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[Federal Register: July 28, 2010 (Volume 75, Number 144)]
[Rules and Regulations]               
[Page 44313-44588]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28jy10-17]                         
 

[[Page 44313]]

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Part II

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 412, 413, 422 et al.

Medicare and Medicaid Programs; Electronic Health Record Incentive 
Program; Final Rule

[[Page 44314]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 412, 413, 422, and 495

[CMS-0033-F]
RIN 0938-AP78

 
Medicare and Medicaid Programs; Electronic Health Record 
Incentive Program

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Final rule.

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SUMMARY: This final rule implements the provisions of the American 
Recovery and Reinvestment Act of 2009 (ARRA) (Pub. L. 111-5) that 
provide incentive payments to eligible professionals (EPs), eligible 
hospitals and critical access hospitals (CAHs) participating in 
Medicare and Medicaid programs that adopt and successfully demonstrate 
meaningful use of certified electronic health record (EHR) technology. 
This final rule specifies--the initial criteria EPs, eligible 
hospitals, and CAHs must meet in order to qualify for an incentive 
payment; calculation of the incentive payment amounts; payment 
adjustments under Medicare for covered professional services and 
inpatient hospital services provided by EPs, eligible hospitals and 
CAHs failing to demonstrate meaningful use of certified EHR technology; 
and other program participation requirements. Also, the Office of the 
National Coordinator for Health Information Technology (ONC) will be 
issuing a closely related final rule that specifies the Secretary's 
adoption of an initial set of standards, implementation, 
specifications, and certification criteria for electronic health 
records. ONC has also issued a separate final rule on the establishment 
of certification programs for health information technology.

DATES: Effective Date: These regulations are effective on September 27, 
2010.

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.
Bob Kuhl or Susan Burris, (410) 786-5594, Medicare CAH payment and 
charity care issues.
Frank Szeflinski, (303) 844-7119, Medicare Advantage issues.

SUPPLEMENTARY INFORMATION:

Acronyms

ARRA American Recovery and Reinvestment Act of 2009
AAC Average Allowable Cost (of certified EHR technology)
AIU Adopt, Implement, Upgrade (certified EHR technology)
CAH Critical Access Hospital
CAHPS Consumer Assessment of Healthcare Providers and Systems
CCN CMS Certification Number
CFR Code of Federal Regulations
CHIP Children's Health Insurance Program
CHIPRA Children's Health Insurance Program Reauthorization Act of 
2009
CMS Centers for Medicare & Medicaid Services
CPOE Computerized Physician Order Entry
CY Calendar Year
EHR Electronic Health Record
EP Eligible Professional
EPO Exclusive Provider Organization
FACA Federal Advisory Committee Act
FFP Federal Financial Participation
FFY Federal Fiscal Year
FFS Fee-For-Service
FQHC Federally Qualified Health Center
FTE Full-Time Equivalent
FY Fiscal Year
HEDIS Healthcare Effectiveness Data and Information Set
HHS Department of Health and Human Services
HIE Health Information Exchange
HIT Health Information Technology
HIPAA 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 and Services Administration
IAPD Implementation Advance Planning Document
ICR Information Collection Requirement
IHS Indian Health Service
IPA Independent Practice Association
IT Information Technology
MA Medicare Advantage
MAC Medicare Administrative Contractor
MAO Medicare Advantage Organization
MCO Managed Care Organization
MITA Medicaid Information Technology Architecture
MMIS Medicaid Management Information Systems
MSA Medical Savings Account
NAAC Net Average Allowable Cost (of certified EHR technology)
NCQA National Committee for Quality Assurance
NCVHS National Committee on Vital and Health Statistics
NPI National Provider Identifier
NPRM Notice of Proposed Rulemaking
ONC Office of the National Coordinator for Health Information 
Technology
PAHP Prepaid Ambulatory Health Plan
PAPD Planning Advance Planning Document
PFFS Private Fee-For-Service
PHO Physician Hospital Organization
PHS Public Health Service
PHSA Public Health Service Act
PIHP Prepaid Inpatient Health Plan
POS Place of Service
PPO Preferred Provider Organization
PQRI Physician Quality Reporting Initiative
PSO Provider Sponsored Organization
RHC Rural Health Clinic
RHQDAPU Reporting Hospital Quality Data for Annual Payment Update
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 and Response and Analysis 
of Comments
    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. Considerations in Defining Meaningful Use
    b. Common Definition of Meaningful Use Under Medicare and 
Medicaid
    c. 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, Eligible Hospitals and 
CAHs
    a. General
    b. Requirements for the Submission of Clinical Quality Measures 
by EPs, Eligible Hospitals and CAHs
    c. Statutory Requirements and Other Considerations for the 
Selection of Clinical Quality Measures for Electronic Submission by 
EPs, Eligible Hospitals and CAHs
    (1) Statutory Requirements for the Selection of Clinical Quality 
Measures for Electronic Submission by EPs, Eligible Hospitals and 
CAHs
    (2) Other Considerations for the Selection of Clinical Quality 
Measures for Electronic Submission by EPs, Eligible Hospitals and 
CAHs
    d. Clinical Quality Measures for EPs
    e. Clinical Quality Measures Reporting Criteria for EPs
    f. Clinical Quality Measures for Electronic Submission by 
Eligible Hospitals
    g. Potential Measures for EPs, Eligible Hospitals and CAHs in 
Stage 2 and Subsequent Years
    h. Reporting Method for Clinical Quality Measures for 2011 and 
Beginning With the 2012 Payment Years
    (1) Reporting Method for 2011 Payment Year
    (2) Reporting Method Beginning in 2012

[[Page 44315]]

    i. Alternative Reporting Methods for Clinical Quality Measures
    j. Reporting Period for Reporting Clinical Quality Measures
    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 
MA-Affiliated 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 Information on the CMS Web site
    8. Limitation on Review
    9. Conforming Changes
    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
    a. Payment Methodology for EPs
    (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 EHR 
Incentive Programs One Time
    g. One State Selection
    5. Single Provider Election Repository and State Data Collection
    6. Collection of Information Related to the Eligible 
Professional's National Provider Identifier (NPI) 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
    d. Quality Measures
    8. Overview of Conditions for States To Receive Federal 
Financial Participation (FFP) for Incentive Payments and 
Implementation Funding
    9. Financial Oversight, Program Integrity and Provider Appeals
III. Collection of Information Requirements
    A. ICRs Regarding Demonstration of Meaningful Use Criteria 
(Sec.  495.8)
    B. ICRs Regarding Participation Requirements for EPs, Eligible 
Hospitals, and Qualifying CAHs (Sec.  495.10)
    C. ICRs Regarding Identification of Qualifying MA Organizations, 
MA-EPs and MA-Affiliated Eligible Hospitals (Sec.  495.202)
    D. ICRs Regarding Incentive Payments to Qualifying MA 
Organizations for MA-EPs and Hospitals (Sec.  495.204)
    E. ICRs Regarding Meaningful User Attestation (Sec.  495.210)
    F. ICRs Regarding Incentive Payments to Qualifying MA 
Organizations for MA-Eligible Professionals and Hospitals (Sec.  
495.220)
    G. ICRs Regarding Process for Payments (Sec.  495.312)
    H. ICRs Regarding Activities Required To Receive an Incentive 
Payment (Sec.  495.314)
    I. ICRs Regarding State Monitoring and Reporting Regarding 
Activities Required To Receive an Incentive Payment (Sec.  495.316)
    J. ICRs Regarding State Responsibilities for Receiving FFP 
(Sec.  495.318)
    K. ICRs Regarding Prior Approval Conditions (Sec.  495.324)
    L. ICRs Regarding Termination of Federal Financial Participation 
(FFP) for Failure To Provide Access to Information (Sec.  495.330)
    M. ICRs Regarding State Medicaid Agency and Medicaid EP and 
Hospital Activities (Sec.  495.332 Through Sec.  495.338)
    N. ICRs Regarding Access to Systems and Records (Sec.  495.342)
    O. ICRs Regarding Procurement Standards (Sec.  495.344)
    P. ICRs Regarding State Medicaid Agency Attestations (Sec.  
495.346)
    Q. ICRs Regarding Reporting Requirements (Sec.  495.348)
    R. ICRs Regarding Retroactive Approval of FFP With an Effective 
Date of February 18, 2009 (Sec.  495.358)
    S. ICRs Regarding Financial Oversight and Monitoring 
Expenditures (Sec.  495.362)
    T. ICRs Regarding Appeals Process for a Medicaid Provider 
Receiving Electronic Health Record Incentive Payments (Sec.  
495.366)
IV. 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,

[[Page 44316]]

2009. 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), eligible hospitals, and critical access 
hospitals (CAHs), and Medicare Advantage Organizations to promote the 
adoption and meaningful use of interoperable health information 
technology (HIT) and qualified electronic health records (EHRs). 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.'' These incentive payments are part 
of a broader effort under the HITECH Act to accelerate the adoption of 
HIT and utilization of qualified EHRs.
    On January 13, 2010 we published a proposed rule (75 FR 1844), 
entitled ``Medicare and Medicaid Programs; Electronic Health Record 
Incentive Program'' to implement the provisions of ARRA that provide 
incentive payments to EPs, eligible hospitals, and CAHs participating 
in Medicare and Medicaid programs that adopt and successfully 
demonstrate meaningful use of ``certified EHR technology,'' and 
incentive payments to certain Medicare Advantage Organizations for 
their affiliated EPs and eligible hospitals that meaningfully use 
certified EHR technology. Through this final rule, we are developing 
the incentive programs which are outlined in Division B, Title IV of 
the HITECH Act. This final rule sets forth the 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. In the interim final rule published on 
January 13, 2010 (75 FR 2014) entitled ``Health Information Technology: 
Initial Set of Standards, Implementation Specifications, and 
Certification Criteria for Electronic Health Record Technology,'' ONC 
defined the term ``certified EHR technology,'' identified the initial 
set of standards and implementation specifications that such EHR 
technology would need to support the achievement of the proposed 
meaningful use Stage 1, as well as the certification criteria that will 
be used to certify EHR technology. ONC is also issuing a final rule on 
the standards, implementation specifications, and certification 
criteria elsewhere in this issue of the Federal Register.
    In a related proposed rule published on March 10, 2010, (75 FR 
11328) entitled ``Proposed Establishment of Certification Programs for 
Health Information Technology'' ONC proposed the establishment of two 
certification programs for purpose of testing and certifying health 
information technology. In the June 24, 2010 Federal Register (75 FR 
36157), ONC published a final rule to establish a temporary 
certification program whereby the National Coordinator would authorize 
organizations to test and certify complete EHRs and EHR Modules, and 
plans to issue a separate final rule to establish a permanent 
certification program to replace the temporary certification program. 
Specifically, this final rule will ensure that the definition of 
meaningful use of certified EHR technology does not require EPs, 
eligible hospitals, and CAHs to perform functions 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 final rule to also review the ONC 
interim final rule on standards and implementation specifications for 
certified EHR technology and the related final rule as well as the 
final rule on the establishment of a temporary certification program. 
Readers may also visit http://healthit.hhs.gov and http://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 demonstration of meaningful use of certified EHR 
technology by EPs participating in the original Medicare program 
(hereinafter referred to as the Medicare Fee-for-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 do 
not demonstrate that they are meaningful users of certified EHR 
technology will receive an adjustment to their fee schedule for their 
professional services of 99 percent for 2015 (or, in the case of an 
eligible professional who was subject to the application of the payment 
adjustment under section 1848(a)(5) of the Act, 98 percent for 2014), 
98 percent for 2016, and 97 percent for 2017 and each subsequent year. 
Section 4101(c) of the HITECH Act adds a new subsection (l) to section 
1853 of the Act to provide incentive payments to certain Medicare 
Advantage (MA) organizations for their affiliated EPs who meaningfully 
use certified EHR technology and meet certain other requirements, and 
requires a downward adjustment to Medicare payments to certain MA 
organizations for professional services provided by any of their 
affiliated EPs who are not meaningful users of certified EHR 
technology, beginning in 2015. Section 1853(l) of the Act also requires 
us to establish a process that ensures that there are no duplicate 
payments made to MA organizations under section 1853(l) of the Act and 
to their affiliated EPs under the FFS EHR incentive program established 
under section 1848(o)(1)(A) of the Act.
    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 
incentives payments for demonstration of meaningful use of certified 
EHR technology by subsection (d) hospitals, as defined under section 
1886(d)(1)(B) of the Act, participating in the Medicare FFS program 
beginning in Federal fiscal year (FFY) 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 for their inpatient hospital services. Section 4102(a)(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 costs for 
the purchase of certified EHR technology beginning in FY 2011. In 
addition, section 4102(b)(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 qualifying MA organizations 
for certain affiliated hospitals that meaningfully

[[Page 44317]]

use certified EHR technology to make a downward adjustment to payments 
to certain 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 1853(m) of the Act also 
requires us to establish a process that ensures that there are no 
duplicate payments made to MA organizations under section 1853(m) of 
the Act and to their affiliated hospitals under the FFS EHR incentive 
program established under section 1886(n) of the Act.
    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, operate (including support 
services and training for staff) and meaningfully use 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 Rule and Analysis of and Responses to 
Public Comments

    We proposed to add a new part 495 to title 42 of the Code of 
Federal Regulations to implement the provisions of Title IV of Division 
B of ARRA providing for incentive payments to EPs, eligible hospitals, 
CAHs and certain Medicare Advantage organizations for the adoption and 
demonstration of meaningful use of certified EHR technology under the 
Medicare program or the Medicaid program.
    The HITECH Act creates incentives under the Medicare Fee-for-
Service (FFS), Medicare Advantage (MA), and Medicaid programs for EPs, 
eligible hospitals and CAHs to adopt and demonstrate meaningful use of 
certified EHR technology, and payment adjustments under the Medicare 
FFS and MA programs for EPs, eligible hospitals, and CAHs who fail to 
adopt and demonstrate meaningful use of certified EHR technology. 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 demonstration of meaningful use of certified EHR technology. 
Eligible hospitals and CAHs may participate in both the Medicare 
program and the Medicaid program, assuming they meet each program's 
eligibility requirements, which vary across the two 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.'' For these reasons, we seek to create as 
much commonality between the three programs as possible and have 
structured this final rule, as we did the proposed rule, based on the 
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, MA, and Medicaid Programs

    Title IV, Division B of ARRA establishes incentive payments under 
the Medicare and Medicaid programs for certain professionals and 
hospitals that meaningfully use certified EHR technology, and for 
certain MA organizations whose affiliated EPs and hospitals 
meaningfully use certified EHR technology. We refer to the incentive 
payments made under the original Medicare program to EPs, eligible 
hospitals, and CAHs as the Medicare FFS EHR incentive program, the 
incentive payments made to qualifying MA organizations as the MA EHR 
incentive program, and the incentive payments made under Medicaid to 
eligible professionals and eligible hospitals as the Medicaid EHR 
incentive program. When referring to the Medicare EHR incentive 
program, we are generally referring to both the Medicare FFS EHR and 
the MA EHR incentive programs.
1. Definitions
    Sections 4101, 4102, and 4201 of the HITECH Act use many identical 
or similar terms. In this section of the preamble, we discuss terms for 
which we are finalizing uniform definitions for the Medicare FFS, MA, 
and Medicaid EHR incentive programs. These definitions are set forth 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.
    The incentive payments are available to EPs which are 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 non-hospital-based criteria of section 1903(t)(2)(A) 
of the Act and eligible hospitals which are 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.
a. Certified Electronic Health Record (EHR) Technology
    Under all three EHR incentive programs, EPs, eligible hospitals, 
and CAHs 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, and for eligible hospitals and CAHs in 
section 1886(n)(3)(A)(i) of the Act. In the MA EHR incentive program 
this requirement for EPs is found in section 1853(l)(1) of the Act, and 
for eligible hospitals and CAHs, in section 1853(m)(1) of the 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. Certified EHR 
technology is a critical component of the EHR incentive programs, and 
the Secretary has charged ONC, under the authority given to her in the 
HITECH Act, with developing the criteria and mechanisms for 
certification of EHR technology. Therefore, we finalize our proposal to 
use the definition of certified EHR technology adopted by ONC. ONC 
issued an interim final rule with comment for the standards and 
certification criteria for certified EHR technology at the same time 
our proposed rule was issued. After reviewing the comments they 
received and to address changes made in this final rule, ONC will be 
issuing a final rule in conjunction with this final rule. When we refer 
to the ONC final rule, we are referring to this final rule titled

[[Page 44318]]

``Health Information Technology: Initial Set of Standards, 
Implementation Specifications, and Certification Criteria for 
Electronic Health Record Technology. When we refer to the ONC IFR, we 
are referring to the interim final rule with comment period published 
in the Federal Register on January 13, 2010.
    Comment: Several commenters asked for clarification on the 
definition of certified EHR technology. Currently, hospitals utilize 
multiple systems to operate electronically. For example, some 
electronic operating systems feed EHR data and some systems pull EHR 
data. Data from the two systems are then extracted and manipulated to 
create a quality measure calculation. The commenters' inquired as to 
how these systems can continue to be utilized even though, 
independently, these systems will not meet all certification standards. 
Some commenters expressed concern the ONC IFR did not include 
generation of the data needed to demonstrate meaningful use as a 
certification requirement and that certified EHR technology 
requirements should also include compliance with HIPAA standards as 
well as all relevant state statutes for the state or states where it is 
installed. Commenters recommended various approaches to defining 
certified technology especially in the early stages of the program. 
Some suggestions included, grandfathering existing systems for a period 
of three years as long as the provider could meet specific meaningful 
use objectives while requiring all upgrades to existing systems to be 
certified, allowing all EHR products certified by the Certification 
Commission for Health Information Technology (CCHIT) at the criteria 
established for 2008 or later be deemed as meeting Stage 1 
certification requirements or alternatively CMS provide a process that 
can verify compliance of required features at no cost to providers or 
vendors as is done now with Enterprise Data Interchange (EDI) claims 
processing. Some commenters also offered other thoughts on potential 
unintended consequences of defining the EHR certification software 
process to include certifying agencies that charge for the process. The 
commenters believed this could result in continued new and revised 
requirements to justify the certifying entities' existence and increase 
its revenue.
    Response: We have referred those comments to ONC who addresses them 
in their final rule.
    We are adopting the ONC definition of certified EHR technology at 
45 CFR 170.102 in this final rule.
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 was defined by ONC in its in its IFR and finalized by ONC in 
their final rule, and we are finalizing our proposal to use the 
definition of qualified electronic health record adopted by ONC in 
their final rule to be published concurrently with this rule.
    Comment: We received a few comments on the definition of qualified 
EHR technology. Commenters expressed concerns regarding perceived gaps 
in defining an EHR as qualified such as a lack of the requirement for a 
narrative text for physicians (also known as progress note). Another 
comment requested further clarification regarding the requirement for a 
qualified EHR to ``capture and query information relevant to health 
care quality'' and ``exchange electronic health information with and 
integrate such information from other sources.'' For example, some 
might believe that these requirements apply strictly to information 
contained within the EHR or closed proprietary hospital systems and not 
to information that would have to be obtained from outside the four 
walls of the practice or the extended (but closed) system.
    Response: We have referred those comments to ONC who addresses them 
in their final rule.
    We are adopting the ONC definition of Qualified Electronic Health 
Record at 45 CFR 170.102.
c. Payment Year
    As discussed in the proposed rule, under section 1848(o)(1)(A)(i) 
of the 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 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 in the 
Medicare and Medicaid EHR incentive programs, we are proposing a common 
definition for both ``payment year'' and ``year of payment,'' as ``any 
calendar year beginning with 2011'' at Sec.  495.4. In the proposed 
rule, we explained that this definition, which is consistent with the 
statutory definition of ``payment year'' under Medicare FFS, would 
simplify the EHR incentive programs for EPs. As discussed later in this 
preamble, EPs will have the opportunity to participate in either the 
Medicare or Medicaid incentive programs, and once an EP has selected 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 incentive programs, and inform their decisions 
regarding participation in either program.
    Under section 1886(n)(1) of the 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 beginning in 2011. As hospitals are paid based 
on the 12-month Federal fiscal year, we interpret the reference to a 
``fiscal year'' means the fiscal year beginning on October 1 of the 
prior calendar 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 in the 
proposed rule and summarized above for proposing a common definition of 
``payment year'' 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 
and CAHs under the Medicare FFS, MA and Medicaid EHR incentive 
programs, we proposed to define payment year and year of payment at 
Sec.  495.4, consistent with the statutory definition, as ``any fiscal 
year beginning with 2011.''
    Comment: A commenter asked CMS to identify the first possible 
payment year for EPs, and hospitals and CAHs.
    Response: The first payment year for EPs is any calendar year (CY) 
beginning with CY 2011 and for eligible hospitals and CAHs is any 
fiscal year (FY) beginning with 2011.
    Comment: The majority of commenters favored our definition of 
``payment year'' based on the different existing fiscal periods for 
eligible professionals and hospitals. Additional support was received 
from some commenters whom explained that they participated in 
performance-based initiatives, which define a payment year the same as 
the proposed rule.
    Response: After consideration of the public comments received, we 
are adopting our proposed definition of ``payment year'' in the 
Medicare and

[[Page 44319]]

Medicaid EHR incentive programs as described above.
    Comment: The majority of comments received regarding the definition 
of a payment year asked whether payment years must be consecutive for 
an EP or eligible hospital to receive all years of incentive payments.
    Response: In the proposed rule, we defined 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.'' However, section 1848(o)(1)(E) of Act defines the 
second through fifth payment years for an EP as each successive year 
immediately following the first payment year for such professional for 
the Medicare FFS and MA EHR incentive programs. Similarly, section 
1886(n)(2)(G)(ii) of the Act defines the second through fourth payment 
years for an eligible hospital or CAH as requiring the years to be 
``successive'' and ``immediately following'' the prior year. This 
requirement, that each payment year ``immediately follow'' the prior 
year, means that every year subsequent to the first payment year is a 
payment year regardless of whether an incentive payment is received by 
the EP, eligible hospital or CAH. For example, if a Medicare EP 
receives an incentive in CY 2011, but does not successfully demonstrate 
meaningful use or otherwise fails to qualify for the incentive in CY 
2012, CY 2012 still counts as one of the EP's five payment years and 
they would only be able to receive an incentive under the Medicare EHR 
incentive program for three more years as CY 2013 would be there third 
payment year. In this example, the maximum incentive payment that would 
apply for this Medicare EP not practicing predominately in a health 
professional shortage area (HPSA) would be $18,000 in 2011, and $8,000 
in 2013 as outlined in section 1848(o)(1)(B) of the Act. The EP would 
have qualified for a maximum incentive payment of $12,000 in 2012, but 
did not qualify as a meaningful user for this year. No incentives may 
be made under the Medicare EHR incentive program after 2016.
    The same rule, however, does not apply to the Medicaid EHR 
incentive program. For that program, payments may generally be non-
consecutive. If an EP or eligible hospital does not receive an 
incentive payment for a given CY or FY then that year would not 
constitute a payment year. For example, if a Medicaid EP receives 
incentives in CY 2011 and CY 2012, but fails to qualify for an 
incentive in CY 2013, they would still be eligible to receive 
incentives for an additional four payment years. For hospitals, 
however, starting with FY 2017 payments must be consecutive. This rule 
is required by section 1903(t)(5)(D) of the Act, which states that 
after 2016, no Medicaid incentive payment may be made to an eligible 
hospital unless ``the provider has been provided payment * * * for the 
previous year.'' As a result, Medicaid eligible hospitals must receive 
an incentive in FY 2016 to receive an incentive in FY 2017 and later 
years. Starting in FY 2016, incentive payments must be made every year 
in order to continue participation in the program. In no case may any 
Medicaid EP or eligible hospital receive an incentive after 2021. We 
have revised our regulations at Sec.  495.4 to incorporate these 
statutory requirements.
    Comment: Some commenters requested that CMS clarify the impact on 
EPs when they change practices in the middle of the incentive payment 
program; in other words, if an EP leaves a practice in year two of the 
incentive payment program and goes to another practice, does that EP 
forfeit the ability to continue collecting incentive payments for years 
3 through 5?
    Response: A qualifying EP that leaves one practice for another may 
still be eligible to receive subsequent incentive payments if the EP is 
a meaningful EHR user in the new practice. The incentive payment is 
tied to the individual EP, and not to his or her place of practice.
d. First, Second, Third, Fourth, Fifth, and Sixth Payment Year
    In accordance with sections 1848(o)(1)(A)(ii), 1886(n)(2)(E), 
1814(l)(3)(A), 1903(t)(4)(B), and 1903(t)(5)(A) of the Act, for EPs, 
eligible hospitals, and CAHs that qualify for EHR incentive payments in 
a payment year, the amount of the payment will depend in part on 
whether the EP or hospital previously received an incentive payment 
and, if so (for the Medicare EHR incentive program) when the EP or 
hospital received his or her first payment. We proposed to define the 
first payment year to mean the first CY or Federal fiscal year (FY) for 
which an EP, eligible hospital, or CAH receives an incentive payment. 
Likewise, we proposed to define the second, third, fourth, fifth, and 
sixth payment year, respectively, to mean the second, third, fourth, 
fifth, and sixth CY or FY, respectively, for which an EP, eligible 
hospital, or CAH receives an incentive payment.
    Comment: As stated above, many commenters requested clarification 
on non-consecutive payment.
    Response: This comment is addressed above.
    Comment: A commenter requested CMS to clarify the consequences for 
a hospital that originally qualified and received incentive payments 
the first year, but in a subsequent year failed to qualify as a 
meaningful user of certified EHR technology.
    Response: Meaningful use will be assessed on a year-by-year basis 
as we establish different Stages of meaningful use criteria for 
different years. If an EP or an eligible hospital including a CAH has 
failed to demonstrate meaningful use of certified EHR technology for a 
certain payment year, the EP, eligible hospital, or CAH will not be 
qualified for incentive payments for that payment year. However, upon 
successful demonstration as a meaningful EHR user in subsequent years, 
an EP, eligible hospital or CAH may be eligible to receive an incentive 
payment. As discussed above, however, for the Medicare program, the 
failure of the eligible hospital or CAH to demonstrate meaningful use 
in the subsequent year, will affect the total payments that hospital is 
eligible to receive, as, pursuant to the statute, the hospital is 
treated as skipping a payment year. Payment adjustments apply to 
Medicare providers who are unable to demonstrate meaningful use 
starting in 2015.
    Comment: One commenter asked if CMS could apply the same Medicaid 
EP's first year incentive eligibility requirements of adopting, 
implementing or upgrading to certified EHR technology to Medicare 
physicians instead of demonstration of meaningful use.
    Response: The HITECH Act allows Medicaid EPs and eligible hospitals 
to receive an incentive for the adoption, implementation, or upgrade of 
certified EHR technology in their first participation year. In 
subsequent years, these EPs and eligible hospitals must demonstrate 
that they are meaningful users. There are no parallel provisions under 
the Medicare EHR incentive program that would authorize us to make 
payments to Medicare EPs, eligible hospitals, and CAHs for the 
adoption, implementation or upgrade of certified EHR technology. 
Rather, in accordance with sections 1848(o)(2), 1886(n)(3)(A), and 
1814(l)(3)(A) of the Act, Medicare incentive payments are only made to 
EPs, eligible hospitals, and CAHs for the demonstration of meaningful 
use of certified EHR technology.

[[Page 44320]]

    After consideration of the public comments received, we are 
finalizing the definitions of First payment year as proposed. For the 
Medicare EHR incentive programs, we are modifying the definitions of 
second, third, fourth, fifth payment year to make clear that these 
years are ``each successive year following the first payment year.'' 
For the Medicaid EHR incentive program, we included definitions of 
first, second, third, fourth, fifth and sixth payment year that make 
clear that these are the years for which payment is received. The 
regulations can now be found at Sec.  495.4 of our regulations.
e. EHR Reporting Period
    In the proposed rule, we proposed 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, we proposed that the EHR 
reporting period would be any continuous 90-day period within the first 
payment year and the entire payment year for all subsequent payment 
years. In our proposed rule, we did not make any proposals regarding 
the reporting period that will be used for purposes of the payment 
adjustments that begin in 2015. We intend to address this issue in 
future rulemaking, 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.
    For the first payment year only, we proposed to define the term EHR 
reporting period at Sec.  495.4 of our regulations to mean any 
continuous 90-day period within a payment year in which an EP, eligible 
hospital or CAH 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. Starting with the second payment year and any subsequent payment 
years for a given EP, eligible hospital or CAH, we proposed to define 
the term EHR reporting period at Sec.  495.4 to mean the entire payment 
year. In our discussion of considerations in defining meaningful use 
later in this section we discuss how this policy may be affected by 
subsequent revisions to the definition of meaningful use.
    For the first payment year, we stated in the proposed rule our 
belief that giving EPs, eligible hospitals and CAHs flexibility as to 
the start date of the EHR reporting period is important, as unforeseen 
circumstances, such as delays in implementation, higher than expected 
training needs and other unexpected hindrances, may cause an EP, 
eligible hospital, or CAH to potentially miss a target start date.
    Comment: Some commenters supported the 90-day reporting period 
proposed for the first payment year. One commenter requested that 
exceptions, per the provider request, be considered individually in 
cases of compliance for less than the 90 days (for example, 85 days). 
Commenters preferred the 90-day reporting period overall and many 
suggested it be used for subsequent years as well. We also received 
comments questioning why Medicaid providers would need to conform to 
the 90-day reporting period in order to adopt, implement or upgrade 
certified EHR technology.
    Response: We do believe that for program integrity it is crucial to 
maintain a consistent reporting period. Basing the incentive payments 
on meaningful use implies a minimum level of use in order to receive 
the incentive payment. The timeframe is part of the determination of 
whether use is meaningful and therefore requires a minimum as well. 
Given the short time period as compared to the entire year, we do not 
believe an exception process is needed. However, we agree with 
commenters that an EHR reporting period for demonstrating adoption, 
implementation or upgrading certified EHR technology by Medicaid EPs 
and eligible hospitals is unnecessary and are removing it for the final 
rule in this instance. Similarly, Medicaid EPs and eligible hospitals 
who are demonstrating meaningful use for the first time in their second 
payment year, will have a 90-day reporting period to maintain parity 
with Medicare providers' first meaningful use payment year. We do not 
believe that after successfully demonstrating meaningful use, a 90-day 
period is appropriate for subsequent years. The reasons for using the 
90-day period instead of the full year are based on potential delays in 
implementing certifying EHR technology. Once certified EHR technology 
is implemented these are no longer applicable.
    After consideration of the public comments received and with the 
clarification described above for adopting, implementing or upgrading, 
we are finalizing the 90-day reporting period for the first payment 
year based on meaningful use as proposed for Medicare EPs, eligible 
hospitals and CAHs and full year EHR reporting periods for subsequent 
payment years. For Medicaid EPs and eligible hospitals, the EHR 
reporting period will be a 90-day period for the first year a Medicaid 
EP or eligible hospital demonstrates meaningful use and full year EHR 
reporting periods for subsequent payment years.
f. Meaningful EHR User
    Section 1848(o)(1)(A)(i) of the Act, limits incentive payments 
under the Medicare FFS EHR incentive program to an EP who is a 
``meaningful EHR user.'' Similarly, section 1886(n)(1) and 1814(l) of 
the Act, limits incentive payments under the Medicare FFS EHR incentive 
program to an eligible hospital or CAH, respectively, who is a 
``meaningful EHR user.'' Section 1903(t)(6)(C)(i)(II) of the Act limits 
incentive payments for payment years other than the first payment year 
to a Medicaid EP or eligible hospital who ``demonstrates meaningful use 
of certified EHR technology.'' We proposed to define at Sec.  495.4 the 
term ``meaningful EHR user'' as an EP, eligible hospital, or CAH 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).
    Comment: Several commenters indicated there is a need to align 
measures and programs, to avoid having to report similar measure 
standards to different Federal, State and other entities.
    Response: We concur with the goal of alignment to avoid redundant 
and duplicative reporting and seek to accomplish this to the extent 
possible now and in future rulemaking.
    Comment: Several commenters suggested that CMS considers EPs, 
eligible hospitals, and CAHs who are participating in certain existing 
programs as meaningful EHR users. The commenters contended that the 
standards followed by participants in these programs are equivalent to 
those we proposed to adopt for purposes of demonstrating meaningful 
use. The programs recommended by commenters are--
     Qualified Health Information Exchange Networks; and
     Medicare Electronic Health Record Demonstration Program.
    Response: We do not agree that participation in these programs 
would be the equivalent to demonstrating meaningful use in accordance 
with the criteria under the EHR incentive programs. Most of these 
programs place a heavy focus on one of the five priorities of 
meaningful use discussed in the next section such as reporting clinical 
quality measures or the exchange of health information, tailored to the 
individual program's goals. For example, the goal of the Medicare

[[Page 44321]]

Electronic Health Record Demonstration Program, for example, which was 
started in 2009 and pre-dates passage of the HITECH Act, is to reward 
delivery of high-quality care supported by the adoption and use of 
electronic health records in physician small to medium-size primary 
care practices. The purpose of this program is to encourage adoption 
and increasingly sophisticated use of EHRs by small to medium-sized 
primary care practices. While this goal is similar to the overall 
objective of the HITECH Act, the requirements for the demonstration are 
not as broad-based as that of the HITECH Act, and payment incentives 
are based on the level of use over the duration of the program, which 
will vary by practice. Therefore, it is not appropriate to deem 
practices participating in the EHR Demonstration as meaningful users 
for purposes of the HITECH Act. The HITECH Act also requires use 
certified EHR technology as defined by ONC to qualify for incentive 
payments. While CCHIT has certified EHR technology in the past, the ONC 
regulation ``Establishment of the Temporary Certification Program for 
Health Information Technology; Final Rule'' (see 75 FR 36157) which 
establishes a temporary certifying body has yet to be established. 
Where possible, we have aligned the criteria required to demonstrate 
meaningful use with existing programs like PQRI and RHQDAPU as 
discussed in section II.A.3 of this final rule. After consideration of 
the public comments received, we are finalizing our definition of a 
meaningful EHR user as proposed.
2. Definition of Meaningful Use
a. Considerations in Defining Meaningful Use
    In sections 1848(o)(2)(A) and 1886(n)(3)(A) of the Act, the 
Congress identified the broad goal of expanding the use of EHRs through 
the term meaningful use. In section 1903(t)(6)(C) of the Act, Congress 
applies the definition of meaningful use to Medicaid eligible 
professionals and eligible hospitals as well. Certified EHR technology 
used in a meaningful way is one piece of a broader HIT infrastructure 
needed to reform the health care system and improve health care 
quality, efficiency, and patient safety. HHS believes this ultimate 
vision of reforming the health care system and improving health care 
quality, efficiency and patient safety should drive the definition of 
meaningful use consistent with the applicable provisions of Medicare 
and Medicaid law.
    In the proposed rule we explained that in defining meaningful use 
we sought to balance the sometimes competing considerations of 
improving health care quality, encouraging widespread EHR adoption, 
promoting innovation, and avoiding imposing excessive or unnecessary 
burdens on health care providers, while at the same time recognizing 
the short timeframe available under the HITECH Act for providers to 
begin using certified EHR technology.
    Based on public and stakeholder input received prior to publishing 
the proposed rule, 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 expect to update the meaningful use criteria 
on a biennial basis, with the Stage 2 criteria by the end of 2011 and 
the Stage 3 criteria by the end of 2013. The stages represent an 
initial graduated approach to arriving at the ultimate goal.
     Stage 1: The Stage 1 meaningful use criteria, consistent 
with other provisions of Medicare and Medicaid law, focuses on 
electronically capturing health information in a structured 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); implementing clinical decision support tools 
to facilitate disease and medication management; using EHRs to engage 
patients and families and reporting clinical quality measures and 
public health information. Stage 1 focuses heavily on establishing the 
functionalities in certified EHR technology that will allow for 
continuous quality improvement and ease of information exchange. By 
having these functionalities in certified EHR technology at the onset 
of the program and requiring that the EP, eligible hospital or CAH 
become familiar with them through the varying levels of engagement 
required by Stage 1, we believe we will create a strong foundation to 
build on in later years. Though some functionalities are optional in 
Stage 1, as outlined in discussions later in this rule, all of the 
functionalities are considered crucial to maximize the value to the 
health care system provided by certified EHR technology. We encourage 
all EPs, eligible hospitals and CAHs to be proactive in implementing 
all of the functionalities of Stage 1 in order to prepare for later 
stages of meaningful use, particularly functionalities that improve 
patient care, the efficiency of the health care system and public and 
population health. The specific criteria for Stage 1 of meaningful use 
are discussed at section II.2.c of this final rule.
     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, genetic tests, genomic tests and other such 
data needed to diagnose and treat disease). For the final rule, we 
elaborate on our plans for Stage 2. We expect that stage two meaningful 
use requirements will include rigorous expectations for health 
information exchange, including more demanding requirements for e-
prescribing and incorporating structured laboratory results and the 
expectation that providers will electronically transmit patient care 
summaries to support transitions in care across unaffiliated providers, 
settings and EHR systems. Increasingly robust expectations for health 
information exchange in stage two and stage three will support and make 
real the goal that information follows the patient. We expect that 
Stage 2 will build upon Stage 1 by both altering the expectations of 
the functionalities in Stage 1 and likely adding new functionalities 
which

[[Page 44322]]

are not yet ready for inclusion in Stage 1, but whose provision is 
necessary to maximize the potential of EHR technology. As discussed 
later in this final rule, we are making some objectives of the Stage 1 
of meaningful use optional and other required. We will consider every 
objective that is optional for Stage 1 to be required in Stage 2 as 
well as revaluate the thresholds and exclusions of all the measures 
both percentage based and those currently a yes/no attestation. 
Additionally, we may consider applying the criteria more broadly to all 
outpatient hospital settings (not just the emergency department).
     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 
leading to improved health outcomes, focusing on decision support for 
national high priority conditions, patient access to self management 
tools, access to comprehensive patient data through robust, patient-
centered health information exchange and improving population health.
    We did not include regulatory provisions for Stage 2 or Stage 3 in 
our proposal and with one exception discussed under the CPOE objective, 
we are not finalizing Stage 2 or Stage 3 requirements at this time. 
However, we plan to build upon Stage 1 by increasing the expectations 
of the functionalities in Stage 1 and adding new objectives for Stage 
2. In our next rulemaking, we currently intend to propose that every 
objective in the menu set for Stage 1 (as described later in this 
section) be included in Stage 2 as part of the core set. While allowing 
providers flexibility in setting priorities for EHR implementation 
takes into account their unique circumstances, we maintain that all the 
objectives are crucial to building a strong foundation for health IT 
and to meeting the statutory objectives of the Act. In addition, as 
indicated in our proposed rule, we anticipate raising the threshold for 
these objectives in both Stage 2 and 3 as the capabilities of HIT 
infrastructure increases. For Stage 2, we intend to review the 
thresholds and measures associated with all Stage 1 objectives 
considering advances in technology, changes in standard practice, and 
changes in the marketplace (for example, wider adoption of information 
technology by pharmacies) and propose, as appropriate, increases in 
these requirements.
    We recognize that the thresholds included in the final regulation 
are ambitious for the current state of technology and standards of 
care. However, we expect the delivery of health care to evolve through 
the inception of the HITECH incentive programs and implementation of 
the Affordable Care Act prior to finalizing Stage 2. Furthermore, data 
collected from the initial attestations of meaningful use will be used 
to ensure that the thresholds of the measures that accompany the 
objectives in Stage 2 are continue to aggressively advance the use of 
certified EHR technology. Finally, we continue to 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. As appropriate, we intend to 
propose the addition of new objectives to capture new functions that 
are necessary to maximize the potential of EHR technology, but were not 
ready for Stage 1. For instance, we would consider adding measures 
related to CPOE orders for services beyond medication orders. The 
intent and policy goal for raising these thresholds and expectations is 
to ensure that meaningful use encourages patient-centric, interoperable 
health information exchange across provider organizations.
    We will continue to evaluate the progression of the meaningful use 
definition for consistency with the HITECH ACT and any future statutory 
requirements relating to quality measurement and administrative 
simplification. 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, eligible hospital or CAH 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, such considerations are dependent on future rulemaking, so for 
this final rule Stage 1 criteria for meaningful use are valid for all 
payments years until updated by future rulemaking.
    We proposed that Medicare EPs, eligible hospitals, and CAHs 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, eligible hospital, or CAH whose 
first payment year is 2011 would have to satisfy the Stage 2 criteria 
of meaningful use to receive the incentive payments. We proposed that 
Medicare EPs, eligible hospitals, and CAHs 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, eligible hospital, or CAH whose first 
payment year is 2012 would have to satisfy the Stage 2 criteria of 
meaningful use to receive the incentive payments. We discussed in the 
proposed rule that Medicare EPs, eligible hospitals, and CAHs 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, eligible 
hospital, or CAH whose first payment year is 2013 would have to satisfy 
the Stage 2 criteria of meaningful use to receive the incentive 
payments. We discussed in the proposed rule that Medicare EPs, eligible 
hospitals, and CAHs 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. In the proposed rule, we discussed 
the idea that alignment of stage of meaningful use and payment year 
should synchronize for all providers in 2015, and requested comment on 
the need to create such alignment. After reviewing public comment on 
this issue, our goal remains to align the stages of meaningful use 
across all providers in 2015. However, we acknowledge the concerns 
regarding the different Medicare and Medicaid incentive timelines, as 
well as concerns about whether Stage 3 would be appropriate for an 
EP's, eligible hospital's or CAH's first payment year at any point in 
the future and believe the issue needs additional review and discussion 
before we lay out a clear path forward for 2015 and beyond. Therefore, 
we have decided to remove language in the final rule discussing our 
possible directions for any year beyond 2014. We will address the years 
beyond 2014 in later rulemaking. Table 1 outlines how we anticipate 
applying the respective criteria of meaningful use in the first years 
of the program, and how we anticipate applying such criteria for

[[Page 44323]]

subsequent payment years, through 2014. Please note that nothing in 
this discussion restricts us from requiring additional stages of 
meaningful use (beyond stage 3) through future rulemaking. In addition, 
as we expect to engage in rulemaking to adopt the criteria that will 
accompany Stages 2 and 3 of meaningful use, stakeholders should wait 
for those rulemakings to determine what will be required for those 
Stages and should not view the discussions in this preamble or final 
rule as binding the agency to any specific definition for those future 
stages.
[GRAPHIC] [TIFF OMITTED] TR28JY10.000

    Please note that each of the EHR incentive programs has different 
rules regarding the number of payment years available, the last year 
for which incentives may be received, and the last payment year that 
can be the first payment year for an EP, eligible hospital, or CAH. The 
applicable payment years and the incentive payments available for each 
program are also discussed in section II.C. of this final rule for the 
Medicare FFS EHR incentive program, in section II.D. of this final rule 
for the MA EHR incentive program, and in section II.E. of this final 
rule for the Medicaid EHR incentive program.
    Comment: Numerous commenters noted that it is inappropriate to 
align the Medicaid EHR incentive payment program with the Medicare 
program due to the lack of penalties in the Medicaid program and due to 
the option for Medicaid providers to participate in their first year by 
adopting, implementing, or upgrading certified EHR technology.
    Response: This was not the only reason for having all EPs, eligible 
hospitals, and CAHs align by 2015. However, as we are not addressing 
stages of meaningful use beyond 2014 in this final rule, potential 
alignment is not discussed. We will reconsider this comment in future 
rulemaking.
    The stages of criteria of meaningful use and how they are 
demonstrated are described further in this final rule and will be 
updated in subsequent rulemaking to reflect advances in HIT products 
and infrastructure. We note that such future rulemaking might also 
include updates to the Stage 1 criteria.
    We invited comment on our alignment between payment year and the 
criteria of meaningful use particularly in regards to the need to 
create alignment across all EPs, eligible hospitals, and CAHs in all 
EHR incentive programs in 2015.
    Comment: Many commenters requested that if there continued to be a 
year where all EPs, eligible hospitals and CAHs must meet the same 
stage of meaningful use that that year be 2017, rather than 2015 as we 
had discussed in the proposed rule. These commenters asserted that EPs, 
eligible hospitals, and CAHs whose first payment year is after 2011 
might not have sufficient time to reach the Stage 3 of meaningful use 
criteria by 2015. Some commenters pointed out that while the HITECH Act 
states that 2015 is the first year of payment adjustments, it provides 
for escalation of the payment adjustments so that they do not reach 
their full levels until 2017.
    Response: As we explained in the proposed rule, equity in the level 
of meaningful use across all EPs, eligible hospitals, and CAHs subject 
to the payment adjustment was not the only reason for our plan that all 
EPs, eligible hospitals, and CAHs satisfy the Stage 3 criteria for 
either the Medicare or Medicaid EHR incentive programs. The achievement 
of many of the ultimate goals of meaningful use of certified EHR 
technology are dependent on a critical mass of EPs, eligible hospitals, 
and CAHs all being meaningful EHR users. Exchange of health information 
is most valuable when it is so robust that it can be relied upon to 
provide a complete or nearly complete picture of a patient's health. 
For example, robust Stage 3 meaningful use by an EP does not assist 
that EP in avoiding ordering a duplicative test, if the EP with 
information on the original test is only a Stage 1 meaningful EHR user 
and is not yet exchanging that information. This dependency is key to 
the need to get to Stage 3 for all providers. Another reason for 
alignment at Stage 3 in 2015 is that many of the barriers to 
functionalities of EHRs that exist today as may no longer exist in 
2015. The existence of these barriers today is one of the primary 
reasons for having a staged approach as opposed to requiring more 
robust meaningful use at the beginning of the program. Providers, 
developers of EHRs, government and non-governmental organizations are 
all working to remove these barriers. We believe it is likely there 
will be success in removing many of these barriers, which would make 
many of the compromises made in Stage 1 no longer necessary by 2015. 
However, due to the many comments on alignment starting in 2015 and our 
plan to engage in additional more rounds of rulemaking, we are removing 
discussion of actual alignment between the first payment year of an EP, 
eligible hospital, or CAH and the Stage of meaningful use they will be 
expected to meet for all years after 2014. Our policies for 2015 and 
subsequent years will be determined through future rulemaking.
    Comment: Several commenters requested that CMS base the payment 
adjustments on Stage 1 of meaningful use regardless of the EP, eligible 
hospital, or CAH's prior participation in the incentive program.
    Response: We thank commenters for the thoughtful comments received, 
and will take their input into consideration when in future rulemaking 
when we consider whether to require that EPs, eligible hospitals, and 
CAHs satisfy the stage 3 definition of meaningful use in order to avoid 
reduced payments under Medicare for their professional services and 
inpatient hospital services beginning 2015. We reiterate, however, that 
in this final rule we are only adopting criteria that we expect will

[[Page 44324]]

apply in 2011 and 2012. We have also outlined the expected progression 
of stages of meaningful use criteria until 2014. However, we are not in 
this rule finalizing regulations that address the meaningful use 
standards that apply in 2015 and thereafter.
    Comment: Numerous commenters requested that we specifically propose 
objectives and measures for Stage 2 and 3. We also received 
recommendations on what those objectives and, in rare cases, measures 
should be. We discussed some of these objectives in the proposed rule 
and discuss them again in this final rule in section II.d. Others are 
highly related to existing objectives, while still others were not 
discussed in any way in the proposed rule. The suggested objectives and 
measures for Stages 2 and 3 include the following:
     Use of evidence-based order sets.
     Electronic medication administration record (eMAR).
     Bedside medication administration support (barcode/RFID).
     Record nursing assessment in EHR.
     Record nursing plan of care in EHR.
     Record physician assessment in EHR.
     Record physician notes in EHR.
     Multimedia/Imaging integration.
     Generate permissible discharge prescriptions 
electronically.
     Contribute data to a PHR.
     Record patient preferences (language, etc).
     Provide electronic access to patient-specific educational 
resources.
     Asking patients about their experience of care.
    Response: With one exception discussed under the CPOE objective, we 
continue to believe that finalizing specific objectives and measures 
for later stages is inappropriate. One of the greatest benefits of the 
phased stage approach is the ability to consider the impact and lessons 
of the prior stage when formulating a new stage. Many commenters 
supported our discussion of later stages for this very reason. In 
addition, we do not believe it is appropriate to finalize objectives 
for any stage of meaningful use that were not specifically discussed in 
the proposed rule, as doing so would deprive the public the opportunity 
to comment on the objective in question. Nevertheless, we thank 
commenters for the thoughtful comments received, and expect to take 
their input into consideration when in future rulemaking we consider 
additional or revised criteria and measures to adopt for the stage 2 
and stage 3 definitions of meaningful use.
    Comment: A commenter indicated that attestation is an insufficient 
means to hold providers accountable for the expenditure of public funds 
and to protect against fraud and abuse.
    Response: We likewise are concerned with the potential fraud and 
abuse. However, Congress for the HITECH Act specifically authorized 
submission of information as to meaningful use through attestation. CMS 
is developing an audit strategy to ameliorate and address the risk of 
fraud and abuse.
b. Common Definition of Meaningful Use Under Medicare and Medicaid
    Under sections 1848(o)(1)(A)(i), 1814(l)(3)(A), and 1886(n)(1) of 
the Act, an EP, eligible hospital or CAH must be a meaningful EHR user 
for the relevant EHR reporting period in order to qualify for the 
incentive payment for a payment year in the Medicare FFS EHR incentive 
program. 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 in section II.D.7.b.2 of this final 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, 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 EHR incentive programs for EPs and eligible hospitals/CAHs 
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 stated in the proposed rule that 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 declared in the proposed rule 
that we had 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 proposed to offer EPs an 
opportunity to switch between the Medicare and Medicaid EHR incentive 
programs. Therefore, we proposed to create a common definition of 
meaningful use that would serve as the definition for EPs, eligible 
hospitals and CAHs 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 
clarified that under Medicaid this proposed common definition would be 
the minimum standard. We proposed to 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 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 II.D.8. of this 
final rule for further details.
    For hospitals, we proposed to exercise the option granted under 
section 1903(t)(8) of the Act and deem any Medicare eligible hospital 
or CAH 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

[[Page 44325]]

is applicable only to eligible hospitals and CAHs, as EPs cannot 
simultaneously receive an incentive payment under both Medicare and 
Medicaid.
    We solicited comments as to whether there are compelling reasons to 
give the States additional flexibility in creating disparate 
definitions beyond what was proposed. In addition, if commenting in 
favor of such disparate definitions, we also asked interested parties 
to comment on whether the proposal of deeming meeting the Medicare 
definition as sufficient for meeting the Medicaid definition 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 CMS-approved 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.
    Comment: Most commenters believe that States should not be allowed 
the option to add to or change the meaningful use requirements for the 
Medicaid EHR incentive program. The commenters' main reason for 
standardizing the meaningful use requirements for both Medicare and 
Medicaid is to eliminate administrative burden on both providers and 
EHR vendors to accommodate programming and reporting using different 
technical specifications for the same or similar measures.
    Response: After consideration of the comments received, we are 
finalizing the provisions regarding possible differences in the 
definition of meaningful use between Medicare and Medicaid with the 
following revisions. We believe that over time the option to add to or 
change the floor definition of meaningful use might represent an 
important policy tool for States and therefore CMS plans to review and 
adjudicate these requests over the duration of the program. For Stage 1 
of meaningful use, we have revised the definition of meaningful use in 
response to the many comments and are requiring an overall lower bar 
and an approach that is more flexible. On the other hand, we wish to 
support the ability for States to reinforce their public health 
priorities and goals based upon their existing public health 
infrastructure and maturity. For that reason, we, for Stage 1, will 
only entertain States' requests to tailor the Stage 1 meaningful use 
definition as it pertains specifically to public health objectives and 
data registries. For purposes of the Medicaid EHR incentive program 
during Stage 1 of meaningful use, these are limited to:
    Objective: Generate lists of patients by specific conditions to use 
for quality improvement, reduction of disparities, research, or 
outreach.
    Measure: Generate at least one report listing patients of the EP or 
eligible hospital with a specific condition.
    Example: Generate lists of patients with the following conditions: 
depression, diabetes, obesity, etc. This would not be for reporting to 
the State but to draw EPs' or eligible hospitals' attention in order to 
better manage their patient population. States would also be permitted 
to request CMS approval to include this in the core set for all EPs 
and/or eligible hospitals.
    Objective: Capability to submit electronic data to immunization 
registries of Immunization Information Systems and actual submission in 
accordance with applicable law and practice.
    Measure: Performed at least one test of certified EHR technology's 
capacity to submit electronic data to immunization registries and 
follow up submission if the test is successful (unless none of the 
immunization registries to which the EP or eligible hospital submits 
such information have the capacity to received the information 
electronically).
    Example: State could point to a specific immunization registry that 
supports standards-based transmission of data and dictate how that 
information is transmitted. States would also be permitted to request 
CMS approval to include this objective in the core list for all EPs and 
eligible hospitals. The justification for this request in their State 
Medicaid HIT Plan, should address any potential barriers for providers 
in achieving this objective.
    Objective: Capability to submit electronic data on reportable (as 
required by state or local law) lab results to public health agencies 
and actual submission in accordance with applicable law and practice.
    Measure: Performed at least one test of certified EHR technology's 
capacity to submit electronic data on reportable lab results to public 
health agencies and follow-up submission if the test is successful 
(unless none of the public health agencies to which an eligible 
hospital submits such information have the capacity to receive the 
information electronically).
    Example: State could specify the standards-based means of 
transmission and/or the destination of this data. States would also be 
permitted to request CMS approval to include this objective in the core 
list for all and eligible hospitals. The justification for this request 
in their State Medicaid HIT Plan, should address any potential barriers 
for providers in achieving this objective.
    Objective: Capability to submit electronic syndromic surveillance 
data to public health agencies and actual transmission according to 
applicable law and practice.
    Measure: Performed at least one test of certified EHR technology's 
capacity to submit electronic syndromic surveillance data to public 
health agencies and follow-up submission if the test is successful 
(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).
    Example: State could specify the standards-based means of 
transmission and/or the destination of this data. States would also be 
permitted to request CMS approval to include this objective in the core 
list for all EPs and eligible hospitals. The justification for this 
request in their State Medicaid HIT Plan, should address any potential 
barriers for providers in achieving this objective.
    We reiterate that we will not approve any requests that would 
require EHR functionality above and beyond that included in the ONC EHR 
certification criteria as finalized for Stage 1 of meaningful use.
    Comment: Several commenters requested that CMS affirm the ability 
of States to require additional meaningful use criteria for all 
eligible professionals and hospitals (pursuant to Sec. Sec.  
495.316(a), 495.316(d)(2)), regardless of whether those entities were 
deemed eligible through Medicare.
    Response: Section 1903(t)(8) provides authority for the Secretary 
to ``deem satisfaction of requirements for * * * meaningful use for a 
payment year under title XVIII to be sufficient to qualify as 
meaningful use under [1903(t)].'' We continue to believe that allowing 
deeming ensures that hospitals eligible for both programs are able to 
focus on only one set of measures, without requiring duplication of 
effort or confusion regarding meaningful use standards. Thus, hospitals 
eligible for both Medicare and Medicaid incentive payments will be 
deemed for Medicaid if they have met the meaningful use definition 
through Medicare, even if a State has an approved State-specific 
definition of meaningful use. States cannot withhold a Medicaid EHR 
incentive payment from dually eligible hospitals if they have met all 
the eligibility criteria for Medicaid, and have met the Medicare 
definition for meaningful use.

