals in 2013 Payment Year and 

Subsequent Years 

We expect that the number of clinical 

quality measures for which EPs and 

eligible hospitals will be able to 

electronically submit information will 

rapidly expand in 2013 and beyond. 

We plan to consider measures from 

the 2010 PQRI program. These clinical 

quality measures can be found at 

http://www.cms.hhs.gov/PQRI/05_

StatuteRegulationsProgramInstructions.

asp 

For future considerations of clinical 

quality measures for 2013 and beyond 

for eligible hospitals, we will also 


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consider other clinical quality measures 

from the RHQDAPU program which are 

identified in the FY 2010 IPPS final rule 

(74 FR 43868 through 43882). We invite 

comments on inclusion of clinical 

quality measures for the 2013 and 

beyond HITECH Act Medicare and 

Medicaid incentive program, based on 

Stage 2 and Stage 3 meaningful use 

criteria. 

For the 2013 payment year, we are 

considering expanding the Medicaid 

EHR incentive programs clinical quality 

measure set for EPs and eligible 

hospitals to include clinical quality 

measures that address the following 

clinical areas, to address quality of care 

for additional patient populations, and 

facilitate alignment with Medicaid and 

CHIP programs: 

• Additional pediatrics measures 

(such as completed growth charts, 

electronic prescriptions with weightbased dosing support and 

documentation of newborn screening). 

• Long-term care measures. 

• Additional obstetrics measure. 

• Dental care/oral health measures. 

• Additional mental health and 

substance abuse measures. 

The above lists do not constitute a 

comprehensive list of all clinical quality 

measures that may be considered. 

Specific measures for payment years 

2013 and beyond will be addressed by 

CMS in future notice and comment 

rulemaking. To assist us in identifying 

potential clinical quality measures for 

future consideration for years 2013 and 

beyond, we welcome comments on the 

potential topics and/or clinical quality 

measures listed above as well as 

suggestions for additional clinical 

quality measure topics and/or specific 

clinical quality measures. 

h. Proposed Reporting Method for 

Clinical Quality Measures for 2011 and 

2012 Payment Year 

(1) Reporting Method for 2011 Payment 

Year 

As we previously discussed, we 

propose to use attestation as a means for 

EPs and eligible hospitals, for purposes 

of the Medicare incentive program, to 

demonstrate the meaningful use 

requirement for the calculation and 

submission of clinical quality measure 

results to CMS. 

Specifically, for 2011, we propose to 

require that Medicare EPs and hospitals 

attest to the use of a certified EHR 

system to capture the data elements and 

calculate the results for the applicable 

clinical quality measures. 

We further propose to require that 

Medicare EPs and eligible hospitals 

attest to the accuracy and completeness 

of the numerators, denominators, and 

exclusions submitted for each of the 

applicable measures, and report the 

results to CMS for all applicable 

patients. 

Attestation will utilize the same 

system for other attestation for 

meaningful use, and we propose to 

require for Medicare EPs that they attest 

to the following: 

• The information submitted with 

respect to clinical quality measures was 

generated as output of an identified 

certified electronic health record. 

• The information submitted is 

accurate to the best of the knowledge 

and belief of the EP. 

• The information submitted includes 

information on all patients to whom the 

clinical quality measure applies. 

• The NPI and TIN of the EP 

submitting the information, and the 

specialty group of clinical quality 

measures that are being submitted. 

• For an EP who is exempt from 

reporting each of the core measures, an 

attestation that one or more of the core 

measures do not apply to the scope of 

practice of the EP. 

• For an EP who is exempt from 

reporting on a specialty group, an 

attestation that none of the specialty 

groups applies to the scope of practice 

of the EP. 

• For an EP who does report on a 

specialty group, but is exempt from 

reporting on each of the clinical quality 

measures in the group, an attestation 

that the clinical quality measures not 

reported do not apply to any patients 

treated by the EP. 

• The numerators, denominators, and 

exclusions for each clinical quality 

measure result reported, providing 

separate information for each clinical 

quality measure including the 

numerators, denominators, and 

exclusions for all patients irrespective 

third party payer or lack thereof; for 

Medicare FFS patients; for Medicare 

Advantage patients; and for Medicaid 

patients. 

• The beginning and end dates for 

which the numerators, denominators, 

and exclusions apply. 

For eligible hospitals, we propose to 

require that they attest to the following: 

• The information submitted with 

respect to clinical quality measures was 

generated as output from an identified 

certified EHR. 

• The information submitted to the 

knowledge and belief of the official 

submitting on behalf of the eligible 

hospital. 

• The information submitted includes 

information on all patients to whom the 

measure applies. 

• The identifying information for the 

eligible hospital. 

• For eligible hospitals that do not 

report one or more measures an 

attestation that the clinical quality 

measures not reported do not apply to 

any patients treated by the eligible 

hospital during the reporting period. 

• The numerators, denominators, and 

exclusions for each clinical quality 

measure result reported, providing 

separate information for each clinical 

quality measure including the 

numerators, denominators, and 

exclusions for all patients irrespective 

third party payer or lack thereof; for 

Medicare FFS patients; for Medicare 

Advantage patients; and for Medicaid 

patients. 

• The beginning and end dates for 

which the numerators, denominators, 

and exclusions apply. 

(2) Reporting Method for 2012 

In accordance with sections 

1848(o)(2)(A)(iii) and 1886(n)(3)(A)(iii) 

of the Act, an EP or eligible hospital, 

respectively, must submit summary 

information (that is, information that is 

not personally identifiable) on the 

clinical quality measures selected by the 

Secretary using certified EHR 

technology in order to demonstrate their 

meaningful use of certified EHR 

technology. Additionally, for the 2012 

payment year, we propose that EPs and 

eligible hospitals be required to 

electronically submit the summary 

information for a selected clinical 

quality measure from those listed in 

Tables 3 through 21 using certified EHR 

technology as defined in section II.A.1.a 

of this proposed rule for the Medicare 

and Medicaid incentives. The required 

Medicare incentive information will be 

identified in the measures 

specifications, which we intend will be 

on our Web site 9 months before the 

start of the payment year. For Medicaid, 

EPs and hospitals eligible only for the 

Medicaid EHR incentive program must 

report their clinical quality measures 

data to States. States will propose to 

CMS how they plan to accept and 

validate Medicaid providers’ clinical 

quality measures data in their State 

Medicaid HIT Plans, subject to CMS 

review and approval, as described in 

section II.D.7. of this proposed rule. 

Sections 1848(o)(A)(2)(iii) and 

1886(n)(3)(A)(iii) of the Act broadly 

state that as a condition of 

demonstrating meaningful use of 

certified EHR technology, an EP, CAH or 

eligible hospital must ‘‘submit 

information’’ for the EHR reporting 

period on the clinical quality or other 

measures selected by the Secretary ‘‘in a 

form and manner specified by the 


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1902 Federal Register / Vol. 75, No. 8 / Wednesday, January 13, 2010 / Proposed Rules 

Secretary.’’ This language does not limit 

us to collecting only that information 

pertaining to Medicare and Medicaid 

beneficiaries. Therefore, we believe that 

we have the authority to collect 

summarized clinical quality measures 

selected by the Secretary, with respect 

to all patients to whom the clinical 

quality measure applies, treated by the 

EP or eligible hospital. We believe that 

it is necessary for the EP or eligible 

hospital to report on all cases to which 

a clinical quality measures applies in 

order to accurately assess the quality of 

care rendered by the particular EP or 

eligible hospital generally. Otherwise it 

would only be possible to evaluate the 

care being rendered for a portion of 

patients and lessen the ability to 

improve quality generally. We solicit 

comments on the impact of requiring 

the submission of clinical quality 

measures data on all patients, not just 

Medicare and Medicaid beneficiaries. 

Sections 1848(o)(2)(B)(iii) and 

1886(n)(3)(B)(iii) of the Act requires that 

in selecting clinical quality measures, 

the Secretary shall seek to avoid 

redundant or duplicative reporting 

otherwise required, including reporting 

under section 1848(k)(2)(C) of the Act 

(the PQRI program) and eligible 

reporting under section 

1886(b)(3)(B)(viii) of the Act 

(RHQDAPU program). We interpret 

‘‘redundant or duplicative reporting’’ to 

mean requiring the reporting of data on 

the same clinical quality measure 

separately for two or more quality 

reporting programs under Medicare. 

Similarly, we seek to align clinical 

quality measure reporting activities 

under CHIPRA with those proposed 

here, to avoid duplication of reporting 

and to strengthen the quality reporting 

infrastructure more broadly. Therefore, 

when a clinical quality measure is 

included in more than one quality 

reporting incentive program, we will 

seek to avoid requiring EPs and eligible 

hospitals to report the same clinical 

quality measure under separate 

programs. In instances in which a 

particular clinical quality measure is 

included in the Medicare EHR incentive 

program and another Medicare quality 

reporting incentive program, an EP or 

eligible hospital would only need to 

report the measure under the Medicare 

EHR incentive program, and the 

reporting of such clinical quality 

measure using certified EHR technology 

would be considered as the EP or 

eligible hospitals having satisfied the 

parallel reporting requirement under all 

other applicable Medicare programs. 

With respect to any clinical quality 

measures that may be included in the 

measure sets for both the Medicare EHR 

Incentive Programs for EPs and the 

PQRI, we note that there is no existing 

statutory authority to make PQRI 

incentive payments for services 

furnished in 2011 and subsequent years. 

We propose that Medicare EPs and 

eligible hospitals would be required to 

report the required clinical quality 

measures information electronically 

using certified EHR technology via one 

of three methods. The primary method 

would require the EP or eligible hospital 

to log into a CMS-designated portal. 

Once the EP or eligible hospital has 

logged into the portal, they would be 

required to submit, through an upload 

process, data payload based on specified 

structures, such as Clinical Data 

Architecture (CDA), and accompanying 

templates produced as output from their 

certified EHR technology. 

As an alternative to this data 

submission method, we propose to 

permit Medicare EPs and eligible 

hospitals to submit the required clinical 

quality measures data using certified 

EHR technology through Health 

Information Exchange (HIE)/Health 

Information Organization (HIO). This 

alternative data submission method 

would be dependent on the Secretary’s 

ability to collect data through a HIE/HIO 

network and would require the EP or 

eligible hospital who chooses to submit 

data via an HIE/HIO network to be a 

participating member of the HIE/HIO 

network. Medicare EPs and eligible 

hospitals would be required to submit 

their data payload based on specified 

structures or profiles, such as Clinical 

Data Architecture (CDA), and 

accompanying templates. The EP’s or 

eligible hospital’s data payload should 

be an output from their respective 

certified EHR products, in the form and 

manner specified from their HIE/HIO 

adopted architecture into the CMS HIE/ 

HIO adopted architecture. 

As another potential alternative, we 

propose to accept submission through 

registries dependent upon the 

development of the necessary capacity 

and infrastructure to do so using 

certified EHRs. 

We intend to post the technical 

requirements for portal submission and 

the alternative HIE/HIO submission, the 

HIE/HIO participating member 

definition, and other specifications for 

submission on our Web site for 

Medicare EPs on or before July 1, 2011 

and for Medicare eligible hospitals on or 

before April 1, 2011 for EHR adoption 

and incorporation and to accommodate 

EHR vendors. 

We invite comments on our three 

proposed clinical quality measures data 

submission methodologies as they 

pertain to CMS for Medicare and to 

States for Medicaid. 

i. Alternative Reporting Methods for 

Clinical Quality Measures 

There are several alternative reporting 

methods we considered to create a 

dataset of provider-submitted summary 

data. One such alternative is the 

development of a distributed network of 

EHRs where health information is 

retained locally in individual EP or 

eligible hospital EHRs and only 

summary reports are submitted to CMS. 

Another alternative is the creation of 

databases of patient-level EHR data 

stored at the state or regional level. We 

invite comment on our proposed 

approach, as well as our two 

alternatives. We also invite comment on 

all other alternative reporting methods. 

j. Proposed Reporting Criteria for EPs 

and Eligible Hospitals 

Sections 1848(o)(A)(2)(iii) and 

1886(n)(3)(A)(iii) of the Act state that to 

demonstrate meaningful use of certified 

EHR technology for an EHR reporting 

period, an EP and eligible hospital must 

submit information ‘‘for such period’’ on 

the clinical quality measures and other 

measures selected by the Secretary. We 

therefore propose that for 2011 and 

2012, the reporting period for the 

clinical quality measures selected by the 

Secretary be the EHR reporting period as 

previously defined in section II.A.1.e. of 

this proposed rule. 

Another alternative we considered 

was a fixed reporting period of four 

quarterly reporting periods, or 2, 6- 

month reporting periods. In terms of 

practice and precedent for other 

Medicare clinical quality measure 

reporting programs, all submit data to us 

at specific reporting intervals. 

We invite industry and interested 

stakeholder comments on our proposal, 

especially those who may feel that a 

fixed period would be more 

advantageous. 

k. Addressing Dually Eligible Medicare/ 

Medicaid Beneficiaries Under HITECH 

Since the EHR incentives are based on 

Medicare or Medicaid EPs choosing one 

program or the other, we are concerned 

that the Medicare and Medicaid 

incentive programs address the HIT 

needs of dually eligible program 

beneficiaries. Since this population 

requires special coordination between 

the State and Federal government, we 

intend to engage in new efforts to 

promote Medicare health information 

exchange with States, as well as look for 

other new ways to meet the care 

management objectives of this 

population through HIT. As such, we 


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Federal Register / Vol. 75, No. 8 / Wednesday, January 13, 2010 / Proposed Rules 1903 

are requesting comments on potential 

measures to reach our goal. 

4. Demonstration of Meaningful Use 

Section 1848(o)(3)(C) of the Act, as 

added by section 4101(a) of the HITECH 

Act, requires that as a condition of 

eligibility for the incentive payment, an 

EP must demonstrate meaningful use of 

certified EHR technology (other than the 

reporting on clinical quality and other 

measures) as discussed in section II.A.3 

of this proposed rule in the manner 

specified by the Secretary, which may 

include the following: An attestation, 

the submission of claims with 

appropriate coding, a survey response, 

reporting of clinical quality or other 

measures, or other means. Similarly, 

section 1886(n)(3)(c) of the Act, as 

added by section 4102(a) of the HITECH 

Act, requires that hospitals seeking the 

incentive payment demonstrate 

meaningful use of certified EHR 

technology in the manner specified by 

the Secretary. Section 1903(t)(6)(C)(i)(II) 

of the Act, as added by section 

4201(a)(2) under the HITECH Act, states 

that a Medicaid EP or eligible hospital 

must demonstrate meaningful use 

through a ‘‘means that is approved by 

the State and acceptable to the 

Secretary.’’ In addition, pursuant to 

section 1903(t)(9) of the Act, a State 

must demonstrate to the satisfaction of 

the Secretary that the State is 

conducting adequate oversight, 

including the routine tracking of 

meaningful use attestations and 

reporting mechanisms. 

a. Common Methods of Demonstration 

in Medicare and Medicaid 

We propose to create a common 

method for demonstrating meaningful 

use in both the Medicare and Medicaid 

EHR incentive programs, for the same 

reasons we have proposed a uniform 

definition of meaningful use. The 

demonstration methods we adopt for 

Medicare would automatically be 

available to the States for use in their 

Medicaid programs. The Medicare 

methods are segmented into two parts, 

as discussed below. States seeking to 

modify or propose alternative 

demonstration methods must submit the 

proposed methods for prior CMS 

approval. This process is discussed 

more fully in Section II.D.7.b.2.c. of this 

proposed rule. 

b. Methods for Demonstration of the 

Stage 1 Criteria of Meaningful Use 

We are proposing at § 495.8 that for 

CY 2011 and FY 2011, EPs and eligible 

hospitals demonstrate that they satisfy 

each of the proposed meaningful use 

objectives specified in § 495.6 through 

attestation. For payment years beginning 

in CY and FY 2012 and subsequent 

years, we are proposing at § 495.8 that 

EPs and eligible hospitals demonstrate 

that they satisfy each of the proposed 

meaningful use objectives other than 

‘‘Submitting quality measures to CMS or 

the States’’ through attestation, and 

demonstrate that they satisfy the 

objective ‘‘Submitting quality measure to 

CMS or the States’’ through electronic 

reporting of clinical quality measures to 

CMS or the States, as specified in 

section II.A.3 of this proposed rule. 

Specifically, we propose that EPs and 

eligible hospitals provide attestation 

through a secure mechanism, such as 

through claims based reporting or an 

online portal. We propose that an EP or 

eligible hospital would through a onetime attestation following the 

completion of the EHR reporting period 

for a given payment year identify the 

certified EHR technology they are 

utilizing and the results of their 

performance on all the measures 

associated with the objectives of 

meaningful use. We chose to propose 

attestation through a secure mechanism 

because we do not believe that HIT will 

advance enough from its current state to 

allow for more automated and/or 

documented options of demonstrating 

meaningful use. As HIT matures we 

expect to base demonstration more on 

automated reporting by certified EHR 

technologies, such as the direct 

electronic reporting of measures both 

clinical and non clinical and 

documented participation in HIE. The 

first example is to the move from 

attestation for clinical quality measures 

to direct reporting in 2012 and 

subsequent years for EPs and eligible 

hospitals. As HIT advances we expect to 

move more of the objectives away from 

being demonstrated through attestation. 

However, given the current state of HIT, 

we believe that imposing such 

demonstration requirements for 2011 

would pose significant barriers to 

participation in the EHR incentive 

programs. 

We believe that the means by which 

EPs and eligible hospitals demonstrate 

meaningful use should work for all 

provider types. We also believe that 

uniform means of demonstration for EPs 

and eligible hospitals are preferable and 

that a greater burden should not be 

placed on one or the other. In addition, 

we do not believe that demonstration of 

meaningful use should require use of 

certified EHR technology beyond the 

capabilities certified to be determined 

by a future rulemaking document 

provided by ONC. 

In addition to requiring electronic 

reporting of clinical quality measures in 

2012 in Medicare and Medicaid, we also 

propose for CMS and/or the States to 

test options to utilize existing and 

emerging HIT products and 

infrastructure capabilities to satisfy 

other objectives of the meaningful use 

definition. The optional testing could 

involve the use of registries or the direct 

electronic reporting of some measures 

associated with the objectives of the 

meaningful use definition. We do not 

propose to require any EP or eligible 

hospital to participate in this testing in 

either 2011 or 2012 in order to receive 

an incentive payment. However, in 

order to make progress towards our goal 

of meaningful use being demonstrated 

through the electronic exchange of 

information we encourage States to 

explore the available options. The state 

of electronic exchange varies widely 

across the country and is dependent on 

numerous Federal, State, local, nonprofit and for-profit initiatives. Given 

this high state of flux, CMS and/or the 

States would have to issue considerable 

updated guidance to EPs and eligible 

hospitals who wish to join in our efforts 

to explore the electronic exchange of 

information. Any testing should be 

based on the principal of electronic 

exchange of information from certified 

EHR technology either directly to the 

States or through an intermediary. For 

purposes of the programs in this 

proposed rule it would be 

counterproductive for an intermediary 

to collect information through paper 

abstraction. 

We will issue further instructions on 

the specifics for submitting attestation 

through established outreach venues. 

5. Data Collection for Online Posting, 

Program Coordination, and Accurate 

Payments 

As described below, the HITECH Act 

requires the Secretary to post online the 

names of Medicare EPs and eligible 

hospitals and CAHs who are meaningful 

EHR users for the relevant payment 

year. Section 1903(t)(2) of the Act also 

requires us to ensure that EPs do not 

receive an EHR incentive payment 

under both Medicare and Medicaid. To 

fulfill these mandates, we must collect 

several data elements from EPs and 

eligible hospitals. Beyond these two 

direct HITECH Act requirements, CMS 

and the States also require certain data 

in order to accurately calculate and 

distribute the incentive payments. 

a. Online Posting 

Section 1848(o)(3)(D) of the Act 

requires the Secretary to list in an easily 

understandable format the names, 

business addresses, and business phone 

numbers of the Medicare EPs and, as 


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determined appropriate by the 

Secretary, of group practices receiving 

incentive payments for being 

meaningful EHR users under the 

Medicare FFS program on our internet 

Web site. We do not propose to post 

information on group practices because 

we do not propose to base incentive 

payments at the group practice level. 

Section 1886(n)(4)(B) of the Act, as 

added by section 4102(c) of the HITECH 

Act, requires the Secretary to list in an 

easily understandable format the names 

and other relevant data, as she 

determines appropriate, of eligible 

hospitals and CAHs who are meaningful 

EHR users under the Medicare FFS 

program, on our internet Web site. 

Eligible hospitals and CAHs will have 

the opportunity to review the list before 

the list is publicly posted. Sections 

1853(m)(5) and 1853(l)(7) of the Act, as 

added by sections 4101(c) and 4102(c) 

of the HITECH Act, require the 

Secretary to post the same information 

for EPs and eligible hospitals in the MA 

program as would be required if they 

were in the Medicare FFS program. 

Additionally, the Secretary must post 

the names of the MA organizations 

receiving the incentive payment or 

payments. We propose to collect the 

information necessary to post the name, 

business address and business phone 

numbers of all EPs, eligible hospitals 

and CAHs participating in the Medicare 

FFS and MA EHR incentive programs, 

and to post this information on our Web 

site. 

b. Program Election Between Medicare 

FFS/MA and Medicaid for EPs 

Section 1903(t)(2) of the Act prohibits 

an EP from receiving incentive 

payments under the Medicaid program 

unless the EP has waived any rights to 

incentive payments under the Medicare 

FFS or MA programs. Furthermore, 

section 1903(t)(7) of the Act requires the 

Secretary to assure no duplication of 

funding with respect to the Medicaid 

program, and the physician and MA 

incentive payments under sections 

1848(o) and 1853(l) of the Act. This 

waiver and non-duplication 

requirement applies only to EPs meeting 

both the Medicare FFS/MA and 

Medicaid EHR incentive programs 

eligibility criteria, and does not apply to 

hospitals (which are eligible to receive 

incentive payments from both Medicare 

and Medicaid simultaneously). 

Proposed § 495.10 would allow an EP 

meeting the eligibility criteria for both 

the Medicare FFS/MA and Medicaid 

programs to participate in either 

program. Further, the EP would be 

permitted to change his or her election 

once during the life of the EHR 

incentive programs after making the 

initial election. We believe this one-time 

election rule would allow an EP whose 

patient volume no longer makes him or 

her eligible for the Medicaid program to 

nevertheless continue to receive 

incentive payments that would 

encourage the meaningful use of 

certified EHR technology. For example, 

an EP who moves to a different practice 

or geographically relocates practices 

may reduce his or her Medicaid patient 

volume, and therefore become ineligible 

for the Medicaid incentive payments. 

Allowing this EP to continue to receive 

incentive payments under Medicare (if 

eligible) would continue the incentive 

for meaningfully using EHR technology, 

and would allow EPs a certain amount 

of flexibility in their operations. While 

allowing this flexibility creates 

administrative complexity, we believe a 

significant number of EPs could have 

their participation in the EHR incentive 

programs endangered due to changing 

circumstances unrelated to the EHR 

incentive programs. 

Under our proposal, if an EP does 

decide to switch programs, we propose 

that the EP would continue in the next 

program at whichever payment year he 

or she would have attained had the EP 

not chosen to switch. For example, if an 

EP decides to switch after receiving his 

or her Medicare FFS incentive payment 

for their second payment year, then the 

EP would be in its third payment year 

for purposes of the Medicaid incentive 

payments. Even after lining up the 

payment years, it is possible for an EP 

to exceed the payment cap under 

Medicaid by switching programs at the 

right time. We do not believe that the 

Congress intended for the payment caps 

to be exceeded under any circumstance, 

and therefore propose that no EP should 

receive more than the maximum 

incentive available to them under 

Medicaid, which is the higher of the two 

caps. The last year incentive payment 

would be reduced if awarding the EP 

the full amount would exceed the 

overall maximum available under 

Medicaid. This is possible if an EP 

receives their first two payment years 

from Medicare and then the last four 

from Medicaid, as the cap would be 

exceeded by $250. An EP who switches 

from Medicaid to Medicare could 

exceed the Medicare threshold in a 

number of circumstances; however, 

since they cannot exceed the Medicaid 

threshold under any circumstance, we 

propose to pay the incentive for which 

they are eligible for a given payment 

year in whichever program they are in 

for that payment year. Finally, we 

propose that the last year for making an 

incentive payment program switch 

would be CY 2014. In making this 

proposal, we considered that it is both 

the last year an EP can enroll in the 

Medicare EHR incentive program, and 

also the last year before the payment 

adjustments under Medicare can begin. 

We request comments on the necessity 

of the ability to switch and the allowed 

timing for such switches. 

c. Data To Be Collected 

In addition to information regarding 

the demonstration of meaningful use, in 

§ 495.10 of this proposed rule we 

propose to collect the following 

administrative data for the Medicare 

and Medicaid EHR incentive programs 

to fulfill our requirements of online 

posting, avoidance of duplication of 

incentive payments, and to ensure 

accurate and timely incentive payments: 

• Name, NPI, business address, and 

business phone of each EP or eligible 

hospital. 

• Taxpayer Identification Number 

(TIN) to which the EP or eligible 

hospital wants the incentive payment 

made. For Medicaid EPs this must be 

consistent with assignment rules at 

§ 495.10. 

• For EPs, whether they elect to 

participate in the Medicare EHR 

incentive programs or the Medicaid 

EHR incentive program. 

• For eligible hospitals, their CCN. 

To coordinate with the States to avoid 

duplication of payments, we further 

propose to make available to the States 

through a single repository the 

following additional data: 

• Whether an EP or eligible hospital 

is a meaningful EHR user, and 

• The remittance date and amount of 

any incentive payments made to an EP 

or eligible hospital. 

CMS, our contractors, and the States 

will have access to these six data 

elements through a single repository 

maintained by CMS. The States will 

have to provide information to us on 

whether EPs or eligible hospitals are 

eligible for the Medicaid incentive 

program, whether EPs or eligible 

hospitals participating in the Medicaid 

program are meaningful EHR users, and 

when any Medicaid incentive payments 

are made and the amount of the 

payment. We will put in place processes 

for an EP or eligible hospital to change 

their information, including the onetime switch in EHR incentive program 

election by EPs. 

6. Hospital-Based Eligible Professionals 

Section 1848(o)(1)(C)(i) of the Act, as 

added by section 4101(a) of the HITECH 

Act, states that hospital-based EPs are 

not eligible for the Medicare incentive 


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payments. Similarly, the majority of 

hospital-based EPs will not be eligible 

for Medicaid incentive payments under 

1903(t)(2)(A) of the Act (the only 

exception to this rule is for those 

practicing predominantly in an FQHC or 

RHC). Section 1848(o)(1)(C)(ii) of the 

Act defines the term ‘‘hospital-based 

eligible professional’’ to mean an EP, 

such as a pathologist, anesthesiologist, 

or emergency physician, who furnishes 

substantially all of his or her Medicarecovered professional services during the 

relevant EHR reporting period in a 

hospital setting (whether inpatient or 

outpatient) through the use of the 

facilities and equipment of the hospital, 

including the hospital’s qualified EHRs. 

This section indicates that the 

determination of whether an EP is a 

hospital-based EP shall be made on the 

basis of the site of service, as defined by 

the Secretary, and without regard to the 

type of service provided by the EP or 

any employment or billing arrangement 

between the EP and any other provider 

(for example, the hospital-based 

determination for an EP would not be 

affected by whether the EP is an 

employee of the hospital, under a 

contractual relationship with the 

hospital, or with respect to where he or 

she has made a reassignment to the 

hospital for Part B billing purposes). 

Section 1903(t)(3)(D) of the Act defines 

hospital-based EP in nearly identical 

terms. 

In addition, as discussed below, 

section 1848(a)(7)(D) of the Act, as 

added by section 4101(b) of the HITECH 

Act, exempts hospital-based EPs from 

the downward payment adjustment 

applied under section 1848(a)(7)(A)(i) of 

the Act to covered professional services 

provided during a payment year by EPs 

who are not meaningful EHR users for 

the relevant payment year beginning in 

2015. 

If an EP is providing ‘‘substantially 

all’’ of their services in the hospital, we 

believe it is reasonable to assume that 

the EP is also using the facilities and 

equipment of the hospital, including 

any qualified EHR implemented by the 

hospital. The statute uses ‘‘facilities and 

equipment’’ to determine whether an EP 

is a hospital-based EP. As ‘‘facilities and 

equipment’’ would generally be 

understood to apply to the hospital 

building and its medical and other 

equipment that is used in furnishing 

medical services, we believe it is 

reasonable to assume that an EP 

providing substantially all of their 

services in a hospital is providing these 

services in the hospital building and 

generally is also using its equipment, 

including qualified EHRs, and not 

bringing his or her own equipment to 

the hospital to provide medical services. 

Similarly, it seems reasonable to assume 

that the statute contemplates that an EP 

that uses the hospital’s facilities and 

equipment would also be using the 

hospital’s EHR system and should be 

ineligible for an incentive payment. We 

seek comment as to whether EPs are 

using qualified EHR of the hospital in 

ambulatory care settings. 

As noted previously, the statute 

provides that hospital-based EPs, ‘‘such 

as a pathologist, anesthesiologist, or 

emergency physician,’’ are those EPs 

that provide substantially all of their 

Medicare-covered professional services 

in a ‘‘hospital setting (whether inpatient 

or outpatient).’’ Because the HITECH Act 

does not define the term ‘‘hospital 

setting,’’ we looked to existing statutes 

and regulations that define and describe 

hospital settings for guidance in 

defining ‘‘hospital setting’’ for purposes 

of this proposed rule. We welcome 

comments on alternative approaches to 

interpreting the meaning of ‘‘hospital 

setting.’’ 

First, section 1861(e) of the Act 

defines the term a ‘‘hospital’’ to mean an 

institution that ‘‘is primarily engaged in 

providing, by or under the supervision 

of physicians, to inpatients (A) 

diagnostic services and therapeutic 

services for medical diagnosis, 

treatment, and care of injured, disabled, 

or sick persons, or (B) rehabilitation 

services for the rehabilitation of injured, 

disabled, or sick persons.’’ Therefore, we 

propose that EPs that practice primarily 

in inpatient hospital settings, as 

referenced in section 1861(e) of the Act, 

be considered hospital-based EPs. 

Because the parenthetical after the 

term ‘‘hospital setting’’ in the statutory 

definition of hospital-based EP 

specifically refers to both inpatient and 

outpatient hospital settings, we believe 

the term ‘‘hospital setting’’ should be 

defined to also include the outpatient 

setting. So although a ‘‘hospital’’ is an 

institution that primarily provides 

inpatient services, we propose to define 

the term ‘‘hospital setting’’ for purposes 

of the Medicare and Medicaid EHR 

incentive payment programs to also 

include all outpatient settings where 

hospital care is furnished to registered 

hospital outpatients. For purposes of 

Medicare payment and conditions of 

participation, it is CMS’s longstanding 

policy to consider as outpatient hospital 

settings those outpatient settings that 

are owned by and integrated both 

operationally and financially into the 

entity, or main provider, that owns and 

operates the inpatient setting. For 

example, we consider as outpatient 

hospital settings all types of outpatient 

care settings in the main provider, oncampus and off-campus provider-based 

departments (PBDs) of the hospital, and 

entities having provider-based status, as 

these entities are defined in § 413.65. 

In accordance with our regulations at 

§ 413.65, a provider-based department 

or entity must operate under the 

ownership and financial and 

administrative control of the main 

provider. We also note that the 

provider-based department or entity of 

the hospital comprises both the physical 

facility where services are furnished and 

the personnel and equipment used to 

care for patients in those settings. In 

addition, § 413.65(d) specifies that the 

financial operations of provider-based 

departments or entities must be fully 

integrated within the financial system of 

the main provider. Medicare makes 

payment to the hospital under the 

outpatient payment system for the 

facility resources required for care that 

is furnished to hospital outpatients in 

its provider-based departments and 

entities, regardless of the specific type 

of hospital outpatient setting. Moreover, 

Medicare pays EPs for their professional 

services furnished to hospital 

outpatients at the facility rate under the 

Medicare Physician Fee Schedule 

(MPFS), also regardless of the specific 

type of hospital outpatient setting, 

recognizing that in all hospital 

outpatient settings the hospital bears the 

cost of personnel, equipment, and 

supplies for which payment would 

otherwise be made to the EP under the 

MPFS for services furnished in a nonfacility setting. Section 413.65(d) also 

requires that the medical records for 

patients treated in the provider-based 

department or entity must be integrated 

into a unified retrieval system (or cross 

reference) of the main provider. 

Moreover, an eligible hospital will 

receive an incentive payment for its 

medical records system if such system 

is considered certified EHR technology 

and is meaningfully used by the 

hospital consistent with the 

requirements of the final rule to this 

rule. Because, by definition of the 

requirements for provider-based 

departments and entities, EPs who 

furnish substantially all of their covered 

professional services to hospital 

outpatients use the hospital’s facility 

and equipment, including the integrated 

medical record system, for which 

payment is made by Medicare to the 

hospital, we believe these EPs should be 

considered hospital-based EPs, and thus 

excluded from the Medicare EP EHR 

incentive payments. This is fully 

consistent with the definition of 

hospital-based EPs in section 

1848(o)(1)(C)(ii) of the Act. 


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In summary, we propose that EPs that 

provide substantially all of their 

professional services in the inpatient 

hospital setting, in any type of 

outpatient hospital setting, or in any 

combination of inpatient and outpatient 

hospital settings, be considered 

hospital-based EPs. 

We propose to consider the use of 

place of service (POS) codes on 

physician claims to determine whether 

an EP furnishes substantially all of their 

professional services in a hospital 

setting and is, therefore, hospital-based. 

This code set is required for use in the 

implementation guide adopted as the 

national standard for electronic 

transmission of professional health care 

claims under the provisions of the 

Health Insurance Portability and 

Accountability Act of 1996 (HIPAA). 

HIPAA directed the Secretary of HHS to 

adopt national standards for electronic 

transactions. These standard 

transactions require all health plans and 

providers to use standard code sets to 

populate data elements in each 

transaction. The Transaction and Code 

Set Rule (65 FR 50312) adopted the ASC 

X12N–837 Health Care Claim: 

Professional, volumes 1 and 2, version 

4010, as the standard for electronic 

submission of professional claims. This 

standard names the POS code set 

currently maintained by CMS as the 

code set to be used for describing sites 

of service in such claims and is 

available at http://www.cms.hhs.gov/ 

PlaceofServiceCodes/Downloads/ 

POS_09_10_07_Rev_2_508.pdf. 

From this code set, we propose to 

consider the use of the following POS 

codes indicating that the EP provided 

the service in an inpatient or any type 

of outpatient hospital setting (including 

a PBD of a hospital) to determine 

whether an EP is a hospital-based 

eligible professional: 

• 21—Inpatient Hospital—is a 

facility, other than psychiatric, which 

primarily provides diagnostic, 

therapeutic (both surgical and 

nonsurgical), and rehabilitation services 

by, or under, the supervision of 

physicians, to patients admitted for a 

variety of medical conditions. 

• 22—Outpatient Hospital—is a 

portion of a hospital which provides 

diagnostic, therapeutic (both surgical 

and nonsurgical), and rehabilitation 

services to sick or injured persons who 

do not require hospitalization or 

institutionalization. 

• 23—Emergency Room, Hospital—is 

a portion of a hospital where emergency 

diagnosis and treatment of illness or 

injury is provided. 

Place of service codes 22 (Outpatient 

Hospital) and 23 (Emergency Room, 

Hospital) are commonly recognized to 

be outpatient departments of the 

hospital. An outpatient department of a 

hospital will either meet the definition 

of the ‘‘main provider,’’ a ‘‘department of 

a provider,’’ or of having ‘‘providerbased status’’ as those terms are used in 

§ 413.65. Place of service codes 22 and 

23 are used to describe hospital 

outpatient settings that meet these 

definitions under § 413.65 and are also 

subject to the conditions of participation 

under part 482. 

The statutory definition of hospitalbased EP provides that to be considered 

a hospital-based EP, the EP must 

provide ‘‘substantially all’’ of his or her 

covered professional services in a 

hospital setting, which we propose to 

encompass all hospital inpatient and 

outpatient settings, including all 

settings that meet the definition of the 

main provider, department of a 

provider, or of having provider-based 

status. Therefore, we must identify the 

minimum percentage of an EP’s covered 

professional services that must be 

provided in a hospital setting in order 

for the EP to be considered as providing 

‘‘substantially all’’ of his or her covered 

professional services in a hospital 

setting. We would define ‘‘substantially 

all’’ as furnishing at least 90 percent of 

services in a hospital setting, either 

inpatient or outpatient. We believe this 

threshold appropriately balances our 

competing goals of ensuring that 

professionals are encouraged to 

participate in the incentive program and 

avoid duplicate payments to a 

professional who is primarily using the 

EHR technology of the hospital in which 

he or she furnishes services. While we 

considered using 75 percent as a 

threshold for determining whether an 

EP is an hospital-based EP, we are 

concerned that such a standard could 

exclude EPs from receiving incentive 

payments that perform a minority but 

significant percentage of their services 

outside of inpatient or outpatient 

hospital settings and would have offices 

separate and independent from the 

hospital where they provide patient care 

services and for which they would have 

costs to obtain an EHR system. Based on 

an analysis of 2008 Medicare claims 

data, if we define ‘‘substantially all’’ of 

covered services in a hospital setting to 

mean that 75 percent or more of an EP’s 

allowed services are associated with one 

of the place of service codes listed 

above, we estimate that 65 percent of 

EPs would be considered eligible to 

receive an EHR incentive payment. If we 

increase this criterion to 90 percent, we 

estimate that 68 of percent of EPs would 

be eligible for the EHR incentive 

payment. In other words, 3 percent 

fewer EPs would be ineligible for the 

EHR incentive payments if we define 

‘‘substantially all’’ to mean at least 90 

percent rather than at least 75 percent. 

Because EPs providing 90 percent or 

more of their services in one of these 

sites as described above are not likely to 

expend significant resources related to 

EHRs in other, non-hospital settings, we 

believe this proposal is most consistent 

with the law’s intent of not providing 

incentive payments to EPs that are 

providing substantially all of their 

services in a hospital setting (whether 

inpatient or outpatient). However, we 

are open to comments on other 

proposals that are consistent with the 

law’s intent of not providing incentive 

payments to hospital-based physicians 

as defined in HITECH. In our proposed 

approach, a hospital-based eligible 

professional would be ineligible to 

receive an EHR incentive payment 

under either Medicare or Medicaid, 

regardless of the type of service 

provided, if more than 90 percent of 

their services are identified as being 

provided in places of service classified 

under place of service codes 21, 22, or 

23. 

Accordingly, for both Medicare and 

Medicaid incentive payment purposes, 

we propose that a hospital-based 

eligible professional is defined as an EP 

who furnishes 90 percent or more of 

their covered professional services in 

any of the above listed places of service. 

A hospital-based EP would be ineligible 

to receive EHR incentive payments. 

(Based on preliminary claims data from 

the first 9 months of 2009, CMS 

currently estimates that, under this 

proposed definition, about 27 percent of 

Medicare EPs (physicians) would be 

considered hospital-based and thus not 

eligible to receive any incentive 

payments. We do not have any data on 

Medicaid practitioners.) We propose to 

make this determination, for Medicare 

incentive payment purposes, as to 

whether or not an EP is hospital-based 

by annually analyzing an EP’s claims 

history from the prior year. Therefore, 

for example, based on such analysis, an 

otherwise EP would be considered a 

hospital-based EP and be ineligible for 

incentive payments in 2011 if he/she 

provided 90 percent or more of his/her 

allowed services in one of the above 

listed places of service based on their 

2010 Medicare claims data. The 

hospital-based status of each EP would 

be reassessed each year, using claims 

data from the year immediately 

preceding the payment year. For 

Medicaid purposes, we are proposing 

that State Medicaid agencies make the 

determination about whether or not an 


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EP is hospital-based by analyzing an 

EP’s Medicaid claims data, or in the 

case of EPs who deliver care via 

Medicaid managed care programs, by 

analyzing either encounter data or other 

equivalent data sources, at the State’s 

option. There is an interest in assuring 

that nearly all primary care providers 

are meaningful users of EHR technology 

by 2014. However, this objective may 

not be reached because of several 

factors. 

• Some primary care EPs who 

provide services to Medicare and 

Medicaid beneficiaries would be 

ineligible for the incentive payments. 

For example, we currently estimate that 

under this proposal, 12–13 percent of 

family practitioners under Medicare 

would be considered hospital-based 

under our proposed definition of 

hospital-based EP, and therefore would 

not be eligible for the EHR incentive 

payments. (Note that we believe that 

these data could be applied generally to 

Medicaid physicians as well. However, 

Medicaid EPs include other 

practitioners who also must meet 

hospital-based eligibility requirements, 

some of whom provide primary care 

services such as nurse practitioners.) 

Although many of these family 

practitioners may be serving in 

nonprimary care roles within the 

hospital setting (such as in emergency 

departments or functioning as 

hospitalists), those EPs performing 

primary care services in the hospital 

setting would also not be eligible to 

receive EP incentive payments. If these 

EPs were eligible to receive incentive 

payments, some might reassign them to 

the hospital, and the hospital could then 

use the EP’s incentive payments for 

additional integrated outpatient EHR 

systems. 

• As will be explained in the next 

section of this proposed rule, the 

hospital’s total incentive payment is 

based on total inpatient services. As 

result, a hospital with a large outpatient 

department will not receive a higher 

incentive payment as a result of their 

outpatient services. 

• Finally, as previously discussed, we 

are proposing that the Stage 1 

meaningful use criteria for eligible 

hospitals apply only to a hospital’s 

inpatient setting. 

Because of these factors, we are 

concerned that hospital investment in 

their outpatient primary care sites is 

likely to lag behind their investment in 

their inpatient EHR systems. To address 

these concerns, as part of future 

rulemaking, we plan to consider ways to 

realign the meaningful use objectives 

and criteria to include a broader 

definition of hospital care to include 

outpatient services. We believe this 

could provide an important incentive 

for hospital investment in EHRs for their 

outpatient primary care sites. We 

welcome comments on these issues 

including other ways that CMS, under 

the current statute, could help meet the 

objective that nearly all primary care 

providers are meaningful users of EHR 

technology by 2014. 

We also seek comment on the extent 

to which hospitals install EHRs in their 

outpatient clinics as part of their 

adoption of EHRs. In addition, we seek 

comment on the way that hospitals with 

provider-based entities meet the 

provider-based requirements at 42 CFR 

413.65(d) if they have EHRs in any or 

all parts of the hospital. 

Finally, we seek comment on whether 

we should use another method for 

defining hospital-based EPs than what 

we have proposed here. Any comments 

should address implementation based 

on the specific POS codes identified, 

and/or any complexities that would 

result from not including all outpatient 

settings owned and operated by and 

integrated with the hospital in the 

determination of whether an EP is 

hospital-based. 

7. Interaction With Other Programs 

The HITECH Act addresses 

interactions between the Medicare EHR 

incentive program and the E-prescribing 

Incentive Program authorized by 

MIPPA. Under section 1848(m)(2)(D) of 

the Act, as added by section 

4101(f)(2)(B) of the HITECH Act, if a 

Medicare FFS or MA EP receives an 

incentive payment from the Medicare 

EHR incentive program, the EP (or 

group practice) is not eligible to also 

receive the incentive payment under the 

E-prescribing Incentive Program created 

by MIPPA. Given the payment timelines 

proposed in this rule for the Medicare 

EHR incentive program and the existing 

payment timeline for the E-prescribing 

Incentive Program, we will know 

whether an EP received a Medicare EHR 

incentive payment before the EPrescribing Incentive Program payment 

is calculated. Thus we will exclude 

those EPs (or group practices) who 

accept a Medicare EHR incentive 

payment for a given year from being 

eligible for the E-Prescribing Incentive 

Program payment for that same year. 

EPs receiving a Medicaid EHR incentive 

payment would remain eligible for the 

Medicare MIPAA E-Prescribing 

Incentive Program payment. 

As the HITECH Act does not specify 

any other restrictions on participation in 

other programs and participation in the 

Medicare and Medicaid EHR incentive 

programs, we do not propose any other 

restrictions. There may be opportunities 

to avoid duplication of reporting 

requirements among our various 

programs. In section II.A.3. of this 

proposed rule, we discuss how we will 

avoid duplication of reporting 

requirements for clinical quality 

measures. 

B. Medicare Fee-for-Service Incentives 

1. Incentive Payments for Eligible 

Professionals (EP) 

Section 1848(o)(1)(A) of the Act, as 

amended by section 4101(a) of the 

HITECH Act, provides for incentive 

payments to EPs who are meaningful 

users of certified EHR technology during 

the relevant EHR reporting periods. 

Section 1848(o)(1)(A)(i) of the Act 

provides that EPs who are meaningful 

EHR users during the relevant EHR 

reporting period are entitled to an 

incentive payment amount, subject to an 

annual limit, equal to 75 percent of the 

Secretary’s estimate of the Medicare 

allowed charges for covered 

professional services furnished by the 

EP during the relevant payment year. 

Under section 1848(o)(1)(B)(ii)(VI) of the 

Act, an EP is entitled to an incentive 

payment for up to 5 years. In addition, 

in accordance with section 

1848(o)(1)(A)(ii) of the Act, there shall 

be no incentive payments made with 

respect to a year after 2016. The 

incentive payments would be disbursed 

from the Federal Supplementary 

Medical Insurance Trust Fund, as 

provided for under section 

1848(o)(1)(A)(i) of the Act. As noted in 

section II.A. of this proposed rule, EPs 

who qualify for both the Medicare and 

Medicaid incentive payments must elect 

to receive payments from one program 

or the other. 

a. Definitions 

In accordance with section 

1848(o)(5)(C) of the Act, we propose to 

add a definition of the term ‘‘eligible 

professional’’ in our regulations at 

§ 495.100 to mean a physician as 

defined under section 1861(r) of the Act. 

Section 1861(r) of the Act defines the 

term ‘‘physician’’ to mean the following 

five types of professionals, each of 

which must be legally authorized to 

practice their profession under state 

law: A doctor of medicine or 

osteopathy, a doctor of dental surgery or 

dental medicine, a doctor of podiatric 

medicine, a doctor of optometry, or a 

chiropractor. As discussed in section 

II.B.1.a of this proposed rule, in 

accordance with section 1848(o)(1)(C) of 

the Act, hospital-based EPs are not 

eligible for an incentive payment. 


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Section 1848(o)(5)(A) of the Act 

defines covered professional services as 

having the same meaning as in section 

1848(k)(3) of the Act, that is, services 

furnished by an eligible professional for 

which payment is made under, or is 

based on, the Medicare physician fee 

schedule. 

In accordance with section 1848(a)(1) 

of the Act, the Medicare allowed charge 

for covered professional services is the 

lesser of the actual charge or the 

Medicare physician fee schedule 

amount established in section 1848 of 

the Act. As specified under section 

1848(o)(1)(A)(i), the Secretary’s estimate 

of allowed charges is based on claims 

submitted to Medicare no later than 2 

months following the end of the 

relevant payment year. We propose to 

codify these specifications and 

definitions in our regulations at [cite 

proposed regulation range]. 

b. Incentive Payment Limits 

Section 1848(o)(1)(B)(i) of the Act sets 

forth the annual limits on the EHRrelated incentive payments to EPs. 

Specifically, section 1848(o)(1)(B) of the 

Act provides that the incentive payment 

for an EP for a given payment year shall 

not exceed the following amounts: 

• For the EP’s first payment year, for 

such professional, $15,000 (or, $18,000 

if the EP’s first payment year is 2011 or 

2012). 

• For the EP’s second payment year, 

$12,000. 

• For the EP’s third payment year, 

$8,000. 

• For the EP’s fourth payment year, 

$4,000. 

• For the EP’s fifth payment year, 

$2,000. 

• For any succeeding year, $0. 

Under section 1848(o)(1)(B)(iv) of the 

Act, for EPs who predominantly furnish 

services in a geographic HPSA (as 

designated by the Secretary under 

section 332(a)(1)(A) of the Public Health 

Service (PHS) Act), the incentive 

payment limitation amounts for each 

payment year are increased by 10 

percent. Section 1848(o)(1)(B)(iii) of the 

Act also provides for a phased reduction 

in payment limits for EPs who first 

demonstrate meaningful use of certified 

EHR technology after 2013. Specifically, 

if the EP’s first payment year is after 

2013, then the annual limit on the 

incentive payment equals the annual 

limit applicable to an EP whose first 

payment year is 2013. Accordingly, if 

the EP’s first payment year is 2014, the 

EP’s maximum incentive payment will 

be $12,000 in 2014, $8,000 in 2015, and 

$4,000 in 2016. Section 1848(o)(1)(B)(v) 

of the Act provides that if the EP’s first 

payment year is after 2014, then the 

applicable incentive payment limit for 

such year and any subsequent year shall 

be $0. In other words, an EP who does 

not qualify to receive an EHR-related 

incentive payment prior to 2015 will not 

receive any of these incentive payments. 

Table 22 shows the maximum incentive 

payment amounts available to EPs 

under Medicare FFS. (As noted above 

and discussed further below, these 

limits are increased by 10 percent for 

EPs who predominantly furnish services 

in an HPSA.) 

TABLE 22—MAXIMUM TOTAL AMOUNT OF EHR INCENTIVE PAYMENTS FOR A MEDICARE EP WHO DOES NOT

PREDOMINANTLY FURNISH SERVICES IN A HPSA 

Calendar year 

First CY in which the EP receives an incentive payment 

2011 2012 2013 2014 

2015– 

subsequent 

years 

2011 ..................................................................................... $18,000 ........................ ........................ ........................ ........................

2012 ..................................................................................... 12,000 $18,000 ........................ ........................ ........................

2013 ..................................................................................... 8,000 12,000 $15,000 ........................ ........................

2014 ..................................................................................... 4,000 8,000 12,000 $12,000 ........................

2015 ..................................................................................... 2,000 4,000 8,000 8,000 $0 

2016 ..................................................................................... ........................ 2,000 4,000 4,000 0 

Total .............................................................................. 44,000 44,000 39,000 24,000 0 

The following examples illustrate 

how the payment amount would be 

determined: 

• Example 1: EP that receives the 

maximum payment. For payment year 2011, 

the incentive payment for an EP would be, 

subject to a payment limit of $18,000, equal 

to 75 percent of the EP’s Medicare physician 

fee schedule allowed charges for CY 2011 (in 

this case, the maximum allowed charges 

recognized for the purposes of the incentive, 

or $24,000 × .75 = $18,000), estimated based 

on claims for covered professional services 

furnished by the EP from January 1, 2011 

through December 31, 2011, and submitted to 

the appropriate Medicare administrative 

contractor (MAC/carrier) on or before 

February 29, 2012. 

• Example 2: EP that receives less than 

the maximum payment. Assume for this 

example that the EP’s estimated total allowed 

charges for covered professional services are 

$10,000 which is less than the $24,000 

maximum allowed charges that could be 

recognized for purposes of this incentive. 

Therefore, for payment year 2011, the 

incentive payment in this case would be, 

$10,000 × .75 = $7,500, based on claims for 

covered professional services furnished by 

the EP from January 1, 2011 through 

December 31, 2011, and submitted to the 

appropriate Medicare administrative 

contractor (MAC) or carrier on or before 

February 29, 2012. 

We propose, for each subsequent 

payment year, to use the annual allowed 

charges and claims in a similar manner 

to calculate the Secretary’s estimate of 

allowed charges for purposes of 

computing the incentive payment. 

• Example: For payment year 2012, the 

incentive payment issued to an EP would be, 

subject to a payment limit (that is, $18,000 

if it is the first payment year, $12,000 if it is 

the second payment year), equal to 75 

percent of the EP’s Medicare physician fee 

schedule allowed charges for CY 2012, based 

on claims for covered professional services 

performed by the EP from January 1, 2012 

through December 31, 2012, and submitted to 

the appropriate Medicare administrative 

contractor (MAC/carrier) on or before 

February 28, 2013. 

c. Increase in Incentive Payment for EPs 

Who Predominantly Furnish Services in 

a Geographic Health Professional 

Shortage Area (HPSA) 

Section 1848(o)(1)(B)(iv) of the Act 

provides that the amount of the annual 

incentive payment limit for each 

payment year be increased by 10 

percent for EPs who predominantly 

furnish services in an area that is 

designated by the Secretary (under 

section 332(a)(1)(A) of the PHS Act) as 

a geographic health professional 

shortage area (HPSA). Section 

332(a)(1)(A) of the PHS Act refers to 

geographic HPSAs, or areas that have 

been determined to have a shortage of 


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health professionals, based on the 

population-to-provider ratio and other 

factors. HPSAs are located in every 

State, and in both rural and urban areas. 

Geographic HPSAs are defined in 42 

CFR Part 5 and include primary medical 

care, dental, and mental health HPSAs. 

In accordance with the statute, we will 

increase the limits per payment year by 

10 percent for EHR-related incentive 

payments to EPs who predominantly 

furnish covered professional services in 

a geographic primary medical care, 

dental, or mental health HPSA. 

We propose that an EP be considered 

as ‘‘predominantly’’ furnishing covered 

professional services in a geographic 

HPSA if more than 50 percent of the 

EP’s Medicare covered professional 

services are furnished in a geographic 

HPSA. Using ‘‘more than 50 percent’’ as 

the criterion to define ‘‘predominantly’’ 

is consistent with how the term is 

defined in general parlance as well as 

how the definition is used for purposes 

of other aspects of the Medicare 

program. 

To determine whether an EP has 

furnished more than 50 percent of his/ 

her covered professional services in a 

geographic HPSA, we propose to utilize 

frequency of services provided over a 1- 

year period from January 1 to December 

31, rather than basing it on the 

percentage of allowed charges. Our data 

indicates that most physicians either 

provide all or none of their services in 

a geographic HPSA, so we believe that 

our proposal to base eligibility for the 10 

percent EHR HPSA payment limit 

increase on frequency, rather than 

allowed charges, will have little or no 

impact on the determination of whether 

an EP is eligible for the EHR HPSA 

payment limit increase. To apply the 

payment limit increase, we will first 

need to determine whether more than 

50 percent of an EP’s covered 

professional services were furnished in 

a geographic HPSA during a particular 

payment year. We propose to first make 

the generally applicable incentive 

payment to the EP based on an EP’s 

estimated allowed charges for the 

relevant payment year. 

Once we compile a full year of data, 

we would determine eligibility for the 

EHR HPSA payment limit increase for 

the payment year based on whether the 

EP provided more than 50 percent of 

his/her services in a geographic HPSA 

during the payment year. The 

determination would be made based on 

claims submitted not later than 2 

months after the end of the year. If we 

determine that the EP provided more 

than 50 percent of his/her services in a 

geographic HPSA and is therefore 

eligible for the EHR HPSA payment 

limit increase, we would then make an 

additional lump sum payment to reflect 

that increased limit amount based on 

the estimated allowable charges for that 

EP for the prior year. We propose that 

the additional amount would be paid no 

later than 120 days after the end of the 

prior year for which the EP was eligible 

for the 10 percent EHR HPSA payment 

limit increase. 

Most physicians furnishing services 

in a HPSA furnish 100 percent of their 

covered services in a HPSA. Based on 

our data, we found very few physicians 

provide even a modest percentage of 

their services across HPSA and nonHPSA areas. We estimate that about 17 

percent of EPs would qualify for the 10 

percent EHR HPSA payment limit 

increase, provided they satisfy the other 

requirements for the incentive payment. 

Section 1848(o)(1)(B)(iv) of the Act also 

authorizes us to apply the provisions of 

sections 1833(m) and (u) of the Act in 

implementing this 10 percent EHR 

HPSA payment limit increase, as the 

Secretary determines appropriate. 

Section 1833(m) of the Act establishes 

the HPSA bonus program, which 

provides a 10 percent bonus to 

physicians who furnish Medicare 

covered professional services in a 

geographic HPSA. Section 1833(u) of 

the Act establishes the Physician 

Scarcity Area bonus program, which 

provided a 5 percent bonus to 

physicians who furnish Medicare 

covered professional services in areas 

that are determined to physician 

scarcity areas. (Note: The authority for 

the Physician Scarcity Area program 

ended on June 31, 2008.) 

Section 1833(m)(1) of the Act 

provides that physicians who furnish 

covered professional services in a year 

in an area that is designated as a 

geographic HPSA prior to the beginning 

of the year are eligible to receive the 

HPSA bonus for services furnished 

during the current year. We have 

interpreted this to mean that bonus 

payments should continue throughout 

the current year, even if the area loses 

its designation as a geographic HPSA 

during the current year. Physicians 

furnishing covered professional services 

in an area that is not designated as a 

geographic HPSA by December 31 of the 

prior year are not eligible to receive the 

HPSA bonus for the current year, even 

if the area is subsequently designated as 

a geographic HPSA during the current 

year. We propose to apply these same 

rules for the 10 percent EHR HPSA 

payment limit increase provided under 

section 1848(o)(1)(B)(iv) of the Act. 

Specifically, we propose that EPs who 

predominately furnish covered 

professional services in an area that is 

designated as a geographic HPSA as of 

December 31 of the prior year would be 

eligible to receive the 10 percent EHR 

HPSA payment limit increase during the 

current year, provided the EP qualifies 

for the EHR HPSA payment limit for the 

current year. For example, an EP 

furnishing a covered professional 

service in an area that was designated as 

a geographic HPSA as of December 31, 

2010, and who qualifies to receive the 

EHR HPSA payment in 2011, also 

would receive a 10 percent EHR 

incentive payment limit increase for 

2011. 

Section 1833(m)(2) of the Act also 

provides that geographic HPSAs that 

consist of an entire county be identified 

and the bonus paid automatically. We 

publish a list annually of the zip codes 

that are in these areas on our Web site 

at http://www.cms.hhs.gov/ 

HPSAPSAPhysicianBonuses/ 

01_Overview.asp#TopOfPage. 

Physicians furnishing Medicare covered 

professional services in a zip code that 

is on this list automatically receive the 

HPSA bonus payment. Physicians 

furnishing Medicare covered 

professional services in a zip code that 

is not on this list but that was 

designated as a geographic HPSA as of 

December 31 of the prior year must use 

a modifier when submitting a Medicare 

claim in order to receive the HPSA 

bonus. 

We note that we would only list a zip 

code on our Web site if the entire 

geographic area encompassed by the zip 

code is designated as a geographic 

HPSA. If a zip code encompasses both 

areas designated as a geographic HPSA 

and areas that are not a geographic 

HPSA, we will not list the zip code on 

our Web site. Our list also will not 

include zip codes for areas designated 

as geographic HPSAs after we create the 

zip code list (but before December 31). 

EPs furnishing Medicare covered 

professional services in an area eligible 

for the EHR HPSA payment limit 

increase that is not included in the list 

of zip codes for automatic payment 

would need to use a modifier when 

submitting a claim to identify their 

eligibility for the HPSA EHR payment 

limit increase. 

Table 23 shows the maximum total 

EHR HPSA payment limit for an EP who 

predominantly furnishes covered 

professional services in a HPSA as 

described previously above for CYs 

2011 through 2016. Table 24 shows the 

maximum additional amount of 

incentive payments for a Medicare EP 

who predominantly furnishes services 

in a HPSA. (That is, Table 24 shows the 

difference between Tables 22 and 23.) 


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TABLE 23—MAXIMUM TOTAL AMOUNT OF INCENTIVE PAYMENTS FOR A MEDICARE EP WHO PREDOMINANTLY PERFORMS

SERVICES IN A HPSA 

Calendar year 

Year that EP becomes EHR user in a HPSA 2015 and 

subsequent 

2011 2012 2013 2014 years 

2011 ..................................................................................... $19,800 ........................ ........................ ........................ ........................

2012 ..................................................................................... 13,200 $19,800 ........................ ........................ ........................

2013 ..................................................................................... 8,800 13,200 $16,500 ........................ ........................

2014 ..................................................................................... 4,400 8,800 13,200 $13,200 ........................

2015 ..................................................................................... 2,200 4,400 8,800 8,800 $0 

2016 ..................................................................................... ........................ 2,200 4,400 4,400 0 

Total .............................................................................. 48,400 48,400 42,900 26,400 0 

TABLE 24—MAXIMUM ADDITIONAL AMOUNT OF INCENTIVE PAYMENTS FOR A MEDICARE EP WHO PREDOMINANTLY

PERFORMS SERVICES IN A HPSA 

Calendar year 

Year that an EP first receives the incentive payment for Medicare 

covered professional services furnished in a geographic HPSA 2015 and 

subsequent 

years 2011 2012 2013 2014 

2011 ..................................................................................... $1,800 ........................ ........................ ........................ ........................

2012 ..................................................................................... 1,200 $1,800 ........................ ........................ ........................

2013 ..................................................................................... 800 1,200 $1,500 ........................ ........................

2014 ..................................................................................... 400 800 1,200 $1,200 ........................

2015 ..................................................................................... 200 400 800 800 $0 

2016 ..................................................................................... ........................ 200 400 400 0 

Total .............................................................................. 4,400 4,400 3,900 2,400 0 

d. Form and Timing of Payment 

Section 1848(o)(1)(D)(i) of the Act, as 

amended by section 4101(a) of the 

HITECH Act, provides that the incentive 

payments may be disbursed as a single 

consolidated payment or in periodic 

installments as the Secretary may 

specify. We propose to make a single, 

consolidated, annual incentive payment 

to EPs. We believe that making a single, 

consolidated payment would be the 

least administratively burdensome for 

both CMS and most EPs. We expect that 

many EPs who demonstrate meaningful 

use of certified EHR technology will 

receive the maximum incentive 

payments. We propose that payments 

would be made on a rolling basis, as 

soon as we ascertain that an EP has 

demonstrated meaningful use for the 

applicable reporting period (that is, 90 

days for the first year or a calendar year 

for subsequent years), and reached the 

threshold for maximum payment. 

Section 1848(o)(1)(A) of the Act 

provides that ‘‘with respect to covered 

professional services provided by an 

eligible professional,’’ the incentive 

payment ‘‘shall be paid to the eligible 

professional (or to an employer or 

facility in the cases described in clause 

(A) of section 1842(b)(6)).’’ Section 

1842(b)(6)(A) of the Act allows for 

reassignment to an employer or entity 

with which the physician has a valid 

contractual arrangement allowing the 

entity to bill for the physician’s services. 

Therefore, EPs are allowed to reassign 

their incentive payment to their 

employer or an entity which they have 

a valid employment agreement or 

contract providing for such 

reassignment, consistent with all rules 

governing reassignments. The statute 

does not address the case where the EP 

has multiple employers/contractual 

arrangements, and it would be difficult 

operationally for CMS to allocate the 

incentive payment among two or more 

individuals/entities. Therefore, in 

§ 495.10(e) we are proposing to preclude 

an EP from reassigning the incentive 

payment to more than one employer or 

entity. We believe that the question of 

whether the EP has reassigned the 

incentive payment to the employer/ 

entity under his or her contract with the 

employer/entity, including any preexisting contract between the parties, is 

a matter of contract interpretation that 

should be resolved by the parties 

themselves. We note that nothing in the 

statute or our existing regulations would 

prohibit an EP from assigning to the 

employer/entity only the allowable 

charges for his or her professional 

services, with the EP retaining any 

incentive payment, or vice versa. If an 

EP will reassign his or her incentive 

payment to an employer/entity with 

which the EP has a contractual 

arrangement, the parties will need to 

review their existing contract to 

determine whether it currently provides 

for reassignment of the incentive 

payment to the employer/entity or 

needs to be revised. 

The statute provides that the 

incentive payment shall be paid to the 

employer or facility in the cases 

described in clause (A) of section 

1842(b)(6) of the Act. This clause 

provides that payment for a service 

provided to an individual may not be 

paid to anyone other than the individual 

or the practitioner who provided the 

service, except that the practitioner may 

reassign his or her right to payment to 

his or her employer or an entity with 

whom he or she has a contractual 

arrangement if certain conditions are 

met. Any such authorization must be in 

accordance with our regulations at 42 

CFR 424.73 and 42 CFR 424.80. 

Section 1848(o)(1)(D)(ii) of the Act 

requires the Secretary to establish rules 

to coordinate the incentive payments 

made among practices for an EP 

furnishing covered professional services 

in more than one practice, including the 

application of the limits on the amounts 

of the incentive payments. To 

implement this requirement, we 

propose to use the EP’s Medicare 

enrollment information to determine 

whether an EP belongs to more than one 

practice (that is, whether the EP’s 

National Provider Identifier (NPI) is 


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associated with more than one practice). 

In cases where the EP is associated with 

more than one practice, we propose that 

EPs select one tax identification number 

to receive any applicable EHR incentive 

payment. 

Although it would not be impossible 

for Medicare contractors to make 

proportional EHR incentive payments to 

each TIN associated with a provider, we 

believe this option would entail the 

creation of highly complex and 

potentially unwieldy administrative 

systems. Therefore, we believe our 

proposal to permit the EP to select one 

TIN to which we will make any EHR 

incentive payment is the most efficient 

alternative. We have proposed that 

payments would be made on a rolling 

basis, as soon as we ascertain that an EP 

has demonstrated meaningful use for 

the applicable reporting period (that is, 

90 days for the first year or a calendar 

year for subsequent years), and reached 

the threshold for maximum payment. If 

we were to adopt an alternative policy, 

permitting EHR incentive payments to 

be made to multiple TINs, we would 

need to calculate the percentage of 

covered professional services billed by 

each TIN for that EP, and the total of 

any incentive payment amount would 

be divided and paid accordingly. Thus, 

a policy permitting payment to multiple 

TINs would conflict with our proposal 

to make payment on a rolling basis as 

EPs meet the criteria to receive the 

maximum EHR incentive payment. An 

additional confounding factor is the 

possibility that an EP might change 

group affiliations during the year. 

Therefore, we believe the most judicious 

policy would be to permit the EP to 

designate one TIN to which payment 

will be made. 

e. Payment Adjustment Effective in CY 

2015 and Subsequent Years for EPs Who 

Are Not Meaningful Users of Certified 

EHR Technology 

Section 1848(a)(7) of the Act, as 

amended by section 4101(b) of the 

HITECH Act, provides for payment 

adjustments effective for CY 2015 and 

subsequent years for EPs who are not 

meaningful EHR users during the 

relevant EHR reporting period for the 

year. In general, beginning in 2015, if an 

EP is not a meaningful EHR user for any 

EHR reporting period for the year, then 

the Medicare physician fee schedule 

amount for covered professional 

services furnished by the EP during the 

year (including the fee schedule amount 

for purposes of determining a payment 

based on the fee schedule amount) is 

adjusted to equal the ‘applicable 

percent’ of the fee schedule amount 

(defined below) that would otherwise 

apply. The HITECH Act includes a 

significant hardship exception, 

discussed below, which, if applicable, 

could exempt certain EPs from this 

payment adjustment. The payment 

adjustments will not apply to hospitalbased EPs, as defined elsewhere. 

The term ‘applicable percent’ means: 

‘‘(I) for 2015, 99 percent (or, in the case 

of an EP who was subject to the 

application of the payment adjustment 

if the EP is not a successful electronic 

prescriber under section 1848(a)(5) for 

2014, 98 percent);’’ ‘‘(II) for 2016, 98 

percent; and (III) for 2017 and each 

subsequent year, 97 percent.’’ 

In addition, section 1848(a)(7)(iii) of 

the Act provides that if for 2018 and 

subsequent years the Secretary finds 

that the proportion of EPs who are 

meaningful EHR users is less than 75 

percent, the applicable percent shall be 

decreased by 1 percentage point from 

the applicable percent in the preceding 

year, but in no case shall the applicable 

percent be less than 95 percent. 

Significant Hardship Exception— 

Section 1848(a)(7)(B) of the Act 

provides that the Secretary may, on a 

case-by-case basis, exempt an EP who is 

not a meaningful EHR user for the year 

from the application of the payment 

adjustment if the Secretary determines 

that compliance with the requirements 

for being a meaningful EHR user would 

result in a significant hardship, such as 

in the case of an EP who practices in a 

rural area without sufficient Internet 

access. The exemption is subject to 

annual renewal, but in no case may an 

EP be granted a hardship exemption for 

more than 5 years. 

We will include specific proposals to 

implement these payment adjustments 

for EPs who are not meaningful EHR 

users in future rulemaking prior to the 

2015 effective date. We welcome 

comments on these payment 

adjustments and any comments received 

will be considered in developing future 

proposals to implement these 

provisions, including comments on the 

possible circumstances for which we 

should allow an EP to qualify for the 

significant hardship exception. 

2. Incentive Payments for Hospitals 

a. Definition of Eligible Hospital for 

Medicare 

Section 1886(n) of the Act, as 

amended by section 4102(a)(1) of the 

HITECH Act, provides for incentive 

payments, beginning in FY 2011 (that is, 

October 1, 2010 through September 30, 

2011) for eligible hospitals that are 

meaningful users of certified EHR 

technology during the EHR reporting 

period for the payment year. We are 

proposing a new § 495.104 to implement 

this provision. For purposes of this 

provision, section 1886(n)(6)(B) of the 

Act defines ‘‘eligible hospitals’’ as 

‘‘subsection (d) hospitals,’’ as that term 

is defined in section 1886(d)(1)(B) of the 

Act. Section 1886(d)(1)(B) of the Act 

generally defines a ‘‘subsection (d) 

hospital’’ as a ‘‘hospital located in one of 

the fifty States or the District of 

Columbia.’’ The term therefore does not 

include hospitals located in the 

territories or hospitals located in Puerto 

Rico. Section 1886(d)(9)(A) of the Act 

separately defines a ‘‘subsection (d) 

Puerto Rico hospital’’ as a hospital that 

is located in Puerto Rico and that 

‘‘would be a subsection (d) hospital 

* * * if it were located in one of the 50 

states.’’ Therefore, because section 

4102(a)(1) of the HITECH Act does not 

refer to ‘‘subsection (d) Puerto Rico 

hospitals,’’ incentive payments for 

meaningful users of certified EHR 

technology are not available under this 

provision to hospitals located in Puerto 

Rico. The provision does apply to 

inpatient, acute care hospitals located in 

the State of Maryland. These hospitals 

are not currently paid under the IPPS in 

accordance with a special waiver 

provided by section 1814(b)(3) of the 

Act. Despite this waiver, the Maryland 

hospitals continue to meet the 

definition of a ‘‘subsection (d) hospital’’ 

because they are located in the 50 states. 

The statutory definition of a subsection 

(d) hospital also does not apply to 

hospitals and hospital units excluded 

under section 1886(d)(1)(B) from the 

IPPS, such as psychiatric, rehabilitation, 

long term care, children’s, and cancer 

hospitals. For purposes of this 

provision, we will provide incentive 

payments to hospitals as they are 

distinguished by provider number in 

hospital cost reports. Incentive 

payments for eligible hospitals will be 

calculated based on the provider 

number used for cost reporting 

purposes, which is the CCN of the main 

provider (also referred to as OSCAR 

number). Payments to eligible hospitals 

are made to each provider of record. The 

criteria for being a meaningful EHR 

user, and the manner for demonstrating 

meaningful use, are discussed in section 

B.2. of this proposed rule. 

b. Incentive Payment Calculation for 

Eligible Hospitals 

Section 1886(n)(2) of the Act, as 

amended by 4102(a) of HITECH, 

describes the methodology for 

determining the incentive payment 

amount for eligible hospitals that are 

meaningful users of certified EHR 

technology during the EHR reporting 

period for a payment year. In general, 


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that section requires the incentive 

payment for each payment year to be 

calculated as the product of: (1) An 

initial amount; (2) the Medicare share; 

and (3) a transition factor applicable to 

that payment year. 

As amended by section 4201(a) of the 

HITECH Act, section 1886(n)(2)(A)(i) of 

the Act defines the initial amount as the 

sum of a ‘‘base amount,’’ as defined in 

section 1886(n)(2)(B) of the Act, and a 

‘‘discharge related amount,’’ as defined 

in section 1886(n)(2)(C) of the Act. The 

base amount is $2,000,000, as defined in 

section 1886(n)(2)(B) of the Act. The 

term ‘‘discharge related amount’’ is 

defined in section 1886(n)(2)(C) of the 

Act as ‘‘the sum of the amount, 

estimated based upon total discharges 

for the eligible hospital (regardless of 

any source of payment) for the period, 

for each discharge up to the 23,000th 

discharge as follows: 

(i) For the first through the 1,149th 

discharge, $0. 

(ii) For the 1,150th through the 23,000th 

discharge, $200. 

(iii) For any discharge greater than the 

23,000th, $0. 

In addition to the base amount, the 

discharge related amount provides an 

additional $200 for each hospital 

discharge during a payment year, 

beginning with a hospital’s 1,150th 

discharge of the payment year, and 

ending with a hospital’s 23,000th 

discharge of the payment year. No 

additional payment is made for 

discharges prior to the 1,150th 

discharge, or for those discharges 

subsequent to the 23,000th discharge. 