[[Page 44326]]

    Because of this comment, we are revising section Sec.  495.4 of our 
regulations to indicate that eligible hospitals who are meaningful 
users under the Medicare EHR incentive payment program are deemed as 
meaningful users under the Medicaid EHR incentive payment program, and 
need not meet additional criteria imposed by the State. While this is 
not a new requirement, it was not previously listed in regulations.
    Comment: A commenter asked that CMS adopt and affirm the deeming 
approach in its final rule and ensure that the regulatory language 
reflects this approach.
    Response: We agree and have included in the final rule regulation 
language that hospitals that are meaningful users under the Medicare 
EHR Incentive Program are deemed meaningful users under the Medicaid 
EHR Program.
    Comment: Several commenters requested that CMS not deem hospitals 
having met the meaningful use requirements for the Medicare EHR 
Incentive Payment, as having fulfilled the meaningful use requirements 
for the State's Medicaid EHR Incentive Payment. The commenters noted 
that if a State sought for acute care hospitals to participate in their 
statewide health information exchange and yet those hospitals did not 
have to do so in order to qualify for both the Medicare and Medicaid 
EHR Incentive Payments, then they would have no motivation to do so. 
The commenters would like acute care hospitals eligible for both the 
Medicare and Medicaid EHR Incentive Program to have to comply with any 
State-specific meaningful use requirements, in addition to the Medicare 
floor definition.
    Response: In consideration of the comments received, CMS adopts its 
proposed preamble language about deeming hospitals and adds the 
corresponding regulation text. This is necessary for Stage 1 of 
meaningful use in particular, where we believe it is crucial to prevent 
additional burden on providers and foster eligible hospitals' path to 
successful EHR adoption and meaningful use. In addition, as already 
noted, for Stage 1, we will not entertain States' requests to alter the 
floor definition of meaningful use as codified in this final rule 
except for specific public health objectives. That thereby reduces the 
possible differences between the Medicare and Medicaid definitions of 
meaningful use. As part of Stage 2 of meaningful use, CMS might 
consider States requests to tailor meaningful use as it pertains to 
health information exchange, for example. Further details about this 
policy option will be included in future rulemaking and subject to 
public comment.
c. Stage 1 Criteria for Meaningful Use
    In the proposed rule we proposed that to qualify as a meaningful 
EHR user for 2011, EPs, eligible hospitals or CAHs must demonstrate 
that they meet all of the objectives and their associated measures as 
set forth in proposed Sec.  495.6. We further proposed and finalize in 
this final rule that except where otherwise indicated, each objective 
and its associated measure 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).
Discussion of Whether an EP, Eligible Hospital or CAH Must Meet All 
Stage 1 Meaningful Use Objectives and Their Associated Measures
    Comment: Commenters almost unanimously said that requiring an EP, 
eligible hospital or CAH to meet all of the objectives and their 
associated measures in order to qualify as a meaningful EHR user was 
too ambitious given the current state of EHR technology, adoption 
levels, the timeline for certification of EHR technologies, the 
realities of implementing EHR technology and the timeline proposed for 
Stage 1 of meaningful use in our proposed rule.
    Most of the commenters suggested alternatives that they believed 
would support the health care policy priorities of Stage 1. Several 
different alternatives were proposed. The first alternative would be to 
require a specified percentage of the Stage 1 meaningful use objectives 
and associated measures, with an EP, eligible hospital or CAH free to 
select which of the objectives and associated measures it would 
satisfy. For example under our proposed objectives and associated 
measures, if an EP were required to meet 20 percent, then an EP would 
be considered a meaningful EHR user if he or she satisfied any five of 
the proposed twenty-five objectives and associated measures. Most 
commenters suggesting this alternative envisioned that later stages of 
meaningful use would require that EPs, eligible hospitals, and CAHs 
satisfy a higher of the percentage of the objectives and associated 
measures. For example if 20 percent of the objectives and associated 
measures were required for Stage 1, then 50 percent might be required 
in Stage 2.
    After a fixed percentage, the suggestion next favored by 
commenters, including the HIT Policy Committee and MedPAC, was to 
divide the meaningful use objectives into two categories, a ``core 
set'' of objectives and ``menu set'' of objectives. To be a considered 
a meaningful user under this approach, an EP, eligible hospital, or CAH 
would be required to satisfy (1) all core set of objectives, and (2) a 
specified percentage of the menu set of objectives, with the EP, 
eligible hospital, or CAH free to select which of the menu set of 
objectives it would satisfy. For example, if five objectives were in 
the core set all EPs, eligible hospitals, and CAHs would have to meet 
those objectives. If twenty objectives were in the menu set, then EPs, 
eligible hospitals, and CAHs would not have to meet one or more of 
those objectives. Commenters varied widely as to which objectives 
should be included in the core set of objectives, as well as the 
percentage of menu set objectives an EP, eligible hospital, or CAH must 
satisfy.
    Some commenters suggested that we simply reduce the number of 
objectives required for Stage 1 of meaningful use. Recommendations in 
this regard varied from reducing the required objectives to only just a 
few (the lowest number being three), limiting the required objectives 
to only to those objectives that affect health outcomes of individual 
patients, to targeted elimination of a few objectives.
    Finally, some commenters suggested that we eliminate all of the 
measures associated with the Stage 1 meaningful use objectives and only 
require that EPs, eligible hospitals, and CAHs attest that they have 
attempted to meet each of the objectives.
    Response: After reviewing the comments, we agree that requiring 
that EPs, eligible hospitals, and CAHs satisfy all of the objectives 
and their associated measures in order to be considered a meaningful 
EHR user would impose too great a burden and would result in an 
unacceptably low number of EPs, eligible hospitals, and CAHs being able 
to qualify as meaningful EHR users in the first two years of the 
program. In considering an alternative approach, we have sought to 
develop an alternative that is responsive to some degree to all the 
concerns raised by the commenters. We have tried to reduce the 
requirements both in number required and in the thresholds of the 
associated measures and provide some flexibility as well. At the same 
time, however, we must be mindful of the relevant statutory 
requirements. Sections 1848 (o)(2)(A) and 1886(n)(3) of the Act, 
specify three requirements for meaningful use: (1) Use of certified EHR 
technology in a meaningful manner (for example, electronic 
prescribing); (2) that

[[Page 44327]]

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. We believe that each EP, 
eligible hospital, and CAH must meet at least one objective within each 
of the three requirements for meaningful use. We are concerned that if 
we were to give EPs, eligible hospitals, and CAHs full discretion to 
select which meaningful use objectives they will satisfy, some 
providers would not choose one or more objectives within each of the 
three statutory requirements for meaningful use. Furthermore, we are 
concerned that affording EPs, eligible hospitals, and CAHs such 
flexibility as to which meaningful use objectives to meet would delay 
many of the goals outlined for meaningful use in section II.a.2. of 
this final rule. If in choosing what objectives to defer, one provider 
chooses to focus on improving processes to improve healthcare quality, 
another chooses to focus on being able to exchange health information 
and yet another on engaging patients and families it is possible that 
we would fail to accomplish any of these goals at a population level. 
For these reasons, we do not believe it would be appropriate to afford 
providers the unlimited flexibility to select which of the meaningful 
use objectives they will meet. Rather, as explained below, we believe 
providers at a minimum should have to satisfy a core set of objectives 
in order to qualify as meaningful EHR users.
    Similarly, while we agree that merely reducing the number of 
objectives would make meaningful use easier to achieve for most 
providers, we believe that this reduction does not afford the same 
flexibility to all providers to account for their individual 
difficulties in meeting meaningful use that some of the other 
alternatives do as allowing a provider to choose certain objectives to 
defer. Due to any number of circumstances such as EHR adoption level, 
availability of health information exchange network, size of practice 
or hospital, etc., an objective that is easy for one EP to achieve 
might be very difficult for another EP. Under this alternative, no 
allowance is made for those differences. Finally, we disagree that 
meaningful use should be limited to improving the health outcomes of 
individual patients. There are significant gains that meaningful use 
can achieve in the areas of public health, privacy and security, 
engagement of patients and their families and efficiency of care that 
may not improve health outcomes, but have significant other benefits 
such as engaging patients more fully in decisions affecting their 
health and reducing costs through increased efficiency of care. We 
believe that all of these have a significant impact on health outcome 
priorities. Therefore, we do not categorically reduce the number of 
objectives for Stage 1 definition of meaningful use. We consider 
requests to defer an objective to later stages of the meaningful use 
criteria or eliminate a specific objective below in our discussion of 
each objective.
    Comment: Another alternative that was recommended by a significant 
number of commenters was that we base the incentive payment amount on 
the number of stage 1 meaningful use objectives satisfied by an EP or 
eligible hospital, with those satisfying more objectives eligible for a 
higher incentive payment amount. While some commenters varied in the 
specifics or did not provide specifics, generally we take this to mean 
that if an EP, eligible hospital, or CAH met half of the objectives 
then they would receive half of the incentive payment they would have 
received had they met all the objectives.
    Response: The HITECH Act does not give us the authority to award 
partial payments. As discussed elsewhere in this final rule, sections 
1848(o)(1)(A) of the Act specifies the payment incentive amount to 
which an EP who is a meaningful EHR user is entitled. Similarly, 
section 1886(n)(2) of the Act sets forth a formula for calculation of 
incentive payment amount to which an eligible hospital that is a 
meaningful EHR user is entitled. Similarly, section 1814(l)(3)(A) of 
the Act sets forth a formula for calculation of incentive payment 
amount to which an eligible hospital that is a meaningful EHR user is 
entitled. Similarly, section 1903(t)(4)(B) of the Act sets parameters 
for determining the Medicaid EHR incentive for Medicaid EP. None of 
these parameters are related to meaningful use. Similarly, section 
1903(t)(5)(A) of the Act sets forth a formula for calculation of the 
incentive payment amount to which a Medicaid eligible hospital is 
entitled. As we do not have the authority to alter these statutory 
formulas for calculating the incentive payment amounts under Medicare 
and Medicaid, we cannot pro rate the incentive payment amount based on 
the number of meaningful use objectives satisfied by an EP, eligible 
hospital, or CAH.
    After consideration of the public comments received, we are 
establishing a core set of objectives with associated measures and a 
menu set of objectives with associated measures. In order to qualify as 
a meaningful EHR user, an EP, eligible hospital, or CAH must 
successfully meet the measure for each objective in the core set and 
all but five of the objectives in the menu set. With one limitation, an 
EP, eligible hospital, or CAH may select any five objectives from the 
menu set to be removed from consideration for the determination of 
qualifying as a meaningful EHR user. Further discussion of the 
objectives, including additional details about their inclusion in the 
core set, can be found at each objective.
    We believe that establishing both a core and a menu set adds 
flexibility and allows the minimum statutory set to be met. In 
determining the objectives to include in the core set, we looked at all 
comments, especially those of the HIT Policy Committee and other 
commenters who recommended some required and optional elements. The 
HITECH Act requires the use of health information technology in 
improving the quality of health care, reducing medical errors, reducing 
health disparities, increasing prevention and improving the continuity 
of care among health care settings. In defining the core set of 
meaningful use objective, we believe the most crucial aspect to 
consider is meeting the three statutory guidelines provided in the 
HITECH Act and discussed in section II.A.2.a of this final rule. Second 
is to identify those objectives that are most crucial to laying the 
foundation for obtaining value from meaningful use of certified EHR 
technology. Third, we believe that meaningful use should be patient-
centered so we focus on getting the most value to the patient. We 
believe the recommendation of the HIT Policy Committee accomplishes 
third criteria, but falls short of the first and second. To accomplish 
the first criteria, we add the objective of submitting clinical quality 
measures to CMS or the States and the objective of exchanging key 
clinical information among providers of care and patient authorized 
entities. To accomplish the second, we add several additional 
objectives to the core set of measures as critical elements pertinent 
to the management of patients. We have received a number of comments in 
support of these particular measures as critical to the management of 
patients (maintaining an up-to-date problem list, active medication 
list, active allergy list, smoking history and incorporate clinical

[[Page 44328]]

lab tests into EHR as structured data) in comparison to other 
requirements. The addition of two other functional objectives (drug-
drug and drug-allergy features) as core measures are for improved 
patient-safety. All of the listed elements are integral to the initial 
or on-going management of a patient's current or future healthcare. 
While each element is important in the management of patients in and of 
itself, the aggregate of the elements elevates the importance of 
clinical information to not only the primary provider but for all 
members of the interdisciplinary team involved in the patient's care. 
The HITECH Act statutorily requires the use of health information 
technology in improving the quality of health care, reducing medical 
errors, reducing health disparities, increasing prevention, and 
improving the continuity of care among health care settings. These core 
set of measures are also foundational and aligned with each other. For 
example, electronic copies of health information given to patient will 
be useless if it does not contain basic information such as a problem 
list, medication list or allergy list. Exchange of information to other 
members of the health care team across settings will depend on having 
structured data of these elements. Therefore, in support of the HITECH 
Act in meeting the statutory requirements, we have expanded the core 
set of measures to include these fundamental elements to improve 
patient care. Below we list the objectives included in the core set of 
meaningful use objectives.

--Use CPOE
--Implement drug to drug and drug allergy interaction checks
--E-Prescribing (EP only)
--Record demographics
--Maintain an up-to-date problem list
--Maintain active medication list
--Maintain active medication allergy list
--Record and chart changes in vital signs
--Record smoking status
--Implement one clinical decision support rule
--Report CQM as specified by the Secretary
--Electronically exchange key clinical information
--Provide patients with an electronic copy of their health information
--Provide patients with an electronic copy of their discharge 
instructions (Eligible Hospital/CAH Only)
--Provide clinical summaries for patients for each office visit (EP 
Only)
--Protect electronic health information created or maintained by 
certified EHR

    In addition, achieving Stage 1 meaningful use means demonstration 
of progress in each of the five healthcare outcome priorities outlined 
in the proposed rule and discussed again later in this section. Only 
one of these priorities is not represented in the core set, population 
and public health. As we have discussed in this section we do not want 
any priority to be overlooked due to the flexibility we have added to 
Stage 1 of meaningful use; therefore, all EPs and hospitals must choose 
at least one of the population and public health measures to 
demonstrate as part of the menu set. This is the only limitation placed 
on which five objectives can be deferred from the menu set.

Discussion on Whether Certain EP, Eligible Hospital or CAH Can Meet all 
Stage 1 Meaningful Use Objectives Given Established Scopes of Practice

    In the proposed rule, we specifically encouraged comments on 
whether certain providers may have difficulty meeting one or more of 
the objectives due to their provider type or chosen specialties
    Comment: We received many comments, both general and specific, that 
certain providers or specialists may not be able to comply with certain 
objectives because they are beyond the scope of their licensing 
authority or because they are outside the scope of their standard of 
practice. For example, chiropractors do not have prescribing authority 
and thus may not make use of an EHR technology's e-prescribing function 
and rheumatologists may not require information on vital signs. While 
comments on this potential non-applicability primarily focused on EPs, 
we did receive comments that some objectives may not be relevant to 
smaller or specialized eligible hospitals as well.
    Response: We believe the division of the meaningful use objectives 
into a core set and a menu set may minimize the impact of including 
among the meaningful use objectives one or more objectives that certain 
providers or specialists may be unable to satisfy as the EP, eligible 
hospital, or CAH can defer five objectives from the menu set. However, 
if the EP, eligible hospital or CAH has an insurmountable barrier to 
meeting an objective in the core set or a significant number in the 
menu set then the problem remains. For example, without any 
consideration on an EP, eligible hospital or CAH's capability to meet 
the measure associated with a core objective any EP that could not 
order medications requiring a prescription would not be able to become 
a meaningful EHR user as e-prescribing is a core set objective. 
Similarly, any eligible hospital or CAH that did not have any requests 
for electronic copy of discharge instructions would not be able to 
become a meaningful EHR user. In addition, if this were to occur for a 
significant number of menu set objectives, the flexibility for the EP, 
eligible hospital, or CAH to use the five objectives to account for 
other concerns such as implementation struggles or workflow process 
redesign would be curtailed. To account for this possibility, we have 
modified each objective and measure to indicate when there is an option 
for an EP, eligible hospital, or CAH to report that the objective/
measure is inapplicable to them, because they have no patients or no or 
insufficient number of actions that would allow calculation of the 
meaningful use measure. This will allow an EP, eligible hospital, or 
CAH to qualify as a meaningful EHR user without being required to meet 
objectives we have specified as potentially inapplicable. We note that 
the exclusions to meaningful use objectives/measures are specific to 
each objective/measure. In our discussion of each specific objective/
measure (which occurs later in this preamble), we have identified 
specific exclusions where they exist. Providers wishing to claim that 
an objective/measure is inapplicable to them would need to meet the 
criteria of such an exception.
    After consideration of the public comments received, we have 
identified, for each meaningful use objective, whether the EP, eligible 
hospital, or CAH may attest that they did not have any patients or 
insufficient actions on which to base a measurement of a meaningful use 
for the EHR reporting period. For objectives in the core set, such an 
attestation would remove the objective from consideration when 
determining whether an EP, eligible hospital, or CAH is a meaningful 
EHR user. In other words, the EP, eligible hospital, or CAH could 
satisfy the core set objectives by satisfying all remaining objectives 
included in the core set. For objectives in the menu set, such an 
attestation would also remove the objective from consideration when 
determining whether an EP, eligible hospital, or CAH is a meaningful 
EHR user. For example, if for one objective included in the menu set an 
EP attests that he or she did not have any patients or insufficient 
actions during the EHR reporting period on which to base a measurement 
of a meaningful use objective, rather than satisfy 5 of the 10 
meaningful use objectives included in the menu set for EPs, the EP need 
only

[[Page 44329]]

satisfy 4 of the 9 remaining meaningful use objectives included in the 
menu set for EPs

EPs Practicing in Multiple Practices

    Another situation where flexibility may be needed in order for an 
EP to become a meaningful EHR user is the situation where an EP may 
provide care in multiple practices or multiple locations. We proposed a 
policy to account for EPs practicing in multiple practices and 
settings. We discussed in the proposed rule that we believe it is 
unlikely for an EP to use one record keeping system for one patient 
population and another system for another patient population at one 
location. We are concerned about the application of the measures 
associated with the meaningful use objectives 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 for the EP to successfully 
become a meaningful EHR user based on the measures associated with the 
meaningful use 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 proposed that 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 geographic location. Equipped does not mean the certified 
EHR technology is functioning on any given day during the EHR reporting 
period. Allowances for downtime and other technical issues with 
certified EHR technology are made on an objective-by-objective basis as 
discussed later in this section. 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 of different 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 proposed 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 equipped with certified EHR technology. For example, if the 
EP practices at both a Federally Qualified Health Center (FQHC) and 
within his or her individual practice, we would include in our review 
both of these locations and certified EHR technology would have to be 
available at the location where the EP has at least 50 percent of their 
patient encounters.
    Comment: Some commenters recommended that 50 percent or more of the 
patient encounters must occur at the practice location that receives 
the incentive payment.
    Response: As discussed in section II.A.4 of this final rule, an EP 
may assign their incentive payment to other practices. We do not 
believe that limiting practices and EPs to only considering the 
location that receives an incentive payment provides advantages to the 
program. The requirement suggested by commenters would potentially 
cause some EPs not to meet the 50 percent threshold even if through a 
combination of practices they may use certified EHR technology for far 
more than 50 percent of their patient encounters.
    Comment: Some commenters requested clarification of our proposed 
statement ``Therefore, we proposed that all measures be limited to 
actions taken at practices/locations equipped with certified EHR 
technology''
    Response: We mean this statement to be that as long as an EP has 
certified EHR technology available for 50 percent or more of their 
patient encounters during the EHR reporting period they only have to 
include those encounters where certified EHR technology is available at 
the start of the EHR reporting period. We discuss the measures later in 
this section of the final rule, but an illustrative example would be 
the objective of maintain an up-to-date problem list. The measure 
associated with this objective is ``More than 80% of all unique 
patients seen by the EP or admitted to the eligible hospital's or CAH's 
inpatient or emergency department (POS 21 or 23) have at least one 
entry or an indication that no problems are known for the patient 
recorded as structured data.'' Therefore, if an EP only practices at 
one location or has certified EHR technology available at all practice 
locations then the denominator would be all unique patients seen during 
the EHR reporting period. However, if an EP practices at multiple 
locations and only has certified EHR technology for 80 percent of their 
patient encounters, then the denominator is only those unique patients 
seen at locations where certified EHR technology is available. We 
reiterate that this is not to account for certified EHR technology 
downtime, Certified EHR technology is available at a location if it is 
available at the start of the EHR reporting period regardless of its 
actual availability for any given day during the EHR reporting period.
    After consideration of the comments received, we are finalizing 
this requirement as proposed.

Discussion of the Burden Created by the Measures Associated With the 
Stage 1 Meaningful Use Objectives

    Comment: Many commenters expressed concerns about the difficulties 
of capturing the denominators for the measures that are expressed as 
percentages. They pointed out that the formulas in the proposed rule 
would require providers to conduct labor-intensive counts of paper 
documents such as prescriptions or laboratory results in order to 
compute the denominators of the percentage based measures. Some 
commenters suggested that we adopt alternative measurement mechanisms, 
for example establishing simple counts of electronic occurrences, while 
others proposed that denominators be computed utilizing only data 
collected in the certified EHR technology.
    Response: We acknowledge that the percentage-based measures, as 
expressed in the proposed rule, would create a reporting burden for 
EPs, eligible hospitals, and CAHs, and we examined a number of 
alternatives that potentially reduce the burden of reporting.
    In the proposed rule, we discussed the option of counts instead of 
percentages and due to comments received have reassessed this option in 
the final rule. This approach clearly has the advantage of simplifying 
the process. For example, rather than counting the number of 
prescriptions transmitted electronically and then dividing by the total 
number of prescriptions, the EP would simply need to count the number 
of electronically transmitted prescriptions until a benchmark number is 
passed. If the benchmark number is exceeded, then the provider meets 
the measure. However, there are several shortcomings to this approach. 
First, we received little input from commenters as to where the 
benchmark numbers for the various objectives should be set and any 
benchmark set now would not benefit

[[Page 44330]]

from public comment without significantly delaying the Medicare and 
Medicaid EHR incentive programs. (One exception was that a number of 
commenters suggested using the PQRI measure for e-prescribing, which is 
the generation of at least one eRx associated with a patient visit on 
25 or more unique events during the reporting period.) Setting the 
limit too high would disadvantage small providers, since they would 
have smaller patient populations, while setting the limit too low would 
create requirements for larger providers that would be so limited as to 
be meaningless. A larger provider could implement the functionality for 
a much shorter period than the EHR reporting period and meet the count. 
In either case, it would be difficult to establish a trajectory in 
later stages that would result in meaningful progress being made by 
both small and large providers.
    We then assessed the option of limiting the occurrences counted in 
the denominator to those included in the provider's certified EHR 
technology. As an example, if an EP captures 1,000 prescriptions as 
structured data in certified EHR technology, and electronically 
transmits 500 of these prescriptions, the EP's certified EHR technology 
generated score would be 50 percent. This approach does simplify the 
computation process, since this approach does not have to take into 
account whether some prescriptions were not included or included as 
unstructured data in the certified EHR technology. However, it does not 
demonstrate the extent to which the provider has used the certified EHR 
technology. For example, a provider that has captured only 10 
prescriptions in the certified EHR technology as structured data, but 
writes 1,000 prescriptions because the provider achieved only a limited 
use of their certified EHR technology would also score 50 percent by 
electronically transmitting only 5 prescriptions according to an 
automatic report from the certified EHR technology. Again, this 
methodology does not lead providers toward an upward trajectory of both 
certified EHR technology deployment and accomplishment of meaningful 
use.
    We selected a third option, which we believe addresses the 
shortcomings of the second option while still preserving much of the 
simplicity of that approach. In our approach, we focus on those 
measures whose denominator is not based on all patients, but rather a 
subset of patients or actions such as the ordering of a lab test or the 
recording of a patient's request for an electronic copy of their 
discharge instructions. We believe that it is reasonable to require an 
EP, eligible hospital, or CAH to know how many unique patients they 
care for in the EHR reporting period and therefore maintain that 
denominator where it applies. The maintenance of measures using the 
patient as the denominator as encompassing all patients ensures a 
certain level of utilization of certified EHR technology by the EP, 
eligible hospital, or CAH. If a measure encompassing all patients has a 
threshold of 80 percent, then at least 80 percent of the patients' 
records must be maintained using certified EHR technology otherwise the 
EP, eligible hospital or CAH could not possibly meet the threshold. We 
note a number of measures included in the core set (such as ``Record 
Demographics'' and ``Maintain an Up-to-Date Problem List'') require an 
analysis of all unique patients, and not just patients whose records 
are maintained in certified EHR technology As discussed later the 
thresholds for maintaining an up-to-date problem list, medication list 
and medication allergy list are set at 80 percent. We believe these 
thresholds will create a baseline that ensures that EPs, eligible 
hospitals and CAHS are maintain a minimum percentage of patient records 
in certified EHR technology, and allows the provider community to 
advance toward the longer-term objective of capturing all patient data 
in certified EHR technology. For those measures that focus on the 
recording of actions or subset of patients to generate the denominator, 
we limit the measures to the information for patients whose records are 
maintained in certified EHR technology. We offer the following examples 
that relate to the e-prescribing and the provision of electronic copy 
of a patient's health information:
    E-Prescribing Example: An EP orders 1,000 prescriptions for 
patients whose records are maintained in their certified EHR technology 
and 500 of those are transmitted electronically. The EP's denominator 
is 1,000 prescriptions, the numerator is 500 prescriptions, and their 
score is 50 percent. If the EP captures all 1,000 prescriptions as 
structured data the calculation could be automated by the certified EHR 
technology. If the EP does not capture all 1,000 prescriptions as 
structured data than more manual review may be required. We would 
define ``records maintained in the certified EHR technology'' to 
include any patient for which sufficient data was entered in the 
certified EHR technology to allow the record to be saved, and not 
rejected due to incomplete data. This may be a more limited set of 
data, but an EP, eligible hospital, or CAH would still have to have 
sufficient information in certified EHR technology to meet the measures 
associated with Stage 1 of meaningful use. For example, an EP might be 
able to save a record with just a patient's name, but as the record 
would lack any information this patient would count in the denominator, 
but not the numerator for many objectives. Electronic Copy of a 
Patient's Health Information Provided upon Request Example: An EP 
maintains 1,000 patient records in their certified EHR technology. Of 
those patients, fifty make requests for electronic copies of their 
health information. The EP provides all of the electronic copies within 
three business days. The denominator is 50, the numerator is 50, and 
the EP's percentage is 100 percent. If the EP captures requests for 
information as structured data, the calculation could be automated by 
the certified EHR technology. If the EP does not capture all the 
requests as structured data then more manual review may be required. We 
will likely revisit the methodology in Stage 2, where we would expect 
that at least basic EHR functionality has been implemented throughout 
the provider enterprise.
    After consideration of public comments, we are limiting the 
following objectives and their associated measures to patients whose 
records are maintained using certified EHR technology. Specific 
information on how to determine inclusion in the denominator and 
numerator is discussed in the full discussion of each objective later 
in this final rule.
     Use CPOE
     Generate and transmit permissible prescriptions 
electronically (eRx)
     Record and chart changes in vital signs
     Record smoking status for patients 13 years old or older
     Record advance directives for patients 65 years old or 
older
     Incorporate clinical lab-test results into certified EHR 
technology as structured data
     Provide patients with an electronic copy of their health 
information (including diagnostic test results, problem list, 
medication lists, medication allergies), upon request
     Provide patients with an electronic copy of their 
discharge instructions at time of discharge, upon request
     Provide clinical summaries for patients for each office 
visit
     Send reminders to patients per patient preference for 
preventive/follow-up care

[[Page 44331]]

     Perform medication reconciliation at relevant encounters 
and each transition of care
     Provide summary care record for each transition of care 
and referral

Discussion on Meaningful Use Relationship to Certified EHR Technology

    Comment: We received several comments requesting more specific 
information of how certified EHR technology will accomplish meaningful 
use. Some commenters expressed concern that patient clinical outcome 
measurement and improvement was not addressed explicitly in the 
requirements of certified EHR technology, but rather the requirements 
focused data entry and provision of data electronically.
    Response: One of the main purposes of certifying EHR technology is 
to provide the EP, eligible hospital, or CAH with confidence that the 
technology will not be the limiting factor in the achievement of 
meaningful use. As such, all questions of how or will certified EHR 
technology be able to accomplish meaningful use broadly or at a 
specific objective level are best answered by ONC. CMS and ONC have 
worked closely since the enactment of the HITECH Act to ensure 
certification fully supports meaningful use. We explicitly link each 
meaningful use objective to certification criteria for certified EHR 
technology. The capabilities and standards that are certified are those 
that are used to meet the Stage 1 objectives of meaningful use. This 
way we ensure that certified EHR technology can accomplish meaningful 
use and meaningful use has the intended consequences of improving the 
healthcare priorities that make up meaningful use.

Discussion on the Relationship Between a Stage 1 Meaningful Use 
Objective and Its Associated Measure

    Comment: Many commenters pointed out gaps between what they 
believed were the anticipated results from an objective and the results 
that are measured by the associated measure. A particular concern of 
some of these commenters is cases where the certification criteria 
supports the measure, but in their view fell short of supporting the 
objective.
    Response: In the proposed rule, we attempted to draw a clear 
distinction between the objective and the associated measure. The 
objectives represent a wide range of activities some of which are 
commonplace for EPs, eligible hospitals, and CAHs using EHRs today, 
while others are ambitious goals even for the most sophisticated EHR 
user of today. For some objectives, all aspects of the objective are 
within the control of the EP, eligible hospital, or CAH. Other 
objectives rely on electronic exchange with partners or external 
infrastructure over which EPs, eligible hospitals and CAHs may have 
little influence and no control. We have attempted to accommodate these 
differences when we select the Stage 1 measure for a given objective. 
The measure more accurately reflects our view of what is feasible for 
Stage 1 than the objective itself. The certification criteria 
necessarily reflect more on the measure than the objective, as full 
compliance with an objective is beyond the scope of what can be 
accomplished for a significant number of EPs, eligible hospitals or 
CAHs in our timeframe for Stage 1. This rationale was our assertion in 
the proposed rule as the justification for measures that represent less 
than full achievement of their objective. This is further supported by 
some of the comments received although for any given objective the 
comments addressing that objective were a small fraction of the total 
number of comments received and views on how much a measure should 
allow for less than full achievement varied widely among those 
commenting. Although we received over 2,000 public comments, the number 
of specific comments addressing an individual objective were relatively 
small ranging from 40 to 200. We reviewed those comments and made 
specific changes to measures in the discussion of each objective. We 
reiterate that achievement of the measure always equates to achievement 
of the objective for Stage 1 of meaningful use. We also reiterate that 
certified EHR technology will always be able to support achievement of 
the measure by including the necessary functionalities. However, as 
with any technology, certified EHR technology is only as good as the 
information it contains and getting information into certified EHR 
technology is heavily dependent on processes developed by the EP, 
eligible hospital, or CAH. It is for this reason that all measures, 
even those for objective whose aspects are fully under the control of 
the EP, eligible hospital, or CAH, represent less than full fulfillment 
of the objective to varying degrees. As stated, for demonstrating 
meaningful use and any follow up review by CMS or the States, 
successfully meeting the associated measure always equates to 
successfully meeting the objective. Updated information on the 
associated measures including the numerator, denominator, thresholds 
and exclusions are as discussed in the following section. More detailed 
specifications and guidance on calculating the measures will be issued 
soon after the publication of this final rule.
    As we described in the proposed rule, 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.
    We will now review the comments for each objective and measure and 
make changes to our original proposal or finalize as proposed.
    (1) Objectives and Their Associated Measures
    The HIT Policy Committee identified as its first health outcomes 
policy priority improving quality, safety, efficiency and reducing 
health disparities. The HIT Policy Committee also 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 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.

As we explained in the proposed rule, for the last care goal, the HIT 
Policy Committee proposed the goal as ``Report to patient registries 
for quality improvement, public reporting, etc.'' We have modified 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.
    NPRM EP Objective: Use CPOE.
    NPRM Eligible Hospital Objective: Use CPOE for orders (any type) 
directly

[[Page 44332]]

entered by the authorizing provider (for example, MD, DO, RN, PA, NP).
    In the proposed rule, we described 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. We said that for Stage 1 criteria, it will not 
include the electronic transmittal of that order to the pharmacy, 
laboratory, or diagnostic imaging center.
    Comment: A majority of commenters recommended that EPs, eligible 
hospitals, and CAHs be allowed to defer CPOE for varying lengths of 
time ranging from 2012 to 2017. The commenters cited various reasons 
for deferment including that CPOE is an advanced clinical function that 
typically is the last process to be implemented due to the need to 
build the entire infrastructure to support the CPOE process. Other 
commenters noted an increased burden as if the orders cannot be 
transmitted, then duplicate paper orders will have to be produced which 
can lead to patient safety risks. Commenters also noted that CPOE 
appears in the latter stages of the Certification Commission for 
Healthcare Information Technology (CCHIT) EHR implementation process. A 
minority, but significant number of comments encouraged CMS to maintain 
CPOE for 2011. Those commenters in favor of retaining CPOE in 2011 
believed that CPOE is a basic EHR feature that should be a standard 
offering of a certified EHR technology and is critical to improving 
quality of care through audit trails and alerting of delinquent order 
and/or delinquent deferred orders.
    Response: We have determined that CPOE should be included in the 
core set of measures for Stage 1 in order to advance meaningful use. 
CPOE is a foundational element to many of the other objectives of 
meaningful use including exchange of information and clinical decision 
support. Many commenters, including several physician associations, the 
HIT Policy Committee and members of Congress through their endorsement 
of the HIT Policy Committee's recommendation, recommended that CPOE be 
required in Stage 1. CPOE has been a major initiative of US hospitals 
for over a decade and is a foundational functionality to many of the 
activities that further the health care policy priorities of meaningful 
use. For example, entering a medication order using CPOE allows the EHR 
to provide feedback on whether the medication may have adverse 
reactions with other medications the patient is taking. Another benefit 
of CPOE is that greatly simplifies the workflow process of inputting 
information into certified EHR technology in a structured way to 
populate the patient record.
    Comment: Several commenters asked that we further specify who could 
enter the order using CPOE. Some commenters stated that only the 
ordering provider should be permitted to enter the order. These 
commenters stated that the ordering professional needs to be presented 
with clinical decision support at the time of entry and that the relay 
of an order to another individual is a source of potential error. Other 
commenters recommended that any licensed healthcare professional or 
indeed any individual (licensed or not) who receives the order from the 
ordering provider be permitted to perform the CPOE. The most common 
argument presented by these commenters is that this is currently how 
CPOE is handled in practice and a shift to entry by only the ordering 
provider would be too disruptive to workflow.
    Response: We agree with those commenters who recommend allowing any 
licensed healthcare professional to enter orders using CPOE. We further 
refine this recommendation to be that any licensed healthcare 
professional can enter orders into the medical record per state, local 
and professional guidelines. While we understand that this policy may 
decrease opportunities for clinical decision support and adverse 
interaction, we believe it balances the potential workflow implications 
of requiring the ordering provider to enter every order directly, 
especially in the hospital setting. We disagree with commenters that 
anyone should be allowed to enter orders using CPOE. This potentially 
removes the possibility of clinical decision support and advance 
interaction alerts being presented to someone with clinical judgment, 
which negates many of the benefits of CPOE.
    Comment: We received requests for clarification of this objective 
and what types of orders would meet this requirement.
    Response: Our intent in the proposed rule was to capture orders for 
medications, laboratory or diagnostic imaging.
    However, after careful consideration of the comments, we are 
adopting an incremental approach by only requiring medication orders 
for Stage 1. First, this supports the objectives of e-prescribing, 
drug-drug and drug-allergy checks. Second, this requirement will 
improve patient-safety because of the alignment of ordering medications 
in a structured data format will enable providers to create registries 
of patients for potential medical recalls, participate in surveillance 
for potential sentinel events and life-threatening side effects of new 
medications. Third, other measures involving transitions of care 
documents and summary of care document will require the entry of an 
active medication list. After consideration of the public comments 
received, we are finalizing the meaningful use objective for EPs at 
495.6(d)(1)(i) and for eligible hospitals, and CAHs at 495.6(f)(1)(i) 
as ``Use CPOE for medication orders directly entered by any licensed 
healthcare professional who can enter orders into the medical record 
per state, local and professional guidelines''.
    NPRM EP Measure: CPOE is used for at least 80 percent of all 
orders.
    NPRM Eligible Hospital or CAH Measure: For eligible hospitals, CPOE 
is used for 10 percent of all orders.
    In the proposed rule under CPOE, we discussed several concepts 
related to any associated measure of any objective that relies on a 
percentage calculation. These are the use of a percentage versus a 
count; setting a threshold for measures not requiring the electronic 
exchange of information; EPs practicing in multiple locations, some of 
which may not have certified EHR technology available, and the patient 
population to which the measure would apply. All except the last of 
these received extensive comments and are addressed in comment and 
response sections earlier in this section. In the proposed rule, we 
said that we would base the measures associated with the objectives on 
both the Medicare/Medicaid patient population and all other patients as 
well. We said that 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 and that requiring reporting 
differences based on payers would actually increase the burden of 
meeting meaningful use. We received very few comments on this aspect of 
our proposed rule and those that were received were generally 
supportive of this proposal. Therefore, we are finalizing the policy 
that all meaningful use measures be calculated based on the eligible 
provider's entire patient population (except where otherwise noted).
    Comment: Nearly every commenter who commented on CPOE objected to 
our proposal to limit this measure to the

[[Page 44333]]

inpatient department (Place of Service Code 21) for the eligible 
hospital or CAH. Commenters stated that this limitation was 
inappropriate given the manner in which hospitals use EHR technology. 
To account for current practice, the commenters recommended the 
measures be expanded to include the emergency department (ED) (POS 23). 
Other reasons cited by commenters were that orders begin in the ED and 
remain open as the patient transitions to inpatient (for example, 
infusions), transitioning from paper documentation in the ED to 
electronic for subsequent care is unsafe as it can result in missed 
information, and/or transcription errors as the initial allergies and 
medications are entered into the system, significant data collection 
occurs in the ED that would not be included in the system, the 
exclusion of the ED creates disincentives to adoption and that the ED 
is a hybrid of temporal and functional services that are neither purely 
ambulatory nor inpatient.
    Response: We agree with the commenters, and therefore are expanding 
this objective and its associated measure to the emergency room (POS 
23). More information on place of service codes is available at http://www.cms.gov/PlaceofServiceCodes/. Furthermore, given the revision to 
the HITECH Act that changed hospital based eligible professionals to 
include only the setting of inpatient and emergency departments and all 
of the benefits of integration of these two departments spelled out by 
commenters we will adopt both departments when considering the measure 
of eligible hospitals or CAHs unless we find there are unique 
circumstances of an objective and its associated measure that would 
preclude the inclusion of the emergency department for meaningful use. 
This change does not affect the incentive payment calculation described 
in section II.B. of this final rule
    Comment: We received several recommendations from commenters that 
the requirement of a percentage measurement for determining whether an 
EP, eligible hospital or CAH meets this objective should be replaced 
with a numerical count for CPOE and many other measures associated with 
percentage thresholds. The two main reasons given for switching to 
numerical counts are the burden of calculating the percentage if it 
cannot be done automatically using certified EHR technology and the 
assertion that if an EP, eligible hospital, or CAH does something a 
specific number of times it can be assumed that it is done often enough 
to constitute meeting the objective for Stage 1 of meaningful use.
    Response: We have previously discussed the merits of a percentage 
based measure over a count based measure earlier in this section under 
the discussion of the burden created by the measures associated with 
the Stage 1 meaningful use objectives. However, we do try to seek a 
balance reducing the burden on providers while still ensuring the 
progression of meaningful use of certified EHR technology. In the next 
comment/response, we discuss changes to this measure that respond to 
concerns regarding burden.
    Comment: Many commenters representing EPs as well as other 
commenters recommended lowering the CPOE threshold for EPs. Those 
commenters representing EPs generally recommended parity with eligible 
hospitals at 10 percent, while other commenters recommending a 
reduction generally recommended 50 percent.
    Response: With CPOE, we had a unique situation of disparate 
thresholds between EPs and hospitals. This was due to recommendations 
prior to the proposed rule by the HIT Policy Committee. Eligible 
hospitals were granted an even lower threshold for this particular 
requirement. The reason given for this recommendation was that CPOE is 
one of the last functionalities to be implemented in the hospital 
setting. Commenters point out that holds true for EPs as well. As 
discussed above, given the limitations we are placing on the numerator 
and denominator for calculating the CPOE percentage, we no longer see a 
compelling reason to maintain disparate thresholds for the EPs and the 
eligible hospital/CAH.
    Comment: Commenters have suggested that our proposal to count an 
action per unique patients could be applied to the measure for CPOE as 
well through a revised measure of ``[a]t least 10% of unique patients 
seen by the EP or admitted to the eligible hospital or CAH have at 
least one order entered using CPOE.'' Commenters also pointed to CPOE 
as an example of a case where adequate lead time is necessary to 
implement certified EHR technology.
    Response: At the heart of this new basis for this measure is the 
assumption that every patient would have at least one order that could 
be entered using CPOE. We believe this is a reasonable assumption for 
EPs, eligible hospitals and CAHs. According to analysis of 25,665 
office-based visits in the 2005 National Ambulatory Medical Care 
Survey, 31 percent of visits included a new medication order, and 44 
percent included at least one refill; 66 percent had any type of 
medication order. However, whether a medication order is appropriate 
for every practice could vary significantly by scope of practice; 
therefore, for the final rule, we are further limiting the denominator 
to patients with at least one medication listed in their medication 
list. We believe that this limitation will reduce providers' burden as 
compared to accounting for all orders. To further reduce the burden on 
providers, we also will limit the numerator to unique patients with at 
least one medication order entered using CPOE. Because we have reduced 
provider burden by limiting the denominator and numerator as discussed 
above, we believe that a corresponding increase in the CPOE threshold 
is appropriate for hospitals and CAHs. For stage 1, we are finalizing a 
threshold for CPOE of 30 percent for EPs, eligible hospitals, and CAHS. 
We believe this relatively low threshold, in combination with the 
limitation to only medication orders, will allow hospitals and EPs to 
gain experience with CPOE. However, as providers gain greater 
experience with CPOE, we believe it is reasonable to expect greater use 
of the function. As explained above, we also believe CPOE is 
foundational to many other objectives of meaningful use. For these 
reasons, we believe it is reasonable to expect providers to move to a 
60 percent threshold at Stage 2 of meaningful use. Thus, for this 
measure, we are finalizing, for Stage 2 of meaningful use, that EPs, 
eligible hospitals and CAHs must meet a 60 percent threshold for CPOE. 
Therefore, we are finalizing a Stage 2 measure for CPOE at Sec.  
495.6(h) for EPs and Sec.  495.6(i) for eligible hospitals and CAHs as 
``More than 60 percent of all unique patients with at least one 
medication in their medication list seen by the EP or admitted to the 
eligible hospital's or CAH's inpatient or emergency department (POS 21 
or 23) during the EHR reporting period have at least medication one 
order entered using CPOE''.
    Comment: We received several comments asking for clarification of 
the term unique patient in response to various objectives.
    Response: In the proposed rule, we state, ``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.'' To further describe the concept of ``unique 
patient'' we mean that if a patient is seen by an EP or admitted to an 
eligible hospital's or CAH's inpatient or emergency department (POS 21 
or 23) more than once during the EHR reporting period

[[Page 44334]]

then for purposes of measurement they only count once in the 
denominator for the measure. All the measures relying on the term 
``unique patient'' relate to what is contained in the patient's medical 
record. Not all of this information will need to be updated or even be 
needed by the provider at every patient encounter. This is especially 
true for patients whose encounter frequency is such that they would see 
the same provider multiple times in the same EHR reporting period. 
Measuring by every patient encounter places an undue burden on the EPs, 
eligible hospitals and CAHs and may have unintended consequences of 
affecting the provision of care to patients merely to comply with 
meaningful use. Given the emphasis placed on the reporting burden by 
commenters as described in the beginning of this section, we believe 
that our concerns about the burden of measurement were well founded. We 
also continue to believe that the use of patient encounters could have 
unintended consequences on the provision of care by providers.
    Comment: Some commenters asked whether the CPOE objective and 
associated measure require transmission of the order. Most of these 
commenters were opposed to such transmission in Stage 1 for various 
reasons such as the cost of developing interfaces between EHRs and 
laboratory and radiology service providers, the volume of transmissions 
would outpace the capacity to connect, HIE infrastructure is not yet 
mature enough and the lack of the requirement for non-eligible entities 
to participate (for example, laboratory vendors, pharmacies). Some 
commenters supported the inclusion of the transmission of the order as 
they believed this would provide better outcomes than if the 
transmission was not required.
    Response: In the proposed rule, we stated, ``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.'' 
While a few commenters recommended that this objective be changed to 
require transmission, given the large opposition to the objective and 
measure as proposed and the reasons commenters presented against 
transmission, it would not be responsive to the vast majority of 
commenters to expand this objective beyond our proposal. We agree with 
the commenters that said the HIE infrastructure is still being 
developed in most parts of the country. Furthermore, we note that in 
the hospital setting, most medication orders would not require 
transmission outside of the certified EHR technology of the hospital. 
For EPs, we already address transmission of the medication order in a 
separate objective for e-prescribing. Therefore, we finalize the 
proposal that the transmission of the order is not included in the 
objective or the associated measure for Stage 1.
    After consideration of the public comments received, we are 
modifying the meaningful use measure for EPs at 495.6(d)(1)(ii) of our 
regulations and for eligible hospitals, and CAHs at Sec.  
495.6(f)(1)(ii) of our regulations to ``More than 30 percent of all 
unique patients with at least one medication in their medication list 
seen by the EP or admitted to the eligible hospital's or CAH's 
inpatient or emergency department (POS 21 or 23) during the EHR 
reporting period have at least medication one order entered using 
CPOE''.
    We further specify that in order to meet this objective and 
measure, an EP, eligible hospital, or CAH must use the capabilities 
Certified EHR Technology includes as specified and standards at 45 CFR 
170.304(a) for EPs and 45 CFR 170.306(a) for eligible hospitals and 
CAHs. The ability to calculate the measure is included in certified EHR 
technology. Thus, for example, an EP, eligible hospital or CAH must use 
a certified functionality in entering the medication order, and could 
not use a functionality that has been added by the EHR vendor, but that 
is outside the scope of the certification. We believe this rule is 
necessary to ensure that the EP, eligible hospital, or CAH is actually 
making meaningful use of ``certified'' EHR technology, and is not using 
non-certified technology. In addition, requiring providers to use 
functionalities that are certified will ensure the interoperability of 
information maintained in the EHR as providers will be able to operate 
according to consistent standards. We believe this standardization and 
consistency is key to realizing the goal of using EHR technology to 
improve health care.
    As noted previously in this section under our discussion of the 
burden created by the measures associated with the Stage 1 meaningful 
use objectives, the only patients that are included in the denominator 
are those patients whose records are maintained using certified EHR 
technology.
    To calculate the percentage, CMS and ONC have worked together to 
define the following for this objective:
     Denominator: Number of unique patients with at least one 
medication in their medication list seen by the EP or admitted to an 
eligible hospital's or CAH's inpatient or emergency department (POS 21 
or 23) during the EHR reporting period
     Numerator: The number of patients in the denominator that 
have at least one medication order entered using CPOE.
     Threshold: The resulting percentage must be more than 30 
percent in order for an EP, eligible hospital or CAH to meet this 
measure.
    Exclusion: If an EP's writes fewer than one hundred prescriptions 
during the EHR reporting period they would be excluded from this 
requirement as described previously in this section in our discussion 
whether certain EP, eligible hospital or CAH can meet all Stage 1 
meaningful use objectives given established scopes of practices. We do 
not believe that any eligible hospital or CAH would have less than one 
hundred prescriptions written for patients admitted to their inpatient 
and emergency departments during the EHR reporting period.
    NPRM EP/Eligible Hospital Objective: Implement drug-drug, drug-
allergy, drug-formulary checks
    In the proposed rule, we did not elaborate on this objective.
    Comment: Many commenters requested clarification as to what 
formulary the checks would be conducted against.
    Response: Ideally, this check would be performed against any 
formulary that may affect the patient's welfare, inform the provider as 
to the best drug to prescribe or provide the patient and provider 
information on the drug's cost to both the patient and any third party 
payer. We recognize, however, that not every available third party 
payer, pharmacy benefit management, preferred drug list is standardized 
and made available for query through certified EHR technology. As we 
cannot through this regulation impose such a requirement on every 
developer of a formulary, we do not require that an EP/eligible 
hospital/CAH would have to accommodate every formulary in their 
implementation. However, at a minimum an EP/eligible hospital/CAH must 
have at least one formulary that can be queried. This may be an 
internally developed formulary or an external formulary. The 
formularies should be relevant for patient care during the prescribing 
process. To further address this, we expect that this measure will be 
expanded to be counted on a transactional basis for future stages.
    Comment: Commenters suggested separating the objective into one 
objective for the clinical checks (drug-drug and drug-allergy) and a 
second objective for the administrative check

[[Page 44335]]

(drug-formulary). The rationale stated for the division was that 
clinical measures are focused on preventing medication errors versus 
encouraging consideration of cost when prescribing medications. In 
addition, the two types involve connections to different kinds of 
resources (drug safety information versus formulary information).
    Response: We agree that these should be separate objectives for the 
reasons stated by the commenters and split them accordingly.
    Comment: We received comments that these functions were really part 
of CPOE and electronic prescribing. Commenters most commonly noted that 
the drug formulary is part of electronic prescribing, as is currently 
the case under the Medicare e-Prescribing program.
    Response: While we agree that the drug-drug, drug-allergy, drug-
formulary checks, CPOE, e-prescribing meaningful use objectives all 
serve the same broader goal of ensuring accurate ordering and 
prescribing that takes into account all available information about the 
patient the functions and their readiness for Stage 1 of meaningful use 
are distinct. In terms of functions, CPOE and e-prescribing could be 
performed without the drug to drug, drug-allergy or drug-formulary 
checks. Similarly, it is not necessary for CPOE or e-Prescribing to 
take place in order for a drug to drug allergy check to occur. In terms 
of readiness and ability to measure progress for Stage 1 of meaningful 
use, CPOE and e-prescribing both are percentage based measures of a 
distinct activity that creates a record even in today's EHR's and paper 
patient records. The viewing and consideration of information presented 
to the provider on possible drug interactions is not a similarly 
distinct activity and does not currently create a record. So while the 
goal of these functionalities is similar, we believe drug-drug, drug-
allergy, drug-formulary checks create unique concerns for 
implementation and demonstration of meaningful use, and therefore we 
maintain them as separate objectives.
    Comments: Several commenters expressed concern of ``alert fatigue'' 
occurring with drug-drug interaction checks. Alert fatigue or otherwise 
known as ``pop-up'' fatigue is a commonly perceived occurrence with 
electronic medical records and clinical decision support tools in which 
alerts are presented to the user when a potential safety issue is 
identified by the system (for example, drug to drug interaction). The 
alerts, while beneficial in some cases, can result in a type of 
``fatigue'' whereby the provider, after receiving too many alerts, 
begins to ignore and/or override the alerts. Receiving too many alerts 
can result in slowing the provider down rendering the alert useless. 
Commenters recommended some changes to the objective and associated 
measure to mitigate the risk of ``alert fatigue'' such as limiting the 
checks for interactions to only the most critical medications or 
allowing for adjustment of risk levels rather than an on/off 
functionality.
    Response: We recognize ``alert fatigue'' is a potential occurrence 
with drug-drug and drug-allergy checks. However, meaningful use seeks 
to utilize the capabilities of certified EHR technology and any means 
to address alert fatigue requires a critical evaluation of each alert. 
We believe this is beyond the scope of the definition of meaningful 
use. We believe these checks are valuable and improve patient care and 
therefore do not remove them to address alert fatigue.
    Comment: Commenters recommended food allergies be included in the 
drug-allergy check as some drugs contain ingredients that are 
contraindicated in individuals with certain allergies.
    Response: We certainly agree that some allergies other than drug 
can interact with drugs; however, as we stated under our discussion of 
the objective ``Medication Allergy List'', the ability to identify 
other types of allergies in a useful way are not yet available to the 
extent necessary to require them in Stage 1 of meaningful use. This 
certainly does not preclude any EP, eligible hospital, or CAH from 
working with the designers of their certified EHR technology to include 
this functionality.
    Comment: A commenter requested clarification as to whether the 
drug-drug, drug-allergy and drug-formulary checks are required for 
contrast media and imaging agents used by radiologists.
    Response: We do not link the checks to specific drugs or agents. 
However, we note that is common practice in radiology to identify a 
patient's past drug and food allergies and take appropriate 
interventions if necessary. Therefore, the drug-drug, drug-allergy and 
drug-formulary checks would be appropriate prior to administration of 
contrast media and imaging agents to patients.
    After consideration of the public comments received, we are 
finalizing the meaningful use objective for EPs at Sec.  495.6(d)(2)(i) 
and for eligible hospitals and CAHs at Sec.  495.6(f)(2)(i) as 
``Implement drug-drug and drug-allergy checks.'' We include this 
objective in the core set as it is integral to the initial or on-going 
management of a patient's current or future healthcare and would give 
providers the necessary information to make informed clinical decisions 
for improved delivery of patient care.
    In addition, we are finalizing the meaningful use objective at for 
EPs at Sec.  495.6(e)(1)(i) and for eligible hospitals and CAHs at 
Sec.  495.6(g)(1)(i) of our regulations as ``Implement drug-formulary 
checks.''
    NPRM EP/Eligible Hospital Measure: The EP/eligible hospital/CAH has 
enabled the drug-drug, drug-allergy, and drug-formulary check 
functionality
    In the proposed rule we discussed that the capability of conducting 
automated drug-drug, drug-allergy, and drug-formulary checks is 
included in the certification criteria for certified EHR technology. 
This automated check provides information to advise the EP, eligible 
hospital, or CAH's decisions in prescribing drugs to a patient. The 
only action taken by the EP, eligible hospital, or CAH 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, eligible hospital, or CAH would be required to enable this 
functionality and ensure they have access to at least one drug 
formulary. While this does not ensure that an EP, eligible hospital or 
CAH is considering the information provided by the check, it does 
ensure that the information is available.
    After consideration of the public comments received on the 
objective, we believe the measure as proposed requires more clarity on 
the length of time for which the functionality must be enabled, which 
we clarify to be the entire EHR reporting period. Therefore, we are 
modifying the meaningful use measure for ``Implement drug-drug and 
drug-allergy checks for the entire EHR reporting period'' for EPs at 
Sec.  495.6(d)(2)(ii) and for eligible hospitals and CAHs at Sec.  
495.6(f)(2)(ii) of our regulations to ``The EP/eligible hospital/CAH 
has enabled this functionality for the entire EHR reporting period.''
    We further specify that in order to meet this objective and 
measure, an EP, eligible hospital, or CAH must use the capabilities 
Certified EHR Technology includes as specified and standards at 45 CFR 
170.302(a). The ability to calculate the measure is included in 
certified EHR technology.
    As this objective only requires that functionalities of certified 
EHR technology be enabled, we do not believe that any EP, eligible 
hospital or

[[Page 44336]]

CAH would need an exclusion for this objective and its associated 
measure.
    After consideration of the public comments received on the 
objective, we are modifying the meaningful use measure for ``Implement 
drug-formulary checks'' for EPs at Sec.  495.6(e)(1)(ii) and for 
eligible hospitals and CAHs at Sec.  495.6(g)(1)(ii) of our regulations 
to ``The EP/eligible hospital/CAH has enabled this functionality and 
has access to at least one internal or external formulary for the 
entire EHR reporting period.''
    We further specify that in order to meet this objective and 
measure, an EP, eligible hospital, or CAH must use the capabilities 
Certified EHR Technology includes as specified and standards at 45 CFR 
170.302(b). The ability to calculate the measure is included in 
certified EHR technology.
    The consideration of whether a drug is in a formulary or not only 
applies when considering what drug to prescribe. Therefore, we believe 
that any EP who writes fewer than one hundred prescriptions during the 
EHR reporting period should be excluded from this objective and 
associated measure as described previously in our discussion of whether 
certain EP, eligible hospital or CAH can meet all Stage 1 meaningful 
use objectives given established scopes of practices.
    NPRM EP/Eligible Hospital Objective: Maintain an up-to-date problem 
list of current and active diagnoses based on ICD-9-CM-CM or SNOMED 
CT[supreg]
    In the proposed rule, we described the term ``problem list'' as a 
list of current and active diagnoses as well as past diagnoses relevant 
to the current care of the patient.
    Comment: Several commenters noted that the coding of problem lists 
at the point of care is outside the normal workflow process and would 
be disruptive.
    Response: We did not and do not intend that coding of the diagnosis 
be done at the point of care. This coding could be done later and by 
individuals other than the diagnosing provider.
    Comment: Commenters suggested including ICD-10-CM, the Diagnostic 
and Statistical Manual of Mental Disorders and explicitly allowing 
subsets of SNOMED CT[supreg].
    Response: We have removed the references to specific standards, as 
we believe specifying the relevant standards falls within the purview 
of ONC. For ONC's discussion of this functionality and the relevant 
standards including response to the above comment, we refer readers to 
ONC's final rule.
    After consideration of the public comments received, we are 
modifying the meaningful use objective for EPs at Sec.  495.6(d)(3)(i) 
and for eligible hospitals at Sec.  495.6(f)(3)(i) of our regulations 
to ``Maintain an up-to-date problem list of current and active 
diagnoses''.
    We include this objective in the core set as it is integral to the 
initial or on-going management of a patient's current or future 
healthcare and would give providers the necessary information to make 
informed clinical decisions for improved delivery of patient care.
    NPRM EP/Eligible Hospital 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 recorded as 
structured data.
    In the proposed rule, we introduced the concept of ``unique 
patients'' in the discussion of this objective. We received many 
comments requesting clarification of this term and address those in the 
comment and response section under our discussion of the CPOE measure.
    Comment: A few commenters stated that ``None'' is not a clinically 
relevant term and should be replaced with no known problem or no 
problem.
    Response: Our intent is not to dictate the exact wording of the 
specific value. Rather we are focused on the overall goal of making a 
distinction between a blank list because a patient does not have known 
problems and a blank list because either no inquiry of the patient has 
been made, or problems have been recorded through other means. As long 
as the indication accomplishes this goal and is structured data, we do 
not believe it is necessary to prescribe the exact terminology, thus 
leaving that level of detail to the designers and users of certified 
EHR technology.
    Comment: Commenters requested clarification of the term ``up-to-
date''.
    Response: The term ``up-to-date'' means the list is populated with 
the most recent diagnosis known by the EP, eligible hospital, or CAH. 
This knowledge could be ascertained from previous records, transfer of 
information from other providers, or querying the patient. However, not 
every EP has direct contact with the patient and therefore has the 
opportunity to update the list. Nor do we believe that an EP, eligible 
hospital, or CAH should be required through meaningful use to update 
the list at every contact with the patient. There is also the 
consideration of the burden that reporting places on the EP, eligible 
hospital, or CAH. The measure, as finalized, ensures the EP, eligible 
hospital, or CAH has a problem list for patients seen during the EHR 
reporting period, and that at least one piece of information is 
presented to the EP, eligible hospital, or CAH. The EP, eligible 
hospital, or CAH can then use their judgment in deciding what further 
probing or updating may be required given the clinical circumstances.
    Comment: Commenters stated that this measure should be replaced 
with either a simple attestation of yes, the problem list exists or the 
percentage of the measure should be replaced with a count. 
Alternatively, that the percentage should be maintained, but that the 
threshold should be lowered. Commenters generally supported this 
lowering of the threshold for one or all of the following reasons: It 
may require a change in traditional workflow; implementation and 
rollout of certified EHR technology creates unforeseeable system 
downtimes, complications, and the required clinical classification 
systems are not geared toward clinical information.
    Response: For reasons discussed earlier in this section under our 
discussion of the burden created by the measures associated with the 
Stage 1 meaningful use objectives, we believe a percentage is a more 
appropriate measure than those suggested by comments. 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 is appropriate to set 
a high percentage threshold. In the proposed rule, we 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. We proposed 80 percent for 
every measure with a percentage that met the criteria of relying solely 
on a capability included as part of certified EHR technology and are 
not, for purposes of Stage 1 meaningful use criteria, reliant on the 
electronic exchange of information. Commenters generally agreed with 
this alignment; however, they disagreed that 80 percent sufficiently 
allows for ``technical hindrances and other barriers''. Commenters have 
highlighted numerous barriers towards successfully meeting an 80 
percent threshold including technical barriers, barriers to 
implementation, applicability to all patients and all provider types 
eligible for the EHR incentives, patient requested exclusions and 
others. We address some of these with specific exclusions from the 
measure as

[[Page 44337]]

discussed previously in this section under our discussion of whether 
certain EP, eligible hospital or CAH can meet all Stage 1 meaningful 
use objectives given established scopes of practices. Although some 
technical issues exist, recording an up-to-date problem list remains 
largely within the individual provider's control and does not rely to a 
large degree on some external sender or receiver of structured 
electronic health data. In addition, there is a standard of practice 
for collecting the elements required for an up-to-date problem list. 
Although the commenters may be right that some clinical workflow needs 
to change, that is an integral part of meaningful use of EHRs. Although 
we do not expect all clinical workflow to adapt in Stage 1, there is an 
expectation that the clinical workflow necessary to support the Stage 1 
priority of data capture and sharing will be in place in order to 
effectively advance meaningful use of EHRs. In addition, given the wide 
range of activities that must occur for meaningful use, we believe that 
most EPs, eligible hospitals and CAHs will have fully rolled out the 
capabilities required by this objective and the others with an 80 
percent threshold prior to the start of the EHR reporting period 
thereby reducing the likelihood of unexpected system downtime and other 
implementation complications.
    For situations in which there is an existing standard of practice 
and complying is fundamentally within the provider's control and where 
the 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, for the final rule, 
we adopt, the reasonably high threshold of 80 percent. We believe 
existing infrastructure and expectations support this relatively high 
target. This foundational step of structured data capture is a 
prerequisite for many of the more advanced functionalities (for 
example, clinical decision support, clinical quality measurement, etc.) 
for which a solid evidence base exists for improved quality, safety and 
efficiency of care. Without having most of a provider's up-to-date 
problem lists in structured, electronic data, that provider will have 
major challenges in building more advanced clinical processes going 
forward.
    For other situations, where the objective may not be fundamentally 
within the provider's control and is not an existing standard of 
practice, but where objective continues to rely solely on a capability 
that is included as part of certified EHR technology and is not reliant 
on electronic exchange of information, we are setting the percentage at 
50 percent. This was the most commonly recommended percentage for these 
objectives that rely solely on a capability included as part of 
certified EHR technology and do not rely on the electronic exchange of 
information.
    After consideration of the public comments received, we are 
modifying the meaningful use measure for EPs at Sec.  495.6(d)(3)(i) 
and for eligible hospitals at Sec.  495.6(f)(3)(i) of our regulations 
to ``More than 80 percent of all unique patients seen by the EP or 
admitted to the eligible hospital's or CAH's inpatient or emergency 
departments (POS 21 or 23) have at least one entry or an indication 
that no problems are known for the patient recorded as structured 
data''.
    We further specify that in order to meet this objective and 
measure, an EP, eligible hospital, or CAH must use the capabilities 
Certified EHR Technology includes as specified and standards at 45 CFR 
170.302(c). The ability to calculate the measure is included in 
certified EHR technology.
    To calculate the percentage, CMS and ONC have worked together to 
define the following for this objective:
     Denominator: Number of unique patients seen by the EP or 
admitted to an eligible hospital's or CAH's inpatient or emergency 
department (POS 21 or 23) during the EHR reporting period.
     Numerator: The number of patients in the denominator who 
have at least one entry or an indication that no problems are known for 
the patient recorded as structured data in their problem list.
     Threshold: The resulting percentage must be more than 80 
percent in order for an EP, eligible hospital, or CAH to meet this 
measure.
    We do not believe that any EP, eligible hospital, or CAH would be 
in a situation where they would not need to know at least one active 
diagnosis for a patient they are seeing or admitting to their hospital. 
Therefore, there are no exclusions for this objective and its 
associated measure.
    NPRM EP Objective: Generate and transmit permissible prescriptions 
electronically (eRx).
    Comment: Some commenters requested clarification of the term 
``permissible prescription.''
    Response: As discussed in the proposed rule, the concept of only 
permissible prescriptions refers to the current restrictions 
established by the Department of Justice on electronic prescribing for 
controlled substances in Schedule II. (The substances in Schedule II 
can be found at http://www.deadiversion.usdoj.gov/schedules/orangebook/e_cs_sched.pdf). Any prescription not subject to these restrictions 
would be permissible. We note that the Department of Justice recently 
released a notice of proposed rulemaking that would allow the 
electronic prescribing of these substances; however, given the already 
tight timeframe for Stage 1 of meaningful use we are unable to 
incorporate any final changes that may result from that proposed rule. 
Therefore, the determination of whether a prescription is a 
``permissible prescription'' for purposes of the eRx meaningful use 
objective should be made based on the guidelines for prescribing 
Schedule II controlled substances in effect when the notice of proposed 
rulemaking was published on January 13, 2010. We define a prescription 
as the authorization by an EP to a pharmacist to dispense a drug that 
the pharmacist would not dispense to the patient without such 
authorization. We do not include authorizations for items such as 
durable medical equipment or other items and services that may require 
EP authorization before the patient could receive them. These are 
excluded from the numerator and the denominator of the measure.
    Comment: Some commenters recommended combining this objective and 
measure with other meaningful use objectives such as CPOE or the drug-
drug, drug-allergy, drug-formulary checks
    Response: We addressed these comments under our discussion of the 
CPOE objective.
    After consideration of the public comments received, we are 
finalizing the meaningful use objective at 495.6(d)(4)(i) as proposed.
    We have also included this objective in the core set. Section 
1848(o)(2)(A)(i) of the Act specifically includes electronic 
prescribing in meaningful use for eligible professionals. This function 
is the most widely adopted form of electronic exchange occurring and 
has been proven to reduce medication errors. We included this objective 
in the core set based on the combination of the maturity of this 
objective, the proven benefits and its specific mention as the only 
example provided in the HITECH Act for what is meaningfully using 
certified EHR technology.
    NPRM EP Measure: At least 75 percent of all permissible 
prescriptions written by the EP are transmitted electronically using 
certified EHR technology.