Section 1886(n)(2)(C) of the Act, as 

amended by section 4102(a) of the 

HITECH Act, specifies that a ‘‘12-month 

period selected by the Secretary’’ may be 

employed for purposes of determining 

the discharge related amount. While the 

statute specifies that the payment year 

is determined based on a Federal fiscal 

year (FY), section 1886(n)(2)(C) of the 

Act provides the Secretary with 

authority to determine the discharge 

related amount on the basis of discharge 

data from a relevant hospital cost 

reporting period, for use in determining 

the incentive payment during a FY. FYs 

begin on October 1 of each calendar 

year, and end on September 30 of the 

subsequent calendar year. Hospital cost 

reporting periods can begin with any 

month of a calendar year, and end on 

the last day of the 12th subsequent 

month. For purposes of administrative 

simplicity and timeliness, we propose, 

for each eligible hospital during each 

incentive payment year, to use data on 

the hospital discharges from the 

hospital fiscal year that ends during the 

FY prior to the FY that serves as the 

payment year as the basis for making 

preliminary incentive payments. Final 

payments would be determined at the 

time of settling the cost report for the 

hospital fiscal year that ends during the 

payment year, and settled on the basis 

of the hospital discharge data from that 

cost reporting period. 

Example: FY 2011 begins on October 1, 

2010 and ends on September 30, 2011. For 

an eligible hospital with a cost reporting 

period running from July 1, 2010 through 

June 30, 2011, we would employ the relevant 

data from the hospital’s cost reporting period 

ending June 30, 2010 in order to determine 

the incentive payment for the hospital during 

FY 2011. This timeline would allow us to 

have the relevant data available for 

determining payments in a timely manner for 

the first and subsequent payment years. This 

timeline would also render it unnecessary to 

develop a cumbersome process to extract and 

employ discharge data across more than one 

hospital cost reporting period in order to 

determine the discharge related amount for a 

FY-based payment period. However, final 

payments would be based on hospital 

discharge data from the cost report ending 

June 30, 2011, and determined at the time of 

settlement for that cost reporting period. 

c. Medicare Share 

As previously discussed, the initial 

amount must be multiplied by the 

Medicare share and an applicable 

transition factor to determine the 

incentive payment to an eligible 

hospital for an incentive payment year. 

As added by section 4102(a) of the 

HITECH Act, section 1886(n)(2)(D) of 

the Act defines the Medicare share for 

purposes of calculating incentive 

payments as a fraction based on 

estimated Medicare FFS and managed 

care inpatient bed days, divided by 

estimated total inpatient bed-days, 

modified by charges for charity care. 

This section specifies that the Medicare 

share fraction is determined for the 

incentive payment year ‘‘for an eligible 

hospital for a period selected by the 

Secretary.’’ As in the case of the 

discharge data discussed above, this 

clause provides the Secretary with 

authority to determine the Medicare 

share fraction on the basis of data from 

a relevant hospital cost reporting period, 

for use in determining the incentive 

payment during a FY. For purposes of 

administrative simplicity and timeliness 

equivalent to those discussed above 

with regard to discharge data, we 

propose, for each eligible hospital 

during each incentive payment year, to 

employ data on the hospital’s Medicare 

fee-for-service and managed care 

inpatient bed days, total inpatient beddays, and charges for charity care from 

the hospital fiscal year that ends during 

the FY prior to the FY that serves as the 

payment year as the basis for 

preliminary payment. Final payment 

would be made on the basis of the data 

from the hospital fiscal year that ends 

during the FY that serves as the 

payment year at the time of the 

settlement of the cost report for the 

latter period. 

Section 1886(n)(2)(D) of the Act, as 

amended by section 4102 of the HITECH 

Act, defines the numerator and 

denominator of this fraction in terms of 

estimated Medicare FFS and managed 

care inpatient bed days, estimated total 

inpatient bed-days, and charges for 

charity care. Specifically, section 

1886(n)(2)(D)(i) of the Act defines the 

numerator of the Medicare share 

fraction as the sum of— 

• The estimated number of inpatientbed-days (as established by the 

Secretary) which are attributable to 

individuals with respect to whom 

payment may be made under part A; 

and 

• The estimated number of inpatientbed-days (as so established) that are 

attributable to individuals who are 

enrolled with a MA organization under 

Part C. 

We propose to determine the numbers 

of Medicare Part A and Part C inpatientbed-days using the same data sources 

and methods for counting those days 

that we employ in determining 

Medicare’s share for purposes of making 

payments for direct graduate medical 

education costs, as provided under 

section 1886(h) of the Act and § 413.75 

of our regulations. Specifically, we 

propose to derive ‘‘the estimated number 

of inpatient-bed-days * * * attributable 

to individuals with respect to whom 

payment may be made under part A’’ 

from lines 1, 6 through 9, 10 and 14 in 

column 4 on Worksheet S–3, Part I of 

the Medicare cost report. The data 

entered on these lines in the cost report 

include all patient days attributable to 

Medicare inpatients, excluding those in 

units not paid under the IPPS and 

excluding nursery days. Similarly, we 

propose to derive the ‘‘estimated number 

of inpatient-bed-days attributable * * * 

to individuals who are enrolled with a 

MA organization under Part C’’ from line 

2 in column 4 on Worksheet S–3, Part 

I of the Medicare cost report. The 

methodology and data sources for 

making these bed day determinations 

are not only well established, but also 

well known and understood within the 

hospital community. We therefore see 

no reason to develop or propose any 

alternative approach for determining the 

‘‘subsection (d) hospital’’ numbers of 

Medicare Part A and Part C inpatientbed-days for purposes of calculating 

these incentive payments. 


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Section 1886(n)(2)(D)(ii) of the Act 

defines the denominator of the Medicare 

share fraction as the product of— 

• The estimated total number of 

inpatient-bed-days with respect to the 

eligible hospital during such period; 

and 

• The estimated total amount of the 

eligible hospital’s charges during such 

period, not including any charges that 

are attributable to charity care (as such 

term is used for purposes of hospital 

cost reporting under Title XVIII), 

divided by the estimated total amount of 

the hospitals charges during such 

period. 

As in the case of Medicare Part A and 

Part C inpatient-bed days, for purposes 

of determining total inpatient-bed days 

in the denominator of the Medicare 

share fraction, we propose to use the 

same data sources, and the same 

methods, that we employ in 

determining Medicare’s share for 

purposes of making payments for direct 

graduate medical education costs. 

Specifically, we will derive the relevant 

data from lines 1, 6 through 9, 10 and 

14 in column 6 on Worksheet S–3, Part 

I of the Medicare cost report. The data 

entered on these lines in the cost report 

include all patient days attributable to 

inpatients, excluding those in units not 

paid under the IPPS. 

d. Charity Care 

In determining the denominator of the 

Medicare share fraction, we also must 

determine any charges that are 

attributable to charity care furnished by 

an eligible hospital or CAH. The 

exclusion of charges attributable to 

charity care has the effect of decreasing 

the denominator of the Medicare share 

fraction as the proportion of charity care 

(charity care charge ratio) provided by a 

hospital increases. This is because the 

ratio of estimated total hospital charges, 

not including charges attributable to 

charity care, to estimated total hospital 

charges during a period decreases, 

relatively speaking, as a hospital 

provides a greater proportion of charity 

care. The effect of this factor on the 

denominator of the Medicare share 

fraction is therefore to decrease the 

denominator (as the total number of 

inpatient-bed days is multiplied by a 

relatively lower charity care charge 

ratio), as a hospital provides a greater 

proportion of charity care. A smaller 

denominator increases the Medicare 

share factor, providing for higher 

incentive payments, to a hospital that 

provides a greater proportion of charity 

care. Conversely, as a hospital provides 

a lower proportion of charity care, the 

ratio of estimated total hospital charges, 

not including charges attributable to 

charity care, to estimated total hospital 

charges during a period increases. In 

this case, the effect of this factor on the 

denominator of the Medicare share 

fraction is therefore to increase the 

denominator (as the total number of 

inpatient-bed days is multiplied by a 

relatively higher charity care charge 

ratio), as a hospital provides a smaller 

proportion of charity care. A larger 

denominator in turn decreases the 

Medicare share factor, providing for 

lower incentive payments, as a hospital 

provides a lower proportion of charity 

care. 

The data and methods for determining 

this charity factor for purposes of the 

Medicare share fraction warrants more 

extensive discussion. Section 112 of the 

Medicare, Medicaid, and State 

Children’s Health Insurance Program 

(SCHIP) Balanced Budget Refinement 

Act of 1999 (Pub. L. 106–113) directs 

the Secretary to require prospective 

payment system hospitals to submit 

data on the costs incurred by the 

hospitals for providing inpatient and 

outpatient hospital services for which 

the hospitals are not compensated, 

including non-Medicare bad debt, 

charity care, and charges for medical 

and indigent care as part of the 

Medicare cost report. 

In the August 1, 2000 Federal 

Register (65 FR 47054), we published a 

final rule that set forth changes to the 

IPPS and FY 2001 rates. In that final 

rule we responded to comments on 

implementing section 112 of Public Law 

106–113. We informed the public that 

the hospital Medicare cost report and 

instructions would be revised to collect 

uncompensated care data. As a result of 

meeting with, and receiving input from, 

various hospital industry groups, 

‘‘Worksheet S–10; Hospital 

Uncompensated and Indigent Care 

Data’’, was added to the Medicare cost 

reporting forms to implement section 

112 of Public Law 106–113. The 

Worksheet S–10 was placed in effect for 

cost reporting periods beginning on or 

after April 30, 2002. 

In May 2005, the Medicare Payment 

Advisory Commission (MedPAC) 

convened an expert panel to address 

concerns on the usefulness of the 

Worksheet S–10 data. Based on the 

panel discussion, MedPAC issued a list 

of recommended changes to the 

Worksheet S–10. In addition, in its 

March 2007 report to Congress, 

MedPAC recommended that the 

Secretary should improve the form and 

accompanying instructions for 

collecting data on uncompensated care 

in the Medicare cost report; and require 

hospitals to report using the revised 

form as soon as possible. 

(Recommendation 2A–3) 

In the August 22, 2007 Federal 

Register (72 FR 47406), we published a 

final rule responding to the MedPAC 

recommendation. We stated in that final 

rule that we were undertaking a major 

update to the Worksheet S–10 form and 

accompanying instructions based on the 

panel’s discussions with MedPAC. 

In the July 2, 2009 Federal Register 

(74 FR 31738), we accordingly 

published a proposed collection to 

revise the Hospital and Hospital Health 

Care Complex Cost Report, Form CMS– 

2552–10, which included a revised 

Worksheet S–10 form. This worksheet 

may change based on public comments. 

The revised cost report and 

accompanying instructions that include 

the definition of charity care based on 

MedPAC’s recommendations are 

currently in the Paperwork Reduction 

Act clearance process. We anticipate 

that the revised hospital cost report will 

be effective for cost reporting periods 

beginning on or after February 1, 2010. 

For the purposes of this proposed 

rule, we propose to define charity care 

as part of uncompensated and indigent 

care described for Medicare cost 

reporting purposes in the Medicare cost 

report instructions at section 4012 of the 

Provider Reimbursement Manual (PRM), 

Part 2; Worksheet S–10; Hospital 

Uncompensated and Indigent Care Data. 

Subsection (d) hospitals and CAHs are 

required to complete the Worksheet 

S–10. 

As part of the Form CMS–2552–10 

described above, the revised Worksheet 

S–10 instructions define 

uncompensated care as follows: ‘‘* * * 

charity care and bad debt which 

includes non-Medicare bad debt and 

non-reimbursable Medicare bad debt. 

Uncompensated care does not include 

courtesy allowances or discounts given 

to patients.’’ These instructions further 

define charity care to include health 

services for which a hospital 

demonstrates that the patient is unable 

to pay. Charity care results from a 

hospital’s policy to provide all or a 

portion of services free of charge to 

patients who meet certain financial 

criteria. For Medicare purposes, charity 

care is not reimbursable, and unpaid 

amounts associated with charity care are 

not considered as an allowable 

Medicare bad debt. Therefore, we are 

proposing to use the charity care 

charges that are reported on line 19 of 

the revised Worksheet S–10 in the 

computation of the Medicare share of 

the incentive payments. The revised 

instructions for line 19 of Worksheet 

S–10 state the following: 


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Enter the total initial payment obligation of 

patients who are given a full or partial 

discount, based on the hospital’s charity care 

criteria (measured at full charges), for care 

delivered during this cost reporting period 

for the entire facility. For uninsured patients, 

including patients with coverage from an 

entity that does not have a contractual 

relationship with the provider (column 1), 

this is the patient’s total charges. For patients 

covered by a public program or private 

insurer with which the provider has a 

contractual relationship (column 2), this is 

the deductible and coinsurance payments 

required by the payer. Include charity care 

for all services except physician and other 

professional services. Do not include charges 

for either uninsured patients given discounts 

without meeting the hospital’s charity care 

criteria or patients given courtesy discounts. 

Charges for non-covered services provided to 

patients eligible for Medicaid or other 

indigent care program (including charges for 

days exceeding a length of stay limit) can be 

included, if such inclusion is specified in the 

hospital’s charity care policy and the patient 

meets the hospital’s charity care criteria. 

Under section 1886(n)(2)(D) of the Act, 

if the Secretary determines that data are 

not available on charity care necessary 

to calculate the portion of the formula 

specified in clause (ii)(II) of section 

1886(n)(2)(D) of the Act, the Secretary 

shall use data on uncompensated care 

and may adjust such data so as to be an 

appropriate proxy for charity care 

including a downward adjustment to 

eliminate bad debt data from 

uncompensated care data. In the 

absence of the data necessary for the 

Secretary to compute the amount 

described in clause (ii)(II) of section 

1886(n)(2)(D) of the Act, the amount 

under such clause shall be deemed to be 

1. 

We believe that the charity care 

charges reported on line 19 of the 

Worksheet S–10 represent the most 

accurate measure of charity care charges 

as part of the hospital’s overall reporting 

of uncompensated and indigent care for 

Medicare purposes. Therefore, since 

eligible hospitals and CAHs are required 

to complete the Worksheet S–10, if a 

hospital has not properly reported any 

charity care charges on line 19, we may 

question the accuracy of the charges 

used for computing the Medicare share 

of the incentive payments. With 

appropriate resources, we believe the 

charity care data can be obtained by the 

MAC. This data would be used to 

determine if the hospital’s charity care 

criteria are appropriate, if a hospital 

should have reported charity care 

charges, and if the reported charges are 

proper. If we determine, as based on the 

determination of the MAC, that the 

hospital did not properly report charity 

care charges on the Worksheet S–10, 

then we propose to deem the 

denominator in section 

1886(n)(2)(D)(ii)(II) of the Act to be 1. 

In this proposed rule, we are 

specifically soliciting public comments 

on the charity care financial criteria 

established by each hospital and 

reviewed by the MACs, the collection of 

charity care data on the Worksheet 

S–10, and whether proxies for charity 

care may be developed with other data 

available to us. 

e. Transition Factor 

As we have previously discussed, the 

initial amount must be multiplied not 

only by the Medicare share fraction, but 

also by an applicable transition factor in 

order to determine the incentive 

payment to an eligible hospital for an 

incentive payment year. Section 

1886(n)(2)(E)(i) of the Act designates 

that the applicable transition factor 

equals 1 for the first payment year, 

three-fourths for the second payment 

year, one-half for the third payment 

year, one-fourth for the fourth payment 

year, and zero thereafter. However, 

section 1886(n)(2)(E)(ii) of the Act 

provides that if ‘‘the first payment year 

for an eligible hospital is after 2013, 

then the transition factor specified in 

this subparagraph for a payment year for 

such hospital is the same as the amount 

specified in clause (i) for such payment 

year for an eligible hospital for which 

the first payment year is 2013.’’ 

Accordingly, if a hospital’s first 

payment year is FY 2014, the applicable 

transition factor equals three-fourths for 

the first payment year (FY 2014), onehalf for the second payment year (FY 

2015), one-fourth for the third payment 

year (FY 2015, and zero thereafter.) If a 

hospital’s first payment year is FY 2015, 

the applicable transition factor equals 

one-half for the first payment year (FY 

2015), one-fourth for the second 

payment year (FY 2016), and zero 

thereafter. As discussed in more detail 

below, under section 1886(n)(2)(E)(ii) of 

the Act, the transition factor for a 

hospital for which the first payment 

year is after 2015 equals zero for all 

years. In other words, 2015 is the last 

year for which eligible hospitals may 

begin participation in the Medicare EHR 

Incentive Program. 

Figure 1—Incentive Payment 

Calculation for Subsection D Hospitals 

Incentive Amount = [Initial Amount] × 

[Medicare Share] × [Transition 

Factor] 

Initial Amount = $2,000,000 + [$200 per 

discharge for the 1,150th – 23,000th 

discharge] 

Medicare Share = Medicare/ 

(Total*Charity Care) = [M/(T*C)] 

M = [# of Inpatient Bed Days for Part A 

Beneficiaries] + [# of Inpatient Bed Days 

for MA Beneficiaries] 

T = [# of Total Inpatient Bed Days] 

C = [Total Charges ¥ Charges for Charity 

Care*]/[Total Charges] 

*If data on charity care is not available, 

then the Secretary would use data on 

uncompensated care as a proxy. If the proxy 

data is not also available, then ‘‘C’’ would be 

equal to 1. 

TRANSITION FACTOR

Consecutive payment year Transition 

factor 

1 ............................................ 1 

2 ............................................ 3⁄4

3 ............................................ 1⁄2

4 ............................................ 1⁄4

f. Duration and Timing of Incentive 

Payments 

Section 1886(n)(2)(E)(i) of the Act 

establishes that an eligible hospital that 

is a meaningful user of certified EHR 

technology could receive up to 4 years 

of financial incentive payments. The 

transition factor phases down the 

incentive payments over the 4-year 

period. Therefore, an eligible hospital 

that is a meaningful user of certified 

EHR technology during the relevant 

EHR reporting period, in payment year 

FY 2011, could receive incentive 

payments beginning with FY 2011 

(transition factor equals 1), and for FY 

2012 (transition factor equals threefourths), 2013 (transition factor equals 

one-half), and 2014 (transition factor 

equals one-fourth) if they continue to be 

a meaningful user of certified EHR 

technology during the relevant EHR 

reporting periods. 

Section 1886(n)(2)(E)(ii) of the Act 

establishes the range of time during 

which a hospital may begin to receive 

incentive payments, and the applicable 

transition periods for hospitals that are 

permitted to begin receiving incentive 

payments after FY 2011. Specifically, 

that section provides that if the ‘‘first 

payment year for an eligible hospital is 

after 2015, then the transition factor 

* * * for such hospital and for such 

year and subsequent year shall be 0.’’ 

This clause in effect provides that no 

incentive payments will be available to 

a hospital that would begin to receive 

such payments after FY 2015. In other 

words, FY 2015 is the last FY in which 

a hospital can begin to receive incentive 

payments. Taken together, sections 

1886(n)(2)(G)(i) and 1886(n)(2)(E)(ii) of 

the Act allow hospitals to begin 

receiving incentive payments during 

FYs 2011 through 2015. Section 

1886(n)(2)(E)(ii) of the Act also 

establishes the transition periods and 


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factors that will be in effect for hospitals 

that begin to receive transition 

payments during FY 2014 and 2015. As 

discussed previously, that section states 

that if ‘‘the first payment year for an 

eligible hospital is after 2013, then the 

transition factor specified in this 

subparagraph for a payment year for 

such hospital is the same as the amount 

specified in clause (i) for such payment 

year for an eligible hospital for which 

the first payment year is 2013.’’ Section 

1886(n)(2)(E)(ii) of the Act also 

establishes the transition periods that 

will be in effect for hospitals that begin 

to receive transition payments during 

FYs 2014 through 2015. That section 

states that if ‘‘the first payment year for 

an eligible hospital is after 2013, then 

the transition factor specified in this 

subparagraph for a payment year for 

such hospital is the same as the amount 

specified in clause (i) for such payment 

year for an eligible hospital for which 

the first payment year is 2013.’’ By 

implication, this clause establishes that, 

for hospitals that begin to receive 

incentive payments in FYs 2012 and 

2013, the transition periods are 

equivalent to those for hospitals that 

begin to receive such payments in FY 

2011. An eligible hospital that is a 

meaningful user of certified EHR 

technology could receive incentive 

payments beginning with FY 2012 

(transition factor equals 1), and for FY 

2013 (transition factor equals threefourths), FY 2014 (transition factor 

equals one-half), and FY 2015 

(transition factor equals one-fourth). 

Similarly, an eligible hospital that is a 

meaningful EHR user could receive 

incentive payments beginning with FY 

2013 (transition factor equals 1), and for 

FYs 2014 (transition factor equals 3⁄4), 

2015 (transition factor equals 1⁄2), and 

2016 (transition factor equals 1⁄4). 

However, this section also specifically 

provides that the transition factor is 

modified for those eligible hospitals that 

first become meaningful users of 

certified EHR technology beginning in 

2014 or 2015. Such hospitals would 

receive payments as if they became 

meaningful EHR users beginning in 

2013. In other words, if a hospital were 

to begin to demonstrate meaningful use 

of EHR certified technology in 2014, the 

transition factor used for that year 

(2014) would be 3⁄4 instead of 1, 1⁄2 for 

the second year (2015), 1⁄4 for the third 

year (2016), and zero thereafter. 

Similarly, if a hospital were to begin 

meaningful use of certified EHR 

technology in 2015, the transition factor 

used for that year would be 1⁄2 instead 

of 1, 1⁄4 for the second year (2016), and 

zero thereafter. 

Table 25 shows the possible years an 

eligible hospital could receive an 

incentive payment and the transition 

factor applicable to each year. 

TABLE 25—TRANSACTION FACTOR FOR MEDICARE FFS ELIGIBLE HOSPITALS

Fiscal year 

Fiscal year that eligible hospital first receives the incentive payment 

2011 2012 2013 2014 2015 

2011 ..................................................................................... 1.00 ........................ ........................ ........................ ........................

2012 ..................................................................................... 0.75 1.00 ........................ ........................ ........................

2013 ..................................................................................... 0.50 0.75 1.00 ........................ ........................

2014 ..................................................................................... 0.25 0.50 0.75 0.75 ........................

2015 ..................................................................................... ........................ 0.25 0.50 0.50 0.50 

2016 ..................................................................................... ........................ ........................ 0.25 0.25 0.25 

We welcome comments from the 

public on our discussion of these 

statutory requirements regarding the 

computation of the incentive payment 

amounts, and the issues regarding the 

sources and timing of data for use in 

these computations. 

g. Incentive Payment Adjustment 

Effective in FY 2015 and Subsequent 

Years for Eligible Hospitals Who Are 

Not Meaningful EHR Users 

In addition to providing for incentive 

payments for meaningful use of EHRs 

during a transition period, section 

1886(b)(3)(B) of the Act, as amended by 

section 4102(b)(1) of the HITECH Act, 

provides for an adjustment to the market 

basket update to the IPPS payment rate 

for those eligible hospitals that are not 

meaningful EHR users for the EHR 

reporting period for a payment year, 

beginning in FY 2015. Specifically, 

section 1886(b)(3)(B) of the Act provides 

that, ‘‘for FY 2015 and each subsequent 

FY,’’ an eligible hospital that is not ‘‘a 

meaningful EHR user * * * for an EHR 

reporting period’’ will receive a reduced 

update to the IPPS standardized 

amount. This reduction will apply to 

‘‘three-quarters of the percentage 

increase otherwise applicable.’’ For FY 

2015 and each subsequent FY, the 

reduction to three-quarters of the 

applicable update for an eligible 

hospital that is not a meaningful EHR 

user will be ‘‘331⁄3 percent for FY 2015, 

662⁄3 percent for FY 2016, and 100 

percent for FY 2017 and each 

subsequent FY.’’ In other words, the 

Secretary is required to subject eligible 

hospitals who are not meaningful users 

to one-quarter, one-half, and threequarters reductions of their market 

basket updates in FY 2015, FY 2016, 

and FY 2017 and subsequent years 

respectively. Section 4102(b)(1)(B) of 

the HITECH Act also provides that such 

‘‘reduction shall apply only with respect 

to the FY involved and the Secretary 

shall not take into account such 

reduction in computing the applicable 

percentage increase * * * for a 

subsequent FY.’’ This provision 

establishes a continuing incentive for 

hospitals to become meaningful EHR 

users, because a hospital that does 

become a meaningful EHR user in any 

year after the effective date of the 

update reduction will receive the same, 

fully updated standardized amount for 

that year, and subsequent years, as those 

hospitals that were already meaningful 

EHR users at the time when the update 

reduction went into effect (although 

hospitals would remain subject to a 

separate reduction for failure to report 

quality data under RHQDAPU). In order 

to conform with this new update 

reduction, section 4102(b)(1)(A) of the 

HITECH Act revises section 

1886(b)(3)(B)(viii)(1) of the Act to 

provide that, beginning with FY 2015, 

the reduction to the IPPS applicable 

percentage increase for failure to submit 

data on quality measures to the 

Secretary shall be one-quarter of the 

applicable market basket update. In this 

way, even the combined reductions for 

EHR use and quality data reporting will 

not produce an update of less than zero 

for a hospital in a given FY as long as 

the hospital market basket remains a 

positive number. 

The following example illustrates 

how this payment reduction would 

work. Suppose that the market basket 

‘‘percentage increase otherwise 

applicable’’ to the IPPS standardized 


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amount is 2.0 percent. Of this 2.0 

percent, one-quarter (0.5 percent) of the 

market basket update would be subject 

to a reduction for any hospital that fails 

to submit data on quality measures, and 

up to three-quarters (1.5 percent) would 

be subject to a reduction for any 

hospital that is not a meaningful EHR 

user. For FY 2015, hospitals could 

receive one of four different updates, 

depending upon their reporting of 

quality data and their use of EHRs: 

• A hospital that reports quality data 

and qualifies as a meaningful EHR user 

would receive the full update of 2.0 

percent. 

• A hospital that fails to report 

quality data but is a meaningful EHR 

user would receive an update of 1.5 

percent, which represents the full 2.0 

percent update minus the reduction of 

one-quarter (0.5 percentage point) for 

failing to report quality data. 

• A hospital that reports quality data 

but does not qualify as a meaningful 

EHR user would receive an update of 

1.5 percent, which represents the full 

2.0 percent update minus 0.5 percentage 

point (331⁄3 percent of three-quarters of 

the full update: 1⁄3 times 1.5 equals 0.5). 

• A hospital that fails to report 

quality data and does not qualify as a 

meaningful EHR user would receive an 

update of 1.0 percent, which represents 

the full 2.0 percent update minus the 

reduction of one-quarter (0.5 percentage 

point) for failing to report quality data, 

and a further reduction of 0.5 

percentage point (331⁄3 percent of threequarters of the full update: 1⁄3 times 1.5 

equals 0.5). 

For FY 2016, hospitals could receive 

one of four different updates (assuming 

a 2 percent update that is otherwise 

applicable), depending upon their 

reporting of quality data and their use 

of EHRs: 

• A hospital that reports quality data 

and qualifies as a meaningful EHR user 

would receive the full update of 2.0 

percent. 

• A hospital that fails to report 

quality data, but is a meaningful EHR 

user would receive an update of 1.5 

percent, which represents the full 2.0 

percent update minus the reduction of 

one-quarter (0.5 percentage point) for 

failing to report quality data. 

• A hospital that reports quality data, 

but does not qualify as a meaningful 

EHR user would receive an update of 

1.0 percent, which represents the full 

2.0 percent update minus 1.0 percentage 

point (662⁄3 percent of three-quarters of 

the full update: 2⁄3 times 1.5 equals 1.0). 

• A hospital that fails to report 

quality data, and does not qualify as a 

meaningful EHR user would receive an 

update of 0.5 percent, which represents 

the full 2.0 percent update minus the 

reduction of one-quarter (0.5 percentage 

point) for failing to report quality data, 

and a further reduction of 1.0 

percentage point (662⁄3 percent of threequarters of the full update: 2⁄3 times 1.5 

equals 1.0). 

For FYs 2017 and subsequent FYs, the 

possibilities (assuming a 2 percent 

update that is otherwise applicable) are 

as follows: 

• A hospital that reports quality data 

and qualifies as a meaningful EHR user 

would receive the full update of 2.0 

percent. 

• A hospital that fails to report 

quality data, but is a meaningful EHR 

user would receive an update of 1.5 

percent, which represents the full 2.0 

percent update minus the reduction of 

one-quarter (0.5 percentage point) for 

failing to report quality data. 

• A hospital that reports quality data, 

but does not qualify as a meaningful 

EHR user would receive an update of 

0.5 percent, which represents the full 

2.0 percent update minus 1.5 percentage 

points (100 percent of three-quarters of 

the full update, which equals 1.5) for 

failing to be a meaningful EHR user. 

• A hospital that fails to report 

quality data, and does not qualify as a 

meaningful EHR user would receive an 

update of 0.0 percent, which represents 

the full 2.0 percent update minus the 

reduction of one-quarter (0.5 percentage 

point) for failing to report quality data, 

and a further reduction of 1.5 

percentage points (100 percent of threequarters of the full update, which equals 

1.5) for failing to be a meaningful EHR 

user. 

These examples are illustrative of 

current law. Specific proposals to 

implement these payment adjustments 

for subsection (d) hospitals that are not 

meaningful EHR users are not being 

made at this time but will be subject to 

future rule-making prior to the 2015 

implementation date. We welcome 

comments on these payment 

adjustments and any comments received 

will be considered in developing future 

proposals to implement these 

provisions. 

3. Incentive Payments for Critical 

Access Hospitals (CAHs) 

Section 1814(l)(3)(A) of the Act, as 

amended by section 4102(a)(2) of the 

HITECH Act, also provides for incentive 

payments for CAHs that are meaningful 

users of certified EHR technology during 

an EHR reporting period for a cost 

reporting period beginning during a 

payment year after FY 2010 but before 

FY 2016. The criteria for being a 

meaningful EHR user, and the manner 

for demonstrating meaningful use, are 

discussed in section II.A.2. of this 

proposed rule. 

a. Definition of CAHs for Medicare 

Section 1861(mm)(1) of the Act 

defines a CAH as a facility that has been 

certified as a critical access hospital 

under section 1820(c). CAHs are 

reimbursed for services furnished to 

Medicare beneficiaries under section 

1814(l) of the Act for inpatient services 

and section 1834(g) of the Act for 

outpatient services. Incentive payments 

for CAHs under section 1814(l)(3)(A) of 

the Act will be calculated based on the 

provider number used for cost reporting 

purposes, which is the CCN of the main 

provider. The process for making 

incentive payments to CAHs is 

discussed in section II.B.4.c. of this 

proposed rule. 

b. Current Medicare Payment of 

Reasonable Cost for CAHs 

For Medicare purposes, CAHs are 

paid for most inpatient and outpatient 

services to Medicare beneficiaries on the 

basis of reasonable cost under section 

1814(l) and section 1834(g) of the Act, 

respectively. Thus, CAHs are not subject 

to the IPPS and Hospital Outpatient 

Prospective Payment System (OPPS). 

Section 1861(v)(1)(A) of the Act is the 

statutory basis for reasonable cost 

reimbursement in Medicare. Under the 

reasonable cost reimbursement 

methodology, payments to providers are 

based on the reasonable cost of 

furnishing Medicare-covered services to 

beneficiaries. Reasonable cost includes 

all necessary and proper costs in 

furnishing the services, subject to the 

principles of reasonable cost 

reimbursement relating to certain 

specific items of revenue and cost. 

Reasonable cost takes into account both 

direct and indirect costs of providers of 

services, including normal standby 

costs. The objective of the reasonable 

cost methodology is to ensure that the 

costs for individuals covered by the 

program are not borne by others not so 

covered, and the costs for individuals 

not so covered are not borne by the 

program. The reasonable costs of 

services and the items to be included 

are determined in accordance with the 

regulations at 42 CFR part 413, manual 

guidance, and other CMS instructions. 

Currently, under section 1814(l)(1) of 

the Act and § 413.70(a) of the 

regulations, effective for cost reporting 

periods beginning on or after January 1, 

2004, payment for inpatient services of 

a CAH, other than services of a distinct 

part unit of a CAH, is 101 percent of the 

reasonable costs of the CAH in 

providing CAH services to its inpatients, 

as determined in accordance with 


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section 1861(v)(1)(A) of the Act and 

with the applicable principles of cost 

reimbursement in Parts 413 and 415 of 

the regulations. However, payment for 

inpatient CAH services is not subject to 

the reasonable cost principles of the 

lesser of cost or charges, the reasonable 

compensation equivalent limits for 

physician services to providers, the 

ceilings on hospital operating costs, and 

the payment window provisions for 

preadmission services, specified in 

§ 412.2(c)(5) and § 413.40(c)(2). Section 

1834(g) of the Act and § 413.70(b) of the 

regulations describe the payment 

methodology for outpatient services 

furnished by a CAH. 

Currently, reasonable cost 

reimbursement for CAHs includes 

payment for depreciation of depreciable 

assets used in providing covered 

services to beneficiaries, as described 

under Part 413 subpart G of our 

regulations and § 104 of the Medicare 

Provider Reimbursement Manual (PRM). 

In general, the depreciation expense of 

an asset, representing a portion of the 

depreciable asset’s costs which is 

allocable to a period of operation, is 

determined by distributing the 

acquisition costs of the depreciable 

asset, less any salvage costs, over the 

estimated useful life of the asset. 

c. Changes Made by the HITECH Act 

Sections 4102(a)(2) and 4102(b)(2) of 

the HITECH Act amended section 

1814(l) of the Act, which governs 

payment for inpatient CAH services. 

The HITECH Act did not amend section 

1834(g) of the Act, which governs 

payment for outpatient CAH services. 

Sections 4102(a)(2) and 4102(b)(2) of 

the HITECH Act amended section 

1814(l) of the Act by adding new 

paragraphs (3), (4), and (5) as follows: 

Section 1814(l)(3)(A) of the Act provides 

the following: 

The following rules shall apply in 

determining payment and reasonable costs 

* * * for a critical access hospital that 

would be a meaningful EHR user (as would 

be determined under paragraph (3) of section 

1886(n)) for an EHR reporting period for a 

cost reporting period beginning during a 

payment year if such critical access hospital 

was treated as an eligible hospital under such 

section: 

(i) The Secretary shall compute reasonable 

costs by expensing such costs in a single 

payment year and not depreciating these 

costs over a period of years (and shall 

include as costs with respect to cost reporting 

periods beginning during a payment year 

costs from previous cost reporting periods to 

the extent they have not been fully 

depreciated as of the period involved). 

(ii) There shall be substituted for the 

Medicare share that would otherwise be 

applied [to CAHs under section 1814(l)(1)] a 

percent (not to exceed 100 percent) equal to 

the sum of— 

(I) the Medicare share (as would be 

specified under paragraph (2)(D) of section 

1886(n)) for such critical access hospital if 

such critical access hospital was treated as an 

eligible hospital under such section; and 

(II) 20 percentage points. 

Section 1814(l)(3)(B) of the Act 

provides that the incentive payment for 

CAHs will be paid ‘‘through a prompt 

interim payment (subject to 

reconciliation) after submission and 

review of such information (as specified 

by the Secretary) necessary to make 

such payment.’’ The provision also 

states that ‘‘[i]n no case may payment 

under this paragraph be made with 

respect to a cost reporting period 

beginning during a payment year after 

2015 and in no case may a critical 

access hospital receive payment under 

this paragraph with respect to more than 

4 consecutive payment years.’’ 

Section 1814(l)(3)(C) of the Act 

provides that the reasonable costs for 

which a CAH may receive an incentive 

payment are costs for the purchase of 

certified EHR technology to which 

purchase depreciation (excluding 

interest) would otherwise apply under 

section 1814(l)(1) of the Act. 

Section 1814(l)(4)(A) of the Act 

provides for an adjustment, subject to 

the hardship exemption in section 

1814(l)(4)(C) of the Act, to a CAH’s 

reimbursement at 101 percent of its 

reasonable costs if the CAH has not met 

the meaningful EHR user definition for 

an EHR reporting period that begins in 

FY 2015 or a subsequent fiscal year. 

Section 1814(l)(4)(B) of the Act specifies 

that if a CAH is not a meaningful EHR 

user during the cost reporting period 

beginning in FY 2015, its 

reimbursement will be reduced from 

101 percent of its reasonable costs to 

100.66 percent. For FY 2016, the 

percentage of reimbursement for a CAH 

that is not a meaningful EHR user is 

reduced to 100.33 percent of its 

reasonable costs. For FY 2017 and each 

subsequent FY, the percentage of 

reimbursement is reduced to 100 

percent of reasonable costs. Section 

1814(l)(4)(C) of the Act states that, as 

provided for eligible subsection (d) 

hospitals, the Secretary may, on a caseby-case basis, exempt a CAH from this 

adjustment if the Secretary determines, 

subject to annual renewal, that requiring 

the CAH to be a meaningful EHR user 

during a cost reporting period beginning 

in FY 2015 or a subsequent fiscal year 

would result in a significant hardship, 

such as in the case of a CAH in a rural 

area without sufficient Internet access. 

However, in no case may a CAH be 

granted an exemption under this 

provision for more than 5 years. 

Section 1814(l)(5) provides that there 

shall be no administrative or judicial 

review under sections 1869 or 1878 of 

the Act, or otherwise, of: (1) The 

methodology and standards for 

determining the amount of payment 

under section 1813(l)(3) and payment 

adjustments under section 1814(l)(4); (2) 

the methodology and standards for 

determining a CAH to be a meaningful 

EHR user; (3) the methodology and 

standards for determining if the 

hardship exemption applies to a CAH; 

(4) the specification of EHR reporting 

periods; and (5) the identification of 

reasonable costs used to compute CAH 

incentive payments. 

d. Incentive Payment Calculation for 

CAHs 

Consistent with section 1814(l)(3)(A) 

of the Act, we are proposing to amend 

§ 413.70(a) to add a new paragraph (5) 

to provide for an incentive payment to 

a qualifying CAH for the reasonable 

costs incurred for the purchase of 

certified EHR technology in a cost 

reporting period beginning during a 

payment year after FY 2010 but before 

FY 2016. We are proposing to include 

a cross-reference to § 495.106 which 

defines the terms associated with the 

CAH incentive payment, including the 

definition of a ‘‘qualifying CAH’’ that is 

eligible to receive the CAH incentive 

payment, and the methodology for 

determining the amount of that 

incentive payment. In addition, we are 

proposing to amend § 413.70(a) to add a 

new paragraph (6) to provide for the 

adjustment of a CAH’s reasonable costs 

of providing inpatient services starting 

in FY 2015 if the CAH is not a 

qualifying CAH. 

In computing the CAH incentive 

payment and applying the adjustments 

to a CAH’s payment if the CAH is not 

a qualifying CAH, we propose to apply 

the definitions of certified EHR 

technology, EHR reporting period, 

meaningful EHR user and qualified EHR 

in proposed § 495.4 that are discussed 

elsewhere in this proposed rule. 

In proposed § 495.106(a), we are 

proposing to define a qualifying CAH as 

a CAH that meets the meaningful EHR 

user definition for eligible hospitals in 

§ 495.4, which is discussed in section II 

A.1. of this proposed rule. Also in 

proposed § 495.106(a), for the purposes 

of computing the CAH incentive 

payment, we are proposing that the 

reasonable costs for the purchase of 

certified EHR technology mean the 

reasonable acquisition costs, excluding 

any depreciation and interest expenses 

associated with the acquisition, 


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incurred for the purchase of depreciable 

assets as described at part 413 subpart 

G, such as computers and associated 

hardware and software, necessary to 

administer certified EHR technology as 

defined in § 495.4 of this proposed rule. 

We also propose to define payment year 

for CAHs to mean a fiscal year 

beginning after FY 2010 but before FY 

2016. 

Under proposed § 495.106(b), we 

specify that a qualifying CAH shall 

receive an incentive payment for its 

reasonable costs incurred for the 

purchase of certified EHR technology. 

The CAH incentive payment will be for 

a cost reporting period that begins 

during a payment year after FY 2010 but 

before FY 2016. 

Consistent with section 1814(l)(3)(A) 

of the Act, under proposed § 495.106(c), 

the proposed payment methodology for 

computing the incentive payment for a 

qualifying CAH for a cost reporting 

period during a payment year is equal 

to the product of—(1) the reasonable 

costs incurred for the purchase of 

certified EHR technology in that cost 

reporting period and any similarly 

incurred costs from previous cost 

reporting periods to the extent they have 

not been fully depreciated as of the cost 

reporting period involved and (2) the 

CAH’s Medicare share which equals the 

Medicare share as computed for eligible 

hospitals including the adjustment for 

charity care (described in sections 

II.A.2.b. and A.3. of this proposed rule) 

plus 20 percentage points. However, in 

no case will the resulting Medicare 

share for a CAH exceed 100 percent. 

This percentage adjustment will be used 

in place of the 101 percent typically 

applied to a CAH’s reasonable costs 

under section 1814(l)(1) of the Act and 

§ 413.70(a) of the regulations. 

For example, a CAH first requests an 

incentive payment for its cost reporting 

period beginning on January 1, 2012 

which is in FY 2012. The CAH incurred 

reasonable costs of $500,000 for the 

purchase of certified EHR technology in 

its previous cost reporting period 

beginning on January 1, 2011. This CAH 

is a meaningful user of certified EHR 

technology during the relevant EHR 

reporting period and thus qualifies for 

an incentive payment for FY 2012. (For 

illustrative purposes this example 

assumes no salvage value of the assets 

acquired.) The CAH depreciated 

$100,000 of the costs of these items in 

the cost reporting period beginning on 

January 1, 2011. As a result, the amount 

used to compute the incentive payment 

will be the remaining $400,000 of 

undepreciated costs. The CAH’s 

Medicare share is 90 percent (its 

Medicare share of 70 percent using the 

methodology described in section 

II.A.2.b. of this proposed rule plus 20 

percentage points). Therefore, the CAH’s 

incentive payment for FY 2012 is 

$360,000 ($400,000 times 90 percent). 

This CAH’s first payment year is FY 

2012, and it can receive incentive 

payments through 4 consecutive 

payment years which, in this example, 

would be FYs 2012 through 2015. 

If, in the above example, the CAH also 

incurred reasonable costs of $300,000 

for the purchase of certified EHR 

technology in its cost reporting period 

beginning in FY 2012 that will not be 

depreciated, then the incentive payment 

for FY 2012 is $630,000 ($700,000 

($400,000 in FY 2011 plus $300,000 in 

FY 2012) times 90 percent). 

(The preceding examples are offered 

for illustrative purposes only and are 

not intended to encompass all possible 

computations of the CAH incentive 

payment.) 

Under proposed § 495.106(d)(1), the 

amount of the incentive payment made 

to a qualifying CAH under this section 

represents the expensing and payment 

of the reasonable costs of certified EHR 

technology computed as described 

above in a single payment year and, as 

specified in § 413.70(a)(5), such 

payment is made in lieu of any payment 

that would have been made under 

§ 413.70(a)(1) for the reasonable costs of 

the purchase of certified EHR 

technology including depreciation and 

interest expenses associated with the 

acquisition. The Medicare contractor 

will review the CAH’s current year and 

each subsequent year’s cost report to 

ensure that the 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. 

Under proposed § 495.106(d)(2), the 

amount of the incentive payment made 

to a qualifying CAH under this section 

is paid through a prompt interim 

payment for the applicable payment 

year after—(1) The CAH submits the 

necessary documentation, as specified 

by CMS or its Medicare contractor, to 

support the computation of the 

incentive payment amount; and (2) CMS 

or its Medicare contractor reviews such 

documentation and determines the 

interim amount of the incentive 

payment. 

Under § 495.106(d)(3), the interim 

incentive payment is subject to a 

reconciliation process as specified by 

CMS and the final incentive payment as 

determined by CMS or its Medicare 

contractor is considered payment in full 

for the reasonable costs incurred for the 

purchase of certified EHR technology in 

a payment year. 

Under § 495.106(d)(4), we propose 

that an incentive payment may be made 

with respect to a cost reporting period 

beginning during a payment year 

beginning with FY 2011 (October 1, 

2010 through September 30, 2011) 

through FY 2015 (October 1, 2014 

through September 30, 2015), but in no 

case may a CAH receive an incentive 

payment with respect to more than four 

consecutive payment years. Therefore, a 

CAH, that is a meaningful EHR user, 

may begin receiving an incentive 

payment for its cost reporting period 

beginning in FY 2011 for the incurred 

reasonable costs for the purchase of 

certified EHR technology during that 

cost reporting period and in previous 

cost reporting periods to the extent that 

the item or items have not been fully 

depreciated. These incentive payments 

will continue for no more than 4 

consecutive payment years and will not 

be made for a cost reporting period 

beginning during a payment year after 

2015. As discussed in section II.B.4. of 

this proposed rule, the CAH must 

submit supporting documentation for its 

incurred costs of purchasing certified 

EHR technology to its Medicare 

contractor (Fiscal Intermediary (FI)/ 

MAC). 

CAHs cannot receive an incentive 

payment for a cost reporting period that 

begins in a payment year after FY 2015. 

If the first payment year for a CAH is FY 

2013 then the fourth consecutive 

payment year would be 2016. However, 

the CAH cannot be paid an incentive 

payment for FYs 2016 and beyond. For 

FY 2016 and beyond, payment to CAHs 

for the purchase of additional EHR 

technology will be made under 

§ 413.70(a)(1) in accordance with the 

reasonable cost principles, as described 

above, which would include the 

depreciation and interest cost associated 

with such purchase. 

e. Reduction of Reasonable Cost 

Payment in FY 2015 and Subsequent 

Years for CAHs That Are Not 

Meaningful EHR Users 

Section 4102(b)(2) of the HITECH Act 

amends section 1814(l) to include an 

adjustment to a CAH’s reimbursement at 

101 percent of its reasonable costs if the 

CAH has not met the meaningful EHR 

user definition for an EHR reporting 

period that begins in FY 2015, FY 2016, 

FY 2017, and each subsequent FY 

thereafter. Consistent with this 

provision, under proposed § 495.106(e) 

and § 413.70(a)(6), if a CAH has not 

demonstrated meaningful use of 

certified EHR technology for FY 2015, 

its reimbursement will be reduced from 


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101 percent of its reasonable costs to 

100.66 percent. For FY 2016, its 

reimbursement will be reduced to 

100.33 percent of its reasonable costs. 

For FY 2017 and each subsequent FY, 

its reimbursement will be reduced to 

100 percent of reasonable costs. 

However, as provided for eligible 

hospitals, a CAH may, on a case-by-case 

basis, be exempted from this adjustment 

if CMS or its Medicare contractor 

determines, on an annual basis, that 

requiring the CAH to be a meaningful 

EHR user would result in a significant 

hardship, such as in the case of a CAH 

in a rural area without sufficient 

Internet access. However, in no case 

may a CAH be granted an exemption 

under this provision for more than 5 

years. 

Section 1814(l)(5) of the Act exempts 

the determinations made under 

paragraphs (l)(3) and (l)(4) from 

administrative and judicial review. 

Accordingly, under proposed 

§ 413.70(a)(6)(iv) and § 495.106(f), we 

are proposing that there shall be no 

administrative or judicial review under 

sections 1869 or 1878 of the Act, or 

otherwise, of the following: 

• The methodology and standards for 

determining the amount of payment 

under section 1814(l)(3) of the Act and 

payment adjustments under section 

1814(l)(4) of the Act for CAHs, 

including selection of periods under 

section 1886(n)(2) of the Act for 

determining, and making estimates or 

using proxies of, inpatient-bed-days, 

hospital charges, charity charges, and 

the Medicare share under subparagraph 

(D) of section 1886(n)(2) of the Act; 

• The methodology and standards for 

determining a CAH to be a meaningful 

EHR user under section 1886(n)(3) of 

the Act as would apply if the CAH was 

treated as an eligible hospital under 

section 1886(n) of the Act; 

• The methodology and standards for 

determining if the hardship exemption 

under section 1814(l)(4)(C) of the Act 

applies to a CAH; 

• The specification of EHR reporting 

periods under section 1886(n)(6)(B) of 

the Act as applied under section 

1814(l)(3) and (4) of the Act for CAHs; 

and 

• The identification of reasonable 

costs used to compute the CAH 

incentive payment under section 

1814(l)(3)(C) of the Act. 

4. Process for Making Incentive 

Payments Under the Medicare FFS 

Program 

As previously discussed in section 

II.B.1. and 2. of this proposed rule and 

sections 1848(o)(1) and 1886(n)(1) of the 

Act, the statute provides for incentive 

payments to eligible professionals, 

eligible hospitals, and CAHS who are 

meaningful users of certified EHR 

technology as early as FY 2011 for 

qualifying eligible hospitals and CAHs 

and CY 2011 for qualifying EPs. The 

statute does not specify the process for 

making these payments to qualifying 

EPs and qualifying eligible hospitals 

and CAHs participating in the FFS 

Medicare incentive payment program, 

but instead leaves the payment process 

to the Secretary’s discretion. 

We propose that FIs, carriers, and 

MACs, as appropriate, would be 

responsible for determining the 

incentive payment amounts for 

qualifying EPs and qualifying eligible 

hospitals and CAHs in accordance with 

the proposed methodology set forth in 

section II.B.1.b. and B.2.b. of this 

proposed rule based on the previously 

discussed meaningful use criteria, 

disbursing the incentive payments to 

qualifying EPs and qualifying eligible 

hospitals and CAHs, and resolving any 

reconciliation issues. 

a. Incentive Payments to EPs 

We propose that the carriers/MACs 

calculate incentive payment amounts 

for qualifying EPs. Incentive payments 

will be disbursed on a rolling basis, as 

soon as they ascertain that an EP has 

demonstrated meaningful use for the 

applicable reporting period (i.e., 90 days 

for the first year or a calendar year for 

subsequent years), and reached the 

threshold for maximum payment. As 

discussed previously in section II.A.1.b. 

of this proposed rule, once a qualifying 

EP’s allowed charges reach the 

minimum threshold of allowed charges 

for the payment year, the qualifying EP 

is eligible to receive the maximum 

incentive payment; the carrier/MAC 

would be authorized to disburse the full 

incentive payment to that qualifying EP. 

If a qualifying EP’s allowed charges do 

not reach the minimum threshold 

during the payment year (including 

subsequent claims submitted not later 

than 2 months after the end of the 

payment year per statute) and if the 

qualifying EP is also a qualifying MA 

EP, the qualifying MA organization with 

which the EP is affiliated will receive 

the incentive payment for the EP from 

the MA. If the qualifying EP does not 

also qualify as a MA EP, then the 

carriers/MAC will calculate the amount 

of the qualifying EP’s incentive payment 

an amount determined by statute as 75 

percent of the accumulated allowed 

charges based on claims submitted not 

later than 2 months after the end of the 

payment year), and disburse the 

incentive payment to the qualifying EP 

in the year following payment year. The 

carriers/MACs will issue incentive 

payments to qualifying EPs after 

ensuring payment has not already been 

made under the Medicaid program for 

the relevant payment year. As required 

by section 1848(m)(2) of the Act as 

amended by section 4101(f) of the 

HITECH Act, qualifying EPs receiving 

incentive payments from the Medicare 

EHR incentive payment program may 

not also receive an e-prescribing 

incentive payment. The carriers/MACs 

will also track the incentive payment at 

the qualifying EP’s TIN level, and 

disburse the electronic payment to the 

TIN provided by the qualifying EP 

indicated during the registration 

process; qualifying EPs who do not have 

individual TINs (that is, a qualifying EP 

who works solely in a group practice) 

will be paid at the group practice level’s 

TIN. Since some EPs work in multiple 

group practices, we considered allowing 

these EPs to direct that their incentive 

payment be allocated among the 

multiple practices based on individual 

and/or group TINs. However, as 

discussed more fully in section II.B.1.d 

of this proposed rule, we determined 

that this would create a significant 

administrative burden for us and 

therefore are proposing that qualifying 

EPs select one TIN for disbursement of 

their Medicare EHR incentive payment. 

Of course, after the payment is 

disbursed to their designated TIN, 

qualifying EPs may decide to allocate 

their incentive payment among the 

multiple practices in which they furnish 

covered professional services. subject to 

applicable laws, regulations and rules, 

including, without limitation, those 

related to fraud, waste, and abuse. 

In addition, we recognize that 

financial relationships between 

physicians and their employers/entities 

with which they have contractual 

arrangements may implicate certain 

fraud, waste, and abuse laws, 

regulations, and rules. Therefore, we are 

considering including specific 

safeguards to limit the risk that the 

allocation/reassignment of incentive 

payments could raise under those and 

other applicable laws, regulations and 

rules; we appreciate public comments 

on this consideration. 

b. Incentive Payments to Eligible 

Hospitals 

The FIs/MACs will calculate 

incentive payments for qualifying 

eligible hospitals, and will disburse 

such payments on an interim basis once 

the hospital has demonstrated it is a 

meaningful EHR user for the EHR 

reporting period for the payment year. 

As discussed above in section B.2.b. of 

the proposed rule, the formula for 


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calculating a qualifying eligible 

hospital’s incentive payment requires 

the following data: (1) An initial 

amount; (2) the Medicare share; and (3) 

a transition factor applicable to that 

payment year. FIs/MACs will use the 

prior-year cost report, Provider 

Statistical and Reimbursement (PS&R) 

System data, and other estimates to 

calculate the interim incentive payment. 

As discussed in section II.B.2.c. of this 

proposed rule, beginning in 2010, cost 

reports will capture charity care data 

which will be used in calculating the 

Medicare share of the payment. As 

discussed in section II.B.2.b. of this 

proposed rule, we are proposing to 

calculate a qualifying hospital’s final 

incentive payment using data from the 

cost report for the hospital’s fiscal year 

that ends during the FY prior to the FY 

that serves as the payment year. We 

therefore are proposing that the FIs/ 

MACs calculate the final incentive 

payment using actual cost report data 

report for the hospital’s fiscal year that 

ends during the FY prior to the fiscal 

year that serves as the payment year, 

and will reconcile the incentive 

payment as necessary at settlement of 

the cost report. Incentive payments for 

qualifying eligible hospitals will be 

calculated based on the provider 

number used for cost reporting 

purposes, which is the CCN of the main 

provider. Therefore, the FIs/MACs 

would disburse incentive payments to 

qualifying hospitals based on the CCN 

rather than the TIN. 

c. Incentive Payments to CAHs 

CAHs are paid on a cost 

reimbursement basis; once a CAH incurs 

actual EHR costs, it can submit 

supporting documentation to the FI/ 

MAC for review. The FIs/MACs will 

determine an incentive payment 

amount, as previously discussed in 

section II.A.3. of this proposed rule by 

substituting for the Medicare share 

amount that would otherwise be applied 

under the formula used for computing 

payments for eligible hospitals, a 

percent (not to exceed 100 percent) 

equal to the sum of—(1) The Medicare 

share for such CAH, and (2) 20 

percentage points. 

The FIs/MACs will reconcile the cost 

report and ensure the EHR expenses are 

adjusted on the cost report to avoid 

duplicate payments. Incentive payments 

for qualifying CAHs will be calculated 

based on the provider number used for 

cost reporting purposes, which is the 

CCN number of the main provider. 

Therefore, the FIs/MACs will disburse 

incentive payments to qualifying CAHs 

based on the CCN number rather than 

the TIN. 

d. Payment Accounting Under Medicare 

We will conduct selected compliance 

reviews of EPs, eligible hospitals, and 

qualified CAHs who register for the 

incentive programs and of recipients of 

incentive payments for the meaningful 

use of certified EHR technology. The 

reviews will validate provider eligibility 

and their meaningful use attestations 

including verification of meaningful use 

and would also review components of 

the payment formulas. 

We will identify and recoup 

overpayments made under the incentive 

payment programs that result from 

incorrect or fraudulent attestations, 

quality measures, cost data, patient data, 

or any other submission required to 

establish eligibility or to qualify for a 

payment. The overpayment will be 

recouped by CMS or its agents from the 

EP, eligible hospital, MA organization, 

CAH, other entities to whom the right to 

payment has been assigned/reassigned, 

or, in the case of Medicaid, from the 

State Medicaid agencies. Medicare FFS 

EPs and eligible hospitals will need to 

maintain evidence of qualification to 

receive incentive payments for 10 years 

after the date they register for the 

incentive program. 

C. Medicare Advantage (MA) 

Organization Incentive Payments 

1. Definitions 

a. Qualifying MA Organization 

Section 1853(l)(1) of the Act, as added 

by section 4101(c) of the HITECH Act, 

provides for incentive payments to 

qualifying MA organizations for certain 

of their affiliated EPs who are 

meaningful users of certified EHR 

technology during the relevant EHR 

reporting period for a payment year. 

Section 1853(l)(5) of the Act defines the 

term ‘‘qualifying MA organization’’ as an 

MA organization that is organized as a 

health maintenance organization (HMO) 

as defined in section 2791(b)(3) of the 

PHS Act. Section 2791(b)(3) of the PHS 

Act in turn defines a health 

maintenance organization as a federally 

qualified HMO, an organization 

recognized as an HMO under State law, 

or a similar organization regulated for 

solvency under State law in the same 

manner and to the same extent as an 

HMO. Since there are few federally 

qualified HMOs, we expect MA 

organizations to primarily qualify for 

incentive payments as State-licensed 

HMOs, or as organizations regulated for 

solvency under State law in the same 

manner and to the same extent as 

HMOs. Therefore, in § 495.200 we 

propose to define ‘‘qualifying MA 

organization.’’ 

In § 495.202(a)(2), we propose to 

deem MA organizations offering MA 

HMO plans that are not federallyqualified HMOs to meet the definition 

of HMO in section 2791(b)(3) of the PHS 

Act, as HMOs recognized under State 

law, or as entities subject to State 

solvency rules in the same manner as 

HMOs. We believe this is reasonable 

because under the MA application 

process, State regulators are required to 

certify that MA organizations operating 

in their State are authorized to offer the 

type of MA plan they propose to offer, 

and meet solvency standards that are 

adequate for these purposes. For each 

MA organization offering MA HMO 

plans, the State has thus recognized that 

the organization is able to assume risk 

as an HMO. Therefore, we have 

determined that absent evidence to the 

contrary, an MA organization offering 

HMO plans is recognized by the State as 

a health maintenance organization, or 

that it is subject to State solvency 

standards in the same manner and to the 

same extent as an HMO and therefore 

provides sufficient assurance that the 

section 2791(b)(3) of the PHS Act 

definition is met. 

In proposed § 495.202(a)(3), for MA 

organizations that offer other 

coordinated care MA plans (Preferred 

Provider Organization (PPO) plans, 

Provider Sponsored Organization (PSO) 

plans, and Regional Preferred Provider 

Organization (RPPO) plans) and for 

other MA organizations offering other 

MA plan types (private fee-for-service 

(PFFS) plans, Medical Savings Account 

(MSA) plans), we would require the 

sponsoring MA organization to attest 

that the MA organization is recognized 

under State law as an HMO, or that it 

is a similar organization regulated under 

State law for solvency in the same 

manner and to the same extent as an 

HMO before we would make a 

determination that the MA organization 

is a qualifying MA organization for 

purposes of incentive payments. 

b. Qualifying MA Eligible Professional 

(EP) 

A qualifying MA organization may 

receive an incentive payment only for 

those EPs described under section 

1853(l)(2) of the Act, as added by 

section 4101(c) of the HITECH Act. 

Section 1853(l)(2) of the Act provides 

that these EPs must be ‘‘eligible 

professionals’’ as defined under section 

1848(o) of the Act as added by section 

4101(a) of the HITECH Act, and must 

either— 

• Be employed by the qualifying MA 

organization; or 

• Be employed by, or be a partner of, 

an entity that through contract with the 


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qualifying MA organization furnishes at 

least 80 percent of the entity’s Medicare 

patient care services to enrollees of the 

qualifying MA organization. 

Further, the EP must furnish at least 

80 percent of his or her professional 

services covered under Title XVIII 

(Medicare) to enrollees of the qualifying 

MA organization and must furnish, on 

average, at least 20 hours per week of 

patient care services. 

As discussed in section II.A.1. of this 

proposed rule, an EP is defined as a 

physician (under section 1861(r) of the 

Act). 

We interpret ‘‘employed by’’ to mean 

that the EP is considered an employee 

of a qualifying MA organization or 

qualifying entity under the usual 

common law rules applicable in 

determining the employer-employee 

relationship under section 3121(d)(2) of 

the Internal Revenue Code of 1986. 

We interpret ‘‘to be a partner of’’ to 

mean that the qualifying MA EP has an 

ownership stake in the entity. Under 

this proposed interpretation, a 

professional that contracts with an 

entity, but has no ownership stake in 

the entity, would not be considered a 

qualifying MA EP. 

We interpret ‘‘furnishing at least 80 

percent’’ of the entity’s ‘‘patient care 

services’’ to mean at least 80 percent of 

the qualifying MA EP’s total Medicare 

revenue in a year (that is, total revenue 

from Medicare FFS as well as from all 

MA organizations) must be from a single 

qualifying MA organization. 

We propose to interpret the 

requirement that a qualifying MA EP 

furnish at least 80 percent of their 

professional services covered under 

Title XVIII means that at least 80 

percent of the professional’s total 

Medicare revenue in a year (that is, total 

revenue from Medicare FFS as well as 

from all MA organizations) must be 

from a single qualifying MA 

organization. We believe that in 

establishing the rule that qualifying MA 

EPs need to furnish at least 80 percent 

of the EP’s Title XVIII covered services 

‘‘to enrollees of the organization,’’ the 

statute limits payment related to any 

specific qualifying MA EP to a single 

qualifying MA organization. Thus, if a 

qualifying MA EP provided an average 

of 20 hours per week of patient care 

services to two distinct qualifying MA 

organizations, we would pay the 

qualifying MA organization for the MA 

EP only if such a qualifying EP provided 

at least 80 percent of his or her 

professional services covered under 

Title XVIII to enrollees of that 

organization. 

For purposes of determining whether 

a qualifying MA EP furnishes, on 

average, at least 20 hours per week of 

patient care services, we interpret the 

requirement to include both Medicare 

and non-Medicare patient care services. 

Moreover, we propose that the relevant 

time period for determining whether an 

MA EP furnishes at least 20 hours per 

week of patient care services should be 

the EHR reporting period. (We discuss 

the proposed definition of EHR 

reporting period in section II.A. 1. e. of 

this proposed rule.) Therefore, over the 

EHR reporting period, the qualifying EP 

must provide on average 20 hours per 

week of patient care services. Finally, 

we interpret ‘‘patient care services’’ to 

mean services that would be considered 

‘‘covered professional services’’ under 

sections 1848(o)(5)(A) and (k)(3) of the 

Act. That is, health care services for 

which payment would be made under, 

or for which payment would be based 

on, the fee schedule established under 

Medicare Part B if they were furnished 

by an eligible professional. 

We considered various methods of 

determining when at least 20 hours per 

week, on average, of patient care 

services will be considered to be 

provided by MA EPs. We considered 

methods such as defining a dollar or 

service threshold, or the number of 

hours of direct patient care services 

actually provided. After due 

consideration we propose to require 

qualifying MA organizations to attest to 

the fact that MA EPs for whom they are 

requesting EHR incentive payments 

have provided, on average, 20 hours of 

patient care services during the EHR 

reporting period. 

As discussed in section II.B. of this 

proposed rule relating to Medicare FFS 

EPs, a qualifying MA EP is also defined 

as a physician under section 1861(r) of 

the Act. Section 1853(l)(1) of the Act, as 

added by section 4101(c) of the HITECH 

Act, provides that the provisions of 

sections 1848(o) and 1848(a)(7) of the 

Act, as amended and added by sections 

4101(a) and (b) of the HITECH Act, 

respectively, which establish the 

incentive payments for EPs under 

Medicare FFS, apply to a qualifying MA 

organization’s qualifying MA EPs ‘‘in a 

similar manner’’ as they apply to EPs 

under Medicare FFS. As discussed 

above in section II.A.6. of this proposed 

rule, section 1848(o)(1)(C)(i) of the Act, 

as added by section 4101(a) of the 

HITECH Act, states that hospital-based 

EPs are not eligible for incentive 

payments. Therefore, we propose that, 

similar to the Medicare FFS incentive 

program, MA incentive payments would 

also not be available for hospital-based 

EPs. We note that the hospital where a 

hospital-based EP provides his or her 

Medicare covered services would be 

potentially entitled to an incentive 

payment either through the Medicare 

FFS incentive program, or through the 

MA-affiliated hospital EHR incentive 

program. Therefore, for such a hospitalbased MA EP, a qualifying MA 

organization would be no more entitled 

to an MA EP incentive payment under 

the MA EHR incentive program than a 

similarly situated EP would be entitled 

to an incentive payment under the 

Medicare FFS EHR incentive program. 

As discussed previously, an MA EP 

must either be employed by the 

qualifying MA organization, or be 

employed by, or be a partner of, an 

entity that through contract with the 

qualifying MA organization furnishes at 

least 80 percent of the entity’s Medicare 

patient care services to enrollees of the 

qualifying MA organization. With 

respect to the later criteria, we do not 

propose to define the term ‘‘entity,’’ but 

instead recognize that there exist a range 

of entities with which MA organizations 

contract for patient care services, 

including a physician group, an 

Independent Practice Association (IPA), 

an Exclusive Provider Organization 

(EPO), a Physician Hospital 

Organization (PHO), or Preferred 

Provider Organization (PPO). 

Moreover, we recognize that an EP 

may contract with more than one such 

entity, and that these entities often 

contract with a number of MA 

organizations and other health care 

insurers. An EP also may directly 

contract with more than one MA 

organization. In general it is only when 

an EP is employed by a single qualifying 

MA organization, or is employed by or 

in partnership with an entity that 

contracts with a single qualifying MA 

organization that an EP can satisfy the 

criteria to be an MA EP. 

Finally, the qualifying MA 

organization must attest to the fact that 

each MA EP is a meaningful user of 

certified EHR technology in accordance 

with proposed § 495.4. If all of these 

conditions are met, such an individual 

is identified as an MA EP. We propose 

to define the term ‘‘MA eligible 

professional (EP)’’ at § 495.200 as an EP 

who satisfies these conditions. 

Section 4101(d) of the HITECH Act 

directs the Secretary to study and report 

on ‘‘nearly exclusive’’ physicians that 

primarily treat MA enrollees and that 

would not otherwise qualify for 

incentive payments under current law. 

This proposed rule does not address 

such individuals, as it is limited to 

codifying in regulation existing 

statutory language as discussed herein. 


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c. Qualifying MA-Affiliated Eligible 

Hospital 

We propose to define ‘‘qualifying MAaffiliated eligible hospital’’ in § 495.200. 

A qualifying MA organization may 

receive an incentive payment only for a 

qualifying MA-affiliated eligible 

hospital described under section 

1853(m)(2) of the Act, as added by 

section 4102(c) of the HITECH Act, that 

is a meaningful user of certified EHR 

technology as defined in proposed 

§ 495.4 . Section 1853(m)(2) of the Act 

provides that such MA-affiliated eligible 

hospitals are ‘‘eligible hospitals’’ as 

defined under section 1886(n)(6) of the 

Act and must be under common 

corporate governance with a qualifying 

MA organization that serves individuals 

enrolled under MA plans offered by 

such organization where more than twothirds are Medicare individuals enrolled 

under MA plans offered by such 

organization. As discussed in section 

II.A.1. of this proposed rule, section 

1886(n)(6) of the Act, defines an 

‘‘eligible hospital’’ as a subsection (d) 

hospital (as defined under section 

1886(d)(1)(B) of the Act). In § 495.200, 

we also propose to define ‘‘under 

common corporate governance’’, as a 

qualifying MA organization and a 

qualifying MA-affiliated eligible 

hospital that have a common parent 

corporation, that one is a subsidiary of 

the other, or that the organization and 

the hospital have a common board of 

directors. 

Section 1853(m)(3)(B)(i) of the Act, as 

added by section 4101(c) of the HITECH 

Act, provides that if for a payment year 

at least one-third (33 percent) of a MA 

eligible hospital’s discharges (or beddays) of Medicare patients are covered 

under Part A (rather than under Part C), 

the hospital may only receive an 

incentive payment under section 

1886(n) of the Act—the Medicare FFS 

incentive program. 

In § 495.200 we propose to define 

‘‘inpatient-bed-days’’ in the same 

manner as that term is defined for 

purposes of implementing section 

4201(a) of the HITECH Act in the 

preamble of this proposed rule. The 

term will be used in the same way in 

computing incentive payments due 

qualifying MA organization under the 

qualifying MA-affiliated eligible 

hospital incentive payment program. 

We note that, as discussed in section 

II.B.2.b. of this proposed rule, under 

section 1886(n)(2)(D)(i)(II) of the Act, 

the portion of the Medicare FFS hospital 

incentive payment comprising the 

discharge related amount, or Medicare 

share, is based in part on the estimated 

number of inpatient-bed-days 

attributable to individuals enrolled in 

MA plans under Part C. This means that 

hospitals that treat individuals enrolled 

in MA plans will receive a Medicare 

FFS hospital incentive payment 

partially based on the number of MAenrollee bed-days. To the extent a 

hospital does not meet the 33 percent 

threshold requiring payment through 

the FFS Medicare EHR hospital 

incentive program, incentive payments 

can be made to a qualifying MA 

organization under common corporate 

governance to the extent other 

requirements of the MA EHR hospital 

incentive program are met. (See section 

II.C.3 of this proposed rule for the 

computation of incentive payments to 

qualifying MA organizations.) 

Therefore, we propose to make EHR 

incentive payments to qualifying MAaffiliated eligible hospitals under the 

FFS EHR incentive program. Finally, to 

the extent that such data necessary to 

estimate the inpatient-bed-days-related 

incentive payment amount are not 

already available to us through the 

normal submission of hospital cost 

reports, we propose to require that 

qualifying MA organizations seeking 

reimbursement for qualifying MAaffiliated eligible hospitals submit 

similar data. 

2. Identification of Qualifying MA 

Organizations, MA EPs, and MAAffiliated Eligible Hospitals 

In § 495.202 we propose to require 

MA organizations that intend to ask for 

reimbursement under the MA EHR 

incentive payment program to so 

indicate as part of submissions of their 

initial bid under section 1854(a)(1)(A) of 

the Act, and to attest, in some cases, that 

they meet the requirements of a 

qualifying MA organization. For MA 

organizations offering an MA HMO plan 

type, we will deem such organizations 

to meet the definition of HMO in 42 

U.S.C. 300–gg(b)(3), (that is, section 

2791(b)(3) of the PHS Act). As noted 

previously, for MA organizations 

offering plan types other than HMOs, 

we propose to require an attestation by 

the organization that the MA 

organization is recognized under State 

law as an HMO, or that it is a similar 

organization regulated under State law 

for solvency in the same manner and to 

the same extent as an HMO before we 

would make a determination that the 

MA organization is a qualifying MA 

organization for purposes of incentive 

payments. We propose to require this 

beginning with bids due in June 2010 

(for plan year 2011) for MA 

organizations seeking reimbursement for 

MA EPs and MA-affiliated eligible 

hospitals. 

We also propose requiring qualifying 

MA organizations, as part of their initial 

bids starting with plan year 2011, to 

make a preliminary identification of 

potentially qualifying MA EPs and 

potentially qualifying MA-affiliated 

eligible hospitals for which the 

organizations will seek EHR incentive 

payments. 

In developing the preliminary and 

final lists of potentially qualifying MA 

EPs, qualifying MA organizations must 

exclude hospital-based MA EPs. We 

propose that qualifying MA 

organizations identify hospital-based 

MA EPs using the same criteria outlined 

in section II.A.6 of this proposed rule 

for identifying hospital-based EPs in the 

Medicare FFS EHR incentive program. 

Along with both the preliminary and 

final lists of potentially qualifying MA 

EPs and hospitals, qualifying MA 

organizations must submit an attestation 

that these professionals and hospitals 

meet the criteria to be considered 

eligible. For example, for hospitals, the 

qualifying MA organization must attest 

that they are under common corporate 

governance with the qualifying MA 

organization. For example, for EPs, the 

qualifying MA organization must attest 

that the list does not include any 

hospital-based EPs. 

We propose requiring qualifying MA 

organizations to provide final 

identification of potentially qualifying 

MA EPs by the end of the MA EP 

payment year (December 31), and final 

identification of potentially qualifying 

MA-affiliated eligible hospitals by the 

end of the MA-affiliated hospital 

payment year (the FFY ending on 

September 30), for which MA EHR 

incentive payments will be sought. We 

also propose requiring qualifying MA 

organizations to report the name, 

practice address, and other identifying 

information, like NPI, for all physicians 

that meet the requirements of a 

qualifying MA EP for which the 

qualifying MA organization will be 

requesting payment under the MA EHR 

incentive payment program. 

Once a qualifying MA organization 

identifies potential EPs, we are required 

to ensure that such EPs did not receive 

the maximum EHR incentive payment 

for the relevant payment year under the 

Medicare FFS program under section 

1848(o)(1)(A) of the Act, as added by 

section 4101(a) of the HITECH Act, 

before releasing an incentive payment to 

a qualifying MA organization related to 

such EP. (See section 1853(l)(3)(B)(i) of 

the Act, as added by section 4101(c) of 

the HITECH Act). Therefore, in order to 

allow us time to determine whether an 

MA EP received the maximum EHR 

incentive payment under the Medicare 


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FFS program, we propose not to make 

incentive payments to qualifying MA 

organizations for the MA EPs for a 

payment year until after the final 

computation of EP incentive payments 

for that year under the Medicare FFS 

program. Additionally, we propose to 

require qualifying MA organization to 

ensure that all MA EPs are enumerated 

through the NPI system, in order to 

detect and prevent duplicate payment 

for EPs under both the FFS and MA 

EHR incentive payment programs. 