[[Page 44338]]

    In the proposed rule, we said that while this measure does rely on 
the electronic exchange of information based on the public input 
previously discussed and our own experiences with e-prescribing 
programs, we believe this is the most robust electronic exchange 
currently occurring and proposed 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.
    Comment: A majority of commenters commenting on this measure 
believe the 75 percent threshold is too high. Several issues were 
raised to explain why the commenters believe the threshold is too high. 
The first is that barriers to e-prescribing exist at the pharmacies and 
they must be brought into the process to ensure compliance on the 
receiving end. The second represents the most common barrier cited by 
commenters and that is patient preference for a paper prescription over 
e-prescribing. A patient could have this preference for any number of 
reasons cited by commenters such as the desire to shop for the best 
price (especially for patients in the Part D ``donut hole''), the 
ability to obtain medications through the VA, lack of finances, 
indecision to have the prescription filled locally or by mail order and 
desire to use a manufacturer coupon to obtain a discount. Other 
barriers mentioned by individual commenters were the limited 
functionality of current e-prescribing systems such as the inability to 
distinguish refills from new orders. Suggestions for addressing these 
difficulties were either to lower the threshold (alternatives 
recommended ranged from ten to fifty percent) or replacing the 
percentage with a numerical count of 25 to align with the 2010 Medicare 
e-Prescribing program. Of the comments received that requested a 
specific lower threshold, about half of them suggested a 50 percent 
threshold, and about half suggested a threshold of 25 percent to 30 
percent.
    Response: We are finalizing the use of a percentage threshold for 
the reasons discussed previously in this section under our discussion 
of the burden created by the measures associated with the Stage 1 
meaningful use objectives. In the proposed rule, we pointed out that we 
``believe this is the most robust electronic exchange currently 
occurring'' to justify a high threshold of 75 percent given that this 
objective relies on electronic exchange. While we continue to believe 
this is the case, two particular issues raised by commenters caused us 
to reconsider our threshold. The first is the argument to include 
pharmacies in the Medicare and Medicaid EHR incentive programs to 
ensure compliance on the receiving end. Non-participation by pharmacies 
was presented by commenters as a major barrier to e-Prescribing. The 
second is patient preference for a paper prescription. In regards to 
the first argument, we do not have the ability to impose requirements 
on pharmacies through the HITECH legislation. However, prescriptions 
transmitted electronically have been growing at an exponential rate. 
The number of prescriptions sent electronically increased by 181 
percent from 2007 to 2008 according to comments received. The number of 
pharmacies is also increasing rapidly. Yet this growth is uneven across 
the country and we wish to accommodate all EPs and do lower the 
threshold based on this argument. In regards to the second argument, we 
also have neither the ability nor the desire to limit patient 
preference. We considered allowing an EP to exclude from the 
denominator those instances where a patient requested a paper 
prescription. However, the burden of tracking when this occurs, the 
disincentive it would create for EPs to work with patients on 
establishing a relationship with a pharmacy and the hindrance to moving 
forward with e-prescribing lead us to address this through further 
reduction of the threshold as opposed to an exclusion. To address these 
concerns we are lowering the threshold for the e-prescribing measure to 
40 percent. As pointed out by commenters, e-prescribing it is not yet 
standard of practice and there may be important external barriers 
beyond the provider's control. In particular, for e-prescribing, 
providers are dependent upon an external receiver of electronic health 
data, and there are significant variations depending on where the 
provider practices.
    After consideration of the public comments received, we are 
modifying the meaningful use measure at Sec.  495.6(d)(4)(ii) of our 
regulations to ``More than 40 percent of all permissible prescriptions 
written by the EP are transmitted electronically using certified EHR 
technology''.
    We further specify that in order to meet this objective and 
measure, an EP, eligible hospital, or CAH must use the capabilities 
Certified EHR Technology includes as specified and standards at 45 CFR 
170.304(b). The ability to calculate the measure is included in 
certified EHR technology.
    As noted previously in this section under our discussion of the 
burden created by the measures associated with the Stage 1 meaningful 
use objectives, the prescriptions in the denominator are only those for 
patients whose records are maintained using certified EHR technology.
    To calculate the percentage, CMS and ONC have worked together to 
define the following for this objective:
     Denominator: Number of prescriptions written for drugs 
requiring a prescription in order to be dispensed other than controlled 
substances during the EHR reporting period.
     Numerator: The number of prescriptions in the denominator 
generated and transmitted electronically.
     Threshold: The resulting percentage must be more than 40 
percent in order for an EP, eligible hospital, or CAH to meet this 
measure.
    As addressed in other objectives and in comment response, this 
objective and associated measure do not apply to any EP who writes 
fewer than one hundred prescriptions during the EHR reporting period, 
as described previously in this section under our discussion of whether 
certain EP, eligible hospital or CAH can meet all Stage 1 meaningful 
use objectives given established scopes of practices.
    NPRM EP/Eligible Hospital Objective: Maintain active medication 
list.
    Comment: Commenters requested clarification of the term ``active 
medication list.''
    Response: We define an active medication list as a list of 
medications that a given patient is currently taking.
    After consideration of the public comments received, we are 
finalizing this objective for EPs at Sec.  495.6(d)(5)(i) and for 
eligible hospitals and CAHs at Sec.  495.6(f)(4)(i) of our regulations 
as proposed.
    We include this objective in the core set as it is integral to the 
initial or on-going management of a patient's current or future 
healthcare and would give providers the necessary information to make 
informed clinical decisions for improved delivery of patient care.
    NPRM 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.
    As with the objective of maintaining a problem list, we clarify 
that the indication of ``none'' should distinguish between a blank list 
that is blank

[[Page 44339]]

because a patient is not on any known medications and a blank list 
because no inquiry of the patient has been made. As long as the 
indication accomplishes this goal and is structured data, we do not 
believe it is necessary to prescribe the exact terminology, preferring 
to leave that level of detail to the designers and users of certified 
EHR technology.
    Comment: Commenters stated that the measure should be replaced with 
a numerical count or attestation and that the threshold was too high 
for reasons including the lack of current electronic exchange of 
information, difficulty capturing information as structured data and 
lack of readiness of HIE infrastructure.
    Response: We are finalizing the use of a percentage for the reasons 
discussed previously in this section under our discussion of the burden 
created by the measures associated with the Stage 1 meaningful use 
objectives. For the same reasons we explained under the discussion of 
up-to-date problem list, medication list is a functionality for which 
there is an existing standard of practice, it is foundational data 
capture function to make more advanced clinical processes possible, and 
complying is fundamentally within the provider's control. Therefore, we 
maintain the reasonably high threshold of 80 percent because the 
existing infrastructure and expectations support this target.
    Comment: Commenters requested clarification as to whether the 
measure is limited to patients seen during the EHR reporting period.
    Response: Yes, the measure applies to all unique patients seen by 
the EP or admitted to the eligible hospital's or CAH's inpatient or 
emergency departments (POS 21 or 23) during the EHR reporting period.
    Comment: A few commenters expressed concern regarding the 
requirement that the entry must be recorded as ``structured data.'' The 
commenters state that there may not be a code for over the counter, 
homeopathic or herbal products and that would penalize the provider 
even though the data is collected and recorded.
    Response: The distinction between structured data and unstructured 
data applies to all types of information. Structured data is not fully 
dependent on an established standard. Established standards facilitate 
the exchange of the information across providers by ensuring data is 
structured in the same way. However, structured data within certified 
EHR technology merely requires the system to be able to identify the 
data as providing specific information. This is commonly accomplished 
by creating fixed fields within a record or file, but not solely 
accomplished in this manner. For example, in this case for it to be 
structured, if the patient is on aspirin, then that information should 
be in the system so that it can be automatically identified as a 
medication and not as an order, note, or anything else. An example of 
unstructured data would be the word aspirin, but no ability of the 
system to identify it as a medication.
    Comment: A few commenters pointed out their current health 
information system vendor does not utilize RxNorm as its standard.
    Response: This is a certification issue best addressed in the ONC 
final rule. We therefore have referred these comments to ONC for their 
consideration.
    Comment: We received comments suggesting that this requirement 
could create additional privacy/security concerns for patients who do 
not want all physicians and their clinical staff to have access to 
their entire medication history. Examples provided included 
antidepressant, antipsychotic or erectile dysfunction medications.
    Response: We are only concerned with medications that are known to 
the provider through querying the patient, their own records and the 
transfer of records from other providers. Meaningful use cannot address 
situations where the information is withheld from the EP, eligible 
hospital, or CAH by the patient or by other providers. We understand 
that some patients would prefer not to have their entire medical 
history available to all physicians and clinical staff. We also 
understand that laws in some states restrict the use and disclosure of 
information (including that related to medication) that may reveal that 
a patient has a specific health condition (for example, HIV). Recording 
data in a structured manner will facilitate the implementation of these 
preferences and policies in an electronic environment. It is easier to 
identify and potentially withhold specific data elements that have been 
recorded in a structured format than information recorded as free text.
    After consideration of the public comments received, we are 
modifying the meaningful use measure for EPs at Sec.  495.6(d)(5)(ii) 
and for eligible hospitals at Sec.  495.6(f)(4)(ii) of our regulations 
to ``More than 80 percent of all unique patients seen by the EP or 
admitted to the eligible hospital's or CAH's inpatient or emergency 
departments (POS 21 or 23) have at least one entry (or an indication 
that the patient is not currently prescribed any medication) recorded 
as structured data''.
    We further specify that in order to meet this objective and 
measure, an EP, eligible hospital, or CAH must use the capabilities 
Certified EHR Technology includes as specified and standards at 45 CFR 
170.302(d). The ability to calculate the measure is included in 
certified EHR technology.
    To calculate the percentage, CMS and ONC have worked together to 
define the following for this objective:
     Denominator: Number of unique patients seen by the EP or 
admitted to an eligible hospital's or CAH's inpatient or emergency 
departments (POS 21 or 23) during the EHR reporting period. A 
definition of unique patient is discussed under the objective of CPOE.
     Numerator: The number of patients in the denominator who 
have a medication (or an indication that the patient is not currently 
prescribed any medication) recorded as structured data.
     Threshold: The resulting percentage must be more than 80 
percent in order for an EP, eligible hospital, or CAH to meet this 
measure. Detailed discussion of the more than 80 percent threshold can 
be found under the objective of maintaining an up-to-date problem list. 
We do not believe that any EP, eligible hospital or CAH would be in a 
situation where they would not need to know whether their patients are 
taking any medications. Therefore, there are no exclusions for this 
objective and its associated measure.
    NPRM EP/Eligible Hospital Objective: Maintain active medication 
allergy list.
    Comment: We received comments that limiting this list to medication 
allergies instead of all allergies was not consistent with efficient 
workflow and that all allergies should be housed in the same location 
within the EHR. Commenters also highlighted that lack of knowledge of 
other allergies such as latex and food allergies could lead to 
significant harm to the patient.
    Response: We agree that information on all allergies, including 
non-medication allergies, provide relevant clinical quality data. 
However, while we agree that collecting all allergies would be an 
improvement, current medication allergy standards exists in a 
structured data format that may be implemented in Stage 1. We hope to 
expand this measurement to include all allergies as the standards 
evolve and expand to include non-medication allergies. We believe EP/
eligible hospitals/CAHs should continue to document all allergies, 
regardless of origin, consistent with standard of care practice for 
that EP/eligible hospital/CAH. We encourage

[[Page 44340]]

them to work with the designers of their certified EHR technology to 
make this documentation as efficient and structured as possible.
    Comment: A commenter inquired why the Substance Registration System 
Unique Ingredient Identifier (UNII) was not indicated for use until 
2013 yet the measure requires the information to be recorded as 
structured data.
    Response: Any standards for the structured vocabulary for 
medication allergies or other aspects of meaningful use are included in 
ONC final rule. Structured data does not require an established 
standard as discussed under the objective of maintaining a medication 
list.
    Comment: We received a few comments requesting a definition of 
``allergy.''
    Response: We adopt the commonly held definition of an allergy as an 
exaggerated immune response or reaction to substances that are 
generally not harmful. The definition is derived from Medline Plus, a 
service of the U.S. National Library of Medicine and the National 
Institutes of Health.
    After consideration of the public comments received, we are 
finalizing the meaningful use objective for EPs at 495.6(d)(6)(i) and 
for eligible hospitals and CAHs at 495.6(f)(5)(i) as proposed.
    We include this objective in the core set as it is integral to the 
initial or on-going management of a patient's current or future 
healthcare and would give providers the necessary information to make 
informed clinical decisions for improved delivery of patient care.
    NPRM 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.
    Comment: Multiple commenters noted that ``none'' is not a typical 
value to describe the absence of allergies in medical documentation and 
should be replaced with ``no known allergies (NKA),'' ``no known drug 
allergies (NKDA)'' or ``no known medication allergies (NKMA).''
    Response: Our intent is not to dictate the exact wording of the 
specific value. Rather we are focused on the overall goal of making a 
distinction between a blank list that is blank because a patient does 
not have known allergies and a blank list because no inquiry of the 
patient has been made or no information is available from other 
sources. As long as the indication accomplishes this goal and is 
structured data, we do not believe it is necessary to prescribe the 
exact terminology, preferring to leave that level of detail to the 
designers and users of certified EHR technology.
    Comment: Given that the measure is only a one time check for a 
single entry, one commenter questioned whether this measure truly 
constitutes maintenance of an ``active'' list.
    Response: We agree that this measure does not ensure that every 
patient under the care of every EP, eligible hospital, or CAH has an 
active or up-to-date medication list. However, not every EP comes in 
contact with the patient, and therefore has the opportunity to update 
the list. Nor do we believe that an EP, eligible hospital, or CAH 
should be required through meaningful use to update the list at every 
contact with the patient. There is also the consideration of the burden 
that reporting places on the EP, eligible hospital, or CAH. The measure 
as finalized ensures that the EP, eligible hospital, or CAH has not 
ignored having a medication allergy list for patients seen during the 
EHR reporting period and that at least one piece of information on 
medication allergies is presented to the EP, eligible hospital, or CAH. 
The EP, eligible hospital, or CAH can then use their judgment in 
deciding what further probing or updating may be required given the 
clinical circumstances at hand. Therefore, we are maintaining the 
measure of a one-time check for a single entry.
    Comment: Several commenters recommended eliminating the percentage 
measurement and allowing the provider to attest that active medication 
lists are maintained in the certified EHR technology.
    Response: We are retaining a percentage for the reasons discussed 
previously in this section under our discussion of the burden created 
by the measures associated with the Stage 1 meaningful use objectives. 
For the same reasons we explained under the discussion of up-to-date 
problem list, medication-allergy list is a functionality for which 
there is an existing standard of practice, it is foundational data 
capture function to make more advanced clinical processes possible, and 
complying is fundamentally within the provider's control. Therefore, we 
maintain the reasonably high threshold of 80 percent because the 
existing infrastructure and expectations support this target.
    After consideration of the public comments received, we are 
modifying the meaningful use measure for EPs at Sec.  495.6(d)(6)(ii) 
and for eligible hospitals at Sec.  495.6(f)(5)(ii) of our regulations 
to ``More than 80 percent of all unique patients seen by the EP or 
admitted to the eligible hospital's or CAH's inpatient or emergency 
departments (POS 21 or 23) have at least one entry (or an indication 
that the patient has no known medication allergies) recorded as 
structured data''.
    We further specify that in order to meet this objective and 
measure, an EP, eligible hospital, or CAH must use the capabilities 
Certified EHR Technology includes as specified and standards at 45 CFR 
170.302(e). The ability to calculate the measure is included in 
certified EHR technology.
    To calculate the percentage, CMS and ONC have worked together to 
define the following for this objective:
     Denominator: Number of unique patients seen by the EP or 
admitted to an eligible hospital's or CAH's inpatient or emergency 
departments (POS 21 or 23) during the EHR reporting period. The 
definition of ``a unique patient'' is provided under the objective of 
CPOE.
     Numerator: The number of unique patients in the 
denominator who have at least one entry (or an indication that the 
patient has no known medication allergies) recorded as structured data 
in their medication allergy list.
     Threshold: The percentage must be more than 80 percent in 
order for an EP, eligible hospital, or CAH to meet this measure. 
Detailed discussion of the rationale more than 80 percent threshold can 
be found at under the objective of maintain an up-to-date problem list.
    We do not believe that any EP, eligible hospital or CAH would be in 
a situation where they would not need to know whether their patients 
have medication allergies and therefore do not establish an exclusion 
for this measure.
    NPRM EP Objective: Record the following demographics: Preferred 
language, insurance type, gender, race and ethnicity, and date of 
birth.
    NPRM Eligible Hospital Objective: 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.
    In the proposed rule, we noted 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 
maintain that proposal for the final rule.
    Comment: Some commenters requested clarification of whether all of 
the demographics are required and under what circumstances no 
indication might be acceptable. Examples of acceptable circumstances 
from commenters include patient unwillingness to report, language

[[Page 44341]]

barriers, and requirement to report ethnicity and/or race contrary to 
some state laws.
    Response: In general, we do require that all demographic elements 
that are listed in the objective be included in a patient's record in 
certified EHR technology. However, we do not desire, nor could we 
require, that a patient provide this information if they are otherwise 
unwilling to do so. Similarly, we do not seek to preempt any state laws 
prohibiting EPs, eligible hospitals, or CAHs from collecting 
information on a patient's ethnicity and race. Therefore if a patient 
declines to provide the information or if capturing a patient's 
ethnicity or race is prohibited by state law, such a notation entered 
as structured data would count as an entry for purposes of meeting the 
measure.
    Comment: Several commenters asked for clarity on the definition of 
preferred language. Commenters also indicated that standards are in 
development (ISO 639 and ANSIX12N Claim/Reporting Transaction). Some 
commenters also requested that we include the requirement that the EP, 
eligible hospital or CAH also communicate with the patient in their 
preferred language.
    Response: Preferred language is the language by which the patient 
prefers to communicate. This is just a record of the preference. We do 
not have the authority under the HITECH Act to require providers to 
actually communicate with the patient in his or her preferred language, 
and thus do not require EPs, eligible hospitals, and CAHs to do so in 
order to qualify as a meaningful EHR user as suggested by some 
commenters. In regards to standards, those would be adopted under the 
ONC final rule.
    Comment: Some commenters also requested clarity on the definition 
of race and ethnicity. Some commenters noted an Institute of Medicine 
report entitled ``Race, Ethnicity and Language Data: Standardization 
for Health Care Quality Improvement'', which makes recommendations for 
how to ask questions to collect information and builds on the OMB 
Standards for language, race and ethnicity. Some commenters were also 
concerned about situations where the available choices were not 
granular enough, did not properly account for mixed race and ethnicity, 
and when the patient did not know their ethnicity.
    Response: In the proposed rule, we said that EPs, eligible 
hospitals and CAHs, should use the race and ethnicity codes that follow 
current federal standards published by the Office of Management and 
Budget (http://www.whitehouse.gov/omb/inforeg_statpolicy/#dr). We 
continue to believe that these standards should be applied for purposes 
of implementing the Stage 1 meaningful use objectives, but will 
consider whether alternative standards or additional clarification 
would be appropriate for future stages of meaningful use criteria. We 
believe it is beyond the scope of the definition of meaningful use to 
provide additional definitions for race and ethnicity beyond what is 
established by OMB. In regards to patients who do not know their 
ethnicity, EPs, eligible hospitals, and CAHs should treat these 
patients the same way as patients who decline to provide the race or 
ethnicity, that is, they should identify in the patient record that the 
patient declined to provide this information.
    Comment: Some commenters requested additional clarity on insurance 
type and others recommended the elimination of insurance type due to 
the complexity of insurance coverage, the function of the EHR as a 
medical tool and not a financial one, the volatility of this 
information due to patients frequently changing plans and concerns that 
information on a patient's insurance status will have a possible 
behavioral influence on the providers if this information were 
presented.
    Response: Classifying insurance involves two distinctions--the 
source of coverage and insurance design. Source of coverage refers to 
the type of funding, such as public, private or self-pay. The design of 
the insurance program, such as health maintenance program (HMO), 
preferred provider organization (PPO), high-deductible consumer 
directed plan, fee-for-service, etc. Although not specified in the 
proposed rule, by insurance type we were referring to the first 
distinction--the source of funding for the insurance. We found two 
initiatives that could provide clarity on type. The first is the 
``Source of Payment Typology'' developed by the Public Health Data 
Standards Consortium (http://www.phdsc.org/standards/payer-typology.asp). The consortium is currently in the process of working 
with States to implement this typology. The other initiative is 
established in the Uniform Data Set (UDS) collected by HRSA (http://www.hrsa.gov/data-statistics/health-center-data/index.html). The 
information in the UDS contains several caveats, however, that make it 
difficult to be used by all EPs, eligible hospitals and CAHs, and it 
does not accommodate patients with multiple types of insurance such as 
those dually eligible for Medicare and Medicaid or for those with both 
Medicare and MediGap coverage. Many EHRs that currently report on HRSA 
UDS Insurance Type standards account for multiple types of insurance by 
maintaining separate Reporting Insurance Groups and deriving the 
Insurance Type data from the primary insurance company on the encounter 
and mappings to that Insurance Type Reporting Group. This information 
is documented at the patient demographic level or the patient 
encounter/progress note. Given the complexity of defining insurance 
type and attributing it to patients in an agreed upon way, we are 
eliminating ``insurance type'' from this meaningful use objective.
    Comment: A minority of commenters commenting on this objective 
recommended that CMS remove cause of death from the objective for 
eligible hospitals. The most common rationale is that the coroner or 
medical examiner officially determines cause of death when the case is 
referred to them. By law, the hospital cannot declare a cause of death 
in these cases.
    Response: When a patient expires, in the routine hospital workflow, 
a clinician evaluates the patient to pronounce the patient's death. The 
clinician typically documents in the patient's chart, the sequence of 
events leading to the patient's death, conducts the physical exam and 
makes a preliminary assessment of the cause of death. We are requiring 
that eligible hospitals record in the patient's EHR the clinical 
impression and preliminary assessment of the cause of death, and not 
the cause of death as stated in any death certificate issued by the 
Department of Health or the coroner's office.
    Comment: A few commenters requested inclusion of Advanced 
Directives under this objective as recommended by the HIT Policy 
Committee.
    Response: We discuss advance directives separately in this final 
rule under its own objective.
    Comment: Several commenters recommended requiring the submission of 
the demographic data to CMS.
    Response: Stage 1 of meaningful use seeks to ensure certified EHR 
technology has the capability to record demographic information and 
that those capabilities are utilized. We believe the information 
recorded for this measure is for provider use in the treatment and care 
of their patients and therefore should not be submitted to CMS at this 
time.
    Comment: Commenters suggested requiring the use of the demographic 
data from this measure to stratify clinical quality measure reporting 
and

[[Page 44342]]

the generation of reports for patient outreach and quality initiatives.
    Response: While we encourage all providers and EHR developers to 
work together to develop reporting from the EHR system for use in the 
improvement of population and public health, for purposes of becoming a 
meaningful EHR user in Stage 1, we only require the recording of the 
specified demographics.
    After consideration of the public comments received, we are 
modifying meaningful use objective at Sec.  495.6(d)(7)(i) of our 
regulations for EPs to ``Record the following demographics: Preferred 
language, gender, race and ethnicity, and date of birth''.
    After consideration of the public comments received, we are 
modifying meaningful use objective at Sec.  495.6(f)(6)(i) of our 
regulations for eligible hospitals and CAHs to ``Record the following 
demographics: Preferred language, gender, race and ethnicity, date of 
birth, and date and preliminary cause of death in the event of 
mortality in the eligible hospital or CAH''.
    We include this objective in the core set as it is integral to the 
initial or on-going management of a patient's current or future 
healthcare, recommended by the HIT Policy Committee and would give 
providers the necessary information to make informed clinical decisions 
for improved delivery of patient care.
    NPRM 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.
    Comment: Commenters said that this should be replaced with a count 
or attestation or alternatively that the threshold was too high.
    Response: We are maintaining a percentage for the reasons discussed 
previously in this section under our discussion of the burden created 
by the measures associated with the Stage 1 meaningful use objectives. 
However, we do reduce the threshold to over 50 percent as this 
objective meets the criteria of relying 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. In 
contrast to our discussion of maintaining an up-to-date problem list/
medication list/medication allergy list, we believe that some 
demographic elements (especially race, ethnicity and language) are not 
as straightforward to collect as objective data elements and therefore 
the standard of practice for demographic data is still evolving. As we 
believe this measure may not be within current standard of practice, we 
are adopting the lower threshold of 50 percent (rather than 80 
percent).
    After consideration of the public comments received, we are 
modifying the meaningful use measure for EPs at Sec.  495.6(d)(7)(ii) 
and for eligible hospitals at Sec.  495.6(f)(6)(ii) of our regulations 
to ``More than 50 percent of all unique patients seen by the EP or 
admitted to the eligible hospital's or CAH's inpatient or emergency 
department (POS 21 or 23) have demographics recorded as structured 
data''.
    We further specify that in order to meet this objective and 
measure, an EP, eligible hospital, or CAH must use the capabilities 
Certified EHR Technology includes as specified and standards at 45 CFR 
170.304(c) for EPs and 45 CFR 170.304(b) for eligible hospitals and 
CAHs. The ability to calculate the measure is included in certified EHR 
technology.
    To calculate the percentage, CMS and ONC have worked together to 
define the following for this objective:
     Denominator: Number of unique patients seen by the EP or 
admitted to an eligible hospital's or CAH's inpatient or emergency 
departments (POS 21 or 23) during the EHR reporting period. A unique 
patient is discussed under the objective of CPOE.
     Numerator: The number of patients in the denominator who 
have all the elements of demographics (or a specific exclusion if the 
patient declined to provide one or more elements or if recording an 
element is contrary to state law) recorded as structured data.
     Threshold: The resulting percentage must be more than 50 
percent in order for an EP, eligible hospital or CAH to meet this 
measure. Most EPs and all eligible hospitals and CAHs would have access 
to this information through direct patient access. Some EPs without 
direct patient access would have this information communicated as part 
of the referral from the EP who identified the service as needed by the 
patient. Therefore, we did not include an exclusion for this objective 
and associated measure.
    NPRM EP/Eligible Hospital Objective: 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.
    In the proposed rule, we described why we included growth charts in 
this objective. The reason given was that BMI was not a sufficient 
marker for younger children.
    Comment: Over two thirds of the commenters commenting on this 
objective expressed concern about the applicability of the listed vital 
signs to all provider types and care settings.
    Response: While this objective could be met by receiving this 
information from other providers or non-provider data sources, we 
recognize that the only guaranteed way for a provider to obtain this 
information is through direct patient interaction and that this 
information is not always routinely provided from the EP ordering a 
service because of a direct patient interaction. EPs who do not see 
patients 2 years or older would be excluded from this requirement as 
described previously in this section under our discussion of whether 
certain EP, eligible hospital or CAH can meet all Stage 1 meaningful 
use objectives given established scopes of practices. We would also 
allow an EP who believes that measuring and recording height, weight 
and blood pressure of their patients has no relevance to their scope of 
practice to so attest and be excluded.
    Comment: Several commenters stated this objective should be removed 
in favor of clinical quality measures addressing BMI and blood pressure 
as these measures serve the same purpose and to require both is to 
require duplicative reporting.
    Response: We disagree that these two measures serve the same 
purpose and therefore that the measure should be eliminated in favor of 
clinical quality measures addressing BMI and blood pressure. The 
objective included here seeks to ensure that information on height, 
weight and blood pressure and the extractions based on them are 
included in the patient's record. Furthermore, the objective seeks to 
ensure that the data is stored in a structured format so that it can be 
automatically identified by certified EHR technology for possible 
reporting or exchanging. We also note that the clinical quality measure 
focuses on a smaller subset of the patient population.
    After consideration of the public comments received, we are 
finalizing the objective for EPs at 495.6(d)(8)(i) and for eligible 
hospitals and CAHs at 495.6(f)(7)(i) as proposed.
    We include this objective in the core set as it is integral to the 
initial or on-going management of a patient's current or future 
healthcare and would give providers the necessary information to make 
informed clinical decisions for improved delivery of patient care.
    NPRM 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,

[[Page 44343]]

record blood pressure and BMI; additionally, plot growth chart for 
children age 2 to 20.
    Comment: Commenters suggested replacement of the percentage 
measurement with a count or attestation or alternatively that that the 
threshold was too high.
    Response: We are retaining a percentage for the reasons discussed 
previously in this section under our discussion of the burden created 
by the measures associated with the Stage 1 meaningful use objectives. 
However, we did reduce the threshold from 80 percent to greater than 50 
percent as this objective meets the criteria of relying 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. In addition, in contrast to the measures associated with 
maintaining an up-to-date problem list, an active medication list, and 
an active medication-allergy list, we believe that for many 
specialties, the current practice on vital signs may not be as well-
established. We believe there may not be the same level of consensus 
regarding the relevance to patient care of vital signs for many 
specialties and the frequency with which such vital signs should be 
collected. Thus, for this measure, we adopt a percentage of 50 percent, 
rather than 80 percent.
    Comment: Commenters requested clarification of the frequency and 
methods of recording the vital signs included in the measure.
    Response: As discussed in the objective, the EP/eligible hospital/
CAH is responsible for height, weight and blood pressure so we will 
focus our discussion on those items. First, we do not believe that all 
three must be updated by a provider at every patient encounter nor even 
once per patient seen during the EHR reporting period. For this 
objective we are primarily concerned that some information is available 
to the EP/eligible hospital/CAH, who can then make the determination 
based on the patient's individual circumstances as to whether height, 
weight and blood pressure needs to be updated. The information can get 
into the patient's medical record as structured data in a number of 
ways. Some examples include entry by the EP/eligible hospital/CAH, 
entry by someone on the EP/eligible hospital/CAH's staff, transfer of 
the information electronically or otherwise from another provider or 
entered directly by the patient through a portal or other means. The 
measure hinges on access of the information. Therefore, any EP/eligible 
hospital/CAH that sees/admits the patient and has access to height, 
weight and blood pressure information on the patient can put that 
patient in the numerator.
    Comment: Some commenters requested clarification regarding the role 
of both the EP/eligible hospital/CAH and the certified EHR technology 
for the calculation of BMI and the plotting and displaying of growth 
charts. Other commenters recommended the exclusion of growth charts for 
certain patients and care settings. Another commenter also expressed 
the desire for the exclusion of growth charts for patients over the age 
of 18, inpatient care settings and more specifically, non-pediatric 
inpatient care settings.
    Response: We believe a clarification is in order about which of the 
listed vital signs are data inputs to be collected by the EP/eligible 
hospital/CAH and which are calculations made by the certified EHR 
technology. The only information required to be inputted by the 
provider is the height, weight and blood pressure of the patient. The 
certified EHR technology will calculate BMI and the growth chart if 
applicable to patient based on age. As this requirement imposes no duty 
or action on the provider, we see no reason to limit its availability 
to any EP, eligible hospital, or CAH based on setting or other 
consideration. Concerns on presentation and interface are best left to 
designers of certified EHR technology and users. Finally, as certified 
EHR technology is able to automatically generate BMI and the growth 
chart if height and weight are entered as structured data we see no 
reason to include BMI and growth chart in the measure. We therefore 
will limit the final measure to data requiring provider data entry 
points.
    Comment: A few commenters suggested that ``reported height'' by the 
patient should be acceptable when measurement is not appropriate such 
as in the case of severe illness.
    Response: We agree and would allow height self-reported by the 
patient to be used.
    After consideration of the public comments received, we are 
modifying the meaningful use measure for EPs at 495.6(d)(8)(ii) and for 
eligible hospitals Sec.  495.6(f)(7)(ii) of our regulations to ``For 
more than 50 percent of all unique patients age 2 and over seen by the 
EP or admitted to eligible hospital's or CAH's inpatient or emergency 
department (POS 21 or 23), height, weight and blood pressure are 
recorded as structured data''.
    We further specify that in order to meet this objective and 
measure, an EP, eligible hospital, or CAH must use the capabilities 
Certified EHR Technology includes as specified and standards at 45 CFR 
170.302(f). The ability to calculate the measure is included in 
certified EHR technology.
    As noted previously in this section under our discussion of the 
burden created by the measures associated with the Stage 1 meaningful 
use objectives, the percentage is based on patient records that are 
maintained using certified EHR technology. To calculate the percentage, 
CMS and ONC have worked together to define the following for this 
objective:
     Denominator: Number of unique patients age 2 or over seen 
by the EP or admitted to an eligible hospital's or CAH's inpatient or 
emergency department (POS 21 or 23) during the EHR reporting period. A 
unique patient is discussed under the objective of CPOE.
     Numerator: The number of patients in the denominator who 
have at least one entry of their height, weight and blood pressure are 
recorded as structure data.
     Threshold: The resulting percentage must be more than 50 
percent in order for an EP, eligible hospital, or CAH to meet this 
measure. As addressed in other objectives and in comment response, an 
EP who sees no patients 2 years old or younger would be excluded from 
this requirement as described previously in this section under our 
discussion of whether certain EP, eligible hospital or CAH can meet all 
Stage 1 meaningful use objectives given established scopes of 
practices. We would also allow an EP who believes that all three vital 
signs of height, weight and blood pressure have no relevance to their 
scope of practice to so attest and be excluded. However, we believe 
this attestation and exclusion from recording height, weight, and blood 
pressure does not hold for other patient specific information 
collection objectives, like maintaining an active medication allergy 
list. We do not believe that any EP would encounter a situation where 
the patient's active medication and allergy list is not pertinent to 
care and therefore would be outside of the scope of work for an EP. We 
believe the exclusion based on EP determination of their scope of 
practice for the record vital signs objective, as written in Stage 1, 
should be studied for relevance in further stages. We do not believe 
eligible hospitals or CAHs would ever only have a patient population 
for patients 2 years old or younger or that these vital signs would 
have no relevance to their scope of practice. Therefore, we do not 
include an exclusion for eligible hospitals or CAHs.

[[Page 44344]]

    NPRM EP/Eligible Hospital Objective: Record smoking status for 
patients 13 years old or older
    In the proposed rule, we explained that we believe it is necessary 
to add an age restriction to this objective as we do not believe this 
objective is applicable to patients of all ages and there is no 
consensus in the health care community as to what the appropriate cut 
off age may be. We encouraged comments on whether this age limit should 
be lowered or raised. We received many comments on the age limit and 
address them below.
    Comment: Several commenters requested a different age limitation. 
Commenters suggested ages anywhere between 5 years old up to 18 years 
old.
    Response: For the purposes of this objective and for meaningful 
use, our interest is focused on when a record of smoking status should 
be in every patient's medical record. Recording smoking status for 
younger patients is certainly not precluded. We do believe there would 
be situations where an EP/eligible hospital/CAH's knowledge about other 
risk factors would indicate that they should inquire about smoking 
status if it is unknown for patients under 13 years old. However, in 
order to accurately measure and thereby assure meaningful use, for this 
objective we believe that the age limit needs to be high enough so that 
the inquiry is appropriate for all patients. Therefore, we are 
maintaining the age limitation at 13 years old or older.
    Comment: Some commenters suggested expanding smoking status to any 
type of tobacco use.
    Response: While we agree that an extended list covering other types 
of tobacco use may provide valuable insight for clinical care for 
certified EHR technology ONC has adopted the CDC's NHIS standard 
recodes for smoking status. This will provide a standard set of 
questions across providers and standardize the data. The extended list 
does not make the collection of multiple survey questions clear. For 
example, a patient may be a current tobacco user as well as a smoker. 
For these reason in Stage 1 we will use the standards adopted by ONC 
for certified EHR technology at 45 CFR 170.302(g). For future stages, 
we will review this measure for possible inclusion of other questions. 
This is a minimum set. We do not intend to limit developers of EHR 
technology from creating more specific fields or to limit EPs/eligible 
hospitals/CAHs from recording more specific information.
    Comment: We also received comments requesting that second-hand 
smoking be included in the objective for children and adolescents.
    Response: Including second-hand smoking introduces much more 
variability into the objective as to what constitutes a level of 
exposure and difficulty in measuring it successfully with different age 
limits to different aspects. For instance, how much exposure is 
acceptable for a given age and how is such exposure determined? How 
would these differing requirements be accounted for by certified EHR 
technology? As with the change from smoking status to tobacco use, we 
believe this introduces an unacceptable level of complexity for Stage 1 
of meaningful use. For Stage 1 of meaningful use we are not adding 
second hand smoke exposure to this objective. However, we remind EPs, 
eligible hospitals and CAHs that nothing about the criteria for 
meaningful use prevents them from working with their EHR developer to 
ensure that their EHR system meets their needs and the needs of their 
patient population. We encourage all EPs, eligible hospitals and CAHs 
to critically review their implementation in light of their current and 
future needs both to maximize their own value and to prepare for future 
stages of meaningful use.
    Comment: We received comments asking at what frequency the 
information must be recorded and whether the information can be 
collected by support staff.
    Response: We clarify that this is a check of the medical record for 
patients 13 years old or older. If this information is already in the 
medical record available through certified EHR technology, we do not 
intend that an inquiry be made every time a provider sees a patient 13 
years old or older. The frequency of updating this information is left 
to the provider and guidance is provided already from several sources 
in the medical community. The information could be collected by any 
member of the medical staff.
    Comment: We received a number of comments recommending either 
removing this objective to record smoking status from the HIT 
functionality objectives or removing the smoking measure from the core 
clinical quality measures as these measures serve the same purpose and 
to require both is to require duplicative reporting.
    Response: We disagree that these two measures serve the same 
purpose and therefore only one should be included. The objective 
included here seeks to ensure that information on smoking status is 
included in the patient's record. Furthermore, that the information is 
stored in a structured format so that it can automatically be 
identified by certified EHR technology as smoking status for possible 
reporting or exchanging. We also note that the clinical quality measure 
only focuses on patients 18 years or older, while the objective focuses 
on patients 13 years or older. In addition, many quality measures 
related to smoking are coupled with follow-up actions by the provider 
such as counseling. We consider those follow-up actions to be beyond 
the scope of what we hope to achieve for this objective for Stage 1 of 
meaningful use.
    After consideration of the public comments received, we are 
finalizing the meaningful use objective for EPs at Sec.  495.6(d)(9)(i) 
and for eligible hospitals at Sec.  495.6(f)(8)(i) of our regulations 
as proposed.
    We include this objective in the core set as it is integral to the 
initial or on-going management of a patient's current or future 
healthcare and would give providers the necessary information to make 
informed clinical decisions for improved delivery of patient care.
    NPRM 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.
    In the proposed rule, discussion of this measure referenced other 
sections exclusively.
    Comment: We received comments recommending alternative thresholds 
for this measure. Commenters provided thresholds ranging from anything 
greater than zero to 60 percent in stage 1.
    Response: In the proposed rule, we established a consistent 
threshold for measures not requiring the exchange of information. For 
the final rule, (other than up-to-date problem list, active medication 
list and active medication-allergy list), we have lowered the threshold 
associated with these measures to 50 percent. In our discussion of the 
objective, we noted many concerns by commenters over the appropriate 
age at which to inquire about smoking status. There were also 
considerable differences among commenters as to what the appropriate 
inquiry is and what it should include. Due to these concerns, we do not 
believe this objective and measure fit into the threshold category 
described under up-to-date problem lists and therefore we adopt a 50 
percent (rather than an 80 percent) threshold for this measure. After 
consideration of the public comments received, we are modifying the 
meaningful use measure for EPs at Sec.  495.6(d)(9)(ii) and for 
eligible hospitals at Sec.  495.6(f)(8)(ii) of

[[Page 44345]]

our regulations to ``More than 50 percent of all unique patients 13 
years old or older seen by the EP or admitted to the eligible 
hospital's or CAH's inpatient or emergency departments (POS 21 or 23) 
have smoking status recorded as structured data''.
    We further specify that in order to meet this objective and 
measure, an EP, eligible hospital, or CAH must use the capabilities 
Certified EHR Technology includes as specified and standards at 45 CFR 
170.302(g). The ability to calculate the measure is included in 
certified EHR technology.
    As noted previously in this section under our discussion of the 
burden created by the measures associated with the Stage 1 meaningful 
use objectives, the percentage is based on patient records that are 
maintained using certified EHR technology.
    To calculate the percentage, CMS and ONC have worked together to 
define the following for this objective:
     Denominator: Number of unique patients age 13 or older 
seen by the EP or admitted to an eligible hospital's or CAH's inpatient 
or emergency departments (POS 21 or 23) during the EHR reporting 
period. A unique patient is discussed under the objective of 
maintaining an up-to-date problem list.
     Numerator: The number of patients in the denominator with 
smoking status recorded as structured data.
     Threshold: The resulting percentage must be more than 50 
percent in order for an EP, eligible hospital, or CAH to meet this 
measure. As addressed in other objectives, EPs, eligible hospitals or 
CAHs who see no patients 13 years or older would be excluded from this 
requirement as described previously in this section under our 
discussion of whether certain EP, eligible hospital or CAH can meet all 
Stage 1 meaningful use objectives given established scopes of 
practices. Most EPs and all eligible hospitals and CAHs would have 
access to this information through direct patient access. Some EPs 
without direct patient access would have this information communicated 
as part of the referral from the EP who identified the service as 
needed by the patient. Therefore, we did not include an exclusion based 
on applicability to scope of practice or access to the information for 
this objective and associated measure.
    NPRM EP/Eligible Hospital Objective: Record advance directives.
    In the proposed rule, we discussed this objective, but did not 
propose it as a requirement for demonstrating meaningful use, for a 
number of reasons, including: (1) It was unclear whether the objective 
would be met by indicating that an advance directive exists or by 
including the contents of the advance directive; (2) the objective 
seems relevant only to a limited and undefined patient population when 
compared to the patient populations to which other objectives of Stage 
1 of meaningful use apply; and (3) we believe that 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 require 
information about a patient's advance directive only in rare 
circumstances.
    Comment: We received several comments including a comment from the 
HIT Policy Committee that we should include advance directives in the 
final rule. The HIT Policy Committee clarified that this would be an 
indication of whether a patient has an advanced directive. Furthermore, 
they recommend limiting this measure to patients 65 and older. We 
received other comments that said this should be a requirement for 
eligible hospitals. Other commenters reported that having this 
information available for the patient would allow eligible hospitals to 
make decisions that were better aligned with the patient's expressed 
wishes.
    Response: In the proposed rule, we said that confusion as to 
whether this objective would require an indication of the existence of 
an advanced directive or the contents of the advance directive itself 
would be included in certified EHR technology was one of the reasons 
for not including the objective in Stage 1 of meaningful use. We 
expressed concerns that the latter would not be permissible in some 
states under existing state law. As commenters have clarified that 
advance directives should be just an indication of existence of an 
advance directive and recommended a population to apply the measure to, 
we reinstate this objective for eligible hospitals and CAHs. We believe 
that the concern over potential conflicts with state law are alleviated 
by limiting this to just an indication. We also believe that a 
restriction to a more at risk population is appropriate for this 
measure. By restricting the population to those 65 years old and older, 
we believe we focus this objective appropriately on a population likely 
to most benefit from compliance with this objective and its measure. 
This objective is in the menu set so if an eligible hospital or CAH 
finds they are unable to meet it then can defer it. However, we believe 
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 require information about a patient's advance directive in 
rare circumstances. For other meaningful use objectives, we have 
focused our exclusions on rare situations, which would not be the case 
for this objective. Therefore, we do not include this objective for 
EPs.
    After consideration of the public comments received, we are 
including this meaningful use objective for eligible hospitals and CAHs 
at Sec.  495.6(g)(2)(i) of our regulations as ``Record whether a 
patient 65 years old or older has an advanced directive as structured 
data ''.
    NPRM EP/Eligible Hospital Measure: N/A.
    While we did not receive specific percentage recommendations from 
commenters, this objective is the recording of a specific data element 
as structured data in the patient record. This is identical to other 
objectives with established measures such as, recording vital signs, 
recording demographics and recording smoking status. Therefore, we 
adopt the measure format and the lower threshold (50 percent) from 
those objectives. We also believe that this information is a level of 
detail that is not practical to collect on every patient admitted to 
the eligible hospital's or CAH's emergency department, and therefore, 
have limited this measure only to the inpatient department of the 
hospital.
    In the final rule, this meaningful use measure for eligible 
hospitals at Sec.  495.6(g)(2)(ii) of our regulations: ``More than 50 
percent of all unique patients 65 years old or older admitted to the 
eligible hospital's or CAH's inpatient department (POS 21) have an 
indication of an advance directive status recorded as structured 
data''.
    We further specify that in order to meet this objective and 
measure, an EP, eligible hospital, or CAH must use the capabilities 
Certified EHR Technology includes as specified and standards at 45 CFR 
170.306(h). The ability to calculate the measure is included in 
certified EHR technology.
    As noted previously in this section under our discussion of the 
burden created by the measures associated with the Stage 1 meaningful 
use objectives, the percentage is based on patient records that are 
maintained using certified EHR technology.
    To calculate the percentage, CMS and ONC have worked together to 
define the following for this objective:
     Denominator: Number of unique patients age 65 or older 
admitted to an eligible hospital's or CAH's inpatient department (POS 
21) during the EHR

[[Page 44346]]

reporting period. A unique patient is discussed under the objective of 
CPOE.
     Numerator: The number of patients in the denominator with 
an indication of an advanced directive entered using structured data.
     Threshold: The resulting percentage must be more than 50 
percent in order for eligible hospital or CAH to meet this measure. An 
exclusion, as described previously in this section under our discussion 
of whether certain EP, eligible hospital or CAH can meet all Stage 1 
meaningful use objectives given established scopes of practices, would 
apply to an eligible hospital or CAH who admits no patients 65 years 
old or older during the EHR reporting period.
    NPRM EP/Eligible Hospital Objective: Incorporate clinical lab-test 
results into EHR as structured data.
    In the proposed rule, we defined structured data as data that has a 
specified data type and response categories within an electronic record 
or file. We have revised that definition for the final rule as 
discussed below.
    Comment: Some commenters requested clarification on what 
constitutes structured data.
    Response: The distinction between structured data and unstructured 
data applies to all types of information. Structured data is not fully 
dependent on an established standard. Established standards facilitate 
the exchange of the information across providers by ensuring data is 
structured in the same way. However, structured data within certified 
EHR technology merely requires the system to be able to identify the 
data as providing specific information. This is commonly accomplished 
by creating fixed fields within a record or file, but not solely 
accomplished in this manner.
    After consideration of the public comments received, we finalize 
the meaningful use objective or EPs at Sec.  495.6(e)(2)(i) and 
eligible hospitals and CAHs at Sec.  495.6(g)(3)(i) as proposed.
    NPRM 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 either in a positive/negative or numerical format are 
incorporated in certified EHR technology as structured data.
    In the proposed rule, we identified this objective and associated 
measure as dependent on electronic exchange and therefore requiring 
special consideration in establishing the threshold. We said that we 
are cognizant that in most areas of the country, the infrastructure 
necessary to support such exchange is still being developed. Therefore, 
we stated our belief that 80 percent is too high a threshold for the 
Stage 1 criteria of meaningful use. As an alternative, we proposed 50 
percent as the threshold based on our discussions with EHR vendors, 
current EHR users, and laboratories. We then invited comment on whether 
50 percent is feasible for the Stage 1 criteria of meaningful use. 
Finally, we indicated that we anticipate raising the threshold in 
future stages of meaningful use as the capabilities of HIT 
infrastructure increase. We received several comments on the 
appropriateness of this 50 percent threshold and discuss them in the 
comment and response section below.
    Comment: Commenters requested clarification as to whether the 
measure includes only electronic exchange of information with a 
laboratory or if it also includes manual entry.
    Response: We encourage every EP, eligible hospital and CAH to 
utilize electronic exchange of the results with the laboratory based on 
the certification and standards criteria in the 45 CFR 170.302(h). If 
results are not received in this manner, then they are presumably 
received in another form such as fax, telephone call, mail, etc. These 
results then must be incorporated into the patient's medical record in 
some way. We encourage that this way use structured data; however, that 
raises the concerns about the possibility of recording the data twice; 
for example scanning the results and then entering the results as 
structured data. Telephoned results could be entered directly. We also 
recognize the risk of entry error, which is why we highly encourage the 
electronic exchange of the results with the laboratory, instead of 
manual entry through typing, option selecting, scanning or other means. 
Reducing the risk of entry error is one of the primary reasons we 
lowered the measure threshold for Stage 1 during which providers are 
changing their workflow processes to accurately incorporate information 
into EHRs through either electronic exchange or manual entry. However, 
for this measure, we do not limit the EP, eligible hospital or CAH to 
only counting structured data received via electronic exchange, but 
count in the numerator all structured data. By entering these results 
into the patient's medical record as structured data, the EP, eligible 
hospital or CAH is accomplishing a task that must be performed 
regardless of whether the provider is attempting to demonstrate 
meaningful use or not. We believe that entering the data as structured 
data encourages future exchange of information.
    Comment: A majority of commenters commenting on this measure 
believe the proposed 50 percent threshold is too high. Suggestions for 
alternative thresholds ranged from more than zero to eighty percent. 
Some commenters suggested that the percentage calculation be replaced 
with a numeric count.
    Response: We are finalizing a percentage calculation for the 
reasons discussed previously in this section under our discussion of 
the burden created by the measures associated with the Stage 1 
meaningful use objectives. We based the 50 percent threshold in the 
proposed rule on our discussions with EHR vendors, current EHR users, 
and laboratories and specifically requested comment on whether the 50 
percent threshold was feasible. While only a small number of commenters 
commented on this objective, those that did were overwhelming in favor 
of either a count or a lower threshold. EPs especially were concerned 
with our inability to impose any requirements on laboratory vendors. 
Based on the comments received, we have modified our assessment of the 
current environment for incorporating lab results into certified EHR 
technology, and believe that a threshold lower than fifty percent is 
warranted. We want to create a threshold that encourages, but does not 
require, the electronic exchange of this information and commenters 
indicated that 50 percent was too high given the current state of 
electronic exchange of lab results. Therefore, we lower the threshold 
to 40 percent.
    Comment: Commenters requested clarification on what types of 
laboratories could generate the lab results.
    Response: The focus of this objective is to get as many lab results 
as possible into a patient's electronic health record as structured 
data. Limiting the objective to a specific type of laboratory would not 
further this objective so therefore we leave it open to all lab tests 
and laboratories.
    Comment: Several commenters expressed concern regarding the 
financial burden of establishing lab interfaces, especially for smaller 
hospitals and practices.
    Response: The ability to exchange information is a critical 
capability of certified EHR technology. Exchange between lab and 
provider and provider to provider of laboratory results reduces errors 
in recording results and prevents the duplication of testing. 
Therefore, we continue to include this objective within Stage 1 of 
meaningful use although as noted above the measure

[[Page 44347]]

does not rely on the electronic exchange of information between the lab 
and the provider.
    Comment: We received comments requesting a listing of laboratory 
tests with results that are in a numerical or positive/negative format.
    Response: We consider it impractical to develop an exhaustive list 
of such tests. Moreover, we believe further description of these tests 
is unnecessary. It should be self-evident to providers when a test 
returns a positive or negative result or a result expressed in numeric 
characters. In these case, the results should be incorporated into a 
patient's EHR as structured data.
    Comment: Several commenters pointed out that many current EHR 
vendors do not support the use of LOINC[supreg] codes and there is no 
federal regulatory requirement for labs to transmit using this code set 
or for that matter, any structured code set.
    Response: Standards such as LOINC[supreg] codes are included in the 
ONC final rule. However, this measure requires incorporation of lab 
test results as structured data, but does not include a requirement for 
transmission or electronic receipt of the results using certified EHR 
technology.
    After consideration of the public comments received, we are 
modifying the meaningful use measure for EPs at Sec.  495.6(e)(2)(ii) 
and eligible hospitals at Sec.  495.6(g)(3)(ii) of our regulations to 
``More than 40 percent of all clinical lab tests results ordered by the 
EP or by an authorized provider of the eligible hospital or CAH for 
patients admitted to its inpatient or emergency department (POS 21 or 
23) 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''.
    We further specify that in order to meet this objective and 
measure, an EP, eligible hospital, or CAH must use the capabilities 
Certified EHR Technology includes as specified and standards at 45 CFR 
170.302(h). The ability to calculate the measure is included in 
certified EHR technology.
    As noted previously in this section under our discussion of whether 
certain EP, eligible hospital or CAH can meet all Stage 1 meaningful 
use objectives given established scopes of practices, the percentage is 
based on labs ordered for patients whose records are maintained using 
certified EHR technology.
    To calculate the percentage, CMS and ONC have worked together to 
define the following for this objective:
     Denominator: Number of lab tests ordered during the EHR 
reporting period by the EP or authorized providers of the eligible 
hospital or CAH for patients admitted to an eligible hospital's or 
CAH's inpatient or emergency department (POS 21 & 23) whose results are 
expressed in a positive or negative affirmation or as a number.
     Numerator: The number of lab test results whose results 
are expressed in a positive or negative affirmation or as a number 
which are incorporated as structured data.
     Threshold: The resulting percentage must be more than 40 
percent in order for an EP, eligible hospital, or CAH to meet this 
measure.
    If an EP orders no lab tests whose results are either in a 
positive/negative or numeric format during the EHR reporting period 
they would be excluded from this requirement as described previously in 
this section under our discussion of whether certain EP, eligible 
hospital or CAH can meet all Stage 1 meaningful use objectives given 
established scopes of practices. We do not believe any eligible 
hospital or CAH would order no lab tests whose results are either in a 
positive/negative or numeric format during the EHR reporting period.
    NPRM EP/Eligible Hospital Objective: Generate lists of patients by 
specific conditions to use for quality improvement, reduction of 
disparities, research, and outreach.
    Comment: A few commenters recommended eliminating this requirement 
because they believe it is redundant of clinical quality reporting.
    Response: We disagree that this is redundant of clinical quality 
reporting. Clinical quality reporting does not guarantee usability for 
all the purposes in the objective. One example of such a use is a 
provider could not only generate list of patients with specific 
conditions, but could stratify the output using other data elements in 
the certified EHR technology that are entered as structured data. The 
lists could also be utilized at an aggregate level for purposes of 
research into disparities, which could result in targeted outreach 
efforts.
    Comment: Some commenters requested that if we finalize our proposal 
to only require one report that we change the ``and'' in the objective 
to ``or''.
    Response: We are finalizing our measurement of only requiring one 
report for Stage 1 of meaningful use and will change ``and'' to ``or''. 
However, we note that all measures will be reconsidered in later stages 
of meaningful use and multiple reports could be required in those 
stages.
    Comment: We received a few comments requesting the removal of the 
terms ``reduction of disparities'' and ``outreach'' as there are no 
actionable items or measures associated with the term. We also received 
comments that the measurement should include the requirement that the 
lists be stratified by race, ethnicity, preferred language, and gender 
for initiatives targeted at reducing disparities.
    Response: We disagree that actions to reduce disparities or conduct 
outreach could not be guided by this report, especially if stratified 
and aggregated reports of many providers are combined within large 
organizations or among organizations. While we do not require such 
stratification or aggregation or specify specific uses, that does not 
preclude them.
    Comment: Some commenters requested clarification of the term 
specific condition.
    Response: Specific conditions are those conditions listed in the 
active patient problem list.
    After consideration of the public comments received, we are 
modifying the meaningful use objective for EPs at Sec.  495.6(e)(3)(i) 
and for eligible hospitals at Sec.  495.6(g)(4)(i) of our regulations 
to ``Generate lists of patients by specific conditions to use for 
quality improvement, reduction of disparities, research, or outreach''.
    NPRM EP/Eligible Hospital Measure: Generate at least one report 
listing patients of the EP or eligible hospital with a specific 
condition.
    In the proposed rule, we said that 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. However, in order to ensure the capability can be utilized we 
proposed to require EPs and hospitals to attest to the ability of the 
EP or eligible hospital to create a report listing patients by specific 
condition and to attest that they have actually done so at least once. 
We received comments on this and address them and any revisions to the 
proposed rule in the comment and response section below.
    Comment: Commenters requested clarification that only one report 
per EHR reporting period is required to meet the measure.
    Response: Yes, only one report in required for any given EHR 
reporting period. The report could cover every patient whose records 
are maintained using certified EHR technology or a subset of those 
patients at the discretion of the EP, eligible hospital or CAH.
    Comment: A few commenters suggested the measure should be

[[Page 44348]]

expanded to require submission of the report to CMS or the States or to 
the local health department.
    Response: Submission raises many questions about what types of 
information can be sent to different entities, how the information is 
used, patient consent for sending the information, and many of the 
issues, which add considerable complexity to this meaningful use 
objective. Therefore, we are not requiring submission of the report to 
CMS, the States or local health departments for Stage 1 of meaningful 
use. We do note that this is one of the objectives for which a State 
can submit modifications to CMS for approval.
    Comment: Several commenters requested a list of condition 
categories, a model report or the core data elements required to 
satisfy the measure.
    Response: As stated in the rule, we believe an EP, eligible 
hospital, or CAH 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.
    Comment: For eligible hospitals, commenters stated that the 
analysis of patient data is derived from post-discharge coding of 
diagnosis and procedures and not problem lists.
    Response: We do not specify that the list is limited to being 
generated from the data problem list; rather, for the definition of 
conditions we refer providers to those conditions contained in the 
problem list.
    Comment: One commenter stated that for privacy and confidentiality 
reasons, patients should be allowed to opt out of any provider outreach 
initiatives.
    Response: Stage 1 of meaningful use does not require the submission 
of these reports to other entities; rather, we require that the 
provider generate these reports for their own use. We therefore do not 
believe the generation of such reports raises privacy and 
confidentiality concerns. We understand, however, that some patients 
may have concerns about such lists being exchanged with others and will 
consider such concerns should future meaningful use requirements focus 
on exchange of these reports.
    After consideration of the public comments received, we are 
finalizing the meaningful use measure for EPs at Sec.  495.6(e)(3)(ii) 
and for eligible hospitals and CAHs at Sec.  495.6(g)(4)(ii) of our 
regulations as proposed.
    We further specify that in order to meet this objective and 
measure, an EP, eligible hospital, or CAH must use the capabilities 
Certified EHR Technology includes as specified and standards at 45 CFR 
170.302(i). The ability to calculate the measure is included in 
certified EHR technology.
    As this measure relies on data contained in certified EHR 
technology the list would only be required to include patients whose 
records are maintained using certified EHR technology as discussed 
previously in this section under our discussion of the burden created 
by the measures associated with the Stage 1 meaningful use objectives.
    We do not believe anything included in this objective or measure 
limit any EP, eligible hospital or CAH from completing the measure 
associated with this objective, therefore, we do not include an 
exclusion.
    NPRM EP Objective: Report ambulatory quality measures to CMS (or, 
for EPs seeking the Medicaid incentive payment, the States).
    Specific comments on the quality measures are discussed in section 
II.A.3 of this final rule.
    We are finalizing this meaningful use objective at Sec.  
495.6(d)(10)(i) of our regulations ``Report ambulatory clinical quality 
measures to CMS (or, for EPs seeking the Medicaid incentive payment, 
the States)'' to better align with the descriptions in section II.A.3.
    In response to our revised requirements for meeting meaningful use, 
we are including this objective in the core set. Section 1848 
(o)(2)(A)(iii) of the Act specifically includes submitting clinical 
quality measures in meaningful use for EPs. Section 1903(t)(6)(D) of 
the Act also anticipates that the demonstration of meaningful use may 
include quality reporting to the States for the Medicaid program.
    NPRM Eligible Hospital Objective: Report ambulatory quality 
measures to CMS (or, for eligible hospitals seeking the Medicaid 
incentive payment, the States).
    We make a technical correction to this objective from the proposed 
rule to ensure that it is clear to the public that we were referring to 
hospital quality measures.
    Specific comments on the quality measures are discussed in section 
II.A.3 of this final rule.
    After consideration of the public comments received, we are 
finalizing this meaningful use objective at Sec.  495.6(d)(9)(i) to 
account for our technical correction and to better align with the 
descriptions in section II.A.3 as ``Report hospital clinical quality 
measures to CMS (or, for eligible hospitals seeking the Medicaid 
incentive payment, the States)''.
    In response to our revised requirements for meeting meaningful use, 
we are including this objective in the core set. Section 1886 
(n)(3)(A)(iii) of the Act specifically includes submitting clinical 
quality measures in meaningful use for eligible hospitals and CAHs. 
Section 1903(t)(6)(D) of the Act also anticipates that the 
demonstration of meaningful use may include quality reporting to the 
States for the Medicaid program.
    NPRM EP Measure: For 2011, an EP would provide the aggregate level 
data for the numerator, denominator, and exclusions through attestation 
as discussed in section II.A.3 of this final rule. For 2012, an EP 
would electronically submit the measures that are discussed in section 
II.A.3. of this final rule.
    Specific comments on the quality measures themselves are discussed 
in section II.A.3 of this final rule.
    After consideration of the public comments received, we are 
finalizing this meaningful use objective at Sec.  495.6(d)(10)(ii) as 
proposed.
    NPRM Eligible Hospital Measure: For 2011, an eligible hospital or 
CAH would provide the aggregate level data for the numerator, 
denominator, and exclusions through attestation as discussed in section 
II.A.3 of this final rule. For 2012, an eligible hospital or CAH would 
electronically submit the measures as discussed in section II.A.3. of 
this final rule. Specific comments on the quality measures are 
discussed in section II.A.3 of this final rule. After consideration of 
the public comments received, we are finalizing this meaningful use 
objective at 495.6(f)(9)(ii) as proposed.
    NPRM EP Objective: Send reminders to patients per patient 
preference for preventive/follow-up care.
    In the proposed rule, we described patient preference as the 
patient's choice between internet based delivery or delivery not 
requiring internet access. We are revising that description based on 
comments as discussed below.
    Comment: Commenters have pointed out that requirements to 
accommodate reasonable requests by individuals to receive 
communications by means other than the means preferred by the provider 
already exist under HIPAA at 45 CFR 164.522(b).
    Response: As we stated in the proposed rule, patient preference 
refers to the patient's preferred means of transmission of the reminder 
from the provider to the patient, and not inquiries by the provider as 
to whether the patient would like to receive reminders. In the proposed 
rule, we had proposed that patient preference be limited to the choice 
between internet based or non-internet based. In order to avoid 
unnecessary confusion and duplication of requirements, EPs meet