We also propose to require all 

qualifying MA organizations to selfreport and identify themselves, 

regardless of whether they have 

qualifying MA EPs or MA-affiliated 

eligible hospitals for whom or which the 

organization plans to claim incentive 

payments at the time the initial bid is 

due (the first Monday of June, see 

section 1854(a)(1)(A) of the Act) 

beginning in 2014 for bids related to 

plan year 2015. We propose to require 

this reporting by all qualifying MA 

organizations in years beginning with 

2014 in anticipation of the statutory 

requirement in sections 1853(l)(4) and 

1853(m)(4) of the Act, to negatively 

adjust our capitation payments to 

qualifying MA organizations for MA EPs 

and MA-affiliated eligible hospitals that 

are not meaningful users of certified 

EHR technology for years beginning 

with 2015. 

3. Computation of Incentives to 

Qualifying MA Organizations for MA 

EPs and Hospitals 

In § 495.204, we propose a 

methodology under which payments to 

qualifying MA organizations for 

qualifying MA EPs will be computed. 

Section 1853(l)(3)(A) of the Act provides 

that in applying section 1848(o), instead 

of the additional payment amount 

specified under section 1848(o)(1)(A) of 

the Act, the Secretary may substitute an 

amount determined by the Secretary, to 

the extent feasible and practical, to be 

similar to the estimated amount in the 

aggregate that would be payable under, 

or would be based on, the Medicare 

physician fee schedule under Part B 

instead of Part C. Section II.B.1. of this 

proposed rule discusses these 

provisions. 

Section 1853(m)(3)(A) of the Act 

provides that in providing an incentive 

payment to qualifying MA organizations 

for MA-affiliated hospitals, we 

substitute for the amount specified 

under section 1886(n)(2) of the Act—the 

incentive payment amount under 

Medicare FFS for qualifying eligible 

hospitals—an amount determined by 

the Secretary to be similar to the 

estimated amount in the aggregate that 

would be payable if payment for 

services furnished by such hospitals 

was payable under Part A instead of Part 

C. (For more detailed information see 

section II.B.2. of this proposed rule.) 

Section 1848(o) of the Act permits us 

to make the incentive payments for a 

year in installments, although we are 

proposing to make a single lump sum 

payment under the Medicare FFS EHR 

incentive program. We read the term 

‘‘aggregate’’ to mean the aggregate 

installment payments made by us under 

the FFS EHR incentive program to a 

qualifying EP over the course of the 

relevant payment year. 

The duplicate payment provisions in 

section 1853(l)(3)(B)(i)(II) of the Act 

direct us to make payment for EPs ‘‘only 

under’’ the MA EHR incentive program 

‘‘and not under’’ the Medicare FFS EHR 

incentive program to the extent any EP 

has earned ‘‘less than [the] maximum 

incentive payment for the same period’’ 

under the Medicare FFS EHR incentive 

program. We note that section 1853(l)(1) 

of the Act, provides that section 1848(o) 

of the Act applies in a ‘‘similar,’’ but not 

the same, manner to qualifying MA 

organizations as it applies to EPs under 

Part B. The Medicare FFS incentive 

payment program under section 1848(o) 

does not include payment for 

professional services provided to MA 

enrollees, but only for services paid 

under Part B. In a similar manner we 

propose to limit payment to an MA 

organization to only payment for their 

EPs’ services to MA enrollees of plans 

offered by the MA organization. We do 

not believe it would be appropriate to 

provide an incentive payment to an MA 

organization for services provided to 

individuals covered under Part B. 

Therefore, we propose, that in 

calculating qualifying MA EP incentive 

payments, we will only consider 

covered professional services provided 

to enrollees of MA plans offered by 

qualifying MA organizations and will 

not include in the calculation any 

services reimbursed by Medicare FFS. 

Under the Medicare FFS EHR 

incentive program, an EP’s incentive 

payment may not exceed the annual 

limits specified under section 

1848(o)(1)(B)(i) of the Act. We propose 

that similar payment limits apply to 

qualifying MA organizations for their 

qualifying MA EPs. Specifically, the 

incentive payment to a qualifying MA 

organization for each of its qualifying 

MA EPs may not exceed certain limits. 

Specifically, section 1848(o)(1)(B) of the 

Act provides that the incentive payment 

for an EP for a given year shall not 

exceed the following amounts: 

• For the EP’s first payment year, 

$15,000 (or, if the first payment year is 

2011 or 2012, $18,000). 

• For the EP’s second payment year, 

$12,000. 

• For the EP’s third payment year, 

$8,000. 

• For the EP’s fourth payment year, 

$4,000. 

• For the EP’s fifth payment year, 

$2,000. 

• For any succeeding year, $0. 

Note that, similar to the Medicare FFS 

EHR incentive program, there will be no 

incentive payments made with respect 

to a year after 2016. We propose similar 

restrictions related to qualifying MA 

organizations. So, the maximum 

cumulative incentive payment over 5 

years to a qualifying MA organization 

for each of its qualifying MA EPs that 

meaningfully use certified EHRs 

beginning on or before 2012 would be 

$44,000 per qualifying MA EP. For 

qualifying MA organizations first 

reporting the meaningful use of certified 

EHRs by qualifying MA EPs after 2014, 

there is no incentive payment amount 

available. Subject to an exception 

discussed below, for MA organizations 

first reporting the meaningful use of 

certified EHRs by qualifying MA EPs in 

2013 or 2014, the maximum potential 

incentive payment per qualifying EP is, 

respectively, $39,000 over 4 years, and 

$24,000 over 3 years. 

As we discuss in more detail in the 

section II.C.4. of this proposed rule, we 

propose to make MA EP incentive 

payments to qualifying MA 

organizations on the same payment 

cycle for all employed/partnering 

qualifying EPs of the organization. In 

other words, all MA EPs of a specific 

qualifying MA organization will be in 

the same payment year with respect to 

the amount of the incentive payment 

per qualifying EP that we will make. So, 

for instance, if a qualifying MA 

organization is in its second payment 

year in 2013 and it hires a new EP for 

which the qualifying MA organization 

had not previously received an EHR 

incentive payment, we will nevertheless 

make a second year incentive payment 

(up to $12,000 in 2013) with respect to 

such an MA EP—assuming all other 

conditions are met. Thus, the limits on 

MA EP incentive payments discussed 

above are applied to the qualifying MA 

organization’s entire MA EP population 

in any specific payment year relative to 

that MA organization, regardless of the 

length of employment/partnership of/ 

between that specific MA EP and that 

specific qualifying MA organization. 

Under section 1848(o)(1)(B)(iv) of the 

Act, the annual incentive payment limit 

for EPs who predominantly furnish Part 


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B services in a geographic health 

professional shortage area (HPSA) is 

increased by 10 percent. While we do 

not anticipate that MA EPs would 

generally practice in a HPSA area, to the 

extent that an MA EP practices in an 

area where he or she would be entitled 

to the 10 percent increase, that amount 

would apply to MA EPs as well. We 

explored various ways of computing the 

EP-level incentive payments due 

qualifying MA organizations whose 

qualifying MA EPs meaningfully use 

certified EHR technology. 

One option that we considered was 

using MA plan bidding and MA 

payment data to estimate average annual 

MA revenue for qualifying MA EPs with 

respect to a qualifying MA organization. 

So, for instance, a qualifying MA 

organization that estimated MA Part B 

service-related physician costs of $3 

million/year in its bid for a year, and 

that employed 100 qualifying MA 

eligible physicians, would be assumed 

to have an average physician Part B 

charge per physician per year factor of 

$30,000 ($3,000,000/100). However, we 

did not pursue this option because the 

approach results in an average revenue 

amount across all potentially qualifying 

MA EPs with respect to a qualifying MA 

organization and, therefore, would 

include revenue amounts that exceed 

the annual per-professional ceiling on 

incentive payments under FFS for all 

EPs. We believe such a result is contrary 

to the legal requirement that qualifying 

MA organizations are to incentive 

payments only for qualifying MA EPs 

that actually provide at least 20 hours 

per week of patient care services. Under 

this method there would also be no way 

to know if the EP provided 80 percent 

of his/her professional Medicare 

services to enrollees of the organization. 

We also considered a reporting system 

for which qualifying MA organizations 

would be required to report eligibleprofessional-specific information along 

with MA patient encounters for 

nonhospital-based office visits. 

Specifically, we examined requiring 

qualifying MA organizations to report 

qualifying MA EP encounters with MA 

plan enrollees based on the five levels 

of office visit codes recognized by 

Medicare FFS. 

We would use such reports to 

estimate the amount of compensation 

that a qualifying MA EP working 

primarily for a qualifying MA 

organization would be eligible to receive 

under Medicare FFS. For example, a 

qualifying MA EP with a primary care 

specialty might have an average of 10 

MA patient low/moderate intensity 

office visits with members of a 

qualifying MA organization per day. 

Such an EP would potentially qualify 

for the maximum Medicare FFS EP 

incentive payment in the first year 

based on a calculation of $63 * 10 * 52 

= $32,760—which is more than the 

Medicare FFS EHR incentive program 

threshold of $24,000 necessary to 

qualify for the maximum incentive 

payment of $18,000 if the fist payment 

year were 2011 or 2012. 

We estimated the national average 

FFS allowed amounts for the 5 levels of 

office visit codes (CPT codes 99211– 

99215) in 2009 to be: $20, $39, $63, $95, 

$129, respectively. We contemplated 

allowing, but not requiring, qualifying 

MA organizations to report consultation 

codes for specialist physicians (CPT 

codes 99241–99245) estimated to have 

national average FFS allowed amounts 

of $50, $94, $129, $190, and $234, 

respectively. 

However, we now believe that such a 

process would be administratively 

burdensome and difficult to 

operationalize. Therefore, we are 

proposing an alternative approach, but 

seek input from interested parties as to 

which of these approaches, or perhaps 

others, would best address the statutory 

requirement to compensate qualifying 

MA organizations for qualifying MA EPs 

the amount that would be payable if 

payment for services furnished by such 

professionals were made under Part B 

instead of Part C. 

We propose an approach in which the 

revenue received by the qualifying MA 

EP for services provided to enrollees of 

the qualifying MA organization would 

serve as a proxy for the amount that 

would have been paid if the services 

were payable under Part B. Under this 

approach, the qualifying MA 

organization would report to us the 

aggregate annual amount of revenue 

received by each qualifying MA EP for 

MA plan enrollees of the MA 

organization. We would calculate the 

incentive payment amount due the 

qualifying MA organization for each 

qualifying MA EP as an amount equal to 

75 percent of the reported annual MA 

revenue of the qualifying MA EP, up to 

the maximum amounts specified under 

section 1848(o)(1)(B) of the Act. 

For qualifying MA EPs who are 

compensated on a salaried basis, we 

propose requiring the qualifying MA 

organization to develop a methodology 

for estimating the portion of the 

qualifying MA EP’s salary attributable to 

providing services that would otherwise 

be covered as professional services 

under Part B of Medicare to MA plan 

enrollees of the MA organization. The 

methodology, which would require 

review and approval by us, could be 

based on the relative share of patient 

care hours spent with MA enrollees of 

the organization or another reasonable 

method. So, for instance, if a qualifying 

MA EP spends 30 percent of his or her 

time providing covered Part B physician 

office services to MA plan enrollees, 

then the qualifying MA organization 

would report 30 percent of the 

qualifying MA EP’s salary as annual 

revenue, which would be used to 

compute the amount of the MA 

incentive payment due to the qualifying 

MA organization for the qualifying MA 

EP. Thus, if the qualifying MA EP had 

a base salary of $150,000, 30 percent 

would be $45,000—which is well over 

the threshold of $24,000 needed by the 

MA organization to qualify for a 

maximum incentive payment of up to 

$18,000 (70 percent of $24,000) for such 

a qualifying MA EP in any year. We also 

propose to require that salaries be 

prorated to ensure that the amount 

reported reflects the salary paid for the 

applicable year. 

Salaried physicians’ compensation 

typically does not include an allowance 

for administrative practice costs. Given 

that Part B allowed amounts do include 

practice expense costs, we propose 

allowing qualifying MA organizations to 

identify, where appropriate, an 

additional amount related to overhead 

that would be added to the qualifying 

MA EP’s estimated Part B 

compensation. To the extent Medicare 

FFS compensation to physicians 

includes an amount for office space 

rental, office staffing, and equipment, 

we believe that qualifying MA 

organizations should also be permitted 

to include an amount for overhead 

related to such costs not directly 

experienced by salaried qualifying MA 

EPs. In § 495.204(b)(4)(ii), we propose 

requiring qualifying MA organizations 

to develop a methodology for estimating 

the additional amount related to 

overhead attributable to providing 

services that would otherwise be 

covered under Part B of Medicare. The 

methodology would require review and 

approval by us. 

For qualifying MA EPs who are not 

salaried (that is, who are paid on a 

capitated or fee-for-service basis), we 

propose in § 495.204(b)(5) to require 

qualifying MA organizations to obtain 

attestations from such EPs and to submit 

to CMS information from the 

attestations as to the amount of 

compensation received by the EPs for 

MA plan enrollees of the MA 

organization. We are proposing such 

attestations because many EPs are not 

paid directly by MA organizations, but 

rather by intermediary contracting 

entities, such as physician groups, and 

as a result the qualifying MA 


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organization may not otherwise know 

how much compensation is received by 

each qualifying MA EP. In reporting 

compensation, we are proposing that the 

EPs include only those amounts for 

professional services that would 

otherwise be payable under Part B and 

for which payment would be made 

under, or would be based on, the 

Medicare physician fee schedule. 

As mentioned previously, in applying 

the instruction in section 1853(m)(3)(A) 

of the Act to substitute for the amount 

specified under section 1886(n)(2) of the 

Act an amount similar to the estimated 

amount in the aggregate that would be 

payable if payment for the hospitals’ 

services were made under Part A 

instead of Part C, we read the term 

‘‘aggregate’’ to mean the aggregate 

installment payments made by us if 

EHR incentive payments were made 

under Part A instead of Part C. 

Incentive payments to eligible 

hospitals under the Medicare FFS EHR 

incentive program are comprised of 

three components: (1) An initial amount 

composed of a base incentive payment 

of $2,000,000 and a second incentive 

payment amount of $200 per discharge 

for discharges 1,150–23,000 during a 12- 

month period selected by the Secretary; 

(2) the Medicare share; and (3) a 

transition factor. As discussed in the 

preamble related to proposed 

§ 495.104(c), for purposes of calculating 

incentive payments to eligible hospitals 

under the Medicare FFS EHR incentive 

program, we are proposing that the 12- 

month period be based on the FFY. For 

the purpose of calculating incentive 

payments for qualifying MA-affiliated 

eligible hospitals, we similarly are 

proposing that the 12-month period be 

based on the FFY. 

Section II.B. of this proposed rule 

discusses our proposed methodology for 

calculating the incentive payment for 

qualifying eligible hospitals under the 

Medicare FFS EHR program. As set forth 

in proposed § 495.204(c)(2), we propose 

to use the FFS EHR hospital incentive 

program for purposes of calculating and 

making the incentive payment for 

qualifying MA-affiliated hospitals. To 

the extent data are not available to 

reimburse MA-affiliated hospitals 

through the FFS hospital incentive 

program, we propose to require 

submission of such data to us and adopt 

the same definition of ‘‘inpatient-beddays’’ and other terms proposed under 

the Medicare FFS EHR hospital 

incentive program specified in § 495.104 

of this proposed rule. In such a case we 

propose in § 495.204(c)(1) to make 

payment for such MA-affiliated eligible 

hospitals to the qualifying MA 

organization. 

The formula for calculating the 

hospital incentive payment under the 

Medicare FFS hospital incentive 

program is an initial amount of the sum 

of the base amount of $2,000,000 per 

hospital plus an additional $200 per 

discharge for discharges 1,150 through 

23,000 for that hospital in that payment 

year. This initial amount is then 

multiplied by a transition factor and 

then again by the Medicare share. These 

last two numbers are fractions and will 

tend to reduce the initial amount 

computed in the first step. 

Similar to the Medicare FFS EHR 

hospital incentive program, we propose 

to use inpatient-bed-day data, 

discharges, and other components of the 

FFS calculation for each qualifying MAaffiliated eligible hospital from the 

hospital-specific fiscal year that ends 

during the FFY prior to the FFY that 

serves as the payment year. To the 

extent such data are not already 

available to us through the normal 

submission of hospital cost reporting 

data, we propose requiring qualifying 

MA organizations seeking 

reimbursement for their qualifying MAaffiliated eligible hospitals to submit 

similar data. 

We can only pay for qualifying MAaffiliated eligible hospitals under 

common corporate governance based on 

inpatient-bed-days computed on a fiscal 

year basis where less than one-third of 

the inpatient-bed-days of Medicare 

patients are covered under Medicare 

FFS—Part A. However, it does not 

appear that reimbursement only under 

the MA EHR incentive program is 

required for qualifying MA-affiliated 

eligible hospitals that are under 

common corporate governance. Rather, 

section 1853(m)(3)(B), of the Act only 

prohibits payment under the MA EHR 

incentive program when Medicare 

hospital inpatient-bed-days covered 

under Part A exceed 33 percent of all 

Medicare inpatient-bed-days. Although 

eligibility under the MA EHR hospital 

incentive program is not available to 

qualifying MA organizations for any 

specific hospital when FFS inpatientbed-days exceed 33 percent of the 

Medicare total, a qualifying MA 

organization could be reimbursed 

through the Medicare FFS EHR hospital 

incentive payment program for 

qualifying hospitals under common 

corporate governance even for hospitals 

with very low ratios of FFS to MA 

inpatient-bed days. 

Given that the hospital incentive 

payment methodology and payment 

amount will be identical under the 

Medicare FFS EHR incentive program 

and the MA EHR incentive program, 

and given that there is no statutory 

prohibition on reimbursing a qualifying 

MA-affiliated eligible hospital through 

the Medicare FFS EHR incentive 

program, for purposes of administrative 

efficiency, and pursuant to our authority 

under section 1857(e) of the Act to add 

new ‘‘appropriate’’ contract terms 

(incorporated for Part D by section 

1860D–12(b)(3)(D) of the Act), we 

propose requiring that qualifying MA 

organizations receive incentive 

payments for qualifying MA-affiliated 

eligible hospitals through their affiliated 

hospitals under the Medicare FFS EHR 

incentive program if they are eligible for 

such payments, rather than through the 

MA EHR incentive program. We believe 

this is the most efficient way in which 

to administer the MA EHR hospital 

incentive program in light of the 

expected low volume of MA-affiliated 

eligible hospitals (approximately 50 

hospitals), and in light of preliminary 

data which indicates that MA-affiliated 

eligible hospitals already submit 

Medicare cost reporting data to us from 

which we can compute hospital 

incentive payments due. To the extent 

sufficient data do not exist to make such 

payments under the Medicare FFS EHR 

incentive program, qualifying MA 

organizations will be required to submit 

additional data to us. 

Finally, to the extent payments are 

made to qualifying MA organizations for 

qualifying MA EPs or qualifying MAaffiliated eligible hospitals, we propose 

to conduct selected compliance reviews 

to ensure that EPs and eligible hospitals 

for which such organizations received 

incentive payments were actually 

meaningful users of certified EHR 

technology, in accordance with our 

existing authority in section 1857(d) of 

the Act and 42 CFR 422.504 of the 

regulations related to protections against 

fraud. The reviews would include 

validation of meaningful user 

attestations, the status of the 

organization as a qualifying MA 

organization, and verification of both 

meaningful use and data used to 

calculate incentive payments. We 

propose requiring MA organizations to 

maintain evidence of compliance with 

all aspects of the MA EHR incentive 

payment program for 10 years after the 

date payment is made with respect to a 

given payment year. Payments that 

result from incorrect or fraudulent 

attestations, cost data, or any other 

submission required to establish 

eligibility or to qualify for a payment, 

will be recouped by CMS from the MA 

organization. 

4. Timeframe for Payment 

For payments to qualifying MA EPs, 

in § 495.206 we propose the time frame 


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for payment to be after the Medicare 

FFS program computes incentive 

payments due under the Medicare FFS 

EHR incentive program—so the first 

possible incentive payments would be 

made sometime in early 2012. We 

propose that payments for qualifying 

MA-affiliated eligible hospitals under 

common corporate governance occur in 

the same manner and in the same time 

frame as payments made under the 

Medicare FFS EHR incentive program to 

‘‘subsection (d)’’ hospitals as discussed 

in section II.B.2.d. of this proposed rule. 

We propose to define ‘‘payment year’’ 

with respect to qualifying MA EPs in 

§ 495.200. Section 1853(l)(3)(C) of the 

Act directs us to establish the same first 

payment year for all EPs with respect to 

any specific qualifying MA 

organization. Consistent with the 

statute, we propose to pay a qualifying 

MA organization on the same schedule 

for all of its qualifying MA EPs. In other 

words, the first year during which the 

qualifying MA organization receives an 

incentive payment for its qualifying EPs 

will be considered the first payment 

year for all of its qualifying EPs. 

Accordingly, for purposes of 

determining the applicable incentive 

payment limits, the second, third, 

fourth, and fifth years during which the 

qualifying MA organization receives an 

incentive payment for its qualifying EPs 

will be considered the second, third, 

fourth, and fifth payments years for each 

of its qualifying EPs, regardless of 

whether the MA organization claimed 

an incentive payment for a particular EP 

for a prior payment year. Such a 

consistent payment cycle relative to 

qualifying MA organizations and 

qualifying MA EPs obviates the need to 

track payment years and payment 

adjustment years based on prior 

payments or adjustments with respect to 

any individual qualifying MA EP. 

Rather, for purposes of payment years 

and payment adjustment years, any EP 

employed by or partnering with any 

specific MA organization will be on the 

same cycle with respect to that 

organization. 

Similar to the Medicare FFS EHR 

incentive program, payment to 

qualifying MA organizations for 

qualifying MA EPs and payment for 

qualifying MA-affiliated eligible 

hospitals is available only for a finite 

number of years. As previously 

discussed in the section on the 

calculation of MA incentive payments, 

above, a qualifying MA organization can 

receive an incentive payment of up to 

$18,000 for each of its qualifying MA 

EPs for its first payment year if its first 

payment year is 2011 or 2012, or up to 

$15,000, if its first payment year is 2013, 

or up to $12,000, if its first payment 

year is 2014. Note that, similar to the 

Medicare FFS EHR incentive program, 

there would be no incentive payments 

made with respect to a year after 2016. 

We propose to define ‘‘payment year’’ 

with respect to qualifying MA-affiliated 

eligible hospitals in § 495.200. For 

incentive payments for qualifying MAaffiliated eligible hospitals, the first year 

for which an MA organization may 

claim payment is FY 2011. Similar to 

the Medicare FFS EHR hospital 

incentive program, we propose to use 

the hospital inpatient-bed-days data 

from the hospital fiscal year that ends 

during the FFY prior to the fiscal year 

that serves as the payment year. For 

qualifying MA-affiliated eligible 

hospitals, we propose to compute 

hospital EHR incentive payments due in 

the same manner as they are being 

computed in the Medicare FFS hospital 

incentive payment program. For 

qualifying MA-affiliated eligible 

hospitals for which the first payment 

year is 2011 through 2013, up to 3 

additional years of incentive payments 

are available. For qualifying MAaffiliated eligible hospitals for which the 

first payment year is after 2015, no EHR 

payment incentive can be made for that 

year or any subsequent year. Finally, for 

qualifying MA-affiliated eligible 

hospitals for which the first payment 

year is 2014 or 2015, only 2 (or 1) more 

year(s) of hospital incentive payments 

will be available. 

Unlike the fixed schedule for 

application of limitation on incentive 

payments for MA EPs discussed 

previously in this section of the 

proposed rule in which all employed/ 

partnering MA EPs will be paid on the 

same schedule (first payment year, 

second payment year, etc.) with respect 

to any specific qualifying MA 

organization, we propose to make 

payments to MA organizations for MAaffiliated eligible hospitals on a 

hospital-specific basis. In other words, if 

a qualifying MA organization has some 

MA-affiliated eligible hospitals with a 

first payment year of FY 2011, it may 

have other MA-affiliated eligible 

hospitals with a first payment year of 

FYs 2012 through 2015. 

5. Avoiding Duplicate Payment 

We propose duplicate payment 

avoidance provisions in § 495.208. 

Section 1853(l)(3)(B) of the Act, as 

added by the HITECH Act, is entitled 

‘‘Avoiding Duplication of Payments.’’ 

Subclause (I) of the Act states that to the 

extent an MA EP is entitled to the 

maximum incentive payment under 

section 1848(o)(1)(A) of the Act, the 

Medicare FFS EHR incentive payment 

program—such incentive payment will 

only be made under the Medicare FFS 

EHR incentive program. Therefore, 

before payments can be made to 

qualifying MA organizations for MA 

EPs, we must first determine if a 

maximum incentive payment under the 

Medicare FFS program has been 

previously earned by potential MA EPs. 

Under the Medicare FFS incentive 

payment program, incentive payment 

calculations will not be completed for 

the first payment year, 2011, until the 

early part of 2012. Therefore, we would 

not be able to make payments to 

qualifying MA organizations for MA EPs 

until claims submissions counted for 

Medicare FFS incentive payments for 

CY 2011 have been closed, and payment 

calculations for participating EP under 

the Medicare FFS EHR incentive 

program have been completed in the 

early part of CY 2012. We will follow 

the same practice—first computing 

Medicare FFS incentive payments for 

EPs and then computing and paying MA 

incentive payments, where 

appropriate—in all subsequent payment 

years. 

Subclause (II) of section 

1853(l)(3)(B)(i) of the Act further states 

that to the extent an MA EP is entitled 

to less than the maximum incentive 

payment under the Medicare FFS EHR 

incentive program, that payment is to be 

made solely under the MA provision. In 

other words, we will need to withhold 

Medicare FFS incentive payments from 

EPs of less than the maximum to the 

extent such professionals are also 

identified as MA EPs under section 

1853(l)(2) of the Act. Again, we would 

need to await the computation of 

payments due EPs under the Medicare 

FFS EHR incentive program before we 

can determine whether the EP is 

entitled to less than the maximum 

payment amount under the Medicare 

FFS EHR program, in which case any 

incentive payment for the EP will only 

be made to the qualifying MA 

organization under the MA EHR 

program, and not to the EP under the 

Medicare FFS EHR program. 

Section 1853(m)(3)(B) of the Act, 

states that incentive payments for 

qualifying MA-affiliated eligible 

hospitals are to be made under either 

the Medicare FFS hospital incentive 

payment program, or under the MA 

hospital incentive payment program. If 

more than 33 percent of discharges or 

bed-days of all Medicare patients for a 

year are covered under Part A, then 

payment for that year is to only be made 

under section 1886(n) of the Act—the 

Medicare FFS EHR incentive program— 

and no payment is to be made under the 

MA hospital incentive payment 


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program. Otherwise, to the extent less 

than 33 percent of bed days of all 

Medicare patients for an incentive 

payment year are covered under Part A, 

then payment for that incentive 

payment year may be made under the 

MA EHR incentive payment program. 

Unlike the process we propose to 

follow related to qualifying EPs (where 

we will wait for the Medicare FFS 

incentive payment program to compute 

eligible physician incentive payments 

due under that program before 

determining the amount due under the 

MA EHR incentive program), we would 

not need to rely on Medicare FFS EHR 

incentive payment program calculations 

before determining eligibility for MAaffiliated hospital incentive payments. 

We would reimburse all hospitals, 

including MA-affiliated eligible 

hospitals, under the Medicare FFS 

hospital incentive program. We believe 

that by doing so, we will prevent 

duplicate payments being made for the 

same hospitals by Medicare FFS and the 

MA incentive payment programs. To the 

extent that qualifying MA organizations 

are to receive incentive payments 

through the MA program rather than 

through their hospitals under the 

Medicare FFS EHR incentive program 

due to a lack of sufficient data to make 

payments under the FFS program, we 

would identify and reimburse only 

appropriate qualifying MA 

organizations for qualifying MAaffiliated eligible hospitals. Such 

reimbursement will be in a manner 

similar to the manner in which the 

Medicare FFS EHR incentive program 

will reimburse eligible hospitals due an 

incentive payment under the Medicare 

FFS EHR incentive program. 

In order to avoid duplicate payments 

and in accordance with section 

1853(m)(3)(B)(ii)(II) of the Act, we will 

not make MA EHR hospital incentive 

payments to qualifying MA 

organizations for MA-affiliated eligible 

hospitals other than through the 

Medicare FFS EHR hospital incentive 

payment program without first ensuring 

that no such payments under the 

Medicare FFS EHR hospital incentive 

payments were made. 

We invite industry and public 

comment on our proposed process to 

eliminate duplicate payments to EPs 

and MA-affiliated eligible hospitals 

under the Medicare FFS and MA 

incentive payment programs. 

6. Meaningful User Attestation 

We propose meaningful user 

attestation requirements in § 495.210. 

For each MA EP and MA-affiliated 

hospital for which a qualified MA 

organization seeks an incentive 

payment, the organization must attest, 

in a form and manner specified by us, 

that its MA EPs and MA-affiliated 

eligible hospitals are meaningful EHR 

users, as required by sections 1853(l)(6) 

and 1853(m)(1) of the Act. We further 

propose to adopt the definitions of 

meaningful user proposed under the 

Medicare FFS program related to EPs 

and hospitals in proposed § 495.4. We 

propose to require qualifying MA 

organizations to attest each payment 

year whether each of its MA EPs and 

MA-affiliated eligible hospitals for 

which it is seeking an incentive 

payment was a meaningful EHR user for 

the EHR reporting period for a payment 

year. A qualifying MA organization 

must make this attestation for each 

payment year for which it is seeking an 

incentive payment for MA EPs and MAaffiliated eligible hospitals. We believe 

attestations should occur toward the 

end of a year with respect to that year, 

since qualifying MA organizations will 

need to attest to, based on our proposed 

rule, meaningful use for the appropriate 

duration and during the appropriate 

period related to MA EPs and MAaffiliated eligible hospitals before 

claiming incentive payments for them. 

Note that unlike the Medicare FFS 

EHR incentive program, where we will 

require the reporting of clinical quality 

measures—see § 495.8—we will not 

require qualifying MA organizations to 

submit clinical quality measures per 

section 1848(o)(2)(B) of the Act, with 

respect to EPs, and section 1886(n)(3)(B) 

of the Act, with respect to eligible 

hospitals. Consistent with sections 

1848(o)(2)(B)(iii) and 1886(n)(3)(B)(iii) 

of the Act, we note that qualifying MA 

organizations sponsoring coordinated 

care MA plans are already required to 

submit Healthcare Effectiveness Data 

and Information Set (HEDIS), Health 

Outcomes Survey (HOS), and Consumer 

Assessment of Healthcare Providers and 

Systems (CAHPS) measures per 

§ 422.152 and § 422.516. Coordinated 

care MA plans include HMO, PPO and 

RPPO (Regional PPO) plans. Beginning 

with CY 2010, PFFS and MSA plans 

will also be required to begin collecting 

and submitting administrative HEDIS 

measures. 

We believe that all qualifying MA 

organizations will be organizations 

offering MA coordinated care plans, and 

therefore; those MA organizations from 

which we routinely receive complete 

HEDIS dataset reporting. Pursuant to 

sections 1848(o)(2)(B)(iii) and 

1886(n)(3)(B)(iii) of the Act, for clinical 

quality measures which overlap 

between the existing MA quality 

reporting program and under the 

HITECH program, we propose to allow 

qualifying MA organizations to continue 

reporting under the existing MA quality 

reporting program. For those HITECH 

clinical quality measures that do not 

overlap and that are appropriate for the 

MA program, we are considering 

requiring that qualifying MA 

organizations that receive an incentive 

payment report those measures to CMS. 

This would ensure that clinical quality 

measure reporting under HITECH is 

consistent between the FFS program 

and MA. An alternative approach would 

be to require that qualifying MA 

organizations that receive an incentive 

payment report all of the HITECH 

clinical quality measures under section 

II.A.2 of this proposed rule that are 

appropriate for the MA program directly 

to CMS, while also reporting those 

HEDIS, HOS, and CAHPS measures 

under the existing MA quality program. 

This may result in duplicative reporting 

under the HITECH program and current 

MA quality reporting, but may provide 

us with more direct access to quality 

data under the HITECH program. We 

invite public comment on these 

approaches, including alternative 

methods to consistently treat MAaffiliated providers and FFS providers 

under the HITECH Medicare incentive 

program. 

Therefore, we propose requiring 

qualifying MA organizations to submit 

attestations to us related to meaningful 

use by MA-affiliated hospitals within 30 

days of the close of the FFY—which is 

the payment year for MA-affiliated 

hospitals—by October 30. We also 

propose requiring qualifying MA 

organization to submit attestations to us 

related to meaningful use by MA EPs 

within 30 days of the close of the MA 

EP payment year—which is a CY—by 

January 30. 

7. Posting Information on the CMS Web 

Site 

Sections 1853(l)(7) and 1853(m)(5) of 

the Act, require us to post information 

on an Internet Web site related to the 

receipt of incentive payments under the 

MA EHR incentive program. 

Information would include the names, 

business addresses, and business phone 

numbers of each qualifying MA 

organization receiving an incentive 

payment under this section for 

qualifying MA EPs and hospitals. A list 

of the names of each qualifying MA EP 

and qualifying MA-affiliated eligible 

hospital for which an incentive payment 

has been made would also be posted. 

Since this requirement is applicable to 

other Medicare EPs and eligible 

hospitals, we have included this 

requirement in proposed § 495.108. 


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8. Limitation on Review 

Section 1853(l)(8) of the Act states 

that there shall be no administrative or 

judicial review under section 1869 of 

the Act, section 1878 of the Act, or 

otherwise of the methodology and 

standards for determining payment 

amounts and payment adjustments 

under the MA EHR EP incentive 

program. This includes provisions 

related to duplication of payment 

avoidance and rules developed related 

to the fixed schedule for application of 

limitation on incentive payments for all 

qualifying MA EPs related to a specific 

qualifying MA organization. This also 

includes the methodology and standards 

developed for determining qualifying 

MA EPs and the methodology and 

standards for determining a meaningful 

EHR user, including the means of 

demonstrating meaningful use and the 

selection of measures. We propose to 

codify these requirements in 

§ 495.212(b). 

Section 1853(m)(6) of the Act, as 

added by the HITECH Act, states that 

there shall be no administrative or 

judicial review under section 1869, 

section 1878, or otherwise of the 

methodology and standards for 

determining payment amounts and 

payment adjustments under the MA 

EHR hospital incentive program. This 

includes provisions related to 

duplication of payment. This also 

includes the methodology and standards 

developed for determining qualifying 

MA hospitals and the methodology and 

standards for determining a meaningful 

EHR user, including the means of 

demonstrating meaningful use and the 

selection of measures. We propose to 

codify these requirements in 

§ 495.212(c). 

9. Conforming Changes 

Sections 4101(e) and 4201(d)(2) and 

(3) of the HITECH Act provide 

conforming amendments to Part C of the 

Social Security Act. Therefore, we are 

proposing the following conforming 

changes to the regulations text: 

• Revising § 422.304 by adding a new 

paragraph (f) to account for the 

amendment to section 1853(a)(1)(A) of 

the Act referencing the additional EHR 

incentive payments that may be made to 

qualifying MA organizations in the 

section of the statute that provides for 

monthly capitation payments to MA 

organizations. (This addition would also 

act as a cross-reference to MA EHR 

incentive payment rules in proposed 

subpart C of part 495 of this chapter.) 

• Revising § 422.306(b)(2) by adding a 

new paragraph (iv) to address the 

amendments to section 1853(c)(1)(D)(i) 

of the Act which exclude the EHR 

incentive payments made to EPs and 

hospitals under the Medicare FFS 

program from the computation of FFS 

costs in a year for the purpose of 

computing MA monthly capitation 

amounts. 

• Revising § 422.308 by adding a new 

paragraph (a)(1) to address the 

amendments to section 1853(c)(1)(D)(1) 

and (c)(6)(A) of the Act regarding the 

exclusion of FFS Medicare EHR 

incentive payments and adjustments 

from the calculation of the national per 

capita growth percentage. 

• Revising § 422.322 by adding a new 

paragraph (a)(3) to account for the 

amendments to section 1853(c)(6)(A) 

and (f) of the Act specifying that the 

source of EHR incentive payments to 

qualifying MA organizations are from 

the Federal Hospital Insurance Trust 

Fund or the Supplementary Medical 

Insurance Trust Fund. 

• Revising § 422.322(b) by adding a 

reference to § 495.204 to address the 

amendment to section 1851(i)(1) of the 

Act that indicates that EHR incentive 

payments are instead of incentive 

payments that would otherwise be 

payable under original Medicare. 

10. Payment Adjustment and Future 

Rulemaking 

In future rulemaking we will develop 

standards related to payment 

adjustments to qualifying MA 

organizations related to MA EPs and 

MA-affiliated eligible hospitals that are 

not meaningful users of certified EHR 

technology. We solicit comment on how 

we can most effectively and efficiently 

apply payment adjustments to 

qualifying MA organizations whose MA 

eligible EPs and hospitals have not 

successfully meaningfully used certified 

EHR technology. 

The statutory requirement related to 

imposition of payment adjustments with 

respect to MA EPs is set forth in section 

1853(l) of the Act. Specifically, section 

1853(l)(4) of the Act requires that 

instead of applying the payment 

adjustment in section 1848(a)(7) of the 

Act, we apply the payment adjustment 

to the Medicare physician expenditure 

proportion. This is our estimate of the 

proportion of the expenditures under 

Parts A and B paid to the qualifying MA 

organization in the form of capitation 

payments under section 1853 of the Act 

that are not attributable to the EHR 

incentive payment program, that are 

attributable to expenditures for 

physician services. In the case of a 

qualifying MA organization that attests 

that not all MA EPs of the organization 

are meaningful EHR users with respect 

to years beginning with 2015, we are 

directed to apply the payment 

adjustment on the proportion of the 

capitation payment with respect to all 

such EPs of the organization that are not 

meaningful users for such year. The 

adjustment amount is 1 percent for 

2015, 2 percent in 2016, and 3 percent 

in 2017 and subsequent years. 

The statutory requirement related to 

imposition of payment adjustments with 

respect to MA-affiliated eligible 

hospitals is provided in section 1853(m) 

of the Act. Specifically, section 

1853(m)(4) of the Act requires us to 

apply the adjustment to the hospital 

expenditure proportion, which is our 

estimate of the proportion of the 

expenditures under Parts A and B paid 

to the qualifying MA organization in the 

form of capitation payments under 

section 1853 of the Act that are not 

attributable to the EHR incentive 

payment program, that are attributable 

to expenditures for inpatient hospital 

services. In the case of a qualifying MA 

organization that attests that not all MAaffiliated eligible hospitals of the 

organization are meaningful EHR users 

with respect to years beginning with 

2015, we are directed to apply the 

payment adjustment on the proportion 

of all such MA-affiliated eligible 

hospitals of the organization that are not 

meaningful users for such year. The 

adjustment amount is of three-fourths of 

the market basket increase related to a 

hospital by a 331⁄3 percent reduction in 

2015, by a 662⁄3 percent reduction in 

2016, and by a 100 percent reduction in 

2017 and all subsequent years. 

Effectively, the reduction is of all but 25 

percent of the market basket increase for 

a specific hospital in years after 2016. 

We welcome comments on these 

incentive payment adjustments and on 

how we can most effectively and 

efficiently apply payment adjustments 

to qualifying MA organizations whose 

EPs and MA-affiliated hospitals have 

not successfully meaningfully used 

certified EHR technology. Any 

comments received will be considered 

in developing future rulemaking. 

D. Medicaid Incentives 

1. Overview of Health Information 

Technology in Medicaid 

Under the HITECH Act, State 

Medicaid programs, at their option, may 

receive Federal financial participation 

(FFP) for expenditures for incentive 

payments to certain Medicaid providers 

to adopt, implement, upgrade, and 

meaningfully use certified EHR 

technology. Additionally, FFP is 

available to States for administrative 

expenses related to administration of 

those incentive payments as long as the 


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State meets certain conditions. Section 

1903(a)(3)(F)(i) of the Act, as amended 

by section 4201 of the HITECH Act, 

establishes 100 percent FFP to States for 

providing incentive payments to eligible 

Medicaid providers (described in 

section 1903(t)(2) of the Act) to adopt, 

implement, upgrade, and meaningfully 

use certified EHR technology. The 

incentive payments are not direct 

reimbursement for the purchase and 

acquisition of such technology, but 

rather are intended to serve as 

incentives for EPs and eligible hospitals 

to adopt and meaningfully use certified 

EHR technology. 

Section 1903(a)(3)(F)(ii) of the Act, as 

amended by section 4201 of the HITECH 

Act, also establishes 90 percent FFP to 

States for administrative expenses 

related to carrying out the substantive 

requirements associated with the 

incentive payments. As discussed later 

in this proposed rule, we interpret these 

administrative expenses as including 

approvable expenses related to oversight 

activities and promotion of health 

information exchange. 

It is important to note that we do not 

believe that the Medicaid incentive and 

administrative payments authorized 

under section 4201 of the HITECH Act 

should be viewed in isolation. Rather, 

we encourage States, providers, and 

other stakeholders to view these new 

programs in concert with the numerous 

other initiatives recently undertaken 

and currently being promoted by both 

CMS and the Department to encourage 

advancements in health care technology 

and health information exchange. These 

initiatives include the following: 

• The establishment of the Office of 

the National Coordinator (first through 

executive order in 2004 and then as 

legislatively mandated in the HITECH 

Act); 

• The Medicaid Transformation Grant 

program authorized by section 6081 of 

the Deficit Reduction Act of 2005 (Pub. 

L. 109–171). This program provided 

$150 million in grants in FY 2007 

through FY 2008 to States to support 

innovative methods for transforming 

Medicaid programs. Twenty-two States 

focused on HIT, with initiatives ranging 

from the use of statewide EHRs for 

beneficiaries, to mechanized clinical 

decision support, to e-prescribing, to 

electronic health information exchange. 

For more information on the program, 

we refer readers to: http:// 

www.cms.hhs.gov/ 

MedicaidTransGrants. 

• The Medicaid Information 

Technology Architecture (MITA) 

initiative and framework. MITA is a 

plan to promote improvements in the 

Medicaid enterprise and the systems 

that support it through collaboration 

between CMS and the States. The MITA 

framework consists of models, 

guidelines, and principles for States to 

use as they plan and implement 

business and technology enterprise 

solutions. Integral to the MITA is the 

State’s Medicaid Management 

Information System (MMIS). The MMIS 

contains a great deal of claims data and 

other Medicaid programmatic 

information that we believe should be 

used by States in analyzing their current 

HIT environments. Once States establish 

a baseline assessment, they can then 

plan the steps necessary to transition 

towards achieving some of the 

objectives of the HITECH Act, such as 

improving both quality of care and 

health care outcomes. In addition, the 

MITA framework is CMS’s initiative 

that will allow States to modernize and 

transform their MMIS to improve the 

administration of the Medicaid program, 

while supporting the States’ need for 

flexibility, adaptability, and rapid 

response to changes in the unique 

aspects of their individual Medicaid 

programs. The ultimate goal of MITA is 

to develop seamless and integrated 

systems that communicate effectively 

and that are interoperable, both within 

and across States as well as with other 

health care entities and payers, such as 

public health departments and nonMedicaid payers. For more information 

on MITA, we refer readers to: http:// 

www.cms.hhs.gov/ 

MedicaidInfoTechArch/. 

We believe that the HITECH Act 

incentives create a unique opportunity 

for States and Medicaid providers to 

build upon prior and current efforts in 

HIT in order to help achieve 

interoperable health information 

exchange in health care. We believe that 

States should build upon the lessons 

learned from these initiatives in order to 

ensure that the incentive and 

administrative payments are leveraged 

in a way that maximizes the role of HIT 

in enhancing quality and access, 

reducing costs, and improving health 

care outcomes. 

We also plan to ensure public 

involvement as the HIT environment 

evolves, both as a result of the HITECH 

Act incentives, as well as a result of 

other Departmental HIT initiatives. We 

have already convened several State 

calls on the HITECH Act, including 

discussing the definition of meaningful 

use of certified EHR technology, and the 

impact the definition would have on 

specific provider groups. More 

information on the content of these calls 

can be found in section II.A.2.a of this 

proposed rule. We convened additional 

calls with State staffs on the Medicaid 

EHR incentives leading up to our 

development of this proposed rule. 

Issues addressed include policies such 

as State oversight of adopting, 

implementing, and upgrading certified 

EHR technology; alternative fiscal 

agents under consideration; and 

validating data to establish program 

eligibility. 

We also released a State Medicaid 

Director’s letter on September 1, 2009. 

This letter outlines steps State Medicaid 

agencies can take to assess the current 

status of their HIT efforts; develop a 

roadmap for achieving their HIT 

objectives in support of the Medicaid 

EHR incentive program; set Medicaidspecific performance goals and 

incentives for provider adoption of HIT; 

and partner with a broad range of 

stakeholders. Furthermore, we 

conducted a follow-up technical 

assistance call with State Medicaid 

Directors and their staffs to provide an 

overview and answer questions. 

Finally, as required by section 

1903(t)(10) of the Act, we will be 

reporting to Congress on the status, 

progress, and oversight of the overall 

EHR incentive program. These reports 

will discuss steps taken to avoid 

duplicate Medicare and Medicaid 

incentive payments to EPs, the extent to 

which Medicaid EPs and hospitals have 

adopted certified EHR technology as a 

result of the incentive payments, and 

any improvements in health outcomes, 

clinical quality, or efficiency resulting 

from the adoption of such technology. 

• 2. General Medicaid Provisions 

In the proposed § 495.342 and 

§ 495.344 we provide the general rule 

that States, at their option, may receive: 

(1) 90 percent FFP for State 

expenditures related to the 

administration of an EHR incentive 

program for certain Medicaid providers 

that are adopting, implementing, or 

upgrading and meaningfully using 

certified EHR technology; and (2) 100 

percent FFP for State expenditures for 

those incentive payments. 

• 3. Identification of Qualifying 

Medicaid EPs and Eligible Hospitals 

a. Overview 

As specified in section 1903(t)(2) of 

the Act, only certain Medicaid providers 

will be eligible for incentive payments. 

This section of the preamble discusses 

some of these eligibility requirements, 

including requirements relating to 

patient volume, whether a provider is 

hospital-based, and whether an EP is 

practicing predominantly in a federallyqualified health center (FQHC) or a rural 

health clinic (RHC). Proposed 


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1State of Connecticut, Office of Health Care 

Access, ‘‘The Health of Connecticut’s Hospitals,’’ 

report released January 16, 2001, page 17. 

regulations relating to these 

requirements may be found at § 495.304 

through § 495.306. 

• b. Program Participation 

As specified under section 

1903(t)(2)(A) of the Act, Medicaid 

participating providers who wish to 

receive a Medicaid incentive payment 

must meet the definition of a ‘‘Medicaid 

EP.’’ This definition (1903(t)(3)(B) of the 

Act) lists five types of Medicaid 

professionals: Physicians, dentists, 

certified nurse-midwives, nurse 

practitioners, and physician assistants 

practicing in an FQHC or RHC that is so 

led by a physician assistant. 

Additionally, to qualify for incentives, 

most Medicaid EPs cannot be ‘‘hospitalbased.’’ We propose to use the same 

definition of ‘‘hospital-based’’ as used in 

the Medicare EHR incentive program, as 

sections 1848(o)(1)(C) and 1903(t)(3)(D) 

of the Act use almost identical 

definitions of the term. We refer readers 

to section II.A. of this preamble for a 

proposed definition of ‘‘hospital-based,’’ 

and for a thorough discussion of our 

proposed methodology. 

The only exception to this rule is that 

Medicaid EPs practicing predominantly 

in an FQHC or RHC are not subject to 

the hospital-based exclusion. 

Medicaid EPs must also meet the 

other criteria for Medicaid incentive 

payment eligibility, such as the patient 

volume thresholds or practicing 

predominantly in an FQHC or RHC, as 

described in this subpart. Since the 

statute at 1903(t)(2)(iii) of the Act does 

not define ‘‘practices predominantly,’’ 

we propose that an eligible professional 

practices predominantly at an FQHC or 

an RHC when the clinical location for 

over 50 percent of his or her total 

patient encounters over a period of 6 

months occurs at an FQHC or RHC. 

Acute care and children’s hospitals 

are listed in section 1903(t)(2) of the Act 

as the only two types of institutional 

providers potentially eligible for 

Medicaid incentive payments. These 

terms are specific to the Medicaid EHR 

incentive program and are not currently 

defined in the Medicaid regulations. 

Consequently, we propose to define 

these terms in § 495.302. 

As specified under section 

1903(t)(2)(B) of the Act, to qualify for 

incentive payments acute care hospitals 

also must meet patient volume 

threshold requirements, as specified in 

proposed § 495.306. Children’s hospitals 

do not have patient volume 

requirements for Medicaid incentive 

program participation. 

(1) Acute Care Hospitals 

‘‘Acute care’’ is defined as the 

necessary treatment of a disease or 

injury for only a short period of time in 

which a patient is treated for a brief but 

severe episode of illness.1 Many 

hospitals can be considered acute care 

facilities if they provide both inpatient 

and outpatient services with the goal of 

discharging the patient as soon as the 

patient is deemed stable, with 

appropriate discharge instructions. We 

are proposing that for purposes of 

Medicaid incentive payments, an ‘‘acute 

care hospital’’ is defined as: A health 

care facility where the average length of 

patient stay is 25 days or fewer. For 

purposes of participation in the 

Medicaid EHR incentive program, this 

proposed definition ensures that 

hospitals are designated as acute care 

hospitals based on the level and nature 

of care they provide. This definition 

also includes some specialty hospitals 

where the average length of stay is 25 

days or fewer. This definition of acute 

care hospitals will exclude specialty 

providers and long-term care facilities 

where the average patients’ length of 

stay exceeds 25 days. To further refine 

the definition, we reviewed the 

Medicare-issued CCN. CCNs are issued 

to categories of providers who meet 

Federal requirements (known as 

conditions of participation) to 

participate in the Medicare program. 

State Medicaid agencies look to 

Medicare’s conditions of participation 

when deciding whether to issue 

provider agreements to many categories 

of providers. In the case of inpatient 

hospital services § 440.10(a)(3)(iii) 

requires that for inpatient hospital 

services provided to Medicaid 

beneficiaries to be eligible for FFP, those 

services must be provided in an 

institution that meets the requirements 

for participation in Medicare as a 

hospital, and such hospitals receive 

CCNs. 

Hospital CCNs are structured such 

that the first two digits represent the 

State in which the hospital is located, 

and the next four digits identify the type 

of facility and are assigned sequentially 

from the appropriate block of numbers. 

Short-stay general hospitals receive 

CCNs whose number range is 0001 

through 0879. The 11 cancer hospitals 

in the United States also are issued 

CCNs within that number range. To 

allow some flexibility for hospital 

participation in the Medicaid EHR 

incentive program, we are proposing to 

define acute care hospitals for purposes 

of this Medicaid EHR incentive program 

as those with an average patient length 

of stay of 25 days or fewer and with a 

CCN that has the last four digits in the 

series 0001 through 0879 (that is, shortterm general hospitals and the 11 cancer 

hospitals in the United States). 

We also recognize a category of longterm care hospitals, which we are 

planning to exclude from the definition. 

Long term acute care hospitals are 

defined for Medicare purposes in 

regulations at 42 CFR 412.23(e). 

Specifically § 412.23(e)(2)(i) states that 

the hospital must have an average 

Medicare inpatient length of stay of 

greater than 25 days (which includes all 

covered and non-covered days of stay of 

Medicare patients). 

We considered allowing both shortterm and long-term acute care hospitals 

to meet the definition of acute care 

hospital for purposes of the Medicaid 

incentive payments. However, we are 

not proposing a definition that 

encompasses both types of acute care 

hospitals because CMS’ interpretation 

was that long-term acute care hospitals 

did not satisfy the intent of the statute, 

which we believe intends to include 

general acute care hospitals. In addition, 

CMS knew of at least one State that does 

not recognize long-term acute care 

hospitals as a Medicaid provider type. 

We therefore drew the line at 25 days, 

the cut-off between short-term general 

and specialty hospitals and long-term 

acute care hospitals. We used this cutoff in conjunction with the list of CMS 

CCNs (which also distinguish between 

short-term and long-term hospitals (see 

CMS State Operations Manual Section 

2779A1, as revised on April 20, 2007 

and effective on October 1, 2007) in 

order to be as inclusive as possible 

within statute. Since Congress 

specifically singled out children’s 

hospitals in addition to acute care 

hospitals, we believe that if Congress 

intended to include long-term care 

hospitals, it would have similarly given 

them separate mention. In addition, 

Congress specifically did not include 

nursing facilities, another category of 

long-term care provider (and an 

important source of Medicaid care) as a 

provider type eligible for incentive 

payments. CMS read this as further 

evidence that the statute did not intend 

inclusion of long-term care facilities. 

(2) Children’s Hospitals 

The statute also does not include a 

definition for ‘‘children’s hospitals.’’ To 

assist with the development of a 

definition of ‘‘children’s hospitals’’ for 

purposes of the Medicaid EHR incentive 

program, we convened teleconferences 

with States to gather input on topics 


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that should be defined in this proposed 

rule. Participants noted that one critical 

issue is whether a children’s wing of a 

general hospital could be considered a 

children’s hospital for purposes of 

qualifying for a Medicaid incentive 

payment. 

As with the acute care hospital 

definition, we again looked to Medicareissued CCNs and recognized that 

numbers whose last four digits are in 

the 3300 to 3399 series are assigned to 

children’s hospitals. Currently in the 

United States there are 78 certified 

children’s hospitals, including both 

freestanding and hospital-withinhospital facilities. 

For purposes of the Medicaid EHR 

incentive program, we propose one 

definition to include only separately 

certified children’s hospitals, with CCNs 

in the 3300–3399 series in the definition 

of eligible ‘‘children’s hospital.’’ By 

proposing to define ‘‘children’s hospital’’ 

in this way, CMS would (1) prevent 

general acute care hospitals, which 

cannot themselves qualify for the 

incentive because they do not meet the 

10 percent Medicaid patient volume, 

from using the fact that they have a 

pediatric wing as justification for 

requesting a Medicaid incentive 

payment; (2) exclude many of the 

facilities that are perceived by the 

public as children’s hospitals, but do 

not meet the Medicare standards as 

either freestanding or hospital-withinhospital children’s hospitals; and (3) 

exclude some pediatric specialty 

hospitals which have CCNs as 

psychiatric or rehabilitation hospitals. 

An alternative proposed definition of 

a ‘‘children’s hospital’’ would include 

those hospitals with Medicare provider 

numbers in the following series: 

• 0001 through 0879—Short-term 

(General and Specialty) Hospitals. 

• 3025 through 3099—Rehabilitation 

Hospitals (Excluded from Prospective 

Payment Systems). 

• 3300 through 3399—Children’s 

Hospitals (Excluded from Prospective 

Payment Systems). 

• 4000 through 4499—Psychiatric 

Hospitals (Excluded from Prospective 

Payment Systems). 

This definition, for the purposes of 

the Medicaid HIT Incentive payments, 

would apply only to those freestanding 

hospitals within the above mentioned 

series that exclusively furnish services 

to individuals under age 21. 

This broader definition would (1) still 

prevent acute care hospitals that cannot 

independently qualify for the incentive 

because they do not meet the 10 percent 

Medicaid patient volume from using the 

fact that they have a pediatric wing as 

justification for requesting an HIT 

incentive payment; (2) allow for 

participation in the incentive program 

by the greatest number of children’s 

hospitals, including rehabilitative and 

psychiatric specialty hospitals; and (3) 

align with Federal efforts aimed at 

improving healthcare quality for all 

children, including those with physical 

and mental diseases/disabilities. 

We are soliciting comment on the 

proposed definitions of ‘‘children’s 

hospital’’ as it applies to the Medicaid 

EHR incentive program recognizing that 

there may be additional alternative 

definitions that could have a positive 

impact on the health care received by 

children. 

c. Medicaid Professionals Program 

Eligibility 

For Medicaid EPs, the general rule 

(subject to the two exceptions listed 

below) is that the EP must have at least 

30 percent patient volume attributable 

to those who are receiving Medicaid. 

Section 1903(t)(2)(A)(i) of the Act 

provides authority to the Secretary to 

establish the methodology by which 

such patient volume will be estimated. 

We propose that to establish such 

patient volume, the EP must have a 

minimum of 30 percent of all patient 

encounters attributable to Medicaid over 

any continuous 90-day period within 

the most recent calendar year prior to 

reporting. There are two exceptions to 

the general 30 percent rule discussed 

previously. The first exception is that a 

pediatrician may have at least 20 

percent patient volume attributable to 

those who are receiving health care 

services under the Medicaid program, as 

estimated in accordance with a 

methodology established by the 

Secretary (section 1903(t)(2)(A)(ii) of the 

Act). Again, the method we propose to 

use is that the pediatrician must have a 

minimum 20 percent of all patient 

encounters attributable to Medicaid over 

any continuous 90-day period within 

the most recent calendar year prior to 

reporting. 

The second exception is that 

Medicaid EPs practicing predominantly 

in an FQHC or RHC must have a 

minimum of 30 percent patient volume 

attributable to ‘‘needy individuals.’’ 

Again, the method we propose to use is 

that 30 percent of all patient encounters 

be attributable to needy individuals over 

any continuous 90-day period within 

the most recent calendar year prior to 

reporting. 

Section 1903(t)(3)(F) of the Act 

defines needy individuals as 

individuals meeting any of the 

following three criteria: (1) They are 

receiving medical assistance from 

Medicaid or the Children’s Health 

Insurance Program (CHIP); (2) they are 

furnished uncompensated care by the 

provider; or (3) they are furnished 

services at either no cost or reduced cost 

based on a sliding scale determined by 

the individual’s ability to pay. An 

explanation of how we propose to apply 

each of these criteria is described in 

detail in this section of the proposed 

rule. 

We propose this flexible patient 

volume methodology in order to capture 

the highest number of true Medicaid 

practitioners potentially eligible for the 

EHR incentive program. We believe 

Congress set the high patient volume 

thresholds in order to offer these 

incentives to the practitioners whose 

practices are open and accessible to 

Medicaid beneficiaries. We noted that 

many Medicaid eligible individuals, 

such as children, may seek care at 

specified times of the year, such as the 

beginning of the school-year for 

required immunizations. Since there are 

five different types of providers, varying 

from specialty to primary care, we 

thought the flexibility would capture 

any seasonal encounter adjustments in 

the year, while still honoring Congress’ 

intent to reward higher-volume 

Medicaid practitioners. 

d. Calculating Patient Volume 

Requirements 

As required by section 1903(t)(2) of 

the Act and discussed in the previous 

section, all EPs and the vast majority of 

hospitals will need to meet certain 

patient volume thresholds in order to be 

eligible for incentive payments. (The 

only exception to this rule is for 

children’s hospitals, which have no 

patient volume threshold requirement). 

In addition, where patient volume is 

a criterion, most providers will be 

evaluated according to their ‘‘Medicaid’’ 

patient volume, while some 

professionals (those practicing 

predominantly in an FQHC or RHC) will 

be evaluated according to their ‘‘needy 

individual’’ patient volume. 

We propose to define ‘‘patient 

volume’’ in § 495.302 to be a minimum 

participation threshold for each 

individual Medicaid provider (with the 

exception of children’s hospitals). 

For the Medicaid patient volume, this 

threshold (represented below) is 

calculated using as the numerator the 

individual hospital’s or EP’s total 

number of Medicaid patient encounters 

in any representative continuous 90-day 

period in the preceding calendar year 

and the denominator is all patient 

encounters for the same individual 

professional or hospital over the same 

90-day period. We are not prescribing 

standards for what is a ‘‘representative’’ 


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period, but we intend to apply a plain 

meaning test. In other words, if a 

reasonable person would not consider 

the selected period to be representative 

(for example, because the selected 

period included a short-term temporary 

Medicaid outreach program), then it 

would not support a threshold 

calculation. 

[Total (Medicaid) patient encounters 

in any 90-day period in the preceding 

calendar year/Total patient encounters 

in that same 90-day period] * 100 

For the needy individual patient 

volume, the threshold (represented 

below) is calculated in the same 

manner, but with the numerator equal to 

the EP’s total number of needy 

individual patient encounters in any 

representative 90-day period in the 

preceding calendar year. 

[Total (Needy Individuals) patient 

encounters in any continuous 90-day 

period in the preceding calendar 

year/Total patient encounters in that 

same 90-day period] * 100 

Medicaid EPs and eligible hospitals 

would be required to annually re-attest 

to patient volume thresholds to 

continue to qualify for Medicaid 

incentive payments. Table 26 

demonstrates the above-referenced 

patient volume thresholds per provider 

type. 

TABLE 26—QUALIFYING PATIENT VOLUME THRESHOLD FOR MEDICAID EHR INCENTIVE PROGRAM

Entity 

Minimum 90-day 

Medicaid patient 

volume threshold 

(percent) 

Physicians ................................................................................ 30 Or the Medicaid EP practices predominantly in an FQHC or 

RHC—30% ‘‘needy individual’’ patient volume threshold. 

Pediatricians ............................................................................ 20 

Dentists .................................................................................... 30 

Certified nurse midwives ......................................................... 30 

Physician Assistants when practicing at an FQHC/RHC led 

by a physician assistant.

30 

Nurse Practitioner .................................................................... 30 

Acute care hospital .................................................................. 10 

Children’s hospital ................................................................... ..............................

If a State has an alternative approach 

to the established timeframe for 

measuring patient volume, it may 

propose it to us for review through the 

State Medicaid HIT Plan (SMHP) 

(discussed later) and we would make a 

determination of whether it is an 

acceptable alternative. To be considered 

for approval, the alternative approach 

would require a verifiable data source 

and justification. In defining the way in 

which patient volume is established, we 

provide for a consistent methodology 

per the statute, but also allow for the 

possibility that States may propose 

acceptable alternatives that synchronize 

with existing data sources, which could 

decrease State data burdens. This 

alternative approach must provide an 

auditable record (that is, a record of how 

the professional demonstrated patient 

volume) for CMS to monitor the States’ 

oversight of the Medicaid EHR incentive 

program implementation. 

In determining the ‘‘needy individual’’ 

patient volume threshold that applies to 

EPs practicing predominantly in FQHCs 

or RHCs, section 1902(t)(2) of the Act 

authorizes the Secretary to make a 

downward adjustment to the 

uncompensated care figure to eliminate 

bad debt data. We interpret bad debt to 

be consistent with the Medicare 

definition, as specified at § 413.89(b)(1). 

Under Medicare, bad debts are amounts 

considered to be uncollectible from 

accounts and notes receivable that were 

created or acquired in providing 

services. ‘‘Accounts receivable’’ and 

‘‘notes receivable’’ are designations for 

claims arising from the furnishing of 

services, and are collectible in money in 

the relatively near future. Providers 

should be required to use cost reports 

(for FQHCs and clinics this would be 

the Medicare 222–92 cost report, or the 

most recent version of the 222), or other 

auditable records to identify bad debts. 

All information under attestation is 

subject to audit. Our proposed 

regulations on calculating the needy 

individual patient volume can be found 

at § 495.302 and § 495.306. 

Further, in establishing the Medicaid 

patient volume thresholds for EPs and 

acute care hospitals, section 1902(t)(2) 

of the Act requires that individuals 

enrolled in Medicaid managed care 

organizations (MCOs), prepaid inpatient 

health plans (PIHPs), or prepaid 

ambulatory health plans (PAHPs), under 

42 CFR Part 438 be included in the 

calculation. Therefore, in determining 

patient volume, providers and States 

should be aware that individuals 

enrolled in such plans will be included 

in the patient volume calculation. Acute 

care hospitals have to meet the 10 

percent Medicaid volume threshold. 

We also note that although § 438.60 of 

our regulations would generally prohibit 

a State from making a direct payment to 

a provider for services that are included 

under a contract with an MCO, PIHP, or 

PAHP, providers contracted with these 

managed care plans will nevertheless be 

eligible for Medicaid EHR incentive 

payments because those payments are 

not for services that are included in 

such a contract. The fact that Congress 

directed that individuals enrolled in 

managed care be included in the patient 

volume calculation demonstrates an 

intent to allow qualified providers to 

receive incentive payments, whether 

they provided their services through 

capitated care arrangements or fee-forservice. Over 70 percent of Medicaid 

beneficiaries receive care in a managed 

care delivery system, and we do not 

believe that the intent of Congress in 

creating the incentives program was to 

remove the providers treating these 

individuals from the incentives 

program. 

e. Entities Promoting the Adoption of 

Certified EHR Technology 

We are proposing to define 

‘‘promoting the adoption of certified 

EHR technology’’ in § 495.302. Under 

section 1903(t)(6)(A)(i), incentive 

payments must generally be made 

directly to the EP. Section 

1903(t)(6)(A)(ii) of the Act provides an 

exception to permit payment of 

incentive payments to ‘‘entities 

promoting the adoption of certified EHR 

technology,’’ as designated by the State, 

if participation in the payment 

arrangement is voluntary for the EP 

involved. Additionally, the entity must 

not retain more than 5 percent of the 

payment for costs unrelated to certified 


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EHR technology (and support services 

including maintenance and training) 

that is for, or is necessary for, the 

operation of the technology. While the 

Act authorizes States to designate these 

entities, the Secretary nevertheless 

retains authority to define what it means 

to be ‘‘promoting the adoption of 

certified EHR technology,’’ as specified 

in section 1903(t)(6)(A)(ii) of the Act. 

Section 1102 of the Act authorizes the 

Secretary to ‘‘make and publish such 

rules and regulations, not inconsistent 

with this Act, as may be necessary to the 

efficient administration of the functions 

with which he or she is charged under 

this Act.’’ Since one of our functions is 

to approve Title XIX plans under 

sections 1902(b) and 1116 of the Act, 

and States would need to submit plans 

as to how they would spend section 

4201 of the HITECH Act funds, we have 

the authority to determine whether a 

State’s plan for allowing EPs to assign 

their Medicaid incentive payments to 

these entities is in compliance with our 

interpretation of the Act. 

We propose to define ‘‘promoting’’ 

certified EHR adoption to mean the 

enabling and oversight of the business, 

operational and legal issues involved in 

the adoption and implementation of 

EHR and/or exchange and use of 

electronic health information between 

participating providers, in a secure 

manner, including maintaining the 

physical and organizational relationship 

integral to the adoption of certified EHR 

technology by EPs. For example, health 

information exchanges have the 

potential to transform the healthcare 

system by facilitating timely, accurate, 

and portable health information on each 

patient at the point of service. Health 

Information Exchanges (HIEs), are one 

type of entity that we believe would 

meet the definition of an entity that is 

promoting the adoption of certified EHR 

technology. HIEs provide the capability 

to move clinical information 

electronically between disparate health 

care information systems while 

maintaining the meaning of the 

information being exchanged. HIEs also 

provide the infrastructure for secondary 

use of clinical data for purposes such as 

public health, clinical, biomedical, and 

consumer health informatics research as 

well as institution and provider quality 

assessment and improvement, where 

permissible under HIPAA and other 

requirements included in the HITECH 

Act. In addition, use of health 

information exchange models can 

reduce the need for costly point-to-point 

interfaces between different EHR tools, 

as used in laboratories and pharmacies, 

thus providing a more scalable model of 

interoperable health information 

exchange. HIEs promote adoption of 

certified EHR technology by providing 

the infrastructure for providers’ EHRs to 

reach outside of their clinical practice 

sites and connect with other points of 

care. Providers report that having a 

more complete picture of their patients’ 

healthcare data from other providers 

and care settings is one of the primary 

appeals to using EHRs. Without health 

information exchange, electronic health 

records are simply digitized filing 

cabinets and will not achieve their 

quality of care or cost containment 

potential. Furthermore, given the 

proposed definition of meaningful use, 

HIEs can significantly help Medicaid 

providers adopt and use EHR in such a 

way that the goals of the incentive 

program are met. The inclusion in 

HITECH of HIE grants to be awarded to 

States or State-designated Entities by 

ONC are an additional indication of the 

symbiotic relationship between health 

information exchanges and optimal use 

of EHRs. 

Under 1903(t)(6)(A)(ii) of the Act and 

as proposed in § 495.354, States must 

establish verification procedures that 

enable Medicaid EPs to voluntarily 

assign payments to entities promoting 

EHR technology. States must guarantee 

that the assignment is voluntary and 

that the entity does not retain more than 

5 percent of those assigned Medicaid 

incentive payments for costs unrelated 

to certified EHR technology. We propose 

requiring States to publish and make 

available to all Medicaid EPs the 

procedures they developed for assigning 

incentive payments to the third party 

entities before payments can be 

assigned. Such publication must also 

include information about the State’s 

verification mechanism. The State’s 

method must assure compliance with 

the requirement that no more than 5 

percent of the Medicaid EP’s annual 

incentive payment is retained by the 

entity for costs not related to certified 

EHR technology. 

Although section 1903(t)(6)(A)(ii) of 

the Act allows assignment of payment to 

entities promoting the adoption of EHR 

technology, we wish to clarify that such 

assignment would not remove the 

responsibility of the Medicaid EP to 

individually demonstrate meaningful 

use of the EHR technology (as discussed 

in greater detail below). Therefore, 

entities promoting the adoption would 

not receive the assigned payments 

unless the Medicaid EP meets all 

eligibility criteria. Our proposed 

definition for promoting the adoption of 

certified EHR technology is in § 495.302. 

4. Computation of Amount Payable to 

Qualifying Medicaid EPs and Eligible 

Hospitals 

The statute, at sections 1903(t)(1), 

(t)(4), and (t)(5) of the Act, creates 

different payment formulas for 

Medicaid EPs versus hospitals. The 

payment methodology for Medicaid 

hospitals shares many aspects of the 

methodology used for Medicare 

hospitals. 

a. Payment Methodology for EPs 

(1) General Overview 

Pursuant to section 1903(t)(1)(A) of 

the Act, payment for EPs equals 85 

percent of ‘‘net average allowable costs.’’ 

While the Secretary is directed to 

determine ‘‘average allowable costs’’ 

based upon studies of the average costs 

of both purchasing and using EHR 

technology, the net average allowable 

costs that set payment are capped by 

statute. As discussed in more detail 

further on, generally stated, these caps 

equal $25,000 in the first year, and 

$10,000 for each of 5 subsequent years 

(there is an exception for pediatricians 

with under 30 percent Medicaid patient 

volume, whose caps are two-thirds of 

these amounts). Thus, the maximum 

incentive payment an EP could receive 

from Medicaid equals 85 percent of 

$75,000, or $63,750, over a period of 6 

years. EPs must begin receiving 

incentive payments no later than CY 

2016. 

(2) Average Allowable Costs 

Section 1903(t)(4)(C) of the Act gives 

the Secretary the authority to determine 

average allowable costs. Specifically, 

the Secretary is directed to study the 

average costs associated with the 

purchase, initial implementation, and 

upgrade of certified EHR technology, 

including support services, and integral 

related training. The Secretary also is 

directed to study the average costs of 

operating, maintaining, and using 

certified EHR technology. The statute 

permits the Secretary to use studies 

submitted by the States. 

We conducted a literature review of 

recent studies on EHR technology to 

determine the average allowable cost of 

implementing and using such 

technology. We reviewed the results 

from four recent, comprehensive 

studies. Specifically, HHS’ Office of the 

Assistant Secretary for Planning and 

Evaluation commissioned a study by 

Moshman Associates, Inc., Booz Allen 

Hamilton, in September 2006— 

Assessing the Economics of EMR 

Adoption and Successful 

Implementation in Physical Small 

Practice Settings. In this study, EHRs 


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2Moshman Associates, Inc., Booz Allen 

Hamilton, in September 2006—Assessing the 

Economics of EMR Adoption and Successful 

Implementation in Physical Small Practice Settings, 

p. 40. 

3Moshman Associates Inc., Booz, Allen, 

Hamilton, p. 50. 

4Market Watch, The Value of Electronic Health 

Records in Community Health Centers: Policy 

Implications by Robert H. Miller and Christopher E. 

West, p. 206. 

5Market Watch, The Value of Electronic Health 

Records in Community Health Centers: Policy 

Implications by Robert H. Miller and Christopher E. 

West, p. 208. 