[[Page 44349]]

the aspect of ``per patient preference'' of this objective if they are 
accommodating reasonable requests as outlined in 45 CFR 164.522(b), 
which are the guidance established under HIPAA for accommodating 
patient requests.
    After consideration of the public comments received, we are 
finalizing the meaningful use objective at Sec.  495.6(e)(4)(i) of our 
regulations as proposed.
    NPRM 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.
    For the final rule, we are changing the measure to recognize that 
this is an EP only objective. Therefore, we make the technical 
correction of striking ``or admitted to the eligible hospital''.
    Comment: Commenters indicated that ``practice management systems'' 
or ``patient management systems'' are commonly used for this function 
and that integrating them into certified EHR technology would be 
expensive and time consuming for little value in return.
    Response: While we disagree with commenters who suggest there is 
little to no value in having information about reminders sent to 
patients available across all the systems used by the provider, we do 
not assert that such integration of systems must be in place to meet 
this measure. ONC provides for a modular approach that would allow 
these systems to be certified as part of certified EHR technology.
    Comment: Some commenters pointed out that many patients seen during 
an EHR reporting period will not be sent a reminder during that same 
period. Commenters said this is especially true for the 90-day EHR 
reporting period, but for some services could be true of the full year 
EHR reporting period as well. Other commenters also pointed out that 
reminders are not limited to the older population and that children 
especially may require many reminders on immunizations.
    Response: We agree with commenters that many patients not seen 
during the EHR reporting period would benefit from reminders. As the 
action in this objective is the sending of reminders, we base the 
revised measure on that action. This focus is supported by numerous 
public comments, including those by the HIT Policy Committee. 
Therefore, we are changing the requirement to account for all patients 
whose records are maintained using certified EHR technology regardless 
of whether they were seen by the EP during the EHR reporting period. 
This greatly expanded denominator caused us to reconsider both our 
threshold and the age limit. In order to increase the probability that 
a patient whose records are maintained in certified EHR technology will 
be eligible for a reminder we change the age limit of the population to 
65 years old or older or 5 years old or under. We believe that older 
patient populations are more likely to have health statuses that will 
indicate the need for reminders to be sent and this segment of the 
population is have higher rates of chronic diseases which will require 
coordination in preventive care such as vaccine reminders. Likewise, 
the 5 years old and under population will require a multitude of 
childhood vaccinations such as influenza and will benefit from 
reminders. However, we do not believe that changing the age limit of 
the affected population will result in 50 percent of every patient 
whose records maintained in certified EHR technology requiring a 
reminder during the EHR reporting period. This is especially true for 
the first payment year when the EHR reporting period is only 90 days. 
We are also concerned about the variability among specialists' scopes 
of practice that may affect the number of patients in the denominator 
for which a reminder is appropriate. Therefore, we lower the threshold 
to 20 percent. The EP has the discretion to determine the frequency, 
means of transmission and form of the reminder limited only by the 
requirements of 45 CFR 164.522(b) and any other applicable federal, 
state or local regulations that apply to them. After consideration of 
the public comments received, we are modifying the meaningful use 
measure at Sec.  495.6(e)(4)(ii) to ``More than 20 percent of all 
patients 65 years or older or 5 years old or younger were sent an 
appropriate reminder during the EHR reporting period''.
    We further specify that in order to meet this objective and 
measure, an EP must use the capabilities Certified EHR Technology 
includes as specified and standards at 45 CFR 170.304(d). The ability 
to calculate the measure is included in certified EHR technology.
    As noted previously in this section under our discussion of the 
burden created by the measures associated with the Stage 1 meaningful 
use objectives, the denominator is based on patients whose records are 
maintained using certified EHR technology.
    To calculate the percentage, CMS and ONC have worked together to 
define the following for this objective:
     Denominator: Number of unique patients 65 years old or 
older or 5 years older or younger.
     Numerator: The number of patients in the denominator who 
were sent the appropriate reminder.
     Threshold: The resulting percentage must be more than 20 
percent in order for an EP to meet this measure.
    As addressed in other objectives and in comment responses, if an EP 
has no patients 65 years old or older or 5 years old or younger with 
records maintained using certified EHR technology that EP is excluded 
from this requirement as described previously in this section under our 
discussion of whether certain EP, eligible hospital or CAH can meet all 
Stage 1 meaningful use objectives given established scopes of 
practices.
    NPRM EP/Eligible Hospital Objective: Document a progress note for 
each encounter. In the proposed rule, we discussed this objective, but 
did not propose it for Stage 1 of meaningful use. We noted our belief 
that 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.
    Comment: We received a limited number of comments regarding our 
decision not to include documentation of progress notes as an 
objective. The commenters generally fell into three categories: Those 
who supported inclusion of this objective in the final rule, those who 
supported its inclusion only if certain caveats are met and those who 
supported our proposal not to include it as an objective for Stage 1 of 
meaningful use. Concerns raised by those supporting the inclusion of 
this objective included the possibility that an EP may keep paper 
progress notes in conjunction with use of certified EHR technology as 
prescribed by Stage 1 of meaningful use and that such a choice by EPs 
would create the possibility of handwriting illegibility, loss of 
information and reduced access to health information by both patients 
and other providers. Another concern raised is that if the objective is 
not included in the criteria for the definition of meaningful use 
designers of EHR technology will not include the function in their 
products. The advocates in the second category agree with the above, 
but only support inclusion with certain caveats. Some of these caveats 
include preserving the option of transcription, voice recognition 
software, and direct entry by an EP or any combination of these. 
Another caveat is that progress notes not be required to be entered as 
structured data. The third category supports exclusion of progress 
notes as an objective for two fundamentally different reasons. Some 
commenters

[[Page 44350]]

supported exclusion because they believe that the volume of objectives 
was already too high for Stage 1 of meaningful use and therefore 
opposed anything that would increase the volume.
    Other commenters agree with our proposal that progress notes is 
already a fundamental part of current EHR products and did not 
represent a move that advances the use of EHRs.
    Response: We predicated our discussion in the proposed rule on the 
assumption that progress notes are a component of basic EHR 
functionality. We still believe this is the case and have not received 
evidence to the contrary. However, we failed to clearly articulate the 
ramifications of our belief. Our view continues to be that an EP who 
incorporates the use of EHRs into a practice and complies with 
meaningful use criteria is unlikely to maintain separate paper progress 
notes outside of the EHR system. We believe that the potential 
disruption in workflow of the efforts to merge paper progress notes 
with the other records in certified EHR technology in order to have a 
complete medical record far outweighs the burden of electronically 
capturing progress notes. Moreover, we continue to believe this is a 
highly unlikely scenario. As with any meaningful use objective, it is 
important to have clear, definitive definitions. However, our 
observations of discussions held in public forums by the medical 
community and review of literature have led us to conclude that it not 
possible to provide a clear, definitive definition of a progress note 
at this time. We note that commenters recommending the documentation of 
a progress note be included as an objective did not attempt to define 
the term. Nor did commenters suggest an associated measure. We continue 
to believe that there is insufficient need and upon review believe 
there is insufficient consensus regarding the term progress note to 
include this objective for Stage 1 of meaningful use.
    After consideration of the public comments received, we do not 
include this meaningful use objective in the final rule.
    NPRM EP/Eligible Hospital Measure: N/A.
    NPRM EP 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.
    NPRM Eligible Hospital Objective: 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.
    First, we make a technical correction. On page 1856 of the proposed 
rule, we described this objective for eligible hospitals as ``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.'' The underlined 
language was inappropriately carried over from the EP objective in this 
instance and in the regulation text. The table contained our intended 
language of ``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.'' Many 
commenters pointed this discrepancy out to us and we appreciate their 
diligence.
    Comment: Nearly half of the commenters mentioning clinical decision 
support suggested that the term needed additional clarification. Some 
commenters said that the term was too vague and open to interpretation 
while others said it was too specific. Other commenters provided 
recommendations on what a clinical decision support rule should mean or 
which elements it should include. These were evidence-based medicine 
templates, decision trees, reminders, linked online resources, 
scientific evidence, and consensus.
    Response: In the proposed rule, we described clinical decision 
support as HIT 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. We purposefully 
used a description that would allow a provider significant leeway in 
determining the clinical decision support rules that are more relevant 
to their scope of practice and benefit their patients in the greatest 
way. In the proposed rule, we asked providers to relate the rules they 
select to clinical priorities and diagnostic test ordering. We do not 
believe that adding a more limiting description to the term clinical 
decision support would increase the value of this objective. We believe 
that this determination is best left to the provider taking into 
account their workflow and patient population.
    Comment: Several commenters objected to the requirement of five 
clinical decision support rules when the HIT Policy Committee only 
recommended one. Others disagreed with our proposed assertion that most 
EPs would report on at least five clinical quality measures from 
section II.A.3 of the proposed rule and eligible hospitals will all 
report on at least five.
    Response: We accept the argument that there is value in focusing 
initial CDS efforts on a single CDS rule in order to get it right the 
first time and lay the foundation for future, broader CDS 
implementation. This will help to prevent the unintended negative 
consequences associated with poorly implemented CDS systems when 
providers have attempted to do too much too soon.
    We agree that the appropriate balance is to require some degree of 
meaningful use of CDS in Stage 1 without overburdening providers with 
too many areas to focus on at once. Since CDS is one area of health IT 
in which significant evidence exists that it can have a substantial 
positive impact on the quality, safety and efficiency of care delivery, 
it is important that it be included as a core objective with this more 
limited expectation. That requirement will assure that all meaningful 
users have taken the first steps in CDS implementation but allow them 
to focus as necessary on a single high-priority area at the outset in 
order to ensure that they can devote the appropriate level of attention 
to their first CDS priority. We anticipate that this will set the 
foundation for much more expansive CDS support in the near future.
    Comment: A commenter inquired if modification of the clinical 
decision support tool negates the EHR's certification status.
    Response: We believe this is a question on certification status and 
is outside of the scope of this rule. ONC discusses what would affect 
Certified EHR Technology's certified status in their final rule (75 FR 
36157) entitled ``Establishment of the Temporary Certification Program 
for Health Information Technology''.
    After consideration of the public comments received, we are 
modifying the meaningful use objective for EPs at 495.6(d)(11)(i) to 
``Implement one clinical decision support rule relevant to specialty or 
high clinical priority along with the ability to track compliance with 
that rule.''
    After consideration of public comments received, we are modifying 
the meaningful use objective for eligible hospitals and CAHs at Sec.  
495.6(f)(10)(i) of our regulations as ``Implement one clinical decision 
support rule related to a high priority hospital condition along with 
the ability to track compliance with that rule.''

[[Page 44351]]

    We believe that clinical decision support is one of the most common 
tools that uses the information collected as structured data included 
in the core set and therefore also include clinical decision support in 
the core as the information needed to support it are already included 
in the core set.
    NPRM 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. of 
this final rule.
    In the proposed rule, we said that 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.
    Comment: Commenters, both in the requests for clarification of the 
term clinical decision support and explicitly in response to this 
measure, expressed concern about the linkage to a particular quality 
measure.
    Response: We agree that such linkage puts constraints on the 
provider and eliminates many types of clinical decision support rules 
that may be beneficial. Therefore, we revise this measure to require 
that at least one of the five rules be related to a clinical quality 
measure, assuming the EP, eligible hospital or CAH has at least one 
clinical quality measure relevant to their scope of practice. However, 
we strongly encourage EPs, eligible hospitals and CAHs to consider the 
clinical quality measures as described in section II.A.3 when deciding 
which additional rules to implement for this measure.
    Comment: Several commenters, including the HIT Policy Committee, 
recommended that we focus at least one clinical decision support rule 
on efficiency of care.
    Response: In light of decision to limit the objective to one 
clinical decision support rule, we do not believe that it is 
appropriate to further to link that rule to specific requirements and 
therefore give the EP, eligible hospital or CAH discretion on what to 
focus the clinical decision support rule used to satisfy this measure.
    Comment: A few commenters asked for clarification of how the ``* * 
* with the ability to track compliance with those rules'' language of 
the proposed objective for clinical decision support rules relates to 
the associated measures.
    Response: While an integral part of the objective and certified EHR 
technology, we did not include this aspect of the objective in the 
measure for Stage 1 of meaningful use. An EP, eligible hospital, or CAH 
is not required to demonstrate to CMS or the States its compliance 
efforts with the CDS recommendations or results for Stage 1 either at 
initial attestation or during an subsequent review of that attestation.
    After consideration of the public comments received, we are 
modifying the meaningful use measure for EPs at Sec.  495.6(e)(11)(ii) 
and for eligible hospitals and CAHs at Sec.  495.6(g)(10)(ii) to 
``Implement one clinical decision support rule.
    We further specify that in order to meet this objective and 
measure, an EP, eligible hospital, or CAH must use the capabilities 
Certified EHR Technology includes as specified and standards at 45 CFR 
170.304(e) for EPs and 45 CFR 170.306(c). The ability to calculate the 
measure is included in certified EHR technology.
    Given the added flexibility added to this measure in the final 
rule, we do not believe that any EP, eligible hospital, or CAH would be 
in a situation where they could not implement one clinical decision 
support rules as described in the measure. Therefore, there are no 
exclusions for this objective and its associated measure.
    NPRM EP/Eligible Hospital Objective: Submit claims electronically 
to public and private payers.
    Comment: Over three quarters of those commenting on this objective 
recommended that it be eliminated for various reasons. The majority of 
the other commenters requested a modification. Reasons given are:

--Electronic claims submission is already covered under HIPAA;
--Electronic claims submission is not part of traditional EHR 
technology;
--Billing systems would have to be certified adding to cost and burden 
of compliance with meaningful use even though when electronic claims 
submission for Medicare is already in place for all by the very 
smallest of providers;
--Electronic claims submission falls outside of the scope of the 
statutory mandate given by Congress to implement the HITECH legislation 
to improve care delivery through broad scale adoption and utilization 
of Electronic Health Record technologies. This function does not impact 
the quality of care delivered and relies on product components that are 
traditionally part of practice management systems;
--Private payers may customize the HIPAA-recognized standard 
transactions, which limits the ability of practices to obtain accurate 
information prior to receiving an Explanation of Benefits based on the 
actual services provided and negates many of the benefits of having 
standardized transactions;
--Workers' compensation and auto insurers do not accept electronic 
claims; and
--Many providers use clearinghouses and they requested that the burden 
of electronic submission be shifted to the clearinghouse.

    Response: In our proposed rule, we specifically cite that the 
existence of standard transactions available under HIPAA for submitting 
claims as a reason for including this objective as a meaningful use 
objective for Stage 1. We also disagree that this objective is outside 
the scope of meaningful use as defined by the HITECH legislation. The 
HITECH legislation states the Secretary shall seek to improve not only 
health care quality, but also the use of electronic health records. In 
addition, we note that sections 1848(o)(2)(A) and 1886(n)(3)(A) of the 
Act provide that to be considered a meaningful EHR user, an EP, 
eligible hospital, or CAH must demonstrate use of certified EHR 
technology in a meaningful manner as defined by the Secretary. In the 
Medicaid context, any demonstration of meaningful use must be 
``acceptable to the Secretary'' under 1903(t)(6). We believe this 
language gives us broad discretion to require the use of certified EHR 
technology in a manner that not only improves health care quality, but 
results in gains in efficiency, patient engagement and enhances privacy 
and security. Under the broad definition of electronic health record 
established by ONC in their final rule, electronic exchange of 
eligibility information and claims submission could certainly improve 
the use of electronic health records.
    We believe that inclusion of administrative simplification in 
meaningful use is an important long-term policy goal for several 
reasons. First, administrative simplification can improve the 
efficiency and reduce unnecessary costs in the health care system as a 
whole; the small percentage of paper claims submitted represent a 
disproportionate administrative cost for health plans; the 
reconciliation of billing charges for services not eligible for payment 
creates a significant burden for providers, health plans, and most

[[Page 44352]]

significantly, for patients. Second, the integration of administrative 
and clinical information systems is necessary to support effective 
management and coordinated care in physician practices. The ability to 
leverage clinical documentation in support of appropriate charge 
capture (for example, for preventive counseling, or immunizations 
provided), the ability to link lists of patients needing clinical 
reminders with patient contact information, the ability to stratify 
quality measures by patient demographic factors (for example, race/
ethnicity) and insurer status (for example, Medicare beneficiaries), 
are examples.
    In addition, there are important benefits to the inclusion of 
administrative transactions in criteria and standards for the 
certification of EHR technologies. The option of modular certification 
provides an opportunity for eligible professionals and hospitals to use 
practice management systems or clearinghouses that provide these 
functions as components of their certified EHR technologies. However, 
we recognize there is not current agreement as to which systems 
constitute an EHR and that many entities may view their billing system 
to be outside their EHR and that the vendors of some practice 
management systems that provide these functionalities in doctors' 
offices today may not be prepared to seek certification for these 
legacy products in 2010/2011. We also recognize that the introduction 
of the X12 5010 standards in January 2012 would further complicate the 
certification process for stage 1. We also acknowledge that we do not 
have the ability to impose additional requirements on third-party 
payers or clearinghouses to participate in this exchange beyond what is 
required by HIPAA. Based on these considerations, we are not including 
this objective in the final rule for Stage 1 of meaningful use.
    However, the introduction of these new X12 5010 standards, and the 
coming introduction of ICD-10 in 2013 provides an opportunity for 
change in Stage 2 of meaningful use. In order to meet these and other 
administrative simplification provisions, most providers will have to 
upgrade their practice management systems or implement new ones. This 
provides an important opportunity to achieve alignment of capabilities 
and standards for administrative transactions in EHR technologies with 
the administrative simplification provisions that the Affordable Care 
Act provides for health plans and health plan clearinghouses. We 
therefore intend to include administrative transactions as a part of 
Stage 2 of meaningful use, and expect providers and vendors to take 
this into consideration in their decisions leading up to 2013.
    Comment: Commenters focusing on how meaningful use would translate 
into the Medicare Advantage program said that the measure of checking 
eligibility electronically and submitting claims electronically for 80 
percent of patients seen would not be possible. They explained that for 
most of their visits, there is no insurance company with which to 
check, and there is no insurance company to whom to submit claims. They 
described themselves as a capitated system and for most of the patient 
visits, the concept of checking eligibility and submitting claims in 
not relevant.
    Response: This comment illustrates the difficulties in adopting FFS 
Medicare meaningful use measures for qualifying MA organizations, MA-
affiliated hospitals and MA EPs. For purposes of determining meaningful 
use in a Medicare Advantage environment, we agree that submitting 
claims electronically is not a useful standard in a capitated 
environment where virtually all patients are members of the same 
insurance plan.
    After consideration of the public comments received, we are not 
finalizing the objective ``Submit claims electronically to public and 
private payers''.
    NPRM EP/Eligible Hospital Measure: At least 80 percent of all 
claims filed electronically by the EP or the eligible hospital.
    We received many comments on the difficulty in calculating this 
measure. However, as all measures are tied to objectives and we do not 
finalize this objective we also do not finalize the measure.
    NPRM EP/Eligible Hospital Objective: Check insurance eligibility 
electronically from public and private payers.
    Comment: Over three quarters of those commenting on this objective 
recommended that it be eliminated for various reasons. Some of the most 
common reasons for elimination are:

--Electronic eligibility checks are already covered under HIPAA;
--Electronic eligibility checks are not part of traditional EHR 
technology;
--Billing and practice management systems that are used for electronic 
eligibility checks would have to be certified as certified EHR 
technology adding to cost and burden;
--Electronic eligibility checks is outside of the scope of the mandate 
given by Congress to implement the HITECH legislation in such a way as 
to improve care delivery through broad scale adoption and utilization 
of Electronic Health Record technologies. This function does not impact 
the quality of care delivered and relies on product components that are 
traditionally part of practice management systems;
--Information returned on typical electronic eligibility checks is of 
little use to providers--as responses are usually a yes/no answer on 
coverage, but not the specificity of coverage;
--The current poor adoption rate of the use of electronic eligibility 
verification is indicative of the deficiencies in current methods;
--Once eligibility checking becomes easy to use and reliable, no 
incentive will be required as providers will adopt the process readily;
--Payers do not guarantee their eligibility results;
--Many payers are still not in compliance with the HIPAA 270/271 
electronic eligibility standard. Therefore the objective should only be 
required if compliance with the standard by health plans can be 
guaranteed; and
--Private payers may customize the HIPAA-recognized standard 
transactions, which limits the ability of practices to obtain accurate 
information prior to receiving an Explanation of Benefits based on the 
actual services provided and negates many of the benefits of having 
standardized transactions.

    Response: In our proposed rule, we specifically cite the existence 
of the standard transaction for eligibility checks available under 
HIPAA as an enabling factor for the inclusion this objective. As with 
the electronic claims submission objective discussed above, we disagree 
that this objective is outside the scope of meaningful use as defined 
by the HITECH legislation. The HITECH legislation requires the 
Secretary to seek to improve not only health care quality, but also the 
use of electronic health records. Under the broad definition of 
electronic health record established by ONC in their final rule, 
electronic exchange of eligibility information could certainly improve 
the use of electronic health records. However, we recognize there is 
not current agreement as to which systems constitute an EHR and that 
many entities may view their practice management system to be outside 
their EHR. We also acknowledge that we do not have the ability to 
impose additional requirements on third-party payers to participate in 
this

[[Page 44353]]

exchange beyond what is required by HIPAA. Third-party payers can 
provide simple yes/no responses, modify the standard transactions and 
do not have to guarantee their results. We agree with commenters that 
this significantly devalues the results of this objective. However, we 
do believe that as electronic records and exchange based on this and 
considerations that commenters nearly universally considered this to 
not be a function of EHR, we are not including this objective in the 
final rule for Stage 1 of meaningful use. However, we do believe that 
inclusion of a robust system to check insurance eligibility 
electronically is an important long term policy goal for meaningful use 
of certified EHR technology and we intend to include this objective as 
well as electronic claims submission Stage 2.
    After consideration of the public comments received, we are not 
finalizing the objective to ``Check insurance eligibility 
electronically from public and private payers'' or any modification 
thereof. Given that we are not finalizing the objective, we also are 
not finalizing the associated EP and eligible hospital/CAH measures.
    The second health outcomes policy priority identified by the HIT 
Policy 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.
    As explained in the proposed rule, we do not intend 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, we defer to existing 
Federal and State laws as to what is appropriate for disclosure to the 
patient or their 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.
    Comment: Several commenters requested that all objectives under the 
health care policy priority be combined, as they are redundant.
    Response: We disagree that they are redundant and believe each 
serves a unique purpose. We will more fully describe those purposes in 
the discussion of each objective.
    NPRM EP Objective: Provide patients with an electronic copy of 
their health information (including diagnostics test results, problem 
list, medication lists, allergies) upon request.
    NPRM Eligible Hospital Objective: Provide patients with an 
electronic copy of their health information (including diagnostic test 
results, problem list, medication lists, allergies, discharge summary, 
procedures), upon request
    The purpose of this objective is to provide a patient's health 
information to them electronically and in a human readable format and 
in accordance with the standards specified in the ONC final rule 
subject to its availability to the provider electronically and any 
withholding under regulations related to the HIPAA Privacy Act at 45 
CFR 164.524, Access of individuals to protected health information.
    In the proposed rule, we indicated that electronic copies may be 
provided through a number of secure electronic methods (for example, 
personal health record (PHR), patient portal, CD, USB drive). We have 
changed this description in response to comments to that when 
responding to patient requests for information, the EP, eligible 
hospital, or CAH should accommodate patient requests in accordance with 
45 CFR 164.524, Access of individuals to protected health information. 
The objective provides additional criteria for meeting meaningful use 
concerning the electronic copy or provision of information that the EP, 
eligible hospital or CAH maintains in or can access from the certified 
EHR technology and is maintained by or on behalf of the EP, eligible 
hospital or CAH.
    Comment: We received requests for clarification that only 
information that the EP, eligible hospital, or CAH has available 
electronically must be provided to the patient.
    Response: Yes, we limit the information that must be provided 
electronically to that information that exists electronically in or 
accessible from the certified EHR technology and is maintained by or on 
behalf of the EP, eligible hospital or CAH. We believe it is 
impractical to require information maintained on paper to be 
transmitted electronically. Furthermore, given the other criteria of 
Stage 1 of meaningful use, we believe sufficient information will be 
available through certified EHR technology, especially given the 
inclusion of many of the foundational objectives that were included in 
the core set.
    Comment: Commenters pointed out that the HIPAA Privacy Rule permits 
licensed healthcare professionals to withhold certain information if 
its disclosure would cause substantial harm to the patient or another 
individual.
    Response: As previously discussed for patient preference, we do not 
seek to conflict with or override HIPAA through meaningful use 
requirements. Therefore, an EP, eligible hospital, or CAH may withhold 
information from the electronic copy of a patient's health information 
in accordance with the regulations at 45 CFR 164.524, Access of 
individuals to protected health information.
    Comment: Commenters requested clarification of the term ``health 
information'' or alternatively a list of elements required to satisfy 
the objective.
    Response: Subject to the withholding described above, an EP, 
eligible hospital, or CAH should provide a patient with all of the 
health information they have available electronically. At a minimum, 
this would include the elements listed in the ONC final rule at 45 CFR 
170.304(f) for EPs and 45 CFR 170.306(d) for eligible hospitals and 
CAHs as required for EHR technology to become certified.
    Comment: Several commenters indicated that a provider should be 
allowed to charge a fee for providing an electronic copy of a patient's 
health information.
    Response: We do not have the authority under the HITECH Act to 
regulate fees in this manner. Rather, the charging of fees for this 
information is governed by the HIPAA Privacy Rule at 45 CFR 
164.524(c)(4) (which only permits HIPAA covered entities to charge an 
individual a reasonable, cost-based fee for a copy of the individual's 
health information). We would expect these costs to be very minimal 
considering that the ability to generate the copy is included in 
certified EHR technology. Additional clarification on the fee that a 
HIPAA covered entity may impose on an individual for an electronic copy 
of the individual's health information will be addressed in upcoming 
rulemaking.
    Comment: Commenters pointed out that the general term ``allergies'' 
is inconsistent with other objectives of Stage 1 and with the 
capabilities mandated by certification under the ONC IFR, which address 
only medication allergies.
    Response: As we have stated on several other objectives, we 
encourage all EPs, eligible hospitals, and CAHs to work with their EHR 
technology designers to make capabilities most relevant to their 
individual practices of care. However, we have maintained that at a 
minimum the capabilities that are part of certification should be 
included

[[Page 44354]]

and those should be the basis for meaningful use so we do modify this 
objective to medication allergies to align it with other objectives and 
certification.
    After consideration of the public comments received, we are 
modifying the meaningful use objective for EPs at Sec.  495.6(d)(12)(i) 
of our regulations to ``Provide patients with an electronic copy of 
their health information (including diagnostics test results, problem 
list, medication lists, medication allergies) upon request'' and for 
eligible hospitals and CAHs at Sec.  495.6(f)(11)(i) of our regulations 
to ``Provide patients with an electronic copy of their health 
information (including diagnostic test results, problem list, 
medication lists, medication allergies, discharge summary, procedures), 
upon request''.
    We include this objective in the core set as it is integral to 
involving patients and their families in their provision of care and 
was recommended by the HIT Policy Committee for inclusion in the core 
set.
    NPRM 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.
    In the proposed rule, we pointed out that all patients have a right 
under ARRA to an electronic copy of their health information. We said 
that our purpose for including it in meaningful use was to ensure that 
this requirement in met in a timely fashion. We also said that 
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 received requests for clarifications on what 
must be provided and in what timeframe. We address those requests in 
the comment and response section below. We note here that participation 
in the Medicare and Medicaid EHR incentive programs is voluntary. 
Nothing in the Stage 1 criteria of meaningful use supersedes or exempts 
an EP, eligible hospital or CAH from complying with otherwise 
applicable requirements to provide patients with their health 
information.
    Comment: An overwhelming majority of commenters commenting on this 
objective indicated that the 48-hour time frame is too short and 
inconsistent with the HIPAA Privacy Rule.
    Response: We discuss the reasoning for the time frame in the 
proposed rule. We state that this measure seeks to ensure that a 
patient's request 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. We also 
believe that certified EHR technology will provide EPs, eligible 
hospitals, and CAHs more efficient means of providing copies of health 
information to patients, which is why we proposed that a request for an 
electronic copy be provided to the patient within 48 hours.
    In the final rule, we further point out that this objective is 
limited to health information maintained and provided electronically 
while HIPAA can require the retrieval, copying and mailing of paper 
documents. For this reason, we do not believe the timeframes under this 
meaningful use objective and the HIPAA Privacy Rule must be aligned. 
However, we appreciate that the 48-hour timeframe may be burdensome for 
some providers, particularly for those providers who do not operate 24/
7. We therefore are lengthening the timeframe to three business days. 
Business days are defined as Monday through Friday excluding federal or 
state holidays on which the EP, eligible hospital, or CAH or their 
respective administrative staffs are unavailable. As an example if a 
patient made a request for an electronic copy of their health 
information on Monday then the EP, eligible hospital, or CAH would have 
until the same time on Thursday to provide the information assuming 
there were no intervening holidays. If provision of the copy involves 
the mailing of physical electronic media, then it would need to be 
mailed on the Thursday.
    Comment: Some commenters believed the 80 percent threshold was too 
high or introduced examples of extraordinary circumstances such as 
natural disasters or system crashes that would indicate a lower 
threshold is needed to accommodate them.
    Response: We reduce the threshold to over 50 percent as this 
objective meets the criteria of relying 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, as 
explained under our discussion of the objective of maintain an up-to-
date problem list. As this is a relatively new capability that was not 
available to either providers or patients before the introduction of 
EHRs, we do not believe it meets the same standard of practice as 
maintaining an up-to-date problem list and therefore adopt a threshold 
of 50 percent (rather than 80 percent).
    Comment: We received comments that were concerned about the 
reporting burden of this requirement.
    Response: We believe that as long as the request by the patient is 
accurately recorded in the certified EHR technology then the certified 
EHR technology should be able to calculate the measure. Recording 
patient requests for certain actions should be part of the expectations 
of meaningful use of certified EHR technology. If the EP, eligible 
hospital, or CAH records the requests using certified EHR technology, 
certified EHR technology will be able to assist in calculating both the 
numerator and denominator. If the requests are recorded by another 
means at the choice of the provider, the provider would be responsible 
for determining the denominator.
    Comment: Commenters inquired if third-party requests for 
information are included in the denominator.
    Response: Only specific third party requests for information are 
included in the denominator. As we stated in the opening discussion for 
this health care priority, providing the copy to a family member or 
patient's authorized representative consistent with federal and state 
law may substitute for a disclosure of the information to the patient 
and count in the numerator. A request from the same would count in the 
denominator. All other third party requests are not included in the 
numerator or the denominator.
    Comment: Commenters inquired if asking the patient to register for 
their own personal health record (PHR) satisfies the intent of the 
objective.
    Response: EPs, eligible hospitals and CAHs are to provide the 
information pursuant to the reasonable accommodations for patient 
preference under 45 CFR164.522(b). To be included in this measure, the 
patient has already requested an electronic method. While having a 
third party PHR certainly would be one method, assuming the provider 
could populate the PHR with all the information required to meet this 
objective. The provider should provide the same level of assistance to 
the patient that would be provided as if they maintained their own 
patient portal.
    Comments: Comments were received requesting the format and media 
for the provision of the health information.
    Response: As this is for use by the patient, the form and format 
should be human readable and comply with the HIPAA Privacy Rule, as 
specified at 45 CFR 164.524(c). In addition, efforts should be made to 
make it easily understandable to the patient. The media could be any 
electronic form such as patient portal, PHR, CD, USB fob, etc. As 
stated in the previous response, EPs, eligible hospitals and CAHs are 
expected to make reasonable

[[Page 44355]]

accommodations for patient preference as outlined in 45 CFR 164.522(b).
    After consideration of the public comments received, we are 
modifying the meaningful use measure for EPs at Sec.  495.6(d)(12)(i) 
and for eligible hospitals at Sec.  495.6(f)(11)(i) of our regulations 
to ``More than 50 percent of all patients of the EP or the inpatient or 
emergency departments of the eligible hospital or CAH (POS 21 or 23) 
who request an electronic copy of their health information are provided 
it within 3 business days.''
    We further specify that in order to meet this objective and 
measure, an EP, eligible hospital, or CAH must use the capabilities 
Certified EHR Technology includes as specified and standards at 45 CFR 
170.304(f) for EPs and 45 CFR 170.306(d) for eligible hospitals and 
CAHs. The ability to calculate the measure is included in certified EHR 
technology.
    As the provision of the electronic copy is limited to the 
information contained within certified EHR technology, this measure is 
by definition limited to patients whose records are maintained using 
certified EHR technology as described previously in this section under 
our discussion of the burden created by the measures associated with 
the Stage 1 meaningful use objectives.
    To calculate the percentage, CMS and ONC have worked together to 
define the following for this objective:
     Denominator: The number of patients of the EP or eligible 
hospital's or CAH's inpatient or emergency departments (POS 21 or 23) 
who request an electronic copy of their electronic health information 
four business days prior to the end of the EHR reporting period.
     Numerator: The number of patients in the denominator who 
receive an electronic copy of their electronic health information 
within three business days.
     Threshold: The resulting percentage must be more than 50 
percent in order for an EP, eligible hospital, or CAH to meet this 
measure. As addressed in other objectives and in comment response, if 
the EP, eligible hospital, or CAH has no requests from patients or 
their agents for an electronic copy of patient health information 
during the EHR reporting period they would be excluded from this 
requirement as described previously in this section under our 
discussion of whether certain EP, eligible hospital or CAH can meet all 
Stage 1 meaningful use objectives given established scopes of 
practices.
    NPRM Eligible Hospital Objective: Provide patients with an 
electronic copy of their discharge instructions and procedures at time 
of discharge, upon request.
    The purpose of this objective is to provide the option to patients 
to receive their discharge instructions electronically. Discharge 
instructions would not necessarily be included in a copy of health 
information and it is unlikely that a patient would request a copy of 
their health information at every discharge. This objective is unique 
to eligible hospitals and CAHs.
    Comment: We received several comments suggesting that we eliminate 
or clarify the term ``procedures.''
    Response: As we believe the terms ``instructions'' and 
``procedures'' are interchangeable as used in this objective, we are 
removing the term ``procedures'' from the objective. We left this term 
in the provision of electronic copy of health information as the term 
``instructions'' is not in that objective. We clarify that the term 
``instructions'' means any directions that the patient must follow 
after discharge to attend to any residual conditions that need to be 
addressed personally by the patient, home care attendants, and other 
clinicians on an outpatient basis.
    Comment: Commenters pointed out that the HIPAA Privacy Rule permits 
licensed healthcare professionals to withhold certain information if 
its disclosure would cause substantial harm to the patient or another 
individual.
    Response: We reiterate that it is not our intent for the meaningful 
use objectives to conflict or override the HIPAA Privacy Rule through 
meaningful use requirements. Therefore an EP, eligible hospital, or CAH 
may withhold information from the electronic copy to the extent they 
are permitted or required to do so in accordance with the regulations 
at 45 CFR 164.524.
    Comment: Some commenters recommended that hospitals should be 
required to either provide every patient an electronic copy of their 
discharge instructions or at least inform them of the option to receive 
it electronically.
    Response: We believe it would be too burdensome to provide every 
patient an electronic copy of his or her discharge instructions. 
Furthermore, we anticipate that many, if not most, patients will prefer 
a paper copy during the years of Stage 1. While we certainly encourage 
eligible hospitals to inform their patients of the option to receive 
their discharge instructions electronically, we do not see requiring 
this as within the scope of meaningful use of certified EHR technology 
for Stage 1.
    Comment: Comments were received requesting a clarification of the 
data that should be included in the discharge instructions.
    Response: This objective simply refers to the option of the 
electronic provision of instructions that would be provided to the 
patient. We believe eligible hospitals are the appropriate entity to 
determine the information that should be included in the discharge 
instructions.
    Comment: Comments were received requesting the format and media for 
the discharge instructions.
    Response: As this is for use by the patient, the form and format 
should be human readable and comply with the HIPAA Privacy Rule, as 
specified at 45 CFR 164.524(c). In addition, efforts should be made to 
make it easily understandable to the patient. The media could be any 
electronic form such as patient portal, PHR, CD, USB fob, etc. EPs, 
eligible hospitals and CAHs are expected to make reasonable 
accommodations for patient preference as outlined in 45 CFR 164.522(b).
    After consideration of the public comments received, we are 
finalizing the objective at 495.6(f)(12)(i) of our regulations as 
proposed.
    We include this objective in the core set as it is integral to 
involving patients and their families in their provision of care and 
was recommended by the HIT Policy Committee for inclusion in the core 
set.
    NPRM 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.
    Comment: Some commenters believed the 80 percent threshold was too 
high or introduced examples of extraordinary circumstances that would 
indicate that a lower threshold is needed to accommodate them.
    Response: We reduce the threshold to over 50 percent as this 
objective meets the criteria of relying 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. However, 
as this is a relatively new capability that was not available to either 
providers or patients before the introduction of EHRs we do not believe 
it meets the same standard of practice as maintaining an up-to-date 
problem list and therefore adopt a threshold of 50 percent (rather than 
80 percent).
    Comment: Some commenters expressed concern about the reporting 
burden imposed by this requirement.
    Response: We believe that as long as the request by the patient is 
accurately recorded in the certified EHR

[[Page 44356]]

technology then the certified EHR technology should be able to 
calculate the measure. We believe that recording patient requests for 
certain actions that involve the use of certified EHR technology should 
be part of EPs, eligible hospitals and CAHs standard practice. If the 
eligible hospital or CAH records the requests using certified EHR 
technology, certified EHR technology will be able to assist in 
calculating both the numerator and denominator. If the requests are 
recorded by another means at the choice of the provider, the provider 
would be responsible for determining the denominator.
    Comment: Several of the comments requested clarification of the 
timeframe in which the discharge instructions should be provided to the 
patient.
    Response: As discussed previously, this objective simply refers to 
the option of the electronic provision of instructions that would be 
provided to the patient at the time of discharge. Therefore, we believe 
for the information to be useful to the patient, the instructions 
themselves or instructions on how to access them electronically should 
be furnished at the time of discharge from the eligible hospital or 
CAH.
    Comment: Some comments expressed concern that providing an 
electronic copy of discharge instructions to the patient at the time of 
discharge would disrupt workflows and lengthen the discharge process 
resulting in reduced bed turnover in emergency departments.
    Response: As discussed previously, this objective simply refers to 
the option of the electronic provision of instructions that would be 
provided to the patient at the time of discharge. We do not believe the 
provision of an electronic copy of the discharge instructions, upon 
request, at the time of discharge alters current workflow or lengthens 
the discharge process. A patient could be provided instructions on how 
to access an Internet Web site where they can get the instructions or 
asked to provide an e-mail address or simply be handed electronic media 
instead of or in addition to a paper copy.
    After consideration of the public comments received, we are 
modifying the meaningful use measure at Sec.  495.6(f)(12)(ii) of our 
regulations to ``More than 50 percent of all patients who are 
discharged \1\ from an eligible hospital's or CAH's inpatient or 
emergency department (POS 21 or 23) and who request an electronic copy 
of their discharge instructions are provided it.''
---------------------------------------------------------------------------

    \1\ Please note that although the final rule meaningful use 
measures refer to patients discharged from an emergency department, 
such emergency room releases are not eligible hospital discharges 
for purpose of determining hospital payment incentives under section 
1886(n) of the Act. Section 1886(n) payments are only with respect 
to ``inpatient'' hospital services pursuant to section 1886(n)(1)(A) 
of the Act.
---------------------------------------------------------------------------

    We further specify that in order to meet this objective and 
measure, an EP, eligible hospital, or CAH must use the capabilities 
Certified EHR Technology includes as specified and standards at 45 CFR 
170.306(e). The ability to calculate the measure is included in 
certified EHR technology.
    As with the previous objective, the provision of the electronic 
copy of the discharge summary is limited to the information contained 
within certified EHR technology; therefore this measure is by 
definition limited to patients whose records are maintained using 
certified EHR technology as described previously in this section under 
our discussion of the burden created by the measures associated with 
the Stage 1 meaningful use objectives.
    To calculate the percentage, CMS and ONC have worked together to 
define the following for this objective:
     Denominator: Number of patients discharged from an 
eligible hospital's or CAH's inpatient or emergency department (POS 21 
or 23) who request an electronic copy of their discharge instructions 
and procedures during the EHR reporting period.
     Numerator: The number of patients in the denominator who 
are provided an electronic copy of discharge instructions.
     Threshold: The resulting percentage must be more than 50 
percent in order for an EP, eligible hospital, or CAH to meet this 
measure.
    As addressed in other objectives and in comment response, if the 
eligible hospital or CAH has no requests from patients or their agents 
for an electronic copy during the EHR reporting period they would be 
excluded from this requirement as described previously in this section 
under our discussion of whether certain EP, eligible hospital or CAH 
can meet all Stage 1 meaningful use objectives given established scopes 
of practices.
    NPRM EP Objective: Provide patients with timely electronic access 
to their health information (including lab results, problem list, 
medication lists, and allergies) within 96 hours of the information 
being available to the EP.
    In the proposed rule, we described timely as within 96 hours of the 
information being available to the EP through either the receipt of 
final lab results or a patient interaction that updates the EP's 
knowledge of the patient's health. We said we judged 96 hours to be a 
reasonable amount of time to ensure that certified EHR technology is up 
to date and welcomed comment on if a shorter or longer time is 
advantageous. We did receive comments on the time frame and have 
revised it as discussed below in the comment and response section.
    Comment: We received comments recommending that ``access'' be 
clarified to determine whether this is online access as indicated in 
the ONC certification criteria for certified EHR technology or just 
electronic access.
    Response: We believe we inadvertently created confusion by listing 
the examples of electronic media (CD or USB drive) in which this access 
could be provided. As many commenters inferred, it was our intention 
that this be information that the patient could access on demand such 
as through a patient portal or PHR. We did not intend for this to be 
another objective for providing an electronic copy of health 
information upon request.
    Comment: Several commenters requested that all objectives included 
in the health care policy priority ``engage patients and their 
families'' be combined, as they are redundant.
    Response: We disagree that they are redundant and believe each 
serves a unique purpose. We regret any confusion created by the 
inclusion of CD or USB drive as examples of electronic media caused in 
the intent of this measure. The difference between electronic access 
and an electronic copy is that a patient with electronic access can 
access the information on demand at anytime while a patient must 
affirmatively request an electronic copy from the EP, eligible hospital 
or CAH at a specific time and the information in the copy is current 
only as of the time that the copy is transferred from the provider to 
the patient.
    Comment: Some commenters asserted that some results and other 
sensitive information are best communicated at a face-to-face 
encounter.
    Response: We agree that there may be situations where a provider 
may decide that electronic access of a portal or Personal Health Record 
is not the best forum to communicate results. Within the confines of 
laws governing patient access to their medical records, we would defer 
to EP's, eligible hospital or CAH's judgment as to whether to hold 
information back in anticipation of an actual encounter between the 
provider and the patient. Furthermore just as in the provision of 
electronic copy, an EP may withhold information from being

[[Page 44357]]

accessible electronically by the patient in accordance with regulations 
at 45 CFR 164.524. Any such withholding would not affect the EP's, 
eligible hospital's or CAH's ability to meet this objective as that 
information would not be included. We do not believe there would be a 
circumstance where all information about an encounter would be withheld 
from the patient and therefore no information would be eligible for 
uploading for electronic access. If nothing else, the information that 
the encounter occurred can be provided. Please note that providers must 
comply with all applicable requirements under the HIPAA Privacy Rule, 
including 45 CFR 164.524.
    Comment: We received several comments stating that the time frame 
of 96 hours is too burdensome for EPs.
    Response: While we believe that 96 hours is sufficient, most EPs do 
not operate 24/7. Therefore, we will limit the timeframe to business 
days, in effect changing the timeframe from 96 hours in the proposed 
rule to four business days. Business days are defined as Monday through 
Friday excluding federal or state holidays on which the EP, eligible 
hospital or CAH or their respective administrative staffs are 
unavailable.
    Comment: Commenters pointed out that allergies is inconsistent with 
other objectives of Stage 1 and with the capabilities mandated by 
certification under the ONC final rule.
    Response: As we have stated on several other objectives, we 
encourage all EPs, eligible hospitals, and CAHs to work with their EHR 
technology designers to make capabilities as relevant to their 
individual practices of care as possible. However, we maintain that at 
a minimum the capabilities that are part of certification should be 
included in certified EHR technology so we do modify this objective to 
medication allergies to align it with other objectives and 
certification.
    After consideration of the public comments received, we are 
modifying the objective for EPs at Sec.  495.6(d)(6)(i) of our 
regulations to ``Provide patients with timely electronic access to 
their health information (including lab results, problem list, 
medication lists, medication allergies) within four business days of 
the information being available to the EP''.
    NPRM EP Measure: At least 10 percent of all unique patients seen by 
the EP are provided timely electronic access to their health 
information.
    In the proposed rule, we said that 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. We received comments on this justification for the 
threshold and requests for clarification, which are addressed in the 
comment and response section below.
    Comment: Some commenters expressed concern about the calculation of 
the percentage and expressed the preference to use an absolute count 
instead of a percentage.
    Response: We acknowledge there are unique concerns about 
calculating this percentage as it involves determining the timeliness 
of the information. Certified EHR technology would be able to ascertain 
the time from when the information was entered into its system to when 
the information was available for electronic access. As certified EHR 
technology can provide the access, any perceivable delay or requirement 
for affirmative action would be built in by the user to allow for 
review of the information before posting. Certified EHR technology 
could not be distinguish the difference in time when the information 
was available to the provider and when it was entered into certified 
EHR technology. However, we see no reasonable way to track this time 
frame that does not impose a heavy burden on the EP. Therefore, for the 
measure, we define the four business days time frame as the time frame 
when the information is updated in the certified EHR technology to when 
it is available electronically to the patient, unless the provider 
indicates that the information should be withheld. It is acceptable for 
a provider to set an automated withhold on certain information at their 
discretion. As we have discussed previously in this section, we do not 
believe absolute counts are an adequate substitute for percentage 
calculations.
    Comment: We received comments requesting clarification on what data 
must be made available.
    Response: Certified EHR technology must be able to make certain 
data available according to the ONC final rule. At a minimum, the data 
specified in the ONC final rule at 45 CFR 170.304(g) must be available 
subject to the ability of the provider to withhold it discussed 
previously.
    Comment: Commenters suggested that some EPs might not have 10 
percent of their patient population who desire or could utilize such 
access.
    Response: We agree that this is a possibility. We stated in the 
proposed rule that ``we recognize that many patients may not have 
internet access, may not be able or interested in the use of 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. However, this 30 percent threshold may not be realistic for 
many practices in the short term and therefore serves justification for 
the 10 percent threshold. However, the objective and measure focus on 
the availability of the access and the timeliness of the data in it, 
not its utilization. Therefore, we focus on the fact that more than 10 
percent of unique patients seen during the EHR reporting period could 
access it and that the information is timely. The EP is not responsible 
for ensuring that 10 percent request access or have the means to 
access. However, we encourage EPs to make the availability of 
electronic access known to their patients.
    Comment: A commenter inquired about the provider's liability versus 
the EHR technology vendor for a security breach of the system.
    Response: Depending on the facts surround the security breach, the 
provider may be liable for a violation under the HIPAA Privacy and 
Security Rules, as well as under any other applicable federal or state 
laws. Additionally, there may be circumstances where the EHR technology 
vendor acted as a business associate and may potentially have liability 
under the HIPAA Privacy and Security Rules. The issue of business 
associate liability under the HIPAA Privacy and Security Rules will be 
addressed in upcoming rulemaking.
    After consideration of the public comments received, we are 
modifying the meaningful use measure for EPs at Sec.  495.6(d)(6)(ii) 
of our regulations to ``At least 10 percent of all unique patients seen 
by the EP are provided timely (available to the patient within four 
business days of being updated in the certified EHR technology) 
electronic access to their health information subject to the EP's 
discretion to withhold certain information''.
    We further specify that in order to meet this objective and 
measure, an EP, eligible hospital, or CAH must use the capabilities 
Certified EHR Technology includes as specified and standards at 45 CFR 
170.304(g). The ability to calculate the measure is included in 
certified EHR technology.
    To calculate the percentage, CMS and ONC have worked together to 
define the following for this objective:
     Denominator: Number of unique patients seen by the EP 
during the EHR

[[Page 44358]]

reporting period. A unique patient is discussed under the objective of 
CPOE.
     Numerator: The number of patients in the denominator who 
have timely (available to the patient within four business days of 
being updated in the certified EHR technology) electronic access to 
their health information online.
     Threshold: The resulting percentage must be at least 10 
percent in order for an EP to meet this measure.
    As addressed in other objectives and in comment response, if an EP 
neither orders nor creates any of the information listed in the ONC 
final rule 45 CFR 170.304(g) and therefore included in the minimum data 
for this objective during the EHR reporting period they would be 
excluded from this requirement as described previously in this section 
under our discussion of whether certain EP, eligible hospital or CAH 
can meet all Stage 1 meaningful use objectives given established scopes 
of practices.
    NPRM EP Objective: Provide clinical summaries for patients for each 
office visit.
    In the proposed rule, we discussed why we were basing the objective 
on office visits rather than encounters. We said that we did want 
encounter to be construed to mean every time a provider interacts with 
the patient. We received comments requesting that we further define 
office visit and address those in the comment and response section 
below. In discussing the measure in the proposed rule, we also said 
that the clinical summary can be provided through a PHR, patient portal 
on the web site, secure email, 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.
    Comment: We received requests for clarification as to what 
constitutes an ``office visit''.
    Response: An office visit is defined as any billable visit that 
includes: (1) Concurrent care or transfer of care visits, (2) 
Consultant visits and (3) Prolonged Physician Service without Direct 
(Face-To-Face) Patient Contact (tele-health). A consultant visit occurs 
when a provider is asked to render an expert opinion/service for a 
specific condition or problem by a referring provider.
    Comment: Some commenters believed the requirement for the provision 
of a clinical summary at an office visit should be linked to the type 
or purpose of the office visit. Samples of the suggested visits are--

--Level 4 or level 5 evaluation and management services;
--Visits conducted at the conclusion of an episode of care;
--Visits conducted at each transition of care;
--Visits relevant to specific conditions such as asthma; and
--Provider to patient face-to-face visits.

    Response: We believe that a clinical summary should be provided at 
all office visits included in the definition of office visit as defined 
in this final rule. We believe all of the office visits described in 
our definition result in the EP rendering a clinical judgment that 
should be communicated to the patient.
    Comment: Commenters requested CMS define ``clinical summary'' and 
offered several specific data elements that should be included in the 
definition such as patient name, provider name, date of visit, location 
of visit, reason for visit, updated medication list, laboratory orders, 
diagnostic orders, patient instructions based on discussions with the 
provider and a nutrition care management plan.
    Response: After reviewing the comments we define clinical summary 
as an after-visit summary that provides a patient with relevant and 
actionable information and instructions containing, but not limited to, 
the patient name, provider's office contact information, date and 
location of visit, an updated medication list and summary of current 
medications, updated vitals, reason(s) for visit, procedures and other 
instructions based on clinical discussions that took place during the 
office visit, any updates to a problem list, immunizations or 
medications administered during visit, summary of topics covered/
considered during visit, time and location of next appointment/testing 
if scheduled, or a recommended appointment time if not scheduled, list 
of other appointments and testing patient needs to schedule with 
contact information, recommended patient decision aids, laboratory and 
other diagnostic test orders, test/laboratory results (if received 
before 24 hours after visit), and symptoms.
    Comment: Commenters pointed out that the HIPAA Privacy Rule permits 
licensed healthcare professionals to withhold certain information if 
its disclosure would cause substantial harm to the patient or another 
individual.
    Response: As the EP is proactively providing this information to 
the patient, 45 CFR 164.524 of the HIPAA Privacy rule does not apply to 
this situation. However, we still believe that an EP should be able to 
withhold information if its disclosure would cause substantial harm to 
the patient or another individual. Therefore, if in their judgment 
substantial harm may arise from the disclosure of particular 
information, an EP may choose to withhold that particular information 
from the clinical summary
    Comment: Most commenters noted that other than ``at the time of the 
visit'', there was no specific time period given in which to comply 
with this objective. If CMS intended ``at the time of the visit'' to 
mean before the patient leaves the building or upon the patient's 
request, neither are possible due to workflow and review processes. 
Most commenters assumed we would associate the 48 hours related to the 
`copy' requirement or the 96 hours related to the `access' requirement 
to address this comment and stated that both were too short a period 
for a clinical visit summary. Others recommended the 30-day timeframe 
for the provision information set forth under the HIPAA Privacy Rule.
    Response: We agree that our proposed objective lacked specificity 
about the time to comply. To provide such specificity, we adopt the 
timeframe of three business days from our objective of providing 
electronic health information to the patient. That is three business 
days following the day of the visit excluding holidays as described in 
the providing electronic health information to the patient objective.
    Comment: Several commenters requested changes to the media through 
which this information could be provided. Differing commenters 
recommended eliminating the paper option, while others recommended only 
the paper option.
    Response: We believe that more options give the EP needed 
flexibility. The EP could choose any of the listed means from the 
proposed rule of PHR, patient portal on a Web site, secure email, 
electronic media such as CD or USB fob, or printed copy. If the EP 
chooses an electronic media, they would be required to provide the 
patient a paper copy upon request. Both forms can be and should be 
produced by certified EHR technology.
    Comment: Several commenters indicated that a provider should be 
allowed to charge a fee for providing the copy.
    Response: As this is a proactive requirement on the part of the EP 
and not a response to a request from the patient, we do not believe it 
is appropriate to charge the patient a fee for this copy. We note that 
we give the EP considerable flexibility in the

[[Page 44359]]

manner in which the copy is provided including the provision of a paper 
copy. The only accommodation an EP is required to make is the provision 
of a paper copy that can be automatically generated certified EHR 
technology. We therefore believe that costs of this will be negligible.
    Comment: A number of commenters expressed concern regarding whether 
the current available technology could produce a summary of the 
required information in a standardized format, the use of clinical 
nomenclature rather than lay terms and the fact that some providers use 
multiple modules to document the care of the patient.
    Response: We believe it is appropriate to leave the design of EHR 
technology systems and their outputs to the system developers and the 
EHR technology users. However, we note that the capability to meet this 
objective is included in the ONC final rule at 45 CFR 170.304(h) as a 
criteria for certified EHR technology and we are confident that vendors 
will be able to produce certified EHR technologies.
    After consideration of the public comments received, we are 
finalizing the objective for EPs at Sec.  495.6(d)(13)(i) of our 
regulations as proposed.
    We include this objective in the core set as it is integral to 
involving patients and their families in their provision of care and 
was recommended by the HIT Policy Committee for inclusion in the core 
set.
    NPRM EP Measure: Clinical summaries provided to patients for at 
least 80 percent of all office visits.
    Comment: Some commenters believed the threshold was too high or 
should be replaced with a numerical count or attestation.
    Response: We reduce the threshold to over 50 percent as this 
objective meets the criteria of relying 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. Also, as 
this is a relatively new capability that was not available to either 
providers or patients before the introduction of EHRs, we do not 
believe it meets the same standard of practice as maintaining an up-to-
date problem list and therefore adopt a threshold of 50 percent (rather 
than 80 percent).
    After consideration of the public comments received, we are 
modifying the meaningful use measure for EPs at Sec.  495.6(d)(13)(ii) 
of our regulation to ``Clinical summaries provided to patients for more 
than 50 percent of all office visits within 3 business days''.
    We further specify that in order to meet this objective and 
measure, an EP, eligible hospital, or CAH must use the capabilities 
Certified EHR Technology includes as specified and standards at 45 CFR 
170.304(h). The ability to calculate the measure is included in 
certified EHR technology.
    As with the previous objective, the provision of the clinical 
summary is limited to the information contained within certified EHR 
technology; therefore this measure is by definition limited to patients 
whose records are maintained using certified EHR technology as 
described previously in this section under our discussion of the burden 
created by the measures associated with the Stage 1 meaningful use 
objectives.
    To calculate the percentage, CMS and ONC have worked together to 
define the following for this objective:
     Denominator: Number of unique patients seen by the EP for 
an office during the EHR reporting period. A unique patient is 
discussed under the objective of using CPOE.
     Numerator: Number of patients in the denominator who are 
provided a clinical summary of their visit within three business days.
     Threshold: The resulting percentage must be more than 50 
percent in order for an EP, eligible hospital, or CAH to meet this 
measure.
    As addressed in other objectives, EPs who have no office visits 
during the EHR reporting period would be excluded from this requirement 
as described previously in this section under our discussion of whether 
certain EP, eligible hospital or CAH can meet all Stage 1 meaningful 
use objectives given established scopes of practices.
    NPRM EP/Eligible Hospital Objective: ``Provide access to patient-
specific education resources upon request.''
    In the proposed rule, we discussed this objective, but did not 
propose it. We stated that there was a paucity of knowledge resources 
that are integrated with EHR, and that also are widely available. We 
also noted that the ability to provide education resources in multiple 
languages might be limited. We stated our intent to further explore the 
objective in subsequent stages of meaningful use.
    Comment: We received many comments, including comments from both 
the HIT Policy Committee and MedPAC, to include this measure in the 
final rule. These commenters disagreed with our assertion in the 
proposed rule that ``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.'' 
Specific examples of the availability of knowledge resources integrated 
with current EHRs were provided. The HIT Policy Committee amended their 
recommendation in their comments on the proposed rule to:

--EPs and hospitals should report on the percentage of patients for 
whom they use the EHR to suggest patient-specific education resources.

    Other recommended language for the objective includes:

--Provide patients educational information that is specific to their 
health needs as identified by information contained in their EHR 
technology such as diagnoses and demographic data, and
--The original HIT Policy Committee objective of ``Provide access to 
patient-specific education resources upon request.''

    Response: We are convinced by commenters that the availability of 
education resources linked to EHRs is more widely available than we had 
indicated in the proposed rule. Therefore, for the final rule we will 
include this objective for the Stage 1 of meaningful use. We note that 
the new recommendation of the HIT Policy Committee is a hybrid of a 
measure and an objective, whereas in developing the meaningful use 
criteria we consistently identify both an objective and associated 
measure. However, we agree with the HIT Policy Committee and others 
that the objective and associated measure should make clear that the 
EP, eligible hospital or CAH should utilize certified EHR technology in 
a manner where the technology suggests patient-specific educational 
resources based on the information stored in the certified EHR 
technology. Therefore, we are including a revised version of this 
objective in the final rule for Stage 1 of meaningful use.
    We also believe it is necessary to state what level of EP, eligible 
hospital and CAH discretion is available when deciding whether to 
provide education resources identified by certified EHR technology to 
the patient. Therefore, we include the phrase ``if appropriate'', which 
allows the EP or the authorized provider in the eligible hospital or 
CAH final decision on whether the education resource is useful and 
relevant to a specific patient.
    After consideration of the public comments received, we are 
including this meaningful use objective for EPs at Sec.  495.6(e)(6)(i) 
and eligible hospitals and CAHs at Sec.  495.6(g)(5)(i) of our 
regulations as ``Use certified EHR technology to identify patient-
specific education resources and provide those resources to the patient 
if appropriate''.

[[Page 44360]]

    NPRM EP/Eligible Hospital Measure: Not applicable.
    Comment: CMS received a comment requesting an 80 percent threshold 
of appropriate patients and/or caregivers receiving patient-specific 
educational materials. In addition, the HIT Policy Committee's revised 
objective suggests a patient based percentage.
    Response: As with the addition of the recording of advance 
directives, we are able to relate this measure to one that is based on 
patients and can be accomplished solely using certified EHR technology. 
As this objective requires more than just the recording of information 
in certified EHR technology, we adopt a lower threshold of 10 percent.
    After consideration of the public comments received, we are 
including this meaningful use measure for EPs at Sec.  495.6(e)(6)(ii) 
and eligible hospitals at Sec.  495.6(g)(5)(ii) of our regulations as 
``More than 10 percent of all unique patients seen by the EP or 
admitted to the eligible hospital's or CAH's inpatient or emergency 
department (POS 21 or 23) are provided patient-specific education 
resources''.
    We further specify that in order to meet this objective and 
measure, an EP, eligible hospital, or CAH must use the capabilities 
Certified EHR Technology includes as specified and standards at 45 CFR 
170.302(m). The ability to calculate the measure is included in 
certified EHR technology.
    To calculate the percentage, CMS and ONC have worked together to 
define the following for this objective:
     Denominator: Number of unique patients seen by the EP or 
admitted to the eligible hospital's or CAH's inpatient or emergency 
department (POS 21 or 23) during the EHR reporting period. A unique 
patient is discussed under the CPOE objective.
     Numerator: Number of patients in the denominator who are 
provided patient education specific resources.
     Threshold: The resulting percentage must be more than 10 
percent in order for an EP, eligible hospital, or CAH to meet this 
measure.

We do not believe that any EP, eligible hospital, or CAH will not have 
more than 10 percent of their patients eligible to receive patient 
specific education resources and therefore do not believe an exclusion 
is necessary for this objective.
    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.
    NPRM 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.
    NPRM 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.
    In the proposed rule, we defined the term ``diagnostic test results 
'' as 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. We 
maintain this description for the final rule. We said that when the 
information was available in a structured format we expected that it be 
transferred in a structured format. However, if it was unavailable in a 
structured format, that the transmission of unstructured data was 
permissible. We provide additional information on structured data in 
the comment and response section, but maintain for the final rule the 
concept that the exchange can be of structured or unstructured data.
    Comment: Commenters requested clarification of the term ``key 
clinical information.''
    Response: By ``clinical information'', 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. We leave it to the 
provider's clinical judgment as to identifying what clinical 
information is considered key clinical information for purposes of 
exchanging clinical information about a patient at a particular time 
with other providers of care. The examples we provided in the proposed 
rule and the final rule below are not intended to be exhaustive. ONC in 
their final rule provides a minimum set of information that certified 
EHR technology must be able to exchange in order to be certified. A 
provider's determination of key clinical information could include some 
or all of this information as well as information not included in the 
ONC final rule at 45 CFR 170.304(i) for EPs and 45 CFR 170.306(f) for 
eligible hospitals and CAHs.
    Comment: Commenters requested clarification of the term ``patient 
authorized entities.''
    Response: By ``patient authorized entities'', we mean 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, an entity facilitating health information 
exchange among providers or a personal health record vendor identified 
by the patient. A patient would have to affirmatively grant access to 
these entities.
    Comment: Commenters requested clarification of the term 
``exchange.''
    Response: We expect that this information, when exchanged 
electronically, would be exchanged in structured electronic format when 
available (for example, drug and clinical lab data). 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. We believe that the electronic exchange of 
information is most efficient when it is exchanged from a provider's 
certified EHR technology to another certified EHR technology either 
directly or through an entity facilitating health information exchange 
using structured data that can be automatically identified by the 
receiving system and integrated into the receiver's records. However, 
we know that much information cannot currently be, and may never be, 
transmitted in the way we just described.
    Comment: Commenters requested clarification of the term 
``structured data.''
    Response: This distinction between structured data and unstructured 
data applies to all types of information. We have previously defined 
structured data in this section. To ensure that certified EHR 
technology has a certain level of functionality, ONC at 45 CFR 
170.304(i) for EPs and 45 CFR 170.306(f) for eligible hospitals and 
CAHs specified certain types of information that a certified EHR 
technology must be able to exchange to become certified. ONC also 
provided standards to support this exchange. These standards do not 
preclude a vendor of EHR technology from enabling its product to 
exchange additional types of information nor limit the provider's 
discretion (either in exchanging more or less) in deciding what 
information is key and should be exchanged about a given patient at a 
given time.
    Comment: Commenters expressed concern that the exchange of key

[[Page 44361]]

clinical information via certified EHR systems requires a unique or 
national patient identifier to ensure accurate exchange.
    Response: While such an identifier could facilitate an exchange, it 
need only be unique to the parties involved in the exchange and need 
not be national in scope, nor is a specific unique identifier necessary 
for successful exchanges. Many current health information exchanges 
have had success identifying patients by a combination of several 
elements of information without a separate independent identifier.
    Comment: Commenters pointed out that the general term ``allergies'' 
is inconsistent with other objectives of Stage 1 and with the 
capabilities mandated by certification under the ONC final rule, which 
uses the term ``medication allergies''.
    Response: As we have stated on several other objectives, we 
encourage all EPs, eligible hospitals, and CAHs to work with their 
certified EHR technology designers to make capabilities most relevant 
to their individual practices of care. However, we have maintained that 
at a minimum the capabilities that are part of certification should be 
included so we modify the example to change allergies to medication 
allergies to align it with other objectives and certification.
    After consideration of the public comments received, we are 
modifying the meaningful use objective for EPs at Sec.  495.6(d)(14)(i) 
of our regulations to ``Capability to exchange key clinical information 
(for example, problem list, medication list, medication allergies, and 
diagnostic test results), among providers of care and patient 
authorized entities electronically'' and for eligible hospitals and 
CAHs at Sec.  495.6(f)(13)(i) to ``Capability to exchange key clinical 
information (for example, discharge summary, procedures, problem list, 
medication list, medication allergies, diagnostic test results), among 
providers of care and patient authorized entities electronically''.
    In response to our revised requirements for meeting meaningful use, 
we included this objective in the core set. Section 1848 (o)(2)(A)(ii) 
of the Act specifically includes electronic exchange of health 
information in meaningful use for eligible professionals.
    NPRM EP/Eligible Hospital Measure: Performed at least one test of 
certified EHR technology's capacity to electronically exchange key 
clinical information.
    In the proposed rule, we identified this objective as reliant on 
the electronic exchange of information. We said that we are aware 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 proposed that EPs and eligible hospitals 
test their ability to send such information at least once prior to the 
end of the EHR reporting period. We proposed that the testing could 
occur prior to the beginning of the EHR reporting period. We also said 
that 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. Finally, we attempted to define an 
``exchange'' as the clinical information must be sent between different 
clinical entities with distinct certified EHR technology and not 
between organizations that share a certified EHR. We received many 
comments requesting further clarification on these concepts and we 
attempt to provide additional information in the comment and response 
section below.
    Comment: Commenters expressed concern that the receiving entities 
are not required to have the same capabilities as meaningful users of 
certified EHR technology.
    Response: The HITECH Act does not provide us the authority to 
require any entity (medical provider or otherwise) to conform to 
certain standards and criteria unless they seek to become a meaningful 
EHR user. The Act also limits the entities that are eligible to become 
meaningful EHR users. In developing the associated measure for this 
objective, we have ensured that eligible providers will be able to meet 
this objective as long as there is one other entity with which they can 
test their capability. As electronic exchange is not constrained by 
distance, we are confident that every provider seeking to test their 
system will be able to find another entity with which to conduct such 
test.
    Comment: Commenters asked whether the test needs to be ``live'' or 
if it could be a ``simulation.''
    Response: As specified in the proposed rule, this test must involve 
the actual submission of information to another provider of care with 
distinct certified EHR technology or other system capable of receiving 
the information.
    Comment: Commenters asked whether the use of ``test'' or ``dummy'' 
data is permissible.
    Response: While the use of test patient information may increase 
the risk that the system will not be testing to its full capability, 
given the privacy and security concerns surrounding the transmission of 
actual patient information we do not require it for the purposes of a 
test. Therefore, the use of test information about a fictional patient 
that would be identical in form to what would be sent about an actual 
patient would satisfy this objective.
    Comment: Commenters suggested deferring the measure to a later 
stage due to the lack of a mature HIE infrastructure and/or to emulate 
the Health Information and Management System Society (HIMSS) EMR 
Adoption Model.
    Response: We agree that many areas of the country currently lack 
the infrastructure to support the electronic exchange of information. 
As the goal of this meaningful use objective is to ensure that 
certified EHR technology has the capability to electronically exchange 
key clinical information, we only require a single test.
    After consideration of the public comments received, we are 
finalizing the meaningful use measure at Sec.  495.6(d)(14)(ii) and 
Sec.  495.6(f)(13)(ii) of our regulations as proposed.
    We further specify that in order to meet this objective and 
measure, an EP, eligible hospital, or CAH must use the capabilities 
Certified EHR Technology includes as specified and standards at 45 CFR 
170.304(i) for EPs and 45 CFR 170.306(f) for eligible hospitals and 
CAHs. The ability to calculate the measure is included in certified EHR 
technology. EPs, eligible hospitals, and CAHs should attempt to 
identify one other entity with whom to conduct a test of the submission 
of electronic data. This test must include the transfer of either 
actual or ``dummy'' data to the chosen other entity. The testing could 
occur prior to the beginning of the EHR reporting period, but must 
occur prior to the end of the EHR reporting period and every payment 
year would require its own, unique test as infrastructure for health 
information exchange is expected to mature over time. Therefore, if an 
eligible hospital or CAH were to become a meaningful EHR user in 2011 
for their first payment year, they would have to conduct another, 
unique test to become a meaningful EHR user in 2012 for their second 
payment year. 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

[[Page 44362]]

certified EHR technology. To be considered an ``exchange'' for this 
objective and measure the clinical information must be sent between 
different legal entities with distinct certified EHR technology or 
other system that can accept the information and not between 
organizations that share certified EHR technology. CMS will accept a 
yes/no attestation to verify all of the above for EPs, eligible 
hospitals, and CAHs.
    As the measure already accounts for the possibility of a failed 
test and we are confident that everyone will be identify an entity with 
which to conduct a test, we do not believe an exception is required for 
EPs, eligible hospitals or CAHs.
    NPRM EP/Eligible Hospital Objective: Perform medication 
reconciliation at relevant encounters and each transition of care.
    In the proposed rule, we described ``medication reconciliation'' as 
the process of identifying the most accurate list of all 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. We 
maintain this description for the final rule. We also described 
``relevant encounter'' and ``transition of care''; however, as we 
received comments requested additional clarification of these terms we 
address them in the comment and response section below.
    Comment: Several commenters requested that this objective be 
deferred until it can be conducted using the exchange of electronic 
information between certified EHR technology. Other commenters believed 
that the process is not one for avoiding medication errors, but a human 
workflow process supported by the EHR, and not an automated EHR 
process.
    Response: We certainly look forward to a time when most medication 
reconciliation occurs as an automated process within the EHR 
reconciling information that has been exchanged. However, it is 
unlikely that an automated process within the EHR will fully supplant 
the medication reconciliation conducted between the provider and the 
patient. In order for this automated reconciliation process to occur 
and be useful, the relevant structured data exchanged needs to be as 
accurate as possible. Requiring medication reconciliation as part of 
meaningful use in Stage 1 lays the groundwork for future reliable 
electronic exchange. We therefore do not believe this objective should 
be deferred to a later stage.
    Comment: Commenters requested additional clarity of the term 
``relevant encounter.'' Only a few suggestions on such clarity were 
provided by commenters. Two examples of commenters' recommendations are 
``when a prescription is generated'' and ``a significant change in the 
patient's condition that resulted in change in medication regimen which 
could include significant change in dosing of more than 1 medication, 
identification of a new medical condition, decline in functional status 
or change in advanced directive.''
    Response: We finalize our proposal by defining ``relevant 
encounter'' as an encounter during which the EP, eligible hospital or 
CAH performs a medication reconciliation due to new medication or long 
gaps in time between patient encounters or for other reasons determined 
appropriate by the EP, eligible hospital or CAH. Essentially an 
encounter is relevant if the EP, eligible hospital, or CAH judges it to 
be so. This flexibility has implications for the measure that were not 
fully considered in the proposed rule. We will discuss those below in 
connection with our discussion of the associated measure.
    Comment: Commenters requested additional clarity of the term 
``transition of care.'' A few suggestions were provided by commenters 
including expanding the description to include all transfers to 
different settings within a hospital or revising the definition to 
``the movement of a patient from one setting of care (hospital, 
ambulatory primary care practice, ambulatory specialty care practice, 
long-term care, home health, rehabilitation facility) to another''.
    Response: In the proposed rule we clarified ``transition of care'' 
as the 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, eligible hospital, or CAH 
(as defined by CCN) to another. We believe that different settings 
within one hospital using certified EHR technology would have access to 
the same information so reconciliation would not be necessary. We 
modify our clarification to account for some of the revisions provided. 
We clarify ``transition of care'' as the movement of a patient from one 
setting of care (hospital, ambulatory primary care practice, ambulatory 
specialty care practice, long-term care, home health, rehabilitation 
facility) to another. We also clarify that the receiving eligible 
hospital or EP would conduct the medication reconciliation.
    Comment: Some commenters requested clarification on which EP, 
eligible hospital or CAH would conduct the medication reconciliation. 
The one to whom the patient is transferred or the one who transfers the 
patient.
    Response: When conducting medication reconciliation during a 
transfer of care, we believe that it is the EP, eligible hospital or 
CAH that receives the patient into their care that should conduct the 
medication reconciliation. It is for this provider that the information 
is most crucial, as they will be making the future clinical judgments 
regarding the patient. Therefore, we revise this objective and its 
associated measure to reflect this clarification.
    Comment: Commenters requested a standard list be defined for the 
process including prescription and non prescription medications, herbal 
products, dietary supplements, prescriber, drug name, regimen and 
allergies.
    Response: We believe the information included in the process of 
medication reconciliation is appropriately determined by the provider 
and patient.
    After consideration of the public comments received, we are 
modifying the meaningful use objective for EPs at Sec.  495.6(e)(7)(i) 
and for eligible hospitals and CAHs at Sec.  495.6(g)(6)(i) of our 
regulations to ``The EP, eligible hospital or CAH who receives a 
patient from another setting of care or provider of care or believes an 
encounter is relevant should perform medication reconciliation''.
    NPRM EP/Eligible Hospital Measure: Perform medication 
reconciliation for at least 80 percent of relevant encounters and 
transitions of care.
    Comment: Commenters believed it was an unjustifiable burden to 
record which encounters were relevant and which were not given our 
flexible definition of ``relevant encounter''.
    Response: We agree that the inclusion of relevant encounters 
creates a burden that one commenter described as ``non-value-added 
work''. We also believe that when the EP, eligible hospital, or CAH 
identifies the encounter as relevant, it is unlikely that the EP, 
eligible hospital, or CAH would then not carry out the medication 
reconciliation. For these reasons, we are removing relevant encounters 
from the measure for this objective.
    Comment: Commenters said the percent measurements should be 
replaced with a numerical count or an attestation the objective has 
been met or the demonstration of the capability by performing one test 
of certified EHR technology's capacity to present

[[Page 44363]]

providers with patient medication information that supports the 
reconciliation of medications at time of admission and discharge. Other 
commenters stated the proposed 80 percent threshold was too high.
    Response: We are maintaining a percentage for the reasons discussed 
previously in this section. However, we do reduce the threshold to over 
50 percent as this objective meets the criteria of relying solely on a 
capability included as part of certified EHR technology and while not 
absolutely reliant on electronic exchange of information, it does 
involve the exchange of information between providers and therefore we 
adopt a threshold of 50 percent (rather than 8 percent).
    Comment: Commenters requested we align this objective with The 
Joint Commission National Patient Safety Goal on medication 
reconciliation (Goal 8) in order to decrease confusion, prevent the 
slowing of adoption of best practices and match current hospital 
reconciliation processes.
    Response: CMS understands the commenters' concerns regarding 
possible confusion if the meaningful use medication reconciliation 
requirement differs from The Joint Commission's requirement for those 
facilities accredited by that organization. However, currently there is 
no finalized Joint Commission standard as the Commission is currently 
in the process of re-evaluating their National Patient Safety Goal 8 
(Accurately and completely reconcile medications across the continuum 
of care) given the difficulties that many organizations are having in 
meeting the complex requirements. In the absence of a definitive Joint 
Commission standard to take into consideration, this is not possible.
    Comment: Some commenters expressed the desire to expand the scope 
of the measure to include the clinical decision making and patient 
counseling and education by a pharmacist.
    Response: We believe that is both beyond the scope of meaningful 
use as pharmacists are not eligible professionals for the EHR incentive 
programs and that the provision of patient counseling is more aligned 
with the objectives of clinical quality measures. Information from the 
medication reconciliation could be used for the basis of clinical 
decision support rules, but is not in and of itself a clinical 
decision.
    After consideration of the public comments received, we are 
modifying the meaningful use measure for EPs at Sec.  495.6(e)(7)(ii) 
and for eligible hospitals and CAHs at Sec.  495.6(g)(6)(ii) of our 
regulations to ``The EP, eligible hospital or CAH performs medication 
reconciliation for more than 50 percent of transitions of care in which 
the patient is transitioned into the care of the EP or admitted to the 
eligible hospital's or CAH's inpatient or emergency department (POS 21 
or 23)''.
    We further specify that in order to meet this objective and 
measure, an EP, eligible hospital, or CAH must use the capabilities 
Certified EHR Technology includes as specified and standards at 45 CFR 
170.302(j). The ability to calculate the measure is included in 
certified EHR technology.
    As discussed previously in this section under our discussion of the 
burden created by the measures associated with the Stage 1 meaningful 
use objectives, we only include in the denominator transitions of care 
related to patients whose records are maintained using certified EHR 
technology. To calculate the percentage, CMS and ONC have worked 
together to define the following for this objective:
     Denominator: Number of transitions of care during the EHR 
reporting period for which the EP or eligible hospital's or CAH's 
inpatient or emergency department (POS 21 to 23) was the receiving 
party of the transition.
     Numerator: The number of transitions of care in the 
denominator where medication reconciliation was performed.
     Threshold: The resulting percentage must be more than 50 
percent in order for an EP, eligible hospital, or CAH to meet this 
measure. If an EP was not on the receiving end of any transition of 
care during the EHR reporting period they would be excluded as 
previously discussed in this section under our discussion of whether 
certain EP, eligible hospital or CAH can meet all Stage 1 meaningful 
use objectives given established scopes of practices. We do not believe 
that any eligible hospital or CAH would be in a situation where they 
would not need to know the precise medications their patients are 
taking.
    NPRM EP/Eligible Hospital Objective: Provide summary care record 
for each transition of care or referral.
    In the proposed rule, we pointed out that this objective was not 
explicitly included in the HIT Policy Committee's recommended 
objectives, but that they did include a measure for the ``percent of 
transitions in care for which summary care record is shared.'' We said 
that 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 proposed 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. We 
received support for this inclusion from commenters and include this 
objective in the final rule for the reasons outlined in the proposed 
rule. We did receive comments requesting clarifications around this 
objective and address them in the comment and response section below.
    Comment: We received several comments that requested clarification 
as to the purpose of this objective.
    Response: The purpose of this objective is to ensure a summary of 
care record is provided to the receiving provider when a patient is 
transitioning to a new provider or has been referred to another 
provider while still remaining under the care of the referring 
provider. If the provider to whom the referral is made or to whom the 
patient is transitioned to has access to the medical record maintained 
by the referring provider then the summary of care record would not 
need to be provided. The most common example cited by commenters was a 
referral during which patient remains an inpatient of the hospital. 
Finally, unlike with medication reconciliation, where the receiving 
party of the transfer conducts the action, the transferring party would 
provide the summary care record to the receiving party.
    Comment: Commenters requested additional clarity of the term 
``transition of care''. A few suggestions were provided by the 
commenters including expanding the description to include all transfers 
to different settings within a hospital or revising the definition to 
``the movement of a patient from one setting of care (hospital, 
ambulatory primary care practice, ambulatory, specialty care practice, 
long-term care, home health, rehabilitation facility) to another''.
    Response: In the proposed rule we clarified that the term 
transition of care means a 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, eligible 
hospital, or CAH (as defined by CMS Certification Number (CCN) to 
another. We believe that different settings within a hospital using 
certified EHR technology would have access to the same information so

[[Page 44364]]

providing a clinical care summary would not be necessary. We further 
clarify transition of care as the movement of a patient from one 
setting of care (hospital, ambulatory primary care practice, 
ambulatory, specialty care practice, long-term care, home health, 
rehabilitation facility) to another.
    Comment: Some commenters requested clarification on which EP, 
eligible hospital or CAH should provide the summary of care document; 
the one to whom the patient is transferred or referred or the one who 
transfers or refers the patient.
    Response: We believe that it is the EP, eligible hospital or CAH 
that transfers or refers the patient to another setting of care or 
provider that should provide the summary of care document. It is for 
this provider that has the most recent information on the patient that 
may be crucial to the provider to whom the patient is transferred or 
referred. Therefore, we revise this objective and its associated 
measure to reflect this clarification.
    Comment: Commenters asked for clarification on how the summary of 
care record should be transferred.
    Response: The goal is to get the summary care record into the next 
provider's possession. While we highly encourage all EPs, eligible 
hospitals, and CAHs to explore ways to accomplish the transfer using 
electronic exchange, we realize that this capability is still in the 
development stages. Therefore, an EP, eligible hospital, or CAH could 
send an electronic or paper copy of the summary care record directly to 
the next provider or could provide it to the patient to deliver to the 
next provider, if the patient can reasonably expected to do so. 
Certified EHR technology would be used to generate the summary of care 
record and to document that it was provided to the patient or receiving 
provider.
    After consideration of the public comments received, we are 
modifying the meaningful use objective for EPs at Sec.  495.6(e)(8)(i) 
and for eligible hospitals and CAHs at Sec.  495.6(g)(7)(i) of our 
regulations to ``The EP, eligible hospital or CAH who transitions their 
patient to another setting of care or provider of care or refers their 
patient to another provider of care should provide summary care record 
for each transition of care or referral''.
    NPRM EP/Eligible Hospital Measure: Provide summary of care record 
for at least 80 percent of transitions of care and referrals.
    Comment: Commenters said that this should be replaced with a count 
and that the threshold was too high.
    Response: We are maintaining a percentage for the reasons discussed 
previously in this section. However, we do reduce the threshold to over 
50 percent as this objective meets the criteria of relying solely on a 
capability included as part of certified EHR technology and while not 
absolutely reliant on electronic exchange of information, it does 
involve the exchange of information between providers and therefore we 
adopt a threshold of 50 percent (rather than 80 percent).
    Comment: There were concerns about the ability of certified EHR 
technology to calculate this measure. As long as an EP, eligible 
hospital, or CAH records the order for a referral or transfer as 
structured data and a record is made that the summary care record was 
provided then certified EHR technology will be able to calculate this 
measure.
    After consideration of the public comments received, we are 
modifying the meaningful use measure for EPs at Sec.  495.6(e)(8)(ii) 
and for eligible hospitals and CAHs at Sec.  495.6(g)(7)(ii) of our 
regulations to ``The EP, eligible hospital or CAH who transitions or 
refers their patient to another setting of care or provider of care 
provides a summary of care record for more than 50 percent of 
transitions of care and referrals''.
    We further specify that in order to meet this objective and 
measure, an EP, eligible hospital, or CAH must use the capabilities 
Certified EHR Technology included as specified and standards at 45 CFR 
170.304(i) for EPs and 45 CFR 170.306(f) for eligible hospitals and 
CAHs. The ability to calculate the measure is included in certified EHR 
technology.
    As discussed previously in this section under our discussion of the 
burden created by the measures associated with the Stage 1 meaningful 
use objectives, we only include in the denominator transitions of care 
and referrals related to patients whose records that are maintained 
using certified EHR technology. To calculate the percentage, CMS and 
ONC have worked together to define the following for this objective:
     Denominator: Number of transitions of care and referrals 
during the EHR reporting period for which the EP or eligible hospital's 
or CAH's inpatient or emergency department (POS 21 to 23) was the 
transferring or referring provider.
     Numerator: The number of transitions of care and referrals 
in the denominator where a summary of care record was provided.
     Threshold: The percentage must be more than 50 percent in 
order for an EP, eligible hospital, or CAH to meet this measure.
    As addressed in other objectives and in comment response, if an EP 
does not transfer a patient to another setting or refer a patient to 
another provider during the EHR reporting period then they would have a 
situation of a null denominator as described would be excluded from 
this requirement as described previously in this section under our 
discussion of whether certain EP, eligible hospital or CAH can meet all 
Stage 1 meaningful use objectives given established scopes of 
practices. We do not believe that any eligible hospital or CAH would be 
in a situation where they would never transfer a patient to another 
care setting or make a referral to another provider.
    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.'' In the proposed rule, we 
explained that 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 the 
individuals who would communicate with public health agencies.
    NPRM EP/Eligible Hospital Objective: Capability to submit 
electronic data to immunization registries and actual submission where 
required and accepted.
    In the proposed rule, we did not elaborate on this objective.
    Comment: Some commenters suggested out that not every EP, eligible 
hospital, or CAH administers immunization. Therefore, as proposed, this 
objective and its associated measure would require an EP, eligible 
hospital, or CAH to implement and test a capability that they would not 
use.
    Response: We acknowledge that this objective is not relevant to all 
EPs, eligible hospitals or CAHs. Therefore, in this final rule, we 
clarify that this objective and its associated measure apply only to 
EPs, eligible hospitals or CAHs that administer one or more 
immunizations during the EHR reporting period.
    Comment: Some commenters recommended revising the language of the 
immunization objective to be consistent with the language of the 
syndromic surveillance objective by

[[Page 44365]]

replacing ``where required and accepted'' with ``according to 
applicable law and practice.''
    Response: First, we make a technical correction. The objective 
listed for EPs on page 1858 of the proposed rule listed this objective 
as ``Capability to submit electronic data to immunization registries 
and actual submission where possible and accepted.'' The objective was 
intended to be ``Capability to submit electronic data to immunization 
registries and actual submission where required and accepted'' for EPs, 
eligible hospitals, and CAHs. It is written as such in every other 
instance in the proposed rule including the regulation text. Second, in 
response to the comment that ``where required and accepted'' be 
replaced with ``according to applicable law and practice'', we see 
little distinction between the two in terms of requirement as 
applicable law and practice would be the things imposing a requirement. 
Therefore, we adopt the proposed language, but modify the language 
slightly to ``in accordance with applicable law and practice''. We do 
note however, that applicable law and practice do not guarantee every 
receiving entity will be able to accept it electronically. Our measure 
for meeting this objective is one test of electronic data submission 
and if the test is successful follow up submission to that one entity. 
We do not seek to enforce through meaningful use every law and practice 
that may require submission of immunization data. We also make another 
consistency change to the objectives under the health care policy goal 
of improving population and public health. In this objective, we 
describe the capability as submitting electronic data. In the other 
objectives under this goal we describe the capability as providing 
electronic data. We believe that functionally these terms are 
interchangeable, but to avoid any confusion we adopt the same term of 
``submit'' electronic data across all three objectives.
    Comment: Some commenters suggested that the term ``Immunization 
Information Systems (IIS)'' has replaced the term ``registry'' and is 
referred to as such by the Centers for Disease Control (CDC).
    Response: We modified the objective to account for both terms. 
After consideration of the public comments received, we are modifying 
the meaningful use objective for EPs at Sec.  495.6(e)(9)(i) and for 
eligible hospitals and CAHs at Sec.  495.6(g)(8)(i) of our regulations 
to Capability to submit electronic data to immunization registries or 
Immunization Information Systems and actual submission in accordance 
with to applicable law and practice.
    NPRM EP/Eligible Hospital Measure: Performed at least one test of 
certified EHR technology's capacity to submit electronic data to 
immunization registries (unless none of the immunization registries to 
which the EP, eligible hospital, or CAH submits such information have 
the capacity to receive the information electronically).
    In the proposed rule, we identified this as an objective where 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. This ability for 
the States is also included in our final rule.
    Comment: As with the objective of exchanging key clinical 
information, some commenters asked whether the test needs to be 
``live'' or if it could be a ``simulation''. Some commenters suggested 
that a simulation where the ability was tested without being 
transmitted to another party should be sufficient. Others suggested 
that the test needs to include transmission or difficulties in actual 
sending information might not be uncovered.
    Response: As specified in the proposed rule, this test must involve 
the actual submission of information to a registry or immunization 
information system, if one exists that will accept the information.
    Comment: Commenters asked whether the use of ``test'' or ``dummy'' 
data is permissible.
    Response: While the use of test patient information may increase 
the risk that the system will not be testing to its full capability, 
given the privacy and security concerns surrounding the transmission of 
actual patient information we do not require it for the purposes of a 
test. Therefore, the use of test information about a fictional patient 
that would be identical in form to what would be sent about an actual 
patient would satisfy this objective. However, we note that this is one 
of the objectives that a State may modify in accordance with the 
discussion in II.A.2.c. of the proposed rule. Therefore, more stringent 
requirements may be established for EPs and eligible hospitals under 
the Medicaid program in states where this capability exists.
    Comment: Commenters expressed concern about the burden of multiple 
requirements for submission from Federal, State, and local government 
agencies or non-governmental registries. They also raised the issue of 
lack of standardization of means and form of submission.
    Response: Standards for content exchange and vocabulary are 
established in the ONC final rule at 45 CFR 170.302(k). As meaningful 
use seeks to utilize certified EHR technology for purposes of the test 
and subsequent submission (if test was successful) these are the 
standards that should be utilized. While we encourage all providers and 
registries to work together to develop efficient, electronic submission 
of immunization information to all registries where it can be used to 
improve population and public health, for purposes of becoming a 
meaningful EHR user, we only require a single test and follow up 
submission if that test is successful.
    Comment: Commenters suggested deferring the measure to a later 
stage due to the lack of a mature HIE infrastructure.
    Response: We agree that many areas of the country currently lack 
the infrastructure to support the electronic exchange of information. 
As meaningful use seeks to ensure certified EHR technology has the 
capability to submit electronic data to registries, we only require a 
single test if a receiving entity is available and follow up submission 
only if that test is successful. If none of the immunization registries 
to which the EP, eligible hospital or CAH submits information has the 
capacity to receive the information electronically, then this objective 
would not apply.
    Comment: Commenters requested clarification whether on a failed 
attempted test satisfies the criteria of this measure and whether EPs 
in a group setting using identical certified EHR technology would only 
need to conduct a single test, not one test per EP.
    Response: A failed attempt would meet the measure. We highly 
encourage EPs, eligible hospitals, and CAHs to work with their vendor 
and the receiving entity with whom they tested to identify the source 
of the failure and develop remedies, but for Stage 1 of meaningful use 
a failed attempt would meet the requirements. We had indicated in the 
proposed rule that only one test is required for EPs practicing in a 
group setting that shares the same certified EHR technology. We 
maintain that proposal for the final rule.
    Comment: Commenters recommended the inclusion of electronically 
reporting to other types of registries in addition to immunization 
registries such as disease-specific registries such as the Cystic 
Fibrosis Registry.
    Response: While we encourage all providers and registries to work 
together

[[Page 44366]]

to develop efficient, electronic submission of information to all 
registries where it can be used to improve population and public 
health, for purposes of becoming a meaningful EHR user, we only require 
a single test utilizing immunization data and follow up submission if 
that test is successful.
    After consideration of the public comments received, we are 
modifying the meaningful use measure for EPs at Sec.  495.6(e)(9)(ii) 
and for eligible hospitals and CAHs at Sec.  495.6(g)(8)(ii) of our 
regulations to ``Performed at least one test of certified EHR 
technology's capacity to submit electronic data to immunization 
registries and follow up submission if the test is successful (unless 
none of the immunization registries to which the EP, eligible hospital, 
or CAH submits such information have the capacity to receive the 
information electronically)''.
    We further specify that in order to meet this objective and 
measure, an EP, eligible hospital, or CAH must use the capabilities 
Certified EHR Technology includes as specified and standards at 45 CFR 
170.302(k). The ability to calculate the measure is included in 
certified EHR technology. We require that an EP, eligible hospital, or 
CAH determine if they have given any immunizations during the EHR 
reporting period. Those that have not given any immunizations during 
the EHR reporting period are excluded from this measure according to 
the discussion of whether certain EP, eligible hospital or CAH can meet 
all Stage 1 meaningful use objectives given established scopes of 
practices. If they have given immunizations during the reporting 
period, they should then attempt to locate a registry or IIS with whom 
to conduct a test of the submission of electronic data. This test must 
include the transfer of either actual or ``dummy'' data to the chosen 
registry or IIS. The testing could occur prior to the beginning of the 
EHR reporting period, but must occur prior to the end 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. If the test is successful, then the EP, eligible hospital, or CAH 
should institute regular reporting to that entity in accordance with 
applicable law and practice. CMS will accept a yes/no attestation to 
verify all of the above for EPs, eligible hospitals or CAHs that have 
administered immunizations during the EHR reporting period.
    NPRM Eligible Hospital Objective: 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.
    In the proposed rule, we did not elaborate on this objective.
    Comment: A few commenters requested this objective be applied to 
EPs as long as the EHR Certification requirements are met. A commenter 
remarked that electronic submission of reportable lab results should 
not put an additional burden on the providers as the EHR would be able 
to automate this process.
    Response: We based the limitation on the recommendation of the HIT 
Policy Committee who in turn went through a considerable public 
development process. We do not believe that burden of reporting was the 
only limiting factor in keeping this objective from being applied to 
EPs; therefore, we maintain our proposal to limit this objective to 
eligible hospitals and CAHs. EPs usually send out lab test to other 
organizations on which reporting burdens may fall.
    Comment: Commenters requested that the actual transmission of the 
information be required.
    Response: In the discussion of the reporting immunization data 
objective, we discussed at length the need to align the language for 
the three objectives included under the health care policy priority of 
improve population and public health, which is one of the five 
priorities of the Stage 1 definition of meaningful use. Our 
interpretation is that the three phrases result in the same outcome, 
but introduce confusion due to the varied wordings. As commenters 
strongly preferred the phrase ``according to applicable law and 
practice'', we will so modify this objective. We do note however that 
applicable law and practice does not guarantee every receiving entity 
will be able to accept it electronically. Our measure for meeting this 
objective is one test of electronic data submission and if the test is 
successful, a follow up submission to that one entity. We do not seek 
to enforce through meaningful use every law and practice that may 
require submission of lab results.
    After consideration of the public comments received, we are 
modifying the meaningful use objective for eligible hospitals and CAHs 
at Sec.  495.6(g)(9)(i) of our regulations to ``Capability to submit 
electronic data on reportable (as required by state or local law) lab 
results to public health agencies and actual submission in accordance 
with applicable law and practice''.
    NPRM 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).
    In the proposed rule, we identified this as an objective where more 
stringent requirements may be established for eligible hospitals under 
the Medicaid program in states where this capability exists. This is 
just one example of a possible State proposed modification to
    Comment: Commenters asked whether the test needs to be ``live'' or 
if it could be a ``simulation''.
    Response: As specified in the proposed rule, this test must involve 
the actual submission of information to a public health agency, if one 
exists that will accept the information.
    Comment: Commenters asked whether the use of ``test'' or ``dummy'' 
data is permissible.
    Response: While the use of test patient information may increase 
the risk that the system will not be testing to its full capability, 
given the privacy and security concerns surrounding the transmission of 
actual patient information we do not require it for the purposes of a 
test. Therefore, the use of test information about a fictional patient 
that would be identical in form to what would be sent about an actual 
patient would satisfy this objective. However, we note that this is one 
of the objectives that a State may modify as discussed previously in 
this section. Therefore, more stringent requirements may be established 
for EPs and eligible hospitals under the Medicaid program in states 
where this capability exists.
    Comment: Commenters requested that one national standard be 
established for reporting lab results to public health agencies.
    Response: Standards for content exchange and vocabulary are 
established in the ONC final rule at 45 CFR 170.306(g). While we 
encourage all providers and public health agencies to work together to 
develop efficient, electronic submission of reportable lab results to 
all public health agencies, for purposes of becoming a meaningful EHR 
user, we only require a single test and follow up submission if that 
test is successful.
    Comment: Commenters suggested deferring the measure to a later 
stage due to the lack of a mature HIE infrastructure and lack of a 
clear standard for exchanging bio-surveillance data.
    Response: We agree that many areas of the country currently lack 
the infrastructure to support the electronic exchange of information. 
As meaningful use seeks to ensure certified EHR

[[Page 44367]]

technology has the capability to submit electronic data to public 
health agencies, we only require a single test if a receiving entity is 
available and follow up submission only if that test is successful.
    After consideration of the public comments received, we are 
modifying the meaningful use measure for eligible hospitals and CAHs at 
Sec.  495.6(g)(9)(ii) of our regulations to ``Performed at least one 
test of certified EHR technology's capacity to provide electronic 
submission of reportable lab results to public health agencies and 
follow-up submission if the test is successful (unless none of the 
public health agencies to which eligible hospital or CAH submits such 
information have the capacity to receive the information 
electronically)''.
    We further specify that in order to meet this objective and 
measure, an EP, eligible hospital, or CAH must use the capabilities 
Certified EHR Technology includes as specified and standards at 45 CFR 
170.306(g). The ability to calculate the measure is included in 
certified EHR technology. Eligible hospitals and CAHs should attempt to 
identify one public health agency with whom to conduct a test of the 
submission of electronic data. This test must include the transfer of 
either actual or ``dummy'' data to the chosen public health agency. The 
testing could occur prior to the beginning of the EHR reporting period, 
but must occur prior to the end of the EHR reporting period. If the 
test is successful, then the eligible hospital or CAH should institute 
regular reporting to that entity according to applicable law and 
practice. CMS will accept a yes/no attestation to verify all of the 
above for eligible hospitals and CAHs.
    NPRM EP/Eligible Hospital Objective: Capability to provide 
electronic syndromic surveillance data to public health agencies and 
actual transmission according to applicable law and practice.
    In the proposed rule, we did not elaborate on this objective.
    Comment: Half of the commenters commenting on this objective 
recommended that the objective be deferred to Stage 2 or 3 as the 
objective is considered expensive, complex and imposes significant 
administrative burdens on EPs, eligible hospitals and CAHs unless the 
certified EHR technologies support the automate, electronic capture of 
the requisite data.
    Response: The measure for this objective accounts for the 
possibility that such electronic exchange of syndromic data is not 
possible. Standards and certification for certified EHR technologies 
are covered under the ONC final rule and do support the automatic 
identification of the requisite data and its electronic capture. This 
greatly limits the cost, complexity and burden of this objective.
    Comment: Commenters requested that an actual transmission be 
required.
    Response: In discussing the reporting immunization data objective, 
we focused on the need to align the language for the three objectives 
contained in under the health care policy priority of improving 
population and public health. Our interpretation is that the three 
phrases result in the same outcome, but introduce confusion with the 
current language. We adopted the language from this objective for the 
others. We do note however that applicable law and practice does not 
guarantee every receiving entity will be able to accept it 
electronically. Our measure for meeting this objective is one test of 
electronic data submission and if the test is successful, then follow 
up submission to that one entity based on the reporting requirements of 
that entity. We do not seek to enforce through meaningful use every law 
and practice that may require submission of lab results.
    Comment: Some commenters requested a clarification of the term 
``public health agencies.''
    Response: A public health agency is an entity under the 
jurisdiction of the U.S. Department of Health and Human Services, 
tribal organization, State level and/or city/county level 
administration that serves a public health function.
    Comment: Some commenters recommended that providers be required to 
satisfy either electronic submission to immunization registries or 
electronic submission of syndromic surveillance data to a public health 
agency, but not both.
    Response: We disagree. We believe these are fundamentally different 
types of information. Each may impose unique requirements in terms of 
ability to exchange information on both the EP, eligible hospital, or 
CAH and the receiving entity. Therefore, a test for one does not prove 
or disprove the ability to exchange information for the other.
    After consideration of the public comments received, we are 
modifying the meaningful use objective for EPs at Sec.  495.6(e)(10)(i) 
and eligible hospitals and CAHs at Sec.  495.6(g)(10(i) of our 
regulations to ``Capability to submit electronic syndromic surveillance 
data to public health agencies and actual submission in accordance with 
applicable law and practice.''
    NPRM 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, eligible hospital, or CAH submits such 
information have the capacity to receive the information 
electronically).
    In the proposed rule, we identified this as an objective where 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.
    First, a technical correction, in the proposed rule we incorrectly 
stated that the capability to send electronic data to immunization 
registries was included in the certification standards for certified 
EHR technology. We intended for this data to be sent to public health 
agencies and ONC in their final rule at 45 CFR 170.304(l) correctly 
stated this capability as such.
    Comment: Commenters asked whether the test needs to be ``live'' or 
if it could be a ``simulation''.
    Response: As specified in the proposed rule, this test must involve 
the actual submission of information to a public health agency, if one 
exists that will accept the information.
    Comment: Commenters asked whether the use of ``test'' or ``dummy'' 
data is permissible.
    Response: While the use of test patient information may increase 
the risk that the system will not be testing to its full capability, 
given the privacy and security concerns surrounding the transmission of 
actual patient information we do not require it for the purposes of a 
test. Therefore, the use of test information about a fictional patient 
that would be identical in form to what would be sent about an actual 
patient would satisfy this objective. However, we note that this is one 
of the objectives that a State may modify in accordance with the 
discussion in II.A.2.c. of the proposed rule. Therefore, more stringent 
requirements may be established for EPs and eligible hospitals under 
the Medicaid program in states where this capability exists.
    Comment: A few commenters expressed confusion as to the required 
ferquency of the test.
    Response: As stated in the proposed rule, the required frequency of 
a test in Stage 1 for EPs, eligible hospitals, and CAHs is at least 
once prior to the end of the EHR reporting period. We further clarify 
that each payment year would require it own unique test.
    Comment: Commenters requested that one national standard be 
established for

[[Page 44368]]

reporting syndromic surveillance data to public health agencies.
    Response: Standards for content exchange and vocabulary are 
established in the ONC final rule. While we encourage all providers and 
public health agencies to work together to develop efficient, 
electronic submission of syndromic surveillance data to all public 
health agencies, for purposes of becoming a meaningful EHR user, we 
only require a single test and follow up submission if that test is 
successful.
    Comment: Commenters suggested deferring the measure to a later 
stage due to the lack of a mature HIE infrastructure.
    Response: We agree that many areas of the country currently lack 
the infrastructure to support the electronic exchange of information. 
As meaningful use seeks to ensure certified EHR technology has the 
capability to submit electronic data to public entities, we only 
require a single test if a receiving entity is available and follow up 
submission only if that test is successful. We note that this measure 
only applies if there is a public health agency with the capacity to 
receive this information.
    Comment: Commenters requested clarification on whether a failed 
attempted test satisfies the measure and whether EPs in a group setting 
using identical certified EHR technology would only need to conduct a 
single test, not one test per EP.
    Response: A failed attempt would meet the measure. We highly 
encourage EPs, eligible hospitals, and CAHs to work with their vendor 
and the receiving entity with whom they tested to identify the source 
of the failure and develop remedies, but for Stage 1 of meaningful use 
a failed attempt would meet the requirements. We had indicated in the 
proposed rule that only on test is required for EPs practicing in a 
group setting that shares the same certified EHR technology. We 
maintain that proposal for the final rule.
    After consideration of the public comments received, we are 
modifying the meaningful use measure for EPs at Sec.  495.6(e)(10)(ii) 
and eligible hospitals and CAHs at Sec.  495.6(g)(10)(ii) of our 
regulations to ``Performed at least one test of certified EHR 
technology's capacity to provide electronic syndromic surveillance data 
to public health agencies and follow-up submission if the test is 
successful (unless none of the public health agencies to which an EP, 
eligible hospital, or CAH submits such information have the capacity to 
receive the information electronically.)''
    We further specify that in order to meet this objective and 
measure, an EP, eligible hospital, or CAH must use the capabilities 
Certified EHR Technology includes as specified and standards at 45 CFR 
170.302(l). The ability to calculate the measure is included in 
certified EHR technology. EPs, eligible hospitals, and CAHs should 
attempt to identify one public health agency with whom to conduct a 
test of the submission of electronic data. This test must include the 
transfer of either actual or ``dummy'' data to the chosen public health 
agency. The testing could occur prior to the beginning of the EHR 
reporting period, but must occur prior to the end of the EHR reporting 
period. If the test is successful, then the EP, eligible hospital, or 
CAH should institute regular reporting to that entity according to 
applicable law and practice. CMS will accept a yes/no attestation to 
verify all of the above for eligible hospitals and CAHs.
    If an EP does not collect any reportable syndromic information on 
their patients during the EHR reporting period, then they are excluded 
from this measure according to the discussion of whether certain EP, 
eligible hospital or CAH can meet all Stage 1 meaningful use objectives 
given established scopes of practices.
    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.
    NPRM EP/Eligible Hospital Objective: Protect electronic health 
information created or maintained by the certified EHR technology 
through the implementation of appropriate technical capabilities.
    In the proposed rule, we discussed how we were relating the 
objectives presented by the HIT Policy committee more tightly to the 
meaningful use of certified EHR technology as opposed to the broader 
success of the EP, eligible hospital or CAH in ensuring privacy and 
security. The primary reason we gave was that the proper vehicle for 
ensuring privacy and security is the HIPAA Privacy and Security Act and 
that we sought with this objective to ensure that certified EHR 
technology does not impede an EP's, eligible hospital's or CAH's 
ability to comply with HIPAA.
    Comment: We received considerable support from many commenters who 
supported this objective and measure as proposed.
    Response: We appreciate the support of these commenters for our 
proposed objective and measure.
    Comment: Commenters requested clarification of appropriate 
technical capabilities.
    Response: The ONC final rule specifies certain capabilities that 
must be in certified EHR technology. For the objective we simply mean 
that a technical capability would be appropriate if it protected the 
electronic health information created or maintained by the certified 
EHR technology. All of these capabilities could be part of the 
certified EHR technology or outside systems and programs that support 
the privacy and security of certified EHR technology. We could not 
develop an exhaustive list. Furthermore as we state in the proposed 
rule compliance with HIPAA privacy and security rules is required for 
all covered entities, regardless of whether or not they participate in 
the EHR incentive programs. Furthermore, compliance with the HIPAA 
Privacy and Security Rules constitutes a wide range of activities, 
procedures and infrastructure. We rephrased 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.
    Comment: Several commenters urged CMS not to finalized requirements 
for the fair data sharing practices set forth in the Nationwide Privacy 
and Security Framework and to clarify the policies to which CMS is 
referring.
    Response: While we stated in the proposed rule we rephrased the 
objective to ensure ``compliance with fair sharing data practices 
outline in the Nationwide Privacy and Security Framework,'' we did not 
propose any practices or policies related to the Nationwide Privacy and 
Security Framework and do not finalize any in this final rule.
    Comment: Several commenters requested the elimination of this 
objective as redundant to HIPAA.

[[Page 44369]]

    Response: We do not see meaningful use as an appropriate regulatory 
tool to impose different, additional, and/or inconsistent privacy and 
security policy requirements from those policies already required by 
HIPAA. With that said, we do feel it is crucial that EPs, eligible 
hospitals, and CAHs evaluate the impact certified EHR technology has on 
their compliance with HIPAA and the protection of health information in 
general. Therefore, we retain this objective and measure for meaningful 
use in the final rule.
    Comment: We received hundreds of comments that requested the 
cancelation of the EHR incentive payment program due to the privacy and 
security risks imposed by the implementation and use of certified EHR 
technology.
    Response: We are required by the ARRA to implement the EHR 
incentive programs and cannot cancel them. We seek to mitigate the 
risks to the security and privacy of patient information by requiring 
EPs, eligible hospitals, and CAHs to 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.
    After consideration of the public comments received, we are 
finalizing the meaningful use objective for EPs at Sec.  
495.6(d)(15)(i) and eligible hospitals and CAHs at Sec.  
495.6(f)(14)(i) of our regulations as proposed.
    We include this objective in the core set. We believe maintaining 
privacy and security is crucial for every EP, eligible hospital or CAH 
that uses certified EHR technology and was recommended by the HIT 
Policy Committee for inclusion in the core set.
    NPRM 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.
    In the proposed rule, we discussed the role of certified EHR 
technology in privacy and security. We said that 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. We have maintained this 
discussion for the final rule, but modified the measure to account for 
requests discussed in the comment and response section below.
    Comment: Some commenters requested clarification of the phrase 
``implement security updates as necessary''.
    Response: A security update would be required if any security 
deficiencies were identified during the risk analysis. A security 
update could be updated software for certified EHR technology to be 
implemented as soon as available, to changes in workflow processes, or 
storage methods or any other necessary corrective action that needs to 
take place in order to eliminate the security deficiency or 
deficiencies identified in the risk analysis. To provide better clarity 
on this requirement, we are modifying the measure.
    After consideration of the public comments received, we are 
modifying the meaningful use measure for EPs at Sec.  495.6(d)(15)(ii) 
and eligible hospitals and CAHs at Sec.  495.6(f)(14)(ii) of our 
regulations ``Conduct or review a security risk analysis per 45 CFR 
164.308(a)(1) of the certified EHR technology, and implement security 
updates and correct identified security deficiencies as part of its 
risk management process.''
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BILLING CODE 4120-01-C
3. Sections 4101(a) and 4102(a)(1) of the HITECH Act: Reporting on 
Clinical Quality Measures Using EHRs by EPs, Eligible Hospitals, and 
CAHs \3\
---------------------------------------------------------------------------

    \3\ For purposes of this final rule, the term ``eligible 
hospital'' for the Medicaid EHR incentive program is inclusive of 
Critical Access Hospitals (CAHs) as defined in this final rule.
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a. General
    As discussed in the meaningful use background in section II.A.2.a. 
there are three elements of meaningful use. In this section, we discuss 
the third requirement: using certified EHR technology, the EP, eligible 
hospital, or CAH 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.c of this final rule. The two other elements of meaningful use 
are discussed in section II.A.2.d.1 of this final rule.
b. Requirements for the Submission of Clinical Quality Measures by EPs, 
Eligible Hospitals, and CAHs
    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.
    In the proposed rule, we stated that 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. We believe that 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 would 
depend 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 proposed 
that Medicare EPs, eligible hospitals, and CAHs use an attestation 
methodology to submit summary information to us on clinical quality 
measures as a condition of demonstrating meaningful use of certified 
EHR technology, rather than electronic submission.
    We proposed that from the Medicaid perspective, delaying the onset 
of clinical quality measures electronic reporting until 2012 addresses 
concerns about States having the ready infrastructure to receive and 
store clinical quality measures data before then. More importantly, we 
recognized that since Medicaid providers are eligible to receive 
incentive payments for adopting, implementing, or upgrading certified 
EHR technology, Medicaid providers may not be focused on demonstrating 
meaningful use until 2012 or later.
    We stated that 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 beginning in CY 2012 we proposed that an 
EP using a certified EHR technology or beginning in FY 2012 an eligible 
hospital or CAH using a certified EHR technology, as appropriate for 
clinical quality measures, must submit information on clinical quality 
measures electronically, in addition to submitting the other measures 
described in section II.2.d.2, in order for the EP, eligible hospital, 
or CAH 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. We stated in the proposed rule 
that should we not have the capacity to accept information on clinical 
quality measures electronically in 2012, we would 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.
    We also are finalizing in this final rule that States must identify 
for us in their State Medicaid HIT Plans how they plan to accept data 
from Medicaid providers who seek to demonstrate meaningful use by 
reporting on clinical quality measures, either via attestation or via 
electronic reporting, subject to our prior approval. If they initiate 
their program by accepting attestations for clinical quality measures, 
they must also describe how they will inform providers of their 
timeframe to accept submission of clinical quality measures 
electronically. We expect that States will have the capacity to accept 
electronic reporting of clinical quality measures by their second year 
implementing their Medicaid EHR incentive program.
    For purposes of the requirements under sections 1848(o)(2)(A)(iii) 
and 1886(n)(3)(iii) of the Act, we defined ``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, patient-centered, equitable, and timely care. We noted 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

[[Page 44381]]

section II.A.3.c.1 of this final rule. These limitations apply solely 
to the submission of clinical quality measures, and do not apply to 
other measures of meaningful EHR use. The clinical quality measures on 
which EPs, eligible hospitals, or CAHs will be required to submit 
information using certified EHR technology, the statutory requirements 
and other considerations that were used to select these measures, and 
the reporting requirements are described below.
    With respect to Medicaid EPs and eligible hospitals, we noted 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. We proposed that in the interest of simplifying 
the program and guarding against duplication of meaningful use 
criteria, the clinical quality measures adopted for the Medicare EHR 
incentive program, would also apply to EPs and eligible hospitals in 
the Medicaid EHR incentive program.
    Despite the statutory limitation prohibiting the Secretary from 
requiring the electronic submission of clinical quality measures in the 
Medicare EHR incentive program, 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, eligible hospitals, and CAHs. Although we proposed to require 
the electronic submission of information on clinical quality measures 
in 2012, we stated that we do not desire this to delay the use of 
certified EHR technology by EPs, eligible hospitals, and CAHs to 
measure and improve clinical quality. Specifically, we stated that 
using EHR functionalities that support measurement of clinical quality 
is critical to a central goal of the HITECH Act, improving health care 
quality. Measuring quality is a fundamental aspect of improving such 
quality, because it allows EPs, eligible hospitals, and CAHs to receive 
quantitative information upon which they can then act in order to 
improve quality.
    Accordingly, although we did not propose under sections 
1848(o)(2)(A)(iii) and 1886(n)(3)(A)(iii) of the Act to require that 
for 2011 EPs, eligible hospitals, and CAHs report clinical quality 
measures to us or States electronically, we proposed to require as an 
additional condition of demonstrating meaningful use of certified EHR 
technology under sections 1848(o)(2)(A)(i), 1886(n)(3)(A)(ii), and 
1903(t)(6) of the Act that EPs and eligible hospitals use certified EHR 
technology to capture the data elements and calculate the results for 
certain clinical quality measures. Further, we proposed that EPs, 
eligible hospitals, and CAHs demonstrate that they have satisfied this 
requirement during the EHR reporting period for 2011 through 
attestation. We also proposed to require that Medicare EPs, eligible 
hospitals, and CAHs attest to the accuracy and completeness of the 
numerators and denominators for each of the applicable measures. 
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, eligible 
hospitals, and CAHs demonstrate compliance with the meaningful use 
criteria, we proposed that EPs, eligible hospitals, and CAHs 
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 us for all applicable patients. 
For the Medicaid incentive program, we proposed that States may accept 
provider attestations in the same manner to demonstrate meaningful use 
in 2011. However, we indicated that we expect that most 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 certified EHR technology 
in 2011, for their first payment year.
    We stated that we recognize that considerable work needs to be done 
by measure owners and developers with respect to the clinical quality 
measures that we proposed. 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 recognized that some measures are further 
developed than others, as discussed in the measures section (see 75 FR 
1871) of the proposed rule. Nevertheless we stated our belief that 
overall there is sufficient time to complete work on measures and 
measures specifications so as to allow vendors and EPs, eligible 
hospitals, and CAHs to implement such systems. We stated that it was 
our intention not to finalize those specific measures should the 
necessary work on measure specifications not be completed for 
particular measures according to the timetable we discuss below. As we 
discuss below, we finalize in this final rule only those clinical 
quality measures for which clearly defined electronic specifications 
have been finalized by the date of display of this final rule. 
Finalized clinical quality measures are listed in Table 6 for EPs and 
Table 7 for eligible hospitals and CAHs. We also clarify that while 
States may not have the capacity to accept electronic reporting of 
clinical quality measures in 2011 or their first year implementing 
their Medicaid EHR incentive program, we expect that they will have 
such capacity by their second implementation year. However, if they do 
not, as with the Federal government, the State would continue to rely 
on an attestation methodology for reporting clinical quality measures 
as a requirement for demonstrating meaningful use of certified EHR 
technology, subject to CMS prior approval via an updated State Medicaid 
HIT plan.
    Comment: A few commenters requested that the definition of 
``clinical quality measures'' be expanded to include ``appropriate 
clinical prevention.''
    Response: We agree that appropriate clinical prevention is a 
pertinent topic for clinical quality measures, but we do not believe 
the definition of clinical quality measures needs to delineate every 
aspect of quality care included in the definition.
    Comment: Several commenters said it will be difficult to develop 
the EHR capability to capture, integrate and train staff regarding 
measure specifications if the clinical quality measures are not posted 
with sufficient time to allow these activities. Other commenters said 
there is insufficient time allowed for vendors to retool their products 
and complete development of the reports and/or systems. Several 
commenters indicated that the clinical quality measures have not been 
tested, and reliability and validity testing should be performed. Other 
commenters indicated that standard, clearly defined electronic 
specifications do not exist and new specifications should be pilot 
tested and published for stakeholder/public comment. A commenter 
requested that CMS establish an explicit process for development and 
testing of evidence based electronically specified measures (eMeasure), 
and ensure adequate time for field testing.
    Response: In general we agree with the desirability of having 
electronic specifications available, pilot tested, and published for 
stakeholder viewing sufficiently in advance so as to allow adequate 
time for modifications if necessary and vendors to incorporate them 
into certified EHR technology, and for EPs, eligible hospitals, and 
CAHs to

[[Page 44382]]

integrate the measures into their operations and train staff on the 
measures. In this case, however, there is a process for certification 
of certified EHR technology which includes testing of the capability of 
the certified EHR. The final rule issued by ONC (found elsewhere in 
this issue of the Federal Register) provides that certified EHR 
technology must have the ability to calculate clinical quality measures 
as specified by us. We interpret this requirement to mean that 
certified EHR technology must have the capability to calculate those 
clinical quality measures selected in this final rule based on the 
specifications we select and post on the CMS Web site. In order to 
provide sufficient time for vendors to retool their products and 
complete development of the necessary reports and/or systems for 
calculation of the results for the required clinical quality measures, 
and for certifying bodies to test and certify that EHR technologies 
adequately do so, we are adopting only those electronic specifications 
that are posted on the CMS Web site as of the date of display of this 
final rule. We believe testing that is part of the process for 
certification of EHR technology will substitute for testing that might 
otherwise occur. Additionally, some of the selected measures have 
undergone various amounts of testing already. For example, the 
Emergency Department Throughput, Stroke and Venous Thromboembolism 
(VTE) measures mentioned by the commenter were tested during the 
January 2010 Connectathon and demonstrated at the Health Information 
and Management Systems Society (HIMSS) 2010 Interoperability Showcase 
which demonstrated the use of the measures by participating vendors. 
However, we expect the EHR certification process to carry out the 
necessary testing to assure that applicable certified EHR technology 
can calculate sufficient number of EP, eligible hospital and CAH 
clinical quality measures required to qualify for the meaningful use 
incentive program. In order to permit greater participation by EHR 
vendors, including specialty EHRs, the certification program (see ONC 
final rule found elsewhere in this issue of the Federal Register) will 
permit EHRs to be certified if they are able to calculate at a minimum 
three clinical quality measures in addition to the six core and 
alternative core measures. In addition, the fact that EPs, eligible 
hospitals, and CAHs can adopt an EHR reporting period toward the end of 
FY/CY 2011, we believe, will provide additional time for providers to 
implement and train staff on the measures we adopt in this final rule.
c. Statutory Requirements and Other Considerations for the Selection of 
Clinical Quality Measures for Electronic Submission by EPs, Eligible 
Hospitals, and CAHs
(1) Statutory Requirements for the Selection of Clinical Quality 
Measures for Electronic Submission by EPs, Eligible Hospitals, and CAHs
    Sections 1848(o)(2)(B)(i)(II) and 1886(n)(3)(B)(i) of the Act 
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, eligible hospitals, and CAHs for 2011 and 
2012 payment were listed in Tables 3 through 21 of the proposed rule 
(see 75 FR 1874 through 1900).
    In the proposed rule, we noted that 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 section 1890(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 and 
CAHs, 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 section 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, we explained in the 
proposed rule that 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 will 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, we stated that when selecting the clinical quality measures 
eligible hospitals and CAHs 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 will 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 
proposed measures for EPs, eligible hospitals, and CAHs that are not 
currently NQF endorsed in an effort to include a broader set of 
clinical quality measures. In the proposed rule, we noted that the 
HITECH Act does not require the use of NQF endorsed measures, nor limit 
the measures to those included in PQRI or RHQDAPU. We stated that 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 proposed certain clinical quality measures for EPs, eligible 
hospitals, and CAHs, and listed these measures in Tables 3 through 21 
of the proposed rule (see 75 FR 1874-1900) for use in the 2011 and 2012 
payment years. We stated that no changes (that is, additions of 
clinical quality measures) would be made after publication of the final 
rule, except through further rulemaking. However, we stated that 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. We stated that the 2011 
specifications for user submission of clinical quality measures would 
be available on our Web site when they are sufficiently developed or 
finalized. Specifications for the EHR incentive programs must be 
obtained only from the specifications documents for the EHR incentive 
program clinical quality measures.
    Comment: Numerous comments were received regarding the criteria for 
selection of clinical quality measures. Some commenters noted the 
importance of scientific and medical evidence supporting the measure, 
as well as

[[Page 44383]]

concerns regarding how the clinical quality measures are maintained. 
Many other commenters indicated that all clinical quality measures 
should be evidence-based and up-to-date with current medical standards. 
Several commenters communicated support for using NQF; Hospital Quality 
Alliance (HQA); Ambulatory care Quality Alliance (AQA); and the 
American Medical Association-Physician Consortium for Performance 
Improvement (AMA-PCPI) clinical quality measures. Another commenter 
suggested that measures that have a related U.S. Preventative Services 
Task Force (USPSTF) recommendation should follow the USPSTF guidelines 
and the regulations should allow for clinical quality measures to be 
updated as the evidence base changes. Another commenter indicated CMS 
should ensure that all clinical quality measures are endorsed through a 
stakeholder consensus process. Commenters also questioned why some 
clinical quality measures in the proposed rule do not have identifiers 
for example, NQF number and another commenter indicated some of the 
clinical quality measures titles were different in the clinical quality 
measure tables. Some commenters also stated that clinical quality 
measures should be phased in, implementing the clinical quality 
measures by clinically related sets, and that all CMS proposed clinical 
quality measures should be NQF endorsed.
    Some commenters suggested that CMS should consult with other 
quality measure stakeholders, such as, NQF, the Hospital Quality 
Alliance (HQA), and the National Committee for Quality Assurance 
(NCQA), The Joint Commission (TJC), and Regional Health Improvement 
Collaboratives to verify the validity, reliability, and appropriateness 
of proposed clinical measures. In addition when developing, validating 
and recommending clinical quality measures for the pediatric 
population, a commenter suggested CMS include consultation with the 
Child Healthcare Corporation of America (CHCA) or the National 
Association of Children's Hospitals (NACHRI).
    Response: The HITECH Act requires that we give preference to 
clinical quality measures that are NQF endorsed. NQF is the only 
organization that we are aware of which is in compliance with the 
requirements of National Technology Transfer and Advancement Act 
(NTTAA), to endorse quality measures through voluntary consensus 
standards. However, the HITECH Act does not require the exclusive use 
of NQF endorsed measures, nor limit the measures to those produced by 
any particular developer or adopted or supported by any particular 
organization, such as those suggested by the commenters. We gave 
preference to NQF endorsed clinical quality measures in this final 
rule. However, we do not adopt a policy that would restrict the 
Secretary's discretion of beyond what is required by the statute. 
Measures listed in the proposed rule that did not have an NQF 
identifying number were not NQF endorsed.
    With respect to specific organizations, we have received broad 
input regarding clinical quality measures including from many 
organizations mentioned by commenters and have considered their 
comments in determining which clinical quality measures to finalize in 
this final rule. We also note that, for NQF endorsed measures, the NQF 
provides a venue for public and member input as a part of the 
endorsement process. With respect to commenters urging consideration of 
whether the scientific and medical evidence support the measure, 
whether the clinical quality measures are evidence-based and consistent 
with current medical standards, and how the clinical quality measures 
are maintained, we note that these factors are part of the NQF process, 
as well as standard measure development processes. We are committed to 
working with national, State and local associations to identify or 
develop additional electronically specified clinical quality measures, 
particularly for pediatric populations, for later stages of meaningful 
use.
    In selecting clinical quality measures for the Medicare EHR 
incentive program, the Secretary is required to provide for notice in 
the Federal Register with public comment. This provides broad public 
input which we fully consider. However, as we stated in the proposed 
rule, we are finalizing the policy that technical specifications for 
clinical quality measures are developed and finalized through the sub-
regulatory process. Further, this requirement does not pertain to the 
Medicaid EHR incentive program. We expect to develop a process in the 
future to solicit public input on Medicaid-specific clinical quality 
measures for future stages of meaningful use, if needed. However, 
because there are no such Medicaid-specific measures in this final 
rule, and all measures apply uniformly across both the Medicare and 
Medicaid EHR incentive program, we have not developed such a process in 
this final rule.
    After consideration of the public comments received, the HITECH Act 
requires that we give preference to clinical quality measures that are 
NQF endorsed. However, it does not require the exclusive use of NQF 
endorsed measures, nor limit the measures to those produced by any 
particular developer nor be adopted by any particular organization. In 
this case, all clinical quality measures we are finalizing are NQF 
endorsed and have current electronic specifications as of the date of 
display of this final rule. Effective with the publication of this 
final rule, these specifications are final for clinical quality measure 
reporting under the HITECH Act beginning with 2011 and 2012. The 
detailed electronic specifications of the clinical quality measures for 
EPs, eligible hospitals, and CAHs are displayed on the CMS Web site at 
http://www.cms.gov/QualityMeasures/03_ElectronicSpecifications.asp#TopOfPage.
    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). For EPs, when the 
proposed rule was issued there was no statutory authority to provide 
PQRI incentive payments for services furnished for 2011 or subsequent 
years. Since then, the PQRI incentive payment for 2011 has been 
authorized. We acknowledge there is overlap within the clinical quality 
measure reporting for EPs in the EHR incentive program with the PQRI 
incentive program. However, the reporting periods in these two 
incentive programs are different. Currently, the PQRI has a six and a 
twelve month reporting period. The reporting period for the HITECH EHR 
incentive program for the first payment year is 90 days, which does not 
meet the PQRI reporting requirement of six or twelve month reporting 
period, as currently provided. However, in the second payment year of 
the HITECH EHR incentive program the reporting period is one year, and 
the PQRI reporting period, would be synchronous. The requirement for 
qualification for PQRI is subject to a separate regulation. Although 
there may be additional issues beyond the reporting periods, we 
anticipate efforts to avoid redundant and duplicative reporting in PQRI 
of the same clinical quality measures as required in the EHR incentive 
program. We envision a single reporting infrastructure for electronic