6A CBO Paper, Evidence on the Costs and 

Benefits of Health Information Technology, May 

2008, p. 17. 7A CBO Paper, Evidence on the Costs and 

Benefits of Health Information Technology, May 

2008, p. 18. 8Agency for Healthcare Research and Quality, 

Research Activities, September 2005, Health 

Information Technology, Adoption rates of 

electronic health records are low among physician 

groups. 

consisted of a core group of functions 

that, in various permutations, are often 

associated with an electronic medical 

record and frequently include the 

capacity to: Capture and display clinical 

notes, display laboratory results, display 

diagnostic imaging results or reports, 

order drugs or diagnostic tests, and 

generate reports.2

The study found that EHR adoption is 

influenced by a variety of factors, 

including hardware costs, software 

costs, the costs of implementation and 

training, and costs associated with 

productivity that occur in the early 

stages of implementation. While there 

are challenges in making cost 

comparisons across different studies 

and across different functionalities (that 

is, EMRs versus EHRs), the costs per 

physician ranged between $33,000 and 

$50,000.3

In reviewing Market Watch, The 

Value of Electronic Health Records in 

Community Health Centers: Policy 

Implications by Robert H. Miller and 

Christopher E. West, the cost and 

benefits of electronic health records is 

reported in six community health 

centers (CHCs) that serve disadvantaged 

patients.4 Robert Miller and Christopher 

West report that initial EHR costs per 

full-time-equivalent (FTE) billing 

provider averaged almost $54,000, with 

much variation across CHCs and within 

each cost category, including hardware, 

software, installation, training, etc. and 

ongoing costs per FTE provider, per 

year, averaged $20,610.5

A Congressional Budget Office (CBO) 

Paper: Evidence on the Costs and 

Benefits of Health Information 

Technology from May 2008 indicates 

that estimating the total cost of 

implementing HIT systems in officebased medical practices is complicated 

by differences in the types and available 

features of the systems now being sold, 

as well as differences in characteristics 

of the practices that adopt them. The 

CBO paper goes further to say that few 

detailed studies available report that 

total costs for office-based EHRs are 

about $25,000—$45,000 per physician 6

and estimates for annual costs for 

operating and maintaining the system, 

which include software licensing fees, 

technical support, and updating and 

replacing used equipment range 

between $3,000 to $9,000 per physician 

per year.7

An article written by the Agency for 

Healthcare Research and Quality 

(AHRQ), Research Activities, September 

2005, Health Information Technology, 

adoption rates of electronic health 

records are low among physician 

groups—indicates that the average 

purchase and implementation cost of an 

EHR was $32,606 per FTE physician. 

The article indicates that maintenance 

costs were an additional $1,500 per 

physician, per month and smaller 

practices had the highest 

implementation costs per physician at 

$37,204.8

In conducting a review of the data, we 

determined that the studies demonstrate 

a cross-sectional view of small and large 

practices and community health centers. 

There was adequate data to support a 

depiction of costs across multiple 

provider types. 

To summarize, we determined that 

the average costs of EHRs vary greatly 

because of the size and type of provider 

practices, the differences in available 

features of systems, and the additional 

costs associated with licensing, support, 

training, and maintenance. However, 

based on the information reviewed, we 

determined that the average costs for 

initial EHR systems currently can range 

from $25,000 to $54,000 in the 

implementation year, per professional. 

Since the average costs of EHR 

technology in the first year can be as 

much as $54,000 and no less than 

$25,000, and since we believe the costs 

of such technology will be increasing, 

we are proposing to set the average 

allowable cost at $54,000. We believe 

that to establish this average allowable 

cost at the high end of the range is 

reasonable since the data we reviewed 

is based on certification standards that 

may not be appropriate moving forward. 

Specifically, since the ONC will be 

establishing new certification standards 

for EHR technology in the coming 

months, we believe the average cost of 

certified EHR technology incorporating 

the new standards will be higher than 

the current costs of EHR technology. It 

is our assumption that making 

improvements to incorporate the new 

certification standards into current EHR 

technology will be costly. Thus, we 

believe that establishing the average 

allowable cost at $54,000 is reasonable. 

Additionally, our analysis determined 

that the range for subsequent incentive 

payment year costs for most providers 

will fall into a large range, based on a 

number of factors. On one end of the 

range, costs related to maintenance 

could be as low as $3,000 to $9,000 per 

provider, where other studies state that 

maintenance will be as high as $18,000 

to $20,610 per provider. Given the 

expectations in the ONC interim final 

rule for system performance, 

interoperability, and the health 

measures data discussed in this 

proposed rule that CMS and the States 

will need to collect from professionals, 

we believe that the costs for maintaining 

certified EHR technology will also be on 

the higher end of the range at $20,610. 

(3) Net Average Allowable Costs 

As required by section 1903(t)(3)(E) of 

the Act, in order to determine ‘‘net’’ 

average allowable costs, average 

allowable costs for each provider must 

be adjusted in order to subtract any 

payment that is made to Medicaid EPs 

and is directly attributable to payment 

for certified EHR technology or support 

services of such technology. The only 

exception to this requirement is that 

payments from State or local 

governments do not reduce the average 

allowable costs. The resulting figure is 

the ‘‘net’’ average allowable cost; that is, 

average allowable cost minus payments 

from other sources (other than State or 

local governments). The statute 

indicates that EPs may receive 85 

percent of a maximum net average 

allowable cost in the first year of 

$25,000 and a maximum net average 

allowable cost of $10,000 in subsequent 

years. This would mean that, as 

required by the statute, the net average 

allowable costs are capped at these 

amounts. 

Since we have proposed that the 

average allowable cost is $54,000 in the 

first year, EPs could receive as much as 

$29,000 in funding from sources (other 

than from State or local governments) as 

contributions to the certified EHR 

technology and the incentive payment 

would still be based on 85 percent of the 

maximum net average allowable cost of 

$25,000 (or $21,250). This is appropriate 

since $54,000 (the average allowable 

cost) minus $29,000 (contributing 

sources of funding from other than State 

or local governments) equals $25,000. 


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Since $25,000 is equal to the level of the 

maximum net average allowable cost or 

capped amount discussed above, 

providers could receive 85 percent of 

$25,000 or $21,250 in year one as a 

Medicaid incentive payment. 

The same logic would hold true for 

subsequent years. Specifically, if in the 

following years an eligible professional 

received as much as $10,610 in 

contributing funds from sources other 

than State or local governments, the 

maximum incentive payment of $8,500 

would be unaffected in such subsequent 

years. This result is due to the fact that 

the average allowable costs of $20,610 

for maintaining EHR technology minus 

the $10,610 received would still equal 

$10,000, the maximum net average 

allowable costs permitted under the 

statute. 

In reviewing whether a reduction in 

the net average allowable cost was 

warranted based on other contributions 

to EHR technology, we considered the 

situation of EPs who may have been 

provided with the actual certified EHR 

technology, as well as training, support 

services, and other services that would 

promote the implementation and 

meaningful use of such technology. In 

some cases, we do not believe the 

contribution would reduce average 

allowable costs at all. For example, if an 

FQHC or RHC has provided technology 

to its staff EPs to use, we do not believe 

that such technology provision would 

be considered a ‘‘payment’’ from another 

source that would reduce average 

allowable costs. Moreover, we believe 

the situations in which an EP has been 

provided with the actual technology, 

support service, or training from another 

source are extremely limited in light of 

the statutory prohibitions on 

‘‘kickbacks’’ at Section 1128B(b) of the 

Act. 

(4) Payments for Medicaid Eligible 

Professionals 

One important difference we propose 

between the payments to Medicaid EPs 

and hospitals is that States would 

disburse the payments to EPs in 

alignment with the calendar year, 

whereas hospitals will receive payments 

in alignment with the fiscal year, as 

described in section II.D.4.b. of this 

proposed rule. There are two primary 

reasons for this. The first is to align 

Medicaid incentive payment 

disbursements with that of the Medicare 

program, in order to support 

consistency between the two programs, 

as well as among the States. We will 

undertake national outreach activities to 

encourage provider EHR adoption and 

to align the annual payment periods. 

Since meaningful use of the certified 

EHR technology is the driver of the 

incentives, we believe that a cooperative 

approach between CMS, ONC, and the 

States would be realized with more 

providers participating in the program. 

As previously discussed in this 

proposed rule, based on the 85 percent 

threshold applied to the net average 

allowable costs, we propose that most 

Medicaid EPs may receive up to a 

maximum incentive payment of $21,250 

in the first payment year. 

In subsequent years of payment, 

Medicaid EPs’ incentive payments will 

be limited to 85 percent of the $10,000 

cap on net average allowable cost, or up 

to a maximum of $8,500 annually for 

most Medicaid EPs. 

Since pediatricians are qualified to 

participate in the Medicaid EHR 

incentive program as physicians, and 

therefore classified as Medicaid EPs, 

they may qualify to receive the full 

incentive (that is, the 85 percent 

threshold applied to the net average 

allowable cost) if the pediatrician is not 

hospital-based and can demonstrate that 

they meet the minimum 30 percent 

Medicaid patient volume requirements 

discussed in this subpart. 

Pediatricians who are not hospitalbased, and have a minimum of 20 

percent of their patient encounters paid 

by Medicaid are also encouraged to 

participate in the Medicaid EHR 

incentive program. The maximum 

payment amount for these pediatricians, 

who meet the 20 percent Medicaid 

patient volume, but fall short of the 30 

percent patient volume, is reduced to 

two-thirds of the net average allowable 

cost, subject to the 85 percent threshold. 

The reduction accounts for the reduced 

patient volume, but the intent is to offer 

an incentive to attract pediatricians to 

participate. This means pediatricians 

with a minimum 20 percent patient 

volume may qualify for up to a 

maximum of $14,167 in the first 

incentive payment year and up to a 

maximum of $5,667 in the 5 subsequent 

incentive payment years, or no more 

than $42,500 over the maximum 6 year 

period. 

Table 27 demonstrates the various 

maximum incentive payment amounts 

for Medicaid professionals. 

TABLE 27—MAXIMUM INCENTIVE PAYMENT AMOUNT FOR MEDICAID PROFESSIONALS

Cap on net average allowable costs, per the HITECH Act 

85 percent 

allowed for eligible 

professionals 

Maximum 

cumulative incentive 

over 6-year period 

$25,000 in Year 1 for most professionals ....................................................................................... $21,250 ....................................

$10,000 in Years 2–6 for most professionals ................................................................................. 8,500 $63,750 

$16,667 in Year 1 for pediatricians with a minimum 20 percent patient volume, but less than 30 

percent patient volume, Medicaid patients .................................................................................. 14,167 ....................................

$6,667 in Years 2–6 for pediatricians with a minimum 20 percent patient volume, but less than 

30 percent patient volume, Medicaid patients ............................................................................. 5,667 42,500 

(5) Basis for Medicaid EHR Incentive 

Program First Payment Year and 

Subsequent Payment Years 

(i) Medicaid EP Who Begins Adopting, 

Implementing or Upgrading Certified 

EHR Technology in the First Year 

A Medicaid EP who begins by 

adopting, implementing, or upgrading 

certified EHR technology in the first 

year will be eligible for the incentive 

payments not in excess of the maximum 

amount. Under section 1903(t)(4) of the 

Act he or she is eligible to receive up 

to the maximum first year Medicaid 

incentive payments discussed in the 

previous sections, plus additional 

incentive payments for up to 5 years for 

demonstrating meaningful use of 

certified EHR technology. In other 

words, these providers may participate 

in the Medicaid EHR incentive program 

for up to 6 years. 

Table 28 demonstrates the payment 

scenarios available to a Medicaid EP 

who begins in their first year by 

adopting, implementing, or upgrading 

certified EHR technology. As can be 

seen from the table, the EP can begin 

receiving payments as late as 2016, and 

still receive up to the maximum 

payments under the program. 


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TABLE 28—PAYMENT SCENARIOS FOR MEDICAID EPS WHO BEGIN ADOPTION IN THE FIRST YEAR

Calendar year 

Medicaid EPs who begin adoption in 

2011 2012 2013 2014 2015 2016 

2011 ......................................................... $21,250 ........................ ........................ ........................ ........................ ........................

2012 ......................................................... 8,500 $21,250 ........................ ........................ ........................ ........................

2013 ......................................................... 8,500 8,500 $21,250 ........................ ........................ ........................

2014 ......................................................... 8,500 8,500 8,500 $21,250 ........................ ........................

2015 ......................................................... 8,500 8,500 8,500 8,500 $21,250 ........................

2016 ......................................................... 8,500 8,500 8,500 8,500 8,500 $21,250 

2017 ......................................................... ........................ 8,500 8,500 8,500 8,500 8,500 

2018 ......................................................... ........................ ........................ 8,500 8,500 8,500 8,500 

2019 ......................................................... ........................ ........................ ........................ 8,500 8,500 8,500 

2020 ......................................................... ........................ ........................ ........................ ........................ 8,500 8,500 

2021 ......................................................... ........................ ........................ ........................ ........................ ........................ 8,500 

Total .................................................. 63,750 63,750 63,750 63,750 63,750 63,750 

(ii) Medicaid EP Who Has Already 

Adopted, Implemented or Upgraded 

Certified EHR Technology and 

Meaningfully Uses EHR Technology 

For a Medicaid EP who has already 

adopted, implemented, or upgraded 

certified EHR technology and can 

meaningfully use this technology in the 

first incentive payment year, we 

propose that the Medicaid EP be 

permitted to receive the same maximum 

payments, for the same period of time, 

as the Medicaid EP who merely 

adopted, implemented or upgraded 

certified EHR technology in the first 

year. Section 1903(t)(6)(C)(ii) of the Act 

states that for a Medicaid EP or hospital 

who has completed ‘‘adopting, 

implementing, or upgrading’’ certified 

EHR technology ‘‘prior to the first year 

of payment. * * * clause (i)(I) shall not 

apply and clause (i)(II) [discussing the 

demonstration of meaningful use] shall 

apply to each year of payment to the 

Medicaid provider under this 

subsection, including the first year of 

payment.’’ We believe this provision 

supports an interpretation that a 

Medicaid EP who has already adopted 

certified EHR technology, would still 

receive a ‘‘first year’’ of payment under 

section 1903(t)(4) of the Act, and like all 

other first years of payment, this 

payment could not exceed $21,250. 

Then, under section 1903(t)(4)(A)(ii) 

and (iii) of the Act, such Medicaid EPs 

could receive an additional 5 years of 

payment for subsequent years of 

payment, with payments not exceeding 

$8,500 in each of these 5 subsequent 

years. This approach allows early 

adopters of certified EHR to begin 

meaningfully using technology, without 

being at a competitive disadvantage, and 

without losing incentive payments for 

the previous costs associated with 

adopting, implementing, or upgrading 

certified EHR technology. 

Thus, the maximum incentive 

payments for Medicaid EPs 

demonstrating that they are meaningful 

users in the first payment year, would 

be identical to the maximum payments 

available to those demonstrating 

adoption, implementation, or upgrading 

certified EHR technology in the first 

year, as depicted in Table 29. 

TABLE 29—MAXIMUM INCENTIVE PAYMENTS FOR MEDICAID EPS WHO ARE MEANINGFUL USERS IN THE FIRST PAYMENT

YEAR

Calendar year 

Medicaid EPs who begin meaningful use of certified EHR technology in 

2011 2012 2013 2014 2015 2016 

2011 ......................................................... $21,250 ........................ ........................ ........................ ........................ ........................

2012 ......................................................... 8,500 $21,250 ........................ ........................ ........................ ........................

2013 ......................................................... 8,500 8,500 $21,250 ........................ ........................ ........................

2014 ......................................................... 8,500 8,500 8,500 $21,250 ........................ ........................

2015 ......................................................... 8,500 8,500 8,500 8,500 $21,250 ........................

2016 ......................................................... 8,500 8,500 8,500 8,500 8,500 $21,250 

2017 ......................................................... ........................ 8,500 8,500 8,500 8,500 8,500 

2018 ......................................................... ........................ ........................ 8,500 8,500 8,500 8,500 

2019 ......................................................... ........................ ........................ ........................ 8,500 8,500 8,500 

2020 ......................................................... ........................ ........................ ........................ ........................ 8,500 8,500 

2021 ......................................................... ........................ ........................ ........................ ........................ ........................ 8,500 

Total .................................................. 63,750 63,750 63,750 63,750 63,750 63,750 

An alternative approach we request 

comment on would be to limit the 

incentive payment for Medicaid EPs 

who have already adopted, 

implemented, or upgraded certified EHR 

technology to 5 years of payment, at a 

maximum payment of $8,500 per year. 

This approach would interpret section 

1903(t)(4)(A) of the Act, which states 

that the $25,000 cap on net average 

allowable costs is intended to cover the 

costs of implementing or adopting 

certified EHR technology, as limiting the 

$21,250 payment only to those actually 

adopting the technology in their first 

year of payment. While early adopters 

would still be eligible to receive 

incentive payments, the payment totals 

would be lower, because such adopters 

would not need an incentive payment in 

order to actually implement, adopt, or 

upgrade certified EHR technology. This 

alternative approach is depicted in 

Table 30. 


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TABLE 30—ALTERNATIVE INCENTIVE PAYMENT SCENARIO FOR MEDICAID EPS WHO HAVE ADOPTED EHR TECHNOLOGY

BEFORE THE FIRST YEAR

Calendar year 

Medicaid EPs who begin meaningful use in 

2011 2012 2013 2014 2015 2016 

2011 ......................................................... $8,500 ........................ ........................ ........................ ........................ ........................

2012 ......................................................... 8,500 $8,500 ........................ ........................ ........................ ........................

2013 ......................................................... 8,500 8,500 $8,500 ........................ ........................ ........................

2014 ......................................................... 8,500 8,500 8,500 $8,500 ........................ ........................

2015 ......................................................... 8,500 8,500 8,500 8,500 $8,500 ........................

2016 ......................................................... ........................ 8,500 8,500 8,500 8,500 $8,500 

2017 ......................................................... ........................ ........................ 8,500 8,500 8,500 8,500 

2018 ......................................................... ........................ ........................ ........................ 8,500 8,500 8,500 

2019 ......................................................... ........................ ........................ ........................ ........................ 8,500 8,500 

2020 ......................................................... ........................ ........................ ........................ ........................ ........................ 8,500 

2021 ......................................................... ........................ ........................ ........................ ........................ ........................ ........................

Total .................................................. 42,500 42,500 42,500 42,500 42,500 42,500 

Medicaid EPs are not required to 

participate on a consecutive annual 

basis. The tables in this section 

demonstrate how a Medicaid EP would 

maximize the aggregate incentive under 

different scenarios, considering that a 

Medicaid EP may initiate participation 

in 2011 through 2016. Additionally, 

these tables do not include the 

alternative Medicaid maximum 

incentive payment for pediatricians 

discussed in the previous section, 

which is two-thirds of the total amount 

listed in Tables 27 through 30. Finally, 

these tables do not represent EPs whose 

incentive payments may be reduced 

because net average allowable costs may 

actually be lower than $25,000 in the 

first year, or $10,000 in subsequent 

years, due to payments from other, nonState/local sources. 

b. Payment Methodology for Eligible 

Hospitals 

Statutory parameters placed on 

Medicaid incentive payments to 

hospitals are largely based on the 

methodology applied to Medicare 

incentive payments. The specifications 

described in this section are limits to 

which States must adhere when 

developing aggregate EHR hospital 

incentive amounts for Medicaid-eligible 

hospitals. States will calculate hospitals’ 

aggregate EHR hospital incentive 

amounts on the FFY to align with 

hospitals participating in the Medicare 

EHR incentive program. 

States may pay children’s hospitals 

and acute care hospitals up to 100 

percent of an aggregate EHR hospital 

incentive amount provided over a 

minimum of a 3-year period and a 

maximum of a 6-year period. The 

maximum incentive amounts for these 

providers are statutorily defined by a 

formula at section 1903(t)(5)(B) of the 

Act. The statute requires that Medicaid 

refer, with some adjustments, to the 

calculation for the Medicare hospital 

incentive payment described at sections 

1886(n)(2)(A), 1886(n)(2)(C), and 

1886(n)(2)(D) of the Act, to determine 

the aggregate EHR amount allowable for 

individual hospitals. The aggregate EHR 

hospital incentive amount is calculated 

using an overall EHR amount multiplied 

by the Medicaid share. The aggregate 

EHR hospital incentive amount is the 

total amount the hospital could receive 

in Medicaid payments over 4 years of 

the program. 

States are responsible for using 

auditable data sources to calculate 

Medicaid EPs’ aggregate EHR hospital 

incentive amounts, as well as 

determining Medicaid incentive 

payments to those providers. Auditable 

data sources include— 

• Providers’ Medicare cost reports; 

• State-specific Medicaid cost reports; 

• Payment and utilization 

information from the State’s MMIS (or 

other automated claims processing 

systems or information retrieval 

systems); and 

• Hospital financial statements and 

hospital accounting records. 

All State Medicaid EHR incentive 

program calculations, payments, and 

limits under this section are subject to 

our review. 

For purposes of the Medicaid EHR 

incentive program, the overall EHR 

amount is equal to the sum over 4 years 

of (I)(a) the base amount (defined by 

statute as $2,000,000); plus (b) the 

discharge related amount defined as 

$200 for the 1,150th through the 

23,000th discharge for the first payment 

year (for subsequent payments years, 

States must assume discharges increase 

by the provider’s average annual rate of 

growth for the most recent 3 years for 

which data are available per year): 

multiplied by (II) the transition factor 

for each year equals 1 in year 1, 3⁄4 in 

year 2, 1⁄2 in year 3, and 1⁄4 in year 4. 

The statute specifies that the payment 

year is determined based on a Federal 

fiscal year. Section 1886(n)(2)(C) of the 

Act provides the Secretary with 

authority to determine the discharge 

related amount on the basis of discharge 

data from a relevant hospital cost 

reporting period, for use in determining 

the incentive payment during a Federal 

fiscal year. Federal fiscal years begin on 

October 1 of each calendar year, and 

end on September 30 of the subsequent 

calendar year. Hospital cost reporting 

periods can begin with any month of a 

calendar year, and end on the last day 

of the 12th subsequent month in the 

next calendar year. For purposes of 

administrative simplicity and 

timeliness, we propose that States, for 

each eligible hospital during each 

incentive payment year, use data on the 

hospital discharges from the hospital 

fiscal year that ends during the Federal 

fiscal year prior to the fiscal year that 

serves as the payment year. 

Example: FY 2011 begins on October 1, 

2010 and ends on September 30, 2011. For 

an eligible hospital with a cost reporting 

period running from July 1, 2010 through 

June 30, 2011, we would employ the relevant 

data from the hospital’s cost reporting period 

ending June 30, 2010 in order to determine 

the incentive payment for the hospital during 

Federal fiscal year 2011. This timeline would 

allow States to have the relevant data 

available for determining the aggregate EHR 

hospital incentive amount in a timely 

manner for the first and subsequent payment 

years. 

The discharge-related amount is $200 per 

discharge for discharges 1,150 through 

23,000. To determine the discharge-related 

amount for the 3 subsequent payment years 

that are included in determining the overall 

EHR amount, States should assume 

discharges for an individual hospital have 

increased by the average annual growth rate 

for an individual hospital over the most 


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recent 3 years of available data from an 

auditable data source. Note that if a hospital’s 

average annual rate of growth is negative over 

the 3 year period, it should be applied as 

such. 

We have provided a sample calculation for 

review that assumes the following: 

• An individual provider had 20,000 

discharges in the first FY (2011). 

• The most recent annual growth data 

available are as follows: 

++ FY 2005 (.028 annual growth rate) 

++ FY 2006 (.013 annual growth rate) 

++ FY 2007 (.027 annual growth rate) 

The average annual growth rate over 3 

years = (.028 × .013 × .027)/3 = .0227. 

Year 1 

2011 discharge related amount equals: 

(20,000 ¥ 1149) × $200 = $3,770,200 

Year 2 

2012 discharge related amount equals: 

20,000 × 1.0227 = 20,454 

(20,454 ¥ 1149) × $200 = $3,861,000 

Year 3 

2013 discharge related amount equals: 

20,454 × 1.0227 = 20,918 

(20,918 ¥ 1149) × $200 = $3,953,800 

Year 4 

2014 discharge related amount equals: 

20,918 × 1.0227 = 21,393 

(21,393 ¥ 1149) × $200 = $4,048,800 

The overall hospital EHR amount requires 

that a transition factor be applied to each 

year. This transition factor equals 1 for year 

1, 3⁄4 for year 2, 1⁄2 for year 3, and 1⁄4 for year 

4, as provided for in sections 1886(n)(2)(A) 

and 1886(n)(2)(E) of the Act, and as 

incorporated through section 1902(t)(5)(B) of 

the Act. We note that although, for purposes 

of the Medicare incentives, section 

1886(n)(2)(E)(ii) of the Act requires a 

transition factor of 0, if the first payment year 

is after 2013, we do not believe this rule 

would apply in the context of the Medicaid 

incentive payments. Nothing in section 

1903(t) of the Act specifically cross 

references this 0 transition factor, and, 

notably, section 1903(t) of the Act allows 

Medicaid incentive payments to begin as late 

as 2016. 

The ‘‘Medicaid Share,’’ against which 

the overall EHR amount is multiplied, is 

essentially the percentage of a hospital’s 

inpatient, non-charity care days that are 

attributable to Medicaid inpatients. 

More specifically, the Medicaid share is 

a fraction expressed as— 

• Estimated Medicaid inpatient-beddays plus estimated Medicaid managed 

care inpatient-bed-days; 

• Divided by; 

• Estimated total inpatient-bed days 

multiplied by ((estimated total charges 

minus charity care charges) divided by 

estimated total charges). 

As indicated in the above formula, the 

Medicaid share includes both Medicaid 

inpatient-bed-days and Medicaid 

managed care inpatient-bed-days. This 

is in keeping with section 1903(t)(5)(C) 

of the Act, which provides that in 

computing inpatient-bed-days, the 

Secretary shall take into account 

inpatient-bed-days that are paid for 

individuals enrolled in a Medicaid 

managed care plan under sections 

1903(m) or 1932 of the Act. We interpret 

these managed care individuals to be 

individuals enrolled in a managed care 

organization (MCO), prepaid inpatient 

health plan (PIHP), or prepaid 

ambulatory health plan (PAHP) under 

42 CFR part 438. 

Some Medicaid managed care entities 

(that is, MCOs, PIHPs, and PAHPs with 

risk contracts) provide substitute 

services (or, ‘‘in-lieu-of services’’) in 

more cost effective or efficient settings 

than the State plan services in the 

managed care contract. For example, in 

a hospital inpatient setting, these 

services could be in a different unit, 

such as a subacute wing or skilled 

nursing wing, so long as States and 

contracting entities are in compliance 

with the actuarial soundness rules at 42 

CFR 438.6(c), provision of substitute 

services is allowed. Although we 

understand that these substitute service 

days may be used to achieve efficiency 

and cost effectiveness, we do not believe 

such substitute service days should 

count as ‘‘inpatient-bed-days’’ in the 

hospital EHR incentive payment 

calculation. The statute requires us to 

calculate the Medicaid share ‘‘in the 

same manner’’ as the Medicare share 

under section 1886(n)(2)(D) of the Act 

and such substitute service days would 

not be considered ‘‘in the same manner.’’ 

Thus, we propose that for purposes of 

the Medicaid formula, we would count 

only those days that would count as 

inpatient-bed-days for Medicare 

purposes under section 1886(n)(2)(D) of 

the Act. 

In addition, because the formula for 

calculating the Medicaid share requires 

a determination of charity care charges, 

States should use the revised Medicare 

2552–10, Worksheet S–10 or another 

auditable data source to determine the 

charity care portion of the formula. In 

the absence of sufficient charity care 

data to complete the calculation, section 

1886(n)(2)(D) of the Act, requires the 

use of uncompensated care data to 

derive an appropriate estimate of charity 

care, including a downward adjustment 

for bad debts. We interpreted bad debt 

to be consistent with the Medicare 

definition of bad debt as promulgated at 

42 CFR 413.89(b)(1). 

Finally, per section 1886(n)(2)(D) of 

the Act, to the extent there is simply not 

sufficient data that would allow the 

State to estimate the inpatient bed-days 

attributable to Medicaid managed care 

patients, the statute directs that such 

figure is deemed to equal 0. Likewise, if 

there is simply not sufficient data for 

the State to estimate the percentage of 

inpatient bed days that are not charity 

care (that is, [estimated total charges— 

charity care charges]/estimated total 

charges), the statute directs that such 

figure is deemed to equal 1. 

The aggregate EHR incentive 

calculation for Medicaid eligible 

hospitals is represented mathematically 

as follows: 

(Overall EHR Amount) * (Medicaid 

Share) or 

{Sum over 4 year of [(Base Amount + 

Discharge Related Amount 

Applicable for Each Year) * 

Transition Factor Applicable for 

Each Year]} * 

{(Medicaid inpatient-bed-days + 

Medicaid managed care inpatientbed-days)/[(total inpatient-bed 

days) * (estimated total 

charges¥charity care charges)/ 

(estimated total charges)]} 

To achieve the aggregate EHR hospital 

incentive amount at 1903(t)(5)(a), the 

calculation must be aggregated over 4 

years. For further clarification, we have 

provided a sample calculation of the 

aggregate EHR hospital amount. 

Assume the following as constant 

over 4 years except where noted: 

• 20,000 discharges (Note: This 

calculation assumes the same averaging 

data calculated in the average annual 

growth example above.) 

• 34,000 inpatient Medicaid bed-days 

(including fee-for-service and managed 

care days) 

• 100,000 total inpatient bed-days 

• $1,000,000,000 in total charges 

• $200,000,000 in charity care 

• Overall EHR amount = Sum (Year 1, 

Year 2, Year 3, Year 4) = $14,655,050 

Year 1: {$2,000,000 + ((20,000 ¥ 1,149) 

× 200)} × 1 × 1 = $5,770,200 

Year 2: {$2,000,000 + ((20,454 ¥ 1,149) 

× 200)} × 1 × .75 = $4,395,750 

Year 3: {$2,000,000 + ((20,918 ¥ 1,149) 

× 200)} × 1 × .50 = $2,976,900 

Year 4: {$2,000,000 + ((21,393 ¥ 1,149) 

× 200)} × 1 × .25 = $1,512,200 

Medicaid Share: 34,000/(100,000 × 

(($1,000,000,000—$200,000,000)/ 

1,000,000,000) = 0.425 

Overall EHR Amount × Medicaid Share 

= Medicaid aggregate EHR incentive 

amount $14,655,050 × 0.425 = 

$6,228,396 

Unlike Medicaid EPs, who must 

waive rights to duplicative Medicare 

incentive payments, hospitals may 

receive incentive payments from both 

Medicare and Medicaid, contingent on 

successful demonstration of meaningful 

use and other requirements under both 

programs. 


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The last year that a hospital may 

begin receiving Medicaid incentive 

payments is FY 2016. States must make 

payments over a minimum of 3 years 

and a maximum of 6 years. 

Additionally, in any given payment 

year, no annual Medicaid incentive 

payment to a hospital may exceed 50 

percent of the hospital’s aggregate 

incentive payment. Likewise, over a 2- 

year period, no Medicaid payment to a 

hospital may exceed 90 percent of the 

aggregate incentive. 

Table 31 demonstrates several 

scenarios for Medicaid hospitals. 

However, there are other scenarios not 

included here. For example, this table 

assumes that a hospital would 

participate on a consecutive annual 

basis until the incentive is exhausted. 

The purpose of Table 31 is to illustrate 

the general timeline for Medicaid 

hospital incentives. 

c. Alternative and Optional Early State 

Implementation to Make Incentive 

Payments for Adopting, Implementing, 

or Upgrading Certified EHR Technology 

Unlike Medicare, Medicaid has no 

statutory implementation date for 

making EHR incentive payments. We 

believe that some States may be 

prepared to implement their program 

and make EHR incentive payments to 

Medicaid providers in 2010 for 

adopting, implementing, or upgrading 

certified EHR technology. We propose to 

allow States to initiate implementation 

of these payments to Medicaid EPs and 

hospitals after promulgation of the final 

rule if they successfully demonstrate to 

CMS that they are ready to make timely 

and accurate payments through the 

SMHP. States should include an 

additional attestation for providers 

assuring that they are not accepting 

payment in any other State. 

In order for us to approve a State for 

early implementation, we are proposing 

that a State would have an electronic 

system for provider registration capable 

of collecting the relevant information 

identified in section II.A.5.c of this 

proposed rule, where we describe the 

data collection requirements. This 

includes the following: 

• Name, National Provider Identifier 

(NPI), business address and business 

phone of each EP or eligible hospital; 

• Taxpayer Identification Number to 

which the EP or eligible hospital wants 

the incentive payment made; 

• For eligible hospitals, their CMS 

Certification Number (CCN); 

• The remittance date and amount of 

any incentive payments made to an EP 

or eligible hospital. 

Participating States would be 

responsible for transmitting this data to 

CMS so that CMS can ensure that no 

duplicate payments will be made to 

providers. We would use the single 

provider election repository described 

in section II.A.5.c. of this proposed rule 

to assure no duplicative payments were 

made between States. 

We are not proposing that States 

would be able to make early payments 

to meaningful users. This opportunity is 

intended to offer Medicaid providers an 

early opportunity for capital so that they 

are more likely to have the certified EHR 


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technology required to demonstrate 

meaningful use in successive periods. 

Since hospitals may qualify under both 

programs, we hope that they will use 

the capital and qualify as a meaningful 

user under the Medicare program in the 

first year. We are requesting comments 

on this proposed approach. 

d. Process for Making and Receiving 

Medicaid Incentive Payments 

The process for making payments 

involves coordination between 

Medicare and State Medicaid agencies 

to avoid duplication of payments, 

prevent fraud and abuse, and create 

program efficiencies to encourage 

adoption. While we have responsibility 

regarding payments to Medicare EPs 

and hospitals, State Medicaid agencies 

(or their contractors) are fully 

responsible for administering and 

disbursing the incentive payments to 

Medicaid providers. 

We will require that EPs make a 

selection between receiving incentive 

payments through either the Medicare 

or Medicaid EHR incentive programs. 

Medicaid EPs who practice in multiple 

states will be required to choose only 

one state from which to receive 

Medicaid incentive payments. The 

issues related to these decisions are 

discussed here, as well as in section II.A 

of this proposed rule. 

In this section, we describe the steps 

Medicaid EPs will take to receive an 

incentive payment. Due to the interdependencies of multiple issues, we 

refer the reader to other sections of this 

proposed rule. Specifically, section II.A 

of this proposed rule solicits comments 

for a proposed reporting period in the 

first payment year of any continuous 90- 

day period that starts and ends within 

the calendar year. In addition, such 90- 

day period would apply in both the first 

and second payments years (that is, 

2010 and 2011) for States approved for 

early implementation in 2010. Section 

II.A. also solicits comments on full 

annual reporting periods for all payment 

years other than the first payment year 

(except in the case of States approved 

for 2010 implementation, for which the 

full annual reporting period would 

begin in the third year). We also discuss 

the proposed single provider election 

repository and other issues impacting 

both programs. 

It is important to note that there is a 

very clear intent in the statute that there 

is coordination between the EHR 

incentive programs to reduce or 

eliminate duplicate payments between 

Medicare and Medicaid. Additionally, 

Medicare requirements under section 

1848(o)(1)(B) of the Act require that 

payments begin no earlier than 2011. 

While the Medicaid provisions have no 

statutory start date, before States may 

begin implementing the Medicaid EHR 

incentives, CMS, and ONC need to 

provide guidance to States in the form 

of rulemaking and other policy 

guidance. To that end, Medicaid will 

not begin to provide 100 percent FFP for 

incentive payments any earlier than FY 

2011 for hospitals and CY 2011 for EPs, 

(except in the case of incentive 

payments for adopting, implementing, 

or upgrading, which could begin in 

2010. See discussion in section 

II.D.4.b.(5).(c). of this proposed rule. 

This also gives CMS, ONC, and States 

an opportunity to coordinate between 

Medicare and Medicaid, which we hope 

will simplify administrative complexity 

in the EHR incentive program and 

facilitate provider adoption. 

We believe that by aligning the EHR 

incentive programs where possible, 

Medicaid EHR incentive program 

administration could be more efficient 

for the States, and provider 

communication about the program 

could be less ambiguous. This will be of 

particular benefit to the providers who 

serve both Medicare and Medicaid 

program beneficiaries, and will be 

eligible for participation in both 

incentive programs. Also, we believe 

that the incidence of fraud and abuse 

could be curtailed, and the potential for 

duplication of payments could be 

decreased. 

Under this proposed rule we are 

proposing that Medicaid EPs, as 

discussed in section II.D.5 and II.A.5.c 

of this proposed rule, will enroll in the 

program through the single provider 

election repository. Once an EP selects 

the Medicaid EHR incentive program, 

we propose that States must have a 

system for reporting and tracking 

necessary information to qualify an EP 

for an incentive payment. In addition, as 

detailed in § 495.316 States will be 

required to submit data to CMS 

including data for the number, type and 

practice location(s) of providers who 

qualified for an incentive payment on 

the basis of having adopted, 

implemented, or upgraded certified EHR 

technology or who qualified for an 

incentive payment on the basis of 

having meaningfully used such 

technology as well as aggregate deidentified data on meaningful use. 

States’ systems and processes will be 

submitted by the States to CMS for prior 

approval, concurrent with the 

requirements described in section II.D.8 

of this proposed rule for review and 

approval of the SMHP. 

The specific timeframes for EPs and 

eligible hospitals to report and submit 

the required information in order to 

demonstrate they have adopted, 

implemented, or upgraded certified EHR 

technology, as well as meaningful use of 

such EHR technology are proposed for 

comment at section II.A.1.e of this 

preamble. As discussed in that section 

of this proposed rule, for the first 

payment year (as well as the second 

payment year for those hospitals that are 

able to begin receiving payments for FY 

2010), the reporting periods for eligible 

hospitals will be on a continuous 90-day 

basis, in the sense that as long as the 

start and end dates occur within the 

payment year and as long as the period 

spans the proposed 90-day consecutive 

period, the period can begin at any time 

during the payment year. States will 

then be expected to process payments, 

also on a rolling basis. In the subsequent 

payment years, the reporting period will 

be a full annual period (that is, a full 

payment period). 

e. Avoiding Duplicate Payment 

At section 1903(t)(7) of the Act, the 

statute requires that the Medicare and 

Medicaid programs coordinate 

payments to avoid duplication. This 

section further specifies that CMS and 

the States should coordinate payments 

through a data matching process, 

utilizing NPIs to the extent practicable. 

Additionally, section 1903(t)(2) of the 

Act states that Medicaid EPs must waive 

rights to Medicare incentive payments 

under sections 1848(o) and 1853(l) of 

the Act. As previously noted, hospitals 

may qualify for incentives under both 

programs. We also propose 

requirements under the review and 

approval of SMHPs in proposed part 

495 subpart D for States to verify that 

providers meet these requirements. 

As discussed in section II.A of this 

proposed rule, we considered what 

information will be necessary to 

eliminate duplicative incentive 

payments to providers between the 

Medicare and Medicaid programs. In 

order to ensure against duplicate 

incentive payments, we believe three 

conditions are required: (1) Knowing 

which EHR incentive program a 

provider has selected, (2) uniquely 

identifying each provider participating 

in each incentive program; and (3) 

ensuring that each State has access to 

the information on which EPs or 

hospitals intend to receive incentive 

payments from another State, or from 

the Medicare program. 

To achieve all three of these 

conditions, as discussed in section 

II.A.5.c of this proposed rule, we 

propose to collect this data in a single 

provider election repository. Next, in 

administering each State Medicaid EHR 

incentive program, we propose that 


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States would cross-check for potential 

duplicative payments through the data 

available to them through the single 

provider election repository, which is 

based on the NPIs. We believe that this 

coordinates with our proposed 

requirements that a State must have an 

approved SMHP which will include a 

mechanism for cross-checking this 

information prior to payment. 

f. Flexibility To Alternate Between 

Medicare and Medicaid EHR Incentive 

Programs One Time 

We refer readers to section II.A.5.b of 

this proposed rule, where we discuss 

our proposal to allow Medicare and 

Medicaid EPs to make one EHR 

incentive program election change prior 

to 2015, and not to permit any switching 

after the year 2014. Under such a 

proposal, even if an EP initially received 

incentive payments under the Medicare 

program, such an EP could still switch 

to the Medicaid program one time prior 

to 2015. Similarly, an EP who initially 

selected the Medicaid EHR incentive 

program could switch to the Medicare 

program one time prior to 2015. 

g. One State Selection 

We propose that for EPs and hospitals 

with multi-state Medicaid practice 

locations, that the provider may 

annually pick only one State from 

which to receive incentive payments. In 

other words, a provider would not be 

able to receive incentive payments from 

more than one State in the same year. 

For example, a provider may be licensed 

to practice in Illinois as well as in Iowa, 

particularly in the area known as the 

Quad Cities because of the multiple 

cities in proximity to the Illinois and 

Iowa borders. There are numerous 

situations like this throughout the 

country for States sharing borders. 

Medicaid EPs and hospitals may change 

the State that they select annually when 

they re-attest to the program 

requirements. 

Since qualifying for the Medicaid 

incentive payments is not a claims 

accrual process, as it is in Medicare, 

allowing providers to include multiple 

practice sites across State boundaries 

would create enormous administrative 

complexity for both CMS and State 

Medicaid agencies. For example, States 

would have to collect and verify 

Medicaid patient volume across more 

than one State, then divide and 

administer payments based on a 

methodology suitable between the State 

Medicaid agencies and the providers. 

Given that the providers qualifying for 

the Medicaid incentive program will 

receive the same incentive payment 

dollar amount regardless of whether 

payments are made by one, or more than 

one, State, we believe it would not be 

worth the resulting administrative 

complexity to allow payments from 

multiple States. 

We considered the possible impact of 

this proposed approach with respect to 

patient volume calculations on 

Medicaid EPs and hospitals in border 

State areas. While we addressed the 

administrative complexity of this issue 

here, we recommend that States 

consider these border State providers 

when developing their policies and 

attestation methodology. We afforded 

additional flexibility in the patient 

volume at proposed § 495.306 to 

account for unique circumstances and 

data collection. 

5. Single Provider Election Repository 

and State Data Collection 

We refer readers to section II.A.5.c of 

this proposed rule for a discussion of 

the single provider election repository. 

As discussed in that section, the 

repository will collect a minimum 

amount of information on all EPs and 

hospitals to prevent duplicative 

payments and coordinate technical 

assistance. 

6. Collection of Information Related to 

the Eligible Professional’s National 

Provider Identifier and the Tax 

Identification Number 

Similar to the policy proposed where 

Medicaid EPs and hospitals must select 

one State, for those EPs in multiple 

group practices or multiple types of 

practice locations, we propose to require 

such professionals to select one TIN for 

Medicaid EHR payment disbursement. 

In other words, such EPs could not 

require a State to divide payments 

among different practices or practice 

locations based upon group TINs. 

Requiring EPs to use only one TIN 

would reduce administrative 

complexity, as it would ensure that 

States are not put in the position of 

dividing payments in any way an EP 

requests (such as by patient encounters 

or amount contributed to EHR 

technology). We also believe that 

requiring reimbursement to be made to 

one TIN would reduce opportunities for 

fraud or abuse, as States will be able to 

cross-check EP and TIN combinations 

more easily to verify EP attestations. 

Although the State would not divide 

payments among the various TINs of an 

individual EP, Medicaid EPs could 

decide to divide payment themselves, 

and distribute funds among their 

respective group practices or practice 

locations after the initial disbursement 

from the State to their designated TIN. 

7. Activities Required To Receive 

Incentive Payments 

• a. General Overview. 

As previously discussed, for Medicaid 

providers (including both EPs and 

eligible hospitals) to qualify to receive a 

first year Medicaid incentive payment, 

section 1903(t)(6)(C)(i) of the Act 

indicates that the provider must 

demonstrate that they are ‘‘engaged in 

efforts to adopt, implement, or upgrade 

certified EHR technology.’’ For providers 

who meet this standard in their first 

year of participation in the Medicaid 

incentive program, in subsequent years 

of participation, they must then 

demonstrate ‘‘meaningful use of certified 

EHR technology through a means that is 

approved by the State and acceptable to 

the Secretary,’’ and that may be based 

upon the methods employed under the 

Medicare incentive payments to 

physicians and hospitals, per sections 

1848(o) or 1886(n) of the Act. 

• b. Definitions Related to Certified 

EHR Technology and Adopting, 

Implementing or Upgrading Such 

Technology. 

(1) Certified EHR Technology 

As noted previously, in order to 

receive a Medicaid incentive payment 

the EHR technology must be ‘‘certified.’’ 

Section 1903(t)(3) of the Act defines 

‘‘certified EHR technology’’ as a 

qualified electronic health record (as 

defined in section 3000(13) of the PHS 

Act) that is certified pursuant to section 

3001(c)(5) of the PHS Act as meeting 

standards adopted under section 3004 of 

the PHS Act that are applicable to the 

type of record involved (as determined 

by the Secretary), such as an ambulatory 

electronic health record for office-based 

physicians or an inpatient hospital 

electronic health record for hospitals). 

In section I.A of this proposed rule, for 

both Medicare and Medicaid, we 

discussed incorporating ONC’s 

definition of certified EHR technology. 

(2) Adopting, Implementing or 

Upgrading 

Unlike the Medicare incentive 

programs, the Medicaid program allows 

eligible providers to receive an 

incentive payment even before they 

have begun to meaningfully use 

certified EHR technology. These 

providers may receive a first year of 

payment if they are engaged in efforts to 

‘‘adopt, implement, or upgrade’’ to 

certified EHR technology. In proposed 

§ 495.302, we define adopting, 

implementing or upgrading certified 

EHR technology as the process by which 

providers have installed and 

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technology capable of meeting 

meaningful use requirements; or 

expanded the available functionality 

and commenced utilization of certified 

EHR technology capable of meeting 

meaningful use requirements at the 

practice site, including staffing, 

maintenance, and training. 

For the purposes of demonstrating 

that providers adopted, implemented, or 

upgraded certified EHR technology, 

Medicaid EPs and hospitals would have 

to attest to having adopted, (that is, 

acquired and installed) or commenced 

utilization of (that is, implemented) 

certified EHR technology; or expanded 

(that is, upgraded) the available 

functionality of certified EHR 

technology and commenced utilization 

at their practice site. States would be 

responsible for ensuring that processes 

are in place to verify that providers have 

actually adopted, implemented or 

upgraded certified EHR technology, 

patient volume, as well as other 

requirements in this section, including 

verifying that attestations are consistent 

with methodologies to combat fraud and 

abuse (see proposed § 495.366 through 

370, Financial Oversight, Program 

Integrity, and Provider Appeals). The 

State’s SMHP must detail these 

processes. 

The CMS Medicaid Transformation 

Grants have demonstrated the many 

challenges that exist to adopting EHR 

technology. EHR system availability is 

not the same as EHR system utilization. 

It is for that reason that we propose to 

include staff training and efforts to 

redesign provider workflow under the 

definition of implementing certified 

EHR technology. Success is not simply 

defined by the acquisition and 

installation of new or upgraded certified 

EHR technology, but more importantly 

by providers demonstrating progress 

towards the integration of EHRs into 

their routine health care practices to 

improve patient safety, care, and 

outcomes. 

In establishing criteria for the 

‘‘adoption’’ portion of the ‘‘adopt, 

implement, or upgrade’’ requirement, we 

propose that there be evidence that a 

provider demonstrate actual installation 

prior to the incentive, rather than 

‘‘efforts’’ to install. This evidence will 

serve to differentiate between activities 

that may not result in installation (for 

example, researching EHRs or 

interviewing EHR vendors) and actual 

purchase/acquisition or installation. It is 

the States’ responsibility to verify this 

evidence of EHR adoption. As these 

Medicaid incentive payments are 

intended to stimulate meaningful use of 

EHR technology, they need to result in 

tangible adoption, implementation, or 

upgrading of certified EHR technology. 

In establishing criteria for the 

‘‘implementation’’ portion of ‘‘adopt, 

implement or upgrade’’ requirement, we 

are proposing that ‘‘implementation’’ 

mean that the provider has installed 

certified EHR technology and has 

started using the certified EHR 

technology in his or her clinical 

practice. Implementation activities 

would include staff training in the 

certified EHR technology, the data entry 

of their patients’ demographic and 

administrative data into the EHR, or 

establishing data exchange agreements 

and relationships between the 

provider’s certified EHR technology and 

other providers, such as laboratories, 

pharmacies, or HIEs. 

In establishing the criteria for the 

‘‘upgrade’’ portion of ‘‘adopt, implement 

or upgrade’’ requirement, we propose 

‘‘upgrade’’ to mean the expansion of the 

functionality of the certified EHR 

technology, such as the addition of 

clinical decision support, e-prescribing 

functionality, CPOE or other 

enhancements that facilitate the 

meaningful use of certified EHR 

technology. States must describe the 

process that would be in place in the 

SMHP for ensuring that providers have 

actually adopted, upgraded or 

implemented certified EHR technology. 

We encourage States to consider the 

submission of a vendor contract from 

providers to ensure the existence of EHR 

technology. 

In listening sessions with State 

Medicaid Agencies’ staff and Governors’ 

offices staffs, States suggested verifying 

providers’ adoption, implementation, or 

upgrading of certified EHR technology 

through system enhancements that track 

and audit providers’ written or 

electronic attestations, through surveys, 

or through new claims codes that would 

serve as attestations. Additional 

suggestions from State staff included 

using EHR vendor audit logs for 

Medicaid EPs rendering service through 

the FQHCs and tracking EHR reporting 

of the Health Resources and Services 

Administration (HRSA)-mandated 

quality indicators. More information on 

feedback received as a result of these 

listening sessions can be found in 

section II.A. of this proposed rule. These 

suggestions may be relevant to the 

discussion below concerning the States 

process for developing a SMHP, 

verifying attestations and ensuring that 

providers are eligible to participate in 

the incentive payments program. 

c. Other General Terminology 

‘‘EHR reporting period’’ and ‘‘payment 

period’’ relate to the requirements for 

Medicaid EPs participating in the 

Medicaid EHR incentive program. As 

discussed previously, the reporting 

period is significant for EPs and eligible 

hospitals because it will define the 

period during which the provider must 

establish efforts to adopt, implement, or 

upgrade certified EHR technology, or 

demonstrate meaningful use of, such 

technology. The reporting period also is 

significant for States, because States will 

refer to such reporting periods in 

assuring us that providers are eligible to 

participate in the Medicaid EHR 

incentive program. (Requirements 

relating to the components that must be 

included in the SMHP are specified in 

proposed § 495.354). States will need to 

refer to the providers’ reports of the 

activities that establish their efforts to 

adopt, implement, or upgrade certified 

EHR technology. Similarly, once 

meaningful use of EHR technology is 

required to include the reporting of 

clinical quality measures, States will 

need to ensure such measures are 

reported in accordance with the 

appropriate period. States could not 

appropriately make incentive payments 

in the absence of such reporting. 

As discussed in section II.A of this 

proposed rule and elsewhere in this 

section, we propose that the EHR 

reporting period would occur on a 

rolling basis during the first payment 

year (and also in 2010 for States 

approved for early implementation). For 

subsequent payment years, the EHR 

reporting period will be on an annual 

basis (that is, for the entire payment 

year). 

States would be required to validate 

to us that the Medicaid EPs and 

hospitals meet all of the eligibility 

criteria to qualify for Medicaid incentive 

payments, including the applicable 

patient volume thresholds, hospitalbased requirements, and all of the 

requirements described in this section. 

States would develop their own 

administration, payment and audit 

processes, and as described in 

§ 495.332, we would require that States 

include in their SMHPs how they would 

obtain Medicaid EPs’ and hospitals’ 

attestations of eligibility to qualify for 

the Medicaid incentive payments. 

Permissible means for ensuring patient 

volume and all of the requirements 

described in this section include survey, 

attestation, or the creation of special 

codes on claims, subject to our prior 

approval. 

Additionally, we may require a more 

robust method for ensuring compliance 

with the requirements listed in this 

section beyond attestation as this 

program matures. Therefore, we are 

soliciting comments, including the 


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impact that an alternative method may 

have on providers and States if an 

alternative method that is not attestation 

is required. 

Section 1903(t)(6)(C)(ii) of the Act 

also indicates that in the case of an early 

adopter, that is, a Medicaid EP or 

eligible hospital that has already 

adopted certified EHR technology, such 

provider would receive payment in the 

first year and all subsequent years of the 

incentive program by demonstrating 

meaningful use. In other words, such a 

provider would not need to demonstrate 

that it has adopted, implemented, or 

upgraded certified EHR technology in 

year one of the program, if they can 

already demonstrate meaningful use of 

such technology. In the case of 

Medicaid EPs, we discuss our proposal 

approach to paying early adopters in 

section II.D.4.5. 

It is expected that the bar for 

demonstrating meaningful use of 

certified EHR technology will rise in 

years to come, as discussed in section 

II.A. States have offered their 

suggestions to us as to how they would 

verify providers’ meaningful use of 

certified EHR technology, including 

participation in the exchange of clinical 

and administrative data; National 

Committee for Quality Assurance 

(NCQA) certification as an advanced 

medical home (which includes an EHR 

requirement); e-prescribing, and 

conducting security and privacy audits. 

Many of these elements are discussed in 

the definition of ‘‘meaningful use’’ noted 

in section II.A.2. of this proposed rule. 

For purposes of participation in the 

Medicaid EHR incentive program, the 

specific definition of ‘‘meaningful use’’ 

in section II.A.2. of this proposed rule 

is what providers must demonstrate to 

the States, and what States must track 

and validate. States wishing to ask 

providers to demonstrate additional 

objectives to the definition of 

‘‘meaningful use’’ as noted in this 

proposed rule would need to request 

our prior approval of such a revised 

definition in their SMHP, as described 

in section II.D.8 of this proposed rule. 

We do not wish to see the bar for 

demonstration of meaningful use set so 

high, especially in the early years of this 

program that, it becomes a deterrent for 

broad provider participation. Examples 

of how States may consider adding to 

the Federal definition of meaningful use 

include requiring providers to 

participate in a health information 

exchange, and requiring that providers 

link to immunization, lead screening, or 

newborn screening registries. These 

mechanisms must be readily available to 

providers, and not represent a financial 

burden for participation. For example, 

States are discouraged from proposing 

additional meaningful use measures that 

would require providers to assume 

additional financial costs in order to 

qualify to participate in the Medicaid 

EHR incentive program. 

States should carefully consider how 

to build upon their existing EHR 

activities and infrastructure without 

deterring eligible Medicaid providers 

from participating by compelling them 

to use a particular system. We 

encourage States that were awarded 

Federal HIT/EHR grants, such as the 

Medicaid Transformation Grants, to 

work to connect the tools and 

infrastructure developed under their 

Federal grant funds with providers’ 

efforts to adopt, implement, and 

upgrade certified EHR technology and to 

become meaningful users of certified 

EHR technology. We would be 

evaluating States’ HIT Planning 

Advanced Planning Documents (PAPDs) 

and SMHP with this objective in mind, 

as described section II.D.8 of this 

proposed rule. 

The requirements to which States 

would hold eligible Medicaid providers 

accountable would vary based upon the 

number of years an eligible Medicaid 

provider participates in the program. In 

other words, regardless of the calendar 

year, a provider’s first year as a 

participant in the Medicaid EHR 

incentive program is when that provider 

must demonstrate either adoption, 

implementation, upgrading or 

meaningful use of certified EHR 

technology. States’ systems must be able 

to track providers’ year of entry into the 

Medicaid EHR incentive program to 

determine the correct eligibility criteria 

and generate the appropriate Medicaid 

incentive payments. 

In Table 32, we depict the 

requirements for eligible Medicaid 

professionals and hospitals that either 

adopt, implement, or upgrade certified 

EHR technology or that move directly to 

meaningful use of such technology. 

Additionally, we refer readers to Table 

1 since the table references the stages of 

meaningful use. Readers may find this 

information helpful when considering 

the information in Table 32. 


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As previously noted, States would be 

required to verify providers’ meaningful 

use of certified EHR technology. We also 

expect to test the reporting of additional 

clinical quality measures that may be 

used in future definitions of meaningful 

use. States may wish to participate in 

this testing and seek out eligible 

Medicaid providers to report on specific 

clinical quality measures, extractable 

from EHRs. States would be able to use 

this reporting to pilot-test requirements 

that could be included in future 

definitions of meaningful use. 

Once States are giving providers the 

Medicaid HIT incentive payments for 

being meaningful users of EHRs, and 

starting in 2012 are collecting those 

providers’ clinical quality measures 

data, States will be required to share any 

such reported data with CMS in an 

aggregated, de-identified manner, on an 

annual basis. The timetable and format 

for sharing the clinical quality 

measurement data would be provided to 

States in future policy guidance issued 

by CMS. States’ failure to submit these 

required reports to us could result in 

discontinued funding or disallowances. 

See the discussion below regarding the 

SMHP and the State reporting 

requirements. We would use the States’ 

reports, including data on meaningful 

use and clinical quality measures, in 

order for the Secretary to fulfill her 

responsibilities to Congress under 

section 1903(t)(10) of the Act. This 

provision requires that the Secretary 

report to Congress on the improvement 

of health outcomes, clinical quality, or 

efficiency as a result of implementing 

this program. For hospitals eligible for 

both Medicare and Medicaid EHR 

incentive programs, where hospitals are 

reporting meaningful use measures to 

CMS, we will make quality data on 

Medicaid eligible hospitals available to 

States. 

d. Quality Measures 

We refer readers to section II.A.3 of 

this proposed rule for a discussion of 

the clinical quality measure reporting 

required for demonstrating meaningful 

use of certified EHR technology. As 

discussed in that section we have 

proposed in II.A.3 of this proposed rule, 

additional clinical quality measures that 

could be used by Medicaid providers to 

meet the quality reporting aspect of 

meaningful use. These additional 

indicators address key Medicaid 

services, such as pediatrics, obstetrical/ 

gynecologic, mental health and 

substance abuse services. Medicaid 

providers could report on these clinical 

quality indicators in lieu of the quality 

indicators that are listed in Table 3. We 

recognize that quality measures 

associated with the Stage 1 definition of 

meaningful use contain certain gaps for 

Medicaid providers, including in the 

areas of oral health, long-term care, 

newborn screening, and other areas of 

pediatric care. As discussed previously, 

we intend to update our definition of 

meaningful use biannually, and we 

expect that our updated, Stage 2 

definition would include additional 

Medicaid clinical quality measures to be 

reported from EHRs. We intend to work 

with the quality measurement 

community to develop these Stage 2 


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quality measures (see section II.B.1.d. of 

this proposed rule). 

8. Overview of Conditions for States To 

Receive Federal Financial Participation 

(FFP) for Incentive Payments and 

Implementation Funding 

Section 1903(a)(3)(F) of the Act 

provides that States are eligible for 100 

percent FFP for direct payment 

expenditures to certain Medicaid EPs 

and eligible hospitals to encourage the 

adoption and use of certified EHR 

technology. States are also eligible for 

90 percent FFP for reasonable 

administrative expenses, contingent on 

State compliance with the following 

requirements: (1) Using the funds to 

administer Medicaid incentive 

payments for certified EHR technology, 

including tracking of meaningful use by 

Medicaid EPs and eligible hospitals; (2) 

conducting oversight of the Medicaid 

EHR incentive program, including 

routine tracking of meaningful use 

attestations and reporting mechanisms; 

and (3) pursuing initiatives to encourage 

the adoption of certified EHR 

technology for the promotion of health 

care quality and the exchange of health 

care information. 

This section of the proposed rule 

discusses the requirements for States to 

request FFP from CMS for the Medicaid 

EHR incentive program. Additionally, 

this section is closely connected to the 

requirements outlined in Financial 

Oversight, Program Integrity and 

Providers Appeals for purposes of 

oversight and accountability. 

In proposed § 495.302, we define 

terms used in the Medicaid subpart of 

the regulations governing State requests 

for FFP. Although some of these terms 

have been defined in other portions of 

our regulations, for ease of reference, 

and in order to define the terms in this 

specific context, we have separately 

included definitions in part 495. Other 

terms such as ‘‘HIT PAPD,’’ ‘‘IAPD,’’ 

‘‘SMHP’’ are new terms which would be 

used in approving State plans for FFP. 

• Acceptance Documents: The term 

‘‘acceptance document’’ refers to written 

evidence of satisfactory completion of 

an approved phase or work or contract 

related to information technology 

projects for which approved Federal 

funding is utilized. The term is 

commonly used in information 

technology projects and is defined in 

this proposed rule to ensure that we are 

able to receive information from the 

State necessary to evaluate and monitor 

the progress of HIT projects requested or 

approved under this proposed rule. 

• Acquisition: The term ‘‘acquisition’’ 

is defined in this proposed rule to 

indicate a State’s intent to acquire 

health information technology 

equipment or services for the purpose of 

implementation and administration of 

the provisions under this proposed rule 

from commercial sources or from State 

or local government resources. We 

define and utilize this term in the 

context of HIT planning and 

implementation activities that will 

enable States to implement existing 

Federal requirements for competitive 

procurement of equipment or services. 

• Service Oriented Architecture: The 

term ‘‘service oriented architecture’’ is 

defined in this proposed rule as a means 

of organizing and developing 

information technology capabilities as 

collaborating services that interact with 

each other based on open standards. We 

are defining this term in the context of 

HIT projects authorized under the 

HITECH Act to ensure that different 

systems and programming languages 

provide the basis for interoperability 

among and between applications that 

may reside on different platforms 

through a communication protocol to 

achieve health information exchange 

required under ARRA. 

• State Self-Assessment: The term 

‘‘State self assessment’’ uses a standard 

methodology and tools to document the 

way a State conducts business now and 

plans to conduct business in the future. 

• Medicaid information technology 

architecture (MITA) is both an initiative 

and a framework. It is a national 

framework to support improved systems 

development and health care 

management for the Medicaid 

enterprise. It is an initiative to establish 

national guidelines for technologies and 

processes that enable improved program 

administration for the Medicaid 

enterprise. The MITA initiative includes 

an architecture framework, models, 

processes, and planning guidelines for 

enabling State Medicaid enterprises to 

meet common objectives with the 

framework while supporting unique 

local needs. 

• Medicaid management information 

system (MMIS) means a mechanized 

claims processing and information 

retrieval system—referred to as 

Medicaid Management Information 

Systems (MMIS)—that meets specified 

requirements and that the Department 

has found (among other things) is 

compatible with the claims processing 

and information retrieval systems used 

in the administration of the Medicare 

program. The objectives of the MMIS are 

to include claims processing and 

retrieval of utilization and management 

information necessary for program 

administration and audit and must 

coordinate with other mechanized 

systems and subsystems that perform 

other functions, such as eligibility 

determination. 

We are defining the ‘‘Medicaid 

Management Information System’’ as it 

relates to the mechanized claims 

processing systems at 42 CFR 433, 

Subpart C, since this term has not 

previously been codified in regulations 

and we are requiring that in 

implementing this program under the 

authority of section 1903(t)(6)(D) of the 

Act, certified EHR technology must be 

compatible with the MMIS. 

Additionally, we expect States would 

align their Medicaid EHR initiatives 

with those envisioned under MITA, in 

order to fully support the meaningful 

use of EHR envisioned under this new 

program. As part of their SMHP, States 

will be required to map different IT 

solutions to their existing Medicaid 

enterprise business requirements using 

the MITA business areas and processes 

list when preparing a baseline State selfassessment. Using the MITA State selfassessment provides a baseline that will 

facilitate collaboration between the 

States and CMS, between the State and 

industry and among the States 

themselves. The MITA ‘‘State selfassessment’’ process uses a standard 

methodology and tools to document the 

way a State conducts business now, and 

plans to conduct business in the future. 

The purpose of the SMHP is to identify 

the ‘‘As Is’’ state and ‘‘To Be’’ (target) 

state of a State’s Medicaid business 

enterprise and to align business areas 

and processes in the user community. 

Once this alignment is complete, States 

may then add other Medicaid business 

processes by extending the MITA model 

during implementation to ultimately 

facilitate the EHR program. The State 

self-assessment would help to identify 

duplicative and overlapping business 

areas and processes and to identify gaps 

by adopting new business areas and 

processes needed to complete the EHR 

enterprise. Using an incremental 

approach and setting achievable goals 

for the near and mid term, would help 

the State assess its progress and identify 

targets of opportunity critical to 

achieving the long-term ‘‘To Be’’ vision 

for HIT by 2014. 

Further, the Medicaid enterprise is 

comprised of internal and external 

communities of common business areas 

that share an interest in seeing that the 

mission and goals of the Medicaid 

program and improved health outcomes 

are achieved. These communities 

include the EPs and hospitals that 

would be receiving incentive payments. 

MITA’s principles and tools fosters 

nationally integrated business and IT 

transformation. It does this by 

demonstrating that planned 


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enhancements support State and 

Medicaid strategic goals and how intrastate systems other than the MMIS have 

been considered in developing the 

solutions. By documenting the analysis 

of alternative solutions, particularly a 

review of solutions in other States or a 

description of data sharing components 

and the reasons to include them or 

exclude them at this time can then be 

considered in its solution. 

As such, the MITA process establishes 

the guidelines necessary for EHRs 

implemented as a result of the Medicaid 

EHR incentive program to be 

interoperable with State Medicaid 

systems, and we believe that as States 

and providers implement EHRs, it is 

essential to plan technology upgrades 

that would facilitate health information 

exchange with Medicaid providers 

receiving incentive funding. 

• State Medicaid Health Information 

Technology Plan (SMHP) means a 

document that describes the State’s 

current and future HIT activities in 

support of the Medicaid EHR incentive 

program. 

• Health Information Technology 

Planning Advance Planning Document 

(HIT PAPD) (and any necessary update 

documents) means a plan of action that 

requests FFP and approval to 

accomplish the planning necessary for a 

State agency to determine the need for 

and plan the acquisition of HIT 

equipment or services or both and to 

acquire information necessary to 

prepare a HIT implementation advanced 

planning document or request for 

proposal to implement the State 

Medicaid HIT Plan. 

• Health Information Technology 

Implementation Advance Planning 

Document (HIT IAPD) (and any 

necessary update documents) means a 

plan of action that requests FFP and 

approval to acquire and implement the 

proposed State Medicaid HIT Plan 

services or equipment or both. 

To qualify to receive FFP for 

administering the incentive program, 

States must develop a SMHP, an HIT 

PAPD, and an HIT IAPD. These 

documents would lay out the process 

States will use to implement and 

oversee the EHR incentive program, and 

would help States to construct an HIT 

roadmap to develop the systems 

necessary to support providers in their 

adoption and meaningful use of 

certified EHR technology. The 

development of a SMHP (see also 

§ 495.332) provides States with the 

opportunity to analyze and plan for how 

EHR technology, over time, can be used 

to enhance quality and health care 

outcomes and reduce overall health care 

costs. The uses of EHR technology can 

be integrated with existing State 

resources to achieve these goals. 

We provided guidance in a State 

Medicaid Director’s letter on September 

1, 2009, on this process and the State 

efforts necessary to receive the 90 

percent FFP. As previously noted, as 

States begin the process of developing 

their SMHPs, they also can begin to 

receive the 90 percent FFP funding 

immediately to be used to support their 

initial EHR planning activities. For 

example, initial planning regarding the 

design and development of the 

anticipated SMHP may be eligible for 

the 90 percent FFP as an expense 

related to the administration of the 

Medicaid incentive payments under 

section 1903(a)(3)(F) of the Act and, 

more broadly, for promoting health 

information exchange. Our review 

process would ensure that States are 

complying with requirements in the 

Act, and that they demonstrate to the 

‘‘satisfaction of the Secretary’’ that they 

are using the funds in the manner 

anticipated by the law; for example, 

because of our oversight responsibilities 

simply proposing activities does not 

ensure the 90 percent FFP. We would 

review and prior approve all elements of 

the State’s SMHP, and APD documents. 

States would be required to submit 

these advance planning documents in 

order for us to approve receipt of the 90 

percent Federal match. Specifically, 

prior approval would be required for the 

HIT PAPD (see also § 495.336). The 

deliverable resulting from the HIT PAPD 

would be the SMHP. The SMHP would 

be reviewed and approved before it is 

included in an Implementation APD 

(IAPD) (see also § 495.338). The IAPD 

also must be prior approved. Until 

approval is granted States cannot draw 

down funds. The APD process allows 

States to update their APD when they 

anticipate changes in scope, cost, 

schedule, etc. This allows States to add 

additional tasks to the contract which 

they may have not thought of at the time 

the HIT PAPD was written, as they 

worked through the original tasks on the 

original submission. Something as 

complex as this will most likely result 

in an ‘‘as needed’’ and ‘‘annual’’ update 

to the original scope of work. 

For purposes of the Medicaid EHR 

incentive program, we envision two 

high-level phases in the process of 

planning and implementing the 

incentive program, as well as the 

promoting the adoption of EHR. Phase 

I would include initial planning, 

including an assessment of the State 

EHR environmental landscape, and 

development of the SMHP. The vehicle 

for informing us of Phase I activities 

will be the HIT PAPD. Phase II will 

involve further development and full 

implementation of the SMHP. 

Consequently, we would be requiring 

the HIT IAPD as the vehicle for 

reporting of Phase II activities. We are 

also proposing to require a prior 

approval process, and anticipate that 

States would work closely with us in 

developing the HIT PAPD prior to 

initiating EHR planning activities and 

prior to submission of the initial HIT 

PAPD. State collaboration with us prior 

to initiating submission of these 

documents would assist States in 

understanding all of the requirements 

and would help us understand the 

State’s strategy and plans which would 

lead to a more effective implementation. 

In addition, such coordination would 

facilitate improved understanding of 

existing State EHR planning and 

implementation efforts in progress that 

should be combined with this effort 

(that is, health information exchange, 

EHR demonstration, and Medicaid 

Transformation Grants). 

Also, States would be required to 

obtain prior written approval of 

funding, planning documents, proposed 

budgets, project schedules, and certain 

implementation activities that a State 

may wish to pursue in support of the 

Medicaid EHR incentive program to 

encourage the adoption and use of 

certified EHR technology in line with 

the 90 percent FFP available to States. 

To minimize the burden on States, these 

prior approval conditions, and the prior 

approval process, would mirror that 

presently used in support of acquiring 

automated data processing equipment 

and services in conjunction with 

development and operation of State 

MMIS, or the State’s automated 

mechanized claims processing and 

information retrieval system approved 

by CMS. 

In considering the States’ strategies 

for adoption of EHR and health 

information exchange, current efforts 

such as the State MMIS or automated 

mechanized claims processing and 

information retrieval system, contain a 

great deal of claims data and other 

Medicaid programmatic information. 

The State MMIS can be of significant 

value in analyzing the State’s current 

position and moving the State forward 

to using certified EHR technology to 

promote health information exchange, 

enhance quality, and improve health 

care outcomes. Additionally, the MITA 

framework provides a conceptual model 

for building capacity in Medicaid EHR 

and health information exchange. 

We are also proposing that State 

Medicaid programs must comply with 

current procurement standards. 

Specifically, we are including language 


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in this proposed rule in accordance with 

the procurement requirements in 45 

CFR Part 95 Subpart F to incorporate 

much of the procurement standards 

previously contained in 42 CFR Part 74. 

Inclusion of these procurement 

requirements maintains the longstanding procurement standards and 

policies for State information 

technology contracts, as well as 

incorporate procurement standards 

under the authority of section 1902(a)(4) 

of the Act, specifically for the definition 

of sole source justification, requiring all 

procurement transactions to be 

conducted in a manner to provide, to 

the maximum extent practical, open and 

free competition and promote the 

administration of the Medicaid program 

in a cost effective manner. This 

proposed rule also addresses grantee 

responsibilities, codes of conduct, 

competition, procurement procedures, 

and access to records that are specific to 

the HIT requirements envisioned under 

the ARRA. Also, under the authority of 

section 1902(a)(4) of the Act, we are 

proposing contracting requirements, 

reporting requirements, systems of 

records access, software and ownership 

rights, and rules for charging equipment 

and cost allocation plans. All of these 

efforts would work to provide clarity for 

States when considering planning and 

implementation activities, and would 

also ensure that we are providing 

necessary direction for States in 

completing their HIT PAPD, HIT IAPD, 

and SMHP. We are proposing under the 

authority of 1902(a)(4) of the Act to 

establish requirements for termination 

of FFP in the case of States failing to 

provide access to information relating to 

any of the requirements of this subpart. 

Additionally, under section 1903(t)(10) 

of the Act, we are required to monitor 

and report on the progress of 

implementation of the EHR provisions. 

These proposed provisions would 

contribute to the overall effort in 

monitoring implementation efforts and 

provide relevant information to 

Congress and the public at large. 

Consistent with our oversight 

responsibilities, we are also proposing 

to provide a framework for attestations. 