[[Page 44384]]

submission in the future, and will strive to align the EHR incentive 
program and PQRI as we develop the reporting framework for clinical 
quality measures to avoid redundant or duplicative reporting. Further, 
we also note that the Affordable Care Act (Pub. L. 111-148) requires 
that the Secretary develop a plan to integrate the EHR incentive 
program and PQRI by January 1, 2012. In doing so we expect to further 
address the issue of redundant and duplicative reporting. For eligible 
hospitals and CAHs, for the EHR incentive program, we are finalizing 
one set of 15 clinical quality measures for both Medicare and Medicaid. 
For Stage 1 (for clinical quality measures Stage 1 is 2011 and 
beginning in 2012), none of the finalized 15 clinical quality measures 
for eligible hospitals and CAHs are currently included in the RHQDAPU 
program, and therefore there is no issue of redundant and duplicative 
reporting based upon the HITECH Act. Nevertheless, clinical quality 
measures in the EHR incentive program for eligible hospitals and CAHs 
were electronically specified for use in the RHQDAPU program with the 
anticipation to place these measures in RHQDAPU once we have completed 
and implemented the mechanism to accept quality measures through 
electronic submission. For the future, we do not anticipate having one 
set of clinical quality measures for the EHR incentive program and 
another set for RHQDAPU. Rather, we anticipate a single set of hospital 
clinical quality measures, most of which we anticipate can be 
electronically specified. We note some of the RHQDAPU quality measures, 
for example HCAHPS experience of care measures, do not lend themselves 
to EHR reporting. Similarly, certain outcome quality measures, such as 
the current RQHDAPU readmission measures, are based on claims rather 
than clinical data. In the future, we anticipate hospitals that report 
RHQDAPU measures electronically would receive incentives from both the 
RHQDAPU and EHR incentive program, in addition to properly reporting 
any required quality measures that are not able to be derived from 
EHRs; this is however subject to future rulemaking. Further, in the 
future, for hospitals that do not report electronically we anticipate 
that they may only qualify for an incentive through the RHQDAPU 
program, and not through the EHR incentive program. Again this is 
subject to future rulemaking. We envision a single reporting 
infrastructure for electronic submission in the future, and will strive 
to align the hospital quality initiative programs to seek to avoid 
redundant and duplicative reporting of quality measures for eligible 
hospitals and CAHs.
    Comment: Many commenters also suggested aligning clinical quality 
measure reporting across federal agencies (for example, HRSA, CMS) as 
well as across programs, (for example, PQRI, CHIP, Medicare and 
Medicaid) to avoid duplicative and redundant quality performance 
reporting. Additionally, several commenters suggested that similar 
clinical quality measures and/or quality data efforts included in the 
proposed rule are included in other clinical quality recognition 
programs and EPs who successfully report in these programs via a 
certified EHR should be deemed to have successfully reported in the EHR 
incentive program. Other commenters suggested using the PQRI reporting 
process to satisfy the meaningful use requirement under the EHR 
incentive program for EPs. Another commenter indicated that clinical 
quality measures employed by this program and others will be valuable 
if EPs using EHRs have an in-depth understanding of how to leverage the 
technology and the data they produce to improve care. A number of 
commenters requested that only clinical quality measures chosen for use 
in the RHQDAPU program should be considered for implementation in the 
EHR incentive program for eligible hospitals and CAHs that qualify for 
both incentives. Additionally, the commenters stated they would like 
the process for avoiding duplicative reporting clearly defined.
    Response: The HITECH Act requires that the Secretary seek to avoid 
redundant and duplicative reporting, with specific reference to PQRI 
for EPs and RHQDAPU for eligible hospitals and CAHs. We have sought to 
avoid duplicative and redundant reporting in the implementation of the 
HITECH Act as discussed elsewhere in our responses to comments in this 
final rule. We will seek to align quality initiative programs in future 
rulemaking.
(2) Other Considerations for the Selection of Clinical Quality Measures 
for Electronic Submission by EPs, Eligible Hospitals, and CAHs
    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, we also proposed applying the following considerations 
to the selection of the clinical quality measures for electronic 
submission under the Medicare and Medicaid EHR incentive programs:
     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 through the PQRI program, 
performed at low or highly variable rates.
     Clinical quality measures that have been recommended for 
inclusion in the EHR incentive by the HIT Policy Committee.
    We noted in the proposed rule that the Children's Health Insurance 
Program Reauthorization Act (CHIPRA) of 2009 (Pub. L. 111-3) Title IV, 
section 401 requires the Secretary to publish a core set of clinical 
quality measures for the pediatric population. We stated that, to the 
extent possible, we would align the clinical quality measures selected 
under the EHR incentive program with the measures selected under the 
CHIPRA core measure set. Included in the proposed clinical quality 
measures were nine clinical quality measures pertaining to pediatric 
providers. Four of these nine measures were on the list of CHIPRA 
initial core measures that were recommended to the Secretary by the 
Subcommittee to AHRQ's National Advisory Committee (SNAC). In our 
proposed rule, we noted that not all CHIPRA initial measures 
recommended to the Secretary were applicable to EHR technology or to 
the EHR incentive payment program. For example, some of

[[Page 44385]]

the measures are population-based, survey-derived, or not yet NQF 
endorsed. We stated that new or additional measures for the next 
iteration of the CHIPRA core set would have EHR extractability as a 
priority.
    Since the publication of the proposed rule, the CHIPRA core measure 
set has been published in a final rule (see 74 FR 68846 through 68849). 
In this EHR incentive program final rule, there are four clinical 
quality measures that are also in the published CHIPRA initial core 
measure set. These clinical quality measures are shown below in Table 
4:
[GRAPHIC] [TIFF OMITTED] TR28JY10.012

    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. Similarly, the adult quality measures 
requirements enacted in the ACA will provide another opportunity for 
CMS to align its quality measures programs for consistency and to 
maximize use of electronic reporting. As these programs move forward, 
we will continue to prioritize consistency in clinical quality measure 
selection for providers when possible.
    We solicited comments on the inclusion or exclusion of any clinical 
quality measure or measures proposed for the 2011 and 2012 payment 
years, and to our approach in selecting clinical quality measures.
    We stated in the proposed rule that 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/steward 
to make basic changes to a clinical quality measure in terms of the 
numerator, denominator, and exclusions. We proposed that the clinical 
quality measures selected for the 2011 and 2012 payment year be 
supplemented by our technical specifications for EHR submission. We 
proposed to post the complete clinical quality measures specifications 
including technical specifications to our Web site and solicited 
comments on our approach.
    We received various comments as to our proposed considerations for 
selection of clinical quality measures for submission by EPs, eligible 
hospitals, and CAHs.
    Comment: One commenter said that there needs to be longer than nine 
months for the look back for capturing clinical quality measures data. 
Several commenters indicated that baseline measurements that have used 
the clinical quality measure in the past have not been performed. 
Commenters also recommended the linkage of clinical decision support to 
clinical quality measures to strengthen quality improvement efforts. A 
commenter supported our inclusion of measures that address both quality 
and resource use efficiency. Another commenter indicated support for 
the clinical quality measures as represented in the proposed rule.
    Response: The look back for capturing clinical quality measures is 
the period of time for which data would be considered as applying to 
the measure calculation. The look back period for a clinical quality 
measure and the method of documentation of prior information is defined 
by the clinical quality measure specification. The clinical quality 
measures require reporting and not achievement on particular 
performance thresholds. We agree with the commenters regarding the 
benefits of linking clinical decision support tools to the clinical 
quality measures, and anticipate that as EHR technology evolves, many 
of the clinical quality measures will be supported by clinical decision 
support tools. We also agree with the benefits of efficiency measures 
and we expect that in future program years the scope and variety of 
measures that address these factors will expand.
    Comment: Commenters requested a definition for ``Eligible Provider 
and Non-Qualifying Eligible Provider'' with respect to the provider's 
ability to meet meaningful use if there are no appropriate clinical 
quality measures to report, the application of financial penalties 
beginning in 2015, and the handling of exclusions. Another commenter 
stressed the need for detailed information regarding what is included 
and excluded in the numerator and denominator for each measure so as to 
ensure that certified EHR technology's programmed analytics capture all 
patients who meet the relevant criteria and to ensure that clinical 
quality measures are properly evaluated. Others indicated that 
reporting measures electronically will reduce administrative reporting 
costs. Other commenters supported the ability to report ``N/A'' for 
clinical quality measures where an insufficient denominator exists. 
Other commenters urged that CMS not include any clinical quality 
measures in Stage 1 of Meaningful Use because they believe Stage 1 
should focus on the initial implementation of certified EHR systems and 
its use for patient care, and that EPs must gain experience with their 
certified EHR technology before attesting to the accuracy and 
completeness of numerators, denominators and quality calculations 
generated from these systems.
    Response: While some commenters recommended we not include any 
clinical quality measures in Stage 1 (2011 and beginning in 2012), as 
previously described for Stage 1 EPs are required to attest to the 
clinical quality measures calculated results (numerator,

[[Page 44386]]

denominator, and exclusions) as automatically calculated by the 
certified EHR technology. Given that the statutory requirement for 
clinical quality measures is an element of meaningful use, we believe 
that providing this information on clinical quality measures is 
appropriate for Stage 1 (2011 and beginning in 2012). We would expect 
that the patient for whom a clinical quality measure does not apply 
will not be included in the denominator of the clinical quality 
measure. If not appropriate for a particular EP we would expect that 
either patients would not appear in the denominator of the measure (a 
zero value) or an exclusion would apply. Therefore reporting ``N/A'' is 
not necessary. Exclusion parameters--that is, information on what is 
included and excluded in the numerator and denominator for a clinical 
quality measure-are included in the measure specifications. We agree 
that reporting measures electronically will reduce administrative 
reporting costs, however as discussed in this final rule we will not 
require electronic submission of clinical quality measures until 2012. 
Also discussed earlier in this final rule, we believe collecting 
clinical quality measure data is an important part of meaningful use.
    Comment: A commenter indicated that CMS should take ownership of 
each of the EP clinical quality measures so that CMS can then 
adjudicate issues related to the clinical quality measures, instead of 
referring the EP to the measure owner. One commenter believes that EPs 
and their specialty societies should be the only owners of EP clinical 
quality measures.
    Response: We are the owner/developer for certain clinical quality 
measures. More commonly, we use the clinical quality measures developed 
and owned by others, who are then responsible for the clinical quality 
measure specifications as endorsed by NQF. Numerous measures have been 
developed over the years by various organizations and CMS, and 
therefore we do not believe that specialty societies should be the only 
owners of EP clinical quality measures. The HITECH Act does not suggest 
or require that we should be the sole owner/developer of clinical 
quality measures.
    Comment: A commenter questioned whether clinical quality measures 
would be updated during the bi-annual review process and how much lead 
time will be given.
    Response: The measures for Stage 1 (2011 and beginning in 2012) of 
meaningful use are finalized in this final rule and will not change 
during that stage. Additionally, the electronic specifications, as 
posted on the CMS Web site at the time of publication of this final 
rule, are final. We intend to expand the clinical quality measures 
again for Stage 2 of meaningful use, which we anticipate will first be 
effective for the 2013 payment year. As required by the HITECH Act for 
the Medicare EHR incentive program, prior to selecting any new clinical 
quality measure(s) for Stage 2 of meaningful use, we will publish 
notice of the proposed measure(s) and request and consider public 
comments on the proposed measures. We note that the Medicaid EHR 
incentive program does not have the same statutory requirement. If 
future stages of meaningful use include clinical quality measures 
specific for Medicaid providers, we will consider a process to receive 
public input on such measures.
    Comment: One commenter suggested that only measures chosen for use 
in the pay-for-reporting program should be considered for 
implementation in the EHR incentive program.
    Response: We selected clinical quality measures that are broadly 
applicable for the 2011 and 2012 EHR incentive program. Many clinical 
quality measures used in other Medicare pay-for-reporting programs are 
not applicable to all Medicaid eligible providers, such as 
pediatricians, certified nurse-midwives, and children's hospitals.
    Comment: Commenters suggested alignment between measures with 
vocabulary standards, in order to promote interoperability of clinical 
data. Stage 1 allows alternative vocabularies for problems, drugs, and 
procedures; and measures should only be included if alternative 
specifications using all Stage 1 vocabularies are provided. Commenters 
recommended incorporating HL7, LOINC, SNOMED, ICD-9, and ICD-10 for 
data exchange.
    Response: Standards for certified EHRs, including vocabulary 
standards, are included in ONC's final rule (found elsewhere in this 
issue of the Federal Register).
    Comment: Commenter recommended that in the beginning stages of 
implementation of the EHR incentive programs, CMS should base its 
reporting initiatives on existing industry models to prevent delays, 
consumer mistrust, and potential legal issues.
    Response: We have conducted extensive reviews of industry 
standards, employed the comments of industry experts and solicited 
public comments on all proposed processes.
    Comment: Many commenters are concerned that there will not be 
adequate time to communicate and implement the electronic specification 
for 2011 clinical quality measure requirements. Additionally, one 
commenter expressed concern that the additional clinical quality 
measures required for 2011 reporting will not be posted by CMS in time 
for careful review and assessment, since currently there are only 15 
measures electronically specified and posted. Commenters requested 
clinical quality measures to be posted with implementation guides for 
each quality reporting metric to ensure successful reporting.
    Response: We have limited the requirements for clinical quality 
measure reporting for eligible hospitals and CAHs to the 15 measures 
that were electronically specified and posted at the time of publishing 
the proposed rule. All measures specifications for clinical quality 
measures selected are final effective upon publication of the EHR 
incentive program final rule.
d. Clinical Quality Measures for EPs
    For the 2011 and 2012 EHR reporting periods, based upon the 
considerations for selecting clinical quality measures discussed above, 
we proposed certain clinical quality measures that were identified in 
the proposed rule (see 75 FR 1874-1889) for EPs. Tables 4 though 19 of 
the proposed rule divided the clinical quality measures identified in 
Table 3 into core measures and specialty group measures (see 75 FR 1890 
through 1895). The concept of core measures and specialty group 
measures is discussed below.
    We also stated that some measures were in a higher state of 
readiness than others, and requested comment on each measure's state of 
readiness for use in the EHR incentive programs. For those measures 
where electronic specifications did not, at the time of the proposed 
rule, exist, we solicited comment on how quickly electronic 
specifications could be developed, and the period of time required from 
final posting of the electronic specifications for final measures to 
ensure the effective implementation of the measures. We stated our 
intention 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. We stated that all 
of the proposed clinical quality measures included in Table 3 (see 75 
FR 1874-1889) meet one or more of the

[[Page 44387]]

criteria for the selection of clinical quality measures, discussed in 
the proposed rule. A large portion of these measures had been through 
notice and comment rulemaking for PQRI, and nearly all 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, nine of the proposed 90 
clinical quality measures listed in Table 3 (see 75 FR 1874-1889) (PQRI 
numbers 1, 2, 3, 5, 7, 110, 111, 112, and 113) had preliminary 
specifications for electronic submission that had already been 
developed for the purpose of testing the submission of clinical quality 
data extracted from an EHR for the PQRI program. The link to the 
preliminary electronic specifications for nine PQRI clinical quality 
measures was provided: http://www.cms.hhs.gov/pqri.
    We stated that 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.
    We pointed out that the PQRI clinical quality measures that were 
proposed largely align with the recommendations of the HIT Standards 
Committee. However, in addition to proposed clinical quality measures 
that are currently included in PQRI, we also proposed certain other 
clinical quality measures that we stated are of high importance to the 
overall population. Those clinical quality measures are Ischemic 
Vascular Disease (IVD): Use of Aspirin or another Antithrombotic; IVD: 
Complete Lipid Profile; IVD: Low Density Lipoprotein (LDL-C) Control, 
and Blood Pressure Management. Finally, we proposed an array of other 
measures which address important aspects of clinical quality.
    We stated our belief that the proposed clinical quality measures 
were broad enough to allow for reporting for EPs and addressed high 
priority conditions. We recognized the importance of integrating the 
measures into certified EHR technologies for calculation of measures 
results, and that not all measures would be feasible for 2011 and 2012. 
We invited comment on the advisability of including the measures for 
payment years 2011 and 2012. Although we recognized that there are many 
other important clinical quality measures of health care provided by 
EPs, we anticipated expanding the set of clinical quality measures in 
future years and listed a number of clinical quality measures for 
future consideration in section II.A.3.g of the proposed rule preamble, 
on which we also invited comment.
    Comment: Many of the proposed clinical quality measures received 
favorable comments and support for inclusion in the final clinical 
quality measure set. A few examples of measures that were supported for 
inclusion were measures related to prevention and screening, and 
diabetes. It was stated by a commenter that the proposed rule includes 
some similar clinical quality measures. For example, the commenter 
indicated NQF 0059 and NQF 0575 both deal with hemoglobin A1c control. 
Others commented that some measures should be eliminated and not 
utilized in the final set of clinical quality measures for EPs. For 
example, a few commented that the following two measures should be 
eliminated, NQF 0052 and NQF 0513 were intended to be implemented at 
the administrator site level using outpatient hospital claims and not 
at the individual practitioner level. A number of commenters stated 
that the specifications for certain clinical quality measures, for 
example, NQF 0022, NQF 0031, NQF 0032, NQF 0033, NQF 0034, and NQF 0061 
were not consistent with current clinical practice guidelines. Another 
commenter requested clarification for the specifications for NQF 0013 
because blood pressures are not routinely monitored for 2-month-old 
patients. Many commenters provided suggestions for other clinical 
quality measures not included in the proposed rule.
    Response: We appreciate all of the suggestions from the commenters. 
We are unable to add any clinical quality measures that were not 
identified in the proposed rule due to language in sections 
1848(o)(2)(B)(i)(II) and 1886(n)(3)(B)(i) of the Act requiring a period 
of public comment for any finalized measures. This requirement does not 
pertain to the Medicaid EHR incentive program; we expect to develop a 
process in the future to solicit public input on Medicaid-specific 
clinical quality measures for future stages of meaningful use, if 
needed. However, we will consider those additional clinical quality 
measures recommended by commenters for future inclusion in the clinical 
quality measure sets.
    In regard to suggested changes/revisions and/or elimination of the 
proposed clinical quality measures, we considered these suggestions 
when finalizing clinical quality measures in this final rule. In regard 
to this, we considered these suggestions when evaluating the clinical 
quality measures for selection in this final rule. Of the clinical 
quality measures in the proposed rule that we are not finalizing, we 
removed the measures that do not have electronic specifications by the 
date of display of this final rule. Additionally, some of the proposed 
clinical quality measures were recommended for deletion or 
modification, and therefore were recommended to not be used in the 
final rule; this is delineated in other comments and responses in this 
final rule. Further, we are only finalizing clinical quality measures 
that are electronically specified the date of display of the final 
rule. The electronic specifications included in the final set of 
clinical quality measures for EPs are posted to the CMS Web site at: 
http://www.cms.gov/QualityMeasures/03_ElectronicSpecifications.asp#TopOfPage.
    Comment: Numerous commenters were concerned about the burden 
(economic and other) of reporting on the large number of clinical 
quality measures and the overall quality reporting burden this will add 
to EPs. Some commenters stated that the use of numerators and 
denominators for some measures will require manual calculation on the 
part of the EPs since there are no automated reports that can capture 
all of the information that must be tabulated. One commenter stated 
that there are insufficient resources to calculate the denominators of 
the required measures. Other commenters suggested using the PQRI 
requirements of reporting only three measures, and others suggested 
reporting on significantly smaller number of measures.
    Response: In response to the many comments received regarding the 
undue burden associated with reporting on a large number of clinical 
quality measures, or measures that involve a manual process, we have 
finalized only those clinical quality measures that can

[[Page 44388]]

be automatically calculated by a certified EHR technology. We further 
limited the measures to those for which electronic specifications are 
currently available, which we posted as final by the date of display of 
this final rule. This limitation significantly reduces the number of 
measures EPs are required to report in 2011 and 2012, thus reducing the 
EPs' reporting burden as well as addressing commenters' concerns about 
readiness. Although for 2011, Medicare EPs, eligible hospitals, and 
CAHs will still need to manually report (attest) to the results 
automatically calculated by their certified EHR technology, we believe 
that with the reduction in the number of measures that the burden is 
reasonable. Additionally, this provides for the reporting of clinical 
quality measures beyond simply the core clinical quality measures that 
EPs identify as suitable to report.
    Table 5, below, shows the proposed clinical quality measures for 
submission by Medicare and Medicaid EPs for the 2011 and 2012 payment 
year as stated in the proposed rule (see 75 FR 1874-1889) for EPs, but 
that are not being finalized. Table 5 conveys the NQF measure number 
and PQRI implementation number (that is, the number used in the PQRI 
program to identify the measure as implemented in PQRI (for the 2010 
PQRI measures list see https://www.cms.gov/PQRI/Downloads/2010_PQRI_MeasuresList_111309.pdf)), clinical quality measure title and 
description, and clinical quality measure steward and contact 
information. The measures listed below in Table 5 do not have 
electronic specifications finished before the date of display of this 
final rule, thus we have eliminated these measures for this final rule 
and will consider the addition of these measures in future rulemaking. 
Also several measures listed below were only concepts at the time of 
publication of the proposed rule (that is, Hysterectomy rates, 
Appropriate antibiotic use for ear infections, Statin after Myocardial 
Infarction, 30 day Readmission Rate, 30 Readmission Rate following 
deliveries, and Use of CT Scans). These concept measures were not 
developed or electronically specified clinical quality measures, nor 
NQF endorsed; and there was not adequate time to consider these 
concepts for development for this final rule. Therefore, the concepts 
listed below will be considered in future rulemaking. Lastly, NQF 0026 
has since been retired since publication of the proposed rule.
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    Comment: Some commenters requested that CMS implement feedback 
reports early in the process that document whether EPs are successfully 
participating in the PQRI Program, the EHR incentive program, and the 
e-prescribing program, and that the report communicate whether the 
information received by CMS for these programs was successfully 
submitted and received.
    Response: As the PQRI and e-prescribing programs are beyond the 
scope of this rule, we do not address suggestions that we implement 
feedback reports related to these programs. The criteria to qualify for 
the EHR incentive payments are based on results automatically 
calculated by EPs' certified EHR technology, as attested by the EPs. As 
such, we believe that the EP will be able to determine whether they 
have reported the required clinical quality measures to CMS or the 
State, rendering it unnecessary that CMS or the State provide the EP 
with a feedback report. We expect the system through which EPs, must 
submit information would indicate successful receipt beginning the 
first year of Stage 1.
    Comment: A commenter indicated that the clinical quality measure 
that addresses tobacco use and the measure that addresses smoking 
status apply to different age groups, and stated that they should be 
consistent. A number of commenters recommended removing smoking status 
as an objective from meaningful use section of this final rule, and 
only including it in the clinical quality measures in order to avoid 
confusion.
    Response: We are in agreement that the meaningful use objective and 
the clinical quality measure address the same topic of smoking. The 
clinical quality measure requires measurement of a clinical action 
performed by the EP to address the negative consequences of smoking, 
whereas the meaningful use objective seeks to make sure smokers are 
identified. Additionally, the age for recording smoking status for 
meaningful use is 13 years and older, and the population addressed by 
the clinical quality measure is 18 years and older, thus they are 
different with respect to intent of the objective/measure and the age 
population. For the clinical quality measure, we are keeping the age 
range at 18 years and older because the measure is currently NQF 
endorsed with these specifications. We will consider merging these in 
the future to reconcile the age range.
    Comment: Some commenters stated that reporting of ambulatory 
quality measures should remain voluntary for EPs, based on the view 
that many process measures do not correlate with outcomes and are not 
evidence based. A process measure focuses on a process which leads to a 
certain outcome, meaning that a scientific basis exists for believing 
that the process, when executed well, will increase the probability of 
achieving a desired outcome. A commenter stated that EPs serving needy 
patients, minorities, and populations with lower socioeconomic levels 
will experience lower performance on many clinical quality measures, 
and therefore will be deterred from participating in the EHR incentive 
program.
    Response: The EHR incentive program is voluntary. Similar to other 
Medicare quality measure reporting programs, EPs are not required to 
satisfy minimum clinical quality performance levels in order to qualify 
for the EHR payment incentive, but rather merely report on their 
ambulatory quality measure results. Thus, as currently structured, we 
do not believe the requirement that EPs report clinical quality 
measures would deter EPs who serve minority patients or patients of 
lower socioeconomic status or otherwise disadvantaged from 
participating in the program.
    After consideration of the public comments received, we are 
finalizing the basic requirement that EPs submit results for clinical 
quality measures.

[[Page 44397]]

This requirement applies to both the 2011 and 2012 reporting periods 
(and will potentially continue to apply, until CMS issues a subsequent 
final rule that supplants this final rule). We are limiting the 
clinical quality measures to those for which electronic specifications 
are available (posted by CMS on the Web site at the time of display of 
this final rule.) These measures are listed in Table 6 of this final 
rule for EPs. They constitute the clinical quality measures ``specified 
by CMS'' for the purposes of the ONC final rule (found elsewhere in 
this issue of the Federal Register) and are the measures that certified 
EHRs are required to be able to calculate. Of these, nine EP measures 
have preliminary electronic specifications for which we provided links 
for in the proposed rule. The remaining 35 clinical quality measures 
for EPs were electronically specified more recently and posted on the 
CMS Web site by the date of display of this final rule. We are 
finalizing only those measures for which there are available electronic 
specifications as of the date of display of this final rule. Although 
we are not finalizing all of 90 proposed clinical quality measures that 
were proposed for EPs in Table 3 (see 75 FR 1874-1889) of the proposed 
rule, because of lack of electronic specifications, our intent is to 
include all of them in our proposed Stage 2 requirements, or to propose 
alternative measures following a transparent process that includes 
appropriate consultation with stakeholders and other interested 
parties. In addition, we plan to add new measures to fill gaps where 
measures were not previously proposed, such as in behavior and mental 
health (e.g., depression and alcoholism). Certified EHR technology must 
be able to calculate each measure numerators, denominators and 
exclusions for each of the clinical quality measures finalized for the 
EHR incentive program. Table 6 conveys the applicable NQF measure 
number and PQRI implementation number (that is, the number used in the 
PQRI program to identify the measure as implemented in PQRI (for the 
2010 PQRI measures list see https://www.cms.gov/PQRI/Downloads/2010_PQRI_MeasuresList_111309.pdf)), title, description, the owner/
steward, and a link to existing electronic specifications. The NQF 
number is an identifying number that is associated with the NQF 
endorsed measure number. All of the clinical quality measures in Table 
6 are NQF endorsed and 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. 
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 66, 110, 111, 112, 
113, 114, 115, and 128 support screening and prevention all of which is 
a high CMS and HHS priority.
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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, we proposed to require that 
each EP submit information on two measure groups: a core measures group 
(Table 4 of the proposed rule see 75 FR 1890), and the subset of 
clinical measures most appropriate given the EP's specialty (Tables 5 
through 19 specialty group measures see 75 FR 1891 through 1895). For 
the core measure group, we stated our belief that the clinical quality 
measures were sufficiently general in application and of such 
importance to population health; we would 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.
    We proposed that with the inclusion of measures applicable to 
targeting children and adolescents and the wide applicability of the 
measures like Blood Pressure Management, we believed the proposed core 
set of clinical quality measures and specialty measures was broad 
enough to enable reporting by all EPs. However, we encouraged 
commenters to identify the EPs in question and propose specific 
remedies if the public believed that other EPs would not have 
sufficient patients in the denominator of these core measures.
    Comment: Several commenters requested clarification about the core 
measures group. Many comments were received regarding the inclusion of 
a core measure set for EPs. Some commenters favored the inclusion of 
one or more core measures (for example, preventive care) and others 
indicated core measures were essential for improving the quality of 
care. Conversely, numerous commenters suggested eliminating the core 
measure set for EPs. The primary reason offered by commenters for 
excluding core measures was that these clinical quality measures were 
outside their scope of practice and/or not relevant to their specific 
patient population. A commenter requested that the core set of clinical 
quality measures be better defined and/or increased for each reporting 
period. Many commenters indicated the clinical quality measures 
included in the core measure set are not appropriate to all EPs and 
specialists (for example, EPs that do not have direct physical access 
to the patients such as teleradioloists, EPs that do not routinely 
report blood pressure in patients with diagnosed hypertension, such as 
dermatologists) and they would not be able to report on these clinical 
quality measures. Many commenters supported reporting exclusions. A 
commenter recommended the use of PQRI 128/NQF 0421 Preventive Care and 
Screening: BMI Screening and Follow-up as a core clinical quality 
measure. Other commenters indicated these clinical quality measures 
were important for improving care and the core measure set should be 
expanded.
    Response: After considering the comments, we agree there may be 
circumstances such that the core clinical quality measures are not 
applicable for specific patient populations and/or a specific EP's 
scope of practice. In such circumstances we anticipate that the 
patients will not appear in the denominator at all or will be excluded. 
We have defined the core measure set for EPs in Table 7 of this final 
rule, and these core measures will be required for Stage 1. We expanded 
the core measures set to include three alternate measures, as well as 
added PQRI 128/NQF0421 as a required core measure, based on commenters 
feedback. Although we require all EPs to report the core measures, 
there is no requirement that the EP have any particular number of 
patients in the denominator, which could be zero as calculated by the 
EHR. Therefore we have changed the reporting criteria to require EPs to 
report on all three core measures (as shown in Table 7, below), and 
three additional clinical quality measures selected from Table 6 (other 
than the core or alternate core measures listed in Table 6). The 
clinical quality measures included in this final rule reflect a subset 
of measures that were included in the proposed rule (see 75 FR 1874 
through 1889). The clinical quality measures included in Table 6 of 
this final rule were selected from the Tables included in the proposed 
rule, based on having electronic specifications fully developed by the 
date of display of this final rule.
    Comment: Many commenters indicated that NQF 0022 Drugs to be 
avoided in the elderly is an inappropriate clinical quality measure and 
should be removed. The rationale given for removal is that the 
numerator (at least one prescription for any drug to be avoided in the 
elderly in the measurement year or at least two different drugs to be 
avoided in the elderly in the measurement year) tends to be very small. 
Others considered poly-pharmacy a more significant problem in the 
elderly than avoidance of specific drugs. A number of commenters 
indicated this clinical quality measure should include a list of the 
drugs to be avoided.
    Response: We agree with the concerns expressed by the commenters 
and have removed the measure NQF 0022. Additionally, electronic 
specifications are not available for this measure by the date of 
display of this final rule making this measure impractical to use for 
Stage 1. We will consider this measure in future rulemaking.
    After consideration of the public comments received, we are 
finalizing the requirement that all EPs must submit calculated results 
for three core measures using the certified EHR technology. However, we 
are finalizing only two of the clinical quality measures that were 
proposed as ``core measures'' in the proposed rule. The other core 
measures presented in Table 6 of this final rule were selected because 
they have broad applicability, support prevention, were recommended by 
commenters, and have electronic specifications by the date of display 
of this final rule. Insofar as a measure does not apply to patients 
treated by the EP, this will be reflected in the calculation of the 
clinical quality measure either by the patient not being included in 
the denominator for the measure or the patient being excluded. 
Therefore, it is not necessary for CMS to delineate for a particular 
specialty which measures may or not apply. We note that to qualify as a 
meaningful EHR user, EPs need only report the required clinical quality 
measures; they need not satisfy a minimum value for any of the 
numerator, denominator, or exclusions fields for clinical quality 
measures. The value for any or all of those fields, as reported to CMS 
or the States, may be zero if these are the results as displayed by the 
certified EHR technology. Thus, the clinical quality measure 
requirement for 2011 and beginning in 2012 is a reporting requirement 
and not a requirement to meet any particular performance standard for 
the clinical quality measure, or to in all cases have patients that 
fall within the denominator of the measure.
    The three core measures that EPs will be required to report are: 
[NQF 0013: Hypertension: Blood Pressure Management; NQF 0028: 
Preventative Care and Screening Measure Pair: a. Tobacco Use Assessment 
b. Tobacco Cessation Intervention; and NQF0421/PQRI 128: Adult Weight 
Screening and Follow-up]. Insofar as the denominator for one or more of 
the core measures is zero, EPs will be required to report results for 
up to three alternate core measures [NQF 0041/PQRI 110: Preventative 
Care and Screening:

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Influenza Immunization for Patients >=50 Years Old; NQF 0024: Weight 
Assessment and Counseling for Children and Adolescents; and NQF 0038: 
Childhood Immunization Status]. We believe this final set of core 
clinical quality measures provides EPs a greater opportunity for 
successful reporting. The EP will not be excluded from reporting any 
core or alternate clinical quality measure because the measure does not 
apply to the EPs scope of practice or patient population. The 
expectation is that the EHR will automatically report on each core 
clinical quality measure, and when one or more of the core measures has 
a denominator of zero then the alternate core measure(s) will be 
reported. If all six of the clinical quality measures in Table 7 have 
zeros for the denominators (this would imply that the EPs patient 
population is not addressed by these measures), then the EP is still 
required to report on three additional clinical measures of their 
choosing from Table 6 in this final rule. In regard to the three 
additional clinical quality measures, if the EP reports zero values, 
then for the remaining clinical quality measures in Table 6 (other than 
the core and alternate core measures) the EP will have to attest that 
all of the other clinical quality measures calculated by the certified 
EHR technology have a value of zero in the denominator, if the EP is to 
be exempt from reporting any of the additional clinical quality 
measures (other than the core and alternate core measures) in Table 6. 
Thus, EPs are not penalized in the Stage 1 reporting years as long as 
they have adopted a certified EHR and that EHR calculates and the EP 
submits the required information on the required clinical quality 
measures, and other meaningful use requirements as defined in this 
final rule in section II.A.2.d.1 of this final rule.
    Table 7, below, shows the core measure groups for all EPs for 
Medicare and Medicaid to report.
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    We proposed that EPs were to submit calculated results on at least 
one of the sets listed in Tables 5 and 19 as specialty groups (see 75 
FR 1891-1895). The specialty groups were Cardiology, Pulmonary 
Diseases, Endocrinology, Oncology, Proceduralist/Surgery, Primary Care 
Physicians, Pediatrics, Obstetrics and Gynecology, Neurology, 
Psychiatry, Ophthalmology, Podiatry, Radiology, Gastroenterology, and 
Nephrology.
    We recognized that clinical quality measures as specified by 
measures developers and as endorsed by the NQF were not specific to 
particular specialties. 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 grouped the proposed measures according to the 
types of patients commonly treated and services rendered by EPs of 
various specialties. We did this for purposes similar to measures 
groups used in PQRI which, however, are based on clinical conditions, 
rather than specialty types. We proposed that the general purpose of 
each specialty measures grouping was to have standardized sets of 
measures, all of which must be reported by the EP for the self-selected 
specialty measures groups in order to meet the reporting requirements. 
We expected to narrow down each set to a required subset of three-five 
measures based on the availability of electronic measure specifications 
and comments received.
    We also proposed to require for 2011 and 2012 that EPs would select 
a specialty measures group, on which to report on all applicable cases 
for each of the measures in the specialty group. We also proposed that 
the same specialty measures group selected for the first payment year 
would be required for reporting for the second payment year. We invited 
comment on whether there were EPs who believed no specialty group would 
apply to them. In accordance with public comments, we noted that we 
would specify in the final rule which EP specialties would be exempt 
from selecting and reporting on a specialty measures group. As stated, 
we proposed, EPs that are so-designated would be required to attest, to 
CMS or the States, to the inapplicability of any of the specialty 
groups and would not

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be required to report information on clinical quality measures from a 
specialty group for 2011 or 2012, though the EP would still be required 
to report information on all of the clinical quality measures listed in 
the proposed core measure set (see 75 FR 1890).
    Comment: Several commenters asked if certain specialties, such as 
chiropractors, audiologists, allergist and immunology, 
otolaryngologists, etc., could be exempt from having to report all 
specific clinical quality specialty measures. Many of these EPs 
indicated the clinical quality measures included in Table 3 were not 
relevant to their specific practice and/or patient population. Other 
commenters requested that specialty groups be created for specialties 
not included in the proposed rule measure groups, (for example, 
chiropractors, dentists, dermatologists, infectious disease, pediatric 
oncology, neurosurgery, interventional radiology, plastic & 
reconstructive surgery, physical therapists, occupational therapists, 
eye care specialists, family planning, genetics, ear/nose/throat, and 
nutritionists providers, etc.). Other commenters indicated that 
specialty clinical quality measures were specific to a subset of 
patients, but were not broadly applicable to their specialty for 
treating other conditions within their specialty area. Other commenters 
asked that CMS reconsider allowing EPs to attest only and be exempt 
from reporting if no applicable clinical quality measures specialty 
group exists for them. Another commenter indicated support of specific 
measure sets for different clinical specialties. Many commenters 
supported the elimination of specialty groups altogether as a mandatory 
set and instead supported the reporting of a fixed number of relevant 
clinically quality measures regardless of the specialty group. A 
commenter asked for a definition of ``specialist'' which is not 
included in the proposed rule. Several commenters expressed concern 
about the large number of clinical quality measures in certain measure 
groups versus other measure groups (for example, the primary care, 
pediatric and ob/gyn measure groups) as well as the applicability of 
clinical quality measures assigned to primary care EPs when they do not 
manage conditions that are typically referred to a specialist for 
example, ischemic vascular disease. A commenter requested clarification 
and suggestions on how to select a clinical quality measure group. 
Several commenters wanted clarification on the proposed EP Specialty 
Measures Tables (see 75 FR 1874), and whether the EPs are accountable 
for only the clinical quality measures for their specialty. One comment 
indicated agreement with CMS regarding requiring EPs to report on the 
same specialty measure groups for 2011 and 2012 and another commenter 
indicated that CMS should not delay reporting of clinical quality 
measures as early adopters of EHRs will be ready to report. A few 
commenters suggested adding NQF 0033 Chlamydia screening in women to 
all other appropriate specialty clinical quality measure groups. A 
commenter indicated that PQRI 112, 113, and NQF 0032 should be 
removed from the oncology clinical quality specialty measure group as 
oncologists do not perform routine cancer screenings.
    Response: We are appreciative of the detail provided by commenters 
to the potential inapplicability of the proposed specialty measures 
groups to various practitioner types or to the inapplicability of 
certain measures within groups to the specialties designated. Our 
primary purpose, similar to the core measures, was to encourage a 
certain consistency in reporting of clinical quality measures by EPs. 
However, after consideration of the comments we do not believe that the 
proposed specialty measures groups are sufficient to have a robust set 
of specialty measures groups. Further, given the lack of electronic 
specifications or final development of many of these measures, 
requiring specialty measures groups becomes even more impractical. We 
expect that electronic specifications will be developed for measures 
which would allow for a broadly applicable set of specialty measures 
groups in the future.
    After consideration of the public comments received, we removed the 
requirement for EPs to report on specialty measures groups as proposed. 
We intend to reintroduce the proposed rule's specialty group reporting 
requirement in Stage 2 with at least as many clinical quality measures 
by specialty as we proposed for Stage 1 in the proposed rule. We expect 
to use a transparent process for clinical quality measure development 
that includes appropriate consultation with specialty groups and other 
interested parties, and we expect that electronic specifications will 
be developed for all of the measures that we originally proposed for 
Stage 1 or alternative related measures, which would allow for a 
broadly applicable set of specialty measures groups and promote 
consistency in reporting of clinical quality measures by EPs. Also, in 
consideration of public comments received, we are finalizing the 
requirement (in addition to the core measure requirement) that EPs must 
report on three measures to be selected by the EP from the set of 38 
measures as shown in Table 6, above. As stated previously, in regard to 
the three additional clinical quality measures, if the EP reports zero 
values, then for the remaining clinical quality measures in Table 6 
(other than the core and alternate core measures) the EP will have to 
attest that all of the other clinical quality measures calculated by 
the certified EHR technology have a value of zero in the denominator. 
In sum, EPs must report on six total measures, three core measures 
(substituting alternate core measures where necessary) and three 
additional measures (other than the core and alternate core measures) 
selected from Table 6.
    We also proposed that although we do not require clinical quality 
measure reporting electronically until 2012, we would require clinical 
quality reporting through attestation in the 2011 payment year. We 
solicited 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 was feasible, we 
solicited comment on which key measures should be chosen for 2011 and 
which should be deferred until 2012 and why. We discuss comments 
received regarding the reporting method for clinical quality measures 
in section II.A.3.h. of this final rule.
f. Clinical Quality Measures for Electronic Submission by Eligible 
Hospitals and CAHs
    Our proposed rule would have required eligible hospitals and CAHs 
to report summary data to CMS on the set of clinical quality measures 
identified in Table 20 and 21 of the proposed rule (see 75 FR 1896-
1899), with eligible hospitals attesting to the measures in 2011 and 
electronically submitting these measures to CMS using certified EHR 
technology beginning in 2012. For hospitals eligible for only the 
Medicaid EHR incentive program, we proposed that reporting would be to 
the States. In the proposed rule, for eligible hospitals under both 
programs, we proposed that they would have to also report on the 
clinical quality measures identified in Table 21 of the proposed rule 
to meet the requirements for the reporting of clinical quality measures 
for the Medicaid program incentive (see 75 FR 1896 through 1900). 
Tables 20 and 21 of the proposed rule (see 75 FR 1896 through 1900) 
conveyed the clinical quality measure's title, number, owner/

[[Page 44412]]

developer and contact information, and a link to existing electronic 
specifications where applicable.
    We included in the proposed 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 between CMS and ONC to 
develop interoperable standards for EHR electronic submission of the 
Emergency Department Throughput, Stroke, and Venous Thromboembolism 
clinical quality measures on Table 20 of the proposed rule (see 75 FR 
1896 through 1899). We also proposed to test the submission of these 
clinical quality measures in Medicare (see 75 FR 43893). The 
specifications for the RHQDAPU clinical quality measures for eligible 
hospitals and CAHs 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 
we proposed derived from the RHQDAPU program or were measures we 
considered important for measuring or preventing adverse outcomes. In 
addition to risk standardized readmission clinical quality measures, we 
proposed that non-risk-adjusted readmission rates also be reported. For 
the proposed rule, we also considered HIT Standards Committee 
recommendations, including the Committee's recommendation to include a 
measure on Atrial Fibrillation Receiving Anticoagulation Therapy which 
was included on Table 20 of the proposed rule Our proposed rule noted 
that we did not propose one measure recommended by the HIT Standards 
Committee: Surgery patients who received Venous Thromboembolism 
prophylaxis within 24 hours period to surgery to 24 hours after surgery 
end time. We noted that the measure is a current clinical quality 
measure collected in the RHQDAPU program through chart abstraction for 
all applicable patients (SCIP-VTE-2), and that the VTE-2 clinical 
quality measure in Table 20 of the proposed rule (see 75 FR 1896 
through 1899) was a parallel clinical quality measure to SCIP-VTE-2. 
SCIP-VTE-2 includes surgical and non-surgical patients, and can be more 
easily implemented for the EHR incentive program because electronic 
specifications had been completed. We added SCIP-VTE-2 for future 
consideration.
    Comment: Many commenters recommended reducing the number of 
eligible hospital clinical quality measures and indicated that such a 
large number of measures would pose a significant financial and 
administrative burden on hospitals. Commenters suggested a variety of 
solutions which include: Eliminating duplication between clinical 
quality measures and meaningful use objectives and associated measures, 
reducing the number of clinical quality measures for reporting and 
allowing organizations to select a limited number of clinical quality 
measures on which they would like to report.
    We received comments supporting many of the measures in the 
proposed rule including Venous Thromboembolism, Emergency Department, 
Stroke, RHQDAPU, and measures that are evidence-based that could 
improve the quality of care. Others recommended additional clinical 
quality measures, changes to the specifications for clinical quality 
measures or the elimination of certain clinical quality measures such 
as risk adjusted re-admission measures or measures not applicable to 
CAHs. Many commenters supported the process through which the 
electronic specifications were developed for the Emergency Department 
Throughput, Stroke and Venous Thromboembolism measures while also 
pointing out the length of time necessary to adequately develop 
electronic specifications and test the clinical quality measures. Many 
commented that the remaining measures had not been electronically 
specified or had otherwise not completed development and would not be 
ready in time for the 2011-2012 implementation. Others stated their 
concerns about duplicate reporting systems and the belief that the 
HITECH Act reporting requirements should be based on the RHQDAPU 
program, similar to the conceptual framework of hospitals value-based 
purchasing plan. Others pointed to measures that are already currently 
reported in RHQDAPU and the statutory provision that clinical quality 
measure reporting required for the HITECH Act should seek to avoid 
duplicative and redundant reporting of measures reported under RHQDAPU.
    Response: We are appreciative of the comments supporting many of 
the clinical quality measure sets and the process utilized for 
electronically specifying the Emergency Department Throughput, Stroke, 
and Venous Thromboembolism sets. As we have discussed for the EP 
measures, we agree that we should limit the required clinical quality 
measures to those measures for where there are electronic 
specifications as of the date of display of this final rule. This will 
allow EHR vendors sufficient time to ensure that certified EHR 
technology will be able to electronically calculate the measures. 
Therefore, we are not finalizing those clinical quality measures that 
either have not been fully developed, are currently only specified for 
claims based calculation, or for which there are not fully developed 
electronic specifications as of the date of display of this final rule. 
Accordingly, we are only finalizing the 15 measures listed in Table 10 
of this final rule. We note that none of these measures are duplicate 
measures which are currently required for reporting in the RHQDAPU 
program. We therefore do not need to address the issue of duplicate or 
redundant reporting. We will consider adding, changing, developing, and 
eliminating duplicative clinical quality measures and meaningful use 
objectives/associated measures in future rulemaking.
    Table 8, shows the proposed clinical quality measures for 
submission by Medicare and Medicaid Eligible Hospitals for the 2011 and 
2012 payment year as stated in the proposed rule (see 75 FR 1896-1899) 
for EPs, but that are not being finalized. Table 9, shows the proposed 
alternative Medicaid clinical quality measures for Medicaid eligible 
hospitals in the proposed rule (see 75 FR 1899-1900). Tables 8 and 9 
convey the NQF measure number, clinical quality measure title and 
description, and clinical quality measure steward and contact 
information. The measures listed below in Tables 8 and 9 do not have 
electronic specifications finished before the date of display of this 
final rule, thus we have eliminated these measures for this final rule 
and will consider the addition of these measures in future rulemaking. 
Also several measures listed below were only concepts at the time of 
publication of the proposed rule (that is, Hospital Specific 30 day 
Rate following AMI admission, Hospital Specific 30 day Rate following 
Heart Failure admission, Hospital Specific 30 day Rate following 
Pneumonia admission, and All-Cause Readmission Index). These concept 
measures were not developed or electronically specified clinical 
quality measures, nor NQF endorsed; and there was not adequate time to 
consider these concepts for development for this final rule. Therefore, 
the concepts listed

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below will be considered in future rulemaking.
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    Comment: Commenters stated that current health information 
technology is not capable of electronically collecting or reporting on 
clinical quality measures. Commenters also stated we should not require 
reporting on clinical quality measures that cannot easily be derived 
from EHRs. Other commenters believed the timeline was unreasonable to 
obtain the functionality required in the EHR system to report on these 
clinical quality measures and were concerned that there were no 
vocabulary standards.
    Response: We agree with the comment that eligible hospitals should 
only be required to submit information that can be automatically 
obtained from certified EHR technology. As we discussed elsewhere, 
ONC's final rule (found elsewhere in this issue of the Federal 
Register) requires that certified EHR technology must be able to 
calculate clinical quality measures specified by us in this final rule. 
Standards for certified EHRs, including vocabulary standards, are 
included in ONC's final rule (found elsewhere in this issue of the 
Federal Register).
    Comment: Commenters recommended that CMS conduct a pilot test of 
the NQF endorsed HITSP electronic specifications of measures in the 
proposed rule for Stage 1 prior to their adoption. Commenters requested 
CMS publish results of the pilot and use this information to inform the 
setting of Stage 2 and 3 objectives and clinical quality measures. 
Commenters also requested allowing adequate time for implementation 
after the pilot test before such measures are considered for 
certification, and 24 months before requiring them for meaningful use. 
One commenter stated that the Emergency Department Throughput, Stroke, 
and Venous Thromboembolism have not yet been thoroughly tested for 
automated reporting and data element capture. Additional commenters 
recommended that the measures selected for the eligible hospitals 
incentive program should be comprehensively standardized and tested in 
the field to ensure that they are thoroughly specified, clinically 
valid when the data are collected through the eligible hospitals 
system, feasible to collect, and are regularly updated and maintained 
with a well established process.
    Response: We agree with the commenters that it is important to 
allow adequate time for pilot testing and implementation before 
clinical quality measures should be considered for certification, as 
well as requiring these measures for meaningful use. Emergency 
Department 1, Emergency Department 2, and Stroke 3, clinical quality 
measures for eligible hospitals and CAHs that are included in this 
final rule, were tested during the January 2010 Connectathon and 
demonstrated at the HIMSS 2010 Interoperability Showcase. Additionally, 
as part of the process of certification of EHR technology it is 
expected that certifying bodies will test the ability of EHR technology 
to calculate the clinical quality measures finalized in this final 
rule.
    After consideration of the public comments received, eligible 
hospitals and CAHs will be required to report on each of the 15 
clinical quality measures, as shown in Table 10. Requiring eligible 
hospitals and CAHs to report on each of the 15 clinical quality 
measures in the EHR incentive program is consistent with the RHQDAPU 
program, which requires reporting on all applicable quality measures. 
Eligible hospitals and CAHs will report numerators, denominators, and 
exclusions, even if one or more values as displayed by their certified 
EHR is zero. We note that to qualify as a meaningful EHR user, eligible 
hospitals and CAHs need only report the required clinical quality 
measures; they need not satisfy a minimum value for any of the 
numerator, denominator, or exclusions fields for clinical quality 
measures. The value for any or all of those fields, as reported to CMS 
or the States, may be zero if these are the results as displayed by the 
certified EHR technology. Thus, the clinical quality measure 
requirement for 2011 and beginning with 2012 is a reporting requirement 
and not a requirement to meet any particular performance standard for 
the clinical quality measure, or to in all cases have patients that 
fall within the denominator of the measure. Further, the criteria to 
qualify for the EHR incentive payments are based on results 
automatically calculated by eligible hospitals or CAHs certified EHR 
technology, as attested by the eligible hospital or CAH. As such, we 
believe that the eligible hospitals or CAHs will be able to determine 
whether they have reported the required clinical quality measures to 
CMS or the State, rendering it unnecessary that CMS or the State 
provide the eligible hospital or CAH with a feedback report, which 
provides information to eligible hospitals and CAHs as to whether they 
have reported their required clinical quality measures. We expect 
successful receipt of Medicare eligible hospitals and CAHs' 
information, beginning the first year of Stage 1.
    We are finalizing Table 10, which conveys the clinical quality 
measure's title, number, owner/steward and contact information, and a 
link to existing electronic specifications.
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    We proposed that 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 would 
require eligible hospitals and CAHs to report on all EHR incentive 
clinical quality measures for which they have applicable cases, without 
regard to payer. We proposed that Medicare eligible hospitals and CAHs, 
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. We also proposed 
that to demonstrate an eligible hospital or CAH is a meaningful EHR 
user, the eligible hospital or CAH would be 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 as proposed, 
we did not require clinical quality reporting electronically until 
2012, we would begin clinical quality reporting though attestation in 
the 2011 payment year. We solicited 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 
was feasible, we solicited comment on which key measures should be 
chosen for 2011 and which should be deferred until 2012 and why.
    Comment: We received numerous comments strongly opposed to 
requiring the reporting of clinical quality measures by eligible 
hospitals prior to 2013, although some comments favored the reporting 
in 2011 and 2012. Comments in favor pointed to the importance of 
quality measurement to achieving improvement in healthcare quality. 
Those opposed to the reporting of clinical quality measures in 2011 and 
2012 cited concerns as to the readiness of EHR technology for automated 
calculation and reporting of clinical quality measures as well as 
financial and administrative burden. Many commenters stated that 
measures should be fully automated and tested prior to implementation, 
and recommended the process for Emergency Department Throughput, 
Stroke, and Venous Thromboembolism measures where CMS developed the 
specifications and has in place a plan to test the submission of such 
measures for RHQDAPU. Commenters stated their expectation that the 
testing process would reveal important insights as to potential 
challenges of electronic submission. Numerous commenters opposed 
measures already in RHQDAPU and not able to be calculated by the EHR 
technology. Many commenters stated that electronic data submission 
should be developed through the RHQDAPU program rather than have a 
separate quality measure reporting program, such as the EHR incentive 
program. Further, commenters stated that RHQDAPU should provide the 
foundation for migration to electronic reporting. Numerous commenters 
were opposed to having a temporary data collection and reporting 
process through attestation that would need to be updated or replaced 
once CMS has the appropriate infrastructure in place. Many commenters 
stated that requiring hospitals to report summary data through 
attestation, without the ability for CMS to receive the summary data 
electronically, creates a dual reporting burden for measures currently 
in RHQDAPU. Many commenters stated concerns as to the timing of the 
certification process for EHRs since having a certified EHR is an 
essential element for quality incentives. Numerous commenters pointed 
out that only 15 of the proposed measures have electronic 
specifications currently available.
    Response: We are sensitive to and appreciate the many comments 
urging us not to require the submission of clinical quality measures, 
through attestation or electronic submission, prior to 2013, based on 
lack of readiness of many of the proposed measures, fully automating 
and testing prior to implementation, burden, and the potential 
duplication of quality measures reporting requirements under the 
RHQDAPU and the EHR incentive payment programs. Having carefully 
considered these comments, we have sought to address them while still 
retaining the important goal of beginning the process of using the 
capacity of EHRs to promote improved quality of care in hospitals by 
providing calculated results of clinical quality measures. In terms of 
readiness, we are limiting the clinical quality measures to those 
measures having existing electronic specifications as of the date of 
display of this final rule. Additionally, as recommended by commenters, 
we will only require hospitals to submit that information that can be 
automatically calculated by their certified EHR technology. Thus we 
will require no separate data collection by the hospital, but require 
submission solely of that information that can be generated 
automatically by the certified EHR technology; that is, we only adopt 
those clinical quality measures where the certified EHR technology can 
calculate the results. Further, we are not adopting any measures which 
are already being collected and submitted in the RHQDAPU program. 
Therefore, we are imposing no duplicate reporting requirement on 
hospitals who participate in RHQDAPU. Through future rulemaking we will 
seek to align the EHR incentive program with RHQDAPU.
    Comment: Some commenters stated that CMS contradicts itself, where 
the proposed rule states that Medicare eligible hospitals who are also 
participating in Medicaid EHR incentive program will need to report on 
all of the Medicaid clinical quality measures and where it says that 
Table 21 is an alternative set of clinical quality measures if the 
hospital does not have any patients in the denominators of the measures 
in Table 20. Many commenters requested clarification of the Medicare 
and Medicaid reporting.
    Response: We agree that the description of the eligible hospital 
and CAH reporting requirements was unclear. To clarify, our proposal 
was that if a hospital could submit information on clinical quality 
measures sufficient to meet the requirements for Medicare that would 
also be sufficient for Medicaid. However, hospitals for which the 
Medicare measures did not reflect their patient populations could 
satisfy the Medicaid requirements by reporting the alternate Medicaid 
clinical quality measures. Reporting the alternate Medicaid measures 
would only qualify for the Medicaid program and would not qualify 
eligible hospitals as to the Medicare incentive program. In this final 
rule, this clarification is moot, however, because we removed the 
alternate Medicaid list of clinical quality measures listed in Table 21 
(see 75 FR 1896 through 1900) of the proposed rule for eligible 
hospitals. This was based on the lack of electronic specifications for 
these measures available at the time of display of this final rule. 
Hospitals that report information on all 15 of the clinical quality 
measures, as applicable to their patient population, will qualify for 
both the Medicare and the Medicaid submission requirements for clinical 
quality measures. We recognize that many of the measures in the 
Medicare list would likely not apply to certain hospitals, such as 
children's hospitals. However, an eligible hospital would meet the 
clinical quality measure requirement by reporting values for the 15 
clinical quality measures, including,

[[Page 44422]]

values of zero for the denominator, if accurate. Some value is required 
for each of the 15 clinical quality measures for eligible hospitals and 
CAHs. Therefore, for example, a children's hospital would enter zero 
for the denominator for any of the 15 measures for which they do not 
have any patients as described in the measure.
    After consideration of public comments received, we are finalizing 
15 clinical quality measures that eligible hospitals and CAHs will be 
required to report for Stage 1 (2011 and beginning 2012), as applicable 
to their patient population. Those 15 clinical quality measures for 
eligible hospitals and CAHs can be found in Table 10 of this final 
rule.
g. Potential Measures for EPs, Eligible Hospitals, and CAHs in Stage 2 
and Subsequent Years
    We stated our expectation that the number of clinical quality 
measures for which EPs, eligible hospitals, and CAHs would be able to 
electronically submit information would 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 Stage 2 of meaningful 
use and beyond for eligible hospitals and CAHs, we also plan to 
consider other clinical quality measures from the RHQDAPU program which 
are identified in the FY 2010 IPPS final rule (75 FR 43868-43882). We 
invited comments on inclusion of clinical quality measures for the 2013 
and beyond for the HITECH Act Medicare and Medicaid incentive program. 
We note that as with the other meaningful use objectives and measures, 
in the event that we have not promulgated clinical quality measures for 
the 2013 payment year, the measures for Stage 1 (beginning in 2011) 
would continue in effect.
    For the Stage 2 of meaningful use, we indicated in the proposed 
rule that we are considering expanding the Medicaid EHR incentive 
program's 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 weight-based dosing support and 
documentation of newborn screening).
     Long-term care measures.
     Additional obstetrics measures.
     Dental care/oral health measures.
     Additional behavioral/mental health and substance abuse 
measures.
The above list does not constitute a comprehensive list of all clinical 
quality measures that may be considered. We stated that specific 
measures for Stage 2 of meaningful use and beyond may be addressed by 
CMS in future notice and comment rulemaking. To assist us in 
identifying potential clinical quality measures for future 
consideration for Stage 2 of meaningful use and beyond, we solicited 
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.
    The following is a summary of comments received regarding the 
request for public comment on potential measures for EPs, eligible 
hospitals, and CAHs for Stage 2 of meaningful use and subsequent 
stages, and our responses.
    Comment: A commenter suggested using newly adopted NQF Level 3 
measures that incorporate common electronic administrative and clinical 
data that represent a better measure of the patient's condition. A 
commenter suggested adding long term care and post acute care measures 
in the next stage of meaningful use. A few commenters suggested future 
clinical quality measures be coordinated with Healthy People 2020. 
Another comment regarding measures included a request for medication 
measures that evaluate provider intervention. Other commenters 
indicated CMS should provide a more structured process for the adoption 
of clinical quality measures such that specialty EPs would have greater 
input into and ownership of the process. A commenter requested 
consideration that future clinical quality measures address both 
quality and resource use efficiency (for example potentially 
preventable Emergency Department visits and hospitalizations and 
inappropriate use of imaging MRI for acute low back pain). A commenter 
requested future clinical quality measures for the following areas: 
reduce hospital readmissions and to improve medication management, 
specifically safe and efficient management of heart disease, diabetes, 
asthma, mental health conditions and hospital procedures. A commenter 
requested clinical quality measures that will aid in increasing 
improved patient safety and reduce disparities. A commenter also 
recommended developing new clinical quality outcomes measures to 
address overuse and efficiency, care coordination, and patient safety. 
Some commenters requested the inclusion of HIV testing and reporting 
for preventive service quality measures. Some commenters stated that 
this would help to facilitate continued efforts to promote and 
implement the 2006 CDC Revised Recommendation on HIV testing, 
especially to non-HIV medical specialties. Some commenters recommended 
measure development in the areas of community mental health, home 
health, renal dialysis centers, long term care, post acute care, and 
nursing homes. A commenter recommended including 3 month treatment of 
pulmonary emboli (NQF 0593) and deep vein thrombosis (NQF 0434) for the 
next stage of meaningful use and beyond. A commenter requested 
including health disparity data in all clinical quality measure 
analyses. Some commenters also recommended future clinical quality 
measure development in the following areas: Diabetes, heart disease, 
asthma, disease screening, chronic disease management, patient safety, 
nursing sensitive measures, atrial fibrillation, and ethnic 
disparities. Commenters requested expanding pediatric measures to 
provide expanded focus on childhood diseases that require 
hospitalization such as asthma, developmental issues and weight-based 
medication dosage safety issues. Additional commenters requested 
measures for blood test for lead levels for children up to 1 year of 
age and between 1 and 2 years of age, co-morbid conditions and dental 
utilization. A commenter recommended that only one EP should be 
accountable for the quality intervention and clinical quality measure 
such as NQF 0323 Title: End Stage Renal Disease (ESRD): Plan of Care 
for Inadequate Hemodialysis in ESRD Patient. The commenter indicated 
that this type of measure could involve more than one provider, for 
example, nephrologist and a dialysis facility. Because provider 
clinical practices may vary, practice variations may independently 
influence patient outcomes. Some commenters suggested future 
development of measures foster greater use of the clinical information 
available in EHRs to improve clinical processes and evaluate patient 
outcomes and suggested use of outcomes measures instead of process 
measures. Furthermore, commenters support the inclusion of outcomes 
measures rather than process measures and composite versus individual 
measures. Several commenters indicated support for the preventive care 
measures included in