Specifically, in section II.D.7 of this 

proposed rule, we discuss that we 

would require that providers attest to 

their efforts to adopt, implement or 

upgrade certified EHR technology, and 

attest to their meaningful use of such 

technology. In this section, we discuss 

our proposal that State Medicaid 

agencies would attest, as outlined in 

section 1903(t)(6)(A)(i) of the Act, that 

States would make Medicaid incentive 

payments to a Medicaid EP or eligible 

hospital directly (or to an employer or 

facility to which such Medicaid EP or 

eligible hospital has assigned their 

Medicaid incentive payments) without 

any deduction or rebate, and that States 

would attest that payments to an entity 

promoting the adoption of certified EHR 

technology, as designated by the State, 

would only be made if participation in 

such a payment arrangement is 

voluntary for the Medicaid EP involved, 

and if such entity does not retain more 

than 5 percent of such assigned 

Medicaid incentive payments for costs 

not related to such technology. States 

would be required to attest that the 

entire incentive payment has been 

forwarded to the eligible Medicaid 

provider, and that no eligible Medicaid 

provider is required to return any 

portion of the incentive payment to the 

State Medicaid agency. We expect States 

to consider utilizing all existing fiscal 

relationships as intermediaries for 

disbursing the incentives. Since many 

States never pay the provider directly, 

but rather pay a managed care plan, 

which then pays the provider, the State 

may have no existing relationship and 

decide to contract with the managed 

care plan to pass this incentive to the 

EP. States must establish a process to 

ensure that any existing fiscal 

relationships with providers to disburse 

the Medicaid incentive payments 

through Medicaid managed care plans 

does not result in payments that exceed 

105 percent of the capitation rate, in 

order to comply with the Medicaid 

managed care incentive payment rules 

at § 438.6(c)(5)(iii) and a methodology 

for verifying such information. 

Additionally, we are proposing that 

termination of funding approved under 

this proposed Part 495 subpart D or 

disallowance of FFP may result if the 

State fails to meet the requirements and 

undertakings of the approved PAPD, 

SMHP, and IAPD, or fails to provide 

access to the required information. 

Since section 4201 of the HITECH Act 

amends section 1903(a)(3) of the Act to 

provide for 90 percent FFP for costs 

associated with certain administrative 

activities performed by a State, we also 

are proposing to allow for claiming of 

such reasonable costs incurred on or 

after February 18, 2009, prior to 

publication of the final rule. 

Specifically, if a State can show that it 

has begun the initial planning stages of 

moving the State in the direction of 

meaningful use of certified EHR 

technology through such activities as 

training efforts, staff support, or 

contracting with a vendor, we may 

allow for retroactive FFP back to the 

date in which these efforts began, but 

not before February 18, 2009. 

9. Financial Oversight, Program 

Integrity and Provider Appeals 

Pursuant to section 1903(t)(9) of the 

Act, which requires States to conduct 

adequate oversight of the incentive 

program, and in order to ensure that 

ARRA funds are expended wisely and 

in a manner that impedes waste, fraud 

or abuse of Federal taxpayer money, at 

§ 495.366, we propose requirements for 

States’ financial oversight and 

monitoring of expenditures. 

Additionally, we are proposing at 

§ 495.368 to provide State requirements 

for combating fraud and abuse. 

Specifically, States would be 

responsible for estimating the 

expenditures for the Medicaid EHR 

incentive program on the State’s 

quarterly budget estimate reports. These 

reports are used as the basis for 

Medicaid quarterly grant awards that 

would be advanced to the State for the 

Medicaid EHR incentive program. The 

State submits this Form electronically to 

CMS via the Medicaid and State CHIP 

Budget and Expenditure System (MBES/ 

CBES). At the end of the quarter, the 

State would be responsible for 

submitting expenditures to us via the 

MBES Form CMS–64. The Form CMS– 

64 is the accounting statement that the 

State Agency, in accordance with 42 

CFR 430.30(c), submits each quarter 

under Title XIX of the Act. The form is 

used to reconcile the Medicaid funding 

advanced to the State for the quarter 

made on the basis of the CMS–37, with 

actual expenditures for the quarter. It 

accounts for any overpayments, 

underpayments, refunds received by the 

State Medicaid agency, and income 

earned on grant funds. States must 

assure that requests for reimbursement 

of FFP comply with all sections of this 

new part and that the amounts reported 

on the Form CMS–64 and its 

attachments represent actual 

expenditures for which all supporting 

documentation, in readily reviewable 

form, has been compiled and which is 

available at the time the claim for 

reimbursement of provider payment 

incentives and administration funding 

is filed. 

We would assure that State 

expenditures claimed for Federal 

matching under the Medicaid program 

are programmatically reasonable, 

allowable, and allocable in accordance 

with existing Federal laws, regulations, 

and policy guidance. CMS’ Regional 

Office financial and auditing specialists 

will be responsible for monitoring State 

funding issues including the funding 

related to these Medicaid EHR payment 

incentives. Funding specialists would 

also review the flow of funds to 

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allowable sources and to insure that 

Medicaid payment incentives would be 

paid without reduction or rebate. 

Additionally, funding specialists would 

ensure that no other sources of funding 

are used to make Medicaid EHR 

payment incentives to providers other 

than State and local government funds. 

States would be responsible for 

establishing policies, computer systems, 

edits to process Medicaid EHR incentive 

payments; and for conducting analyses 

of providers’ patterns of practice (datamining) and taking other reasonable 

steps to ensure that no duplicate or 

otherwise improper EHR incentive 

payments have been made. States will 

be responsible for ensuring that 

provider information, including but not 

limited to, attestations, survey, and any 

information added to CMS’ single 

provider election repository indicates 

that any falsification of documentation 

or concealment of material facts may be 

prosecuted under Federal and State 

laws. States would be responsible for 

recovering and returning to CMS FFP 

for any HIT incentive payments that are 

discovered to be improper. State 

Agencies must have information 

processing systems, including a MMIS— 

the automated mechanized claims 

processing and information retrieval 

system, to process Medicaid EHR 

incentive payments. MMIS systems can 

also help to manage information for 

program administration and audit 

purposes. 

States must assure that any requests 

for reimbursement of the 90 percent 

Federal match for administration of the 

program are being requested only 

because the State has used the funds for 

purposes related to administering 

payments to qualified Medicaid 

providers for certified EHR technology, 

including for tracking of meaningful use 

of such technology, is conducting 

adequate oversight of the program 

including routine tracking of 

meaningful use attestations and 

reporting mechanisms; and is pursuing 

initiatives to encourage the adoption of 

certified EHR technology to promote 

health care quality and the exchange of 

health care information because of such 

technology. Any initiatives for health 

information exchange must be 

consistent with Federal laws and 

regulations governing the exchange. 

We would monitor State Agency 

compliance through systems 

performance reviews, on-site reviews, 

and audits of the APD process. 

As a result of the authority extended 

to the Secretary under section 1902(a)(4) 

of the Act requiring the effective and 

efficient administration of the State 

plan, as well as section 1903(t)(9) of the 

Act, requiring that a State demonstrate 

to the satisfaction of the Secretary that 

it is conducting adequate oversight of 

the program, we are also proposing to 

establish § 495.370, Provider Appeals. 

This proposed section would specify 

that Medicaid providers who believe 

that they have been denied an incentive 

payment or have received an incorrect 

payment amount under this part 

because of incorrect determinations of 

eligibility, including, but not limited to, 

measuring patient volume; 

demonstrating meaningful use of, or the 

efforts to adopt, implement, or upgrade 

to, certified EHR technology; whether 

the professional is hospital-based; 

whether the professional is practicing 

predominantly in an FQHC or RHC; 

whether the hospital qualifies as an 

acute care or children’s hospital; or 

whether the provider is already 

participating in the Medicare incentive 

program and therefore ineligible 

duplicate Medicaid incentive program 

payments can appeal the decision using 

current Federal processes established at 

42 CFR 447.253(e). 

III. Information Collection 

Requirements 

Under the Paperwork Reduction Act 

of 1995, CMS is required to provide 60- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. In order to fairly evaluate 

whether an information collection 

should be approved by OMB, section 

3506(c)(2)(A) of the Paperwork 

Reduction Act of 1995 requires that 

CMS solicit comment on the following 

issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

The following is a discussion of the 

requirements we believe are subject to 

PRA and collection of information 

requirements as a result of this proposed 

rule. The projected numbers of EPs and 

eligible hospitals, MA organizations, 

MA EPs and MA-affiliated hospitals are 

based on the numbers used in the 

Impact Analysis Assumptions as well as 

in Table 45 in the Regulatory Impact 

Analysis section. 

A. ICRs Regarding Demonstration of 

Meaningful Use Criteria (§ 495.8) 

In § 495.8(a)(1), we propose that to 

demonstrate meaningful use for CY 

2011, an EP must attest, through a 

secure mechanism in a specified 

manner, to the following: (1) During the 

EHR reporting period, the EP used 

certified EHR technology and specify 

the technology used; and (2) during the 

EHR reporting period, the EP satisfied 

each of the applicable objectives and 

associated measures under § 495.6 

(including quality measures). The EP 

must specify the EHR reporting period 

and provide the result of each 

applicable measure for all patients seen 

during the EHR reporting period for 

which a selected measure is applicable. 

We estimate that the certified EHR 

technology adopted by the EP will 

capture many of the Meaningful Use 

objectives and associated measures and 

generate automated numerator and 

denominator information, where 

required, or automated summary 

reports. Therefore, for these objectives 

and associated measures (Set A), we 

estimate that it would take no more than 

0.5 hours for an EP to attest to them 

collectively as the EHR would be able to 

gather all of the information necessary 

for the provider. For objectives and 

associated measures requiring a 

numerator and denominator we limit to 

actions taken in the presence of certified 

EHR technology. We do not anticipate 

that an EP or eligible hospital will 

maintain two record keeping systems 

when certified EHR technology is 

present. Therefore, we assume that all 

patient records that would be in the 

denominator would be kept using 

certified EHR technology. Because 

generating this automated information 

requires the purchase of a certified EHR 

with the requisite technical 

functionality, reporting these measures 

will incur significant capital costs. 

However, there are still some 

Meaningful Use objectives and 

associated measures (Set B) where 

reporting may require EPs to manually 

gather the information necessary to 

report numerators and denominators or 

to take any other additional steps before 

attesting that the objective has been met, 

we have estimated that it would take 1 

hour for the EP to gather that 

information and report the result. For 

example, the measure ‘‘At least 80 

percent of all patients who request an 

electronic copy of their health 

information are provided it within 48 

hours’’ requires EPs to not only provide 

that information (a third-party 

disclosure) but also attest to the 

provision of that information for 80 


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percent of all patients who request that 

information. Another example is the 

CPOE measure. The numerator for the 

CPOE measure could be generated by 

the certified EHR technology adopted by 

the EP, as all orders entered through 

CPOE could be tracked. However, the 

denominator for this measure could 

require EPs to manually track the 

number of orders entered through 

paper-based processes. Alternatively, 

EPs may choose to purchase EHRs 

equipped with additional functionality 

to enable the tracking of all orders, 

whether entered using CPOE or 

otherwise, in which case reporting 

burden may be less than an hour but the 

capital costs will be higher. We invite 

comments on what the incremental 

costs of such additional functionality 

may be and what the reporting burden 

using EHRs equipped with this 

functionality might be. 

Table 33 below lists those objectives 

and associated measures which we 

estimate will require 0.5 hours to fulfill 

(‘‘Set A’’) and those objectives and 

associated measures which we estimate 

will take 1 hour each (‘‘Set B’’). We 

welcome comments on our burden 

estimates for each particular measure, as 

well as what the incremental capital 

costs attributable to each measure might 

be. Estimates of total capital costs at the 

bottom of Table 33 are derived from the 

estimates used in the ‘‘Industry Costs’’ 

section in Section V.G.4. 

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First, we will discuss the burden 

associated with EP attestation to EHR 

technology and Meaningful Use Set A 

objectives/measures, and ambulatory 

quality measures. We estimate that it 

will take no more than 0.5 hour for an 

EP to attest that during the EHR 

reporting period, he or she used 

certified EHR technology and specify 

the technology, and satisfied each of the 

applicable Meaningful Use Set A 

objectives/measures. We also estimate 

that it will take an EP an additional 0.5 

hour to select and attest to the 

ambulatory quality measures for CY 

2011.The total burden hours for an EP 

to attest to the above is one hour. We 

estimate that there are about 442,600 

non-hospital-based Medicare and 

Medicaid EPs (323,500 Medicare EPs, 

80,900 dual Medicare/Medicaid EPs and 

38,200 Medicaid-eligible-only EPs) who 

may attest to the above (after 

registration) in CY 2011 to receive an 

EHR incentive payment. We estimate 

the burden for the 28,000 MA EPs in the 

MAO burden estimate section. The total 

estimated annual attestation burden 

hours for EHR technology, Meaningful 

Use Set A objectives/measures, and 

ambulatory quality measures are 

442,600 for all EPs (442,600 EPs × 1 

hour). The cost burden for an EP to 

attest to the above information is $79.33 

(1 hour × $79.33 (mean hourly rate for 

physicians based on the May 2008 

Bureau of Labor Statistics)). The total 

estimated annual cost burden for all EPs 

to attest to EHR technology, Meaningful 

Use Set A objectives/measures, and 

ambulatory quality measures is 

$35,111,458 (442,600 EPs × $79.33). We 

invite public comments on the 

estimated percentages and the numbers 

of (registered) EPs that will attest to the 

above in CY 2011 because such 

information would help us determine 

more accurately the burden on the EPs. 

Next, we discuss the burden for EPs 

to gather information and attest to 

Meaningful Use Set B objectives/ 

measures. We estimate that it takes 

about 8 hours for each EP to comply 

with this requirement. As stated, we 

estimate that there are about 442,600 

non-hospital-based EPs in CY 2011. The 

total estimated annual attestation 

burden hours for all EPs for the 

Meaningful Use Set B objectives and 

measures included in Table 33 is 

3,540,800 (442,600 EPs × 8 hours). The 

cost burden for an EP to attest to the 

above information is $634.64 (8 hours × 

$79.33/hour (the mean hourly rate for 

physicians based on the May 2008 

Bureau of Labor Statistics is $79.33) and 

$280,891,664 for EPs as a whole 

(3,540,800 hours × $79.33/hour). We 

invite public comments on the 

estimated percentages and the numbers 

of (registered) EPs that will attest to Set 

B objectives and measures in CY 2011 

because such information would help us 

determine more accurately the burden 

on the EPs. 

To estimate capital costs, we assume 

a certified EHR will cost roughly 

$54,000 as explained in section V.G.4 of 

this proposed rule. If 442,600 EPs adopt 

these EHRs, total capital costs prior to 

incentives would be roughly $23.9 

billion. We also estimate that in 2011, 

$200 million of Medicare incentive 

payments (the midpoint of the low and 

high estimates in Tables 36 and 37) and 

$900 million of Medicaid incentive 

payments (the midpoint of the low and 

high estimates in Tables 45 and 46) 

would be provided to EPs to help offset 

those costs. Therefore, we estimate that 

total net capital costs for EPs in 2011 

would be $22.8 billion ($23.9 billion ¥ 

$200 million ¥ $900 million). These 

capital costs would decrease over the 

course of the EHR incentive programs as 

additional incentives are provided. 

Therefore, in 2012, the total net capital 

costs for EPs would be $20.6 billion 

(22.8 billion ¥ $1.6 billion of Medicare 

incentives ¥ $650 million of Medicaid 

incentives). Over the course of 2011 and 

2012, the average net capital costs 

would be $21.7 billion. 

We expect that there will be a steady 

growth in EPs. We estimate that in 2012, 

there are about 447,400 non-hospitalbased Medicare, and Medicaid EPs 

(326,900 Medicare EPs, 81,700 dual 

Medicare/Medicaid EPs and 38,800 

Medicaid-eligible-only EPs) who are 

qualified to receive EHR incentive 

payment. In § 495.8(a)(2), we propose 

that to demonstrate meaningful use for 

CY 2012 and subsequent years, a 

(registered) EP is required to attest, 

through a secure mechanism in a 

specified manner, to the following: (1) 

During the EHR reporting period, the EP 

used certified EHR technology and 

specify the technology used; and (2) 

during the EHR reporting period, the EP 

satisfied each of the applicable 

objectives and associated measures 

under § 495.6 except § 495.8(d)(3) 

‘‘Report ambulatory quality measures to 

CMS or the States (in the case of 

Medicaid EPs).’’ 

For burden estimate purposes, we 

believe the burden associated with 

gathering the information necessary to 

provide the attestations for the measures 

in Table 33, as well as the burden 

associated with providing the actual 

attestation, will remain unchanged from 

CY2011. As detailed in Table 33, some 

measures (Set A) will require a total of 


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0.5 hours to report while others (Set B) 

will require 1 hour. 

First, we will discuss the burden for 

an EP to attest that during the reporting 

period, he or she used certified EHR 

technology, specify the EHR technology, 

and he or she satisfied each of the 

applicable Set A objectives measures in 

CY 2012. We estimate it will take no 

more than 0.5 hour for an EP to attest 

to the above requirements. For burden 

estimate purposes, we estimate that all 

447,400 non-hospital-based Medicare, 

and Medicaid EPs (326,900 Medicare 

EPs, 81,700 dual Medicare/Medicaid 

EPs and 38,800 Medicaid-eligible-only 

EPs) may attest (after registration) in 

2012 to receive an EHR incentive 

payment. We estimate the burden for 

the 28,000 MA EPs in the MAO burden 

estimate section. We estimate it will 

take an EP 0.5 hour to attest. The total 

estimated annual attestation burden 

hours for all EPs are 223,700 (447,400 

EPs × 0.5 hour). The cost burden for an 

EP to attest to the above information is 

$39.67 (0.5 hour × $79.33 (mean hourly 

rate for physicians based on the May 

2008 Bureau of Labor Statistics)). The 

total estimated annual cost burden for 

all EPs to attest is $17,746,121 (223,700 

hours × $79.33). We invite public 

comments on the estimated percentages 

and the numbers of registered EPs that 

will attest to EHR technology used and 

Meaningful Use Set A objectives/ 

measures in CY 2012 because such 

information would help us determine 

more accurately the burden on the EPs. 

Next, we will discuss the estimated 

burden for EP attestation for Meaningful 

Use Set B objectives/measures. We 

estimate it will take an EP 8 hours to 

gather information and attest to the 

Meaningful Use Set B objectives/ 

measures. We estimated annual 

attestation burden hours in CY 2012 for 

all EPs for the Set B objectives and 

measures included in Table 33 is 

3,579,200 (447,400 EPs × 8 hours). 

Therefore, the cost burden for an EP to 

attest to the above information is 

$634.64 per EP (8 hours × $79.33/hour 

(mean hourly rate for physicians based 

on the May 2008 Bureau of Labor 

Statistics) and $283,937,936 for EPs as 

a whole (3,579,200 hours × $79.33/hour 

(mean hourly rate for physicians based 

on the May 2008 Bureau of Labor 

Statistics). 

For ‘‘Report ambulatory quality 

measures to CMS or the States’’ as stated 

in § 495.8(a)(2), we propose that in CY 

2012, EPs must report, clinical quality 

information in the form and manner 

specified by CMS, electronically to 

CMS. We estimate that the reporting/ 

submission of these data to CMS should 

not take more than 0.5 hour. The total 

annual burden hours for all EPs to 

report and submit the ambulatory 

quality measures are 223,700 (447,400 

EPs × 0.5 hour). We believe that an EP 

may assign a medical secretary to 

submit the specific ambulatory clinical 

quality measures to CMS or the States. 

Therefore, the cost burden for an EP to 

submit these clinical quality measures is 

$7.41 (0.5 hour × $14.81 (mean hourly 

rate for medical secretaries based on the 

May 2008 Bureau of Labor Statistics)). 

The total annual cost burden for all EPs 

to report the clinical quality measures is 

$3,312,997 (223,700 hours × $14.81 

(mean hourly rate for medical 

secretaries based on the May 2008 

Bureau of Labor Statistics)). 

Similar to the requirements for EPs, 

we propose in § 495.10(b)(1) that to 

demonstrate meaningful use for FY 

2011, an eligible hospital or CAH must 

attest, through a secure mechanism in a 

specified manner, to the following: (1) 

During the EHR reporting period, the 

eligible hospital or CAH used certified 

EHR technology and specify the 

technology used; and (2) during the EHR 

reporting period specified by the 

eligible hospital or CAH, the eligible 

hospital or CAH satisfied each of the 

applicable objectives and associated 

measures under § 495.6 (including 

quality measures). The eligible hospital 

or CAH must specify the EHR reporting 

period and provide the result of each 

applicable measure for all patients 

admitted to the eligible hospital during 

the EHR reporting period for which a 

selected measure is applicable. 

We estimate that the certified EHR 

technology adopted by the eligible 

hospital or CAH will capture many of 

the objectives and associated measures. 

We estimate that it would take no more 

than 0.5 hour for an eligible hospital or 

CAH to attest that during the EHR 

reporting period, they used EHR 

technology, specify the technology used, 

and satisfied each of the applicable 

Meaningful Use objectives and 

associated measures listed in Table 33– 

Set A. Because generating this 

automated information requires the 

purchase of a certified EHR with the 

requisite technical functionality, 

reporting these measures will incur 

significant capital costs. 

Where reporting may require eligible 

hospitals or CAHs to manually gather 

the information necessary to report 

numerators and denominators or to take 

any other additional steps before 

attesting that the objective has been met, 

we have estimated that it would take 1 

hour for an eligible hospital or CAH to 

gather that information and report the 

result. These measures are listed in 

Table 33–Set B. Alternatively, eligible 

hospitals or CAHs may choose to 

purchase EHRs equipped with 

additional functionality to enable more 

efficient reporting, in which case 

reporting burden may be less than an 

hour but the capital costs will be higher. 

We invite comments on what the 

incremental costs of such additional 

functionality may be and what the 

reporting burden using EHRs equipped 

with this functionality might be. 

First, we will discuss the burden for 

eligible hospitals and CAHs to attest to 

the technology used and the Meaningful 

Use Set A objectives/measures and 

hospital quality measures in FY 2011. 

We estimate that in FY 2011, there are 

about 5,011 Medicare and Medicaid 

eligible hospitals and CAHs that may be 

qualified to receive EHR incentive 

payment. We estimate that it will take 

no more than 1 hour for an eligible 

hospital or CAH to attest (0.5 hour to 

attest to the EHR technology used and 

Meaningful Use Set A objectives/ 

measures, and 0.5 hour to attest to the 

hospital quality measures—a total of 1 

hour.) We estimate that there are about 

5,011 Medicare and Medicaid hospitals 

(including 3,620 acute care hospitals, 

1,302 critical access hospitals, 78 

Medicaid children’s hospitals, and 11 

Medicaid cancer hospitals). For burden 

estimate purposes, we estimate that 

5,011 Medicare and Medicaid hospitals 

may attest (after registration) in FY 2011 

to receive an EHR incentive payment. 

The total estimated annual attestation 

burden hours for all hospitals are 5,011 

(5,011 hospitals and CAHs × 1 hour). 

We believe that an eligible hospital or 

CAH may assign an attorney to attest on 

their behalf. The cost burden for an 

eligible hospital or CAH to attest to the 

above information is $59.98 (1 hour × 

$59.98 (mean hourly rate for attorneys 

based on the May 2008 Bureau of Labor 

Statistics)). The total estimated annual 

cost burden for all eligible hospitals and 

CAHs to attest is $300,560 (5,011 × 

$59.98). We invite public comments on 

the estimated percentages and the 

numbers of (registered) eligible 

hospitals and CAHs that will attest in 

FY 2011 because such information 

would help us determine more 

accurately the burden on the hospitals 

and CAHs. We also invite comments on 

the type of personnel or staff that would 

most likely attest on behalf of eligible 

hospitals and CAHs. 

Next, we will discuss the burden for 

eligible hospitals and CAHs to gather 

information and attest to Meaningful 

Use Set B objectives/measures for FY 

2011. We estimate that it may take an 

eligible hospital and CAH 7 hours to 

comply with this requirement. As 

stated, we estimate there are about 5,011 


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eligible hospitals and CAHs that may 

attest to Meaningful Use Set B 

objectives/measures. Therefore, the total 

estimated annual attestation burden 

hours for all eligible hospitals and CAHs 

for the Set B objectives and measures 

included in Table 33 is 35,077 (5,011 

hospitals and CAHs × 7 hours). We 

estimate that the hospital or CAH may 

use an attorney to attest on their behalf. 

Therefore, the cost burden for an 

eligible hospital or CAH to attest to 

Meaningful Use Set B objectives/ 

measures is $419.86 (7 hours × $59.98/ 

hour (mean hourly rate for attorneys 

based on the May 2008 Bureau of Labor 

Statistics) and $2,103,918 for eligible 

hospitals and CAHs as a whole (35,077 

hours × $59.98/hour (mean hourly rate 

for attorneys based on the May 2008 

Bureau of Labor Statistics)), not 

including capital costs. 

To estimate capital costs, consistent 

with the sources cited in V.G.4, we 

assume that achieving meaningful use 

will require roughly a $5 million capital 

investment for the average hospital. If 

5,011 hospitals adopt these EHRs, total 

capital costs prior to incentives would 

be roughly $25.1 billion. We also 

estimate that in 2011, $2.1 billion of 

Medicare incentive payments (the midpoint of the low and high estimates in 

Tables 39 and 40) and $900 million of 

Medicaid incentive payments (the midpoint of the low and high estimates in 

Tables 45 and 46) would be provided to 

eligible hospitals and CAHs to help 

offset those costs. Therefore, we 

estimate that total net capital costs for 

hospitals in 2011 would be $22.1 billion 

($25.1 billion¥$2.1 billion¥$900 

million). These capital costs would 

decrease over the course of the EHR 

incentive programs as additional 

incentives are provided. Therefore, in 

2012, the total net capital costs for 

hospitals would be $19 billion (22.1 

billion¥$2.2 billion of Medicare 

incentives¥$900 million of Medicaid 

incentives). Over the course of 2011 and 

2012, the average net capital costs 

would be $20.6 billion. 

Similar to the requirements for EPs, 

we propose in § 495.8(b)(2) that to 

demonstrate meaningful use in FY 2012 

and subsequent years, an eligible 

hospital or CAH must attest, through a 

secure mechanism in a specified 

manner, to the following: (1) During the 

EHR reporting period, the eligible 

hospital or qualifying CAH used 

certified EHR technology and specify 

the technology used; and (2) during the 

EHR reporting period specified by the 

eligible hospital or CAH, the eligible 

hospital or CAH satisfied each of the 

applicable objectives and associated 

measures under § 495.6. except 

§ 495.6(e)(2). The eligible hospital or 

CAH must specify the EHR reporting 

period and provide the result of each 

applicable measure for all patients 

admitted to the eligible hospital during 

the EHR reporting period for which a 

selected measure is applicable. We 

estimate that the certified EHR 

technology adopted by the eligible 

hospital or CAH will capture many of 

the objectives and associated measures. 

Therefore, we estimate that it would 

take no more than 0.5 hour for an 

eligible hospital or CAH to attest to the 

EHR technology used and objectives and 

associated measures listed in Table 33– 

Set A. Because generating this 

automated information requires the 

purchase of a certified EHR with the 

requisite technical functionality, 

reporting these measures will incur 

significant capital costs. We do not 

anticipate there is a significant growth 

in the number of hospitals or CAHs. We 

estimate that in FY 2012, the total 

burden attestation burden hours for 

hospitals and CAHs are 2,506 (5,011 

hospitals and CAHs × 0.5 hour). We 

estimate that an eligible hospital or CAH 

may assign an attorney to attest on their 

behalf. The attestation burden for an 

eligible hospital or CAH is $29.99 (0.5 

hour × $59.98 (mean hourly rate for 

attorneys based on the May 2008 Bureau 

of Labor Statistics). The total cost 

burden for all hospitals and CAHs to 

attest to EHR technology used, and 

Meaningful Use Set A objectives/ 

measures is $150,310 (2,506 hours × 

$59.98). We also invite comments on the 

type of personnel or staff that would 

mostly likely attest on the behalf of 

eligible hospitals and CAHs. 

Where reporting may require eligible 

hospitals or CAHs to manually gather 

the information necessary to report 

numerators and denominators or to take 

any other additional steps before 

attesting that the objective has been met, 

we have estimated that it would take 1 

hour for the eligible hospitals or CAHs 

to gather that information and report the 

result for each of these measures or a 

total of 7 hours to comply with this 

requirement in FY 2012. These 

measures are listed in Table 33–Set B. 

Alternatively, eligible hospitals or CAHs 

may choose to purchase EHRs equipped 

with additional functionality to enable 

more efficient reporting, in which case 

reporting burden may be less than an 

hour but the capital costs will be higher. 

We invite comments on what the 

incremental costs of such additional 

functionality may be and what the 

reporting burden using EHRs equipped 

with this functionality might be. 

For burden estimate purposes, we 

estimate that there are 5,011 Medicare 

and Medicaid hospitals and CAHs that 

may attest to the above requirements in 

FY 2012. Therefore, the total estimated 

annual attestation burden hours for all 

eligible hospitals and CAHs for the Set 

B objectives and measures included in 

Table 33 are 35,077 (5,011 hospitals and 

CAHs × 7 hours). We estimate that the 

hospital or CAH may use an attorney to 

attest on behalf of its organization. 

Therefore, the cost burden for an 

eligible hospital or CAH to attest to the 

above information is $419.86 (7 hours × 

$59.98/hour (mean hourly rate for 

attorneys based on the May 2008 Bureau 

of Labor Statistics)) and $2,103,918 for 

eligible hospitals and CAHs as a whole 

(35,077 hours × $59.98/hour (mean 

hourly rate for attorneys based on the 

May 2008 Bureau of Labor Statistics)), 

not including capital costs. 

We estimate the capital cost for 2012 

is $20.6 billion which is the same as 

2011, which was discussed earlier. 

Under § 495.8, for ‘‘Report hospital 

quality measures to CMS or the States’’, 

we propose that in FY 2012, eligible 

hospitals must report clinical quality 

measures through electronic submission 

from certified EHR technology. The 

reporting of these data to CMS or States 

should not take more than 0.5 hour. The 

total annual reporting burden hours for 

eligible hospitals and CAHs is 2,506 

(5,011 hospitals and CAHs × 0.5 hour). 

We believe that an eligible hospital or 

CAH may assign a medical secretary to 

report/submit the hospital quality 

measures to CMS or the States. The 

reporting cost burden for an eligible 

hospital or CAH is $7.41 (0.5 hour × 

$14.81 (mean hourly rate for medical 

secretaries based on the May 2008 

Bureau of Labor Statistics)). The total 

annual reporting cost burden for all 

eligible hospitals and CAHs is $37,113 

(2,506 hours × $14.81 (mean hourly rate 

for medical secretaries based on the May 

2008 Bureau of Labor Statistics)). 

B. ICRs Regarding Participation 

Requirements for EPs, Eligible 

Hospitals, and CAHs (§ 495.10) 

Since the EHR incentive payment 

program is new, we do not have enough 

information to estimate the information 

collection requirements burden beyond 

the first payment year for an EP, eligible 

hospital, or CAH for this provision. 

Furthermore, the EPs, eligible hospitals, 

and CAHs can enroll any time during 

the first 5 years; therefore, it is difficult 

to predict with certainty the burden 

beyond the first payment year as the 

burden depends on the number of 

participants. Therefore, we provide a 

best estimate of what we believe the 

burden associated with this provision 

might be. 


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Under § 495.10 (a)(b)(c), we propose 

that in order for an EP, eligible hospital, 

or CAH to participate in the Medicare or 

Medicaid EHR incentive program, they 

must submit, in a manner specified by 

CMS, the following initial registration 

information in the first payment year: 

(1) Name of the EP, eligible hospital or 

CAH; (2) the National Provider 

Identifier (NPI); (3) business address 

and business phone; (4) Taxpayer 

Identification Number (TIN) to which 

the EP wants the incentive payment 

made; and (5) for an eligible hospital 

and CAH, their CMS Certification 

Number (CCN) and its TIN. We estimate 

that the initial burden associated with 

the above requirements would be the 

time required to submit the required 

registration information. 

We estimate that in FY 2011, there are 

5,011 Medicare and Medicaid eligible 

hospitals, and CAHs that may be 

qualified to receive EHR incentive 

payment. Since we cannot predict how 

many eligible hospitals, and CAHs will 

participate in the EHR incentive 

payment program, we estimate that all 

5,011 hospitals may register for the 

incentive program for burden estimate 

purposes. We estimate that it would 

take no more than 0.5 hour for an 

eligible hospital or CAH to register. We 

estimate the total annual burden hours 

for registration will be 2,506 (5,011 

hospitals × 0.5 hour). Once the decision 

to participate in the incentive program 

is made, we believe eligible hospitals or 

CAHs may assign a medical secretary to 

submit the registration information. The 

cost burden for an eligible hospital or 

CAH to register is $7.41 (0.5 hour × 

$14.81 (mean hourly rate for medical 

secretaries based on the May 2008 

Bureau of Labor Statistics)). We estimate 

that the total annual cost burden for 

eligible hospitals and CAHs to register 

is $37,106 (5,011 hospitals × 0.5 hour × 

$14.81) (mean hourly rate for medical 

secretaries based on the May 2008 

Bureau of Labor Statistics)). We invite 

public comments on the estimated 

percentages or the number of eligible 

hospitals and CAHs that will register for 

the EHR incentive payment program in 

2011 and subsequent years. Such 

information would help us determine 

more accurately the burden on the 

eligible hospitals and CAHs. 

We estimate that all 442,600 nonhospital-based Medicare, and Medicaid 

EPs may register in 2011 to receive an 

EHR incentive payment. We estimate 

that it would take no more than 0.5 hour 

to complete the registration. The total 

estimated annual registration burden 

hours for all EPs are 221,300 (442,600 

EPs × 0.5 hour) in the first payment 

year. We cannot predict if an EP will 

register himself or herself or assign a 

medical secretary to do it on his or her 

behalf. Therefore, we are doing one high 

end burden estimate for an EP and one 

low end burden estimate for a medical 

secretary. The cost burden for an EP 

who chooses to register in the EHR 

incentive payment program himself or 

herself is $39.67 (0.5 hour × $79.33 

(mean hourly rate for physicians based 

on the May 2008 Bureau of Labor 

Statistics)). The total estimated annual 

cost burden for all EPs who register for 

the EHR incentive payment program 

themselves is $17,555,729 (221,300 

hours × $79.33 (mean hourly rate for 

physicians based on the May 2008 

Bureau of Labor Statistics)). Similarly, 

the cost burden for an EP who chooses 

to use medical secretary to register on 

their behalf is $7.41 (0.5 hour × $14.81 

(mean hourly rate for medical 

secretaries based on the May 2008 

Bureau of Labor Statistics)). The total 

estimated annual cost burden for all EPs 

who choose to use medical secretaries to 

register on their behalf is $3,277,453 

(221,300 hours × $14.81 (mean hourly 

rate for medical secretaries based on the 

May 2008 Bureau of Labor Statistics)). 

We invite comments on whether we 

should use the higher cost burden 

estimate ($17,555,729) or the lower cost 

burden estimate ($3,277,453). We only 

use the average of the two estimates in 

the tally in Table 34. We invite public 

comments on the estimated percentages 

or the numbers of EPs that will register 

in 2011 and subsequent years and this 

information would help us determine 

more accurately the burden on EPs 

affected by this proposed rule. 

In § 495.10(d), we propose that if 

there are subsequent changes in the 

initial registration information, the EP is 

responsible for providing us with 

updated changes in the manner 

specified by us. Based on our 

experience with provider enrollment, 

we estimate that about 11 percent of the 

Medicare and Medicaid EPs may need 

to update their registration information 

during a one-year period. We estimate 

that EPs in this 11 percent (447,400 EPs 

(estimated number of EPs in CY 2012) 

× 11 percent = 49,214 EPs) may only 

have one occasion that requires 

updating of information in a given year. 

For each occasion, we estimate that it 

would take no more than 0.5 hour to 

notify us of the changes. With that, we 

estimate that the annual total burden 

hours for 49,214 EPs to update changes 

are 24,607 (49,214 EPs × 0.5 hour). 

However, we cannot predict if the EP 

will update the registration information 

himself or herself or assign a medical 

secretary to do it. Therefore, we are 

doing two burden estimates for an EP 

and his/her medical secretary. The cost 

burden for an EP who chooses to update 

the registration information himself or 

herself is $39.67 (0.5 hour × $79.33 

(mean hourly rate for physicians based 

on the May 2008 Bureau of Labor 

Statistics)). The total estimated annual 

cost burden for all 49,214 EPs to update 

registration information themselves is 

$1,952,073 (49,214 EPs × 0.5 hour × 

$79.33 (mean hourly rate for physicians 

based on the May 2008 Bureau of Labor 

Statistics)). Similarly, the cost burden 

for the EP who chooses to use a medical 

secretary to update registration 

information on their behalf is $7.41 (0.5 

hour × $14.81 (mean hourly rate for 

medical secretaries based on the May 

2008 Bureau of Labor Statistics)). The 

total estimated annual cost burden for 

48,686 EPs who choose to use medical 

secretaries to update registration 

information on their behalf is $364,429 

(49,214 EPs × 0.5 hour × $14.81 (mean 

hourly rate for medical secretaries based 

on the May 2008 Bureau of Labor 

Statistics)). We only use the average of 

the two estimates in the tally in Table 

34. We invite comments on whether we 

should use the higher cost burden 

estimate ($1,952,073) or the lower cost 

burden estimate ($364,429). We also 

invite public comments on the 

estimated percentages and the numbers 

of EPs that will need to submit 

subsequent registration changes to us 

over the course of the EHR incentive 

payment program and such information 

would help us determine more 

accurately the burden on the EPs. 

Similarly, for hospitals and CAHs, we 

propose that if there are subsequent 

changes in the initial registration 

information, the eligible hospital or 

CAH is responsible for providing us 

with updated information in the manner 

specified by us. Based on our 

experience with provider enrollment, 

we estimate that about 8 percent of the 

Medicare and Medicaid eligible 

hospitals and CAH (5,011 hospitals and 

CAHs × 8 percent = 401 hospitals) may 

need to update their registration 

information during a one-year period. 

We estimate that eligible hospitals in 

this 8 percent pool may only have 1 

occasion that requires updating of 

registration information in a given year. 

For each occasion, we estimate that it 

would take no more than 0.5 hour to 

notify us of the changes. With that, we 

estimate that the total annual burden 

hours for eligible hospitals and CAHs to 

update CMS of registration changes are 

201 (401 hospitals and CAHs × 0.5 

hour). We believe that eligible hospitals 

or CAHs may assign a medical secretary 


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to update the registration information. 

We estimate the total annual cost 

burden for eligible hospitals and CAHs 

to update CMS of registration changes is 

$2,969 (401 hospitals and CAHs × 0.5 

hour × $14.81) (mean hourly rate for 

medical secretaries based on the May 

2008 Bureau of Labor Statistics)). We 

invite public comments on the 

estimated percentages and the numbers 

of eligible hospitals and CAHs that will 

submit subsequent registration changes 

to us over the course of the EHR 

incentive payment program and this 

information would help us determine 

more accurately the burden on the 

eligible hospitals and CAHs. 

In § 495.10(e)(1), we propose that for 

participation in the EHR incentive 

payment programs, prior to the first 

payment year, an EP must notify us in 

a specified manner as to whether he or 

she elects to participate in the Medicare 

or Medicaid EHR incentive program. We 

estimate that in 2011, there are about 

80,900 dual Medicare/Medicaid EPs 

who may make the initial Medicare and 

Medicaid program selection. The 

standard full amount of Medicaid 

incentive payments that an EP could 

receive is larger than the standard full 

amount for the Medicare EP incentive 

payments. Therefore, for burden 

estimate purposes, we believe that all of 

the 80,900 dual Medicare/Medicaid EPs 

may make the Medicaid program 

selection for burden estimate purposes. 

We estimate that it would take no more 

than 0.5 hour to submit the initial 

Medicare or Medicaid selection 

notification to us. We cannot predict if 

the EP will submit the notification to 

CMS himself or herself or assign a 

secretary to do it. Therefore, we are 

doing one high end estimate and one 

low end burden estimate for an EP and 

a medical secretary respectively. The 

total estimated burden hours for all the 

dual Medicare/Medicaid EPs to notify 

CMS of program selection are 40,450 

(80,900 EPs × 0.5 hour) in the first 

payment year. The cost burden for these 

EPs who notify CMS of Medicare or 

Medicaid program selection himself or 

herself is $39.67 (0.5 hour × $79.33 

(mean hourly rate for physicians based 

on the May 2008 Bureau of Labor 

Statistics)). The total estimated annual 

cost burden for all dual Medicare/ 

Medicaid EPs to notify CMS of program 

selection themselves is $3,208,899 

(40,450 hours × $79.33). Similarly, the 

cost burden for an EP who chooses to 

use medical secretaries to notify CMS of 

program selection is $7.41 (0.5 hour × 

$14.81 (mean hourly rate for medical 

secretaries based on the May 2008 

Bureau of Labor Statistics)). The total 

estimated annual cost burden for all 

dual Medicare/Medicaid EPs who use 

medical secretaries to notify CMS of 

program selection is $599,065 (40,450 

hours × $14.81 (mean hourly rate for 

medical secretaries based on the May 

2008 Bureau of Labor Statistics)). We 

only use the average of the two 

estimates in the tally in Table 34. We 

invite comments on whether we should 

use the higher cost burden estimate 

($3,208,899) or the lower cost burden 

estimate ($599,065). We also invite 

public comments on the estimated 

percentages and the number of dual 

Medicare/Medicaid EPs that will submit 

initial Medicare or Medicaid program 

selection in 2011, 2012, 2013, or 2014 

and this information would help us 

determine more accurately the burden 

on the EPs affected by the proposed 

rule. 

Under § 495.10(e)(2), we propose that 

EPs may switch from Medicare to 

Medicaid EHR incentive program or 

vice versa one time, and only for 

payment year 2014 or before. Since we 

have no knowledge of how many EPs 

will make the subsequent changes in 

program selection, we assume that all 

81,700 (estimated number of dual 

Medicare/Medicaid EPs for CY 2012) 

dual Medicare/Medicaid EPs may make 

subsequent program selection changes 

for burden estimate purposes. We 

estimate that it would take no more than 

0.5 hour to submit the Medicare/ 

Medicaid selection change to us. We 

cannot predict if the EP will submit the 

change to CMS himself or herself or 

assign a secretary to do it. Therefore, we 

are doing one high end burden estimate 

for an EP and one low end estimate for 

a medical secretary. The total estimated 

burden hours for all dual Medicare/ 

Medicaid EPs to notify CMS of program 

changes are 40,850 (81,700 EPs × 0.5 

hour) in a given year. The cost burden 

for the EP who choose to notify CMS of 

Medicare/Medicaid program change 

himself or herself is $39.67 (0.5 hour × 

$79.33 (mean hourly rate for physicians 

based on the May 2008 Bureau of Labor 

Statistics)). The total estimated annual 

cost burden for all dual Medicare/ 

Medicaid EPs to notify CMS of program 

changes themselves is $3,240,630 

(40,850 hours × $79.33 (mean hourly 

rate for physicians based on the May 

2008 Bureau of Labor Statistics)). 

Similarly, the cost burden for an EP who 

chooses to use a medical secretary to 

notify CMS of program changes is $7.41 

(0.5 hour × $14.81 (mean hourly rate for 

medical secretaries based on the May 

2008 Bureau of Labor Statistics)). The 

total estimated annual cost burden for 

all dual Medicare/Medicaid EPs who 

use medical secretaries to notify CMS of 

program changes is $604,989 (40,850 

hours × $14.81 (mean hourly rate for 

medical secretaries based on the May 

2008 Bureau of Labor Statistics)). We 

invite comments on whether we should 

use the higher cost burden estimate 

($3,240,630) or the lower cost burden 

estimate ($604,989). We only use the 

average of the two estimates in the tally 

in Table 34. We also invite public 

comments on the estimated percentages 

and the numbers of dual Medicare/ 

Medicaid EPs that will submit initial 

Medicare or Medicaid program changes 

in 2012, 2013, or 2014 and this 

information would help us determine 

more accurately the burden on the EPs 

affected by the proposed rule. 

C. ICRs Regarding Identification of 

Qualifying MA Organizations, MA–EPs 

and MA-Affiliated Eligible Hospitals 

(§ 495.202) 

Proposed § 495.202(a)(1) states that 

beginning with bids due in June 2010 

(for plan year 2011), MA organizations 

seeking reimbursement for qualifying 

MA EPs and qualifying MA-affiliated 

eligible hospitals under the MA EHR 

incentive program are required to 

identify themselves to CMS in a form an 

manner specified by CMS, as part of 

submissions of initial bids under section 

1854(a)(1)(A) of the Act. The burden 

associated with this requirement is 

providing a list of MA EPs and 

qualifying MA-affiliated eligible 

hospitals who may potentially seek for 

EHR incentive payments. However, for 

EPs, we believe there is no extra burden 

incur from this requirements as MA 

organizations can identify the same lists 

of names of EPs as they used to satisfy 

the collection requirements for 

§ 495.204(b)(2) and (5). In other words, 

when identifying amounts of 

compensation per § 495.204(b)(2) and 

(5), qualifying MA organizations will be 

simultaneously identifying EPs under 

this requirement. For hospitals, we 

estimate that it may take no more than 

0.25 hour for a MA organization to 

identify their MA-affiliated hospitals to 

CMS. There are 29 MA-affiliated eligible 

hospitals and 12 MA organizations or an 

average of 2.42 eligible hospitals for 

each MA organization. The total burden 

hours for all MA organizations to 

identify their affiliated hospitals to CMS 

are 3 hours. We believe a MA 

organization may use a billing clerk to 

identify the eligible hospital to us. The 

cost burden for a MA organization is 

$3.86 (0.25 hour × $15.44 (mean hourly 

rate for billing clerks based on the May 

2008 Bureau of Labor Statistics)). The 

total cost burden for all MA 

organizations to identify their eligible 


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hospitals to us is $46.32 ($3.86 × 12 MA 

organizations). 

We proposed in § 495.202(a)(3) that 

qualifying MA organizations offering 

MA plan types other than HMOs are 

required to attest to the fact that they 

meet the definition of HMO in 42 U.S.C. 

300gg–91(b)(3)-section 2791(b)(3) of the 

PHS Act. There is minimal burden 

associated with this requirement as 

qualifying MA organizations sponsoring 

MA coordinated care plans, like PPOs, 

PSOs, and RPPOs, are not expected to 

employ physicians that meet the 

definition of MA EP in section 

1853(1)(2) of the Act and therefore, we 

do not expect any to need to attest. 

Similarly, we do not expect any MA 

organizations that offer other plan types 

other than coordinated care plans to 

request need to attest to their status for 

similar reasons. 

In § 495.202(a)(4), we propose 

requiring that, beginning with bids due 

in June 2014 (for plan year 2015), all 

MA organizations with potentially 

qualifying MA EPs or potentially 

qualifying MA-affiliated eligible 

hospitals under the MA EHR incentive 

program to identify themselves to CMS 

in a form and manner specified by CMS, 

as part of submissions of initial bids 

under section 1854(a)(1)(A) of the Act. 

We cannot estimate the collection 

burden for this requirement as the 

timeframe goes beyond the scope of the 

effective date of the proposed 

information collection period (three 

years from the effective date of the final 

rule). 

In § 495.202(b)(1), we propose that a 

qualifying MA organization, as part of 

its initial bid starting with plan year 

2011, must make preliminary 

identification of potentially qualifying 

MA EPs and potentially qualifying MAaffiliated eligible hospitals for which the 

organization is seeking incentive 

payments. The burden for this 

requirement is already addressed in 

§ 495.202 (a)(1) and § 495.204(b)(2)(5). 

In § 495.202(b)(2), we propose that MAaffiliated organizations must provide 

and attest to the following information 

on their MA-affiliated EPs and eligible 

hospitals: (A) Name of the EP or eligible 

hospital; (B) address of the EP or eligible 

hospital; and (C) NPI. We believe that it 

is customary and business practices of 

an MA organization to keep the 

information in (A), (B), and (C) on file. 

The burden for this requirement is the 

time it takes to attest to CMS that the 

MA EPs or MA-affiliated eligible 

hospitals meet the eligibility criteria. 

We estimate it should not take more 

than 0.5 hour for a MA organization to 

comply with this attestation 

requirement. The total burden hours for 

all MA organizations to attest are 6 

hours. We believe that MA 

organizations may use an attorney to 

attest on their behalf. The cost burden 

for a MA organization to attest is $29.99 

(0.5 hour × $59.98 (mean hourly rate for 

attorneys based on the May 2008 Bureau 

of Labor Statistics)). The total cost 

burden for all MA organizations to attest 

is $359.88 ($29.99 × 12 MA 

organizations). We invite comments on 

the type of personnel who will mostly 

likely attest on behalf of MA 

organizations. 

Proposed § 495.202(b)(4) states that all 

qualifying MA organizations, as part of 

their initial bids in June 2014 for plan 

year 2015, must identify potentially 

qualifying MA EPs and potentially 

qualifying MA-affiliated eligible 

hospitals. An attestation that each 

professional or hospital either meets or 

does not meet the eligibility criteria 

must be included as part of the 

identification submission. We cannot 

estimate the collection burden for this 

requirement as the timeframe goes 

beyond the scope of the effective date of 

the proposed information collection 

period (3 years from the effective date 

of the final rule). 

D. ICRs Regarding Incentive Payments 

to Qualifying MA Organizations for MA– 

EPs and Hospitals (§ 495.204) 

Under § 495.204(b)(2), we propose 

that a qualifying MAO would need to 

report to CMS within 30 days of the 

close of the calendar year, the aggregate 

annual amount of revenue attributable 

to providing services that would 

otherwise be covered as professional 

services under Part B received by each 

qualifying MA EP for enrollees in MA 

plans of the MA organization in the 

payment year. Since the tracking of 

salaries or compensation for MA EPs 

constitutes usual and customary 

business practices, the only burden 

associated with this requirement is the 

time required to submit the aggregated 

annual amount of revenue received by 

each qualifying MA EP for enrollees in 

MA plans of the MA organization. We 

estimate that there are 12 MA 

organizations and 28,000 MA EPs, or an 

average of 2,333 (28,000 EPs/12 MA 

organizations) MA EPs affiliated with 

each qualifying MA organization. We 

believe that it will take a MA 

organization 40 hours annually to report 

the required aggregate revenue data for 

all its salaried MA EPs, given that all the 

data are readily available. The total 

estimated annual burden hours for all 

MA organizations to comply with this 

requirement is 480 (12 MA 

organizations × 40 hours). We believe 

MA organizations may involve a billing 

clerk to report the required data to CMS. 

We estimate the cost burden for a MA 

organization to report is $617.6 (40 

hours × $15.44 (mean hourly rate for 

billing clerk based on the May 2008 

Bureau of Labor Statistics)). We estimate 

the total annual cost burden for all MA 

organizations to comply with this 

requirement is $7,411 (12 MA 

organizations × $617.6). 

Under § 495.204(b)(4), we propose 

that for qualifying MA EPs who are 

compensated on a salaried basis, CMS 

requires the qualifying MA organization 

to develop a methodology for estimating 

the portion of each qualifying MA EP’s 

salary attributable to providing services 

that would otherwise be covered under 

Part B to MA plan enrollees of the MA 

organization. The methodology: (i) Must 

be approved by CMS; and (ii) may 

include an additional amount related to 

overhead, where appropriate, estimated 

to account for the MA-enrollee related 

Part B practice costs of the salaried 

qualifying MA EP. We estimate that it 

may take a MA organization one and a 

half hour to develop the methodology. 

We estimate that there are about two 

MA organizations that may have the 

need to develop the methodology. The 

total burden hours for the MA 

organizations to develop the 

methodology are 3 hours (1.5 hours × 2 

MA organizations). A MA organization 

may use an accountant to develop the 

methodology. The cost burden for a MA 

organization is $47.48 (1.5 hours × 

$31.65 (mean hourly rate for 

accountants based on the May 2008 

Bureau of Labor Statistics)). The total 

cost burden for the MA organizations to 

develop the methodology is $94.95 

($47.48 × 2 MA organizations). 

In § 495.204(b)(5), we propose that for 

qualifying MA EPs who are not salaried, 

qualifying MA organizations would 

need to obtain, and submit to CMS, 

attestations from such qualifying MA 

EPs as to the amount of compensation 

received by such EPs for MA plan 

enrollees of the MA organization. We 

estimate that about 10 percent of the 

MA EPs (28,000 EPs × 10 percent = 

2,800 EPs) are not salaried and that is 

an average of 233 (2,800 EPs/12 MA 

organizations = 233 EPs) non-salaried 

EPs in each MA organization. We 

estimate that it may take up to 0.25 hour 

to electronically obtain and compile 

each attestation into a document for 

transmission to CMS. The total burden 

hours for a MA organization are 58.3 

(0.25 hour × 233 EPs). The total 

estimated burden hours for all MA 

organizations are 699 (58.3 × 12 MA 

organizations). We believe an MA 

organization may involve a billing clerk 

to compile and submit the 


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compensation information from such 

attestations. We estimate the cost 

burden for a MA organizations to 

comply with this requirement is 

approximately $899.38 (0.25 hour × 233 

EPs × $15.44 (mean hourly rate for 

billing clerk based on the May 2008 

Bureau of Labor Statistics)). We estimate 

the total annual cost burden for all MA 

organizations to comply with this 

requirement is $10,792.56 (58.3 hours × 

12 organizations × $15.44). 

E. ICRs Regarding Meaningful User 

Attestation (§ 495.210) 

Under § 495.210(b), we propose 

requiring qualifying MA organizations 

to attest within 30 days after the close 

of a calendar year whether each 

qualifying MA EP is a meaningful EHR 

user. We anticipate that the adopted 

EHR technology will capture the data 

for determination whether each 

qualifying MA EP is a meaningful EHR 

user. The burden associated with this 

requirement is the time necessary to 

attest to the required information. We 

estimate that there are 12 MA 

organizations and 28,000 MA EPs, or an 

average of 2,333 MA EPs affiliated with 

each qualifying MA organization. We 

believe that it will take a MA 

organization about 40 hours annually to 

attest whether each qualifying MA EP is 

a meaningful user, given that all the 

data are captured in the certified EHR 

technology. The total estimated annual 

burden hours for all MA organizations 

to comply with this requirement is 480 

(12 MA organizations × 40 hours). We 

believe MA organizations may involve 

an attorney to attest on their behalf. We 

estimate the cost burden for a MA 

organization to attest is $2,399 (40 hours 

× $59.98 (mean hourly rate for attorneys 

based on the May 2008 Bureau of Labor 

Statistics)). We estimate the total annual 

cost burden for all MA organizations to 

comply with attestation for MA EPs is 

$28,790 (12 MA organizations × $2,399). 

We invite comments on the type of 

personnel, who will mostly attest on 

behalf of MA organizations. 

Section 495.204(c)(2) states that to the 

extent data are available, qualifying MA 

organizations must receive hospital 

incentive payments through their 

affiliated hospitals under the Medicare 

FFS EHR hospital incentive program, 

rather than through the MA EHR 

hospital incentive program. Under 

§ 495.210(c), we proposed that 

qualifying MA organizations be required 

to attest within 30 days after the close 

of a calendar year whether each 

qualifying MA-affiliated eligible 

hospital is a meaningful EHR user. As 

stated in the preamble, the EHR 

incentive payments for Medicare FFS 

and MA-affiliated hospitals are treated 

the same as all Medicare-certified MA 

affiliated hospitals and they will attest 

like other Medicare FFS hospitals. This 

means that § 495.210(c) only applies to 

a MA-affiliated hospital that is not 

Medicare certified and such type of 

hospitals do not exist currently. We do 

not expect there to be any MA-affiliated 

hospitals that will not be covered under 

the Medicare FFS EHR hospital 

incentive program because section 

1852(a)(1)(A) of the Act requires MA 

organizations to provide Part A 

inpatient services solely through 

providers that meet applicable 

requirements of the Medicare program. 

We have already addressed the 

attestation burden on hospitals, 

including MA-affiliated hospitals under 

§ 495.10(b)(2)(i)(ii). 

F. ICRs Regarding Establishing Patient 

Volume (§ 495.306) 

Proposed § 495.306(a) states that to 

establish patient volume, a Medicaid 

provider must annually meet one of the 

requirements contained in 

§ 495.306(a)(1). Proposed 

§ 495.306(a)(1)(i) states that except as 

specified in paragraph (a)(1)(ii) of this 

section, a Medicaid professional must 

attest that a minimum of 30 percent of 

their patient encounters over any 

continuous 90-day period in the most 

recent calendar year was covered by 

Medicaid. Proposed 

§ 495.306(a)(1)(ii)(A) states that a 

pediatrician must attest that a minimum 

of 20 percent of his or her patient 

encounters over any continuous 90-day 

period in the most recent calendar year 

was covered by Medicaid. Proposed 

§ 495.306(a)(1)(ii)(B) states that a 

Medicaid professional practicing 

predominantly in a FQHC or RHC must 

attest that a minimum of 30 percent of 

his or her patient encounters over any 

continuous 90-day period in the most 

recent calendar year was with needy 

individuals as defined in § 495.302. 

Proposed § 495.306(a)(2) states that an 

acute care hospital must attest that a 

minimum of 10 percent of all patient 

encounters over any continuous 90-day 

period in the most recent calendar year 

was covered by Medicaid. 

The burden associated with the 

requirements in this section is the time 

and effort necessary to submit the 

information to CMS. In each instance, 

we estimate that it will take no longer 

than 0.5 hour to submit the necessary 

information to CMS. For proposed 

§ 495.306(a)(1)(i) through (ii), we 

estimate that 119,000 entities will 

submit the required information. 

Similarly, we estimate the total annual 

burden to be 59,500 hours in both 

§ 495.306(a)(1)(i) and § 495.306(a)(1)(ii). 

The total labor cost associated with the 

requirement in § 495.306(a)(1)(i) is 

$4,720,135. The total labor cost 

associated with the requirement in 

§ 495.306(a)(1)(ii) is $4,720,135. We 

reached these costs estimates since it 

will be important for physicians (rather 

than staff assistants) to establish patient 

volume at $79.33 (mean hourly rate for 

physicians based on the May 2008 

Bureau of Labor Statistics)). 

The burden associated with the 

requirements in proposed 

§ 495.306(a)(1)(ii)(B) and § 495.306(a)(2) 

is the time and effort necessary to 

submit the information to CMS. In each 

instance, we estimate that it will take no 

longer than 0.5 hour to submit the 

necessary information to CMS. For 

proposed § 495.306(a)(1)(ii)(B) and 

§ 495.306(a)(2), we estimate that 3,361 

entities will submit the required 

information. Similarly, we estimate the 

total annual burden to be 1,815.50 hours 

in both § 495.306(a)(1)(ii)(B) and 

§ 495.306(a)(2). The total labor cost 

associated with the requirement in 

§ 495.306(a)(1)(ii)(B) is $144,024. This 

cost burden is based on the physician 

establishing patient volume at $79.33 

(mean hourly rate for physicians based 

on the May 2008 Bureau of Labor 

Statistics)). The total labor cost 

associated with the requirement in 

§ 495.306(a)(2) is $25,617. This cost 

burden is based on a secretary reporting 

patient volume on behalf of the acute 

care hospital at $14.11 (mean hourly 

rate for secretaries based on the May 

2008 Bureau of Labor Statistics)). 

G. ICRs Regarding Process for Payments 

(§ 495.312) 

Proposed § 495.312(b) states that in 

order to receive a payment under this 

part, a provider must report the required 

data under this subpart within the EHR 

reporting period described in § 495.6. 

The data required is the information 

necessary to document that the provider 

is a meaningful user or an adopter, 

implementer, or upgrader of certified 

EHR technology and the data reported to 

the single provider election repository. 

The burden associated with this 

requirement is the time and effort 

necessary to report the required data to 

States during the EHR reporting period. 

This burden is accounted for in our 

burden discussions for sections A and B 

of the information collection section, 

§ 495.10 and § 495.12, respectively. 

H. ICRs Regarding Activities Required 

To Receive an Incentive Payment 

(§ 495.314) 

Proposed § 495.314(a)(1) states that in 

the first payment year, to receive an 


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incentive payment, the Medicaid EP or 

eligible hospital must meet one of the 

following criteria. The Medicaid EP or 

eligible hospital must demonstrate that 

during the EHR reporting period for a 

payment year, it has adopted, 

implemented, or upgraded certified EHR 

technology, as defined in § 495.302; or, 

the Medicaid EP or eligible hospital 

must demonstrate that during the EHR 

reporting period for a payment year it is 

a meaningful user of certified EHR 

technology as defined in § 495.6. 

The burden associated with the 

requirements in proposed 

§ 495.314(a)(1) is the time and effort 

necessary for a Medicaid EP or eligible 

hospital to demonstrate that it meets 

one of the criteria in § 495.314(a)(1)(i) 

through (ii). We already accounted for 

this burden in the earlier discussion of 

the burden associated with § 495.10. 

Proposed § 495.314(a)(2) states that a 

provider may notify the State of its 

nonbinding intention to participate in 

the incentives program prior to having 

fulfilled all of the eligibility criteria. 

This requirement constitutes a thirdparty disclosure. The burden associated 

with this requirement is the time and 

effort necessary for a provider to send 

notification to the State. We estimate 

that this burden will be the same burden 

associated with § 495.12 as stated above, 

since the information necessary to 

notify the State of the providers nonbinding intention to participate in the 

program could be the same information 

as submitted by those providers that 

have committed to participating in the 

program, that is, the National Provider 

Identifier, the tax identification number, 

etc. 

Proposed § 495.314(b)(1) states that in 

the second, third, fourth, fifth, and sixth 

payment years, to receive an incentive 

payment, the Medicaid EP or eligible 

hospital must demonstrate that during 

the EHR reporting period for the 

applicable payment year, it is a 

meaningful user of certified EHR 

technology, as defined in § 495.6. The 

burden associated with this requirement 

is the time and effort necessary for a 

Medicaid EP or eligible hospital to 

demonstrate that it is a meaningful user 

of certified EHR technology. We 

discussed the burden associated with 

this requirement in our discussion of 

the burden associated with § 495.10. 

I. ICRs Regarding State Monitoring and 

Reporting Regarding Activities Required 

To Receive an Incentive Payment 

(§ 495.316) 

Proposed § 495.316(a) would require 

States to be responsible for tracking and 

verifying the activities necessary for a 

Medicaid EP or eligible hospital to 

receive an incentive payment for each 

payment year, as described in § 495.314. 

Burden is calculated for each State’s 

process for the administration of the 

Medicaid incentive payments, including 

tracking of attestations and oversight, 

and the process for approving, 

processing, and making timely 

payments. 

We estimate that there will be 

approximately 50 States, the District of 

Columbia, and 5 Territories per year 

requesting reimbursement for the 

administration of and paying of 

Medicaid incentive payments to 

providers for the meaningful use of 

electronic health record systems. For 

States to collect and submit the 

information required, we estimate it will 

take 5 hours per State. The estimated 

annual burden for States associated with 

the aforementioned submission 

requirements is 280 hours (56 StatesTerritories × 5.0 hours/State-Territory). 

The cost burden was estimated based on 

an employee contracting with the State 

Agency. The burden associated with 

§ 495.316 is already in the OMB 

approval process. We announced the 

information collection in a Federal 

Register notice that published on 

September 11, 2009 (74 FR 467330). 

J. ICRs Regarding State Responsibilities 

for Receiving FFP (§ 495.318) 

Proposed § 495.318 states that in 

order to be provided FFP under section 

1903(a)(3)(F) of the Act, a State must 

demonstrate to the satisfaction of the 

Department, that the State is conducting 

the activities listed at § 495.318(a) 

through (c). This burden is the same as 

that listed above in the burden 

discussion for § 495.316. 

K. ICRs Regarding Prior Approval 

Conditions (§ 495.324) 

Proposed § 495.324(a) would require a 

State to obtain prior written approval 

from the Department as specified in 

paragraph (b) of this section, when the 

State plans to initiate planning and 

implementation activities in support of 

Medicaid provider incentive payments 

encouraging the adoption and use of 

certified EHR technology with proposed 

Federal financial participation (FFP). 

Specifically, proposed § 495.324(b) 

states that to receive 90 percent match, 

each State must receive prior approval 

for all of the requirements listed in 

§ 495.324(b)(1) through (3). 

Proposed § 495.324(c) would require a 

State to obtain prior written approval 

from the Department of its justification 

for a sole source acquisition, when it 

plans to acquire non-competitively from 

a nongovernmental source HIT 

equipment or services, with proposed 

FFP under this subpart if the total State 

and Federal acquisition cost is more 

than $100,000. Burden must be 

calculated for State Medicaid Agencies 

to submit the planning and 

implementation documents and the 

SMHP to CMS including, among other 

things, an alternative approach to the 

established timeframe for measuring 

patient volume, the process for verifying 

eligibility, annual reports specifying 

provider adoption, implementation, 

and/or upgrading of certified EHR 

technology activities and payments, 

proposed additional quality measures, 

and the data supporting the adoption, 

implementation, or upgrading and 

meaningful use of certified EHR 

technology. This burden is the same as 

that listed above in the burden 

discussion for § 495.316. 

L. ICRs Regarding Termination of 

Federal Financial Participation (FFP) for 

Failure To Provide Access to 

Information (§ 495.330) 

Proposed § 495.330(a) states that the 

Department terminates FFP at any time 

if the Medicaid agency fails to provide 

State and Federal representatives with 

full access to records relating to HIT 

planning and implementation efforts, 

and the systems used to interoperate 

with electronic HIT, including on-site 

inspection. Proposed § 495.330(b) states 

that the Department may request such 

access at any time to determine whether 

the conditions in this subpart are being 

met. The burden associated with the 

requirements in this section is the time 

and effort necessary to make the 

information available to the Department 

upon request so it can monitor 

compliance. The Department estimates 

that it will make 1 request per State/ 

Territory per year for information and 

that it will take each State 5 hours to 

compile and furnish the information. 

We estimate that there will be 

approximately 50 States, the District of 

Columbia, and 5 Territories per year 

submitting this information. For States 

to collect and submit the information 

required, we estimate it will take 5 

hours per State. The estimated annual 

burden for States associated with the 

aforementioned submission 

requirements is 280 hours (56 StatesTerritories × 5.0 hours/State-Territory). 

The annual cost burden for a State 

employee to provide the above 

information is $9,904 (280 hours × 

$35.37 (mean hourly rate for a 

management analyst based on the May 

2008 Bureau of Labor Statistics)). We 

believe that it is possible that a secretary 

may compile State information and 

provide the information to the 

Department. In that case the annual cost 


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burden for the secretary to provide this 

information is $3,951 (280 hours × 

$14.11 (mean hourly rate for secretaries 

based on the May 2008 Bureau of Labor 

Statistics)). 

M. ICRs Regarding State Medicaid 

Agency and Medicaid EP and Hospital 

Activities (§ 495.332 Through § 495.344) 

The burden associated with this 

section is the time and effort associated 

with completing the single provider 

election repository and each State’s 

process for the administration of the 

Medicaid incentive payments, including 

tracking of attestations and oversight; 

the submission of the State Medicaid 

HIT Plan and the additional planning 

and implementation documents; 

enrollment or reenrollment of providers, 

and collection and submission of the 

data for adopting, implementing, or 

upgrading and meaningful use of 

certified EHR technology. This burden 

is the same as that listed above in the 

burden discussion for § 495.316. 

N. ICRs Regarding Access to Systems 

and Records (§ 495.346) 

Proposed § 495.346 states that the 

State agency must allow the Department 

access to all records and systems 

operated by the State in support of this 

program, including cost records 

associated with approved administrative 

funding and incentive payments to 

Medicaid providers. State records 

related to contractors employed for the 

purpose of assisting with 

implementation or oversight activities 

or providing assistance, at such 

intervals as are deemed necessary by the 

Department to determine whether the 

conditions for approval are being met 

and to determine the efficiency, 

economy, and effectiveness of the 

program. 

This section imposes both 

recordkeeping and reporting 

requirements. The burden associated 

with this requirement is the time and 

effort necessary for a State to both 

maintain records and to make them 

available to the Department upon 

request. The Department believes that 

the burden associated with maintaining 

the records is exempt under 5 CFR 

1320.3(b)(2) as this burden is part of a 

usual and customary business practice; 

the time, effort, and financial resources 

necessary to comply with a collection of 

information that would be incurred by 

persons in the normal course of their 

activities (for example, in compiling and 

maintaining business records) will be 

excluded from the ‘‘burden’’ if the 

agency demonstrates that the reporting, 

recordkeeping, or disclosure activities 

needed to comply are usual and 

customary. 

However, there is burden associated 

with making the information available 

to the Department upon request. This 

burden is described in the burden 

discussion for § 495.330. 

O. ICRs Regarding Procurement 

Standards (§ 495.348) 

Proposed § 495.348(c) states that a 

grantee must maintain written standards 

of conduct governing the performance of 

its employees engaged in the award and 

administration of contracts. The burden 

associated with this requirement is the 

time and effort necessary for a grantee 

to develop and maintain written 

standards of conduct. We estimate that 

it will take each of the 56 grantees 0.5 

hour to develop and maintain standards 

of conduct. The total estimated annual 

burden is 28 hours (56 grantees × 0.5 

hours). The annual cost burden for a 

grantee to develop and maintain 

standards of conduct is $990 (28 hours 

× $35.37 (mean hourly rate for a 

management analyst based on the May 

2008 Bureau of Labor Statistics)). 

Proposed § 495.348(e) would require 

that all grantees establish written 

procurement procedures. At a 

minimum, the standards must provide 

for the information listed in 

§ 495.348(e)(1) through (13). The burden 

associated with this requirement is the 

time and effort necessary for a grantee 

to develop and maintain written 

procurement procedures. We estimate 

that it will take each of the 56 grantees 

0.5 hour to develop and maintain 

written procurement procedures. The 

total estimated annual burden is 28 

hours (56 grantees × 0.5 hours). The 

annual cost burden for a grantee to 

develop and maintain written 

procurement procedures is $990 (28 

hours × $35.37 (mean hourly rate for a 

management analyst based on the May 

2008 Bureau of Labor Statistics)). 

Proposed § 495.348(f) imposes a 

recordkeeping requirements. This 

section states that a system for contract 

administration must be maintained to 

ensure contractor performance with the 

terms, conditions and specifications of 

the contract and to ensure adequate and 

timely follow up on all purchases. The 

burden associated with this requirement 

is the time and effort necessary to 

develop and maintain a system for 

contract administration. We estimate 

that it will take each of the 56 grantees 

5 hours to develop and maintain a 

system for contract administration. The 

total estimated annual burden is 280 

hours (56 grantees × 5 hours). The 

annual cost burden for a grantee to 

develop and maintain a system for 

contract administration is $9,904 (280 

hours × $35.37 (mean hourly rate for a 

management analyst based on the May 

2008 Bureau of Labor Statistics)). 

P. ICRs Regarding State Medicaid 

Agency Attestations (§ 495.350) 

Proposed § 495.350 would require 

States to provide assurances to the 

Department that amounts received with 

respect to sums expended that are 

attributable to payments to a Medicaid 

provider for the adoption of EHR are 

paid directly to such provider, or to an 

employer or facility to which such 

provider has assigned payments, 

without any deduction or rebate. The 

burden associated with this requirement 

is the time and effort necessary for a 

State to verify that the sums expended 

are attributable to payments to a 

Medicaid provider for the adoption of 

EHR are paid directly to such provider, 

or to an employer or facility to which 

such provider has assigned payments, 

without any deduction or rebate. 

Additionally, there is burden associated 

with submitting an attestation to the 

Department to that effect. The estimated 

burden associated with these 

requirements is 0.5 hour to verify the 

information and 0.5 hour to submit the 

attestation to the Department, for a total 

of 1 hour. We estimate that there will be 

approximately 50 States, the District of 

Columbia and 5 Territories per year 

verifying this information and 

submitting attestations to the 

Department. The estimated annual 

burden for States associated with the 

aforementioned submission 

requirements is 56 hours (56 StatesTerritories × 1 hours State-Territory). 

The annual cost burden for a State 

employee to provide the above 

information is $1,981 (56 hours × $35.37 

(mean hourly rate for a management 

analyst based on the May 2008 Bureau 

of Labor Statistics)). We believe that it 

is possible that a secretary may compile 

State information and provide the 

information to the Department. In that 

case the annual cost burden for the 

secretary to provide this information is 

$790 (56 hours × $14.11 (mean hourly 

rate for secretaries based on the May 

2008 Bureau of Labor Statistics)). 

Q. ICRs Regarding Reporting 

Requirements (§ 495.352) 

Proposed § 495.352 would require 

each State to submit to the Department 

on a quarterly basis a progress report 

documenting specific implementation 

and oversight activities performed 

during the quarter, including progress in 

implementing the State’s approved 

Medicaid HIT plan. The burden 

associated with this requirement is the 


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time and effort necessary for a State to 

draft and submit quarterly progress 

reports to the Department. We estimate 

that there will be approximately 50 

States, the District of Columbia, and 5 

Territories per year drafting and 

submitting the quarterly progress 

reports. For States to collect and submit 

the information required, we estimate it 

will take 5 hours per State. The 

estimated annual burden for States 

associated with the aforementioned 

submission requirements is 280 hours 

(56 States-Territories × 5 hours/StateTerritory). 

The annual cost burden for a State 

employee to provide the above 

information is $9,904 (280 hours × 

$35.37 (mean hourly rate for a 

management analyst based on the May 

2008 Bureau of Labor Statistics)). We 

believe that it is possible that a secretary 

may compile State information and 

provide the information to the 

Department. In that case the annual cost 

burden for the secretary to provide this 

information is $3,951 (280 hours × 

$14.11 (mean hourly rate for secretaries 

based on the May 2008 Bureau of Labor 

Statistics)). 

R. ICRs Regarding Retroactive Approval 

of FFP With an Effective Date of 

February 18, 2009 (§ 495.362) 

Proposed § 495.362 states that for 

administrative activities performed by a 

State, without obtaining prior approval, 

which are in support of planning for 

incentive payments to providers, a State 

may request consideration of FFP by 

recorded request in a HIT 

implementation planning advance 

planning document or implementation 

advance planning document update. 

While this requirement is subject to the 

PRA, we believe the burden is already 

covered in the discussion of proposed 

§ 495.332 through § 495.344. 

S. ICRs Regarding Financial Oversight 

and Monitoring Expenditures 

(§ 495.366) 

Proposed § 495.366(a)(2) would 

require a State to have a process in place 

to report actual expenditures for the 

Medicaid EHR payment incentive 

program using the Medicaid Budget 

Expenditure System. Since States 

already have to report Medicaid 

expenditures to the Medicaid Budget 

and Expenditure System, there is no 

need for States to develop and 

implement a reporting process. 

However, States will need to estimate 

and report the expenditures related to 

the provider incentive payments and the 

cost of the administration of the 

incentive payments. We estimate that it 

will take each of the 50 States, the 

District of Columbia and 5 Territories, 5 

hours to compile and report this 

information. The estimated annual 

burden for States associated with the 

aforementioned requirements is 280 

hours (56 States-Territories × 5 hours 

State-Territory). 

The annual cost burden for a State 

employee to provide the above 

information is $9,904 (280 hours × 

$35.37 (mean hourly rate for a 

management analyst based on the May 

2008 Bureau of Labor Statistics)). We 

believe that it is possible that a secretary 

may compile State information and 

provide the information to the 

Department. In that case the annual cost 

burden for the secretary to provide this 

information is $3,951 (280 hours × 

$14.11 (mean hourly rate for secretaries 

based on the May 2008 Bureau of Labor 

Statistics)). 

Proposed § 495.366(a)(2) would 

require a State to have an automated 

payment and information retrieval 

mechanized system (Medicaid 

Management Information System), to 

make EHR payment incentives, to 

ensure Medicaid provider eligibility, to 

ensure the accuracy of payment 

incentives, and to identify potential 

improper payments. Since States 

already have an automated payment and 

information retrieval system, there is no 

need to estimate this burden. 

Proposed § 495.366(b) lists the 

information collection requirements 

associated with provider eligibility as a 

basis for making payment. States must, 

subject to § 495.332, collect and verify 

information on Medicaid providers. 

This burden is the same as that listed 

above in the discussion of § 495.316. 

Proposed § 495.366(c) discusses 

information collection requirements 

pertaining to meaningful use and efforts 

to adopt, implement, or upgrade to 

certified electronic health record 

technology to make payment. 

Specifically, proposed § 495.366(c)(1) 

states that subject to § 495.332, the State 

must annually collect and verify 

information regarding the efforts to 

adopt, implement, or upgrade certified 

EHR technology and the meaningful use 

of said technology before making any 

payments to providers. This burden has 

already been discussed in our burden 

explanation for § 495.10. 

Proposed § 495.366(d)(1) states that 

subject to paragraph § 495.332, the State 

must assure that State expenditures are 

claimed in accordance with, including 

but not limited to, applicable Federal 

laws, regulations and policy guidance. 

Proposed § 495.366(d)(2) specifies that 

subject to § 495.332, the State must have 

a process in place to assure that 

expenditures for administering the 

Medicaid EHR incentive payment 

program will not be claimed at amounts 

higher than 90 percent of the cost of 

such administration. Proposed 

§ 495.366(d)(3) states that subject to 

§ 495.332, the State must have a process 

in place to assure that expenditures for 

payment of Medicaid EHR incentive 

payments will not be claimed at 

amounts higher than 100 percent of the 

cost of such payments to Medicaid 

providers. This burden is the same as 

that listed above in the discussion of 

§ 495.316. 

Proposed § 495.366(e) discusses the 

information collection requirements 

associated with improper Medicaid 

electronic health record payment 

incentives. The burden associated with 

the requirements listed in proposed 

§ 495.366(e)(1) through (7) is the time 

and effort necessary to develop 

processes to provide the necessary 

assurances discussed in this section. 

This burden is the same as that listed 

above in the discussion of § 495.316. 

T. ICRs Regarding Appeals Process for 

a Medicaid Provider Receiving 

Electronic Health Record Incentive 

Payments (§ 495.370) 

Proposed § 495.370(a) would require 

states to have a process in place 

consistent with the requirements 

established in § 447.253(e) of this 

chapter for a provider or entity to appeal 

incentive payments, incentive payment 

amounts, provider eligibility 

determinations, and the demonstration 

of adopting, implementing, or upgrading 

and meaningful use of certified EHR 

technology. This burden is the same as 

that listed above in the discussion of 

§ 495.316. 

These numbers are subject to a 

substantial amount of uncertainty and 

actual experience may be significantly 

different. The range of possible 

experience is greater than under most 

other rules for the following reason; 

specifically, this rule provides the 

option for States to participate in the 

Medicaid certified electronic health 

record technology incentive payment 

program. To the extent that States 

participate more or less than assumed 

here (that is, the number of States, EPs 

and hospitals) the burden associated 

may be greater than or less than 

estimated. 

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If you comment on these information 

collection and recordkeeping 

requirements, please do either of the 

following: 

Submit your comments electronically 

as specified in the ADDRESSES section of 

this proposed rule; or submit your 

comments to the Office of Information 

and Regulatory Affairs, Office of 

Management and Budget, Attention: 

CMS Desk Officer, [CMS–0033–P— 

Meaningful Use] Fax: (202) 395–5806; or 

E-mail: OIRA_submission@omb.eop.gov. 

IV. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

V. Regulatory Impact Analysis 

A. Overall Impact 

We have examined the proposed 

impacts of this rule as required by 

Executive Order 12866, the Regulatory 

Flexibility Act (RFA), section 1102(b) of 

the Social Security Act regarding rural 

hospital impacts, the Unfunded 

Mandates Reform Act, Executive Order 

13132 on Federalism, and the 

Congressional Review Act. 

Executive Order 12866 directs 

agencies to assess all costs and benefits 

of available regulatory alternatives and, 

if regulation is necessary, to select 

regulatory approaches that maximize 

net benefits (including potential 

economic, environmental, public health 

and safety effects, distributive impacts, 

and equity). A regulatory impact 

analysis (RIA) must be prepared for 

rules with economically significant 

effects ($100 million or more in any 1 

year). This proposed rule is anticipated 

to have an annual effect on the economy 

of $100 million or more, making it an 

economically significant rule under the 

Executive Order and a major rule under 

the Congressional Review Act. 

Accordingly, we have prepared a RIA 

that to the best of our ability presents 

the costs and benefits of the proposed 

rule. We request comments on the 

analysis provided in this proposed rule. 

This proposed rule is one of three 

coordinated rulemakings undertaken to 

implement the goals and objectives of 

the HITECH Act related to the adoption 

and meaningful use of certified EHR 

technology. The other two are HHS’s 

interim final rule establishing 

certification criteria, standards, and 

implementation specifications for 

certification of EHR systems, and the 

proposed rule on EHR certification 

programs. Each rule will assess the 

direct economic effects of the provisions 

it creates. This proposed rule on 

Medicare and Medicaid EHR Incentive 

Programs addresses the impacts related 

to the actions taken by EPs or eligible 

hospitals to become meaningful users of 

certified EHR technology, including 

purchasing or developing in-house 

certified EHR technology or EHR 

technology modules. 

A number of factors will affect the 

adoption of EHR systems and 

demonstration of meaningful use. Many 

of these are addressed in this analysis. 

Readers should understand that these 

forecasts are subject to substantial 

uncertainty. Demonstration of 

meaningful use will depend in part on 

the final provisions of these three 

rulemakings, which will depend in turn 

on comments we now solicit but have 

not yet received. These three rules deal 

primarily with standards and 

requirements for FYs 2011 and 2012, 

but overall rates of meaningful use of 

certified EHR technology will depend in 

part on future rulemakings issued by the 

HHS. 

The HITECH Act provides incentives 

for the meaningful use of certified EHR 

technology. Additionally, the Medicaid 

program also provides incentives for the 

adoption, implementation, and upgrade 

of certified EHR technology. Payment 

adjustments are incorporated into the 

Medicare program for providers unable 

to demonstrate meaningful use. The 

absolute and relative strength of these is 

unclear. For example, a provider with 

relatively small Medicare billings will 

be less disadvantaged by payment 

adjustments than one with relatively 

large Medicare billings. Another 

uncertainty arises because there are 

likely to be ‘‘bandwagon’’ effects as the 

number of providers using EHRs rises, 

thereby inducing more participation in 

the incentives program, as well as 

greater adoption by entities (for 

example, clinical laboratories) that are 

not eligible for incentives or subject to 

penalties, but do business with EHR 

adopters. It is impossible to predict 

exactly if and when such effects may 

take hold. 

One legislative uncertainty arises 

because under current law, physicians 

are scheduled for massive payment 

reductions under the sustainable growth 

rate (SGR) formula for determining 

Medicare payments. Under the current 

law, physician payments will be 

reduced by at least 21 percent beginning 

in CY 2010. Such reductions would 

almost certainly cause major changes in 

physician behavior, enrollee care, and 

other Medicare provider payments, but 

the specific nature of these changes is 

exceptionally uncertain. Under a 

current law scenario, the EHR 

incentives or payment adjustments 

would exert only a minor influence on 

physician behavior relative to these very 

large payment reductions. However, the 

Congress has legislatively avoided 

physician payment reductions in each 

of the past 7 years. Behavioral changes 

resulting from these scheduled 

physician payment reductions are not 

included in our estimate and likewise 

we do not assume any additional 

behavioral changes from EHR incentive 

payments for physicians. 

All of these factors taken together 

make it impossible to predict with 

precision the timing or rates of adoption 

and ultimately meaningful use. 

Therefore, we present a range of 

estimates, which capture how different 

scenarios will impact overall costs. Our 

‘‘high’’ scenario of meaningful use 

demonstration assumes that roughly a 

decade from now, nearly 100 percent of 

hospitals and 70 percent of EPs will be 

‘‘meaningful users’’ in the Medicare EHR 

incentive program. This estimate is 

based on the substantial economic 

incentives created by the combined 

direct and indirect factors affecting 

providers. We appreciate that in the real 

world nothing is ever 100 percent, and 

can even identify factors that would 

certainly lead providers to forego 

implementing an EHR. For example, a 

physician nearing retirement with a low 

Medicare caseload might well decide to 

accept the relatively low adverse 

consequences of declining to 

demonstrate meaningful use of certified 

EHR technology. Alternatively, EPs and 

eligible hospitals and CAHs may choose 

not to adopt EHRs if the total costs of 

purchasing certified EHRs and the total 

costs of complying with this rule are 

higher than the value of the total EHR 

incentive payments (and adjustments, if 

applicable). However, we have no 

reliable basis for estimating the rate of 

such ‘‘holdouts.’’ To emphasize the 

uncertainties involved, we have also 

created a ‘‘low’’ estimate for the 

demonstration of meaningful use each 

year. This might best be viewed as a 

more pessimistic view of the rate at 

which adoption approaches 100 

percent. 

Both the high and low estimates are 

based on current law. That is, we 

assume that the incentive payments and 

potential reimbursement reductions set 

forth in the HITECH Act will remain 

unchanged. We also assume that the 

scheduled physician payment 


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reductions will occur. We appreciate 

that this assumption reflects the 

standard practice used in forecasts of 

government spending (including effects 

on the private sector) by the Boards of 

Trustees for the Hospital Insurance and 

Supplementary Medical Insurance Trust 

Funds, the Social Security trustees, the 

Office of the Actuary in HHS, and the 

Congressional Budget Office. However, 

we note that if this assumption is 

rendered invalid by future 

Congressional action, the combination 

of positive and negative incentives in 

the HITECH Act are such that we 

believe adoption rates would differ from 

those estimated in this RIA. 

There are many estimates of current 

EHR adoption and usage rates. There are 

at least two EHR functions— 

e-prescribing and billing—for which 

adoption and usage rates for both 

physicians and hospitals may exceed 50 

percent. However, high estimates are 

misleading because they focus on 

particular elements, not on 

comprehensive systems that provide a 

full range of functions, similar in scope 

to those established in the companion 

interim final rule that adopts standards, 

implementation specifications, and 

certification criteria for the technical 

requirements and capabilities that EHR 

systems will need to meet in order to be 

certified. Based on several peerreviewed studies, only a small 

proportion of physicians and hospitals 

have invested in EHR technology that 

encompasses such a broad range of 

functions. For example, a study entitled 

‘‘Electronic Health Records in 

Ambulatory Care—A National Survey of 

Physicians’’ (Catherine DesRoches et al., 

New England Journal of Medicine, July 

3, 2008), found that in 2007 only ‘‘four 

percent of physicians reported having 

an extensive, fully functional electronicrecords system, and 13 percent reported 

having a basic system.’’ (Additional 

results from the same survey can be 

found at the Department’s Health IT 

Adoption Initiative Web site at http:// 

healthit.hhs.gov/portal/server.pt?

open=512&mode=2&cached=true&

objID=1152) Another study entitled 

‘‘Use of Electronic Health Records in 

U.S. Hospitals’’ (Ashish Jha et al., New 

England Journal of Medicine, April 16, 

2009) found that in 2007 ‘‘only 1.5 

percent of U.S. hospitals have a 

comprehensive electronic-records 

system * * * and an additional 7.6 

percent have a basic system.’’ 

Computerized order entry for drugs was 

fully implemented in only 17 percent of 

hospitals. 

Most physicians and hospitals have 

not yet invested in the hardware, 

software, testing and training to 

implement EHRs for a number of 

reasons—lack of standards, lack of 

interoperability, limited physician 

acceptance, fear of maintenance costs, 

and lack of capital. Perhaps most 

importantly, adoption of EHR 

technology necessitates major changes 

in business processes and practices 

throughout a provider’s office or facility. 

Business process reengineering on such 

a scale is not undertaken lightly. 

However, the availability of the HITECH 

Act incentives, grants for technical 

support, more consistent use of 

standards and specified certification 

criteria, and other factors addressed in 

this RIA are sure to increase the 

adoption of EHR technology very 

substantially over the next 10 years— 

perhaps approaching complete adoption 

for physicians, hospitals, and many 

other types of providers. 

Section II. of this proposed rule 

describes the categories of EPs, eligible 

hospitals, and CAHs under Medicare 

and Medicaid, and outlines the 

eligibility criteria, so those details are 

not repeated here. 

Overall, we expect spending under 

the EHR incentive program for transfer 

payments to Medicare and Medicaid 

providers to be between $14 and $27 

billion over 10 years (these estimates 

include net payment adjustments for 

providers who do not achieve 

meaningful use in 2015 and beyond in 

the amount of ¥$2.3 billion to ¥$5.1 

billion). We have also estimated ‘‘per 

entity’’ costs for EPs and eligible 

hospitals, which aggregate to total 

spending. We estimate also that 

adopting entities will achieve dollar 

savings at least equal to their total costs, 

and that there will be additional 

benefits to society whose magnitude is 

uncertain, but will certainly be many 

billions of dollars over time. 

While implementation costs will be 

significant for each participating entity, 

we anticipate that the short-term costs 

to demonstrate meaningful use of 

certified EHR technology will be 

outweighed by the long-term benefits, 

including practice efficiencies and 

improvements in medical outcomes. 

Although both cost and benefit 

estimates are highly uncertain, we have 

prepared a RIA that to the best of our 

ability presents the costs and benefits of 

the proposed rulemaking. 

B. Regulatory Flexibility Analysis 

The Regulatory Flexibility Act (RFA) 

requires agencies to prepare an Initial 

Regulatory Flexibility Analysis to 

describe and analyze the impact of 

proposed rule on small entities unless 

the Secretary can certify that the 

regulation will not have a significant 

impact on a substantial number of small 

entities. In the healthcare sector, Small 

Business Administration size standards 

define a small entity as one with 

between $7 million and $34 million in 

annual revenues. For the purposes of 

the RFA, essentially all non-profit 

organizations are considered small 

entities, regardless of size. Individuals 

and States are not included in the 

definition of a small entity. Since the 

vast majority of Medicare providers 

(well over 90 percent) are small entities 

within the RFA’s definitions, it is the 

normal practice of HHS simply to 

assume that all affected providers are 

‘‘small’’ under the RFA. In this case, 

most healthcare EPs, eligible hospitals, 

and CAHs are either non-profit or meet 

the SBA’s size standard for small 

business. We also believe that the effects 

of the incentives program on many and 

probably most of these affected entities 

will be economically significant. 

Accordingly, this RIA section, in 

conjunction with the remainder of the 

preamble, constitutes the required 

Initial Regulatory Flexibility Analysis. 

We welcome comments on the analysis. 

We believe that the adoption of EHRs 

will have an impact on virtually every 

EP and eligible hospital, as well as 

CAHs and some physicians and 

hospitals affiliated with MA plans. 

While the program is voluntary, in the 

first 5 years it carries substantial 

positive incentives that will make it 

attractive to virtually all eligible 

entities. Furthermore, entities that do 

not demonstrate meaningful use of EHR 

technology will be subject to significant 

Medicare payment reductions after the 

fifth year. The anticipation of these 

Medicare payment adjustments will also 

motivate EPs, eligible hospitals, and 

CAHs to adopt and meaningfully use 

certified EHR technology. 

For some EPs and eligible hospitals, 

the EHR technology that they have in 

place before the HITECH requirements, 

will be able to be upgraded to meet the 

criteria for certified EHR technology as 

defined for this program. These costs 

may be minimal, involving no more 

than a software upgrade. ‘‘Home-grown’’ 

EHR systems that might exist will also 

require an upgrade to meet the HITECH 

certification requirements. 

We believe that most EPs using EHR 

systems will require significant changes 

to achieve certification and/or the EPs 

will have to make process changes to 

achieve meaningful use. Further, given 

what we know about the current low 

levels of EHR adoption, we believe that 

the majority of EPs will need to 

purchase certified EHR technology and 

implement this new technology and 

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costs for implementation and complying 

with the criteria of meaningful use 

could lead to higher operational 

expenses. However, we believe that the 

combination of payment incentives and 

long-term overall gains in efficiency will 

compensate for the initial expenditures. 

Additionally EPs and eligible hospitals 

will have to demonstrate meaningful 

use of their certified EHR technology as 

defined in the preamble. Since the 

definition for stage 1 meaningful use has 

not yet been finalized and may be 

altered due to public comment, it is 

difficult to determine how hard it will 

be for providers to achieve meaningful 

use. 

1. Number of Small Entities 

In total, we estimate that there are 

approximately 624,000 healthcare 

organizations (EPs or eligible hospitals) 

that will be affected by the incentive 

program. These include hospitals and 

physician practices as well as doctors of 

medicine or osteopathy, dental surgery 

or dental medicine, podiatric medicine, 

optometry or a chiropractor. 

Additionally, eligible non-physicians 

(such as certified nurse-midwives, etc.) 

will be eligible to receive the Medicaid 

incentive payments. 

Of the 624,000 healthcare 

organizations we estimate will be 

affected by the incentive program, we 

estimate that 94.71 percent will be EPs, 

0.8 percent will be hospitals, and 4.47 

percent will be MAO physicians or 

hospitals. We further estimate that EPs 

will spend approximately $54,000 to 

purchase a certified EHR and $10,000 

annually for ongoing maintenance, 

while we estimate the hospitals will 

spend approximately $5 million to 

purchase a certified EHR and $1 million 

annually for ongoing maintenance. See 

the Assumptions section (section V.G.3 

of this proposed rule) for details on our 

estimates for the number of entities that 

are eligible for the incentive, within 

each eligibility type category (EPs and 

eligible hospitals). 

2. Alternatives Considered 

This proposed rule implements new 

provisions of the Act for providing 

incentives for EPs, eligible hospitals, 

and CAHs that adopt and meaningfully 

use certified EHR technology. HHS has 

no discretion to change the incentive 

payments or payment reductions 

specified in the statute for providers 

that adopt or fail to adopt EHR and 

achieve meaningful use of EHR 

technology. The only substantial 

alternatives within the discretion of the 

Department revolve around how best to 

meet the requirements of the HITECH 

Act regarding requirements for 

meaningful use for FY 2011 and beyond. 

Requirements that are too stringent 

could have the adverse effect of 

preventing many EPs, eligible hospitals, 

and CAHs from achieving meaningful 

use and thus preventing them from 

receiving an incentive payment. Our 

meaningful EHR use requirements for 

2011 are designed to encourage more 

widespread adoption of certified EHR 

technology and allow more EPs, eligible 

hospitals, and CAHs to qualify for 

incentives while they are also adjusting 

their practice patterns and training staff 

to operate the EHR technology in 

preparation for more stringent 

meaningful use requirements over time. 

We recognize that there may be 

incremental costs that result from 

requiring additional functionality over 

the base level defined in the ARRA. For 

example, ARRA does not require 

certified EHRs to include functionalities 

associated with administrative 

simplification, but we have proposed 

them in this rule. We have not been able 

to find research that allows us to 

quantify these incremental costs and 

request comments on possible estimates 

or further sources of information that 

will help us develop estimates. 

We note that with regard to reporting 

of quality measures for purposes of 

demonstrating meaningful use, we 

considered requiring EPs, eligible 

hospitals, and CAHs to report quality 

measures electronically in the initial 

year of the program; however, 

ultimately we determined that many 

providers would not be able to comply 

with a requirement to report all quality 

measures at the beginning of the 

program. The alternative approach, 

consistent with the requirements of this 

proposed rule, is to require reporting of 

quality measures in phases. In 2011, 

there will be a requirement to report 

quality measures through attestation 

with a numerator and denominator. 

Electronic quality measure reporting 

will begin in CY 2012. Additional 

quality measure reporting will be added 

in later years. 

Under Medicaid, we considered 

numerous alternatives regarding how to 

demonstrate eligibility for the incentive 

payments as well as adoption and 

meaningful use of the certified EHR 

technology. These alternatives, 

including the period for demonstrating 

adequate patient volume, and the 

requirements and methods for 

demonstrating meaningful use are 

discussed in section II.D. of this 

proposed rule. 

3. Conclusion 

As discussed later in this analysis, we 

believe that there are many positive 

effects of adopting EHR on health care 

providers, quite apart from the incentive 

payments to be provided under this 

rule. While economically significant, we 

do not believe that the net effect on 

individual providers will be negative 

over time except in very rare cases. (The 

statute provides for hardship exemption 

in such cases.) Accordingly, we believe 

that the object of the RFA to minimize 

burden on small entities are met by this 

rule as proposed. We invite public 

comments on the analysis and request 

any additional data that would help us 

determine more accurately the impact 

on the EPs and eligible hospitals 

affected by the proposed rule. 

C. Small Rural Hospitals 

Section 1102(b) of the Act requires us 

to prepare a RIA if a rule would have 

a significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 603 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside of 

a metropolitan statistical area and has 

fewer than 100 beds. This proposed rule 

would affect the operations of a 

substantial number of small rural 

hospitals because they are required to 

adopt certified EHR technology by 2015, 

or face adjusted payments. As stated 

above, we have determined that this 

proposed rule would create a significant 

impact on a substantial number of small 

entities, and have prepared a Regulatory 

Flexibility Analysis as required by the 

RFA and, for small rural hospitals, 

section 1102(b) of the Act. Furthermore, 

any impacts that would arise from the 

implementation of certified EHR 

technology in a rural eligible hospital 

would be positive, with respect to the 

streamlining of care and the ease of 

sharing information with other EPs to 

avoid delays, duplication, or errors. 

D. Unfunded Mandates Reform Act 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

requires that agencies assess anticipated 

costs and benefits before issuing any 

rule whose mandates would require 

spending in any 1 year $100 million in 

1995 dollars, updated annually for 

inflation. In 2009, that threshold is 

approximately $130 million. UMRA 

does not address the total cost of a rule. 

Rather, it focuses on certain categories 

of cost, mainly those ‘‘Federal mandate’’ 

costs resulting from—(1) imposing 

enforceable duties on State, local, or 

tribal governments, or on the private 

sector, or (2) increasing the stringency of 

conditions in, or decreasing the funding 


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of, State, local, or tribal governments 

under entitlement programs. 

This rule imposes no substantial 

mandates on States. The State role in 

the incentive program is essentially to 

administer the Medicaid incentive 

program. While this entails certain 

procedural responsibilities, these do not 

involve substantial State expense. In 

general, each State Medicaid Agency 

that participates in the incentive 

program will be required to invest in 

systems and technology to comply— 

States will have to identify and educate 

providers, evaluate their attestations 

and pay the incentive. However, the 

Federal government will fund 90 

percent of the cost, providing controls 

on the total State outlay. 

The investments needed to meet the 

meaningful use standards and obtain 

incentive funding are voluntary, and 

hence not ‘‘mandates’’ within the 

meaning of the statute. However, the 

potential reductions in Medicare 

reimbursement after FY 2015 are 

effectively mandates. We note that we 

have no discretion as to those potential 

payment reductions. Private sector EPs 

that voluntarily choose not to 

participate in the program may 

anticipate potential costs in the 

aggregate that may exceed $130 million; 

however, because EPs may choose for 

various reasons not to participate in the 

program, we do not have firm data for 

the percentage of participation within 

the private sector. 

This RIA, taken together with the 

remainder of the preamble, constitutes 

the analysis required by UMRA. We 

welcome comments on any aspects of 

this proposed rule that mandate costs 

that could be reduced or ameliorated. 

E. Federalism 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

This proposed rule would not have a 

substantial direct effect on State or local 

governments, preempt State law, or 

otherwise have a Federalism 

implication. Importantly, State 

Medicaid agencies are receiving 100 

percent match from the Federal 

government for incentives paid and a 90 

percent match to administer the 

program. As previously stated, we 

believe that those administrative costs 

are minimal. We note that this proposed 

rule does add a new business 

requirement for States, because of the 

systems that will need to be 

implemented to track and report on 

provider attestations, applications, and 

payments. States will also expend funds 

on the systems that must be built to 

conduct the tracking and reporting 

activities. However, the Federal share of 

the 90 percent match will protect the 

States from burdensome financial 

outlays. 

F. Anticipated Effects 

The objective of the remainder of this 

RIA is to summarize the costs and 

benefits of the HITECH incentive 

program for the Medicare FFS, 

Medicaid, and Medicare Advantage 

(MA) programs. We also provide 

assumptions and a narrative addressing 

the potential costs to the industry for 

implementation of this technology. 

G. HITECH Impact Analysis 

1. Need for Regulation 

This proposed rule would implement 

the provisions of the American 

Recovery and Reinvestment Act of 2009 

(ARRA) (Pub. L. 111–5) that provide 

incentive payments to eligible 

professionals (EPs) and eligible 

hospitals participating in Medicare and 

Medicaid programs that adopt and 

meaningfully use certified electronic 

health record (EHR) technology. The 

proposed rule would specify the—initial 

criteria an EP and eligible hospital must 

meet in order to qualify for the incentive 

payment; calculation of the incentive 

payment amounts; payment adjustments 

under Medicare for covered professional 

services and inpatient hospital services 

provided by EPs and eligible hospitals 

failing to meaningfully use certified 

EHR technology; and other program 

participation requirements. 

2. Alternatives Considered 

As previously discussed in the 

alternatives section of the regulatory 

flexibility analysis, HHS has no 

discretion to change the incentive 

payments or payment reductions 

specified in the statute for providers 

that adopt or fail to adopt EHR and 

achieve meaningful use of EHR 

technology. However, the Department 

has discretion around how best to meet 

the HITECH Act requirements for 

meaningful use for FY 2011 and beyond. 

We recognize that there may be 

additional costs that result from various 

discretionary policy choices such as 

requiring additional functionality over 

the base level defined in the ARRA. For 

example, ARRA does not require 

certified EHRs to include functionalities 

associated with administrative 

simplification, but we have proposed 

them in this rule. While ARRA also 

requires that certified EHRs have the 

capability to support CPOE, we have 

used our discretion in developing the 

‘‘CPOE use’’ measure discussed in 

section III. 

We have not been able to find 

research that allows us to quantify these 

incremental costs and request comments 

on possible estimates or further sources 

of information that will help us develop 

estimates (please refer to the analysis 

below as well as to the rightmost 

column in Table 33). In addition, we 

welcome information on benefits of 

specific provisions of this rule so that 

we can conduct, for the final rule, a 

more robust assessment of alternatives 

comparing incremental costs and 

benefits of each requirement. 

3. Background and Assumptions 

The principal costs of this proposed 

rule are the additional expenditures that 

will be undertaken by eligible entities in 

order to obtain the Medicare and 

Medicaid incentive payments to adopt 

and demonstrate meaningful use of 

certified EHR technology, and to avoid 

the Medicare payment adjustments that 

will ensue if they fail to do so. The 

estimates for the provisions affecting 

Medicare and Medicaid EPs, eligible 

hospitals, and CAHs are somewhat 

uncertain for several reasons: (1) The 

program is voluntary although payment 

adjustments will be imposed on 

Medicare providers who are unable to 

demonstrate meaningful use starting in 

2015; (2) the criteria for the 

demonstration of meaningful use of 

certified EHR technology have not been 

finalized and will change over time; (3) 

HHS has not yet defined certified EHR 

technology; (4) the impact of the 

financial incentives and payment 

adjustments on the rate of adoption of 

certified EHR technology by EPs, 

eligible hospitals, and CAHs, is difficult 

to predict; and (5) the ultimate impact 

of certified EHR technology on 

expenditures for medical treatments (for 

example, reducing errors, expedited 

treatment) cannot be known with 

certainty at this time. The net costs and 

savings shown for this program 

represent a range of possible scenarios, 

and actual impacts could differ. We 

welcome public input on all aspects of 

the costs and benefits of this proposed 

rule. 

As written in the preamble, this 

proposed rule describes the incentive 

payments for EPs, eligible hospitals, and 

CAHs for adopting and demonstrating 

meaningful use of certified EHR 

technology. This impact analysis 

addresses the costs and benefits to the 

Medicare and Medicaid programs, as 


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well as general implementation costs for 

eligible hospitals and EPs. 

Detailed information about the 

incentive program, the specific payment 

amounts and how those payments will 

be paid, is provided in section II. of this 

proposed rule. Based on input from a 

number of internal and external sources, 

including the Government 

Accountability Office (GAO) and CBO, 

we calculated the numbers of EPs and 

eligible hospitals under Medicare, 

Medicaid, and MA and used them 

throughout the analysis. 

• About 553,200 original Medicare 

FFS EPs in 2011 (some of which will 

also be Medicaid EPs). 

• About 27 percent of the total EPs 

are hospital-based Medicare EPs, and 

are not eligible for the program. This 

leaves approximately 404,400 

nonhospital-based Medicare EPs in 

2011. 

• Twenty percent of the nonhospitalbased Medicare EPs (approximately 

80,900 Medicare EPs in 2011) are also 

eligible for Medicaid (meet the 30 

percent Medicaid patient volume 

criteria) but can only be paid under one 

program. Any EP in this situation will 

choose to receive the Medicaid 

incentive payment, because it is larger. 

• About 38,200 non-Medicare eligible 

EPs (such as dentists, pediatricians, and 

eligible non-physicians such as certified 

nurse-midwives, nurse practitioners and 

physicians assistants) will be eligible to 

receive the Medicaid incentive 

payments. 

• 5,011 eligible hospitals, comprised 

of the following: 

++ 3,620 acute care hospitals. 

++ 1,302 CAHs (Medicare only). 

++ 78 children’s hospitals (Medicaid 

only). 

++ 11 cancer hospitals (Medicaid 

only). 

• All eligible hospitals, except for 

children’s and cancer hospitals, may 

qualify and apply for both Medicare and 

Medicaid incentive payments. 

• 12 MA Organizations (about 28,000 

EPs, and 29 hospitals) would be eligible 

for incentive payments. 

• Payments can begin as early as FY 

2011. 

4. Industry Costs and Adoption Rates 

To estimate the impact on healthcare 

providers we used information from 

four studies cited previously. Based on 

these studies, we estimate for EPs, the 

average adopt/implement/upgrade cost 

is $54,000 per physician FTE, while 

annual maintenance costs average 

$10,000 per physician FTE. For all 

eligible hospitals, the range is from $1 

million to $100 million. Though reports 

vary widely, we anticipate that the 

average would be $5 million for 

installation. We estimate $1 million for 

maintenance, upgrades, and training 

each year. Though we cite these existing 

studies, we realize that these estimates 

vary widely, in part, because different 

providers have adopted different types 

of EHRs, each with their own set of 

functionalities. Because providers who 

would like to qualify as ‘‘meaningful 

users’’ of EHRs will need to purchase 

‘‘certified EHRs,’’ we further 

acknowledge that ‘‘certified EHRs’’ may 

differ in many important respects from 

the types of EHRs used in these studies 

and the functionalities they contained. 

For that reason, we welcome industry 

input on the costs of implementing and 

maintaining certified EHR technology. 

We would be particularly interested in 

estimates of what a ‘‘qualified EHR’’ as 

defined in ARRA would cost (that is, an 

EHR with the capability to collect and 

store patient demographic data and 

support CPOE, clinical decision 

support, and registry functions) for both 

EPs and hospitals. To the extent that 

there may be additional costs that result 

from various discretionary policy 

choices in this rulemaking, such as 

requiring additional functionality over 

the base level defined in the ARRA, we 

would be interested to know what those 

incremental additional costs may be. 

Industry costs are important, in part, 

because EHR adoption rates will be a 

function of these industry costs and the 

extent to which the costs of ‘‘certified 

EHRs’’ are higher than the total value of 

EHR incentive payments available to 

EPs and eligible hospitals (as well as 

adjustments, in the case of the Medicare 

EHR incentive program) and any 

perceived benefits including societal 

benefits. Because of the uncertainties 

surrounding industry cost estimates, we 

have made various assumptions about 

adoption rates in the following analysis 

in order to estimate the budgetary 

impact on the Medicare and Medicaid 

programs. We welcome comments on 

our estimates, including costs estimates 

and adoption rate estimates. 

For an eligible Medicaid EP, the first 

year incentive is based in part on the 

adoption, implementation, and upgrade 

costs. Previously, we noted that section 

1903(t)(4)(C) of the Act gives the 

Secretary the authority to determine 

average allowable costs for certified 

EHR technology. The Secretary is to 

study average costs associated with the 

purchase, initial implementation, and 

upgrade of certified EHR technology, 

including support services and initial 

training. 

Sections 1903(t)(1)(A) and 1903(t)(4) 

of the Act specify that EPs may not 

receive incentive payments in excess of 

85 percent of the net average allowable 

costs of certified EHR technology, with 

such net average allowable costs capped 

at $25,000 in the first year (for the 

purchase, implementation or upgrade of 

certified EHR technology) and $10,000 

in each of the subsequent years. 

a. Costs of EHR Adoption for EPs 

Previously, we described four studies 

used to estimate costs of 

implementation including the purchase 

and installation of hardware and 

software, training, as well as 

productivity losses associated with 

implementation and training. Each of 

these studies was conducted several 

years ago, and did not control for type 

of EHR, functionality, physician 

practice type or size. Furthermore, EHRs 

were not being built against any 

particular consensus standard, nor was 

the concept of ‘‘meaningful use’’ a factor. 

Thus, the cost of implementing and 

maintaining certified EHR technology 

which meets the requirements 

established in this regulation might 

exceed the estimates from these studies. 

One average estimate of the cost per 

physician for implementation is around 

$35,000. Therefore, in a practice with 

five physicians, the cost could be 

$175,000. A similar study of community 

health centers estimated costs to average 

$54,000 per physician FTE. In this 

study, the authors explained that 

implementation costs varied between 

entities for hardware, software, 

installation, and training. After 

implementation, there were ongoing 

operating costs estimated at $21,000 per 

year for a practice of four physicians. 

The CBO paper, Evidence on the Costs 

and Benefits of Health Information 

Technology, May 2008, in attempting to 

estimate the total cost of implementing 

health IT systems in office-based 

medical practices, recognized the 

complicating factors of EHR types, 

available features and differences in 

characteristics of the practices that are 

adopting them. The CBO estimated a 

cost range of $25,000 to $45,000 per 

physician. In the CBO study, operating 

costs added $3,000 to $9,000 per 

physician per year. Finally, a 2005 

paper from AHRQ stated that the 

average purchase and implementation 

cost of an EHR could be $32,606 per 

FTE physician. Maintenance costs were 

an additional $1,500 per physician, per 

month, or $18,000 per year. Smaller 

practices had the highest 

implementation costs per physician at 

$37,204. Based on the studies cited, 

eligible providers will be eligible to 

receive the maximum incentive 

permitted under the statute, because the 

implementation and maintenance costs 


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we have estimated exceed the caps for 

net average allowable costs set in the 

statute. 

In calculating the impact of the EHR 

incentive program for Medicaid EPs, we 

assumed that approximately 20 percent 

of the EPs eligible for the Medicare 

incentive payment program are also 

eligible for Medicaid EHR incentive 

payments (about 80,000 in 2011). Since 

the Medicaid incentive payments are 

higher than those for Medicare are and 

EPs can only receive payments from on 

program, we assume the dually eligible 

EPs will receive their payments through 

the Medicaid program. Medicaid also 

offers incentive payments for 

pediatricians, dentists, certified nursemidwives, nurse practitioners and 

certain physicians’ assistants. While 

minimal, we have incorporated the sum 

of these groups in Table 51. We have 

estimated a range of Medicaid EPs that 

will be meaningful users each calendar 

year. The last line represents the range 

of predicted meaningful EHR users each 

calendar year. The Medicaid penetration 

rate for EPs is consistent with the 

analysis that was used for the Medicare 

EPs, but without the behavioral 

limitations imposed by the Medicare 

current statute SGR payment reductions. 

We assumed a modest behavioral 

response by Medicaid EPs to the 

Medicaid incentive payments resulting 

in an increase over baseline 

participation. 

b. Costs of EHR Adoption for Eligible 

Hospitals 

In 2006, the AHA conducted a survey 

to evaluate annual hospital costs: the 

range was enormous—ranging from 

$30,500 to $93.8 million, with a median 

amount of $3.8 million. In another 

article from HealthDayNews, EHR 

system costs were reported by experts to 

run as high as $20 million to $100 

million; HHS discussions with experts 

led to cost ranges for adoption that 

varied by hospital size and level of EHR 

system sophistication. Research to date 

has shown that adoption of 

comprehensive EHR systems is limited. 

In the AHA study, nearly 3,050 U.S. 

hospitals were surveyed about the use of 

EHR systems. Only 1.5 percent of these 

organizations had comprehensive 

systems, which were defined as 

hospital-wide clinical documentation of 

cases, test results, prescription and test 

ordering, plus support for decisionmaking that included treatment 

guidelines. Almost eight percent of 

hospitals had an EHR system that 

includes physician and nursing notes, 

but these systems did not have decision 

support. Some 10.9 percent have a basic 

system that does not include physician 

and nursing notes, and can only be used 

in one area of the hospital. Researchers 

found that 17 percent of the hospitals 

had the capacity for e-prescribing, a key 

feature in any modern day system. 

According to hospital CEOs, the main 

barrier to adoption is the cost of the 

systems, and the lack of capital. 

Hospitals have been concerned that they 

will not be able to recoup their 

investment, and they are already 

operating on the smallest of margins. 

Because uptake is low, it is difficult to 

get a solid average estimate for 

implementation and maintenance costs 

that can be applied across the industry. 

Although we have provided some 

estimates on implementation/upgrade 

costs in this analysis, we recognize that 

there are additional industry costs 

associated with adoption and 

implementation of EHR technology that 

are not captured in our estimates that 

eligible entities will incur. Because the 

impact of those activities, such as 

reduced staff productivity related to 

learning how to use the EHR 

technology, the need to add additional 

staff to work with HIT issues, 

administrative costs related to reporting, 

and the like are unknown at this time 

and difficult to quantify, we invite 

public comment and additional 

information to assist in our analysis. We 

also note that there may be EPs that 

voluntarily choose not to participate in 

the program, and that those EPs may 

anticipate potential costs resulting from 

that decision. Therefore, we have set a 

placeholder in our accounting statement 

at this time and request public comment 

on industry costs on those that may or 

may not choose to implement the 

program that could inform our analysis 

for the final rule. 

We did not include cost estimates on 

Federal hospitals in this analysis, since 

the Veterans Affairs hospitals have 

already implemented comprehensive 

electronic health record systems. There 

may be costs if those systems have to be 

significantly upgraded to meet the 

certification criteria, but no estimates 

were gathered for this analysis. 

5. Medicare Incentive Program Costs 

a. Medicare Eligible Professionals (EPs) 

To determine the estimated costs of 

the Medicare incentives for EPs we first 

needed to determine the EPs with 

Medicare claims. Then, we calculated 

that about 27 percent of those EPs are 

hospital-based based on the definition 

proposed in § 495.6, and therefore, do 

not qualify for incentive payments. 

They are subtracted from the total 

number of EPs who have claims with 

Medicare. These numbers were 

tabulated from Medicare claims data. 

We have also estimated that about 20 

percent of EPs that are not hospitalbased will qualify for Medicaid 

incentive payments and will choose that 

program because the payments are 

higher. Of the remaining EPs, we have 

estimated the percentage which will be 

meaningful users each calendar year. As 

discussed previously our estimates for 

the number of EPs that will successfully 

demonstrate meaningful use of certified 

EHR technology are uncertain, so we 

established high and low scenario to 

account for high and low rates of 

demonstration of meaningful use. 

The percentage of Medicare EPs who 

will satisfy the criteria for 

demonstrating meaningful use of 

certified EHR technology and will 

qualify for incentive payments is a key, 

but highly uncertain factor. Our 

Medicare EHR adoption assumptions for 

EPs are also affected by the current 

situation with Medicare physician fee 

schedule payment rates. As noted 

previously, under current law (that is, 

the SGR system formulas), physician 

payments will be reduced by at least 21 

percent beginning in CY 2010. Such 

reductions would almost certainly cause 

major changes in physician behavior, 

enrollee care, and other Medicare 

provider payments, but the specific 

nature of these changes is exceptionally 

uncertain. Under a current law scenario, 

the EHR incentives or payment 

adjustments would exert only a minor 

influence on physician behavior relative 

to these very large payment reductions. 

Behavioral changes resulting from these 

scheduled payment reductions are not 

included in our estimate and likewise 

do not assume any additional behavioral 

changes from EHR incentive payments. 

Accordingly, the estimated number of 

nonhospital based Medicare EPs who 

will demonstrate meaningful use of 

certified EHR technology over the 

period CYs 2011 through 2019 is as 

shown in Table 35. 


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TABLE 35—MEDICARE EPS DEMONSTRATING MEANINGFUL USE OF CERTIFIED EHR TECHNOLOGY, HIGH AND LOW

SCENARIO

Calendar year 

2011 2012 2013 2014 2015 2016 2017 2018 2019 

EPs who have claims 

with Medicare (thousands) ..................... 553 .2 558 .9 564 .6 570 .3 576 .0 581 .7 587 .5 593 .3 599 .0 

Non-Hospital Based 

EPs (thousands) ..... 404 .4 408 .6 412 .7 416 .9 421 .1 425 .3 429 .5 433 .7 437 .9 

EPs that are both 

Medicare and Medicaid EPs (thousands) ..................... 80 .9 81 .7 82 .5 83 .4 84 .2 85 .1 85 .9 86 .7 87 .6 

Low Scenario: 

Percent of EPs 

who are Meaningful Users ..... 10 13 15 18 21 24 28 32 36 

Meaningful Users 

(thousands) ...... 33 .8 41 .3 49 .8 59 .5 70 .3 82 .4 95 .6 110 .0 125 .4 

High Scenario: 

Percent of EPs 

who are Meaningful Users ..... 36 40 44 49 53 58 62 66 70 

Meaningful Users 

(thousands) ...... 115 .8 131 .0 146 .8 163 .1 179 .7 196 .4 212 .9 229 .0 244 .6 

Under the HITECH Act, EPs can 

receive up to 5 years of Medicare 

incentive payments for the meaningful 

use of certified EHR technology. These 

payments are the lesser of 75 percent of 

the physician’s allowed charges for the 

year or a specified maximum amount, 

which declines from a possible $18,000 

incentive payment for the first payment 

year to a $2,000 incentive payment for 

the fifth payment year. EPs in HPSAs 

receive incentives that are 10 percent 

higher than the maximum amounts. 

Hospital-based EPs are not eligible for 

the Medicare EP incentive payments. 

EPs may choose to receive incentive 

payments from either Medicare or 

Medicaid, but not from both. 

The standard full amount of Medicaid 

incentive payments that an EP could 

receive is larger than the standard full 

amount for the Medicare EP incentive 

payments: about $65,000 versus $44,000 

for Medicare. Details about the 

Medicaid payments are described in the 

section V.G.3 of this proposed rule. 

Medicare incentive payments can first 

be paid to EPs in CY 2011; and 2012 is 

the last year that an EP can start to 

receive incentives and obtain the full 5 

years of payments. EPs who first qualify 

in CY 2013 would be limited to an 

incentive of $15,000 for the first year, 

and may be eligible to receive 4 years 

of incentive payments. EPs who first 

qualify in CY 2014 would be limited to 

an incentive of $12,000 for the first year 

and may be may be eligible to receive 

3 years of incentive payments. For the 

Medicare program, incentives are not 

payable after CY 2016, and EPs who first 

demonstrate meaningful use in CY 2015 

or later are not eligible for EHR 

incentive payments. 

Medicare payment adjustments will 

apply in CY 2015 and later to EPs who 

cannot demonstrate meaningful use of 

certified EHR technology, regardless of 

whether they received an EHR incentive 

payment or not. Specifically, the 

Medicare Physician Fee Schedule 

payments for an EP who cannot 

demonstrate meaningful use of certified 

EHR technology would be reduced by 1 

percentage point in CY 2015, two 

percentage points in CY 2016, and 3 

percentage points in CY 2017, and 

between 3 and 5 percentage points in 

starting in CY 2018. The HITECH Act 

gives the Secretary the authority, 

beginning in CY 2018, to increase these 

reductions by 1 percentage point each 

year, but not more than 5 percentage 

points overall, if the Secretary finds the 

proportion of EPs who are meaningful 

EHR users is less than 75 percent. 

Each year a transfer will be made 

between the general fund of the 

Treasury and the Part B account of the 

Supplemental Medical Insurance (SMI) 

trust fund to offset the incentives paid 

or payment adjustments made during 

the year. In this way, the Part B 

beneficiary premium will not be 

affected by the EP payment incentives. 

We estimate that there are 12 MA 

plans that might be eligible to 

participate in the EHR incentive 

program. Those plans have about 28,000 

EPs. 

Our estimates of the incentive 

payment costs and payment adjustment 

savings reflect our assumptions about 

the proportion of EPs who will 

demonstrate meaningful user of certified 

EHR technology. These assumptions 

were developed based on a review of 

recent studies and discussions with 

subject matter experts. We project that 

a growing proportion of EPs will adopt 

certified EHR technology that meets the 

standards even in the absence of the 

legislated incentives. This number 

could be higher or lower depending on 

the final meaningful use definition 

adopted, physicians’ access to capital 

and implementation expertise, the 

success of the other HITECH programs 

in reaching physicians, and other 

factors. 

Specifically, our assumptions are 

based on literature estimating current 

rates of physician EHR adoption and 

rates of diffusion of EHRs and similar 

technologies. There are a number of 

studies that have attempted to measure 

the rate of adoption of electronic 

medical records (EMR) among 

physicians prior to the enactment of the 

HITECH Act (see, for example, Funky 

and Taylor (2005) The State and Pattern 

of Health Information Technology 

Adoption. RAND Monograph MG–409. 

Santa Monica: The RAND Corporation; 

Ford, E.W., Menachemi, N., Peterson, 

L.T., Huerta, T.R. (2009) ‘‘Resistance is 

Futile: But it is Slowing the Pace of EHR 

Adoption Nonetheless’’ Journal of the 

American Informatics Association 16(3): 

274–281). We took the estimated rate of 


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EHR adoption from the study with the 

most rigorous definition, assuming that 

meaningful use would be a standard at 

least as strict as that one (DesRoches, 

CM, Campbell, EG, Rao, SR et al. (2008) 

‘‘Electronic Health Records in 

Ambulatory Care—A National Survey of 

Physicians’’ New England Journal of 

Medicine 359(1): 50–60). We then 

inflated that number (4 percent) to a 

2011 baseline using the numbers of 

physicians reporting in that survey that 

they had EHR implementation 

underway. We assumed that the same 

proportion of them would be 

implementing fully-functional EHRs as 

in the baseline (30 percent of those with 

basic systems.) We then trended this 

number forward using the trajectory 

mapped out by Ford et al. using the data 

from the period prior to FY 2004 since 

the slower rate of adoption during the 

FY 2005 through 2007 period was 

thought to be caused by policy 

uncertainty which this regulation 

should resolve. 

However, actual adoption trends 

could be significantly different from 

these assumptions, given the elements 

of uncertainty we describe throughout 

this analysis. 

The estimated net costs for the low 

scenario of the Medicare EP portion of 

the HITECH Act are shown in Table 36. 

This provision is estimated to decrease 

Part B expenditures by a net total of $0.6 

billion during FYs 2011 through 2019. 

TABLE 36—ESTIMATED COSTS (+) AND SAVINGS (¥) FOR MEDICARE EPS DEMONSTRATING MEANINGFUL USE OF

CERTIFIED EHR TECHNOLOGY, LOW SCENARIO

[In billions] 

Fiscal year Incentive 

payments 

Payment 

adjustment 

receipts 

Benefit 

payments Net total 

2009 ................................................................................................................. ........................ ........................ ........................ ........................

2010 ................................................................................................................. ........................ ........................ ........................ ........................

2011 ................................................................................................................. $0.1 ........................ ........................ $0.1 

2012 ................................................................................................................. 0.9 ........................ ........................ 0.9 

2013 ................................................................................................................. 0.8 ........................ ........................ 0.8 

2014 ................................................................................................................. 0.7 ........................ ........................ 0.7 

2015 ................................................................................................................. 0.5 ¥$0.4 ........................ 0.1 

2016 ................................................................................................................. 0.3 ¥0.6 ........................ ¥0.3 

2017 ................................................................................................................. 0.1 ¥0.9 ........................ ¥0.8 

2018 ................................................................................................................. ........................ ¥1.0 ........................ ¥1.0 

2019 ................................................................................................................. ........................ ¥1.1 ........................ ¥1.1 

Total, 2009–2014 ...................................................................................... 2.4 ........................ ........................ 2.4 

Total, 2009–2019 ...................................................................................... 3.2 ¥3.9 ........................ ¥0.6 

The estimated net costs for the high 

scenario of the Medicare EP portion of 

the HITECH Act are shown in Table 37. 

This provision is estimated to increase 

Part B expenditures by a net total of $5.4 

billion during FYs 2011 through 2019. 

TABLE 37—ESTIMATED COSTS (+) AND SAVINGS (¥) FOR MEDICARE EPS DEMONSTRATING MEANINGFUL USE OF

CERTIFIED EHR TECHNOLOGY, HIGH SCENARIO

[In billions] 

Fiscal year Incentive 

payments 

Payment 

adjustment 

receipts 

Benefit 

payments Net total 

2009 ................................................................................................................. ........................ ........................ ........................ ........................

2010 ................................................................................................................. ........................ ........................ ........................ ........................

2011 ................................................................................................................. $0.3 ........................ ........................ $0.3 

2012 ................................................................................................................. 2.2 ........................ ........................ 2.2 

2013 ................................................................................................................. 1.8 ........................ ........................ 1.8 

2014 ................................................................................................................. 1.5 ........................ ........................ 1.5 

2015 ................................................................................................................. 1.0 ¥$0.2 ........................ 0.8 

2016 ................................................................................................................. 0.6 ¥0.3 ........................ 0.2 

2017 ................................................................................................................. 0.1 ¥0.5 ........................ ¥0.4 

2018 ................................................................................................................. ........................ ¥0.5 ........................ ¥0.5 

2019 ................................................................................................................. ........................ ¥0.5 ........................ ¥0.5 

Total, 2009–2014 ...................................................................................... 5.8 ........................ ........................ 5.8 

Total, 2009–2019 ...................................................................................... 7.5 ¥2.1 ........................ 5.4 

b. Medicare Eligible Hospitals 

In brief, the estimates of hospital 

adoption were developed by calculating 

projected incentive payments (which 

are driven by discharges), comparing 

them to projected costs of attaining 

meaningful use, and then making 

assumption about how rapidly hospitals 

would adopt given the fraction of their 

costs that were covered. 

Specifically, the first step in preparing 

estimates of Medicare program costs for 

eligible hospitals was to determine the 

amount of Medicare incentive payments 

that each hospital in the country could 

potentially receive under the statutory 

formula, based on its admission 

numbers (total patients and Medicare 


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patients). The total incentive payments 

potentially payable over a 4-year period 

vary significantly by hospitals’ inpatient 

caseloads, ranging from a low of about 

$9,000 to a high of $10.4 million, with 

the median being $3.6 million. The 

potential Medicare incentive payments 

for each eligible hospital were compared 

with the hospital’s expected cost of 

purchasing and operating certified EHR 

technology. Costs of adoption for each 

hospital were estimated using data from 

the 2007 AHA annual survey and IT 

supplement. Estimated costs varied by 

size of hospital and by the likely status 

of EHR adoption in that class of 

hospitals. Hospitals were grouped first 

by size (CAHs, non-CAH hospitals 

under 400 beds, and hospitals with 400 

or more beds) because EHR adoption 

costs do vary by size: namely, larger 

hospitals with more diverse service 

offerings and powerful physician staffs 

generally implement more customized 

systems than smaller hospitals that 

might purchase off-the-shelf products. 

We then calculated the proportion of 

hospitals within each class that were at 

one of three levels of EHR adoption: (1) 

Hospitals which had already 

implemented relatively advanced 

systems that included CPOE systems for 

medications; (2) hospitals which had 

implemented more basic systems 

through which lab results could be 

shared, but not CPOE for medications; 

and (3) hospitals starting from a base 

level either neither CPOE or lab 

reporting. The CPOE for medication 

standard was chosen because expert 

input indicated that the CPOE standard 

in the proposed meaningful use 

definition will be the hardest one for 

hospitals to meet. Table 38 provides 

these proportions. 

TABLE 38—HOSPITAL IT CAPABILITIES BY HOSPITAL SIZE

Hospital size 

Levels of adoption 

Any CPOE meds Lab results Neither Total 

Number of 

hospitals Percentage Number of hospitals Percentage Number of hospitals Percentage Number of hospitals Percentage 

CAHs ................................ 146 18 372 47 274 35 792 23 

Small/Medium .................. 683 30 1,268 55 359 16 2,310 67 

Large (400+ beds) ........... 169 49 162 47 17 5 348 10 

Total .......................... 998 29 1802 52 650 19 3,450 100 

We then calculated the costs of 

moving from these stages to meaningful 

use for each class of hospital, assuming 

that even for hospitals with CPOE 

systems they would incur additional 

costs of at least 10 percent of their IT 

budgets. These costs were based on 

cross-sectional data from the AHA 

survey and thus do not likely represent 

the true costs of implementing systems. 

We request public input on the costs of 

adoption and attaining the meaningful 

use standard and the determinants of 

those costs. 

Under the HITECH Act, an eligible 

hospital can receive up to 4 years of 

Medicare incentive payments for the 

demonstration of meaningful use of 

certified EHR technology. These 

payments reflect the ratio of Medicare 

inpatient days to total inpatient days 

and are adjusted by transition factors of 

100, 75, 50, and 25 percent for the first 

through fourth implementation years 

respectively. Medicare incentive 

payments can first be paid to hospitals 

in FY 2011, and FY 2013 is the last year 

that a hospital can start to receive 

incentives and obtain the full 4-year 

transition rates. Eligible hospitals that 

first qualify in FY 2014 or FY 2015 will 

only receive the transition portions that 

apply to eligible hospitals who 

implement their EHR in FY 2013 (for 

example, 75 percent in FY 2014 and 50 

percent in FY 2015). Eligible hospitals 

that first demonstrate meaningful use in 

FY 2016 or later are not eligible for 

incentive payments. Payment 

adjustments will be applied beginning 

in FY 2015 to eligible hospitals that 

cannot demonstrate meaningful use of 

certified EHR technology. Special rules 

apply to CAHs. 

We estimate that there are 12 MAOs 

that might be eligible to participate in 

the incentive program. Those plans have 

29 eligible hospitals. The costs for the 

MA program have been included in the 

overall Medicare estimates. 

Again due to uncertainties, we are 

providing ranges for our estimates. Our 

high scenario estimated net costs for 

section 4102 of the HITECH Act are 

shown in Table 39: Estimated costs (+) 

and savings (–) for eligible hospitals 

adopting certified EHRs. This provision 

is estimated to increase Medicare 

hospital expenditures by a net total of 

$11.2 billion during FYs 2011 through 

2019. 

TABLE 39—ESTIMATED COSTS (+) AND SAVINGS (–) FOR MEDICARE ELIGIBLE HOSPITALS DEMONSTRATING MEANINGFUL

USE OF CERTIFIED EHR TECHNOLOGY, HIGH SCENARIO

[In billions] 

Fiscal year Incentive 

payments 

Payment 

adjustment 

receipts 

Benefit 

payments Net total 

2009 ................................................................................................................. ........................ ........................ ........................ ........................

2010 ................................................................................................................. ........................ ........................ ........................ ........................

2011 ................................................................................................................. $2.4 ........................ (1) $2.4 

2012 ................................................................................................................. 2.7 ........................ (1) 2.7 

2013 ................................................................................................................. 2.4 ........................ (1) 2.4 

2014 ................................................................................................................. 2.3 ........................ (1) 2.3 

2015 ................................................................................................................. 1.3 ¥$0.1 (1) 1.2 

2016 ................................................................................................................. 0.5 ¥0.1 (1) 0.4 

2017 ................................................................................................................. ........................ ........................ (1) (1) 


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TABLE 39—ESTIMATED COSTS (+) AND SAVINGS (–) FOR MEDICARE ELIGIBLE HOSPITALS DEMONSTRATING MEANINGFUL

USE OF CERTIFIED EHR TECHNOLOGY, HIGH SCENARIO—Continued 

[In billions] 

Fiscal year Incentive 

payments 

Payment 

adjustment 

receipts 

Benefit 

payments Net total 

2018 ................................................................................................................. ........................ ........................ (1) (1) 

2019 ................................................................................................................. ........................ ........................ (1) (1) 

Total, 2009–2014 ...................................................................................... 9.8 ........................ –0.1 9.7 

Total, 2009–2019 ...................................................................................... 11.6 –$0.2 –0.2 11.2 

1Savings of less than $50 million. 

We are also providing the estimates 

for a low scenario in Table 40. 

TABLE 40—ESTIMATED COSTS (+) AND SAVINGS (–) FOR MEDICARE ELIGIBLE HOSPITALS DEMONSTRATING MEANINGFUL

USE OF CERTIFIED EHR TECHNOLOGY, LOW SCENARIO

[In billions] 

Fiscal year Incentive 

payments 

Payment 

adjustment 

receipts 

Benefit 

payments Net total 

2009 ................................................................................................................. ........................ ........................ ........................ ........................

2010 ................................................................................................................. ........................ ........................ ........................ ........................

2011 ................................................................................................................. $1.7 ........................ (1) $1.7 

2012 ................................................................................................................. 1.6 ........................ (1) 1.6 

2013 ................................................................................................................. 1.5 ........................ (1) 1.5 

2014 ................................................................................................................. 1.8 ........................ (1) 1.8 

2015 ................................................................................................................. 1.4 –$0.4 (1) 1.0 

2016 ................................................................................................................. 0.6 –0.3 (1) 0.3 

2017 ................................................................................................................. ........................ ¥0.3 (1) ¥0.3 

2018 ................................................................................................................. ........................ ¥0.2 (1) ¥0.2 

2019 ................................................................................................................. ........................ ........................ (1) (1) 

Total, 2009–2014 ...................................................................................... 6.6 ........................ –$0.1 6.5 

Total, 2009–2019 ...................................................................................... 8.6 –1.1 –0.2 7.4 

1Savings of less than $50 million. 

Based on the comparison of Medicare 

incentive payments and 

implementation/operating costs for each 

eligible hospital (described above), we 

made the assumptions shown in Table 

41, related to the prevalence of certified 

EHR technology for FY 2011 through 

2018. As indicated, eligible hospitals 

that could cover the full cost of an EHR 

system through Medicare incentive 

payments were assumed to implement 

them relatively rapidly, and vice-versa. 

In other words, eligible hospitals will 

have an incentive to purchase and 

implement an EHR system if they 

perceive that a large portion of the costs 

will be covered by the incentive 

payments. Table 41 shows the high 

scenario estimates: 

TABLE 41—ASSUMED PROPORTION OF ELIGIBLE HOSPITALS WITH CERTIFIED EHR TECHNOLOGY, BY PERCENTAGE OF

SYSTEM COST COVERED BY MEDICARE INCENTIVE PAYMENTS, HIGH SCENARIO

Fiscal year 

Incentive payments as percentage of EHR technology cost 

100+% 75–100% 50–75% 25–50% 0–25% 

2011 ................................................................................................................... 0 .8 0 .5 0 .3 0 .2 0 .1 

2012 ................................................................................................................... 0 .95 0 .65 0 .5 0 .35 0 .2 

2013 ................................................................................................................... 1 .0 0 .8 0 .7 0 .6 0 .4 

2014 ................................................................................................................... 1 .0 0 .95 0 .85 0 .75 0 .6 

2015 ................................................................................................................... 1 .0 1 .0 0 .95 0 .9 0 .8 

2016 ................................................................................................................... 1 .0 1 .0 1 .0 0 .95 0 .9 

2017 ................................................................................................................... 1 .0 1 .0 1 .0 1 .0 0 .95 

2018 ................................................................................................................... 1 .0 1 .0 1 .0 1 .0 1 .0 

For instance, under the high scenario 

50 percent of eligible hospitals whose 

incentive payments would cover 

between 75 percent and 100 percent of 

the cost of a certified EHR system were 

assumed to have a certified system in 


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FY 2011. In FY 2012, 65 percent of 

those hospitals were assumed to have a 

certified EHR system. All such hospitals 

were assumed to have a certified EHR 

system in FY 2015 and thereafter. 

High rates of EHR adoption are 

anticipated prior to FY 2015 due to the 

large payment adjustments that will be 

imposed on eligible hospitals that are 

unable to demonstrate meaningful use 

beginning in FY 2015. Specifically, the 

Medicare ‘‘market basket’’ payment 

updates would be reduced (on a 

noncumulative basis) by one-fourth, 

one-half, and three-fourths for FYs 2015, 

2016, and 2017 and later, respectively, 

for eligible hospitals that were not 

meaningful users of certified EHR 

technology. However, we heard from 

industry experts that issues surrounding 

the capacity of vendors and expert 

consultants to support implementation, 

issues of access to capital, and 

competing priorities in responding to 

payer demand will limit the number of 

hospitals that can adopt advanced 

systems in the short term. Therefore, we 

cannot be certain of the adoption rate 

for hospitals due to these factors and 

others previously outlined in this 

preamble, and so we provide a range 

which reflects what we believe are 

reasonably anticipated low to high rates 

of adoption. 

Table 42 shows the low scenario 

estimates. 

TABLE 42—ASSUMED PROPORTION OF ELIGIBLE HOSPITALS WITH CERTIFIED EHR TECHNOLOGY, BY PERCENTAGE OF

SYSTEM COST COVERED BY MEDICARE INCENTIVE PAYMENTS, LOW SCENARIO

Fiscal year 

Incentive payments as percentage of EHR technology cost 

100+% 75–100% 50–75% 25–50% 0–25% 

2011 ................................................................................................................... 0 .6 0 .35 0 .2 0 .2 0 .05 

2012 ................................................................................................................... 0 .65 0 .4 0 .25 0 .15 0 .1 

2013 ................................................................................................................... 0 .75 0 .55 0 .4 0 .25 0 .15 

2014 ................................................................................................................... 0 .9 0 .75 0 .55 0 .4 0 .3 

2015 ................................................................................................................... 1 .0 0 .9 0 .75 0 .6 0 .5 

2016 ................................................................................................................... 1 .0 1 .0 0 .9 0 .85 0 .75 

2017 ................................................................................................................... 1 .0 1 .0 0 .95 0 .9 0 .85 

2018 ................................................................................................................... 1 .0 1 .0 1 .0 0 .95 0 .9 

2019 ................................................................................................................... 1 .0 1 .0 1 .0 1 .0 1 .0 

For large, organized facilities such as 

hospitals, we believe that the revenue 

losses caused by these payment 

adjustments would be a substantial 

incentive to adopt certified EHR 

technology, even in instances where the 

Medicare incentive payments would 

cover only a portion of the costs of 

purchasing, installing, populating, and 

operating the EHR system. Based on the 

assumptions about incentive payments 

as percentages of EHR technology costs 

in Table 42, we estimated that the great 

majority of eligible hospitals would 

qualify for at least a portion of the 

Medicare incentive payments that they 

could potentially receive, and only a 

modest number would incur penalties. 

Nearly all eligible hospitals are 

projected to have implemented certified 

EHR technology by FY 2019. Table 43 

shows our high scenario estimated range 

of percentages of the total potential 

incentive payments associated with 

eligible hospitals that could 

demonstrate meaningful use of EHR 

systems. Also shown are the estimated 

percentages of potential incentives that 

would actually be paid each year. 

TABLE 43—ESTIMATED PERCENTAGE OF MEDICARE INCENTIVES WHICH COULD BE PAID FOR MEANINGFUL USE OF CERTIFIED EHR TECHNOLOGY ASSOCIATED WITH ELIGIBLE HOSPITALS AND ESTIMATED PERCENTAGE PAYABLE IN YEAR, 

HIGH SCENARIO

Fiscal year 

Percent associated with eligible hospitals 

Percent payable in year 

2011 ......................................................................................................................................................................... 43.4 43.4 

2012 ......................................................................................................................................................................... 58.5 58.5 

2013 ......................................................................................................................................................................... 73.9 73.9 

2014 ......................................................................................................................................................................... 84.8 84.8 

2015 ......................................................................................................................................................................... 93.6 50.2 

2016 ......................................................................................................................................................................... 97.3 35.1 

2017 ......................................................................................................................................................................... 99.1 ........................

2018 ......................................................................................................................................................................... 100.0 ........................

For instance in FY 2012 under the 

high scenario, 58.5 percent of the total 

amount of incentive payments which 

could be payable in that year would be 

for eligible hospitals who have 

demonstrated meaningful use of 

certified EHR technology and therefore 

will be paid. In FY 2015 under the high 

scenario, 93.6 percent of the total 

amount of incentive payments which 

could be payable will be for hospitals 

who have certified EHR systems, but 

some of those eligible hospitals would 

have already received 4 years of 

incentive payments, and therefore 50.2 

percent of all possible incentive 

payments actually paid in that year. 

Table 44 shows the low scenario 

estimates. 


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TABLE 44—ESTIMATED PERCENTAGE OF MEDICARE INCENTIVES WHICH COULD BE PAID FOR THE MEANINGFUL USE OF

CERTIFIED EHR TECHNOLOGY ASSOCIATED WITH ELIGIBLE HOSPITALS AND ESTIMATED PERCENTAGE PAYABLE IN

YEAR, LOW SCENARIO

Fiscal year 

Percent associated with eligible hospitals 

Percent payable in year 

2011 ......................................................................................................................................................................... 30.5 30.5 

2012 ......................................................................................................................................................................... 35.5 35.5 

2013 ......................................................................................................................................................................... 46.2 46.2 

2014 ......................................................................................................................................................................... 61.7 61.7 

2015 ......................................................................................................................................................................... 77.8 47.3 

2016 ......................................................................................................................................................................... 90.9 42.3 

2017 ......................................................................................................................................................................... 94.5 ........................

2018 ......................................................................................................................................................................... 97.3 ........................

The estimated payments to eligible 

hospitals were calculated based on the 

hospitals’ qualifying status and 

individual incentive amounts under the 

statutory formula. Similarly, the 

estimated penalties for nonqualifying 

hospitals were based on the market 

basket reductions and Medicare 

revenues. The estimated savings in 

Medicare eligible hospital benefit 

expenditures resulting from the use of 

hospital certified EHR systems are 

discussed under ‘‘general 

considerations’’ at the end of this 

section. We assumed no future growth 

in the total number of hospitals in the 

U.S. because growth in acute care 

hospitals has been minimal in recent 

years. 

c. Critical Access Hospitals (CAHs) 

We estimate that there are 1,302 CAHs 

eligible to receive EHR incentives 

payments, and that will participate in 

the incentive program beginning in FY 

2011. The statistics for their incentives 

are incorporated into the overall 

Medicare and Medicaid program costs. 

6. Medicaid Incentive Program Costs 

Under section 4201 of the HITECH 

Act, States can voluntarily participate in 

the Medicaid incentive payment 

program and we have based our 

Medicaid incentive program costs on all 

States participating. Eligible hospitals 

and EPs can also qualify for a Medicaid 

incentive payment for adopting, 

implementing, or upgrading and up to 5 

years of incentive payments for 

demonstrating meaningful use certified 

EHR technology. Under Medicaid, EPs 

include physicians and pediatricians, 

dentists, certified nurse-midwives, 

nurse practitioners, and certain 

physician assistants. Initial incentive 

payments are available through 2016. 

The Medicaid hospital incentives are 

similar to those specified in section 

4102 of the HITECH Act for Medicare, 

except that they are payable for up to 6 

years based on the ratio of Medicaid 

inpatient days to total days, and are not 

phased down by the Medicare eligible 

hospital transition factors. Medicaid 

hospitals can begin incentive payments 

through 2016. There are also additional 

hospitals, such as children’s and cancer 

hospitals that are only eligible for 

Medicaid incentives. 

EPs may qualify for Medicaid 

incentive payments if at least 30 percent 

of their patient volume is from 

Medicaid. (Separate rules apply for 

pediatricians.) As mentioned above, the 

Medicaid maximum incentive payments 

are larger than the corresponding 

Medicare payments. Various maximums 

are specified for eligible hospital and EP 

incentive payments. There are no 

Medicaid penalties for nonadoption of 

EHR systems or for failing to 

demonstrate meaningful use. The 

Federal costs for Medicaid incentive 

payments to providers who can 

demonstrate meaningful use of EHR 

technology were estimated similarly to 

the estimates for Medicare eligible 

hospital and EP. Table 45 shows our 

high estimates for the net Medicaid 

costs for eligible hospitals and EP. 

TABLE 45—ESTIMATED FEDERAL COSTS (+) AND SAVINGS (–) UNDER MEDICAID, HIGH SCENARIO

[In $billions] 

Fiscal year 

Incentive payments 

Benefit 

payments Net total 

Hospitals Eligible 

professionals 

2009 ................................................................................................................. ........................ ........................ ........................ ........................

2010 ................................................................................................................. ........................ ........................ ........................ ........................

2011 ................................................................................................................. 1.1 1.2 (1) 2.3 

2012 ................................................................................................................. 1.2 0.9 (1) 2.1 

2013 ................................................................................................................. 0.7 0.9 (1) 1.6 

2014 ................................................................................................................. 0.4 0.9 (1) 1.3 

2015 ................................................................................................................. 0.3 0.9 (1) 1.2 

2016 ................................................................................................................. 0.2 1.0 (1) 1.2 

2017 ................................................................................................................. 0.1 0.4 (1) 0.5 

2018 ................................................................................................................. 0.0 0.3 (1) 0.3 

2019 ................................................................................................................. 0.0 0.2 (1) 0.2 

Total, 2009–2014 ...................................................................................... 3.4 3.8 0.0 7.2 

Total, 2009–2019 ...................................................................................... 4.1 6.6 ¥0.1 10.6 

1Savings of less than $50 million. 


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Table 46 shows the low estimates for 

Medicaid costs and savings. 

TABLE 46—ESTIMATED FEDERAL COSTS (+) AND SAVINGS (–) UNDER MEDICAID, LOW SCENARIO

[In $billions] 

Fiscal year 

Incentive payments 

Benefit 

payments Net total 

Hospitals Eligible 

professionals 

2009 ................................................................................................................. ........................ ........................ ........................ ........................

2010 ................................................................................................................. ........................ ........................ ........................ ........................