[[Page 44423]]

the proposed rule and suggested expanding the set of preventive care 
measures to include HIV and STD screening and eye care specialty 
measures. A commenter requested CMS provide information about their 
strategic plan for future Medicare clinical quality measurement 
selection, how they will improve care delivery, proposed stages of 
reporting, goals and metrics.
    Response: We are appreciative of the many suggestions and 
acknowledge the breadth of interest in certified EHR technology being 
the vehicle for clinical quality measures reporting. We expect to 
consider these suggestions for future measure selection in the Medicare 
and Medicaid EHR incentive payment programs.
    Comment: We received various comments pertaining to future clinical 
quality measures applicable principally to the Medicaid population. One 
commenter urged CMS to include clinical quality measures specific to 
newborn screening in Stage 1 of meaningful use for pediatric providers.
    Response: We agree that newborn screening, both as a clinical 
quality measure, and from a data standards perspective, is a prime 
candidate for inclusion in the Stage 2 definition of meaningful use. We 
affirm our proposed statement about our commitment to work with the 
measure development community to fill noted gaps. We are appreciative 
of the many suggestions. We expect to consider these suggestions for 
immunizations, prenatal screening, infectious disease, etc. in measure 
selection in future rulemaking.
    Comment: A commenter indicated CMS should make explicit the health 
goals and targets for the HITECH Act investments that are already 
implied by the proposed clinical measures. Making them explicit allows 
CMS to set national targets.
    Response: In general, the goal with respect to clinical quality 
measures is to improve healthcare quality as measured by the clinical 
quality measures. We believe that specific quantitative targets are 
impractical at this stage given lack of established base level notes 
and no prior clinical quality measure reporting via certified EHR 
technology.
    Comment: Several commenters asked how CMS plans to develop further 
measure specifications for clinical quality measures. Another commenter 
asked for an electronic source for ICD-9 and CPT codes defining the 
specific conditions or diagnoses or treatments in order to maintain an 
up-to-date capability.
    Response: For many clinical quality measures, clearly defined 
electronic specifications are not yet available. In general, CMS relies 
on the measures' stewards to both develop measures and to provide the 
specifications. Nevertheless, we recognize that many existing measures, 
some of which are owned and maintained by us or its contractors, do not 
currently have electronic specifications. We are aware of work 
currently taking place to fill this gap. We expect to actively work in 
a collaborative way with measures developers and stewards to help 
assure the development of electronic specifications for clinical 
quality measures, but we also expect to engage a contractor to perform 
work developing electronic specifications which may or may not involve 
measure developers and stewards. As for CPT codes, these are 
copyrighted by and are available from the American Medical Association. 
The National Center for Health Statistics (NCHS) and CMS are the U.S. 
governmental agencies responsible for overseeing all changes and 
modifications to the ICD-9 codes.
    Comment: Some commenters suggested specific new clinical quality 
measures which are listed below in Table 11. Several commenters 
suggested new or revised clinical quality measures or the use of 
existing measures from other programs.
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    Response: Many of the proposed clinical quality measures are in the 
existing PQRI program or are NQF endorsed. Others are not. We are 
appreciative of these many specific suggestions and will retain the 
comments for future consideration. Prior to including measures in the 
Medicare EHR incentive payment program, as required by the HITECH Act, 
we will publish the measures in the Federal Register and provide an 
opportunity for public comment. We will examine all options for 
soliciting public comment on future Medicaid-specific clinical quality 
measures, as the Federal Register notice requirement does not apply to 
the Medicaid EHR incentive program.
    Comment: Some commenters suggested the following new topics for 
clinical quality measure development for our program:

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    Response: We appreciate the suggested measure topics submitted by 
commenters for potential new clinical quality measures. Any future 
clinical quality measures developed will be in consideration of the 
clinical practices particular to EPs and eligible hospitals. We have 
captured these recommendations and will have them available for 
consideration in future years.
h. Reporting Method for Clinical Quality Measures for 2011 and 
Beginning With the 2012 Payment Year
(1) Reporting Method for 2011 Payment Year
    As we previously discussed, we proposed to use attestation as a 
means for EPs, eligible hospitals and CAHs, 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 proposed to require that Medicare EPs 
and hospitals attest to the use of certified EHR technology to capture 
the data elements and calculate the results for the applicable clinical 
quality measures. State Medicaid HIT Plans submitted to CMS will 
address how States will verify use of certified EHR technology to 
capture and calculate clinical quality measures by Medicaid EPs and 
eligible hospitals.
    Further, we proposed to require that Medicare EPs, eligible 
hospitals, and CAHs 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. We expect that States will follow a similar strategy as 
Medicare for the Medicaid EHR incentive program.
    We proposed that attestation will utilize the same system for other 
attestation for meaningful use objectives, and proposed we would 
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 EHR 
technology.
     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 of 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.
    Again, State Medicaid Agencies will determine the required elements 
for provider attestations for clinical quality measure reporting, 
subject to CMS prior approval via the State Medicaid HIT Plan.
    For eligible hospitals, we proposed 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 
technology.
     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 of 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.
    The following is a summary of comments received regarding the 
proposed reporting method for clinical quality measures for the 2011 
payment year, and our responses.
    Comment: The majority of commenters were against requiring 
attestation for 2011, rather than suggesting modification of the 
specific attestation requirements. Others commented that reporting 
should not be delayed to realize quality improvements

[[Page 44431]]

and better health outcomes for patients as soon as possible. Many 
commenters suggested deferral of clinical quality measures submission 
until CMS can electronically accept data. Commenters indicated that 
this is consistent with allowing delayed reporting by Medicaid 
providers until 2012 or beyond. A number of commenters suggested that 
attestation should be confined to attesting that the EP's had reviewed 
or selected relevant clinical quality measures.
    Response: While we received many comments to delay attestation past 
2011, we are finalizing our proposed requirement for EPs and eligible 
hospitals to attest to the numerators, denominators, and exclusions in 
their first payment year for the required clinical quality measures as 
described in section II.A.3.d through f of this final rule. Medicaid 
providers do not have ``delayed reporting of clinical quality 
measures.'' The statute and this final rule allow Medicaid providers 
the option of receiving the EHR Incentive Payment for having adopted, 
implemented or upgraded to certified EHR technology, in lieu of meeting 
the meaningful use bar in their first participation year. We expect 
that most Medicaid providers would choose to adopt, implement or 
upgrade to certified EHR technology, rather than demonstrating they are 
meaningful EHR users in their first participation year.
    Comment: Some commenters also suggested EPs should only have to 
attest that the EP is entering the required data elements for clinical 
quality measure reporting where those fields exist in the certified EHR 
technology and provide feedback to the vendor where structured data 
fields are not available. Other commenters indicated the burden of 
adding numerous new data elements is high and labor intensive.
    Response: We considered the suggestion of only requiring 
attestation of documentation of clinical encounters. While we agree 
that this could be considered ``information on clinical quality 
measures,'' however, we do not believe that such information is needed 
when including the submission of information on clinical quality 
measures, which is a required element of meaningful use. We also 
believe that submission of such information would be of limited value. 
We believe that by limiting the clinical quality measure submission 
requirement to those results calculated by certified EHR technology, we 
have limited the potential burden.
    After consideration of the public comments received, we are 
requiring EPs, eligible hospitals, and CAHs to attest to the numerator, 
denominator, and exclusions for the payment year 2011 at Sec.  495.8. 
We are finalizing the following requirements for EPs in this final rule 
for reporting clinical quality measures:
     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 for all patients 
included in the certified EHR technology.
     The NPI and TIN of the EP submitting the information at 
Sec.  495.10.
     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 applicable patients contained in 
the certified EHR technology irrespective of third party payer or lack 
thereof.
     The beginning and end dates for which the numerators, 
denominators, and exclusions apply (the Medicare EHR reporting period 
in payment year 1 is 90 days as stated at Sec.  495.4, and for payment 
year 2 is the beginning and end date of the reporting period as stated 
at Sec.  495.4. For Medicaid providers, as there is no EHR reporting 
period for adopting, implementing or upgrading for their first payment 
year, it is in their second payment year/first year of demonstrating 
meaningful use that they have a 90-day EHR reporting period. Therefore, 
it is their 2nd year of demonstrating meaningful use that has a 12 
month EHR reporting period. For eligible hospitals and CAHs, we are 
finalizing the following requirements in this final rule:
     The information submitted with respect to clinical quality 
measures was generated as output from an identified certified EHR 
technology.
     The information submitted is accurate to the best of the 
knowledge and belief of the official submitting on behalf of the 
eligible hospital or CAHs.
     The information submitted includes information on all 
patients to whom the measure applies for all patients included in the 
certified EHR technology.
     The identifying information for the eligible hospital and 
CAH at Sec.  495.10.
     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 applicable patients contained in 
the certified EHR technology irrespective of third party payer or lack 
thereof.
     The beginning and end dates for which the numerators, 
denominators, and exclusions apply (the Medicare EHR reporting period 
in payment year 1 is 90 days as stated at Sec.  495.4, and for payment 
year 2 is the beginning and end date of the reporting period as stated 
at Sec.  495.4. For Medicaid providers, as there is no EHR reporting 
period for adopting, implementing or upgrading for their first payment 
year, it is in their second payment year/first year of demonstrating 
meaningful use that they have a 90-day EHR reporting period. Therefore, 
it is their 2nd year of demonstrating meaningful use that has a 12 
month EHR reporting period.
    States must implement the same meaningful use requirements, 
including clinical quality measures, with the exceptions described in 
section II.A. of this final rule. Therefore, Medicaid EPs and eligible 
hospitals must submit the same required information described above for 
clinical quality measures. States will propose in their State Medicaid 
HIT Plans how they will accept provider attestations in the first year 
they implement their Medicaid EHR incentive program, and how they will 
accept electronic reporting of clinical quality measures from 
providers' certified EHR technology in their second and subsequent 
implementation years.
(2) Reporting Method Beginning in 2012
    In our proposed rule, we proposed that for the 2012 payment year, 
the reporting method for clinical quality measures would be the 
electronic submission to CMS of summary information, (that is, 
information that is not personally identifiable) on the clinical 
quality measures selected by the Secretary using certified EHR 
technology. For Medicaid, we proposed that EPs and hospitals eligible 
only for the Medicaid EHR incentive program must report their clinical 
quality measures data to States. We proposed that States would 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 we did for payment year 2011, for 2012, we also proposed 
reporting on all cases to which a clinical quality measures applies in 
order to accurately assess the quality of care rendered by the 
particular EP, eligible hospital, or CAH generally. Otherwise it would 
only

[[Page 44432]]

be possible to evaluate the care being rendered for a portion of 
patients and lessen the ability to improve quality generally. We 
solicited comments on the impact of requiring the submission of 
clinical quality measures data on all patients, not just Medicare and 
Medicaid beneficiaries.
    The following is a summary of comments received regarding the 
proposed reporting method beginning in 2012 in regard to the collection 
of aggregate level data on all patients.
    Comment: Several commenters noted that it appears that EPs are 
supposed to submit clinical quality measures electronically to the 
States in 2012. The commenters noted that several States have aging 
Medicaid Management Information Systems that may not be capable of 
accepting this data/information. The commenters requested clarification 
about whether CMS expects the States to utilize and report this data 
immediately.
    Response: To clarify, States may propose to CMS in their State 
Medicaid HIT Plans (See Section 495.332) the means by which they want 
to receive providers' clinical quality measures, starting with States' 
second implementation year of their Medicaid EHR incentive program. 
States are not obliged to receive this data using their MMIS but can 
consider other options such as but not limited to: An external data 
warehouse, registries or health information exchanges that include data 
repositories.
    Comment: A commenter asked that we state the authority which 
provides us the ability to require EPs and hospitals to report on non-
Medicare and Medicaid patients.
    Response: 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 Secretary.'' Likewise, section 1903(t)(6) of 
the Act states that demonstrating meaningful use may include clinical 
quality reporting to the States, and may be based upon the 
methodologies that are used in sections 1848(o) and 1886(n). 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, eligible hospital, or CAH. We believe that the quality of care of 
our EP, eligible hospitals, and CAHs, as well as the ability to 
demonstrate the meaningful use of certified EHR technology, is best 
reflected by the care rendered to all patients, not just Medicare or 
Medicaid beneficiaries.
    Comment: Some commenters recommended patient level data for 
clinical quality measure reporting while others supported CMS' 
requirement to submit summary level data for EPs and hospitals. There 
were several commenters that indicated support for reporting clinical 
quality measure data on all patients rather than just on Medicare and 
Medicaid patients. Another commenter stated that CMS should not require 
hospitals to submit patient level data and that the data should be at 
the aggregated level for all payment years. Another commenter stated 
that it is well proven in other disciplines that aggregated clinical 
data on quality measures can drive improvements in outcomes. Another 
commenter recommended patient level data that would be useful to State 
health programs and link information to managed care organizations.
    Response: We agree with the commenters that stated that reporting 
clinical quality measure data for all patients provides a more 
comprehensive measure of quality. We acknowledge that there are 
potential advantages to patient level data in measuring quality such as 
those stated by the commenter. However, for Stage 1 we have elected to 
require aggregate level data since the EHR standards as adopted by 
ONC's final rule (found elsewhere in this issue of the Federal 
Register) do not provide standards for the submission of patient level 
data.
    Comment: The commenter requested that CMS should have a process in 
place to support end-users with on-going help desk support.
    Response: We agree with the suggestion for the implementation of a 
help desk to respond to questions related to the various CMS related 
questions after implementation of the proposed rule. Information about 
how we will provide assistance to providers will occur outside this 
final rule.
    Comment: A few commenters asked for clarification regarding the 
Stage 1 audit process to ensure accuracy for the reporting of clinical 
quality measures (for example, numerator, denominator, and exception 
data).
    Response: EPs, eligible hospitals, and CAHs are required for 2011 
to attest to results as automatically calculated by certified EHR 
technology. Beginning with 2012, such information will be submitted 
electronically with respect to these requirements; we expect our audit 
strategy would be based on verifying that the results submitted accord 
with how they were calculated by the certified EHR technology.
    Comment: We received comments requesting that CMS require that 
eligible providers report their clinical quality measures data to not 
only States and CMS, but also to Regional Health Improvement 
Collaboratives, where such programs exist. The commenters believed that 
this represents an alternative means for data submission rather than 
attestation and would allow States and CMS to test this alternative in 
2011 or 2012. A commenter requested that CMS interpret the statutory 
requirement (Sections 1848(o)(2)(B)(iii) and 1886(n)(3)(B)(iii)) to 
avoid redundant or duplicative reporting of quality measures to include 
not just other CMS reporting efforts but also to avoid duplicative and 
redundant reporting with State and/or regional quality measurement and 
reporting efforts. They therefore requested that for Medicaid, CMS 
require EPs and hospitals report their clinical quality measures to not 
only States/CMS but also to Regional Health Improvement Collaboratives, 
where such programs exist.
    Response: Clinical quality measures need to be reported to CMS for 
the Medicare program. For 2011, we intend to provide a web based tool 
for attestation. Beginning with 2012 for Medicare, we will provide one 
or more alternative options for electronic submission which may include 
intermediaries. For Medicaid, information will go to the States as 
directed by the States. We believe it would go well beyond the purview 
of this provision to require additional reporting other than to CMS or 
the States. To clarify the issue raised by the commenter, sections 
1848(o)(2)(B)(iii) and 1886(n)(3)(B)(iii) are tied to the Secretary and 
Federally-required quality measures reporting programs. However, CMS 
agrees that State and regional redundancies could be very problematic. 
We therefore clarify our proposed policy. States must include in their 
State Medicaid HIT Plans an environmental scan of existing HIT and 
quality measure reporting activities related to Medicaid. We expect 
States to include details in their SMHP about how these other on-going 
efforts can be leveraged and supported under HITECH; and how HITECH 
will not result in duplicative and/or burdensome reporting requirements 
on the same providers or organizations.

[[Page 44433]]

    In the proposed rule, we proposed that Medicare EPs, eligible 
hospitals, and CAHs would be required to report the required clinical 
quality measures information electronically using certified EHR 
technology via one of three methods. The primary method we proposed 
would require the EP, eligible hospital, or CAH to log into a CMS-
designated portal. Once the EP, eligible hospital, or CAH 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 proposed to 
permit Medicare EPs, eligible hospitals, and CAHs 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, eligible hospital, or CAH who chooses 
to submit data via an HIE/HIO network to be a participating member of 
the HIE/HIO network. Medicare EPs, eligible hospitals, and CAHs would 
be required to submit their data payload based on specified structures 
or profiles, such as Clinical Data Architecture (CDA), and accompanying 
templates. The EPs, eligible hospitals, or CAHs data payload would be 
an output from their respective certified EHR technologies, in the form 
and manner specified from their HIE/HIO adopted architecture into the 
CMS HIE/HIO adopted architecture.
    As another potential alternative, we proposed to accept submission 
through registries dependent upon the development of the necessary 
capacity and infrastructure to do so using certified EHRs.
    We stated in the proposed rule that we intended 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 and CAHs on or 
before April 1, 2011 for EHR adoption and incorporation and to 
accommodate EHR vendors.
    The following is a summary of comments received regarding the 
proposed reporting method for clinical quality measures beginning with 
the 2012 payment year, and our responses.
    Comment: A commenter recommended that CMS test a range of reporting 
options for clinical quality measures to establish uniform and reliable 
rates of data transmission. Several commenters supported the three data 
submission methodologies listed in the proposed rule to allow 
flexibility in the quality reporting mechanisms. Many commenters 
requested reporting via registries.
    Response: We agree with the desirability of considering the three 
transmission methodologies listed in the proposed rule. The submission 
through a portal is the only mechanism that is feasible and practical 
for 2012 electronic clinical quality measure submission. We plan to 
test HIE/HIO and registry submission for future possible implementation 
through HITECH.
    Comment: A commenter requested clarification as to when CMS would 
no longer accept data for 2012 for Medicare EPs.
    Response: The specific technical mechanism for attestation and 
electronic submission will be posted on the CMS Web site, and through 
various educational products in development. We anticipate that the 
last date for attestation or electronic submission will be two-three 
months after the close of the applicable EHR reporting period for EPs, 
eligible hospitals, and CAHs respectively.
    Comment: Several commenters requested that CMS continue programs 
that incentivize advanced patient care for providers who are not 
eligible for the EHR incentive program and/or who do not become 
meaningful users of certified EHR technology.
    Response: CMS clarifies, based upon the comments, that our efforts 
to avoid duplicative quality reporting requirements do not necessarily 
mean the discontinuation of other quality reporting programs. CMS and 
State Medicaid agencies support several quality reporting programs that 
are legislatively mandated or approach quality measurement in ways that 
are not exclusively tied to HIT, or that, are voluntary and/or address 
emerging or developing quality measure focus areas. We are committed to 
determining where the EHR incentive program's quality measure reporting 
can support other quality objectives, where it cannot and how to best 
align our overall quality measurement efforts across programs.
    Comment: Many commenters requested deferring quality measure 
reporting until 2012 and/or 2013, at which time all measures will be 
electronically specified and tested. Commenters believed that this was 
especially important for new clinical quality measures such as 
Emergency Department Throughput and Stroke, and recommended gradually 
phasing in or gradually increasing the number of reportable measures 
and measure sets over time to allow for sufficient testing and 
harmonization between programs. Some commenters suggested that for 
Stage 1, eligible hospitals should be required to report only on the 15 
measures that have been electronically specified and those that are 
appropriate for that organization. One commenter requested clinical 
quality measure reporting should be optional. Also, commenters 
requested for 2011 and 2012 that hospitals continue to report clinical 
quality measures through the current pay-for-reporting (RHQDAPU and HOP 
QDRP) programs or on clinical quality measures that coincide with HEDIS 
reporting measures including HOS and CAHPS, using the existing 
approaches, while quality measurement specialists and vendors create 
valid, reliable, and field-tested e-measures for deployment in the 
eligible hospitals for 2013. Finally, commenters stated that the 
proposed timeline may negatively impact credibility of data produced 
and have potentially negative impact on patient safety.
    Response: With respect to comments received regarding the timeline 
for implementation of the EHR incentive program, we are only finalizing 
clinical quality measures that are electronically specified by the date 
of display of this final rule. For eligible hospitals and CAHs, we are 
finalizing 15 clinical quality measures as listed in Table 10 of this 
final rule that will be required to report for 2011 and 2012, as 
applicable to their patient population. Although we understand the 
suggestion that reporting through RHQDAPU should suffice for the HITECH 
Act, the difficulty is that HITECH specifically requires that EPs, 
eligible hospitals, and CAHs use ``certified EHR technology'' in 
connection with the submission of clinical quality measures. Thus the 
HITECH Act introduces a requirement that at least some clinical quality 
measures be submitted in connection with the use of certified EHR 
technology, whereas RHQDAPU has no such requirement. We have limited 
the measures to those that have been electronically specified and that 
are able to be automatically calculated by the certified EHR 
technology. These results will be reported by EPs, eligible hospitals, 
and CAHs. We will seek to align the EHR incentive program and quality 
reporting programs in future rulemaking.
    Comment: A number of commenters urged CMS not to require submission 
of

[[Page 44434]]

clinical quality measures data beyond what a certified EHR can produce. 
Specifically, commenters stated that no clinical quality measures 
required for submission in Stage 1 should require a manual chart 
review. Some commenters also requested allowing submission of clinical 
quality measures through other EHRs that are not certified.
    Response: We have adopted the suggested approach for 2011 and 2012 
that limits the required information on clinical quality measures 
results to that which can be automatically calculated by the certified 
EHR technology. As to non-certified EHR technology, the HITECH Act 
incentive program specifically requires the meaningful use of certified 
EHR technology.
    Comment: Several commenters stated that currently the data required 
to be used in the calculation of clinical quality measures are obtained 
from EHR discrete fields, free text and paper records. Commenters 
recommended a uniform reporting structure. Commenters questioned if 
they would be submitting raw data, numerators and denominators only, if 
there will be an intermediary file that will allow manual edits to the 
file prior to submission, and if not will validity be based entirely on 
discrete electronic data. Commenters asked if sampling will be 
permitted or if hospitals will be required to report on entire 
populations. Commenters supported the value of reporting clinical 
quality measures for all patients, not just Medicare and Medicaid 
patients, in order to see the whole picture of the patient population 
which will enhance quality improvement.
    Response: As discussed elsewhere, the submission requirement is 
limited to calculated results of clinical quality measures from 
certified EHR technology, as specified in this final rule, and as is 
consistent with the ONC final rule (see 75 FR 2014) which requires 
certified EHR technology to be able to calculate clinical quality 
measures as specified by CMS.
    Comment: Several commenters suggested the clinical quality measures 
requiring medication administration data be delayed for reporting 
because they require advanced features of EHR systems with 
implementation of the features, in particular Electronic Medication 
Administration Record (eMAR).
    Response: The Department has adopted certification criteria for EHR 
Modules and Complete EHRs, as identified in the Health Information 
Technology: Initial Set of Standards, Implementation Specifications, 
and Certification Criteria for Electronic Health Record Technology; 
Interim Final Rule (75 FR 2014). It has also proposed temporary and 
permanent certification programs for testing and certifying health 
information technology in a March 10, 2010 proposed rule (75 FR 11328). 
The certification of EHRs will assure functionality of the information 
system to obtain clinical quality data from the EHR.
    After consideration of the public comments received, starting in 
payment year 2012, in addition to meeting requirements for measures on 
meaningful EHR use and other requirements, Medicare EPs, eligible 
hospitals, and CAHs will be required to electronically submit clinical 
quality measures results (numerators, denominators, exclusions) as 
calculated by certified EHR technology at Sec.  495.8. Medicaid EPs 
will be required to do so in the State's second implementation year for 
their Medicaid EHR incentive program. The clinical quality measures 
will be for all patients, regardless of payer, and will be for the 
period of the EHR reporting period. Medicare EPs, eligible hospitals, 
and CAHs will be required to report the required clinical quality 
measures information electronically using certified EHR technology via 
one of three methods. The primary method will require the EP, eligible 
hospital, or CAH to log into a CMS-designated portal. Once the EP, 
eligible hospital, or CAH has logged into the portal, they will 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, contingent on 
feasibility, we will permit Medicare EPs, eligible hospitals, and CAHs 
to submit the required clinical quality measures data using certified 
EHR technology through a Health Information Exchange (HIE)/Health 
Information Organization (HIO). This alternative data submission method 
will be dependent on the Secretary's ability to collect data through a 
HIE/HIO network and would require the EP, eligible hospital, or CAH who 
chooses to submit data via an HIE/HIO network to be a participating 
member of the HIE/HIO network. Medicare EPs, eligible hospitals, and 
CAHs would be required to submit their data payload based on specified 
structures or profiles. The EPs, eligible hospitals, or CAHs data 
payload should be an output from their respective certified EHR 
technologies, in the form and manner specified from their HIE/HIO 
adopted architecture into the CMS HIE/HIO adopted architecture.
    As another alternative, we will also accept submission through 
registries dependent upon the development of the necessary capacity and 
infrastructure to do so using certified EHRs. Finally, qualifying 
Medicare Advantage organizations for their eligible Medicare Advantage 
EPs, as well as, Medicare Advantage-affiliated eligible hospitals and 
CAHs will continue to submit HEDIS, HOS and CAHPS data instead of the 
clinical quality measures results under this final rule in section 
II.C.6.
    We will 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 and CAHs on or before April 1, 2011 for EHR adoption and to 
accommodate EHR vendors.
    State Medicaid Agencies must follow the same requirements for 
meaningful use, including clinical quality measures, for example, 
across all payers and for the entire EHR reporting period for EPs and 
eligible hospitals. We expect that States will be able to accept the 
electronic reporting of clinical quality measures by their second year 
of implementing the EHR incentive program. States will include in their 
State Medicaid HIT Plan a description of how Medicaid providers will be 
able to electronically report clinical quality measures, subject to CMS 
prior approval.
i. Alternative Reporting Methods for Clinical Quality Measures
    We proposed several alternative reporting methods to create a 
dataset of provider-submitted summary data. One such alternative we 
proposed is the development of a distributed network of EHRs where 
health information is retained locally in individual EP, eligible 
hospital, and CAH EHRs and only summary reports are submitted to CMS. 
Another alternative we proposed is the creation of databases of 
patient-level EHR data stored at the state or regional level.
    The following is a summary of comments received regarding the 
proposed alternative reporting methods for clinical quality measures 
and our responses.
    Comment: A commenter recommends aggregate reporting necessary for 
clinical quality measures to be able to be completed in secondary 
systems such as data warehouses.
    Response: For Medicare, we require that the data source be from 
certified EHR technology. EPs, eligible hospitals

[[Page 44435]]

and CAHs may use intermediaries (data warehouses) to submit the EHR-
generated clinical quality measure if available, assuming all 
requirements are met. States may seek CMS prior approval via their 
State Medicaid HIT Plans for how they expect Medicaid providers to 
report the required meaningful use data, including clinical quality 
measures. For example, States may propose that the data, while it 
originates in the providers' certified EHR technology, may be reported 
using a health information exchange organization or registry as an 
intermediary.
    Comment: A few commenters communicated that the calculation and 
submission of quality measures may depend on the use of health 
information technology systems beyond those used by the EP such as data 
warehouses or registries that have to manipulate the data received. 
They indicated the final rule should not exclude the use of additional 
non-certified EHR technology to assist EPs in satisfying the quality 
reporting requirements provided the EP uses certified EHR technology to 
capture the data and to calculate the results.
    Response: Certified EHR technology will be required to calculate 
the clinical quality measure results for the CMS specified measures we 
finalize in this final rule and transmit under the PQRI Registry XML 
specification, as provided in the ONC final rule (found elsewhere in 
this issue of the Federal Register).
    Comment: Several commenters recommended inclusion of QRDA with PQRI 
XML for reporting, thus allowing vendors the ability to bypass PQRI XML 
if they plan to ultimately implement QRDA. There is also concern that 
switching to QRDA from XML will require duplicative investments. They 
recommended attestation for 2011 and 2012 as well as allowing use of 
QRDA in 2012.
    Response: Electronic specifications will need to utilize standards 
that the certified EHR can support. ONC's final rule (found elsewhere 
in this issue of the Federal Register) limits this to PQRI Registry XML 
specifications. There is no current requirement that a certified EHR be 
able to produce QRDA.
j. Reporting Period for Reporting of Clinical Quality Measures
    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, eligible hospital, and CAH must submit 
information ``for such period'' on the clinical quality measures and 
other measures selected by the Secretary. Therefore we proposed that 
the reporting period for the clinical quality measures selected by the 
Secretary be the EHR reporting period.
    Another alternative we proposed was a fixed reporting period of 
four quarterly reporting periods, or two six-month reporting periods. 
In terms of practice and precedent for other Medicare clinical quality 
measure reporting programs, all of these programs submit data to us at 
specific reporting intervals.
    The following is a summary of comments received regarding the 
proposed EHR reporting period for EPs, eligible hospitals, and CAHs.
    Comment: Some commenters asked for clarification on whether the EP 
must continuously report during the ``entire payment year'' or whether 
the reporting period for clinical quality measures covers a 12-month 
period. Other commenters questioned the timing of the requirements 
associated with the measures--whether the specifications for Stage 1 
payment year 1 apply to EPs regardless of when the EPs become first 
eligible or whether the clinical quality measure specifications follow 
the calendar year.
    Response: The EP only needs to report clinical quality measures 
once a year, as described at Sec.  495.4. For Medicare EPs, eligible 
hospitals and CAHs, the EHR reporting period is 90 days for their first 
payment year. For Medicaid eligible providers, their first payment year 
in which they demonstrate meaningful use (which may be their second 
payment year, if they adopted, implemented or upgraded in their first 
payment year) also has a 90-day EHR reporting period. For Medicare EPs, 
eligible hospitals and CAHs, in their second payment year, the 
reporting period is 12 months. For Medicaid EPs and eligible hospitals, 
in their second payment year of demonstrating meaningful use, they also 
have a 12-month EHR reporting period. Related to the timing of the 
requirements, the final clinical quality measure specifications for 
2011 and 2012 will be posted at the time of display of this final rule.
    Comment: Some commenters requested clarification of the process for 
reporting in the entire payment year. A commenter requested 
clarification regarding whether the EP must continuously report during 
the entire payment year or whether the reporting period for clinical 
quality measures covers an entire 12-month period. Some commenters 
pointed out that reporting capability may not be available every day of 
the year due to information system availability.
    Response: Technical requirements for electronic reporting will be 
posted on the CMS Web site prior to the reporting period. The reporting 
period refers to parameters of the data captured in the EHR or the 
services documented in the EHR, not the time when the submission of 
information regarding clinical quality measures is made. States will 
dictate for Medicaid EPs and eligible hospitals the timing of 
submission of their clinical quality measures data via electronic 
reporting. Submission could be as infrequent as once a year after the 
close of the reporting period. The reporting period beyond 2011 and 
2012 for clinical quality measures will be determined in future 
rulemaking.
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 final 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
    As proposed, in the final rule, we are adopting a common method for 
demonstrating meaningful use in both the Medicare and Medicaid EHR 
incentive programs, for the same reasons we have 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 in section II.4.b of this final rule. States seeking to

[[Page 44436]]

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 final rule.
b. Methods for Demonstration of the Stage 1 Criteria of Meaningful Use
    Our final regulations, at Sec.  495.8, will require that for CY 
2011, EPs demonstrate that they satisfy each of the fifteen objectives 
and their associated measures of the core set listed at Sec.  495.6(d) 
and five of the objectives and their associated measures from the menu 
set listed at Sec.  495.6(e) unless excluded as described in Sec.  
495.6(a)(2). (An exclusion will reduce the number of objectives/
measures the EP must satisfy by the number that is equal to the EP's 
exclusions. For example, an EP that can exclude two menu objectives/
measures is required to satisfy only three of the objectives and 
associated measures from the menu set. Similarly, an exclusion will 
reduce the number of core objectives/measures that apply). We permit 
only those exclusions that are specifically indicated in the 
description of each objective and its associated measure (Sec.  
495.6(d) for the core set and Sec.  495.6(e) for the menu set). If an 
exclusion exists and the EP meets the criteria for it, the EP would 
report to CMS or the States that fact rather than demonstrating that 
they satisfy the objective and associated measure. At Sec.  495.8, we 
will require that for FY 2011, eligible hospitals and CAHs demonstrate 
that they satisfy each of the fourteen objectives and their associated 
measures of the core set listed at Sec.  495.6(f) and five of 
objectives and their associated measures from the menu set listed at 
Sec.  495.6(g) unless excluded as described in Sec.  495.6(b)(2). As 
with EPs, all exclusions are specifically indicated, in the description 
of the objective and associated measures (Sec.  495.6(f) for the core 
set and Sec.  495.6(g) for the menu set) and an exclusion will reduce 
the number of objectives and associated measures an eligible hospital 
or CAH must satisfy (see above example for EPs). If an exclusion exists 
and the hospital meets the criteria for it, the eligible hospital or 
CAH would report to CMS or the States that fact rather than 
demonstrating that they satisfy the objective and associated measure. 
Finally, as specified in 495.316(d), for those participating in the 
Medicaid EHR incentive program, the State may alter the requirements 
for demonstrating that an EP or eligible hospital is a meaningful user, 
with regard to four specific objectives and measures. For these 
objectives and measures, the State may also choose to make a menu-set 
objective a core objective. Such State additions could increase the 
core or menu set objectives and measures that must be satisfied.
    For payment years beginning in CY 2012 and subsequent years, our 
final regulations, at Sec.  495.8, will require that for Stage 1 of 
meaningful use, EPs demonstrate that they satisfy each of the 15 
objectives and their associated measures of the core set listed at 
Sec.  495.6(d), except Sec.  495.6(d)(4) ``Report ambulatory quality 
measures to CMS or, in the case of Medicaid EPs, the states'' and 5 of 
the objectives and their associated measures from the menu set listed 
at Sec.  495.6(e) unless excluded as described in Sec.  495.6(a)(2). 
The form and mechanism for excluding an objective and its associated 
measure is the same for CY2012 and subsequent years as it is for 
CY2011. The ability for States to add certain requirements is the same 
for CY 2012 and subsequent years as it is for CY 2011. The EP must 
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 final rule. For payment years beginning in FY2012 and 
subsequent years, our final regulations, at Sec.  495.8, will require 
that eligible hospitals and CAHs demonstrate that they satisfy each of 
the fourteen objectives and their associated measures of the core set 
listed at Sec.  495.6(f), except Sec.  495.6(f)(3) ``Report hospital 
quality measures to CMS or, in the case of Medicaid EPs, the states'' 
and five of the objectives and associated measures from the menu set 
listed at Sec.  495.6(g) unless excluded as described in Sec.  
495.6(b)(2). The form and mechanism for excluding an objective and its 
associated measure is the same for FY2012 and subsequent years as it is 
for FY2011. The ability for States to add certain requirements also is 
the same for FY 2012 and subsequent years as it is for FY 2011. The 
eligible hospital or CAH must 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 final rule.
    Except for the clinical quality measures (for which we require 
electronic reporting in CY or FY 2012 and subsequent years as discussed 
above), satisfaction of meaningful use objectives and associated 
measures may be demonstrated through attestation. Specifically, we will 
require that EPs, eligible hospitals and CAHs attest through a secure 
mechanism, such as through claims based reporting or an online portal. 
For the Medicare FFS and MA EHR incentive programs, CMS will issue 
additional guidance on this mechanism. For the Medicaid EHR incentive 
program, the States will include additional information in the State 
Medicaid HIT plans they submit to CMS to implement the program. We will 
require that an EP, eligible hospital or CAH would, through a one-time 
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 reported objectives of meaningful use. We would 
require 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, eligible hospitals and CAHs. 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, eligible hospitals and CAHs 
demonstrate meaningful use should work for all provider types. We also 
believe that uniform means of demonstration for EPs, eligible hospitals 
and CAHs are preferred 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 could require use of certified EHR technology beyond 
the capabilities certified according to the ONC FR.
    In addition to requiring electronic reporting of clinical quality 
measures beginning in 2012 in Medicare and Medicaid, we also leave open 
the possibility 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

[[Page 44437]]

electronic reporting of some measures associated with the objectives of 
the meaningful use definition. We do not require any EP, eligible 
hospital or CAH to participate in this testing in either 2011 or 2012 
in order to receive an incentive payment. The state of electronic 
exchange varies widely across the country and is dependent on numerous 
Federal, State, local, non-profit and for-profit initiatives. Given 
this high state of flux, CMS and/or the States would have to issue 
considerable updated guidance to EPs, eligible hospitals and CAHs who 
wish to join in our efforts to explore the electronic exchange of 
information. Any testing should be based on the principle 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 final 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.
    Comment: Several commenters submitted comments regarding the 
methods of demonstration for clinical quality measures.
    Response: We summarize and respond to those comments in section 
II.A.3 of this final rule.
    Comment: A few commenters submitted comments regarding section 
1848(o)(2)(A) of the Act, which provides discretion to the Secretary to 
provide for the use of alternative means for meeting the requirements 
of meaningful use in the case of an eligible professional furnishing 
covered professional services in a group practice. Some of these 
commenters suggested that CMS provide such an alternative means in the 
final rule, while others suggested we consider doing so in future 
rulemaking.
    Response: We did not propose any alternative means in the proposed 
rule. Given the per EP basis for most of the objectives and their 
associated measures, we did not believe group reporting would provide 
an accurate reflection of meaningful use. In addition, as the 
incentives payments are calculated on a per EP basis it is unclear to 
us how variance of meaningful use among EPs within the group should be 
treated. We believe the possible reduction in burden of attesting once 
per group versus once per EP is outweighed by the less accurate 
reporting, increased possibility of duplicate payments and decreased 
transparency. We note that many of the measures rely on data which 
could easily be stored at a group level such as a patient's 
demographics or medication lists and any EP with access to that 
information about a patient in their certified EHR technology and who 
sees that same patient in the EHR reporting period would receive credit 
for that patient in their numerator and denominator. Other aspects such 
as the enabling of drug-drug, drug-allergy checks, using CPOE and eRx 
could vary widely from EP to EP within the same group. We would also be 
concerned with EPs in multi-specialty group practices some of whom 
might be eligible for an exclusion, while others would not be. As 
requested by commenters we will continue to review this option in 
future rulemaking, but for this final rule we do not include the option 
to demonstrate meaningful use at a group level.
    While we did not make changes to the demonstration of meaningful 
use requirements based on the comments above, we did make modifications 
to other aspects of the Stage 1 definition of meaningful use that 
required the descriptions of how many and which objectives and their 
associated measure EPs, eligible hospitals and CAHs to be altered 
accordingly. These changes are to the first paragraph of this section 
(II.4.b).
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
    In the proposed rule, we said that 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 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 will not post 
information on group practices because we will not 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 qualifying MA 
organizations receiving the incentive payment or payments. We would 
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. The HITECH Act did not require 
Medicaid EPs and eligible hospitals to be identified online so we will 
not do so.
    We did not receive any comments and we are finalizing these 
provisions as proposed.
b. Program Election Between Medicare FFS/MA and Medicaid for EPs
    In the proposed rule, we said 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, if eligible, could 
receive incentive payments from both Medicare and Medicaid 
simultaneously). Section 495.10 allows an EP meeting the eligibility 
criteria for both the Medicare FFS/MA and Medicaid programs to 
participate in either program. We would also allow an EP to change his 
or her election once during the life of the EHR incentive programs 
after making the initial election, for payment years 2014 and

[[Page 44438]]

before. We believe this one-time election rule allows 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) continues the availability to the EP of 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.
    In the proposed rule, we proposed at 495.10(e)(5), that an EP 
switching program is ``placed in the payment year the EP would have 
been in, had the EP not switched programs.'' 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. For 
the final rule, we are clarifying that the EP is ``placed in the 
payment year the EP would have been in had the EP begun in and remained 
in the program to which he or she has switched.'' We have modified 
495.10(e)(5) accordingly.
    We believe this clarification is necessary in order to address 
comments we received on non-consecutive payments. As outlined in 
II.A.1.c and d of this final rule, the definition of first, second, 
third, fourth, fifth, and sixth payment year differs across the 
Medicare and Medicaid programs. Section 1848(o)(1)(E)(ii) of the Act 
requires that the second Medicare payment year be successive to the 
first payment year and immediately follow it. Similarly, the third 
payment year must immediately follow the second, and so on. Thus, as 
explained in II.A.1.c., ``if a Medicare EP receives an incentive in 
CY2011, but does not successfully demonstrate meaningful use or 
otherwise fails to qualify for the incentive in CY2012, CY2012 still 
counts as one of the EP's five payment years and they would only be 
able to receive an incentive under the Medicare EHR incentive program 
for three more years.'' The same rule, however, does not apply to the 
Medicaid EHR incentive program. For that program, EP payments may 
generally be non-consecutive. If an EP does not receive an incentive 
payment for a given CY or FY then that year would not constitute a 
payment year. For example, if a Medicaid EP receives incentives in 
CY2011 and CY2012, but fails to qualify for an incentive in CY 2013, 
they would still be potentially eligible to receive incentives for an 
additional four payment years.
    The rules on consecutive payment, discussed above, govern how an EP 
should be treated after switching from the Medicaid to the Medicare EHR 
incentive program, or vice versa. As stated above, we believe that an 
EP that switches from the Medicaid to the Medicare program should be 
treated in the same manner as if such EP had started in the Medicare 
program. Payment years that are skipped in the Medicaid EHR incentive 
program thus become payment years that count against the EP's five 
years of payment in Medicare. For example, an EP that receives 
nonconsecutive payment under Medicaid for CYs 2011 and 2013 (but skips 
CY 2012), and then switches to the Medicare program in CY 2014, is in 
the fourth payment year in 2014, and is limited to that payment year's 
limit on incentive payments. Such an EP may receive only one more year 
of incentive payments under the Medicare EHR incentive program. We 
believe this rule is equitable, given that, had the EP started in the 
Medicare program, the EP would not have been able to benefit from non-
consecutive payments available under the Medicaid EHR incentive 
program. We see no reason why EPs that switch from the Medicaid to the 
Medicare program should be treated differently from those who initially 
began in the Medicare program, and believe that any other rule might 
encourage gaming on the part of eligible professionals.
    By the same token, an EP that switches from the Medicare to the 
Medicaid EHR incentive program will not be penalized for non-
consecutive payment years accrued while in the Medicare program. For 
example, an EP that receives nonconsecutive payment under Medicare for 
CYs 2011 and 2013 (but skips CY 2012), and then switches to the 
Medicaid program in CY 2014, is in the third year of payment in 2014, 
and is potentially eligible to receive three additional years of 
payment under Medicaid (after 2014), for a total of six years of 
payment. Similar to our rationale described in the paragraph above, we 
do not believe an EP that switches to the Medicaid program should be 
treated differently from the EP that initially begins in the Medicaid 
program, as once the EP switches to the Medicaid program, there is no 
statutory requirement that the payment year ordering be consecutive.
    We believe it is self-evident that an EP switching to a new program 
is subject to the requirements of such new program. Thus, for example, 
an EP switching from Medicaid to Medicare might be subject to a higher 
stage of meaningful use upon moving to the Medicare program. The EP 
also would be subject to fewer years of payment and to the requirement 
that no incentive payments may be made after 2016.
    Finally, 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 
proposed 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. If the EP receives the HPSA bonus available under the 
Medicare FFS EHR incentive program, this amount could be as much as 
$4,450. An EP who switches from Medicaid to Medicare could potentially 
exceed the Medicare threshold in a number of circumstances; however, 
since they will not be allowed to exceed the Medicaid threshold under 
any circumstance, we would pay the incentive for which they are 
eligible for a given payment year in whichever program they are in for 
that payment year until they exceed the Medicaid threshold. No 
incentive payments will be made to any EP that would allow the EP to 
exceed the Medicaid threshold. We anticipate that this would result in 
a prorated final year incentive payment. Finally, we proposed 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.
    Comment: We received comments requesting clarification on when an 
EP could make their one switch.
    Response: As described in our example, the EP could make their one

[[Page 44439]]

switch anytime after the receipt of an incentive payment under either 
the Medicare or Medicaid program. Since this policy would also apply to 
other program changes (for example, changing from one State to another, 
or updating registration data elements), we want to clarify when 
program registration changes can take place. An EP, eligible hospital 
or CAH sets into motion receipt of the incentive payment when they 
attempt to demonstrate meaningful use or demonstrate to the State 
efforts to adopt, implement, or upgrade to certified EHR technology. 
Therefore, prior to their first successful attempt to demonstrate 
meaningful use or demonstrate to the State efforts to adopt, implement, 
or upgrade to certified EHR technology, the EP could change their 
registration in either the Medicare or Medicaid EHR incentive program 
as many times as they wish. Furthermore, EPs and hospitals selecting 
the Medicaid incentive program may also switch freely prior to payment 
as described here. However, there may only be one payment from one 
State in any one payment year.
    After consideration of the public comment received, we are 
modifying the provision at Sec.  495.10(e)(2) to ``(2) After receiving 
at least one EHR incentive payment, may switch between the two EHR 
incentive programs only one time, and only for a payment year before 
2015''. This modification better reflects our clarification in response 
to the comment received on the ability to switch between programs. For 
the final rule, we have made a few other technical changes to Sec.  
495.10, in addition to the changes made to Sec.  495.10(e)(2) and 
(e)(5).
c. Data To Be Collected
    In addition to information regarding the demonstration of 
meaningful use, in Sec.  495.10 of this final rule we would 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 Sec.  495.10.
     For EPs, whether they elect to participate in the Medicare 
EHR incentive programs or the Medicaid EHR incentive program.
     For eligible hospitals and CAHs, their CCN.
    To coordinate with the States to avoid duplication of payments, we 
would make available to the States through a single National Level 
Repository (NLR) 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.
     Other information as specified by CMS.
    CMS, our contractors, and the States will have access to these data 
elements through the NLR 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 one-time switch in 
EHR incentive program election by EPs.
    Comment: We received comments that some EPs do not use TINs, but 
rather the EP's Social Security Number (SSN).
    Response: In these cases the EP would submit a TIN, which is their 
SSN. An incorporated EP would have a TIN for the corporation that would 
be an EIN. The EP's own TIN remains his/her SSN.
    Comment: Some commenters requested clarification on whether the 
business address is the physical location or the mailing address.
    Response: We believe that the HITECH Act required reporting of this 
information to assist the public in identifying meaningful EHR users. 
We believe the practice location address serves this purpose better 
than the mailing address. However we will allow EPs to enter an 
alternate address for posting purposes but will not allow that address 
to be a post office box.
    Comment: Commenters suggested that States would be allowed to 
determine the requirements associated with Medicaid provider TIN 
assignments.
    Response: We discuss the requirements associated with TIN 
assignment in 495.10(f) and in the requirements associated with SMHPs 
in this preamble at section 495.332 SMHPs. States are responsible for 
making sure the providers are providing an acceptable TIN, consistent 
with the regulations at 495.10(f), which states that providers may only 
assign to certain TINs.
    We clarified 495.10(f), to reflect this and other changes.
    Comment: CMS received numerous comments about the schedule for and 
State's role in the national single repository where CMS will collect 
data elements on all registrants.
    Response: The technological requirements and systems interfaces are 
outside this regulation and we look forward to providing additional 
guidance.
    Comment: Some commenters recommended a shorter record retention 
period that the ten years proposed. Commenters recommended periods 
ranging from three to eight years. The reasons given for a shorter time 
period were the cost of record retention, no perceived need for a 
retention period longer than the incentive period, rapid changes in EHR 
technology and consistency with other unspecified retention 
requirements.
    Response: After reviewing the comments, we agree with commenters 
that ten years is longer than necessary to ensure the integrity of the 
program. In considering a shorter retention period, we believe that 
there may be cause to look over the entire incentive period. As a 
Medicaid EP would be eligible for incentives over a six-year period if 
they successfully receive an incentive each year and that is the 
longest such period available to any participant in the Medicare and 
Medicaid EHR incentive programs, we adopt a new retention period of six 
years for this final rule.
    Comment: We received a comment suggesting that Medicare adopt an 
appeals process similar to the one proposed for Medicaid.
    Response: We expect to address Medicare appeals in future guidance.
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 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). Sections 4101(a) and 
4201(a) of the HITECH Act originally defined 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 Medicare-covered professional services during the 
relevant EHR reporting period in a hospital setting (whether inpatient 
or outpatient) through the use of the

[[Page 44440]]

facilities and equipment of the hospital, including the hospital's 
qualified EHRs. Following publication of our proposed rule, Congress 
modified the definition of hospital-based EPs. More specifically, on 
April 15, 2010, President Obama signed into law the Continuing 
Extension Act of 2010 (Pub. L. 111-157) which, in Section 5, made the 
following changes to the Social Security Act as it applies to both the 
Medicare and Medicare EHR incentives for EPs:
    (1) Medicare--Section 1848(o)(1)(C)(ii) of the Social Security Act 
(42 U.S.C. 1395w-4(o)(1)(C)(ii)) is amended by striking `setting 
(whether inpatient or outpatient)' and inserting `inpatient or 
emergency room setting'.
    (2) Medicaid--Section 1903(t)(3)(D) of the Social Security Act (42 
U.S.C. 1396b(t)(3)(D)) is amended by striking `setting (whether 
inpatient or outpatient)' and inserting `inpatient or emergency room 
setting'.
    These amendments were effective as if included in the enactment of 
the HITECH Act.
    The above sections indicate 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 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 
whether he or she has made a reassignment to the hospital for Part B 
billing purposes.
    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.
    Based on section 4101(a) of the HITECH Act (and prior to the 
amendments in the Continuing Extension Act of 2010), we proposed that 
an EP would be a hospital-based EP and therefore ineligible to receive 
a Medicare or Medicaid EHR incentive payment if more than 90 percent of 
their services are provided in the following place of service (POS) 
codes for HIPAA standard transactions: 21--Inpatient Hospital, 22--
Outpatient Hospital, 23--Emergency Room.
    In addition, because of concerns that some primary care EPs who 
provide services to Medicare and Medicaid beneficiaries would be 
ineligible for the incentive payments under this proposed definition, 
in the proposed rule, we asked for comments on whether we should use 
another method for defining hospital-based EPs. We estimated that under 
this proposal, 12-13 percent of family practitioners under Medicare 
would be considered hospital-based. We did not have corresponding data 
for Medicaid EPs.
    Comment: Many congressional representatives, hospital associations, 
individual providers and other commenters indicated that they believed 
that the proposal would inappropriately exclude from receiving EHR 
incentive payments EPs practicing in ambulatory settings such as those 
that practice in hospital provider-based departments (referred to by 
most commenters as ``outpatient centers and clinics''). They indicated 
these centers and clinics provide services similar to services 
furnished by EPs in private offices. Many suggested that this 
definition may inhibit hospital investments in their outpatient primary 
care sites. Commenters believe the absence of any EP incentive payment 
in these settings may discourage hospitals from adopting EHR in 
ambulatory settings, particularly if doing so requires the purchase of 
an ambulatory-based EHR system (or an ambulatory component to be added 
to the hospital's EHR system). This is because the hospital's total 
incentive payment is based on total inpatient services. A hospital with 
a large outpatient department will not receive a higher incentive 
payment as a result of their outpatient services. These commenters 
indicated that ambulatory care EHRs are very different from inpatient 
EHRs because of the inherent differences between the types of care 
provided in each setting. Commenters differed somewhat to the extent 
that they provided specific alternatives. Some commenters went so far 
as to suggest that all EPs should be eligible to receive EHR incentive 
payments, regardless of where they practice.
    Response: The changes to the hospital-based definition that are 
included in the Continuing Extension Act of 2010 (Pub. L. 111-157) 
discussed above address commenters concerns about ambulatory settings. 
These changes have been incorporated into the final rule. An EP will be 
a hospital-based EP and therefore ineligible to receive a Medicare (or 
Medicaid) EHR incentive payment if more than 90 percent of their 
Medicare (or Medicaid) services are provided in the following two place 
of service (POS) codes for HIPAA standard transactions: 21--Inpatient 
Hospital, 23--Emergency Room.
    Comment: Some commenters argued that the proposed rule failed to 
make a critical distinction between hospital-based EPs who primarily 
use an EHR paid for and maintained by the hospital and those that did 
not. Some commenters suggested that an EP should be eligible for an EHR 
incentive payment if he or she had contributed 15 percent or more 
toward the cost of acquiring or maintaining the certified EHR. Some 
commenters requested that CMS change the definition of a hospital-based 
EP to read: ``An EP who furnishes 90 percent or more of his or her 
covered professional services in the CY preceding the payment year in a 
hospital setting and primarily through the use of the qualified 
electronic health records of the hospital.'' The commenters believed 
that Congress's intent was to exclude only those EPs using qualified 
EHRs of the hospital, and that their approach would allow separate EHR 
incentive payments for EPs who have developed cutting-edge, patient 
centered EHR modules, thereby allowing for a clinical specificity not 
currently available in more generalized, hospital-wide EHR systems. 
Commenters stated that these EHR technologies are currently used in 
hospital settings and interoperate with hospital systems, but are paid 
for and primarily maintained by physician groups who see patients in 
hospital settings. The commenters indicate that these physician groups 
continue to invest in their EHRs through improvements, ongoing 
maintenance, and support staff employed to ensure optimal use of such 
technology. The commenters indicated that many early health IT 
champions, including hospital-based anesthesiologists, radiologists, 
pathologists, hospitalists, emergency medicine physicians, and neonatal 
physicians would be negatively affected by the proposal. These comments 
would apply to EP services provided in all hospital settings, including 
inpatient, outpatient, and emergency rooms.
    Response: The statute, as now amended, indicates that hospital-
based EPs are those who furnish substantially all their services in an 
inpatient or emergency room setting, such as a pathologist, 
anesthesiologist, or emergency physician, and who do so using the 
facility and equipment, including qualified electronic health care 
records, of the hospital. While commenters focused on the statutory 
language: ``* * * including qualified electronic health care records of 
the hospital'', they did not address the

[[Page 44441]]

broader meaning of the section which also includes the requirement that 
hospital-based EPs are those who furnish services ``using the facility 
and equipment'', including qualified electronic health care records of 
the hospital. We believe both phrases together are intended to provide 
an explanation of why hospital-based EPs are to be excluded from 
receiving EHR incentive payments (that is, that they would typically 
use the facilities and equipment, including the EHR, of the hospital 
and that therefore it would represent double payment if both hospitals 
and hospital-based EPs were to be paid incentives). We do not believe 
that the intent of this language was to require CMS to evaluate each EP 
as to whether they are using the EHR of the hospital. Further, the 
commenters did not address the significance of the next sentence of the 
statute, which clearly indicates that: ``The determination of whether 
an eligible professional is a hospital-based eligible professional 
shall be made on the basis of the site of service * * *''. Since 
Congress directed that site of service must be the determinant of 
whether an EP is hospital-based, we could not use individualized 
determinations of whether an EP is using the EHR of the hospital to 
deliver his or her services. Also, the subsequent legislation in the 
Continuing Extension Act of 2010 is consistent with the interpretation 
that the determination of whether an EP is hospital-based is based on 
the place where the EP furnishes services, as that subsequent 
legislation further limited hospital-based to those EPs providing 
substantially all services in the emergency room or inpatient hospital 
settings. Furthermore, our final policy is that eligible hospitals must 
demonstrate meaningful use based upon all applicable cases in the 
inpatient (21) and emergency department (23) site of service codes. 
Therefore, there would be duplication in measuring meaningful use for 
the purposes of making EHR incentive payments in the scenario proposed 
by these commenters.
    The HITECH Act does not define the term ``hospital'' for purposes 
of establishing a definition of hospital-based EPs for Medicare and 
Medicaid. However, 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, clearly EPs that practice primarily in 
inpatient hospital settings, as referenced in section 1861(e) of the 
Act, would be considered hospital-based EPs.
    We will 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://www4.cms.gov/PlaceofServiceCodes/Downloads/posdatabase110509.pdf.
    From this code set, we would consider the use of the following POS 
codes to determine whether an EP is a hospital-based eligible 
professional for Medicare:
     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.
     23--Emergency Room, Hospital--is a portion of a hospital 
where emergency diagnosis and treatment of illness or injury is 
provided.
    Comment: Most commenters were supportive of the proposal to define 
``substantially all'' of his or her covered professional services in a 
hospital setting as EPs who furnish at least 90 percent of his/her 
services in a hospital setting. However, some commenters expressed 
concerns that this threshold will be too high starting in 2015 when the 
time comes to determine which EPs should be subject to penalties for 
failure to become meaningful users of certified EHR technology. A few 
commenters misunderstood the proposal and requested that a hospital-
based EP be defined as one who provides at least 90 percent of his or 
her services, defined as encounters and not as charges.
    Response: The statutory definition of hospital-based 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. 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. Consistent with the statute, we proposed to make this 
determination on the basis of services performed by each EP, not the 
charges for each EP. We are finalizing the proposed definition of 
``substantially all'' as furnishing at least 90 percent of services in 
a hospital setting. We believe a 90 percent threshold certainly would 
qualify as ``substantial.''
    Comment: Representatives of surgeons asked that CMS make an 
accommodation to the hospital-based definition to account for services 
paid under a global fee.
    Response: The determination of whether or not an EP is hospital-
based is determined individually for each EP. A global fee is a single 
payment for a bundle of services, some of which could be performed in a 
hospital such as major surgery or hospital visits, whereas some could 
be performed in an office such as follow-up visits, CMS does not have 
data, for the place of service for services performed by individual EPs 
when the services are paid as part of a global fee. We considered 
possibilities for using national level estimates for individual 
services typically performed under global fees as proxies for services 
provided by individual EPs. However, this would add significant 
additional operational complexity to the determination of hospital-
based status and we have not pursued this approach.
    Comment: Some commenters requested that CMS establish a process by 
which EPs could know in advance of a payment year whether CMS 
considered them as being hospital-based and therefore ineligible for an 
incentive payment.
    Response: To the extent practical, we intend on establishing a 
process whereby the EP would know his/her hospital-based status during 
the registration period. We plan to provide information to EPs 
regarding their hospital-based status as early as possible (that is, no 
later than early in each payment year). As indicated in the proposed 
rule, we will make a determination for Medicare incentive

[[Page 44442]]

payment purposes, as to whether or not an EP is hospital-based by 
annually analyzing an EP's claims history from the prior year. In the 
proposed rule we indicated that we would use claims data from the prior 
calendar year to make hospital-based determinations for EPs. However, 
in order to provide information regarding the hospital-based status of 
each EP at the beginning of each payment year, we will need to use 
claims data from an earlier period. Therefore, we will use claims data 
from the prior fiscal year (October through September). Under this 
approach, the hospital-based status of each EP would be reassessed each 
year, using claims data from the fiscal year preceding the payment 
year. The hospital-based status will be available for viewing beginning 
in January of each payment year. For Medicaid purposes, State Medicaid 
agencies will make the determination about whether or not an 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. For purposes of making this determination, States 
would be permitted to use data either from the prior fiscal or calendar 
year.
    After consideration of the public comments received, we are 
revising the definition of hospital based EPs in this final rule. An EP 
will be defined as being hospital-based and therefore 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 two place of service codes 21 (Inpatient Hospital) or 
23 Emergency Room, Hospital. We plan to reassess the hospital-based 
status of each EP for Medicare purposes each year, using claims data 
from the fiscal year immediately preceding the payment year. Based on 
preliminary claims data from the first 9 months of 2009, CMS currently 
estimates that, under this final definition of hospital-based EPs, 
about 14 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.
7. Interaction With Other Programs
    In the proposed rule, we described how 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 in this final 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 e-prescribing 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 final rule, we discuss how we will avoid duplication of 
reporting requirements for clinical quality measures.
    Comment: Some commenters requested more information on efforts to 
avoid duplication of requirements and highly encouraged CMS to do 
everything it could in this regard.
    Response: We address comments on the avoidance of duplication of 
requirements in several other areas of this rule where more specifics 
can be provided.
    Comment: Commenters generally supported our proposal to only apply 
the limitation of participation in multiple programs to the limitation 
outlined in the HITECH Act.
    Response: We continue to believe that providers should be able to 
participate in every program for which they are statutorily eligible 
and therefore are maintaining our proposal to only limit Medicare EPs 
from receiving either the Medicare EHR incentive payment or the 
Medicare E-Prescribing incentive payment.