2011 ................................................................................................................. 0.7 0.6 (1) 1.3 

2012 ................................................................................................................. 0.6 0.4 (1) 1.0 

2013 ................................................................................................................. 0.4 0.4 (1) 0.9 

2014 ................................................................................................................. 0.5 0.5 (1) 1.0 

2015 ................................................................................................................. 0.6 0.5 (1) 1.1 

2016 ................................................................................................................. 0.6 0.5 (1) 1.1 

2017 ................................................................................................................. 0.3 0.2 (1) 0.5 

2018 ................................................................................................................. 0.1 0.2 (1) 0.2 

2019 ................................................................................................................. 0.0 0.1 (1) 0.1 

Total, 2009–2014 ...................................................................................... 2.3 1.9 0.0 4.2 

Total, 2009–2019 ...................................................................................... 3.8 3.5 ¥0.1 7.3 

1Savings of less than $50 million. 

a. Medicaid EPs 

To determine the Medicaid EP 

incentive payments, we first determined 

the number of qualifying EPs. As 

indicated above, we assumed that 20 

percent of the non-hospital-based 

Medicare EPs would meet the 

requirements for Medicaid incentive 

payments (30 percent of patient volume 

from Medicaid). All of these EPs were 

assumed to choose the Medicaid 

incentive payments, as they are larger. 

In addition, the total number of 

Medicaid EPs was adjusted to include 

EPs who qualify for the Medicaid 

incentive payments but not for the 

Medicare incentive payments, such as 

most pediatricians, dentists, certified 

nurse-midwives, nurse practitioners and 

physicians assistants. As noted 

previously there is much uncertainty 

about the rates of demonstration of 

meaningful that will be achieved. 

Therefore, as we estimated for the 

Medicare EPs, we are providing high 

and low scenario estimates for Medicaid 

EPs. 

Our high scenario estimates are listed 

in the Table 47. 

BILLING CODE 4120–01–P 


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Under the high scenario, we assumed 

an increase over baseline participation 

of Medicaid EPs because of the 

incentive payments, with the proportion 

of EPs ever receiving incentive 

payments increasing from 46.5 percent 

in CY 2011 to 93.7 percent by CY 2019. 

About 55,000 EPs are projected to 

qualify for incentive payments in CY 

2011, resulting in a CY 2011 cost of 

about $1.2 billion. It should be noted 

that since the Medicaid EHR incentive 

payment program provides that a 

Medicaid EP can receive an incentive 

payment in their first year because he or 

she is a meaningful user or because he 

or she is engaged in efforts to adopt, 

implement, or upgrade certified EHR 

technology, these participation rates 

include not only meaningful users but 

eligible providers implementing 

certified EHR technology as well. Table 

48 shows our low scenario estimates. 


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BILLING CODE 4120–01–C 

b. Medicaid Hospitals 

Medicaid incentive payments to most 

acute-care hospitals were estimated 

using the same adoption assumptions 

and methodology as described 

previously for Medicare eligible 

hospitals and shown in Table 49. 

Because hospitals’ Medicare and 

Medicaid patient loads differ, we 

separately calculated the range of 

percentage of total potential incentives 

that could be associated with qualifying 

hospitals, year by year, and the 

corresponding actual percentages 

payable each year. Acute care hospitals 

and children’s hospitals can receive 

Medicaid incentive payments for no less 

than 3 years but no more than 6 years 

and may qualify to receive both the 

Medicare and Medicaid incentive 

payments. 

As stated previously, the estimated 

eligible hospital incentive payments 

were calculated based on the hospitals’ 

qualifying status and individual 

incentive amounts payable under the 

statutory formula. The estimated savings 

in Medicaid benefit expenditures 

resulting from the use of certified EHR 

technology are discussed under ‘‘general 


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considerations.’’ We estimated the 

Medicaid incentives payable to 

children’s hospitals as an add-on to the 

base estimate, using data on the number 

of children’s hospitals compared to nonchildren’s hospitals. 

TABLE 49—ESTIMATED PERCENTAGE OF POTENTIAL MEDICAID INCENTIVES ASSOCIATED WITH ELIGIBLE HOSPITALS AND

ESTIMATED PERCENTAGE PAYABLE EACH YEAR, HIGH SCENARIO

Fiscal year 

Percent associated with eligible hospitals 

Percent payable in year 

2011 ......................................................................................................................................................................... 60.7 60.7 

2012 ......................................................................................................................................................................... 75.5 75.5 

2013 ......................................................................................................................................................................... 86.0 86.0 

2014 ......................................................................................................................................................................... 91.5 30.8 

2015 ......................................................................................................................................................................... 96.3 20.8 

2016 ......................................................................................................................................................................... 98.3 12.3 

2017 ......................................................................................................................................................................... 99.5 6.8 

2018 ......................................................................................................................................................................... 100.0 2.0 

2019 ......................................................................................................................................................................... 100.0 0.0 

Table 50 shows our low scenario 

estimates. 

TABLE 50—ESTIMATED PERCENTAGE OF POTENTIAL MEDICAID INCENTIVES ASSOCIATED WITH ELIGIBLE HOSPITALS AND

ESTIMATED PERCENTAGE PAYABLE EACH YEAR, LOW SCENARIO

Fiscal year 

Percent associated with eligible hospitals 

Percent payable in year 

2011 ......................................................................................................................................................................... 35.6 35.6 

2012 ......................................................................................................................................................................... 40.6 40.6 

2013 ......................................................................................................................................................................... 50.9 50.9 

2014 ......................................................................................................................................................................... 66.8 31.2 

2015 ......................................................................................................................................................................... 81.6 41.0 

2016 ......................................................................................................................................................................... 92.6 41.7 

2017 ......................................................................................................................................................................... 95.5 25.8 

2018 ......................................................................................................................................................................... 97.4 11.0 

2019 ......................................................................................................................................................................... 100.0 0.0 

7. Benefits for All EPs and All Eligible 

Hospitals 

In this proposed rule we have not 

quantified the overall benefits to the 

industry, nor to eligible hospitals or EPs 

in the Medicare, Medicaid, or MA 

programs. We believe that the first 5 

years of the incentive program will be 

dedicated to implementation activities, 

from installation of the technology to 

training to operational and behavioral 

changes. Information on the costs and 

benefits of adopting systems specifically 

meeting the requirements in this rule 

does not yet exist—and information on 

costs and benefits overall is limited 

(Goldzweig et al. 2009 ‘‘Costs and 

Benefits of Health Information 

Technology: New Trends from the 

Literature’’ Health Affairs.) We would 

welcome industry input on the impact 

of this proposed rule on adoption, the 

costs of adopting and meeting the 

meaningful use criteria, and on resulting 

benefits to providers. 

Nonetheless, we believe there are 

benefits that can be obtained by eligible 

hospitals and EPs, including: 

Reductions in medical recordkeeping 

costs, reductions in repeat tests, 

decreases in length of stay, and reduced 

errors. Furthermore, there is limited but 

growing evidence to support the cost 

saving benefits anticipated from wider 

adoption of EHRs. For example, at one 

hospital emergency room in Delaware, 

the ability to download and create a file 

with a patient’s medical history saved 

the ER $545 per use, mostly on reduced 

waiting times. A pilot study of 

ambulatory practices found a positive 

ROI within 16 months and annual 

savings thereafter (Greiger et al. 2007, A 

Pilot Study to Document the Return on 

Investment for Implementing an 

Ambulatory Electronic Health Record at 

an Academic Medical Centers.) Some 

vendors have estimated that EHRs could 

result in cost savings of between $100 

and $200 per patient per year. As 

adoption increases, there will be more 

opportunities to capture and report on 

cost savings and benefits. A number of 

relevant studies are required in the 

HITECH Act for this specific purpose, 

and the results will be made public, as 

they are available. 

Some vendors have estimated that 

EHRs could result in cost savings of 

between $100 and $200 per patient per 

year. As adoption increases, there will 

be more opportunities to capture and 

report on cost savings and benefits. A 

number of relevant studies are required 

in the HITECH Act for this specific 

purpose, and the results will be made 

public, as they are available. 

8. Benefits to Society 

According to the recent CBO study 

‘‘Evidence on the Costs and Benefits of 

Health Information Technology’’ (http:// 

www.cbo.gov/ftpdocs/91xx/doc9168/05- 

20-HealthIT.pdf), when used effectively, 

EHRs can enable providers to deliver 

health care more efficiently. For 

example, they can reduce the 

duplication of diagnostic tests, prompt 

providers to prescribe cost-effective 

generic medications, remind patients 

about preventive care, reduce 

unnecessary office visits and assist in 

managing complex care. Further, the 

report points out that there is a potential 

to gain both internal and external 

savings from widespread adoption of 


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health IT, noting that internal savings 

would likely be in the reductions in the 

cost of providing care, and that external 

savings could accrue to the health 

insurance plan or even the patient, such 

as the ability to exchange information 

more efficiently. The benefits resulting 

specifically from this proposed 

regulation are even harder to quantify 

because they represent, in many cases, 

adding functionality to existing systems 

and reaping the network externalities 

created by larger numbers of providers 

participating in information exchange. 

We would welcome additional data on 

the costs and benefits of specific 

provisions of this rule and the incentive 

program as a whole so that we can 

conduct, for the final rule, a more robust 

assessment of societal benefits to 

determine whether the benefits of the 

regulation justify its costs (as directed 

by Executive Order 12866). 

9. General Considerations 

The estimates for the HITECH Act 

provisions were based on the economic 

assumptions underlying the President’s 

2010 Budget. Under the statute, 

Medicare incentive payments for 

certified EHR technology are excluded 

from the determination of MA 

capitation benchmarks. As noted 

previously, there is considerable 

uncertainty about the rate at which 

eligible hospitals and EPs will adopt 

EHRs and other HIT. Nonetheless, we 

believe that the Medicare incentive 

payments and the prospect of significant 

payment penalties for nonparticipation 

will result in the great majority of 

hospitals implementing certified EHR 

technology in the early years of the 

Medicare EHR incentive program. We 

expect that a steadily growing 

proportion of practices will implement 

certified EHR technology over the next 

10 years, even in the absence of the 

Medicare incentives. Actual future 

Medicare and Medicaid costs for eligible 

hospital and EP incentives will depend 

in part on the standards developed and 

applied for assessing meaningful use of 

certified EHR technology. We will 

administer the requirements in such a 

way as to encourage adoption of 

certified EHR technology and facilitate 

qualification for incentive payments, 

and will adopt progressively demanding 

standards each year. Certified EHR 

technology has the potential to help 

reduce medical costs through efficiency 

improvements, such as prompter 

treatments, avoidance of duplicate or 

otherwise unnecessary services, and 

reduced administrative costs (once 

systems are in place), with most of these 

savings being realized by the providers 

rather than by Medicare or Medicaid. To 

the extent that this technology will have 

a net positive effect on efficiency, then 

more rapid adoption of such EHR 

systems would achieve these 

efficiencies sooner than would 

otherwise occur, without the EHR 

incentives. 

The CBO has estimated a modest level 

of such savings attributable to EHRs, 

with much of the amount associated 

with reductions in adverse drug-to-drug 

interactions. We believe that most of 

such savings will result from the 

existing statutory requirements for eprescribing and that the acceleration of 

other efficiency savings will be 

relatively modest in comparison to the 

incentive and payment adjustments. We 

expect a negligible impact on benefit 

payments to hospitals and EPs from 

Medicare and Medicaid as a result of the 

implementation of EHR technology.’’ 

In the process of preparing the 

estimates for this rule, we consulted 

with and/or relied on internal CMS 

sources, as well as the following 

sources: 

• Congressional Budget Office (staff 

and publications). 

• American Medical Association 

(staff and unpublished data). 

• American Hospital Association. 

• Actuarial Research Corporation. 

• RAND Health studies on: 

++ ‘‘The State and Pattern of Health 

Information Technology Adoption’’ 

(Fonkych & Taylor, 2005); 

++ ‘‘Extrapolating Evidence of Health 

Information Technology Savings and 

Costs’’ (Girosi, Meili, & Scoville, 2005); 

and 

++ ‘‘The Diffusion and Value of 

Healthcare Information Technology’’ 

(Bower, 2005). 

• Kaiser Permanente (staff and 

publications). 

• Miscellaneous other sources (Health 

Affairs, American Enterprise Institute, 

news articles and perspectives). 

As noted at the beginning of this 

analysis, it is difficult to predict the 

actual impacts of the HITECH Act with 

much certainty at this time. We believe 

the assumptions and methods described 

herein are reasonable for estimating the 

financial impact of the provisions on the 

Medicare and Medicaid programs, but 

acknowledge the wide range of possible 

outcomes. We invite comments on all of 

our assumptions. 

All financial analysis is calculated 

over a 10-year planning horizon, 

because though the incentive payments 

for Medicare EPs, CAHs and eligible 

hospitals will only be paid for 5 years, 

the Medicaid incentives will cease in 

CY 2021. Starting in CY 2015, payment 

adjustments will be made to the 

Medicare physician fee schedule. 

10. Summary 

The total cost to the Medicare and 

Medicaid programs is estimated to be 

range from $14.1 (low scenario) to 27.3 

(high scenario) billion over a 10-year 

timeframe. We do not estimate total 

costs to the provider industry, but rather 

provide a possible per EP and per 

eligible hospital outlay for 

implementation and maintenance 

operations. 


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Table 53 shows the total costs from 

2009 through 2019 for the high scenario 

after which the payment adjustments 

will be invoked. 

11. Explanation of Benefits and Savings 

Calculations 

In our analysis, we assume that 

benefits to the program would accrue in 

the form of savings to Medicare, through 

the Medicare EP payment adjustments. 

Expected qualitative benefits, such as 

improved quality of care, better health 

outcomes, reduced errors and the like, 

unable to be quantified at this time. We 

invite public comment on the subject of 

benefits to the Medicare and Medicaid 

programs. 

H. Accounting Statement 

Whenever a rule is considered a 

significant rule under Executive Order 

12866, we are required to develop an 

Accounting Statement indicating the 

classification of the expenditures 

associated with the provisions of this 

proposed rule. Monetary annualized 

benefits and non-budgetary costs are 

presented as discounted flows using 3 

percent and 7 percent factors. 

Additional expenditures that will be 

undertaken by eligible entities in order 

to obtain the Medicare and Medicaid 

incentive payments to adopt and 

demonstrate meaningful use of certified 

EHR technology, and to avoid the 

Medicare payment adjustments that will 

ensue if they fail to do so are noted by 

a placeholder in the accounting 

statement. We are not able to explicitly 

define the universe of those additional 

costs, nor specify what the high or low 


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range might be. We invite public 

comments that may inform additional 

analysis on the subject of industry costs 

to implement EHR technology at the 

final rule stage. 

In accordance with the provisions of 

Executive Order 12866, this proposed 

rule was reviewed by the Office of 

Management and Budget. 

List of Subjects 

42 CFR Part 412 

Administrative practice and 

procedure, Health facilities, Medicare, 

Puerto Rico, Reporting and 

recordkeeping requirements. 

42 CFR Part 413 

Health facilities, Kidney diseases, 

Medicare, Reporting and recordkeeping 

requirements. 

42 CFR Part 422 

Administrative practice and 

procedure, Health facilities, Health 

maintenance organizations (HMO), 

Medicare, Penalties, Privacy, Reporting 

and recordkeeping requirements. 

42 CFR Part 495 

Administrative practice and 

procedure, Electronic health records, 

Health facilities, Health professions, 

Health maintenance organizations 

(HMO), Medicaid, Medicare, Penalties, 

Privacy, Reporting and recordkeeping 

requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicare Services proposed to amend 

42 CFR Chapter IV as follows: 

PART 412—PROSPECTIVE PAYMENT 

SYSTEMS FOR INPATIENT HOSPITAL 

SERVICES 

1. The authority citation for part 412 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

Social Security Act (42 U.S.C. 1302 and 

1395hh). 

Subpart D—Basic Methodology for 

Determining Prospective Payment 

Federal Rates for Inpatient Operating 

Costs 

2. Section 412.64 is amended by— 

A. Revising paragraph (d)(2)(i)(B). 

B. Adding a new paragraphs 

(d)(2)(i)(C) and (d)(3). 

The revision and additions read as 

follows: 

§ 412.64 Federal rates for inpatient 

operating costs for Federal fiscal year 2005 

and subsequent fiscal years. 

* * * * * 

(d) * * * 

(2) * * * 

(i) * * * 

(B) For fiscal year 2007 through 2014, 

by 2 percentage points. 

(C) For fiscal year 2015 and 

subsequent fiscal years, by one-fourth. 

* * * * * 

(3) Beginning in fiscal year 2015, in 

the case of a ‘‘subsection (d) hospital,’’ 

as defined under section 1886(d)(1)(B) 

of the Act, that is not a meaningful 

electronic health record (EHR) user as 

defined in part 495 of this chapter, 

three-fourth of the applicable percentage 

change specified in paragraph (d)(1) of 

this section is reduced— 

(i) For fiscal year 2015, by 331⁄3

percent; 

(ii) For fiscal year 2016, by 662⁄3

percent; and 

(iii) For fiscal year 2017 and 

subsequent fiscal years, by 100 percent. 

* * * * * 

PART 413—PRINCIPLES OF 

REASONABLE COST 

REIMBURSEMENT; PAYMENT FOR 

END-STAGE RENAL DISEASE 

SERVICES; OPTIONAL 

PROSPECTIVELY DETERMINED 

PAYMENT RATES FOR SKILLED 

NURSING FACILITIES 

3. The authority citation for part 413 

continues to read as follows: 

Authority: Secs. 1102, 1812(d), 1814(b), 

1815, 1833(a), (i), and (n), 1861(v), 1871, 

1881, 1883, and 1886 of the Social Security 

Act (42 U.S.C. 1302, 1395d(d), 1395f(b), 

1395g, 1395l(a), (i), and (n), 1395x(v), 

1395hh, 1395rr, 1395tt, and 1395ww); and 

sec. 124 of Public Law 106–133 (113 Stat. 

1501A–332). 

Subpart E—Payments to Providers 

4. Section 413.70 is amended by— 

A. Revising paragraph (a)(1). 


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B. Adding new paragraphs (a)(5) and 

(a)(6). 

The revision and additions read as 

follows: 

§ 413.70 Payment for services of a CAH. 

(a) Payment for inpatient services 

furnished by a CAH (other than services 

of distinct part units). (1) Effective for 

cost reporting periods beginning on or 

after January 1, 2004, payment for 

inpatient services of a CAH, other than 

services of a distinct part unit of the 

CAH and other than the items included 

in the incentive payment described in 

paragraph (a)(5) of this section and 

subject to the adjustments described in 

paragraph (a)(6) of this section, is 101 

percent of the reasonable costs of the 

CAH in providing CAH services to its 

inpatients, as determined in accordance 

with section 1861(v)(1)(A)of the Act and 

the applicable principles of cost 

reimbursement in this part and in Part 

415 of this chapter, except that the 

following payment principles are 

excluded when determining payment 

for CAH inpatient services: 

(i) Lesser of cost or charges; 

(ii) Ceilings on hospital operating 

costs; 

(iii) Reasonable compensation 

equivalent (RCE) limits for physician 

services to providers; and 

(iv) The payment window provisions 

for preadmission services, specified in 

§ 412.2(c)(5) of this subchapter and 

§ 413.40(c)(2) of this part. 

* * * * * 

(5) A qualifying CAH receives an 

incentive payment for the reasonable 

costs of purchasing certified EHR 

technology in a cost reporting period 

during a payment year as determined 

under § 495.106 of this chapter in lieu 

of payment for such reasonable costs 

under paragraph (a)(1) of this section. 

(6)(i) For cost reporting periods 

beginning in or after FY 2015, if a CAH 

is not a qualifying CAH, as defined in 

§ 495.106(a) of this chapter, then 

notwithstanding the percentage 

applicable in paragraph (a)(1) of this 

section, the reasonable costs of the CAH 

in providing CAH services to its 

inpatients are adjusted, by the following 

applicable percentage: 

(A) For cost reporting periods 

beginning in FY 2015, 100.66 percent; 

(B) For cost reporting periods 

beginning in FY 2016, 100.33 percent; 

and 

(C) For cost reporting periods 

beginning in FY 2017 and each 

subsequent fiscal year, 100 percent. 

(ii) A CAH may, on a case-by-case 

basis, be exempt from the application of 

the adjustments made under this 

paragraph, if CMS or its Medicare 

contractors determine, on an annual 

basis, that requiring the CAH to become 

a qualifying CAH under § 495.106 of 

this chapter would result in a significant 

hardship, such as in the case of a CAH 

in a rural area without sufficient 

Internet access. 

(iii) In no case may a CAH be granted 

an exemption under this paragraph 

(a)(6) for more than 5 years. 

(iv) There is no administrative or 

judicial review under section 1869 of 

the Act, section 1878 of the Act, or 

otherwise of the following: 

(A) The methodology and standards 

for determining the amount of payment 

under paragraph (a)(5) of this section. 

(B) The methodology and standards 

for determining the amount of payment 

adjustments made under this paragraph 

(a)(6). 

(C) The methodology and standards 

for determining a CAH to be a qualifying 

CAH under § 495.106 of this chapter. 

(D) The methodology and standards 

for determining if the hardship 

exemption applies to a CAH under 

paragraph (a)(6)(ii) of this section. 

(E) The specification of the cost 

reporting periods, payment years, or 

fiscal years as applied under this 

paragraph. 

(F) The calculation of reasonable costs 

under § 495.106(c) of this chapter. 

* * * * * 

PART 422—MEDICARE ADVANTAGE 

PROGRAM 

5. The authority citation for part 422 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

Social Security Act (42 U.S.C. 1302 and 

1395hh). 

Subpart G—Payments to Medicare 

Advantage Organizations 

6. Section 422.304 is amended by 

adding a new paragraph (f) to read as 

follows: 

§ 422.304 Monthly payments. 

* * * * * 

(f) Separate payment for meaningful 

use of certified EHRs. In the case of 

qualifying MA organizations, as defined 

in § 495.200 of this chapter, entitled to 

MA EHR incentive payments per 

§ 495.220 of this chapter, such payments 

are made in accordance with sections 

1853(l) and (m) of the Act and subpart 

C of Part 495 of this chapter. 

7. Section 422.306 is amended by: 

A. Removing ‘‘and’’ from the end of 

paragraph (b)(2)(ii); 

B. Removing the period at the end of 

paragraph (b)(2)(iii) and adding ‘‘; and’’ 

in its place; and 

C. Adding a new paragraph (b)(2)(iv) 

to read as follows: 

§ 422.306 Annual MA capitation rates. 

* * * * * 

(b) * * * 

(2) * * * 

(iv) Adjusted to exclude costs 

attributable to payments under sections 

1848(o) and 1886(n) of the Act of 

Medicare FFS incentive payments for 

meaningful use of electronic health 

records. 

* * * * * 

8. Section 422.308 is amended by— 

A. Redesignating paragraph (a) as 

paragraph (a)(1). 

B. Adding a new paragraph (a)(2). 

The addition reads as follows: 

§ 422.308 Adjustments to capitation rates, 

benchmarks, bids, and payments. 

* * * * * 

(a) * * * 

(2) The amount calculated in 

paragraph (a)(1) of this section must 

exclude expenditures attributable to 

sections 1848(a)(7) and (o) and sections 

1886(b)(3)(B)(ix) and (n) of the Act. 

* * * * * 

9. Section 422.322 is amended by— 

A. Adding paragraph (a)(3). 

B. Revising paragraph (b). 

§ 422.322 Source of payment and effect of 

MA plan election on payment. 

(a) * * * 

(3) Payments under subpart C of part 

495 of this chapter for meaningful use 

of certified EHR technology are made 

from the Federal Hospital Insurance 

Trust Fund or the Supplementary 

Medical Insurance Trust Fund. In 

applying section 1848(o) of the Act 

under sections 1853(l) and 1886(n)(2) of 

the Act under section 1853(m) of the 

Act, CMS determines the amount to the 

extent feasible and practical to be 

similar to the estimated amount in the 

aggregate that would be payable for 

services furnished by professionals and 

hospitals under Parts B and A, 

respectively, under title XVIII of the 

Act. 

(b) Payments to the MA organization. 

Subject to § 412.105(g), § 413.86(d), and 

§ 495.204 of this chapter and §§ 422.109, 

422.316, and 422.320, CMS’ payments 

under a contract with an MA 

organization (described in § 422.304) 

with respect to an individual electing an 

MA plan offered by the organization are 

instead of the amounts which (in the 

absence of the contract) would 

otherwise be payable under original 

Medicare for items and services 

furnished to the individual. 

* * * * * 

SUBCHAPTER G—STANDARDS AND 

CERTIFICATIONS 

10. A new part 495 is added to read 

as follows: 


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PART 495—STANDARDS FOR THE 

ELECTRONIC HEALTH RECORD 

TECHNOLOGY INCENTIVE PROGRAM 

Subpart A—General Provisions 

Sec. 

495.2 Basis and purpose. 

495.4 Definitions. 

495.6 Meaningful use objectives measures 

for EPs, eligible hospitals, and CAHs. 

495.8 Demonstration of meaningful use 

criteria 

495.10 Participation requirements for EPs 

and eligible hospitals, and qualifying 

CAHs. 

Subpart B—Requirements Specific to the 

Medicare Program 

495.100 Definitions. 

495.102 Incentive payments to EPs. 

495.104 Incentive payments to eligible 

hospitals. 

495.106 Incentive payments to CAHs. 

495.108 Posting of required information. 

Subpart C—Requirements Specific to 

Medicare Advantage (MA) Organizations 

495.200 Definitions. 

495.202 Identification of qualifying MA 

organizations, MA–EPs, and MAaffiliated eligible hospitals. 

495.204 Incentive payments to qualifying 

MA organizations for MA–EPs and 

hospitals. 

495.206 Timeframe for payment to 

qualifying MA organizations. 

495.208 Avoiding duplicate payment. 

495.210 Meaningful user attestation. 

495.212 Limitation on review. 

Subpart D—Requirements Specific to the 

Medicaid Program 

495.300 Basis and purpose. 

495.302 Definitions. 

495.304 Medicaid provider scope and 

eligibility. 

495.306 Establishing patient volume. 

495.308 Net average allowable costs as the 

basis for determining the incentive 

payment. 

495.310 Medicaid provider incentive 

payments. 

495.312 Process for payments. 

495.314 Activities required to receive an 

incentive payment. 

495.316 State monitoring and reporting 

regarding activities required to receive 

an incentive payment. 

495.318 State responsibilities for receiving 

FFP. 

495.320 FFP for payments to Medicaid 

providers. 

495.322 FFP for reasonable administrative 

expenses. 

495.324 Prior approval conditions. 

495.326 Disallowance of Federal financial 

participation (FFP). 

495.328 Request for reconsideration of 

adverse determination. 

495.330 Termination of Federal financial 

participation (FFP) for failure to provide 

access to information. 

495.332 State Medicaid (HIT) plan 

requirements. 

495.334 State self-assessment requirements. 

495.336 Health information technology 

planning advance planning document 

requirements (HIT PAPD). 

495.338 Health information technology 

implementation advance planning 

document requirements (HIT IAPD). 

495.340 As-needed HIT PAPD update and 

as-needed HIT IAPD update 

requirements. 

495.342 Annual HIT IAPD requirements. 

495.344 Approval of the State Medicaid 

HIT plan, the HIT PAPD and update, the 

HIT IAPD and update, and the annual 

HIT IAPD. 

495.346 Access to systems and records. 

495.348 Procurement standards. 

495.350 State Medicaid agency attestations. 

495.352 Reporting requirements. 

495.354 Rules for charging equipment. 

495.356 Nondiscrimination requirements. 

495.358 Cost allocation plans. 

495.360 Software and ownership rights. 

495.362 Retroactive approval of FFP with 

an effective date of February 18, 2009. 

495.364 Review and assessment of 

administrative activities and expenses of 

Medicaid provider health information 

technology adoption and operation. 

495.366 Financial oversight and monitoring 

of expenditures. 

495.368 Combating fraud and abuse. 

495.370 Appeals process for a Medicaid 

provider receiving electronic health 

record incentive payments. 

Authority: Secs. 1102 and 1871 of the 

Social Security Act (42 U.S.C. 1302 and 

1395hh). 

Subpart A—General Provisions 

§ 495.2 Basis and purpose. 

This part implements the following: 

(a) Section 1848(o) of the Act by 

establishing payment incentives under 

Medicare Part B for physicians and 

other professionals who adopt and 

meaningfully use certified electronic 

health record technology. 

(b) Section 1853(1) of the Act to 

provide incentive payments to Medicare 

Advantage organizations for their 

affiliated professionals who 

meaningfully use certified EHR 

technology and meet certain other 

requirements. 

(c) Section 1886(n) of the Act by 

establishing incentives payments for the 

meaningful use of certified EHR 

technology by subsection (d) hospitals, 

as defined under section 1886(d)(1)(B) 

of the Act, participating in Medicare 

FFS program. 

(d) Section 1814(l) of the Act to 

provide an incentive payment to critical 

access hospitals who meaningfully use 

certified EHR technology based on the 

hospitals’ reasonable costs. 

(e) Section 1853(m) of the Act to 

provide incentive payments to MA 

organizations for certain affiliated 

hospitals that meaningfully use certified 

EHR technology. 

(f) Sections 1903(a)(3)(F) and 1903(t) 

of the Act to provide 100 percent 

Federal financial participation (FFP) to 

States for incentive payments to certain 

eligible providers participating in the 

Medicaid program to purchase, 

implement, and operate (including 

support services and training for staff) 

certified EHR technology and 90 percent 

FFP for State administrative expenses 

related to such incentive payments. 

(g) Sections 1848(a)(7), 1853(l)(4), 

1886(b)(3)(ix)(1), and 1853(m)(4) of the 

Act, providing for payment reductions 

for inpatient services furnished on or 

after October 1, 2014 to Medicare 

beneficiaries by hospitals that are not 

meaningful users of certified electronic 

health record technology, and for 

covered professional services furnished 

on or after January 1, 2015 to Medicare 

beneficiaries by physicians and other 

professionals who are not meaningful 

users of certified electronic health 

record technology. 

§ 495.4 Definitions. 

In this part, unless otherwise 

indicated— 

Certified electronic health record 

technology means a qualified EHR that 

meets the certification requirements 

specified in 45 CFR 170.102. 

Critical access hospital (CAH) means 

a facility that has been certified as a 

critical access hospital under section 

1820(e) of the Act and for which 

Medicare payment is made under 

section 1814(l) of the Act for inpatient 

services and under section 1834(g) of 

the Act for outpatient services. 

EHR reporting period means either of 

the following: 

(1) For an EP— 

(i) For the first payment year, any 

continuous 90-day period within a 

calendar year; 

(ii) For the second, third, fourth, fifth 

or sixth payment year, the calendar 

year. 

(2) For an eligible hospital or a CAH— 

(i) For the first payment year, any 

continuous 90-day period within a fiscal 

year; and 

(ii) For the second, third, fourth, fifth 

or sixth payment year, the fiscal year. 

Eligible hospital means an eligible 

hospital as defined under § 495.100 or 

Medicaid eligible hospital under 

subpart D of this part. 

Eligible professional (EP) means an 

eligible professional as defined under 

§ 495.100 or a Medicaid eligible 

professional under subpart D of this 

part. 

Fifth payment year means the fifth 

payment year that the EP, eligible 

hospital or CAH receives an incentive 

payment under this part. 


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First payment year means the first 

payment year that the EP, eligible 

hospital or CAH receives an incentive 

payment under this part. 

Fourth payment year means the fourth 

payment year that the EP, eligible 

hospital or CAH receives an incentive 

payment under this part. 

Hospital-based EP is an EP (as defined 

under this section) who furnishes 90 

percent or more of his or her covered 

professional services in the CY 

preceding the payment year in a 

hospital setting. A setting is considered 

a hospital setting if it is identified by the 

codes used in the HIPAA standard 

transactions that identifies the site of 

service as an inpatient hospital, 

outpatient hospital, or emergency room. 

Meaningful EHR user means— 

(1) An EP, eligible hospital or CAH 

that, for an EHR reporting period for a 

payment year, demonstrates in 

accordance with § 495.8 meaningful use 

of certified EHR technology by meeting 

the applicable objectives and associated 

measures under § 495.6; and 

(2) A Medicaid EP or Medicaid 

eligible hospital, that meets paragraph 

(1) of this definition and any additional 

criteria for meaningful use imposed by 

the State and approved by CMS under 

§ 495.316 and § 495.332. 

Payment year means— 

(1) For an EP other than a Medicaid 

EP, a calendar year beginning with CY 

2011; and 

(2) For a CAH or an eligible hospital 

other than a Medicaid eligible hospital, 

a Federal fiscal year beginning with FY 

2011. 

(3) For a Medicaid EP, 

(i) The timeframe specified in 

paragraph (1) of this definition; or 

(ii) In accordance with subpart D of 

this part and with CMS approval, CY 

2010. 

(4) For a Medicaid eligible hospital, 

(i) The timeframe specified in 

paragraph (2) of this definition; or 

(ii) In accordance with subpart D of 

the part and with CMS approval, 

FY2010. 

Qualified EHR means an electronic 

record of health related information on 

an individual that includes patient 

demographic and clinical health 

information, such as medical history 

and problem lists; and has the capacity 

to meet all of the following: 

(1) Provide clinical decision support. 

(2) Support physician order entry. 

(3) Capture and query information 

relevant to health care quality. 

(4) To exchange electronic health 

information with, and integrate such 

information from other sources. 

Second payment year means the 

second payment year that the EP, 

eligible hospital or CAH receives an 

incentive payment under this part. 

Sixth payment year means the sixth 

payment year that the EP, eligible 

hospital or CAH receives an incentive 

payment under this part. 

Third payment year means the third 

payment year that the EP, eligible 

hospital or CAH receives an incentive 

payment under this part. 

§ 495.6 Meaningful use objectives and 

measures for EPs, eligible hospitals, and 

CAHs. 

(a) Stage 1 criteria for EPs—(1) 

General rule regarding Stage 1 criteria 

for meaningful use for EPs. Except as 

specified in paragraph (a)(2) of this 

section, EPs must meet all objectives 

and associated measures of the Stage 1 

criteria specified in paragraphs (c) and 

(d) of this section to receive an incentive 

payment. 

(2) Exceptions for Medicaid EPs—(i) 

Exception for Medicaid EPs receiving 

payment in CY 2010. If CMS has 

approved a State’s request to begin 

providing incentive payments to EPs in 

CY 2010 for adopting, implementing or 

upgrading certified EHR technology, the 

objectives and associated measures of 

the Stage 1 criteria specified in 

paragraphs (c) and (d) are applicable to 

an EP whose second payment year is CY 

2011. 

(ii) Exception for Medicaid EPs who 

adopt, implement or upgrade in their 

first payment year. For Medicaid EPs 

who adopt, implement, or upgrade 

certified EHR technology in their first 

payment year, the meaningful use 

objectives and associated measures of 

the Stage 1 criteria specified in 

paragraphs (c) and (d) apply beginning 

with the second payment year, and do 

not apply to the first payment year. 

(b) Stage 1 criteria for eligible 

hospitals and CAHs—(1) General rule 

regarding Stage 1 criteria for meaningful 

use for eligible hospitals or CAHs. 

Except as specified in paragraph (b)(2) 

of this section, eligible hospitals and 

CAHs must meet all objectives and 

associated measures of the Stage 1 

criteria specified in paragraphs (c) and 

(e) of this section to receive an incentive 

payment. 

(2) Exception for Medicaid eligible 

hospitals. For Medicaid eligible 

hospitals who adopt, implement, or 

upgrade certified EHR technology in 

their first payment year, the meaningful 

use objectives and associated measures 

of the Stage 1 criteria specified in 

paragraphs (c) and (e) apply beginning 

with the second payment year. 

(c) Stage 1 criteria for EPs and eligible 

hospitals or CAHs. An EP, eligible 

hospital or CAH must satisfy the 

following objectives and associated 

measures: 

(1)(i) Objective. Implement drug-drug, 

drug-allergy, drug-formulary checks. 

(ii) Measure. The EP, eligible hospital 

or CAH has enabled this functionality. 

(2)(i) Objective. Maintain an up-todate problem list of current and active 

diagnoses based on ICD–9–CM or 

SNOMED CT ®. 

(ii) Measure. At least 80 percent of all 

unique patients seen by the EP or 

admitted to an eligible hospital or CAH 

have at least one entry or an indication 

of none recorded as structured data. 

(3)(i) Objective. Maintain active 

medication list. 

(ii) Measure. At least 80 percent of all 

unique patients seen by the EP or 

admitted by the eligible hospital or CAH 

have at least one entry (or an indication 

of ‘‘none’’ if the patient is not currently 

prescribed any medication) recorded as 

structured data. 

(4)(i) Objective. Maintain active 

medication allergy list. 

(ii) Measure. At least 80 percent of all 

unique patients seen by the EP or 

admitted to the eligible hospital or CAH 

have at least one entry (or an indication 

of ‘‘none’’ if the patient has no 

medication allergies) recorded as 

structured data. 

(5)(i) Objective. Record the following 

demographics: 

(A) Preferred language. 

(B) Insurance type. 

(C) Gender. 

(D) Race. 

(E) Ethnicity. 

(F) Date of birth. 

(G) For eligible hospitals or CAHs, the 

date and cause of death in the event of 

mortality. 

(ii) Measure. At least 80 percent of all 

unique patients seen by the EP or 

admitted to the eligible hospital or CAH 

have the demographics specified in 

paragraphs (c)(5)(i)(A) through (G) of 

this section recorded as structured data. 

(6)(i) Objective. (A) Record and chart 

changes in the following vital signs: 

(1) Height. 

(2) Weight. 

(3) Blood pressure. 

(B) Calculate and display the body 

mass index (BMI) for patients 2 years 

and older. 

(C) Plot and display growth charts for 

children 2 to 20 years including body 

mass index. 

(ii) Measure. For at least 80 percent of 

all unique patients age 2 years or older 

seen by the EP or admitted to the 

eligible hospital, record blood pressure 

and BMI and plot the growth chart for 

children age 2 to 20 years old. 

(7)(i) Objective. Record smoking status 

for patients 13 years old or older. 


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(ii) Measure. At least 80 percent of all 

unique patients 13 years old or older 

seen by the EP or admitted to the 

eligible hospital or CAH have ‘‘smoking 

status’’ recorded. 

(8)(i) Objective. Incorporate clinical 

lab-test results into EHR as structured 

data. 

(ii) Measure. At least 50 percent of all 

clinical lab tests results ordered by the 

EP or authorized provider of the 

hospital during the EHR reporting 

period whose results are either in a 

positive/negative or numerical format 

are incorporated in certified EHR 

technology as structured data. 

(9)(i) Objective. Generate lists of 

patients by specific conditions to use for 

quality improvement, reduction of 

disparities, research and outreach. 

(ii) Measure. Generate at least one 

report listing patients of the EP, eligible 

hospital or CAH with a specific 

condition. 

(10)(i) Objective. Implement five 

clinical decision support rules relevant 

to specialty or high clinical priority, 

including for diagnostic test ordering, 

along with the ability to track 

compliance with those rules. 

(ii) Measure. Implement five clinical 

decision support rules relevant to the 

clinical quality metrics reported under 

this subpart. 

(11)(i) Objective. Check insurance 

eligibility electronically from public and 

private payers. 

(ii) Measure. Insurance eligibility is 

checked electronically for at least 80 

percent of all unique patients seen by 

the EP or admitted to the eligible 

hospital or CAH. 

(12)(i) Objective. Submit claims 

electronically to public and private 

payers. 

(ii) Measure. At least 80 percent of all 

claims filed electronically by the EP or 

the eligible hospital or CAH. 

(13)(i) Objective. Perform medication 

reconciliation at relevant encounters 

and each transition of care. 

(ii) Measure. Perform medication 

reconciliation for at least 80 percent of 

relevant encounters and transitions of 

care. 

(14)(i) Objective. Provide summary 

care record for each transition of care 

and referral. 

(ii) Measure. Provide summary of care 

record for at least 80 percent of 

transitions of care and referrals. 

(15)(i) Objective: Capability to submit 

electronic data to immunization 

registries and actual submission where 

required and accepted. 

(ii) Measure: Performed at least one 

test of certified EHR technology’s 

capability to submit electronic data to 

immunization registries. 

(16)(i) Objective. Capability to provide 

electronic syndromic surveillance data 

to public health agencies and actual 

transmission according to applicable 

law and practice. 

(ii) Measure. Performed at least one 

test of certified EHR technology’s 

capacity to provide electronic 

syndromic surveillance data to public 

health agencies (unless none of the 

public health agencies to which the EP, 

eligible hospital or CAH submits such 

information have the capacity to receive 

the information electronically). 

(17)(i) Objective. Protect electronic 

health information created or 

maintained by certified EHR technology 

through the implementation of 

appropriate technical capabilities. 

(ii) Measure. Conduct or review a 

security risk analysis in accordance 

with the requirements under 45 CFR 

164.308(a)(1) and implement security 

updates as necessary. 

(d) Additional Stage 1 criteria for EPs. 

An EP must meet the following 

objectives and associated measures: 

(1)(i) Objective. Use computerized 

provider order entry (CPOE). 

(ii) Measure. CPOE is used for at least 

80 percent of all orders. 

(2)(i) Objective. Generate and transmit 

permissible prescriptions electronically 

(eRx). 

(ii) Measure. At least 75 percent of all 

permissible prescriptions written by the 

EP are transmitted electronically using 

certified EHR technology. 

(3)(i) Objective. Report ambulatory 

quality measures to CMS or, in the case 

of Medicaid EPs, the States. 

(ii) Measure. Successfully report to 

CMS (or, in the case of Medicaid EPs, 

the States) clinical quality measures in 

the form and manner specified by CMS. 

(4)(i) Objective. Send reminders to 

patients per patient preference for 

preventive/follow-up care. 

(ii) Measure. Reminder sent to at least 

50 percent of all unique patients seen by 

the EP that are 50 years of age and over. 

(5)(i) Objective. Provide patients with 

an electronic copy of their health 

information (including diagnostic test 

results, problem list, medication lists, 

and allergies) upon request. 

(ii) Measure. At least 80 percent of all 

patient requests for an electronic copy 

of their health information are provided 

it within 48 hours. 

(6)(i) Objective. Provide patients with 

timely electronic access to their health 

information (including diagnostic test 

results, problem list, medication lists, 

and allergies) within 96 hours of the 

information being available to the EP. 

(ii) Measure. At least 10 percent of all 

unique patients seen by the EP are 

provided timely electronic access to 

their health information. 

(7)(i) Objective. Provide clinical 

summaries to patients for each office 

visit. 

(ii) Measure. Clinical summaries 

provided to patients for at least 80 

percent of all office visits. 

(8)(i) Objective. Capability to 

exchange key clinical information 

among providers of care and patient 

authorized entities electronically. 

(ii) Measure. Perform at least one test 

of certified EHR technology’s capacity to 

electronically exchange key clinical 

information. 

(e) Additional Stage 1 criteria for 

eligible hospitals or CAHs. Eligible 

hospitals or CAHs must meet the 

following objectives and associated 

measures: 

(1)(i) Objective. Use computerized 

provider order entry (CPOE) for orders 

(any type) directly entered by 

authorizing provider (for example, MD, 

DO, RN, PA, NP). 

(ii) Measure. CPOE is used for at least 

10 percent of all orders. 

(2)(i) Objective. Report hospital 

quality measures to CMS or, in the case 

of Medicaid eligible hospitals, the 

States. 

(ii) Measure. Successfully report to 

CMS (or, in the case of Medicaid eligible 

hospitals, the States) clinical quality 

measures in the form and manner 

specified by CMS. 

(3)(i) Objective. Provide patients with 

an electronic copy of their health 

information (including diagnostic test 

results, problem list, medication lists, 

allergies, discharge summary, and 

procedures), upon request. 

(ii) Measure. At least 80 percent of all 

patient requests for an electronic copy 

of their health information are provided 

it within 48 hours 

(4)(i) Objective. Provide patients with 

an electronic copy of their discharge 

instructions and procedures at time of 

discharge, upon request. 

(ii) Measure. At least 80 percent of all 

patients who are discharged from an 

eligible hospital or CAH and who 

request an electronic copy of their 

discharge instructions and procedures 

are provided it. 

(5)(i) Objective. Capability to 

exchange key clinical information (for 

example, discharge summary, 

procedures, problem list, medication 

list, allergies, and diagnostic test results) 

among providers of care and patientauthorized entities electronically. 

(ii) Measure. Performed at least one 

test of certified EHR technology’s 

capacity to electronically exchange key 

clinical information. 

(6)(i) Objective. Capability to provide 

electronic submission of reportable lab 

results (as required by State or local 


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law) to public health agencies and 

actual submission where it can be 

received. 

(ii) Measure. Performed at least one 

test of certified EHR technology capacity 

to provide electronic submission of 

reportable lab results to public health 

agencies (unless none of the public 

health agencies to which the eligible 

hospital submits such information have 

the capacity to receive the information 

electronically). 

§ 495.8 Demonstration of meaningful use 

criteria. 

(a) Demonstration by EPs. An EP must 

demonstrate that he or she satisfies each 

of the applicable objectives and 

associated measures under § 495.6 of 

this subpart as follows: 

(1) For CY 2011, 

(i) Attest, through a secure 

mechanism, in a manner specified by 

CMS (or for a Medicaid EP, in a manner 

specified by the State), that during the 

EHR reporting period, the EP used 

certified EHR technology, and specify 

the technology used. 

(ii) Attest, through a secure 

mechanism, in a manner specified by 

CMS (or for a Medicaid EP, in a manner 

specified by the State), that during the 

EHR reporting period, the EP satisfied 

each of the applicable objectives and 

associated measures under § 495.6 of 

this part. The EP must specify the EHR 

reporting period and provide the result 

of each applicable measure for all 

patients seen during the EHR reporting 

period for which a selected measure is 

applicable. 

(iii) For Medicaid EPs, if, in 

accordance with § 495.316 and 

§ 495.332, CMS has approved a State’s 

additional criteria for meaningful use, 

demonstrate meeting such criteria using 

the method approved by CMS. 

(iv) Exception for Medicaid EPs. If a 

Medicaid EP has adopted, implemented 

or upgraded certified EHR technology 

described in § 495.4 of this subpart, the 

provider must demonstrate meaningful 

use in the second payment year as 

described in § 495.6 and § 495.8 of this 

subpart. 

(2) For CY 2012 and subsequent 

years— 

(i) Attest, through a secure 

mechanism, in a manner specified by 

CMS (or for a Medicaid EP, in a manner 

specified by the State) that during the 

EHR reporting period, the EP used 

certified EHR technology and specify 

the technology used. 

(ii) Attest, through a secure 

mechanism, in a manner specified by 

CMS (or for a Medicaid EP, in a manner 

specified by the State), that during the 

EHR reporting period, the EP satisfied 

each of the applicable objectives and 

associated measures under § 495.6, 

except § 495.6(d)(3) ‘‘Report ambulatory 

quality measures to CMS or, in the case 

of Medicaid EPs, the states.’’ 

(iii) For § 495.6(d)(3), ‘‘Report 

ambulatory quality measures to CMS or, 

in the case of Medicaid EPs, the States’’, 

report electronically to CMS (or in the 

case of Medicaid EPs, the States) 

clinical quality information in the form 

and manner specified by CMS. 

(iv) For Medicaid EPs, if, in 

accordance with § 495.316 and 

§ 495.332, CMS has approved a State’s 

additional criteria for meaningful use, 

demonstrate meeting such criteria using 

the method approved by CMS. 

(b) Demonstration by eligible 

hospitals and CAHs. To successfully 

demonstrate meaningful use an eligible 

hospital or CAH must the following 

requirements: 

(1) For FY 2011— 

(i) Attest, through a secure 

mechanism, in a manner specified by 

CMS (or for a Medicaid eligible hospital, 

in a manner specified by the State), that 

during the EHR reporting period, the 

eligible hospital or CAH used certified 

EHR and specify the technology used. 

(ii) Attest, through a secure 

mechanism, in a manner specified by 

CMS (or for a Medicaid eligible hospital, 

in a manner specified by the State), that 

during the EHR reporting period, the 

eligible hospital or CAH satisfied each 

of the applicable objectives and 

associated measures under § 495.6. The 

eligible hospital or CAH must specify 

the EHR reporting period and provide 

the result of each applicable measure for 

all patients admitted to the eligible 

hospital during the EHR reporting 

period for which a selected measure is 

applicable. 

(iii) Exception for Medicaid eligible 

hospitals. If a Medicaid eligible hospital 

has adopted, implemented or upgraded 

certified EHR technology for the first 

payment year, the eligible hospital must 

demonstrate meaningful use in the 

second payment year, see § 495.6 and 

§ 495.8. 

(iv) For hospitals participating in the 

Medicaid EHR incentive program, if, in 

accordance with § 495.316 and 

§ 495.332, CMS has approved a State’s 

additional criteria for meaningful use, 

demonstrate meeting such criteria using 

the method approved by CMS. 

(2) For FY 2012 and subsequent years 

must— 

(i) Attest, through a secure 

mechanism, in a manner specified by 

CMS (or for a Medicaid eligible hospital, 

in a manner specified by the State), that 

during the EHR reporting period, the 

eligible hospital or CAH used certified 

EHR and specify the technology used. 

(ii) Attest, through a secure 

mechanism, in a manner specified by 

CMS (or for a Medicaid eligible hospital, 

in a manner specified by the State), that 

during the EHR reporting period, the 

eligible hospital or CAH satisfied each 

of the applicable objectives and 

associated measures under § 495.6 

except § 495.6(e)(2). The eligible 

hospital or CAH must specify the EHR 

reporting period and provide the result 

of each applicable measure, except for 

§ 495.6(e)(2) ‘‘Report hospital quality 

measures to CMS or, in the case of 

Medicaid eligible hospitals, the States:’’ 

(iii) For § 495.6(e)(2) ‘‘Report hospital 

clinical quality measures to CMS or, in 

the case of Medicaid eligible hospitals, 

the States,’’ report electronically to CMS 

(or in the case of Medicaid eligible 

hospitals, the States), clinical quality 

measures in the form and manner 

specified by CMS. 

(iv) For Medicaid hospitals if, in 

accordance with § 495.316 and 

§ 495.332, CMS has approved a State’s 

additional criteria for meaningful use, 

demonstrate meeting such criteria using 

the method approved by CMS. 

(c) Review of meaningful use. (1) CMS 

may review an EP, eligible hospital or 

CAH’s demonstration of meaningful use. 

(2) EPs, eligible hospitals, and CAHs 

must keep documentation supporting 

their demonstration of meaningful use 

for 10 years. 

§ 495.10 Participation requirements for 

EPs, eligible hospitals, and CAHs. 

(a) An eligible hospital, CAH or EP 

must submit in a manner specified by 

CMS the following information in the 

first payment year: 

(1) Name of the EP, eligible hospital 

or CAH. 

(2) National Provider Identifier (NPI). 

(3) Business address and phone 

number. 

(b) In addition to the information 

submitted under paragraph (a) of this 

section, an eligible hospital or CAH, 

must, in the first payment year, submit 

in a manner specified by CMS its CMS 

Certification Number (CCN) and its 

Taxpayer Identification Number (TIN). 

(c) Subject to paragraph (f) of this 

section, in addition to the information 

submitted under paragraph (a) of this 

section, an EP must submit in a manner 

specified by CMS, the Taxpayer 

Identification Number (TIN) to which 

the EP’s incentive payment should be 

made. 

(d) In the event the information 

specified in paragraphs (a) through (c) of 

this section as previously submitted to 

CMS is no longer accurate, the EP or 


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eligible hospital must provide updated 

information to CMS or the State on a 

timely basis in the manner specified by 

CMS or the State. 

(e) An EP that qualifies as both a 

Medicaid EP and Medicare EP— 

(1) Must notify CMS in the manner 

specified by CMS as to whether he or 

she elects to participate in the Medicare 

or the Medicaid EHR incentive program. 

(2) Is limited to switching between 

programs one time, and only for 

payment years 2014 and before; 

(3) Must, for each payment year, meet 

all of the Medicare or Medicaid 

applicable requirements, including 

applicable patient volume requirements, 

for the program he or she chooses to 

participate in; 

(4) Is limited to receiving, in total, the 

maximum payments the EP would 

receive under the Medicaid EHR 

program, as described in subpart D of 

this part; 

(5) Is placed in the payment year the 

EP would have been in, had the EP not 

switched programs. For example, an EP 

that begins receiving Medicaid incentive 

payments in 2011, and then switches to 

the Medicare program for 2012, is in his 

or her second payment year in 2012. 

(f) Limitations on incentive payment 

reassignments. Section 1842(b)(6)(A) of 

the Act allows for the reassignment of 

payments under Medicare to an 

employer or entity with which the EP 

has a contractual arrangement allowing 

the employer or entity to bill and 

receive payment for the EP’s covered 

professional services. 

(1) EPs are permitted to reassign their 

incentive payments to their employer or 

to an entity with which they have a 

contractual arrangement, consistent 

with all rules governing reassignments 

including part 424, subpart F of this 

chapter. 

(2) Each EP may only reassign the 

entire amount of the incentive payment 

to one employer or entity. 

Subpart B—Requirements Specific to 

the Medicare Program 

§ 495.100 Definitions. 

In this subpart unless otherwise 

indicated— 

Covered professional services means 

services furnished by an eligible 

professional for which payment is made 

under, or is based on, the Medicare 

physician fee schedule as provided in 

section 1848(k)(3) of the Act. 

Eligible hospital means a hospital 

subject to the prospective payment 

system specified in § 412.1(a)(1) of this 

chapter, excluding those hospitals 

specified in § 412.23 of this chapter. 

Eligible professional (EP) means a 

physician as defined in section 1861(r) 

of the Act, which includes all of the 

following types of professionals: 

(1) A doctor of medicine or 

osteopathy. 

(2) A doctor of dental surgery or 

medicine. 

(3) A doctor of podiatric medicine. 

(4) A doctor of optometry. 

(5) A chiropractor. 

Geographic health professional 

shortage area (HPSA) means an area 

that is designated by the Secretary 

under section 332(a)(1)(A) of the PHS 

Act as of December 31 of the year prior 

to the payment year as having a shortage 

of health professionals. 

Qualifying CAH means a CAH that is 

a meaningful EHR user for the EHR 

reporting period for a cost reporting 

period beginning during a payment 

year. 

Qualifying eligible professional (EP) 

means an EP who is a meaningful EHR 

user for the EHR reporting period for a 

payment year and who is not a hospitalbased EP. 

Qualifying hospital means an eligible 

hospital that is a meaningful EHR user 

for the EHR reporting period for a 

payment year. 

§ 495.102 Incentive payments to EPs. 

(a) General rules. (1) Subject to 

paragraph (b) of this section, in addition 

to the amount otherwise paid under 

section 1848 of the Act, there shall be 

paid to a qualifying eligible professional 

(or to an employer or entity in the cases 

described in section 1842(b)(6)(A) of the 

Act) for a payment year an amount 

equal 75 percent of the estimated 

allowed charges under the physician fee 

schedule (established under section 

1848 of the Act) for the covered 

professional services furnished by the 

EP during the payment year. 

(2) For purposes of this paragraph (a), 

the estimated allowed charges for the 

qualifying EP’s covered professional 

services during the payment year are 

determined based on claims submitted 

no later than 2 months after the end of 

the payment year, and, in the case of a 

qualifying EP who furnishes covered 

professional services in more than one 

practice, are determined based on 

claims submitted for the EP’s covered 

professional services across all such 

practices. 

(b) Limitations on amounts of 

incentive payments. 

(1) Except as otherwise provided in 

paragraph (b)(2) and paragraph (c) of 

this section, the amount of the incentive 

payment that a qualifying EP can 

receive for each payment year is limited 

to the following amounts: 

(i) For the first payment year, $15,000 

(or, if the first payment year for such 

qualifying eligible professional is 2011 

or 2012, $18,000). 

(ii) For the second payment year, 

$12,000. 

(iii) For the third payment year, 

$8,000. 

(iv) For the fourth payment year, 

$4,000. 

(v) For the fifth payment year, $2,000. 

(vi) For any succeeding payment year 

for such professional, $0. 

(2)(i) If the first payment year for a 

qualifying eligible professional is 2014, 

then the amount for a payment year for 

a qualifying EP is the same as the 

amount specified for such payment year 

for a qualifying EP whose first payment 

year is 2013. 

(ii) If the first payment year for a 

qualifying EP is after 2014, then the 

applicable amount specified in this 

paragraph for such professional for such 

year and any subsequent year must be 

$0. 

(c) Increase in incentive payment 

limit for EPs who predominantly furnish 

services in a geographic HPSA. In the 

case of a qualifying eligible professional 

who in the year prior to the payment 

year furnishes more than 50 percent of 

his or her covered professional services 

in a geographic HPSA, the annual 

incentive payment limit determined 

under paragraph (b) of this section is to 

be increased by 10 percent. 

(d) Payment adjustment effective in 

CY 2015 and subsequent years for 

nonqualifying EPs. 

(1) Subject to paragraph (d)(3) of this 

section, beginning in 2015, for covered 

professional services furnished by an EP 

who is not a qualifying EP or a hospitalbased EP for the year, the payment 

amount for such services is equal the 

product of the applicable percent 

specified in paragraph (d)(2) and the 

Medicare physician fee schedule 

amount for such services. 

(2) Applicable percent. Applicable 

percent is as follows: 

(i) For 2015, 99 percent if the eligible 

professional is not subject to the 

payment adjustment for an eligible 

professional who is not a successful 

electronic prescriber under section 

1848(a)(5) of the Act, or 98 percent if the 

eligible professional is subject to the 

payment adjustment for an eligible 

professional who is not a successful 

electronic prescriber under section 

1848(a)(5) of the Act). 

(ii) For 2016, 98 percent. 

(iii) For 2017 and each subsequent 

year, 97 percent. 

(3) Significant hardship exception. 

The Secretary may, on a case-by-case 

basis, exempt an EP who is not a 

qualifying EP from the application of 

the payment adjustment under 


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paragraph (d)(1) of this section, if the 

Secretary determines that compliance 

with the requirement for being a 

meaningful EHR user would result in a 

significant hardship for the EP. The 

Secretary’s determination to grant an EP 

an exemption under this paragraph 

(d)(3) may be renewed on an annual 

basis, provided that in no case may an 

EP be granted an exemption under this 

paragraph (d)(3) for more than 5 years. 

§ 495.104 Incentive payments to eligible 

hospitals. 

(a) General rule. A qualifying hospital 

(as defined in this subpart) shall receive 

the special incentive payment as 

determined under the formulas 

described in paragraph (c) of this 

section for the period specified in 

paragraph (b) of this section. 

(b) Transition periods. Subject to the 

payment formula specified in paragraph 

(e) of this section, qualifying hospitals 

may receive incentive payments during 

transition periods which comprise the 

following fiscal years: 

(1) Hospitals whose first payment year 

is FY 2011 may receive such payments 

for FYs 2011 through 2014. 

(2) Hospitals whose first payment year 

is FY 2012 may receive such payments 

for FYs 2012 through 2015. 

(3) Hospitals whose first payment year 

is FY 2013 may receive such payments 

for FYs 2013 through 2016. 

(4) Hospitals whose first payment year 

is FY 2014 may receive such payments 

for FY 2014 through 2016. 

(5) Hospitals whose first payment year 

is FY 2015 may receive such payments 

for FY 2015 through 2017. 

(c) Payment methodology. (1) The 

incentive payment for each payment 

year is calculated as the product of the 

following: 

(i) The initial amount determined 

under paragraph (c)(3) of this section; 

(ii) The Medicare share fraction 

determined under paragraph (c)(4) of 

this section; and 

(iii) The transition factor determined 

under paragraph (c)(5) of this section. 

(2) Interim and final payments. CMS 

uses data on hospital discharges (as that 

term is defined in § 412.4(a) of this 

chapter), Medicare Part A inpatient-beddays, Medicare Part C inpatient-beddays, and total inpatient-bed-days, from 

the hospital cost report for the hospital 

fiscal year that ends during the Federal 

fiscal year prior to the fiscal year that 

serves as the payment year as the basis 

for making preliminary incentive 

payments. Final payments are 

determined at the time of settling the 

hospital cost report for the hospital 

fiscal year that ends during the payment 

year, and settled on the basis of data 

from that cost reporting period. 

(3) Initial amount. The initial amount 

is equal to one of the following: 

(i) For each hospital with 1,149 

discharges or fewer during the fiscal 

year prior to the payment year, 

$2,000,000. 

(ii) For each hospital with at least 

1,150 but no more 23,000 discharges 

during the payment year, $2,000,000 + 

[$200 × (n ¥ 1,149)], where n is the 

number of discharges for the hospital 

during the fiscal year prior to the 

payment year. 

(iii) For each hospital with more than 

23,000 discharges for the fiscal year 

prior to the payment year, $6,370,400. 

(4) Medicare share fraction— (i) 

General. (A) CMS determines the 

Medicare share fraction by using the 

number of Medicare Part A, Medicare 

Part C, and total inpatient-bed-days 

using data from the Medicare cost report 

as specified by CMS. 

(B) CMS computes the denominator of 

the Medicare share fraction using the 

charity care charges reported on the 

hospital’s Medicare cost report. 

(ii) The Medicare share fraction is the 

ratio of— 

(A) A numerator which is the sum 

of— 

(1) The number of inpatient-bed-days 

during the period which are attributable 

to individuals with respect to whom 

payment may be made under Part A; 

and 

(2) The number of inpatient-bed-days 

during the period which are attributable 

to individuals who are enrolled with a 

Medicare Advantage organization (as 

defined in § 422.2 of this chapter). 

(iii) A denominator which is the 

product of— 

(A) The total number of inpatient-beddays during the period; and 

(B) The total amount of the eligible 

hospital’s charges during the period, not 

including any charges that are 

attributable to charity care divided by 

the estimated total amount of the 

hospitals charges during the period. 

(5) Transition factor. For purposes of 

the payment formula, the transition 

factor is as follows: 

(i) For hospitals whose first payment 

year is FY 2011— 

(A) 1 for FY 2011; 

(B) 3⁄4 for FY 2012; 

(C) 1⁄2 for FY 2013; and 

(D) 1⁄4 for FY 2014. 

(ii) Hospitals whose first payment 

year is FY 2012— 

(A) 1 for FY 2012; 

(B) 3⁄4 for FY 2013; 

(C) 1⁄2 for FY 2014; and 

(D) 1⁄4 for FY 2015; 

(iii) Hospitals whose first payment 

year is FY 2013— 

(A) 1 for FY 2013; 

(B) 3⁄4 for FY 2014; 

(C) 1⁄2 for FY 2015; and 

(D) 1⁄4 for FY 2016. 

(iv) Hospitals whose first payment 

year is FY 2014— 

(A) 3⁄4 for FY 2014; 

(B) 1⁄2 for FY 2015; and 

(C) 1⁄4 for FY 2016. 

(v) Hospitals whose first payment year 

is FY 2015— 

(A) 1⁄2 for FY 2015; and 

(B) 1⁄4 for FY 2016. 

§ 495.106 Incentive payments to CAHs. 

(a) Definitions. In this section, unless 

otherwise indicated— 

Payment year means a Federal fiscal 

year beginning after FY 2010 but before 

FY 2016. 

Qualifying CAH means a CAH that 

would meet the definition of a 

meaningful EHR user at § 495.4, if it 

were an eligible hospital. 

Reasonable costs incurred for the 

purchase of certified EHR technology for 

a qualifying CAH means the reasonable 

acquisition costs incurred for the 

purchase of depreciable assets as 

described in part 413 subpart G of this 

chapter, such as computers and 

associated hardware and software, 

necessary to administer certified EHR 

technology as defined in § 495.4, 

excluding any depreciation and interest 

expenses associated with the 

acquisition. 

(b) General rule. A qualifying CAH 

receives an incentive payment for its 

reasonable costs incurred for the 

purchase of certified EHR technology, as 

defined in paragraph (a) of this section, 

in the manner described in paragraph 

(c) of this section for a cost reporting 

period beginning during a payment year 

as defined in paragraph (a) of this 

section. 

(c) Payment methodology— (1) 

Payment amount. A qualifying CAH 

receives an incentive payment amount 

equal to the product of its reasonable 

costs incurred for the purchase of 

certified EHR technology and the 

Medicare share percentage. 

(2) Calculation of reasonable costs. 

CMS or its Medicare contractor 

computes a qualifying CAH’s reasonable 

costs incurred for the purchase of 

certified EHR technology, as defined in 

paragraph (a) of this section, as the sum 

of— 

(i) The reasonable costs incurred for 

the purchase of certified EHR 

technology during the cost reporting 

period that begins in a payment year; 

and 

(ii) Any reasonable costs incurred for 

the purchase of certified EHR 

technology in cost reporting periods 

beginning in years prior to the payment 


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year which have not been fully 

depreciated as of the cost reporting 

period beginning in the payment year. 

(3) Medicare share percentage. 

Notwithstanding the percentage 

applicable under § 413.70(a)(1) of this 

chapter, the Medicare share percentage 

equals the lesser of— 

(i) 100 percent; or 

(ii) The sum of the Medicare share 

fraction for the CAH as calculated under 

§ 495.104(c)(3) of this subpart and 20 

percentage points. 

(d) Incentive payments made to 

CAHs. (1) The amount of the incentive 

payment made to a qualifying CAH 

under this section represents the 

expensing and payment of the 

reasonable costs computed in paragraph 

(c) of this section in a single payment 

year and, as specified in § 413.70(a)(5) 

of this chapter, such payment is made 

in lieu of payment that would have been 

made under § 413.70(a)(1) of this 

chapter for the reasonable costs of the 

purchase of certified EHR technology 

including depreciation and interest 

expenses associated with the 

acquisition. 

(2) The amount of the incentive 

payment made to a qualifying CAH 

under this section is paid through a 

prompt interim payment for the 

applicable payment year after— 

(i) The CAH submits the necessary 

documentation, as specified by CMS or 

its Medicare contractors, to support the 

computation of the incentive payment 

amount under this section; and 

(ii) CMS or its Medicare contractor 

reviews such documentation and 

determines the interim amount of the 

incentive payment. 

(3) The interim incentive payment 

made under this paragraph is subject to 

a reconciliation process as specified by 

CMS and the final incentive payment as 

determined by CMS or its Medicare 

contractor is considered payment in full 

for the reasonable costs incurred for the 

purchase of certified EHR technology in 

a single payment year. 

(4) In no case may an incentive 

payment be made with respect to a cost 

reporting period beginning during a 

payment year before FY 2011 or after FY 

2015 and in no case may a CAH receive 

an incentive payment under this section 

with respect to more than 4 consecutive 

payment years. 

(e) Reductions in payment to CAHs. 

For cost reporting periods beginning in 

FY 2015, if a CAH is not a qualifying 

CAH for a payment year, then the 

payment for inpatient services furnished 

by a CAH under § 413.70(a) of this 

chapter is adjusted by the applicable 

percentage described in § 413.70(a)(6) of 

this chapter unless otherwise exempt 

from such adjustment. 

(f) Administrative or judicial review. 

There is no administrative or judicial 

review under sections 1869 or 1878 of 

the Act, or otherwise, of the — 

(1) Methodology and standards for 

determining the amount of payment, the 

reasonable cost, and adjustments 

described in this section including 

selection of periods for determining, 

and making estimates or using proxies 

of, inpatient-bed-days, hospital charges, 

charity charges, and the Medicare share 

percentage as described in this section; 

(2) Methodology and standards for 

determining if a CAH is a qualified CAH 

under this section; 

(3) Specification of EHR reporting 

periods, cost reporting periods, payment 

years, and fiscal years used to compute 

the CAH incentive payment as specified 

in this section; and 

(4) Identification of the reasonable 

costs used to compute the CAH 

incentive payment under paragraph (c) 

of this section including any 

reconciliation of the CAH incentive 

payment amount made under paragraph 

(d) of this section. 

§ 495.108 Posting of required information. 

(a) CMS posts, on its Internet Web 

site, the following information regarding 

EPs, eligible hospitals, and CAHs 

receiving an incentive payment under 

subparts B and C of this part: 

(1) Name. 

(2) Business addresses. 

(3) Business phone number. 

(b) CMS posts, on its Internet Web 

site, the following information for 

qualifying MA organizations that 

receive an incentive payment under 

subpart C of this part— 

(1) The information specified in 

paragraph (a) of this section for each of 

the qualifying MA organization’s MA 

plan information; and 

(2) The information specified in 

paragraph (a) of this section for each of 

the qualifying MA organization’s MA 

EPs and MA-affiliated eligible hospitals. 

Subpart C—Requirements Specific to 

Medicare Advantage (MA) 

Organizations 

§ 495.200 Definitions. 

As used in this subpart: 

First payment year means with 

respect to— 

(1) Covered professional services 

furnished by a qualifying MA EP, the 

first calendar year for which an 

incentive payment is made for such 

services under this subsection to a 

qualifying MA organization. 

(2) Qualifying MA-affiliated eligible 

hospitals, the first fiscal year for which 

an incentive payment is made for 

qualifying MA-affiliated eligible 

hospitals under this subsection to a 

qualifying MA organization. 

Inpatient-bed-days is defined in the 

same manner and is used in the same 

manner as that term is defined and used 

for purposes of implementing section 

4201(a) of the American Recovery and 

Reinvestment Act of 2009 with respect 

to the Medicare FFS hospital EHR 

incentive program in § 495.104 of this 

part. 

Patient care services means health 

care services for which payment would 

be made under, or for which payment 

would be based on, the fee schedule 

established under Medicare Part B if 

they were furnished by an EP. 

Payment year means – 

(1) For a qualifying MA EP, a calendar 

year beginning with CY 2011 and 

ending with CY 2016; and 

(2) For an eligible hospital, a Federal 

fiscal year beginning with FY 2011 and 

ending with FY 2016. 

Qualifying MA-affiliated eligible 

hospital means an eligible hospital 

under section 1886(n)(6) of the Act that 

is under common corporate governance 

with a qualifying MA organization and 

that of the Medicare beneficiaries it 

serves, more than two-thirds are 

Medicare individuals enrolled under 

MA plans, and that is a meaningful user 

of certified EHR technology as defined 

by § 495.4 of this part. In the case of a 

hospital for which at least one-third of 

whose Medicare bed-days for the year 

are covered under Part A rather than 

Part C, payment for that payment year 

is only be made under section 1886(n) 

of the Act and not under this section. 

Qualifying MA EP means all of the 

following: 

(1) A physician (as described in 

section 1861(r) of the Act), including a 

doctor of medicine or osteopathy who is 

either of the following: 

(i) Employed by a qualifying MA 

organization. 

(ii) Employed by, or is a partner of, an 

entity that through a contract with a 

qualifying MA organization furnishes at 

least 80 percent of the entity’s Medicare 

patient care services to enrollees of such 

organization. 

(2) Furnishes at least 80 percent of his 

or her professional services covered 

under Title XVIII to enrollees of the 

qualifying MA organization. 

(3) Furnishes, on average, at least 20 

hours per week of patient care services 

to enrollees of the qualifying MA 

organization during the EHR reporting 

period. 

(4) Is a meaningful user of certified 

EHR technology in accordance with 

§ 495.4 of this part. 


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Qualifying MA organization means a 

MA organization that is organized as a 

health maintenance organization (HMO) 

as defined in section 2791(b)(3) of the 

Public Health Service (PHS) Act which 

includes a federally qualified HMO, an 

organization recognized as an HMO 

under State law, or a similar 

organization regulated for solvency 

under State law in the same manner and 

to the same extent as an HMO. 

Second, third, fourth, and fifth 

payment year means with respect to 

incentive payments for qualifying— 

(1) MA EPs to a qualifying MA 

organization, each successive calendar 

year immediately following the first 

payment year for the qualifying MA 

organization. The first payment year and 

each successive year immediately 

following the first payment year, for the 

qualifying MA organizations, through 

2016, is the same for all qualifying MA 

EPs with respect to any specific 

qualifying MA organization. 

(2) MA-affiliated eligible hospitals to 

a qualifying MA organization, each 

successive fiscal year immediately 

following the first payment year for the 

qualifying MA organization. 

Under common corporate governance 

means that a qualifying MA 

organization and a qualifying MAaffiliated eligible hospital have a 

common parent corporation, that one is 

a subsidiary of the other, or that the 

organization and the hospital have a 

common board of directors. 

§ 495.202 Identification of qualifying MA 

organizations, MA–EPs and MA-affiliated 

eligible hospitals. 

(a) Identification of qualifying MA 

organizations. (1) Beginning with bids 

due in June 2010 (for plan year 2011), 

MA organizations seeking 

reimbursement for qualifying MA EPs 

and qualifying MA-affiliated eligible 

hospitals under the MA EHR incentive 

program are required to identify 

themselves to CMS in a form and 

manner specified by CMS, as part of 

submissions of initial bids under section 

1854(a)(1)(A) of the Act. 

(2) Qualifying MA organizations 

offering MA HMO plans, absent 

evidence to the contrary, are deemed to 

meet the definition of HMO in 42 U.S.C. 

300gg–91(b)(3)–section 2791(b)(3) of the 

PHS Act. 

(3) Qualifying MA organizations 

offering MA plan types other than 

HMOs, must attest to the fact that they 

meet the definition of HMO in 42 U.S.C. 

300gg–91(b)(3)–section 2791(b)(3) of the 

PHS Act. 

(4) Beginning with bids due in June 

2014 (for plan year 2015), all MA 

organizations with potentially 

qualifying MA EPs or potentially 

qualifying MA-affiliated eligible 

hospitals under the MA EHR incentive 

program must identify themselves to 

CMS in a form and manner specified by 

CMS, as part of submissions of initial 

bids under section 1854(a)(1)(A) of the 

Act. 

(b) Identification of qualifying MA EPs 

and qualifying MA-affiliated eligible 

hospitals. 

(1) A qualifying MA organization, as 

part of its initial bid starting with plan 

year 2011, must make a preliminary 

identification of potentially qualifying 

MA EPs and potentially qualifying MAaffiliated eligible hospitals for which the 

organization is seeking incentive 

payments. 

(2) A qualifying MA organization 

must provide CMS with the following 

for each MA EP or eligible hospital: 

(i) The MA EP’s or MA-affiliated 

eligible hospital’s name. 

(ii) The address of the MA EP’s 

practice or MA-affiliated eligible 

hospital’s location. 

(iii) NPI. 

(iv) An attestation by MA organization 

specifying that the MA EP or MAaffiliated eligible hospital meets the 

eligibility criteria. 

(3) Final identification of potentially 

qualifying MA EP or MA-affiliated 

eligible hospital must be made by the 

end of the payment year as defined in 

§ 495.200 for which MA EHR incentive 

payments are being sought. 

(4) Beginning plan year 2015 and for 

subsequent plan years, all qualifying 

MA organizations, as part of their initial 

bids in June for the following plan year 

must— 

(i) Identify potentially qualifying MA 

EPs and potentially qualifying MAaffiliated eligible hospitals; 

(ii) Include information specified in 

paragraph (b)(2)(i)(A) through (C) of this 

section for each professional and 

hospital. 

(iii) Include an attestation that each 

professional and hospital either meets 

or does not meet the EHR incentive 

payment eligibility criteria. 

§ 495.204 Incentive payments to qualifying 

MA organizations for MA–EPs and 

hospitals. 

(a) General rule. A qualifying MA 

organization receives an incentive 

payment for its qualifying MA–EPs and 

its qualifying MA-eligible hospitals. The 

incentive payment amount paid to a 

qualifying MA organization for a— 

(1) Qualifying MA–EP is the amount 

determined under paragraph (b) of this 

section; and 

(2) Qualifying MA-eligible hospital is 

the amount determined under paragraph 

(c) of this section. 

(b) Amount payable to qualifying MA 

organization for qualifying MA EPs. 

(1) CMS substitutes an amount 

determined to be equivalent to the 

amount computed under § 495.102 of 

this part. 

(2) The qualifying MA organization 

must report to CMS within 30 days of 

the close of the calendar year, the 

aggregate annual amount of revenue 

attributable to providing services that 

would otherwise be covered as 

professional services under Part B 

received by each qualifying MA EP for 

enrollees in MA plans of the MA 

organization in the payment year. 

(3) CMS calculates the incentive 

amount for the MA organization for 

each qualifying MA EP as an amount 

equal to 75 percent of the reported 

annual revenue specified in paragraph 

(b)(2) of this section, up to the 

maximum amounts specified under 

1848 (o)(1)(B) of the Act. 

(4) For qualifying MA EPs who are 

compensated on a salaried basis, CMS 

requires the qualifying MA organization 

to develop a methodology for estimating 

the portion of each qualifying MA EP’s 

salary attributable to providing services 

that would otherwise be covered as 

professional services under Part B to 

MA plan enrollees of the MA 

organization in the payment year. The 

methodology— 

(i) Must be approved by CMS; and 

(ii) May include an additional amount 

related to overhead, where appropriate, 

estimated to account for the MAenrollee related Part B practice costs of 

the salaried qualifying MA EP. 

(5) For qualifying MA EPs who are not 

salaried, qualifying MA organizations 

must obtain attestations from such 

qualifying MA EPs as to the amount of 

compensation received by such EPs for 

MA plan enrollees of the MA 

organization. The organizations must 

submit to CMS compensation 

information for each such MA EP based 

on such attestations. 

(c) Amount payable to qualifying MA 

organization for qualifying MAaffiliated eligible hospitals. 

(1) CMS substitutes an amount 

determined to be equivalent to the 

amount computed under § 495.104, to 

the extent data are not available to 

compute payments for qualifying MAaffiliated eligible hospitals under the 

Medicare FFS EHR hospital incentive 

program. CMS uses the same 

methodology and defines ‘‘inpatientbed-days’’ and other terms as used under 

the Medicare FFS EHR hospital 

incentive program in § 495.104 of this 

part in computing amounts due 

qualifying MA organizations for MAaffiliated eligible hospitals. 


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(2) To the extent data are available, 

qualifying MA organizations must 

receive hospital incentive payments 

through their affiliated hospitals under 

the Medicare FFS EHR hospital 

incentive program, rather than through 

the MA EHR hospital incentive 

program. 

(d) Payment to qualifying MA 

organizations. CMS makes payment to 

qualifying MA organizations for 

qualifying MA EPs only under the MA 

EHR incentive program and not under 

the Medicare FFS EHR incentive 

program to the extent an EP has earned 

less than the maximum incentive 

payment for the same period under the 

Medicare FFS EHR incentive program. 

(e) Payment review under MA. To 

ensure the accuracy of the incentive 

payments, CMS conducts selected 

compliance reviews of qualifying MA 

organizations to ensure that EPs and 

eligible hospitals for which such 

qualifying organizations received 

incentive payments were meaningful 

users of certified EHR technology in 

accordance with § 422.504 of this 

chapter. 

(1) The reviews include validation of 

the status of the organization as a 

qualifying MA organization, verification 

of meaningful use and review of data 

used to calculate incentive payments. 

(2) MA organizations are required to 

maintain evidence of their qualification 

to receive incentive payments and the 

data necessary to accurately calculate 

incentive payments. 

(3) Documents and records must be 

maintained for 10 years from the date 

such payments are made with respect to 

a given payment year. 

(4) Payments that result from 

incorrect or fraudulent attestations, cost 

data, or any other submission required 

to establish eligibility or to qualify for 

such payment, will be recouped by CMS 

from the MA organization. 

§ 495.206 Timeframe for payment to 

qualifying MA organizations. 

(a) CMS makes payment to qualifying 

MA organizations for qualifying MA EPs 

under the MA EHR incentive program 

after computing incentive payments due 

under the Medicare FFS EHR incentive 

program according to § 495.102. 

(b) Payments to qualifying MA 

organizations for qualifying MAaffiliated eligible hospitals under 

common corporate governance are made 

under the Medicare FFS EHR incentive 

program, following the timeline in 

specified in § 495.104 of this part. To 

the extent sufficient data do not exist to 

pay qualifying MA-affiliated eligible 

hospitals under common corporate 

governance under the Medicare FFS 

EHR incentive program, payment is 

made under the MA EHR incentive 

program, following the same timeline in 

§ 495.104 of this part. 

§ 495.208 Avoiding duplicate payment. 

(a) Unless a qualifying MA EP is 

entitled to a maximum payment for a 

year under the Medicare FFS EHR 

incentive program, payment for such an 

individual is only be made under the 

MA EHR incentive program to a 

qualifying MA organization. 

(b) Payment to qualifying MA 

organizations for a qualifying MAaffiliated eligible hospital under 

common governance only occurs under 

the MA EHR incentive program to the 

extent that sufficient data does not exist 

to pay such hospital under the Medicare 

FFS hospital incentive program under 

§ 495.104 of this part. In no event are 

EHR incentive payments made for a 

hospital for a payment year under this 

section to the extent they have been 

made for the same hospital for the same 

payment year under § 495.104 of this 

part. 

(c) Each qualifying MA organization 

must ensure that all potentially 

qualifying MA EPs are enumerated 

through the NPI system and that other 

identifying information required under 

§ 495.210(b) is provided to CMS. 

§ 495.210 Meaningful user attestation. 

(a) Qualifying MA organizations are 

required to attest, in a form and manner 

specified by CMS, that each qualifying 

MA EP and qualifying MA-affiliated 

eligible hospitals is a meaningful EHR 

user. 

(b) Qualifying MA organizations are 

required to attest within 30 days after 

the close of a calendar year whether 

each qualifying MA EP is a meaningful 

EHR user. 

(c) Qualifying MA organizations are 

required to attest within 30 days after 

close of the FY whether each qualifying 

MA-affiliated eligible hospital is a 

meaningful user. 

§ 495.212 Limitation on review. 

(a) There is no administrative or 

judicial review under section 1869 or 

1878 of the Act, or otherwise of the 

methodology and standards for 

determining payment amounts and 

payment adjustments under the MA 

EHR EP incentive program. This 

includes provisions related to 

duplication of payment avoidance and 

rules developed related to the fixed 

schedule for application of limitation on 

incentive payments for all qualifying 

MA EPs related to a specific qualifying 

MA organization. It also includes the 

methodology and standards developed 

for determining qualifying MA EPs and 

the methodology and standards for 

determining a meaningful EHR user, 

including the means of demonstrating 

meaningful use and the selection of 

measures. 

(b) There is no administrative or 

judicial review under sections 1869 or 

1878 of the Act, or otherwise, of the 

methodology and standards for 

determining payment amounts and 

payment adjustments under the MA 

EHR hospital incentive program. This 

includes provisions related to 

duplication of payment avoidance. It 

also includes the methodology and 

standards developed for determining 

qualifying MA-affiliated eligible 

hospitals and the methodology and 

standards for determining a meaningful 

EHR user, including the means of 

demonstrating meaningful use and the 

selection of measures. 

Subpart D—Requirements Specific to 

the Medicaid Program 

§ 495.300 Basis and purpose. 

This subpart implements section 4201 

of the American Reinvestment and 

Recovery Act of 2009 and sections 

1903(a)(3)(F) and 1903(t) of the Act 

which authorizes States, at their option, 

to provide for incentive payments to 

Medicaid providers for adopting, 

implementing, or upgrading certified 

electronic health record technology or 

for meaningful use of such technology. 

This subpart also provides enhanced 

Federal financial participation (FFP) to 

States to administer these incentive 

payments. 

§ 495.302 Definitions. 

As used in this subpart— 

Acceptance documents mean written 

evidence of satisfactory completion of 

an approved phase of work or contract 

and acceptance thereof by the State 

agency. 

Acquisition means to acquire health 

information technology (HIT) 

equipment or services for the purpose of 

implementation and administration 

under this Part from commercial sources 

or from State or local government 

resources. 

Acute care hospital means a health 

care facility— 

(1) Where the average length of 

patient stay is 25 days or fewer; and 

(2) With a CMS certification number 

(previously known as the Medicare 

provider number) that has the last four 

digits in the series 0001—0879 

Adopt, implement or upgrade 

means— 

(1) Install or commence utilization of 

certified EHR technology capable of 


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meeting meaningful use requirements; 

or 

(2) Expand the available functionality 

of certified EHR technology capable of 

meeting meaningful use requirements at 

the practice site, including staffing, 

maintenance, and training. 

Children’s hospital means a 

separately certified children’s hospital, 

either freestanding or hospital-withinhospital that— 

(1) Has a CMS certification number, 

(previously known as the Medicare 

provider number), that has the last 4 

digits in the series 3300–3399; and 

(2) Predominantly treats individuals 

under 21 years of age. 

Entities promoting the adoption of 

certified electronic health record 

technology means the State-designated 

entities that are promoting the adoption 

of certified EHR technology by enabling 

oversight of the business, operational 

and legal issues involved in the 

adoption and implementation of EHR or 

by enabling the exchange and use of 

electronic clinical and administrative 

data between participating providers, in 

a secure manner, including maintaining 

the physical and organizational 

relationship integral to the adoption of 

certified EHR technology by EPs. 

Health information technology 

planning advance planning document 

(HIT PAPD) means a plan of action that 

requests FFP and approval to 

accomplish the planning necessary for a 

State agency to determine the need for 

and plan the acquisition of HIT 

equipment or services or both and to 

acquire information necessary to 

prepare a HIT implementation advanced 

planning document or request for 

proposal to implement the State 

Medicaid HIT plan. 

HIT implementation advance 

planning document (HIT IAPD) means a 

plan of action that requests FFP and 

approval to acquire and implement the 

proposed State Medicaid HIT plan 

services or equipment or both. 

Medicaid information technology 

architecture (MITA) is both an initiative 

and a framework. It is a national 

framework to support improved systems 

development and health care 

management for the Medicaid 

enterprise. It is an initiative to establish 

national guidelines for technologies and 

processes that enable improved program 

administration for the Medicaid 

enterprise. The MITA initiative includes 

an architecture framework, models, 

processes, and planning guidelines for 

enabling State Medicaid enterprises to 

meet common objectives with the 

framework while supporting unique 

local needs. 

Medicaid management information 

system (MMIS) means a mechanized 

claims processing and information 

retrieval system—referred to as 

Medicaid Management Information 

Systems (MMIS)—that meets specified 

requirements and that the Department 

has found (among other things) is 

compatible with the claims processing 

and information retrieval systems used 

in the administration of the Medicare 

program. The objectives of the MMIS are 

to include claims processing and 

retrieval of utilization and management 

information necessary for program 

administration and audit and must 

coordinate with other mechanized 

systems and subsystems that perform 

other functions, such as eligibility 

determination. 

Needy individuals mean individuals 

that meet one of following: 

(1) Received medical assistance from 

Medicaid or the Children’s Health 

Insurance Program. 

(2) Were furnished uncompensated 

care by the provider. 

(3) Were furnished services at either 

no cost or reduced cost based on a 

sliding scale determined by the 

individuals’ ability to pay. 

Patient volume means the minimum 

participation threshold where the 

numerator is the total number of 

Medicaid patients or needy individuals 

treated in any 90-day period in the most 

recent calendar year preceding the 

reporting and the denominator is all 

patient encounters in the same 90-day 

period. Represented as follows: 

[Total (Medicaid) treated in any 90- 

day period in the most recent calendar 

year preceding the reporting/Total 

patients in same 90-day period] * 100; 

or 

[Total (Needy Individuals) treated in 

any 90-day period in the most recent 

calendar year preceding the reporting/ 

Total patients in same 90-day period] * 

100. 

Practices predominantly means an EP 

for whom the clinical location for over 

50 percent of his or her total patient 

encounters over a period of 6 months in 

the most recent calendar year occurs at 

a federally qualified health center or 

rural health clinic. 

Service oriented architecture or 

service component based architecture 

means organizing and developing 

information technology capabilities as 

collaborating services that interact with 

each other based on open standards. 

State Medicaid health information 

technology plan (SMHP) means a 

document that describes the State’s 

current and future HIT activities. 

State self-assessment means a process 

that a State uses to review its strategic 

goals and objectives, measure its current 

business processes and capabilities 

against the (MITA) business capabilities 

and ultimately develops target 

capabilities to transform its Medicaid 

enterprise to be consistent with the 

MITA principles. 

§ 495.304 Medicaid provider scope and 

eligibility. 

(a) General rule. The following 

Medicaid providers are eligible to 

participate in the HIT incentives 

program: 

(1) Medicaid EPs. 

(2) Acute care hospitals. 

(3) Children’s hospitals. 

(b) Medicaid EP. The Medicaid 

professional eligible for a EHR incentive 

payment is limited to the following: 

(1) A physician. 

(2) A dentist. 

(3) A certified nurse-midwife. 

(4) A nurse practitioner. 

(5) A physician assistant practicing in 

a Federally Qualified Health Center or 

Rural Health Clinic, which is so led by 

a physician assistant. 

(c) Additional requirements for the 

Medicaid EP. To qualify for an EHR 

incentive payment, a Medicaid EP must 

not be hospital-based as defined § 495.4 

of this subpart and meet one of the 

following criteria for each year for 

which the EP seeks an EHR incentive 

payment: 

(1) Have a minimum 30 percent 

patient volume attributable to 

individuals receiving Medicaid. 

(2) Have a minimum 20 percent 

patient volume attributable to 

individuals receiving Medicaid, and be 

a pediatrician. 

(3) Practice predominantly in a FQHC 

or RHC and have a minimum 30 percent 

patient volume attributable to needy 

individuals, as defined at § 495.302. 

(d) Exception. The hospital-based 

exclusion in paragraph (c) does not 

apply to the Medicaid-EP qualifying 

based on practicing predominantly at a 

FQHC or RHC. 

(e) Additional requirement for the 

eligible hospital. To be eligible for an 

EHR incentive payment for each year for 

which the eligible hospital seeks an 

EHR incentive payment the eligible 

hospital must meet the following 

criteria: 

(1) An acute care hospital must have 

at least a 10 percent Medicaid patient 

volume for each year for which the 

hospital seeks an EHR incentive 

payment. 

(2) A children’s hospital is exempt 

from meeting a patient volume 

threshold. 


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§ 495.306 Establishing patient volume. 

(a) A Medicaid provider must 

annually meet one of the following to 

establish patient volume: 

(1)(i) General rule for a professional. 

Except as specified in paragraph 

(a)(1)(ii) of this section, a Medicaid EP 

must attest that a minimum of 30 

percent of his or her patient encounters 

over any continuous 90-day period in 

the most recent calendar year was 

covered by Medicaid. 

(ii) Optional exception. (A) A 

pediatrician must attest that a minimum 

of 20 percent of his or her patient 

encounters over any continuous 90-day 

period in the most recent calendar year 

was covered by Medicaid. 

(B) A Medicaid EP practicing 

predominantly in a Federally Qualified 

Health Center or Rural Health Clinic 

must attest that a minimum of 30 

percent of his or her patient encounters 

over any continuous 90-day period in 

the most recent calendar year was with 

needy individuals as defined in 

§ 495.302 of this subpart. 

(2) General rule for an acute care 

hospital. An acute care hospital must 

attest that a minimum of 10 percent of 

all patient encounters over any 

continuous 90-day period in the most 

recent calendar year was covered by 

Medicaid. 

(b) If a State has an alternative 

approach to the established timeframe 

for measuring patient volume, the State 

must submit the approach to CMS for 

review and prior approval. CMS 

determines if it is an acceptable 

alternative. 

(1) To be considered for approval, the 

alternative approach must be justified 

and have a verifiable data source. 

(2) If CMS approves the State’s 

alternative approach to the established 

timeframe for measuring patient 

volume, such timeframe would apply to 

Medicaid EPs and eligible hospitals, 

instead of the 90-day timeframe 

described in paragraph (a) of this 

section. 

(c) To establish patient volume for an 

EP who practices predominantly in a 

Federally Qualified Health Center or 

Rural Health Clinic by use of 

uncompensated care data, an 

adjustment to the uncompensated care 

data must be completed so that it is an 

appropriate proxy for charity care, 

including a downward adjustment to 

eliminate bad debt data from 

uncompensated care. 

(d) An individual enrolled in a 

managed care organization, pre-paid 

inpatient health plan, or pre-paid 

ambulatory health plan under part 438 

of this chapter must be included in the 

calculation to establish patient volume. 

§ 495.308 Net average allowable costs as 

the basis for determining the incentive 

payment. 

(a) The first year of payment. (1) The 

incentive is intended to offset the costs 

associated with the initial adoption of 

certified electronic health records 

technology. 

(2) The maximum net average 

allowable costs for the first year are 

$25,000. 

(b) Subsequent payment years. (1) The 

incentive is intended to offset 

maintenance and operation of certified 

EHR technology. 

(2) The maximum net average 

allowable costs for each subsequent year 

are $10,000. 

§ 495.310 Medicaid provider incentive 

payments. 

(a) General rule for a Medicaid EP. 

The Medicaid EP’s incentive payments 

are subject to the following limitations: 

(1) First payment year. A first year 

payment may not exceed 85 percent of 

the maximum threshold of $25,000, 

which equals $21,250. 

(2) Subsequent annual payment years. 

A subsequent annual payment may not 

exceed 85 percent of the maximum 

threshold of $10,000, which equals 

$8,500. 

(i) Payments after the first year may 

continue for a maximum of 5 years. 

(ii) Medicaid EPs may participate for 

a total of 6 years and may not begin 

receiving payments any later than CY 

2016. 

(3) Maximum incentives. In no case 

will the maximum incentive over a 6- 

year period exceed $63,750. 

(4) Limitation. For a Medicaid EP who 

is a pediatrician described in paragraph 

(b) of this section is as follows: 

(i) The maximum payment in the first 

year is further reduced to two-thirds, 

which equals $14,167. 

(ii) The maximum payment in 

subsequent years is further reduced to 

two-thirds, which equals $5,667. 

(iii) In no case will the maximum 

incentive payment to a pediatrician 

under this limitation exceed $42,500 

over a 6-year period. 

(b) Optional exception for 

pediatricians. A pediatrician described 

in this paragraph is a Medicaid EP who 

does not meet the 30 percent patient 

volume requirements described in 

§ 495.304 and § 495.306, but who meets 

the 20 percent patient volume 

requirements described in such 

sections. 

(c) General rule for EPs. An EP may 

only receive an incentive payment from 

either Medicare or Medicaid but not 

both. 

(d) Optional exception for EPs. An EP 

may change his or her EHR incentive 

payment program election once, 

consistent with § 495.10 of this part but 

such change in election must occur for 

payments by occurring before CY 2015. 

(e) General rule for Medicaid EPs and 

hospitals. An Medicaid EP or hospital 

may receive an incentive payment from 

only one State in a payment year. 

(f) Incentive payments to hospitals. 

Incentive payments to an eligible 

hospital under this subpart are subject 

to all of the following conditions: 

(1) The payment is provided over a 

minimum of a 3-year period and 

maximum of a 6-year period. 

(2) The total incentive payment 

received over all payment years of the 

program is not greater than the aggregate 

EHR incentive amount, as calculated 

under paragraph (g) of this section. 

(3) No single incentive payment for a 

payment year may exceed 50 percent of 

the aggregate EHR hospital incentive 

amount calculated under paragraph (g) 

of this section for an individual 

hospital. 

(4) No incentive payments over a 2- 

year period may exceed 90 percent of 

the aggregate EHR hospital incentive 

amount calculated under paragraph (g) 

of this section for an individual 

hospital. 

(5) No hospital may begin receiving 

incentive payments for any year after 

2016. 

(6) A multi-site hospital with one 

CMS Certification Number is considered 

one hospital for purposes of calculating 

payment. 

(g) Calculation of the aggregate EHR 

hospital incentive amount. The 

aggregate EHR hospital incentive 

amount is calculated as the product of 

the (overall EHR amount) times (the 

Medicaid Share). 

(1) Overall EHR amount. The overall 

EHR amount for an eligible hospital is 

based upon a theoretical 4 years of 

payment the hospital would receive 

based, for each of such 4 years, upon the 

product of the following: 

(i) Initial amount. The initial amount 

is equal to the sum of— 

(A) The base amount which is set at 

$2,000,000 for each of the theoretical 4 

years; plus 

(B) The discharge related amount for 

a 12-month period selected by the State 

but with the Federal fiscal year before 

the hospital’s fiscal year that serves as 

the payment year. The discharge related 

amount is the sum of the following, 

with discharges over the 12-month 

period and based upon the total 

discharges for the eligible hospital 

(regardless of any source of payment): 

(1) For the first through 1,149th 

discharge, $0. 


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(2) For the 1,150th through the 

23,000th discharge, $200. 

(3) For any discharge greater than the 

23,000th, $0. 

(C) For purposes of calculating the 

discharge-related amount under 

paragraph (g)(1)(i)(B) of this section, for 

the last 3 of the theoretical 4 years of 

payment, discharges are assumed to 

increase by the provider’s average 

annual rate of growth for the most 

recent 3 years for which data are 

available per year. Negative rates of 

growth must be applied as such. 

(ii) Medicare share. The Medicare 

share, which equals 1. 

(iii) Transition factor. The transition 

factor which equals as follows: 

(A) For the first of the theoretical 4 

years, 1. 

(B) For the second of the theoretical 

4 years, 3⁄4. 

(C) For the third of the theoretical 4 

years, 1⁄2. 

(D) For the fourth of the theoretical 4 

years, 1⁄4. 

(2) Medicaid share. The Medicaid 

share specified under this paragraph for 

an eligible hospital is equal to a 

fraction— 

(i) The numerator of which is the sum 

(for the 12 month period selected by the 

State and with respect to the eligible 

hospital) of— 

(A) The estimated number of 

inpatient-bed-days which are 

attributable to Medicaid individuals; 

and 

(B) The estimated number of 

inpatient-bed-days which are 

attributable to individuals who are 

enrolled in a managed care organization, 

a pre-paid inpatient health plan, or a 

pre-paid ambulatory health plan under 

part 438 of this chapter; and 

(ii) The denominator of which is the 

product of— 

(A) The estimated total number of 

inpatient-bed-days with respect to the 

eligible hospital during such period; 

and 

(B) The estimated total amount of the 

eligible hospital’s charges during such 

period, not including any charges that 

are attributable to charity care, divided 

by the estimated total amount of the 

hospital’s charges during such period. 

(iii) In computing inpatient-bed-days 

under the previous sentence, a State 

may not include estimated inpatientbed-days attributable to individuals 

with respect to whom payment may be 

made under Medicare Part A, or 

inpatient-bed-days attributable to 

individuals who are enrolled with a 

Medicare Advantage organization under 

Medicare Part C. 

(h) Approximate proxy for charity 

care. If the State determines that an 

eligible hospital’s data are not available 

on charity care necessary to calculate 

the portion of the formula specified in 

paragraph (g)(2)(ii)(B) of this section, the 

State may use that provider’s data on 

uncompensated care to determine an 

appropriate proxy for charity care, but 

must include a downward adjustment to 

eliminate bad debt from uncompensated 

care data. The State must use auditable 

data sources. 

(i) Deeming. In the absence of the data 

necessary, with respect to an eligible 

hospital the amount described in 

paragraph (g)(2)(ii)(B) must be deemed 

to be 1. In the absence of data, with 

respect to an eligible hospital, necessary 

to compute the amount described in 

paragraph (g)(2)(i)(B) of this section, the 

amount under such clause must be 

deemed to be 0. 

(j) Dual eligibility for incentives 

payments. A hospital may receive 

incentive payments from both Medicare 

and Medicaid if it meets all eligibility 

criteria. 

(k) Payments to State-designated 

entities. Payments to entities promoting 

the adoption of certified EHR 

technology as designated by the State 

must meet the following requirements: 

(1) A Medicaid EP may designate his 

or her incentive payment to an entity 

promoting the adoption of certified EHR 

technology, as defined in § 495.302, and 

as designated by the State, only under 

the following conditions: 

(i) The State has established a method 

to designate entities promoting the 

adoption of EHR technology that 

comports with the Federal definition in 

§ 495.302. 

(ii) The State publishes and makes 

available to all EPs a voluntary 

mechanism for designating annual 

payments and includes information 

about the verification mechanism the 

State will use to ensure that the 

assignment is voluntary and that no 

more than 5 percent of the annual 

payment is retained by the entity for 

costs not related to certified EHR 

technology. 

(2) [Reserved] 

§ 495.312 Process for payments. 

(a) General rule. States must have a 

process for making payments consistent 

with the requirements in subparts A and 

D of this part. 

(b) Reporting data consistent with this 

subpart. In order to receive a payment 

under this part, a provider must report 

the required data under subpart A and 

this subpart within the EHR reporting 

period described in § 495.4. 

(c) State role. The State determines 

the provider’s eligibility for the EHR 

incentive payment under subpart A and 

this subpart and approves, processes, 

and makes timely payments using a 

process approved by CMS. 

(d) State disbursement. The State 

disburses an incentive payment to the 

provider based on the criteria described 

in subpart A and this subpart. 

(e) Timeframes. Payments are 

disbursed consistent with the following 

timeframes for each type of Medicaid 

eligible provider: 

(1) Medicaid EPs. States disburse 

payments consistent with the calendar 

year on a rolling basis following the end 

of the EHR reporting period for the 

payment year. 

(2) Medicaid eligible hospitals. States 

disburse payments consistent with the 

Federal fiscal year on a rolling basis 

following the end of the EHR reporting 

period for the payment year. 

§ 495.314 Activities required to receive an 

incentive payment. 

(a) First payment year. (1) In the first 

payment year, to receive an incentive 

payment, the Medicaid EP or eligible 

hospital must meet one of the following: 

(i) Demonstrate that during the EHR 

reporting period for a payment year, it 

has adopted, implemented, or upgraded 

certified EHR technology, as defined in 

§ 495.302; or 

(ii) Demonstrate that during the EHR 

reporting period for a payment year, it 

is a meaningful EHR user as defined in 

§ 495.4. 

(2) A provider may notify the State of 

its non-binding intention to participate 

in the incentives program prior to 

having fulfilled all of the eligibility 

criteria. 

(b) Subsequent payment years. (1) In 

the second, third, fourth, fifth, and sixth 

payment years, to receive an incentive 

payment, the Medicaid EP or eligible 

hospital must demonstrate that during 

the EHR reporting period for the 

applicable payment year, it is a 

meaningful EHR user, as defined in 

§ 495.4. 

(2) The automated reporting of the 

clinical quality measures will be 

accomplished using certified EHR 

technology interoperable with the 

system designated by the State to 

receive the data. 

§ 495.316 State monitoring and reporting 

regarding activities required to receive an 

incentive payment. 

(a) Subject to § 495.332 the State is 

responsible for tracking and verifying 

the activities necessary for a Medicaid 

EP or eligible hospital to receive an 

incentive payment for each payment 

year, as described in § 495.314. 

(b) Subject to § 495.332, the State 

must submit a State Medicaid HIT Plan 

to CMS that includes: 


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(1) A detailed plan for monitoring, 

verifying and periodic auditing of the 

requirements for receiving incentive 

payments, as described in § 495.314; 

and 

(2) A description of the how the State 

will collect and report on provider 

meaningful use of certified EHR 

technology. 

(c) Subject to § 495.332 and § 495.350, 

the State is required to submit to CMS 

annual reports on the following: 

(1) Provider adoption, 

implementation, or upgrade of certified 

EHR technology activities and 

payments; and 

(2) Aggregated, de-identified 

meaningful use data. 

(d)(1) The annual report described in 

paragraph (c) of this section must 

include, but is not limited to the 

following: 

(i) The number, type, and practice 

location(s) of providers who qualified 

for an incentive payment on the basis of 

having adopted, implemented, or 

upgraded certified EHR technology; 

(ii) Aggregated data tables 

representing the provider adoption, 

implementation, and upgrade of 

certified EHR technology; 

(iii) The number, type, and practice 

location(s) of providers who qualified 

for an incentive payment on the basis of 

meaningful use of certified EHR 

technology; 

(iv) Aggregated data tables 

representing the provider’s clinical 

quality measures data; and 

(v) A description and quantitative 

data on how its incentive payment 

program addressed individuals with 

unique needs such as children. 

(2) The State may propose additional, 

not substitute, measures for meaningful 

use of certified EHR technology, subject 

to CMS prior approval. 

(e) State failure to submit the required 

reports to CMS may result in 

discontinued or disallowed funding. 

§ 495.318 State responsibilities for 

receiving FFP. 

In order to be provided FFP under 

section 1903(a)(3)(F) of the Act, a State 

must demonstrate to the satisfaction of 

the Department, that the State is— 

(a) Using the funds provided for the 

purposes of administering incentive 

payments to providers under this 

program, including tracking of 

meaningful use by Medicaid providers 

of EHR technology; 

(b) Conducting adequate oversight of 

the program, including routine tracking 

of meaningful use attestations and 

reporting mechanisms; and 

(c) Pursuing initiatives to encourage 

the adoption of certified EHR 

technology to promote health care 

quality and the exchange of health care 

information, subject to applicable laws 

and regulations governing such 

exchange. 

§ 495.320 FFP for payments to Medicaid 

providers. 

Subject to the requirements outlined 

in this Subpart, FFP is available at 100 

percent of State expenditures for 

payments to Medicaid eligible providers 

to encourage the adoption and 

meaningful use of certified EHR 

technology. 

§ 495.322 FFP for reasonable 

administrative expenses. 

Subject to prior approval conditions 

at § 495.324 of this subpart, FFP is 

available at 90 percent in State 

expenditures for administrative 

activities in support of implementing 

incentive payments to Medicaid eligible 

providers. 

§ 495.324 Prior approval conditions. 

(a) A State must obtain prior written 

approval as specified in paragraph (b) of 

this section, when the State plans to 

initiate planning and implementation 

activities in support of Medicaid 

provider incentive payments 

encouraging the adoption and use of 

certified EHR technology with proposed 

Federal financial participation. 

(b) To receive 90 percent match, each 

State must receive prior approval for all 

of the following: 

(1) The HIT planning advance 

planning document and the 

implementation advance planning 

document. 

(2) A request for proposal and any 

contract that a State may utilize to 

complete activities under this subpart, 

unless specifically exempted by the 

Department, prior to release of the 

request for proposal or prior to 

execution of a contract. 

(3) For contract amendments, unless 

specifically exempted by the 

Department, before execution of the 

contract amendment, involving contract 

cost increases exceeding $100,000 or 

contract time extensions of more than 

60 days. 

(c) Failure to submit any of the 

information specified in paragraph (b) of 

this section to the satisfaction of the 

Department may result in disapproval or 

suspension of project funding. 

(d) A State must obtain prior written 

approval from the Department of its 

justification for a sole source 

acquisition, when it plans to acquire 

non-competitively from a 

nongovernmental source HIT equipment 

or services, with proposed FFP under 

this subpart if the total State and 

Federal acquisition cost is more than 

$100,000. 

§ 495.326 Disallowance of Federal 

financial participation (FFP). 

If the Department finds that any 

acquisition approved or modified under 

the provisions of this subpart fails to 

comply with the criteria, requirements, 

and other undertakings described in the 

approved HIT planning advance 

planning document and HIT 

implementation advance planning 

document to the detriment of the proper 

and efficient operation of the Medicaid 

program, payment of FFP may be 

disallowed. In the case of a suspension 

of approval of a HIT planning advance 

planning document and HIT 

implementation advance planning 

document, see 45 CFR 205.37(c) and 

307.40(a). 

§ 495.328 Request for reconsideration of 

adverse determination. 

If CMS disapproves a State request for 

any elements of a State’s advance 

planning document or State Medicaid 

HIT Plan under this subpart, or 

determines that requirements are met 

for approval on a date later than the date 

requested, the decision notice includes 

the following: 

(a) The finding of fact upon which the 

determination was made. 

(b) The procedures for appeal of the 

determination in the form of a request 

for reconsideration. 

§ 495.330 Termination of Federal financial 

participation (FFP) for failure to provide 

access to information. 

(a) The Department terminates FFP at 

any time if the Medicaid agency fails to 

provide State and Federal 

representatives with full access to 

records relating to HIT planning and 

implementation efforts, and the systems 

used to interoperate with electronic 

HIT, including on-site inspection. 

(b) The Department may request such 

access at any time to determine whether 

the conditions in this subpart are being 

met. 

§ 495.332 State Medicaid (HIT) plan 

requirements. 

Each State Medicaid HIT plan must 

include all of the following elements: 

(a) State systems. For State systems, 

interoperability, and the current and 

future visions: 

(1) A baseline assessment of the 

current HIT landscape environment in 

the State including the inventory of 

existing HIT in the State. The 

assessment must include a 

comprehensive— 


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(i) Description of the HIT ‘‘as-is’’ 

landscape; 

(ii) Description of the HIT ‘‘to-be’’ 

landscape; and 

(iii) HIT roadmap and strategic plan 

for the next 5 years. 

(2) A description of how the State 

Medicaid HIT plan will be planned, 

designed, developed and implemented, 

including how it will be implemented 

in accordance with the Medicaid 

Information Technology Architecture 

(MITA) principles as described in the 

Medicaid Information Technology 

Framework 2.0. The MITA initiative— 

(i) Establishes national guidelines for 

technologies and processes that enable 

improved program administration for 

the Medicaid enterprise; 

(ii) Includes business, information 

and technology architectures that 

provide an overall framework for 

interoperability, as well as processes 

and planning guidelines for enabling 

State Medicaid enterprises to meet 

common objectives within the 

framework while supporting unique 

local needs; and 

(iii) Is important to the design and 

development of State EHR incentive 

payment systems. 

(3) A description of how intrastate 

systems, including the Medicaid 

Management Information System 

(MMIS) and other automated 

mechanized claims processing and 

information retrieval systems— 

(i) Have been considered in 

developing a HIT solution; and 

(ii) A plan that incorporates the 

design, development, and 

implementation phases for 

interoperability of such State systems 

with a description of how any planned 

systems enhancements support overall 

State and Medicaid goals. 

(4) A description of data-sharing 

components of HIT solutions. 

(5) A description of how each State 

will promote secure data exchange, 

where permissible under the Health 

Insurance Portability and 

Accountability Act (HIPAA). HIPAA 

and other requirements included in the 

Recovery Act. 

(6) A description of how each State 

will promote the use of data and 

technical standards to enhance data 

consistency and data sharing through 

common data-access mechanisms. 

(7) A description of how each State 

will support integration of clinical and 

administrative data. 

(8) A description of the process in 

place for ensuring improvements in 

health outcomes, clinical quality, or 

efficiency resulting from the adoption of 

certified EHR technology by recipients 

of Medicaid incentive payments and a 

methodology for verifying such 

information. 

(9) A description of the process in 

place for ensuring that any certified 

EHR technology used as the basis for a 

payment incentive to Medicaid 

providers is compatible with State or 

Federal administrative management 

systems, including the MMIS or other 

automated claims processing system or 

information retrieval system and a 

methodology for verifying such 

information. 

(10) A description of how each State 

will adopt national data standards for 

health and data exchange and open 

standards for technical solutions as they 

become available. 

(11) A description of how the State 

intends to address the needs of 

underserved and vulnerable populations 

such as children, individuals with 

chronic conditions, Title IV–E foster 

care children, individuals in long-term 

care settings and the aged, blind, and 

disabled. This description must address 

the following: 

(i) Person centered goals and 

objectives and shared decision-making. 

(ii) Coordination of care across 

multiple service providers, funding 

sources, settings, and patient 

conditions. 

(iii) Universal design to ensure access 

by people with disabilities and older 

Americans. 

(iv) Self-direction including budget 

development and expenditure tracking. 

(v) Institutional discharge planning 

and diversion activities that are tied to 

community based service availability. 

(b) Eligibility. For eligibility, a 

description of the process in place for 

all of the following: 

(1) For ensuring that each EP and 

eligible hospital meets all provider 

enrollment eligibility criteria upon 

enrollment and re-enrollment to the 

Medicaid EHR payment incentive 

program. 

(2) For ensuring patient volume 

consistent with the criteria in § 495.304 

and § 495.306 for each EP who practices 

predominantly in a FQHC or RHC and 

for each Medicaid EP who is a 

physician, pediatrician, nurse 

practitioner, certified nurse midwife or 

dentist and a methodology in place used 

to verify such information. 

(3) For ensuring that the EP is a 

provider who meets patient volume 

consistent with the criteria in § 495.304 

and a methodology in place used to 

verify such information. 

(4) For ensuring that each Medicaid 

EP is not hospital-based and a 

methodology in place used to verify 

such information. 

(5) To ensure that a hospital eligible 

for incentive payments has 

demonstrated an average length of stay 

of 25 days or less and that a 

methodology for verifying such 

information is available. 

(c) Monitoring and validation. For 

monitoring and validation of 

information, States must include the 

following: 

(1) A description of the process in 

place for ensuring that, because of CMS’ 

and the States’ oversight 

responsibilities, all provider 

information for attestations and any 

information added to the CMS Single 

Provider Repository including all 

information related to patient volume, 

NPI, Tax identification number (TIN), 

meaningful use, efforts to adopt, 

implement, or upgrade are all true and 

accurate and that any concealment or 

falsification of a material fact related to 

the attestation may result in prosecution 

under Federal and State laws and a 

methodology in place used to verify 

such information. 

(2) A description of the process in 

place for ensuring that the EP or eligible 

hospital is eligible to receive an 

incentive payment consistent with the 

criteria outlined in § 495.314 and a 

methodology in place used to verify 

such information. 

(3) A description of the process in 

place for capturing attestations from 

each EP or eligible hospital that they 

have meaningfully used certified EHR 

technology during the reporting period, 

and that they have adopted, 

implemented, or upgraded certified EHR 

technology during the reporting period 

and a description of the methodology in 

place used to verify such information. 

(4) A description of the process in 

place for capturing clinical quality data 

from each EP or eligible hospital and a 

description of the methodology in place 

used to verify such information. 

(5) A description of the process in 

place for monitoring the compliance of 

providers coming onto the program with 

different requirements depending upon 

the year and a methodology for verifying 

such information. 

(6) A list of the specific actions 

planned to implement the HIT EHR 

incentive program, including a 

description and organizational charts for 

workgroups within State government 

including external partners. 

(7) A description of the process in 

place to ensure that no amounts higher 

than 100 percent of FFP will be claimed 

for reimbursement of expenditures for 

State payments to Medicaid eligible 

providers for the certified EHR 

technology incentive payment program 


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and a methodology for verifying such 

information is available. 

(8) A description of the process in 

place to ensure that no amounts higher 

than 90 percent of FFP will be claimed 

for administrative expenses in 

administering the certified EHR 

technology incentive payment program 

and a methodology for verifying such 

information is available. 

(9) A description of the process and 

methodology for ensuring and verifying 

such information that includes the 

following: 

(i) Amounts received under section 

1903(a)(3)(F) of the Act with respect to 

payments to a Medicaid EP or eligible 

hospital are paid directly to such 

provider (or to an employer or facility 

to which such provider has assigned 

payments) without any deduction or 

rebate. 

(ii) All assignments to an entity 

promoting the adoption of certified EHR 

technology, as designated by the State, 

are voluntary for the Medicaid EP 

involved. 

(iii) Entities promoting the adoption 

of certified EHR technology do not 

retain more than 5 percent of such 

payments for costs not related to 

certified EHR technology (and support 

services including maintenance and 

training) that is for, or is necessary for 

the operation of, such technology. 

(10) A description of the process in 

place for ensuring that each Medicaid 

EP or eligible hospital that collects an 

EHR payment incentive has collected a 

payment incentive from only one State 

even if the provider is licensed to 

practice in multiple States and a 

methodology for verifying such 

information. 

(11)(i) A description of the process in 

place for ensuring that each EEP or 

eligible hospital that wishes to 

participate in the EHR incentive 

payment program will receive a NPI; 

and 

(ii) A description of how the NPI will 

be used to coordinate with the CMS so 

that the EP will choose only one 

program from which to receive the 

incentive payment and the hospital 

payments are tracked accordingly. 

(12) A description of the process in 

place for ensuring that each EP or 

eligible hospital who wishes to 

participate in the EHR incentive 

payment program will provide a TIN to 

the State for purposes of the incentive 

payment. 

(d) Payments. Payments must provide 

descriptions of the following processes 

that are in place: 

(1) The process in place for ensuring 

that there is no duplication of Medicare 

and Medicaid incentive payments to 

EPs and a methodology for verifying 

such information. 

(2) The process in place to ensure that 

any existing fiscal relationships with 

providers to disburse the incentive 

payments through Medicaid managed 

care plans does not result in payments 

that exceed 105 percent of the capitation 

rate, in order to comply with the 

Medicaid managed care incentive 

payment rules at § 438.6(v)(5)(iii) of this 

chapter and a methodology for verifying 

such information. 

(3) The process in place to ensure that 

only appropriate funding sources are 

used to make Medicaid EHR incentive 

payments and that a methodology for 

verifying such information is available. 

(4) The process in place to ensure that 

Medicaid EHR incentive payments are 

made for no more than 6 years and that 

no EP or eligible hospital begins 

receiving payments after 2016 and that 

a methodology for verifying such 

information is available. 

(5) The process in place to ensure that 

Medicaid EHR incentive payments are 

not paid at amounts higher than 85 

percent of the net average allowable cost 

of certified EHR technology and the 

yearly maximum allowable payment 

thresholds and a methodology for 

verifying such information is available. 

(6) The process in place to ensure that 

all hospital calculations and hospital 

payment incentives are made consistent 

with the requirements of this part and 

a methodology for verifying such 

information is available. 

(7) The process in place to provide for 

the timely and accurate payment of 

incentive payments to EPs and eligible 

hospitals, including the time frame 

specified by the State to meet the timely 

payment requirement. 

(8) The process in place and a 

methodology for verifying such 

information to provide that any monies 

that have been paid inappropriately as 

an improper payment or otherwise not 

in compliance with this subpart will be 

recouped and FFP will be repaid. 

(e) For combating fraud and abuse 

and for provider appeals. (1) A 

description of the process in place for a 

provider to appeal consistent with the 

criteria described in § 495.370 and a 

methodology for verifying the following 

related to the EHR incentives payment 

program: 

(i) Incentive payments. 

(ii) Provider eligibility 

determinations. 

(iii) Demonstration of efforts to adopt, 

implement or upgrade and meaningful 

use eligibility for incentive payments 

under this part. 

(2) A description of the process in 

place, and a methodology for verifying 

such information, to address Federal 

laws and regulations designed to 

prevent fraud, waste, and abuse, 

including, but not limited to applicable 

provisions of Federal criminal law, the 

False Claims Act (32 U.S.C. 3729 et 

seq.), and the anti-kickback statute 

(section 1128B(b) of the Act). 

(f) Optional—proposed alternatives. A 

State may choose to propose any of the 

following, but they must be included as 

an element in the State Medicaid HIT 

Plan for review and approval: 

(1) An alternative methodology for 

measuring patient volume, consistent 

with § 495.306(b). 

(2) (i) Additional requirements for 

qualifying a Medicaid provider as a 

meaningful user of certified EHR 

technology consistent with § 495.4 and 

§ 495.316(e) of this part. 

(ii) A State may propose additional 

meaningful use objectives beyond the 

Federal standards at § 495.6, if they do 

not require additional functionality 

beyond that of certified electronic 

health record technology. See also 

§ 495.316(e). 

(3) A plan for early implementation of 

incentive payments for a provider who 

adopts, implements, or upgrades 

certified EHR technology consistent 

with the § 495.302 and § 495.314. 

(i) An approvable plan must include 

mechanisms for making timely and 

accurate payments. 

(ii) A State will require a provider to 

attest that they are not receiving a 

payment in any other State. 

§ 495.334 State self-assessment 

requirements. 

Each State must prepare a State selfassessment that meets the following 

requirements: 

(a) List and prioritize the State’s goals 

and objectives for HIT. 

(b) Define the State’s current business 

model and map to the Medicaid 

information technology architecture 

business process model. 

(c) Assess the State’s current 

capabilities. 

(d) Determine the State’s target 

capabilities. 

§ 495.336 Health information technology 

planning advance planning document 

requirements (HIT PAPD). 

Each State’s HIT PAPD must contain 

the following: 

(a) A statement of need and objective 

which clearly state the purpose and 

objectives of the project to be 

accomplished and the necessity for the 

project. 

(b) A project management plan which 

addresses the following: 

(1) The planning project organization. 


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(2) Planning activities and 

deliverables. 

(3) State and contractor resource 

needs. 

(4) Planning project procurement 

activities and schedule. 

(c) A specific budget for the planning 

of the project. 

(d) An estimated total project cost and 

a prospective State and Federal cost 

distribution, including planning and 

implementation. 

(e) A commitment to submit a HIT 

implementation advance planning 

document. 

(f) A commitment to conduct and 

complete activities which will result in 

the production of the State Medicaid 

HIT plan that includes conduct of the 

following activities: 

(1) A statewide HIT environmental 

baseline self-assessment. 

(2) An assessment of desired HIT 

future environment. 

(3) Development of benchmarks and 

transition strategies to move from the 

current environment to the desired 

future environment. 

(g) A commitment to submit the plan 

to CMS for approval. 

§ 495.338 Health information technology 

implementation advance planning 

document requirements (HIT IAPD). 

Each State’s HIT IAPD must contain 

the following: 

(a) The results of the activities 

conducted as a result of the HIT 

planning advance planning document, 

including the approved state Medicaid 

HIT plan. 

(b) A statement of needs and 

objectives. 

(c) A statement of alternative 

considerations. 

(d) A personnel resource statement 

indicating availability of qualified and 

adequate staff, including a project 

director to accomplish the project 

objectives. 

(e) A detailed description of the 

nature and scope of the activities to be 

undertaken and the methods to be used 

to accomplish the project. 

(f) The proposed activity schedule for 

the project. 

(g) A proposed budget including a 

consideration of all HIT implementation 

advance planning document activity 

costs, including but not limited to the 

following: 

(1) The cost to implement and 

administer incentive payments. 

(2) Procurement or acquisition. 

(3) State personnel. 

(4) Contractor services. 

(5) Hardware, software, and licensing. 

(6) Equipment and supplies. 

(7) Training and outreach. 

(8) Travel. 

(9) Administrative operations. 

(10) Miscellaneous expenses for the 

project. 

(h) An estimate of prospective cost 

distribution to the various State and 

Federal funding sources and the 

proposed procedures for distributing 

costs. 

(i) A detailed payment listing file 

that— 

(1) Is in an electronic format that may 

be a field delimited ASCII text file, a 

commonly used spreadsheet file, or a 

commonly used database file; and 

(2) Shows each EP and eligible 

hospital for which the State will provide 

for the payment of incentive payments, 

including the— 

(i) Name of the provider; 

(ii) National provider identifier of the 

provider; 

(iii) Type of provider as specified in 

§ 495.304; 

(iv) Planned annual payment 

amounts; 

(v) Total of planned payment 

amounts; and 

(vi) Calendar year of each planned 

annual payment amount. 

(j) A statement setting forth the 

security and interface requirements to 

be employed for all State HIT systems, 

and related systems, and the system 

failure and disaster recovery procedures 

available. 

§ 495.340 As-needed HIT PAPD update and 

as-needed HIT IAPD update requirements. 

Each State must submit a HIT PAPD 

update or a HIT IAPD no later than 60 

days after the occurrence of project 

changes including but not limited to any 

of the following: 

(a) A projected cost increase of 

$100,000 or more. 

(b) A schedule extension of more than 

60 days for major milestones. 

(c) A significant change in planning 

approach or implementation approach, 

or scope of activities beyond that 

approved in the HIT planning advance 

planning document or the HIT 

implementation advance planning 

document. 

(d) A change in implementation 

concept or a change to the scope of the 

project. 

(e) A change to the approved cost 

allocation methodology. 

§ 495.342 Annual HIT IAPD requirements. 

Each State’s annual HIT IAPD is due 

60 days from the HIT IAPD approved 

anniversary date and must contain the 

following: 

(a) A reference to the approved HIT 

PAPD/IAPD and all approved changes. 

(b) A project activity status which 

reports the status of the past year’s 

major project tasks and milestones, 

addressing the degree of completion and 

tasks/milestones remaining to be 

completed and discusses past and 

anticipated problems or delays in 

meeting target dates in the approved 

HIT technology PAPD/IAPD and 

approved changes to it. 

(c) A report of all project deliverables 

completed in the past year and degree 

of completion for unfinished products. 

(d) A project activity schedule for the 

remainder of the project. 

(e) A project expenditure status which 

consists of a detailed accounting of all 

expenditures for project development 

over the past year and an explanation of 

the differences between projected 

expenses in the approved HIT PAPD/ 

IAPD and actual expenditures for the 

past year. 

(f) A report of any approved or 

anticipated changes to the allocation 

basis in the advance planning 

document’s approved cost methodology. 

(g) An updated detailed payment 

listing file in an electronic format. 

§ 495.344 Approval of the State Medicaid 

HIT plan, the HIT PAPD and update, the HIT 

IAPD and update, and the annual HIT IAPD. 

The Department does not approve any 

of these documents that do not include 

all information required under this 

subpart. 

§ 495.346 Access to systems and records. 

The State agency must allow the 

Department access to all records and 

systems operated by the State in support 

of this program, including cost records 

associated with approved administrative 

funding and incentive payments to 

Medicaid providers. State records 

related to contractors employed for the 

purpose of assisting with 

implementation or oversight activities 

or providing assistance, at such 

intervals as are deemed necessary by the 

Department to determine whether the 

conditions for approval are being met 

and to determine the efficiency, 

economy, and effectiveness of the 

program. 

§ 495.348 Procurement standards. 

(a) General rule. Procurements of HIT 

equipment and services are subject to 

the following procurement standards in 

paragraphs (b) through (f) of this section 

regardless of any conditions for prior 

approval. These standards— 

(1) Include a requirement for 

maximum practical open and free 

competition regardless of whether the 

procurement is formally advertised or 

negotiated. 

(2) Are established to ensure that such 

materials and services are obtained in a 


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cost effective manner and in compliance 

with the provisions of applicable 

Federal statutes and executive orders. 

(3) Apply when the cost of the 

procurement is treated as a direct cost 

of an award. 

(b) Grantee responsibilities. The 

standards contained in this section do 

not relieve the Grantee of the 

contractual responsibilities arising 

under its contract(s). 

(1) The grantee is the responsible 

authority, without recourse to the 

Departmental awarding agency, 

regarding the settlement and satisfaction 

of all contractual and administrative 

issues arising out of procurements 

entered into in support of an award or 

other agreement. This includes disputes, 

claims, and protests of award, source 

evaluation or other matters of a 

contractual nature. 

(2) Matters concerning violation of 

statute are to be referred to such 

Federal, State or local authority as may 

have proper jurisdiction. 

(c) Codes of conduct. The grantee 

must maintain written standards of 

conduct governing the performance of 

its employees engaged in the award and 

administration of contracts. 

(1) No employee, officer, or agent 

must participate in the selection, award, 

or administration of a contract 

supported by Federal funds if a real or 

apparent conflict of interest would be 

involved. 

(2) Such a conflict would arise when 

the employee, officer, or agent, or any 

member of his or her immediate family, 

his or her partner, or an organization 

which employs or is about to employ 

any of the parties indicated herein, has 

a financial or other interest in the firm 

selected for an award. 

(3) The officers, employees, and 

agents of the grantee must neither solicit 

nor accept gratuities, favors, or anything 

of monetary value from contractors, or 

parties to subagreements. 

(4) Grantees may set standards for 

situations in which the financial interest 

is not substantial or the gift is an 

unsolicited item of nominal value. 

(5) The standards of conduct provide 

for disciplinary actions to be applied for 

violations of such standards by officers, 

employers, or agents of the grantees. 

(d) Competition. All procurement 

transactions must be conducted in a 

manner to provide, to the maximum 

extent practical, open and free 

competition. 

(1) The grantee must be alert to 

organizational conflicts of interest as 

well as noncompetitive practices among 

contractors that may restrict or 

eliminate competition or otherwise 

restrain trade. 

(2) In order to ensure objective 

contractor performance and eliminate 

unfair competitive advantage, 

contractors that develop or draft grant 

applications, or contract specifications, 

requirements, statements of work, 

invitations for bids and requests for 

proposals must be excluded from 

competing for such procurements. 

(3) Awards must be made to the 

bidder or offeror whose bid or offer is 

responsive to the solicitation and is 

most advantageous to the grantee, price, 

quality, and other factors considered. 

(4) Solicitations must clearly set forth 

all requirements that the bidder or 

offeror must fulfill in order for the bid 

or offer to be evaluated by the grantee. 

(5) Any and all bids or offers may be 

rejected when it is in the grantee’s 

interest to do so. 

(e) Procurement procedures. All 

grantees must establish written 

procurement procedures. These 

procedures must provide, at a 

minimum, the following: 

(1) Grantees avoid purchasing 

unnecessary items. 

(2) When appropriate, an analysis is 

made of lease and purchase alternatives 

to determine which would be the most 

economical and practical procurement 

for the grantee and the Federal 

government. 

(3) Solicitations for goods and 

services provide for all of the following: 

(i) A clear and accurate description of 

the technical requirements for the 

material, product or service to be 

procured. In competitive procurements, 

such a description must not contain 

features which unduly restrict 

competition. 

(ii) Requirements which the bidder or 

offer must fulfill and all other factors to 

be used in evaluating bids or proposals. 

(iii) A description, whenever 

practicable, of technical requirements in 

terms of functions to be performed or 

performance required, including the 

range of acceptable characteristics or 

minimum acceptable standards. 

(iv) The specific features of brand 

name or equal descriptions that bidders 

are required to meet when such items 

are included in the solicitation. 

(v) The acceptance, to the extent 

practicable and economically feasible, 

of products and services dimensioned in 

the metric system of measurement. 

(vi) Preference, to the extent 

practicable and economically feasible, 

for products and services that conserve 

natural resources and protect the 

environment and are energy efficient. 

(4) Positive efforts must be made by 

grantees to utilize small businesses, 

minority-owned firms, and women’s 

business enterprises, whenever possible. 

Grantees of Departmental awards must 

take all of the following steps to further 

this goal: 

(i) Ensure that small businesses, 

minority-owned firms, and women’s 

business enterprises are used to the 

fullest extent practicable. 

(ii) Make information on forthcoming 

opportunities available and arrange time 

frames for purchases and contracts to 

encourage and facilitate participation by 

small businesses, minority-owned firms, 

and women’s business enterprises. 

(iii) Consider in the contract process 

whether firms competing for larger 

contracts intend to subcontract with 

small businesses, minority-owned firms, 

and women’s business enterprises. 

(iv) Encourage contracting with 

consortia of small businesses, minorityowned firms and women’s business 

enterprises when a contract is too large 

for one of these firms to handle 

individually. 

(v) Use the services and assistance, as 

appropriate, of such organizations as the 

Small Business Administration and the 

Department of Commerce’s Minority 

Business Development Agency in the 

solicitation and utilization of small 

businesses, minority-owned firms and 

women’s business enterprises. 

(5) The type of procuring instruments 

used (for example, fixed price contracts, 

cost reimbursable contracts, purchase 

orders, and incentive contracts) must be 

determined by the grantee but must be 

appropriate for the particular 

procurement and for promoting the best 

interest of the program or project 

involved. 

(6) The ‘‘cost-plus-a-percentage-ofcost’’ or ‘‘percentage of construction 

cost’’ methods of contracting must not 

be used. 

(7) Contracts must be made only with 

responsible contractors who possess the 

potential ability to perform successfully 

under the terms and conditions of the 

proposed procurement. 

(8) Consideration must be given to 

such matters as contractor integrity, 

record of past performance, financial 

and technical resources or accessibility 

to other necessary resources. 

(9) In certain circumstances, contracts 

with certain parties are restricted by 

agencies’ implementation of Executive 

Orders 12549 and 12689, ‘‘Debarment 

and Suspension’’ as described in 45 CFR 

part 76. 

(10) Some form of cost or price 

analysis must be made and documented 

in the procurement files in connection 

with every procurement action. 

(11) Price analysis may be 

accomplished in various ways, 

including the comparison of price 

quotations submitted, market prices, 


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and similar indicia, together with 

discounts. 

(12) Cost analysis is the review and 

evaluation of each element of cost to 

determine reasonableness, allocability, 

and allowability. 

(13) Procurement records and files for 

purchases in excess of the simplified 

acquisition threshold must include the 

following at a minimum: 

(i) Basis for contractor selection. 

(ii) Justification for lack of 

competition when competitive bids or 

offers are not obtained. 

(iii) Basis for award cost or price. 

(f) Contract administration. A system 

for contract administration must be 

maintained to ensure contractor 

conformance with the terms, conditions 

and specifications of the contract and to 

ensure adequate and timely follow-up of 

all purchases. Grantees must evaluate 

contractor performance and document, 

as appropriate, whether contractors 

have met the terms, conditions, and 

specifications of the contract. 

(g) Additional contract requirements. 

The grantee must include, in addition to 

provisions to define a sound and 

complete agreement, the following 

provisions in all contracts, which must 

also be applied to subcontracts: 

(1) Contracts in excess of the 

simplified acquisition threshold must 

contain contractual provisions or 

conditions that allow for administrative, 

contractual, or legal remedies in 

instances in which a contractor violates 

or breaches the contract terms, and 

provide for such remedial actions as 

may be appropriate. 

(2) All contracts in excess of the 

simplified acquisition threshold 

(currently $100,000) must contain 

suitable provisions for termination by 

the grantee, including the manner by 

which termination must be effected and 

the basis for settlement. 

(h) Conditions for default or 

termination. Such contracts must 

describe conditions under which the 

contract may be terminated for default 

as well as conditions where the contract 

may be terminated because of 

circumstances beyond the control of the 

contractor. 

(i) Access to contract materials and 

staff. All negotiated contracts (except 

those for less than the simplified 

acquisition threshold) awarded by 

grantees must include a provision to the 

effect that the grantee, the Departmental 

awarding agency, the U.S. Comptroller 

General, or any of their duly authorized 

representatives, must have access to any 

books, documents, papers and records 

and staff of the contractor which are 

directly pertinent to a specific program 

for the purpose of making audits, 

examinations, excerpts and 

transcriptions. 

§ 495.350 State Medicaid agency 

attestations. 

(a) The State must provide assurances 

to the Department that amounts 

received with respect to sums expended 

that are attributable to payments to a 

Medicaid provider for the adoption of 

EHR are paid directly to such provider, 

or to an employer or facility to which 

such provider has assigned payments, 

without any deduction or rebate. 

(b) State Medicaid agency attestations 

must be provided in accordance with 

§ 433.74 of this chapter. 

§ 495.352 Reporting requirements. 

Each State must submit to the 

Department on a quarterly basis a 

progress report documenting specific 

implementation and oversight activities 

performed during the quarter, including 

progress in implementing the State’s 

approved Medicaid HIT plan. 

§ 495.354 Rules for charging equipment. 

Equipment acquired under this 

subpart is subject to the public 

assistance program requirements 

concerning the computation of claims 

for Federal financial participation in 

accordance with the provisions of 45 

CFR part 95, subpart G. 

§ 495.356 Nondiscrimination 

requirements. 

State agencies and any other 

recipients or subrecipients of Federal 

financial assistance provided under this 

subpart are subject to the 

nondiscrimination requirements in 45 

CFR parts 80, 84, and 91. 

(a) These regulations in 45 CFR parts 

80, 84, and 91 prohibit individuals from 

being excluded from participation in, 

being denied the benefits of, or being 

otherwise subjected to discrimination 

under any program or activity which 

received Federal financial assistance. 

(b) Specifically, 45 part 80 prohibits 

discrimination on the basis of race, 

color, or national origin; 45 CFR part 84 

prohibits discrimination on the basis of 

disability; and 45 CFR part 91 prohibits 

discrimination on the basis of age. 

§ 495.358 Cost allocation plans. 

State agencies that acquire HIT 

equipment and services under this 

subpart are subject to cost allocation 

plan requirements in 45 CFR part 95. 

§ 495.360 Software and ownership rights. 

(a) General rule. The State or local 

government must include a clause in all 

procurement instruments that provides 

that the State or local government will 

have all ownership rights in software or 

modifications thereof and associated 

documentation designed, developed or 

installed with FFP under this Subpart. 

(b) Federal license. The Department 

reserves a royalty-free, nonexclusive, 

and irrevocable license to reproduce, 

publish, or otherwise use and to 

authorize others to use for Federal 

government purposes, such software, 

modifications, and documentation. 

(c) Proprietary software. Proprietary 

operating/vendor software packages 

such as software that is owned and 

licensed for use by third parties, which 

are provided at established catalog or 

market prices and sold or leased to the 

general public must not be subject to the 

ownership provisions in paragraphs (a) 

and (b) of this section. 

(d) Limitation. Federal financial 

participation is not available for 

proprietary applications software 

developed specifically for the public 

assistance programs covered under this 

subpart. 

§ 495.362 Retroactive approval of FFP with 

an effective date of February 18, 2009. 

For administrative activities 

performed by a State, without obtaining 

prior approval, which are in support of 

planning for incentive payments to 

providers, a State may request 

consideration of FFP by recorded 

request in a HIT advance planning 

document or implementation advance 

planning document update. In such a 

consideration, the agency takes into 

consideration overall Federal interests 

which may include any of the following: 

(a) The acquisition must not be before 

February 18, 2009. 

(b) The acquisition must be 

reasonable, useful, and necessary. 

(c) The acquisition must be 

attributable to payments for reasonable 

administrative expenses under section 

1903(a)(3)(F)(ii) of the Act. 

§ 495.364 Review and assessment of 

administrative activities and expenses of 

Medicaid provider health information 

technology adoption and operation. 

(a) CMS conducts periodic reviews on 

an as needed basis to assess the State’s 

progress described in its approved HIT 

planning advance planning document 

and health information technology 

implementation advance planning 

document. 

(b) During planning, development, 

and implementation, these reviews will 

generally be limited to the overall 

progress, work performance, 

expenditure reports, project deliverables 

and supporting documentation. 

(c) CMS assesses the State’s overall 

compliance with the approved advance 

planning document and provide 


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technical assistance and information 

sharing from other State projects. 

(d) CMS will, on a continuing basis, 

review, assess and inspect the planning, 

design, development, implementation, 

and operation of activities and 

payments for reasonable administrative 

expenses related to the administration 

of payment for Medicaid provider HIT 

adoption and operation payments to 

determine the extent to which such 

activities meet the following: 

(1) All requirements of this subpart. 

(2) The goals and objectives stated in 

the approved HIT implementation 

advance planning document and State 

Medicaid HIT plan. 

(3) The schedule, budget, and other 

conditions of the approved HIT 

implementation advance planning 

document and State Medicaid HIT plan. 

§ 495.366 Financial oversight and 

monitoring of expenditures. 

(a) General rule. (1) The State must 

have a process in place to estimate 

expenditures for the Medicaid EHR 

payment incentive program using the 

Medicaid Budget Expenditure System. 

(2) The State must have a process in 

place to report actual expenditures for 

the Medicaid EHR payment incentive 

program using the Medicaid Budget 

Expenditure System. 

(3) The State must have an automated 

payment and information retrieval 

mechanized system (Medicaid 

Management Information System) to 

make EHR payment incentives, to 

ensure Medicaid provider eligibility, to 

ensure the accuracy of payment 

incentives, and to identify potential 

improper payments. 

(b) Provider eligibility as basis for 

making payment. Subject to § 495.332, 

the State must do all of the following: 

(1) Collect and verify basic 

information on Medicaid providers to 

assure provider enrollment eligibility 

upon enrollment or re-enrollment to the 

Medicaid EHR payment incentive 

program. 

(2) Collect and verify basic 

information on Medicaid providers to 

assure patient volume. 

(3) Collect and verify basic 

information on Medicaid providers to 

assure that EPs are not hospital-based 

including the determination that 

substantially all health care services are 

not furnished in a hospital setting, 

either inpatient or outpatient. 

(4) Collect and verify basic 

information on Medicaid providers to 

assure that EPs are practicing 

predominantly in a Federally qualified 

health center or rural health clinic. 

(5) Have a process in place to assure 

that Medicaid providers who wish to 

participate in the EHR incentive 

payment program has or will have a NPI 

and will choose only one program from 

which to receive the incentive payment 

using the NPI, a TIN, and CMS’ national 

provider election database. 

(c) Meaningful use and efforts to 

adopt, implement, or upgrade to 

certified electronic health record 

technology to make payment. Subject to 

§§ 495.354 and 495.374, the State must 

annually collect and verify information 

regarding the efforts to adopt, 

implement, or upgrade certified EHR 

technology and the meaningful use of 

said technology before making any 

payments to providers. 

(d) Claiming Federal reimbursement 

for State expenditures. Subject to 

§ 495.332, the State must do the 

following: 

(1) Assure that State expenditures are 

claimed in accordance with, including 

but not limited to, applicable Federal 

laws, regulations, and policy guidance. 

(2) Have a process in place to assure 

that expenditures for administering the 

Medicaid EHR incentive payment 

program will not be claimed at amounts 

higher than 90 percent of the cost of 

such administration. 

(3) Have a process in place to assure 

that expenditures for payment of 

Medicaid EHR incentive payments will 

not be claimed at amounts higher than 

100 percent of the cost of such 

payments to Medicaid providers. 

(e) Improper Medicaid electronic 

health record payment incentives. 

(1) Subject to § 495.332, the State 

must have a process in place to assure 

that no duplicate Medicaid EHR 

payment incentives are paid between 

the Medicare and Medicaid programs, or 

paid by more than one State even if the 

provider is licensed to practice in 

multiple States, or paid within more 

than one area of a State. 

(2) Subject to § 495.332, the State 

must have a process in place to assure 

that Medicaid EHR incentive payments 

are made without reduction or rebate, 

have been paid directly to an eligible 

provider or to an employer, a facility, or 

an eligible third-party entity to which 

the Medicaid eligible provider has 

assigned payments. 

(3) Subject to § 495.332, the State 

must have a process in place to assure 

that Medicaid EHR incentive payments 

are made for no more than 6 years or for 

any year starting after the year of 2015 

unless the provider has been provided 

payment under paragraph (b)(1) of this 

section for the previous year. 

(4) Subject to § 495.332, the State 

must have a process in place to assure 

that only appropriate funding sources 

are used to make Medicaid EHR 

incentive payments. 

(5) Subject to § 495.332, the State 

must have a process in place to assure 

that Medicaid EHR incentive payments 

are not paid at amounts higher than 85 

percent of the net average allowable cost 

of certified EHR technology and the 

yearly maximum allowable payment 

thresholds. 

(6) Subject to § 495.332, the State 

must have a process in place to assure 

that for those entities promoting the 

adoption of EHR technology, the 

Medicaid EHR incentive payments are 

paid on a voluntary basis and that these 

entities do not retain more than 5 

percent of such payments for costs not 

related to certified EHR technology. 

(7) Subject to § 495.332, the State 

must have a process in place to assure 

that any existing fiscal relationships 

with providers to disburse the incentive 

through Medicaid managed care plans 

does not exceed 105 percent of the 

capitation rate, in order to comply with 

the Medicaid managed care incentive 

payment rules at § 438.6(c)(5)(iii) of this 

chapter and a methodology for verifying 

such information. 

(8) The State must not request 

reimbursement for Federal financial 

participation unless all requirements of 

this subpart have been satisfied. 

§ 495.368 Combating fraud and abuse. 

(a) General rule. (1) The State must 

comply with Federal requirements to— 

(i) Ensure the qualifications of the 

providers who request Medicaid EHR 

incentive payments; 

(ii) Detect improper payments; and 

(iii) In accordance with 42 CFR 

§ 455.15 and § 455.21, refer suspected 

cases of fraud and abuse to the Medicaid 

Fraud Control Unit. 

(2) The State must take corrective 

action in the case of improper EHR 

payment incentives to Medicaid 

providers. 

(b) Providers’ statements regarding 

submission of documentation 

containing falsification or concealment 

of a material fact on EHR incentive 

payment documentation. On any forms 

on which a provider submits 

information necessary to the 

determination of eligibility to receive 

EHR incentive payments, the State must 

obtain the statement that meet the 

following: 

(1) Is signed by the provider and 

contains the following statement: ‘‘This 

is to certify that the foregoing 

information is true, accurate, and 

complete. I understand that Medicaid 

EHR incentive payments submitted 

under this provider number will be from 


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Federal Register / Vol. 75, No. 8 / Wednesday, January 13, 2010 / Proposed Rules 2011 

Federal funds, and that any falsification, 

or concealment of a material fact may be 

prosecuted under Federal and State 

laws.’’ 

(2) Appears directly above the 

claimant’s signature, or if it is printed 

on the reverse of the form, a reference 

to the statements must appear 

immediately preceding the provider’s 

signature. 

(3) Is resubmitted upon a change in 

provider representative. 

(4) Is updated as needed. 

(c) Overpayments. States must repay 

to CMS all Federal financial 

participation received by providers 

identified as an overpayment regardless 

or recoupment from such providers, 

within 60 days of discovery of the 

overpayment, in accordance with 

sections 1903(a)(1), (d)(2), and (d)(3) of 

the Act and part 433 Subpart F of the 

regulations. 

(d) Complying with Federal laws and 

regulations. States must comply with all 

Federal laws and regulations designed 

to prevent fraud, waste, and abuse, 

including, but not limited to applicable 

provisions of Federal criminal law, the 

False Claims Act (32 U.S.C. 3729 et 

seq.), and the anti-kickback statute 

(section 1128B(b) of the Act). 

§ 495.370 Appeals process for a Medicaid 

provider receiving electronic health record 

incentive payments. 

(a) The State must have a process in 

place consistent with the requirements 

established in § 447.253(e) of this 

chapter for a provider or entity to appeal 

the following issues related to the HIT 

incentives payment program: 

(1) Incentive payments. 

(2) Incentive payment amounts. 

(3) Provider eligibility determinations. 

(4) Demonstration of adopting, 

implementing, and upgrading, and 

meaningful use eligibility for incentives 

under this subpart. 

(b) Subject to paragraph (a) of this 

section, the State’s process must ensure 

the following: 

(1) That the provider (whether an 

individual or an entity) has an 

opportunity to challenge the State’s 

determination under this Part by 

submitting documents or data or both to 

support the provider’s claim. 

(2) That such process employs 

methods for conducting an appeal that 

are consistent with the State’s 

Administrative Procedure law(s). 

(c) The State must provide that the 

provider (whether individual or entity) 

is also given any additional appeals 

rights that would otherwise be available 

under procedures established by the 

State. 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program, Program No. 93.778, 

Medical Assistance Program.) 

Dated: November 13, 2009. 

Charlene Frizzera, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: December 28, 2009. 

Kathleen Sebelius, 

Secretary. 

[FR Doc. E9–31217 Filed 12–30–09; 4:15 pm] 

BILLING CODE 4120–01–P 


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