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 final 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 will add a 
definition of the term ``eligible professional'' in our regulations at 
Sec.  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 final rule, in 
accordance with section 1848(o)(1)(C) of the Act, hospital-based EPs 
are not eligible for an incentive payment.
    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 the Act. As specified under section 1848(o)(1)(A)(i) of 
the Act, the

[[Page 44443]]

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 proposed to codify these specifications and 
definitions in our regulations at 495.102.
    Comment: The commenters who expressed concerns about the EP 
definition under the Medicare program had one overall theme. It is that 
the definition is too narrow and that it should be more inclusive of 
other health professionals in order to serve the goals of the HITECH 
Act. The commenters stated that they believe that the intent of the 
electronic health records (EHR) legislation is to encompass a wide 
range of health professionals to incorporate efficient and effective 
EHR technology. Specifically, these commenters stated that the Medicare 
EP definition should be expanded to include nonphysician practitioners 
and health professionals such as physician assistants (PAs), nurse 
practitioners (NPs), clinical nurse specialists (CNSs), certified 
nurse- midwives (CNMs), clinical psychologists (CPs), clinical social 
workers (CSWs), certified registered nurse anesthetists (CRNAs), 
registered nurses (RNs), occupational therapists (OTs), and 
credentialed pedorthists who make shoes for diabetic patients. 
Additionally, we received a comment that the Medicare EP definition 
should recognize health professionals who provide health support 
services as members of an interdisciplinary health care team such as a 
team consisting of diabetes nurse educators, NPs, pharmacists, PAs, 
dieticians, and case managers.
    Representatives of rural health clinics (RHCs), Federally qualified 
health centers (FQHCs), ambulatory surgical centers (ASCs), outpatient 
clinics and dialysis facilities commented that their providers should 
also be included under the Medicare EP definition to qualify for 
Medicare incentive payments. These providers believe that they are a 
key set of contributors that will implement and meaningfully utilize 
electronic health care record program modules that directly benefit 
their patient populations. Alternatively, one of these commenters 
recommended that provider eligibility should be determined by type of 
service provided rather than by location of service and should include 
non-physician clinicians and providers.
    The sub-theme of the comments that we received on the Medicare EP 
definition is that the definition of an ``eligible provider'' that 
qualifies for EHR incentive payments should be a common definition for 
the Medicare and Medicaid programs. The commenters believe that a 
uniform definition of an EP would be more administratively efficacious 
for the Medicare and Medicaid programs considering that EPs are 
permitted to switch participation between the Medicare and Medicaid 
incentive programs one-time after the initial payment year.
    An organization representing pathologists expressed concern that 
the Medicare EP definition, as currently drafted would subject certain 
pathologists to payment incentive penalties for not being meaningful 
EHR users if the pathologists performed less than 90 percent of their 
professional services in any inpatient or outpatient setting in the 
prior year. All EPs have to report on all Core Measures and a subset of 
clinical measures that pathologists could not meet in their day-to-day 
practice given the nature of pathology's scope of practice. 
Accordingly, this organization recommended that CMS ensure that 
pathologists who are currently defined as Medicare EPs be considered as 
``non-qualifying'' EPs, that are exempt from future meaningful user 
penalties.
    Response: While we appreciate the comments that we received on the 
Medicare EP definition, we are unable to expand or alter this statutory 
definition or consolidate it with the Medicaid program EP definition as 
suggested by the commenters. Under the EHR incentive payment program, 
the law provided a separate Medicare EP definition rather than giving 
the Secretary authority or discretion to determine who is a Medicare EP 
or, who is an EP for both the Medicare and Medicaid programs.
    Comment: A commenter requested clarification of the method used for 
determining Medicare incentives for EPs practicing in a rural health 
clinic.
    Response: The amount of the EHR incentive payment is based on the 
estimated allowed charges for all covered professional services 
furnished by an EP during the payment year, subject to the maximum 
payment amount for the payment year for the EP. For EPs that practice 
in an RHC, EHR incentive payments are based on the amount of covered 
professional services that are not part of the RHC package of services 
and are billed by the EP through the physician fee schedule.
    Comment: A commenter suggested that the definition of allowable 
charges be amended to include the RHC schedule of services, or allow 
providers who use UB92 and HCFA 1500 forms to be eligible for the EHR 
incentive payment.
    Response: The allowed charge is the amount that Medicare determines 
to be reasonable payment for a provider or service under Part B, 
including coinsurance and deductibles. RHC services furnished by an EP 
are not considered covered professional services for purposes of the 
Medicare EHR because they are not billed or paid under the physician 
fee schedule.
    After consideration of the public comments received on the term, 
``eligible professional'' for the Medicare program, we are adopting the 
Medicare EP definition in our regulations at Sec.  495.100 that state 
that a Medicare EP is a physician as defined under Sec.  1861(r) of the 
Social Security Act. That is, a Medicare EP is 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 and a 
doctor who is legally authorized to practice their profession under 
State law.
b. Incentive Payment Limits
    Section 1848(o)(1)(B)(i) of the Act sets forth the annual limits on 
the EHR-related 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)

[[Page 44444]]

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.
    Comment: One commenter believes that the methodology for 
determining the incentive payments under the incentive program does not 
offer each EP an equal incentive, despite being held to the same 
standards of adoption and implementation.
    Response: We are uncertain why the commenter believes that the 
methodology for determining the incentive payments under the incentive 
program does not offer each EP an equal incentive to adopt EHR 
technology. However, the payment methodology in the statute for EPs (as 
well as the methodologies for hospitals and CAHs) is quite 
prescriptive, and offers no discretion for us to adopt revisions 
designed to enhance incentives for adoption. For EPs, the HITECH Act 
defines the incentive payment amount as, ``an amount equal to 75 
percent of the Secretary's estimate * * * of the allowed charges under 
this part of all such covered professional services furnished by the 
eligible professional during such year.''
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). This 
section of the PHS Act refers to geographic HPSAs, which are areas that 
have been designated by the Secretary as having a shortage of 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 proposed that for an EP to be considered as ``predominantly'' 
furnishing covered professional services in a geographic HPSA, more 
than 50 percent of the EP's covered professional services must be 
furnished in a geographic HPSA. We stated that 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. Our data indicates that most physicians furnishing services in 
a HPSA furnish 100 percent of their covered services in a HPSA, and 
only very few furnish services in both HPSA and non-HPSA areas.
    To determine whether an EP has furnished more than 50 percent of 
his/her covered professional services in a geographic HPSA, we proposed 
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. We proposed to make the incentive payment to the EP 
based on an EP's estimated allowed charges for the relevant payment 
year.
    We proposed that 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. 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. 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(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 
Medicare-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 will apply these same rules for the 10 percent EHR 
HPSA payment limit increase provided under section 1848(o)(1)(B)(iv) of 
the Act.
    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.
    Comment: We received a comment stating that many EPs who work in a 
HPSA do so only on a part-time basis and that most would not qualify 
for the 10 percent increase in the payment limit based on the proposed 
threshold of furnishing more than 50 percent of his/her covered 
professional services in a geographic HPSA. The commenter suggested 
that an EP should be able to qualify for the ten percent increase in 
the payment limit if at least 25 percent of his/her covered services 
during an EHR reporting period are furnished in a HPSA.
    Response: The statute states that the annual payment limit be 
increased by ten percent for EPs who predominantly furnish services in 
a geographic HPSA. We continue to believe that ``more than fifty 
percent'' correctly reflects the

[[Page 44445]]

meaning of the word ``predominantly'' as used in this statute. As noted 
above, our data also indicate that most physicians furnish all of their 
services either in a HPSA or outside of a HPSA, and only very few 
furnish services in both HPSA and non-HPSA areas.
    Comment: Several commenters requested that Federally Qualified 
Health Centers (FQHCs) be eligible to receive the ten percent increase 
in the payment limit for EPs who predominantly furnish services in a 
HPSA since the FQHC is a legal entity that bills Medicare and receives 
payment for services provided by physicians.
    Response: The 10 percent increase in the payment limit applies to 
EPs who predominantly furnish services in a geographic HPSA. FQHCs and 
RHCs are not eligible for the ten percent increase in the payment limit 
because they do not meet the definition of EP as specified in section 
1848(o)(5)(C) of the Act. Please see others sections of the regulation 
that discuss the criteria to be considered an EP. Additionally, we wish 
to restate that FQHCs are not entitled to any Medicare or Medicaid 
incentive payments under this program.
    Comment: A commenter suggested that ``predominantly'' be defined as 
the location where the EP provides the most services, so that an EP who 
sees patients in more than two locations could receive the increase in 
the payment limit if he/she provided more care in the HPSA location 
than any other location. The commenter also suggested that if this is 
too difficult to administer, we should accept an attestation from the 
EP.
    Response: We are aware that many physicians, especially in rural 
areas, furnish services in more than one location, and appreciate the 
commenter's interest in making the HPSA payment limit increase 
available to these EPs. If we were to accept this recommendation, then 
an EP who worked in three locations at forty percent, thirty percent, 
and thirty percent time respectively, would be eligible for the HPSA 
payment limit increase if the first location was in a geographic HPSA. 
If the EP worked in four locations at thirty percent, twenty-five 
percent, twenty five percent, and twenty percent time respectively, he/
she would be eligible for the HPSA payment limit increase if the first 
location was in a geographic HPSA. We considered this suggestion and 
concluded that lowering the threshold for services furnished in a HPSA 
would be inconsistent with the intent of the HPSA payment limit 
increase, which is to provide an incentive to promote the use of EHR by 
EPs who practice predominantly in HPSAs. Also, if an EP who worked in 
more than two locations and furnished services in a HPSA only thirty or 
forty percent of his/her time was eligible for the HPSA payment limit 
increase, this would be unfair to an EP who worked in two locations and 
spent forty-five percent of his/her time in a HPSA and fifty-five 
percent time in a non-HPSA, because this EP would not be eligible for 
the HPSA payment limit increase even though he/she spent more total 
time in a HPSA.
    Comment: A commenter stated that the proposed HPSA payment limit 
increase was being applied inconsistently because an EP would still get 
the payment limit increase if the designation was removed mid-year, and 
would not get the payment limit increase if the designation was added 
mid-year.
    Response: Section 1848(o)(1)(B)(iv) of the Act authorizes us to 
apply the provisions of the HPSA bonus program to the implementation of 
the EHR HPSA payment limit increase. The HPSA bonus is paid to 
physicians who furnish Medicare-covered professional services in an 
area that is designated as a geographic HPSA as of December 31 of the 
prior year. They are authorized to receive the HPSA bonus throughout 
the current year, even if the area loses its designation as a 
geographic HPSA during the current year. Physicians furnishing 
Medicare-covered professional services in an area that is not 
designated as a geographic HPSA as of 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 proposed to use the same methodology for the HPSA EHR 
program, and believe that this is consistent with the statute.
    After consideration of the public comments received, we are 
finalizing these provisions as proposed.
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 proposed to make a single, 
consolidated, annual incentive payment to EPs. Payments would be made 
on a rolling basis, as soon as we ascertained that an EP had 
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, we proposed that EPs would be 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. 
We proposed to preclude an EP from reassigning the incentive payment to 
more than one employer or entity. To implement this requirement, we 
proposed 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 associated with more than 
one practice). In cases where the EP was associated with more than one 
practice, we proposed that EPs would select one tax identification 
number to receive any applicable EHR incentive payment.
    As mentioned above, we 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. We proposed to add a new 
part 495.10(e) and (f) to permit reassignment of the incentive payment 
with certain limitations. The following is a summary of the comments we 
received and our responses.
    Comment: Several commenters, including one representing Rural 
Health Clinics, requested clarification of the statement in the 
proposed rule (75 FR 1910) that an eligible professional (EP) is 
allowed to reassign his/her EHR incentive payment to an employer or 
other entity to which the EP has reassigned his/her payments for 
Medicare covered services. The commenters believe that the HITECH Act 
requires in such cases that any Medicare EHR incentive for which the EP 
qualifies must be paid to such employer or other entity. The commenters 
reference the phrases from the HITECH Act, ``shall be paid'' to an 
eligible professional (or to an employer or facility in cases described 
in the reassignment provisions of the Social

[[Page 44446]]

Security Act). In addition, the commenters referenced the phrase 
regarding the transfer of an EP's Medicaid EHR incentive which states 
that ``such incentives are paid directly to such provider (or to an 
employer or facility to which such provider has assigned payments)''. 
The commenters interpret these phrases to mean that an EP's EHR 
incentive payments (both Medicare and Medicaid) must be paid to an 
employer or other entity to which the EP has reassigned payments for 
his/her services.
    Response: We do not agree with the commenters' conclusions 
regarding to whom the payments must be made. As we stated in the 
proposed rule, Section 1842(b)(6) of the Act allows, but does not 
require reassignment to an employer or entity with which the physician 
has a valid contractual arrangement allowing the employer or entity to 
bill for the physician's services. The HITECH Act provisions cited by 
the commenter similarly do not require that the EHR incentive payment 
be made pursuant to a reassignment, but provide that the payment may be 
made directly to the EP or to the employer or other entity. A physician 
reassigns payment based on the scope of his or her employment or 
contractual arrangement. Based upon our interpretation of the 
applicable provisions, we are finalizing our proposal at Sec.  
495.10(f) to permit EPs 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.
    We are taking this opportunity to remind the public that if the EP 
wishes to reassign his or her incentive payment to the employer or 
entity with which the EP has a contractual arrangement, the parties 
should review their existing contract(s) to determine whether the 
contract(s) currently provides for reassignment of the incentive 
payment or if the contract(s) needs to be revised. Reassignment of the 
incentive payment must be consistent with applicable Medicare laws, 
rules, and regulations, including, without limitation, those related to 
fraud, waste, and abuse. For Medicaid, a discussion of reassignment of 
the incentive payment is found in section II.D.3.e of this final rule 
``Entities Promoting the Adoption of Certified EHR technology.''
    Comment: Several commenters stated that the rationale and 
objectives of the HITECH Act provisions regarding transfer of the EP's 
EHR incentives are merely to align EHR incentives and EHR costs. 
Therefore, they believe that the HITECH Act provisions support their 
view that Congressional intent was to prevent windfall EHR incentives 
to EPs who incur no EHR-related costs. The commenters also asserted 
that CMS's failure to address this issue will require entities that 
employ or contract with EPs to enter into negotiations and a separate 
agreement transferring the EP's EHR incentive payments to the employer 
or other entity.
    Response: We do not agree with the commenters' statement that the 
Congress intended to prevent windfall EHR incentives to EPs who incur 
no EHR-related costs. 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. The provisions are not focused solely upon the costs 
associated with the EHR technology. Rather, as we stated in the 
proposed rule (75 FR 1849), it focuses upon the adoption, 
implementation, upgrade, or meaningful use of the technology.
    However, we do agree that some entities may have to review and/or 
negotiate current contractual arrangements to address the transfer of 
the incentive payments. The first payment year for the incentive 
payment is CY 2011, which we believe should afford parties sufficient 
time to reach a new agreement. For Medicaid, a discussion of 
reassignment of the incentive payment is found in section II.D.3.e of 
this final rule ``Entities Promoting the Adoption of Certified EHR 
technology.''
    Comment: Several commenters supported our proposal that if an EP 
has reassigned his or her payments for services to more than one 
employer or entity, that only one of those employers or entities should 
receive the EP's EHR incentive payments for a particular EHR Reporting 
Period (75 FR 1910). The commenters do not believe that EPs should 
decide which employer or entity should receive his or her EHR incentive 
payment. Rather, the commenters stated that such payments should 
automatically be paid to the employer or entity that has received for 
the reporting period the largest percentage of the EP's Medicare or 
Medicaid payments for services.
    Response: We are not persuaded to adopt the commenters' suggestion. 
We believe that the suggestion by the commenters would create 
administrative complexities for both CMS and EPs with little benefit. 
Many of these obstacles would be similar to those described in the 
proposed rule when discussing the possibility of making proportional 
EHR incentive payments (75 FR 1911). Therefore, we are finalizing our 
proposal to revise Sec.  495.10(e) to preclude an EP from reassigning 
the incentive payment to more than one employer or entity. In cases 
where the EP is associated with more than one practice, EPs must select 
one TIN to receive any applicable EHR incentive payment.
    Comment: The commenters also state that if an EP has incurred out-
of-pocket costs in connection with an EHR provided by an employer or 
other entity to which the EP has reassigned payments for his or her 
services, the EP should be permitted to keep an amount of his or her 
EHR incentives equal to the amount of such costs incurred.
    Response: The statute does not address this issue. It simply 
provides that the incentive payments are to be made directly to the EP 
or to an employer or other entity to which the EP has reassigned the 
incentive payment. Reassignment of the incentive payment must be 
consistent with applicable Medicare laws, rules, and regulations, 
including, without limitation, those related to fraud, waste, and 
abuse. We believe that any cost-sharing or subsequent distribution of 
the incentive payment, such as in the manner described by the 
commenter, should be resolved between the parties.
    Comment: Several commenters urged CMS to clarify that any 
reassignment of the EP's EHR incentive payment should not constitute a 
financial arrangement within the meaning of the physician self-referral 
law, or remuneration within the meaning of the federal anti-kickback 
statute.
    Response: The physician self-referral law prohibits a physician 
from making a referral for designated health services to an entity with 
which the physician or a member of the physician's immediate family has 
a financial relationship, unless an exception applies. For purposes of 
the physician self-referral law, a financial arrangement includes 
ownership or investment interests and compensation arrangements. The 
statute defines a ``compensation arrangement'' to mean any arrangement 
involving remuneration, direct or indirect, overt or covert, in cash or 
in kind. A reassignment of an EP's EHR payment would constitute 
remuneration, and we note that reassignment generally occurs in the 
context of an existing compensation arrangement (for example, 
employment). There are many potentially applicable exceptions for 
compensation arrangements that involve a physician's reassignment of 
Medicare payments.

[[Page 44447]]

    Similarly, with respect to the anti-kickback statute, absent 
compliance with a safe harbor, a determination of whether a 
reassignment constitutes prohibited remuneration would be made on a 
case-by-case basis and we therefore decline to issue any statement 
regarding the application of the anti-kickback statute to a 
reassignment. For additional information regarding the anti-kickback 
statute, please refer to the OIG's Web site at http://oig.hhs.gov.
    Comment: One commenter representing American Indian and Alaska 
Native health providers urged CMS to require that the HITECH/EHR 
Meaningful Use provider incentive payments be reassigned to the Tribal 
outpatient clinics, because the Tribal clinics developed the 
infrastructure not the EPs themselves, and purchased electronic medical 
record systems to complement the current Registration Patient 
Management Systems (RPMS) of the Indian Health Service. In addition, 
the commenter noted that many tribal outpatient clinics have employment 
contracts with their EPs. Thus, the commenters urged CMS to require 
that incentive EHR payments should be included in employment contracts 
to help protect the EP as employee and the Tribe as the employer.
    Response: As stated above, section 1848(o)(1)(A) of the Act 
provides that the EP's incentive payment shall be paid to the eligible 
professional (or to an employer or other entity with which the 
physician has a valid contractual arrangement allowing the employer or 
other entity to bill for the physician's services). We recognize that 
some tribes purchased EHR systems based upon criteria established by 
the Indian Health Service. However, after careful consideration, we 
believe that the same standards concerning the incentive payments 
should apply. The EP and the Tribal outpatient clinic should jointly 
resolve whether the EP's EHR incentive payment will be reassigned to 
the Tribal outpatient clinic or made directly to the EP. Similarly, any 
decision by the Tribal outpatient clinic concerning whether to include 
language in its employment contract (or in the alternative, whether any 
pre-existing contract already requires reassignment of the payment), is 
a matter of contract interpretation that should be resolved by the 
parties themselves. This discussion is also addressed in the Medicaid 
section of this rule at II.D.4.a.3.
    Comment: One commenter expressed concern about the potential tax 
consequences associated with an EP's reassignment of the EHR incentive 
payment by an independent contractor to a larger organization. The 
commenter recommended that a 1099 independent contractor should consult 
with his/her tax advisor before agreeing to reassign incentive payments 
and to ensure that the election to reassign is made before payment is 
sent from CMS or the State Medicaid Agency.
    Response: The commenter's recommendation falls outside the scope of 
our authority. This is a matter for the 1099 independent contractor EP 
to consider.
    Comment: Many national and state medical associations expressed 
concern regarding the proposed requirement that the EP must identify a 
Tax Identification Number (TIN) to which the EP's incentive payment 
should be made. They assert that this will not work for physicians who 
do not have a TIN, and are enrolled in Medicare or Medicaid through 
their Social Security Number (SSN). Therefore, the commenters recommend 
that CMS accept the SSN in lieu of the TIN, so that all eligible 
physicians are able to participate in the Medicare and Medicaid EHR 
incentive programs.
    Response: We recognize that many physicians are enrolled in 
Medicare or Medicaid through their Social Security Number (SSN). 
Therefore, we are revising our proposal at Sec.  495.10 that 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. In 
finalized Sec.  495.10(c), we provide that the TIN may be the EP's 
Social Security Number (SSN) to which the EP's incentive payment should 
be made. We note that if the physician is part of a group with more 
than one owner or organization that is incorporated, they would have a 
TIN for the corporation that is not the EP's SSN.
    Comment: Some commenters recommended that the employer or entity to 
which an EP reassigns payment for covered services, should be deemed 
authorized to provide, on the EP's behalf, any documentation necessary 
for the EP to qualify for EHR incentive payments.
    Response: We believe that this should be resolved by the parties 
themselves. There is nothing in the statute that requires an EP's 
employer or other entity to which an EP reassigns payment to provide 
any necessary documentation for an EP to qualify for EHR incentive 
payments. Rather, the finalized regulatory provision at Sec.  495.8 
provides that an EP must demonstrate that he or she satisfies each of 
the applicable objectives and associated measures under Sec.  495.6. If 
the parties wish to have the necessary documentation furnished by the 
employer or entity, they should resolve this pursuant to an employment 
or contractual agreement. We are finalizing our proposal because we 
believe that making a single, consolidated payment would be the least 
administratively burdensome for both CMS and EPs. In addition, we 
believe a single, consolidated payment would reduce the possibility of 
fraud and duplicate payments. Several of these issues related to 
reassignment of payment are also addressed in the Medicaid section. See 
II.D.3.e.
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 do not apply 
to hospital-based EPs.
    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

[[Page 44448]]

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.
    Comment: Some commenters believed that when an EP's performance 
leads to a negative financial impact under Medicare payment policy, it 
would be unfair and overly punitive for them to face a separate and 
potentially more significant financial impact--whether through a denial 
of funding and/or ARRA's penalties. Further, some commenters indicated 
that they interpreted these requirements to mean that Medicaid 
participants would or would not experience fee-schedule adjustments if 
they are not meaningful users by the end of 2014.
    Response: We will reduce payments as specified under the statute. 
Under sections 4101(b) and (c) of the HITECH Act, we are required to 
pay EPs less than 100 percent of the fee schedule and to make downward 
adjustments to MA-affiliated EPs for their professional services if 
they are not meaningful users of certified EHR beginning in CY 2015. 
Under sections 4102(a), (a)(2), and (c) of the HITECH Act, we are 
authorized to pay eligible hospitals a reduced annual payment update, 
provide downward payment adjustment to CAHs for cost reporting periods, 
and provide downward payment adjustment to MA-affiliated hospitals 
respectively, if they are not meaningful users of certified EHR 
technology beginning in FY 2015. The Medicare fee schedule adjustments 
will impact any EP or subsection(d) hospital that is not a meaningful 
user by the end of 2014. The adjustments are not authorized under 
Medicaid, but the adjustments will still apply to Medicaid EPs who are 
also Medicare EPs and also to Medicaid acute care hospitals that are 
also subsection(d) hospitals. We are finalizing these provisions as 
proposed.
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. In the proposed rule, we 
proposed a new Sec.  495.104 to implement this provision. As we noted 
in the proposed rule, section 1886(n)(6)(B) of the Act defines 
``eligible hospitals'' for purposes of the incentive payments 
provision, as ``subsection (d) hospitals,'' referring to the definition 
of that term 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,'' we proposed 
that incentive payments for meaningful users of certified EHR 
technology would 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 hospitals located in the 50 states. 
Therefore we proposed that incentive payments for meaningful users of 
certified EHR technology would be available under this provision to 
acute care hospitals located in the State of Maryland. The statutory 
definition of a subsection (d) hospital also does not apply to 
hospitals and hospital units excluded from the IPPS under section 
1886(d)(1)(B) of the Act, such as psychiatric, rehabilitation, long 
term care, children's, and cancer hospitals. We also proposed that, for 
purposes of this provision, we would provide incentive payments to 
hospitals as they are distinguished by provider number in hospital cost 
reports. We proposed that incentive payments for eligible hospitals 
would be calculated based on the provider number used for cost 
reporting purposes, which is the CMS Certification Number (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 final rule.
    Comment: We received numerous comments on our proposal to identify 
all individual hospitals eligible for incentive payments based on the 
provider number used for cost reporting purposes (the CCN of the main 
provider). These commenters, including national and regional hospital 
associations, hospital systems, and hospitals with multiple campuses, 
objected to the proposed policy on various grounds. Many of these 
commenters pointed out that there is no standard policy that defines 
the specific types of facilities to which a single CCN applies. As a 
result, a single CCN could encompass multiple hospitals within a 
hospital system in some cases, while in other cases multiple hospitals 
within a system could have separate CCNs. These commenters therefore 
maintained that our proposed policy would unjustifiably lead to 
disparate treatment of hospital systems based solely on whether the 
system had one or more provider numbers. Commenters also maintained 
that, because the Medicare and Medicaid payment incentives are 
calculated using a per-hospital base amount, plus a capped per-
discharge amount per hospital, identifying individual hospitals solely 
by CCN would result in distributing payments in a manner that does not 
foster widespread EHR adoption and use. The for this argument regarding 
limited EHR adoption and use is that multi-campus systems with a single 
CCN would receive only one base payment, and would be more likely to 
reach the discharge cap. Some commenters also argued that linking 
incentive payments only to a single CCN would not accurately reflect 
the pattern of costs required for deploying EHR systems across all 
sites in a hospital system. For example, even hospital sites that are 
part of the same system often require significant variations in their 
EHR systems, accommodating local policies and processes, as well as 
different legacy systems, physician preferences, clinical protocols, 
and other variables. Some commenters cited as a precedent our policy 
with regard to hospitals with one CCN, but multiple sites spanning more 
than one wage index region. CMS has instructed such hospitals to report 
wage data for each site separately on the cost report, and pays for 
discharges under the wage index that applies where the service is 
provided, that is, under a different wage index for each site.
    These commenters recommended various approaches to recognizing and 
verifying the status of separate hospitals under one CCN number. Many 
of them

[[Page 44449]]

recommended that we adopt a ``multi-pronged approach that allows a 
``hospital'' to be defined in ways that acknowledge the varied 
organizational structures of multi-hospital systems, including by a 
distinct CCN, a distinct emergency department, or a distinct hospital 
license.'' Commenters recommended that we indentify and verify the 
distinct hospitals within hospital systems either by revising the cost 
report or by developing an attestation process similar to the process 
employed under Sec.  413.65 of the regulations to verify provider-based 
status. Commenters also recommended that we either collect the data 
necessary for determining payment amounts (for example, discharge 
counts) directly from each hospital within a system with a single 
provider number, or develop a method of allocating discharges, bed 
days, and other relevant data among the hospital campuses represented 
in a hospital cost report under a single CCN.
    Finally, a number of the commenters advocating a different approach 
contended that our proposed policy ran counter to the intent of the EHR 
incentive provision, which is to promote broader adoption of EHR 
systems. These commenters argued in various ways that recognizing each 
campus of a multi-campus hospital for separate payment was most 
consistent with the statute because it would provide a greater overall 
level of funding for EHR efforts, especially to hospital systems that 
have elected to enroll multiple campuses under a single Medicare 
provider agreement, and thus support diffusion of EHR systems more 
broadly. One of these commenters did, however, acknowledge that ``in 
most circumstances the term `subsection(d) hospital' under the Medicare 
Program includes all of a hospital system's inpatient facilities that 
operate under a single provider number,'' before going on to argue that 
CMS has both the authority and the obligation under the HITECH Act to 
diffuse EHR incentive payment more broadly by treating each facility 
under a hospital system as a separate hospital, regardless of whether 
any of the facilities share a single provider number.
    Response: We appreciate the commenters' concerns, but we continue 
to believe that our proposal represents the best policy approach in 
determining what constitutes an ``eligible hospital.'' In the absence 
of clear direction from the statute to the contrary, we believe that 
the most appropriate policy is to interpret the terms in subsection (d) 
``acute care hospital'' and ``children's hospital'' in the light of 
existing Medicare and Medicaid program policies and precedents. It is 
quite true, as a number of the commenters noted, that hospital systems 
have considerable latitude (although not unlimited) in choosing whether 
to obtain one CCN for all their facilities, or to obtain separate CCNs 
for some or all of their facilities. However, once a hospital has 
sought and obtained a single CCN for two or more facilities, that 
hospital has chosen to represent itself to CMS as a single hospital, 
including for purposes of payment, cost reporting, and satisfying the 
conditions of participation. Such systems submit unified cost reports 
integrating data (including charges, discharges, bed days, and other 
relevant data) from every facility under the single CCN. For purposes 
of DSH and IME payments under the IPPS, both eligibility for payment 
and the applicable payment amounts are determined on the basis of this 
integrated data. Most significantly, the Medicare conditions of 
participation require that a system with a single CCN establish and 
maintain a single governing structure, medical staff, nursing staff, 
and record services. Section 482.2 states that a ``hospital must have 
an organized medical staff that operates under by-laws approved by the 
governing body.'' Section 482.21(e) states that the governing body must 
ensure, among other matters, that ``the hospital-wide quality 
assessment and performance improvement efforts address priorities for 
improved quality of care.'' In addition, Sec.  482.24 states that the 
hospital must have ``a medical record service that has administrative 
for medical records.''. For these reasons, we believe that recognition 
of the decision made by each hospital or hospital to represent and 
organize itself as a single entity under one CCN, or as two or more 
distinct entities under separate CCNs is a strength, rather than a 
weakness, of our proposed policy. Each institution that has exercised 
available latitude to obtain one CCN for all their facilities not only 
represents itself as a single hospital, but also agrees to conduct 
itself in significant ways as a single hospital.
    We also do not agree with those commenters who argue that our 
policy of applying different wage indexes to the campuses comprising a 
hospital system operating under a single CCN warrants our treating each 
campus as a separate eligible hospital for purposes of the EHR 
incentive payment program. Our policy for these few cases when a multi-
campus hospital spans two or more wage index areas does not amount to 
recognizing that each campus is a separate hospital for payment 
purposes, but rather to accounting for the fact that, in these few 
cases, one hospital is located in two wage index areas. In these cases, 
it is appropriate to pay, and to account for wages, on the basis of 
where each discharge occurs rather than on the basis of where, for 
example, the main campus of a hospital may be located.
    With regard to the disparate treatment argument advanced by a 
number of commenters, we acknowledge that, under our proposed policy, a 
single hospital system with two campuses will receive (all other things 
being equal) lower incentive payments than the combined incentive 
payments of two-single-campus hospitals with the same number of 
discharges. However, an equivalent disparate treatment situation would 
arise under the policy advocated by these commenters. Under the policy 
of recognizing each campus of a multi-campus system as a separate 
hospital, a single-campus hospital would received lower incentive 
payments than a multi-campus hospital with the same number of 
discharges, despite the fact that both hospitals have a single CCN and 
are recognized for administrative and financial purposes, and for 
purposes of the conditions of participation, as a single hospital.
    Example: Hospital A is a multicampus hospital with 30,000 
discharges and a Medicare share of 50 percent. Hospital A's discharges 
are evenly split between its two campuses. Hospital B is a single 
campus hospital with 30,000 discharges and a Medicare share of 50 
percent. During the first year of the transition, each campus of 
Hospital A would receive a separate incentive payment determined on the 
following manner:

($2,000,000 base amount + [(15,000 - 1,149) x $200] discharge-related 
amount) x .5 Medicare share x 1.0 transition factor = ($2,000,000 + 
$2,770,200) x .5 x 1.0 = $2,385,100

Hospital A's total payment would therefore be $4,770,200. In contrast, 
Hospital B would receive a single payment determined in the following 
manner:

($2,000,000 base amount + [(23,000 - 1,149) x $200] discharge-related 
amount) x .5 Medicare share x 1.0 transition factor = ($2,000,000 + 
$4,370,200) x .5 x 1.0 = $3,185,100

Hospital B would thus receive a payment that is $1,585,100 smaller than 
Hospital A's total payment for the same number of discharges.
    The change in policy recommended by these commenters will therefore 
replace one equity issue with another. We see no reason to privilege 
one of these arguments over the other, and

[[Page 44450]]

therefore we believe that the decision on a final policy ought to turn 
on the other considerations that we discuss.
    Finally, we cannot agree with the commenters that determining the 
appropriate policy on this question should turn on which alternative 
produces the greatest overall level of spending on EHR systems. Many 
decisions could result in lower potential payments to some or all 
potential meaningful users of EHR payments. Congress deliberately chose 
to limit incentive payments based on the statutory formula (using the 
current statutory and regulatory definition of ``subsection (d) 
hospital''), and further limited the amount of incentive payments 
available to large hospitals by not increasing incentive payments above 
23,000 discharges.
    After consideration of the public comments received, we are 
finalizing our policy as proposed. 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 CMS Certification Number 
(CCN) of the main provider (also referred to as OSCAR number). Payments 
to eligible hospitals will be made to each provider of record.
b. Incentive Payment Calculation for Eligible Hospitals: Initial Amount
    Section 1886(n)(2) of the Act, as amended by 4102(a) of the HITECH 
Act, 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, 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. We proposed to implement the ``initial amount'' within the 
formula as that term is defined in the statute.
    Comment: Several commenters requested that we identify the sources 
of the discharge data we plan to employ for purposes of determining the 
discharge related amount. These commenters also requested confirmation 
of their understanding that no type of discharge, regardless of source 
of payment, would be excluded from the discharge count for this 
purpose. Commenters specifically cited nursery discharges and 
discharges from non-PPS areas of a hospital as examples of discharges 
that should not be excluded under the statutory language, which they 
believe requires the inclusion of all patient discharges regardless of 
type of patient within the inpatient areas of the hospital.
    Response: We cannot agree with the commenters that the statutory 
language includes all patient discharges within the inpatient areas of 
the hospital. Rather, the statutory language clearly restricts the 
discharges to be counted for purposes of determining the discharge-
related amount to discharges from the acute care portion of the 
hospital. As we discussed in the proposed rule, 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.''

    The phrase ``total discharges for the eligible hospital (regardless 
of any source of payment)'' limits the count of discharges to the acute 
care inpatient discharges. This is because of the reference to 
``eligible hospital.'' ``Eligible hospital'' is defined in section 
1886(n)(6)(B) of the Act for purposes of the incentive payments 
provision, as ``a subsection (d) hospital,'' referring in turn to the 
definition of that term 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,'' excluding hospitals that are not paid under the 
IPPS in accordance with section 1886(d)(1)(B) of the Act, such as 
psychiatric, rehabilitation, long term care, children's, and cancer 
hospitals. However, 1886(d)(1)(B) also specifies that the ``term 
`subsection (d) hospital * * * does not include a psychiatric or 
rehabilitation unit of the hospital which is a distinct part of the 
hospital (as defined by the Secretary).'' Therefore, the term 
``eligible hospital'' for purposes of the incentive payments provision 
does not extend to the excluded units of the hospital. The term does, 
of course, include the inpatient portion of the hospital that receives 
payment for Medicare purposes under the inpatient PPS. The phrase 
``regardless of any source of payment,'' however, indicates that the 
count of ``total discharges'' for this purpose should include not only 
patients for whom Medicare is the source of payment, but also patients 
for whom payment is received from Medicaid or any other source of 
payment. Accordingly, in the revised cost report form that is currently 
pending and which will be finalized in time for the 2011 payment year, 
CMS Form 2552-10, Hospital and Hospital Health Care Complex Cost 
Report, we have included a cell for entry of ``Total hospital 
discharges as defined in section 4102 of AARA,'' in the new Worksheet 
E-1, Part II, ``Calculation of Reimbursement for Settlement for HIT.'' 
This new cell is derived from line 14, from ``Worksheet S-3, Part I 
column 15.'' In turn, this cell from Worksheet S-3, Part I, column 15 
incorporate all discharges from the inpatient, acute care portion of 
the hospital, regardless of payment source. In this final rule, we have 
also revised the definition of ``eligible hospital'' in Sec.  495.100 
of the regulations, as well as the specification of ``initial amount'' 
in Sec.  495.104(c)(3) of the regulations, in order to clarify this 
point.
    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

[[Page 44451]]

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. We proposed, for purposes of 
administrative simplicity and timeliness, 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 that 
is prior to the FY that serves as the payment year as the basis for 
making preliminary incentive payments. Similarly, we proposed that 
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 of proposal: 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, 2009 through June 30, 2010, 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.
    Commenters raised several issues with regard to our proposals 
regarding the timing of the cost reports to be used for purposes of 
determining preliminary and final incentive payments. Each of these 
issues embraces the use of several data elements, including discharge 
counts, bed days, and other factors employed in the payment 
calculations. For purposes of simplicity, we will address these issues 
in general terms in this section. As we will note at several junctures 
below, this discussions of these issues, however, are applicable to the 
cost report data for other elements of the computation.
    Comment: Several commenters called our attention to timing issues 
with regard to the cost reporting periods that we proposed to use for 
purposes of determining preliminary and final incentive payments. These 
commenters noted that, if we finalize our proposal to use data 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, hospitals with cost reporting periods on the 
October-to-September cycle would face a delay of two months or longer 
after potentially qualifying as a meaningful user before receiving a 
preliminary incentive payment. Specifically, for hospitals on this 
cycle, the cost report that would be used for determining interim 
payments for the first payment year (the October 1, 2009 through 
September 30, 2010 cost report) would not be due until February 28, 
2011, two months after the hospital may have been able to qualify as a 
meaningful user (January 1, 2011). For hospitals on the September-to-
August cycle, the delay could be one month. The commenters pointed out 
that over one-fifth of subsection (d) hospitals have cost reporting 
periods beginning on September 1 or October 1. The commenters therefore 
recommended that we employ discharge and other data from a hospital's 
most recently filed cost report as the basis for determining the 
hospital's preliminary incentive payment once the hospital has 
qualified as a meaningful user.
    Response: We agree with these commenters, and in this final rule we 
are therefore adopting the policy that we employ discharge and other 
data from a hospital's most recently filed 12-month (see discussion 
below) cost report as the basis for determining the hospital's 
preliminary incentive payment once the hospital has qualified as a 
meaningful user. However, the precise timing of payments, especially 
during the first payment year, may be affected by other factors such as 
the timeline for implementing the requisite systems to calculate and 
disburse the payments. We are adopting the policy recommended by the 
commenters in order to avoid any unnecessary delays in making interim 
payments due merely to the timing of cost reporting periods.
    Example: FY 2011 begins on October 1, 2010 and ends on September 
30, 2011. For an eligible hospital with a cost reporting period on the 
October-to-September cycle, we would employ the relevant data from the 
hospital's most recently submitted cost reporting period in order to 
determine the incentive payment for the hospital during FY 2011. If the 
hospital qualifies for incentive payments on January 1, 2011, this 
would probably be the cost report for the period running from October 
1, 2008 through September 30, 2009. However, we would also employ the 
October 1, 2009 through September 30, 2010 cost report, if that cost 
report is submitted before the point when preliminary incentive 
payments can be calculated.
    Comment: A number of commenters also raised concerns about our 
proposal to determine final incentive payments at the time of settling 
the cost report for the hospital fiscal year that ends during the 
payment year, and to be settled on the basis of the hospital discharge 
and other data from that cost reporting period. These commenters 
pointed out that the pending CMS Form 2552-10 will not be effective in 
time for all hospitals and CAHs to complete the new S-10 worksheet, 
Hospital Uncompensated Care and Indigent Care Data, reporting charity 
care for their cost reporting period ending during the payment year. 
The effective date of the new cost report will be for cost reporting 
periods beginning on or after May 1, 2010 (as opposed to February 1, 
2010 date anticipated in the proposed rule). For purposes of our 
proposal for determining final incentive payments, including the 
Medicare share/charity calculation, the first cost reporting period for 
which the new cost report will be available is the period running from 
May 1, 2010 through April 30, 2011. This means that, for cost reporting 
periods ending in FY 2011 before April 30, hospitals will not be able 
to complete the new S-10 worksheet to report charity care charges. 
Therefore, these commenters recommended that we revise our proposed 
policy, so that final incentive payments will be determined at the time 
of settlement for the cost reporting period beginning in the payment 
year. In this way all hospitals, regardless of their cost reporting 
cycle, will have adequate time to submit the revised cost reports in 
time for determining final incentive payments.
    Response: We agree with these commenters, and in this final rule we 
are therefore adopting the policy that we determine final incentive 
payments at the time of settling the 12-month (see discussion below) 
cost report for the hospital fiscal year that begins after the 
beginning of the payment year, and to be settled on the basis of the 
hospital

[[Page 44452]]

discharge and other 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 through June 30, we would employ the relevant data from the 
hospital's cost reporting period ending June 30, 2009 in order to 
determine the preliminary incentive payment for the hospital during FY 
2011 (or June 30, 2010, if that cost report was filed prior to the 
calculation). However, final payments would be based on hospital 
discharge data from the cost report beginning on July 1, 2011 and 
ending June 30, 2012, and determined at the time of settlement for that 
cost reporting period.
    Comment: Several commenters requested that we explain how the 
occurrence of non-standard cost reporting periods will be taken into 
account in determining the appropriate cost reporting periods to employ 
for determining preliminary and final EHR incentive payments. Non-
standard cost reporting periods run for periods shorter than the 
standard 12-month cost reporting periods (for example, 3 months, 6 
months), and are typically employed to accommodate the circumstances of 
hospitals in several distinct situations, such as newly constructed 
hospitals, changes of ownership, and reorganization of a single 
multicampus hospital into multiple separate providers. In these cases, 
one non-standard cost reporting period may be employed before the 
hospital resumes (or begins) cost reporting on a 12-month cycle. One 
commenter recommended that we account for these situations by adopting 
three changes to our proposed regulations:
     For purposes of determining preliminary incentive 
payments, employ the most recently submitted 12-month cost reporting 
period that ends in the year prior to the payment year, in order to 
account for those situations in which the most recent cost reporting 
period ending prior to the payment year is a non-standard period.
     For purposes of determining final incentive payments, 
employ the first 12-month cost reporting period that begins after the 
start of the payment year, in order to account for those situations in 
which the cost reporting period ending during the payment year is a 
non-standard period.
     Provide that a hospital may address the CMS regional 
office responsible for its payment area for determination of the 
appropriate cost reporting period to employ for calculating preliminary 
or final incentive payment in cases that are not anticipated by the 
rules adopted in the final regulation.
    Response: We acknowledge that we failed to address the 
circumstances of non-standard cost reporting periods in the proposed 
rule, and we agree with the commenters that it is only appropriate to 
do so. Non-standard cost reporting periods are not likely to be truly 
representative of a hospital's experience, even if methods were to be 
adopted for extrapolating data over a normal 12-month cost reporting 
period. This is because these periods are often quite short (for 
example, 3 months), which makes it questionable to extrapolate the data 
over a full cost reporting period. In addition, these abbreviated 
periods often capture the experience of a hospital during a period of 
transition (for example, change of ownership), which often renders the 
data highly unrepresentative. We also agree with the logic of the 
policy revisions proposed by the commenter cited above, subject only to 
the necessity of adapting the recommendations slightly to the 
revisions, as discussed above, we are also adopting to our proposals 
for identifying the cost reporting periods to be employed in 
determining preliminary and final EHR incentive payments.
    After consideration of the public comments we receive with regard 
to the use of cost reporting periods for preliminary and final 
incentive payment determinations, we are adopting the following 
policies in this final rule.
     For purposes of determining preliminary incentive 
payments, we will employ discharge and other relevant data from a 
hospital's most recently submitted 12-month cost report once the 
hospital has qualified as a meaningful user.
     For purposes of determining final incentive payments, we 
will employ the first 12-month cost reporting period that begins after 
the start of the payment year, in order to settle payments on the basis 
of the hospital discharge and other data from that cost reporting 
period. In this final rule, we are revising section 495.104(c)(2) of 
the regulations accordingly. We are not adopting the recommendation to 
allow the CMS regional offices to make a determination about the 
appropriate cost reporting period in situations not anticipated by 
these rules because we believe that these two rules cover all possible 
situations. For example, even in complicated cases involving non-
standard cost reporting periods, the cost reporting period for a 
hospital adjusts to a standard 12-month cycle within a brief period.
c. Incentive Payment Calculation for Eligible Hospitals: Medicare Share
    As previously discussed, the initial amount must be multiplied by 
the eligible hospital's Medicare share and an applicable transition 
factor to determine the incentive payment to an eligible hospital for a 
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 eligible hospital's 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 proposed, for each eligible 
hospital during each payment year, to employ data on the hospital's 
Medicare fee-for-service and managed care inpatient bed days, total 
inpatient bed-days, and charges for charity care from the hospital FY 
that ends during the FY prior to the FY that serves as the payment year 
as the basis for preliminary payment. We also proposed that 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.
    As a result of the changes we are making to these proposed policies 
in response to the comments discussed in the previous section, in this 
final rule we are adopting the following policies for employing data on 
the eligible hospital's Medicare fee-for-service and managed care 
inpatient bed days, total inpatient bed-days, and charges for charity 
care from the hospital in making preliminary and final EHR incentive 
payment determinations:
     For purposes of determining preliminary incentive 
payments, we will employ data on the hospital's Medicare fee-for-
service and managed care inpatient bed days, total inpatient bed-days, 
and charges for charity care from a hospital's most recently submitted 
12-month cost report once the

[[Page 44453]]

hospital has qualified as a meaningful user.
     For purposes of determining final incentive payments, we 
will employ the first 12-month cost reporting period that begins after 
the start of the payment year, in order to settle payments on the basis 
of the hospital's Medicare fee-for-service and managed care inpatient 
bed days, total inpatient bed-days, and charges for charity care data 
from that cost reporting period.
    Section 1886(n)(2)(D) of the Act, as amended by section 4102 of the 
HITECH Act, defines the numerator and denominator of the Medicare share 
fraction for an eligible hospital 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 inpatient-bed-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 inpatient-bed-days (as so 
established) that are attributable to individuals who are enrolled with 
a MA organization under Part C.
    We proposed to determine the numbers of Medicare Part A and Part C 
inpatient-bed-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 Sec.  413.75 of our 
regulations. Specifically, we proposed 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 CMS Form 2552-96, 
Hospital and Hospital Health Care Complex Cost Report. We stated that 
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.
    Comment: A number of commenters pointed out an apparent 
contradiction between the cost report sources from which we proposed to 
derive the ``the estimated number of inpatient-bed-days * * * 
attributable to individuals with respect to whom payment may be made 
under part A'' (lines 1, 6 through 9, 10, and 14 in column 4 on 
Worksheet S-3, Part I of CMS Form 2552-96,), and our statement that 
``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.'' These 
commenters supported our proposal to employ the data from those lines 
of the cost report, on the grounds that these cost report lines 
``adequately capture the necessary data.'' However, as the commenters 
pointed out, the data on the identified lines do include patient days 
in units not paid under the inpatient PPS. These commenters also 
contended that the relevant statutory language (``inpatient-bed-days * 
* * attributable to individuals with respect to whom payment may be 
made under part A''; emphasis supplied) would seem to include patient 
days in units not paid under the inpatient PPS.
    Response: We agree with the commenters that our citation of the 
specific cost report sources from which we proposed to derive ``the 
estimated number of inpatient-bed-days * * * attributable to 
individuals with respect to whom payment may be made under part A'' was 
not consistent with our statement 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.'' In this case, our error was in the specific 
cost report lines that we cited, rather than in our statement that the 
relevant statutory language (``inpatient-bed-days * * * attributable to 
individuals with respect to whom payment may be made under part A'') 
includes ``all patient days attributable to Medicare inpatients, 
excluding those in units not paid under the IPPS and excluding nursery 
days.'' As in the case which we discussed above with regard to counting 
``total discharges,'' the relevant statutory language directs that the 
numerator and denominator of the Medicare share fraction incorporate 
inpatient bed-day counts for the eligible hospital, and, as discussed 
in our section on total discharges, ``eligible hospital'' is defined 
with reference to section 1886(d)(1)(B) of the Act, which specifically 
excludes from the definition psychiatric or rehabilitation units that 
are a distinct part of the hospital. Specifically, the ``Medicare 
share'' is to be ``specified * * * for an eligible hospital.'' The 
numerator of the Medicare share fraction is further defined as ``the 
sum (* * * with respect to the eligible hospital) of--
    ``(I) the estimated number of inpatient-bed-days (as established by 
the Secretary) which are attributable to individuals with respect to 
whom payment may be made under part A; and
    ``(II) the estimated number of inpatient-bed-days (as so 
established) which are attributable to individuals who are enrolled 
with a Medicare Advantage organization under part C.''
    Finally, the denominator of the Medicare share fraction includes 
``the estimated total number of inpatient-bed-days with respect to the 
eligible hospital.'' Therefore, the inpatient-bed-day counts included 
in the Medicare share fraction for purposes of the incentive payments 
provision do not extend to inpatient-bed-days in excluded units of the 
hospital, but only to inpatient-bed-days in the acute care portion of 
the hospital that receives Medicare payment under the inpatient PPS. In 
this final rule, we are revising section 495.104(c)(4) of the 
regulations in order to clarify this point.
    Since the publication of the proposed rule, we have adopted various 
changes to the Medicare cost report, including changes designed to 
accommodate the appropriate computation and final settlement of EHR 
incentive payments for qualifying hospitals. These changes are included 
in the pending cost report form, CMS Form 2552-10. In this revised 
form, the relevant Medicare inpatient days are entered in line 2 of the 
new Worksheet E-1, Part II, ``Calculation of Reimbursement for 
Settlement for HIT.'' This new line is defined as the sum of lines 1 
and 8 through 12, from Worksheet S-3, Part I, column 6 of CMS Form 
2552-10. These lines include all patient days attributable to Medicare 
inpatients, excluding those in units not paid under the IPPS, and 
excluding nursery days.
    Comment: Several commenters also contended that our proposed 
exclusion of nursery days from the determination of ``inpatient-bed-
days * * * attributable to individuals with respect to whom payment may 
be made under part A'' is inappropriate. These commenters maintained 
that the statutory language is broad enough to include all inpatient 
days associated with Medicare eligible individuals without restriction 
based on the type of Part A patient.
    Response: In excluding nursery days from the count of Medicare 
inpatient bed days, we are following the precedent of not counting such 
days for purposes of the direct medical education, indirect medical 
education, and disproportionate share adjustments under the Medicare 
IPPS. As in the case of the term ``subsection (d)'' hospital, we 
believe that, in the absence of clear direction from the statute to the 
contrary, the most appropriate policy is

[[Page 44454]]

to interpret terms such as ``inpatient bed-days'' in the light of 
existing Medicare program policies and precedents. Under our policies 
for the direct medical education, indirect medical education and 
disproportionate share adjustments, a bed must be permanently 
maintained for lodging inpatients in order to be included in available 
inpatient bed and inpatient bed day counts. We exclude the days 
provided to newborns (except for those in intensive care units of the 
hospital) because healthy newborn infants are not provided with an 
acute level of hospital care. (This is not the case with newborns 
assigned to intensive care units, who are included in the counts for 
those units.) For these reasons, nursery days are explicitly excluded 
from:
     The counts of Medicare inpatient hospital days and total 
inpatient hospital days for purposes of direct graduate medical 
education payments under section 413.75(b) of the regulations, where 
the definition of Medicare patient load reads: ``Inpatient days in any 
distinct part of the hospital are included and nursery days are 
excluded.''
     The counts of bed days for purposes of the Medicare 
indirect graduate medical education adjustment under section 
412.105(b): the ``count of available bed days excludes bed days 
associated with * * * (5) Beds or bassinets in the healthy newborn 
nursery * * *.''
     The count of beds for purposes of the Medicare DSH 
adjustment under section 412.106(a)(i) of the regulations: ``The number 
of beds in a hospital is determined in accordance with Sec.  
412.105(b).''
    We note that, in addition to excluding nursery days from the 
numerator of the Medicare share fraction, these days are excluded for 
the same reasons from the count of total inpatient bed days in the 
denominator of the Medicare share fraction. We therefore do not believe 
that excluding these days would result in disadvantage to hospitals in 
determining their Medicare share fractions for purposes of calculating 
EHR incentive payments. (See our discussion of the cost report data 
employed to determine total inpatient bed days in the denominator of 
the Medicare share fraction, below.)
    Comment: Other commenters maintained that swing bed days should 
also be included in the determination of ``inpatient bed-days * * * 
attributable to individuals with respect to whom payment may be made 
under part A.''
    Response: Once again, as in the case of the term ``subsection(d)'' 
hospital, we believe that, in the absence of clear direction from the 
statute to the contrary, the most appropriate policy is to interpret 
terms such as ``inpatient bed-days'' in the light of existing Medicare 
program policies and precedents. We are therefore also following the 
precedent of Medicare payment adjustments in excluding certain swing 
bed days from the count of Medicare inpatient days. As in these cases, 
swing bed days are excluded when the swing bed is used to furnish SNF 
care, because only the days used for inpatient hospital care will be 
included in the count of ``inpatient bed-days * * * attributable to 
individuals with respect to whom payment may be made under part A.'' 
Otherwise, we would be including non-inpatient bed-days in the count.
    Comment: One commenter objected that, for purposes of the Medicare 
inpatient day count in the Medicare share, we appeared to be proposing 
to use only paid Medicare days. This commenter argued that all eligible 
Medicare days should be counted in order to reflect a hospital's true 
Medicare utilization. The commenter also maintained that the statute's 
reference to days ``attributable to individuals with respect to whom 
payment may be made under part A'' requires inclusion of all days when 
a beneficiary was eligible for Medicare, on the grounds that this 
language ``does not require actual payment by Medicare.'' The commenter 
further noted that the other factor in the numerator of the Medicare 
share fraction requires inclusion of all patient days associated with 
individuals enrolled in a Part C Medicare Advantage plan, and 
maintained that there ``would be no rational basis for Congress to 
include all enrolled Part C days, quite clearly regardless of whether 
they are paid, but to limit part A days to those paid by Medicare.''
    Response: We assume that, by the term ``unpaid'' Medicare days, the 
commenter is referring to days provided to Medicare entitled 
beneficiaries for which the services are non-covered, such as the cases 
in which a beneficiary has exhausted coverage of inpatient hospital 
services, or in which the services are not covered under a national or 
local coverage determination. We do not agree with the commenter that 
these days ought to be included in the count of ``inpatient-bed-days * 
* * attributable to individuals with respect to whom payment may be 
made under part A.'' Indeed, we believe that the best reading of this 
statutory language suggests the opposite of what the commenter 
maintains: In cases of non-covered days, payment may not be made under 
Part A, and therefore these days should not be included in a count of 
days ``attributable to individuals with respect to whom payment may be 
made under part A.'' We agree with the commenter that the language for 
the other factor in the numerator of the Medicare share fraction 
(``inpatient-bed-days attributable * * * to individuals who are 
enrolled with a MA organization under Part C'') is more inclusive. 
However, we must assume that the difference in the statutory language 
is meaningful. Therefore, we are finalizing our proposal not to include 
days provided to Medicare entitled beneficiaries for which the services 
are non-covered in the count of Medicare inpatient days. It is 
important to note that we do include such ``non-paid'' days for 
purposes of other Medicare payment provisions, where it is appropriate 
to do so under the governing statutory provisions. For example, for 
purposes of the Medicare DSH adjustment the relevant statutory language 
requires inclusion of days associated with individuals who are 
``entitled'' to benefits under Medicare Part A, rather than days for 
which ``payment may be made under part A.''
    After consideration of these comments, we are finalizing our 
proposals with regard to the data to be used to determine the 
``inpatient bed-days * * * attributable to individuals with respect to 
whom payment may be made under part A'' in the numerator of the 
Medicare share fraction. Accordingly, we will derive this information 
from Worksheet E-1, Part II, line 2 of the pending Medicare cost 
report, Form CMS-2552-10, which is defined as the sum of lines 1 and 8 
through 12 in column 6, Worksheet S-3, Part I of the pending cost 
report. As we have just discussed, we are revising the cost report data 
sources from which we are deriving this information in order to be 
consistent with the statutory requirement. We are also revising Sec.  
495.104(c)(4)(ii)(A)(2) of the regulations to clarify this point.
    Comment: One commenter inquired about the status of inpatient-bed-
days attributable to individuals enrolled in the 1876 Medicare cost 
plan operating under ``billing option 2,'' under which the section 1876 
cost contractor pays hospitals for Part A benefits, and then claims 
reimbursement from CMS. The cost-contractor pays Part A benefits for 
its 36,000 enrolled Medicare beneficiaries to contracted hospitals in 
one State. The commenter maintained that a reasonable interpretation of 
the statutory language suggests that the inpatient bed days for these

[[Page 44455]]

beneficiaries should be counted in the numerator of the Medicare share 
fraction. The commenter requested clarification concerning the 
inclusion of these days in the data sources we proposed to employ, or 
the development of an appropriate remedy in order to ensure that they 
are counted. Another commenter noted that Worksheet S-3, Part I, column 
4, line 2 in the Medicare cost report, CMS 2552-96, has historically 
been completed primarily by teaching hospitals, based on patient days 
reported on Provider Statistical and Reimbursement (PS&R) Report Type 
118. The commenter further stated that there have been many situations 
in which non-teaching hospitals reporting days on this cost report line 
have the days removed by the Medicare fiscal intermediary or Medicare 
administrative contractor (MAC), as PS&R Report Type 118 contains no 
patient day data for non-teaching hospitals. The commenter recommended 
that we clarify our plans with regard to PS&R Report Type 118 and allow 
the form to populate with accurate data for all hospitals submitting 
no-pay bills for Medicare beneficiaries who are enrolled in Medicare 
Advantage (MA) plans and who receive Medicare-covered hospital 
services. The commenter further noted that, at this time, CAHs and IPPS 
hospitals that do not receive the DSH adjustment are not required to 
submit no-pay bills for Medicare Advantage patients.
    Response: We agree with the commenters that all these days should 
be counted in the numerator of the Medicare share fraction. With 
respect to MA plan enrollees, these patients are already included in 
the ``estimated number of inpatient-bed-days attributable * * * to 
individuals who are enrolled with a MA organization under Part C.'' In 
order for the data on the inpatient days attributable to individuals 
enrolled in MA plans to be included on the Medicare cost report, the 
hospital must submit a ``no-pay'' bill to the Medicare contractor. We 
have issued instructions clarifying that hospitals must submit no-pay 
bills for inpatient days attributable to individuals enrolled in MA 
plans. Specifically, CR 5647, dated July 20, 2007, required all 
hospitals paid under the inpatient prospective payment system (IPPS), 
inpatient rehabilitation facility prospective payment system (IRF PPS), 
and long term care hospital prospective payment system (LTCH PPS) to 
submit informational only Medicare Advantage claims. Furthermore, CR 
6821, dated May 5, 2010, provided that applicable IPPS, IRF PPS and LTC 
hospitals will be given one final opportunity to comply with the 
requirement to submit FY 2007 informational only claims. In addition, 
these hospitals are required to attest in writing to their Medicare 
contractor that they have either submitted all of their Medicare 
Advantage claims for FY 2007 or that they have no Medicare Advantage 
claims for that fiscal year. After consideration of the comments, we 
are finalizing our proposals for determining the ``inpatient bed-days * 
* * attributable to individuals with respect to whom payment may be 
made under part A'' and the ``estimated number of inpatient-bed-days 
attributable * * * to individuals who are enrolled with a MA 
organization under Part C.'' However, we are modifying the language of 
Sec.  495.104(c)(4)(ii)(A)(1) regarding the counting of inpatient bed-
days attributable to individuals with respect to whom payment may be 
under part A to clarify that this count includes days attributable to 
enrollees under section 1876 cost contracts where payments for Part A 
benefits are made by the section 1876 contractor. We intend to derive 
this information from Worksheet E-1, Part II, line 3 of the pending 
Medicare cost report, Form CMS-2552-10, which is derived from line 2 in 
column 6, Worksheet S-3, Part I of the pending cost report. This data 
source on the revised Medicare cost report is the equivalent of the 
source we cited in the proposed rule.
    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 hospital's 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 proposed 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 proposed to 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. We noted that 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.
    Comment: Several commenters noted, regarding our proposal 
concerning Medicare inpatient days in the denominator of the Medicare 
share fraction, an apparent contradiction between the cost report 
sources from which we proposed to derive ``estimated total number of 
inpatient-bed-days with respect to the eligible hospital during such 
period'' (lines 1, 6 through 9, 10, and 14 in column 6 on Worksheet S-
3, Part I), and our statement that ``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 .'' These commenters 
supported our proposal to employ the data from those lines of the cost 
report, on the grounds that these cost report lines adequately capture 
the necessary data. However, as the commenters pointed out, the data on 
the identified lines do include patient days in units not paid under 
the inpatient PPS. And these commenters contended that the relevant 
statutory language (``the estimated total number of inpatient-bed-days 
with respect to the eligible hospital during such period'') would seem 
to include patient days in units excluded from the inpatient PPS.
    Response: As in the case of the equivalent issue with regard to 
Medicare inpatient bed days, we agree with the commenters that our 
citation of the specific cost report sources from which we proposed to 
derive the ``the estimated total number of inpatient-bed-days with 
respect to the eligible hospital during such period'' was not 
consistent with our statement that the data entered on these lines in 
the cost ``include all patient days attributable to inpatients, 
excluding those in units not paid under the IPPS.'' And as in the case 
of Medicare inpatient-bed-days, our error was in the specific cost 
report lines that we cited, rather than in our statement that the 
relevant statutory language (``the estimated total number of inpatient-
bed-days with respect to the eligible hospital'') includes ``all 
patient days attributable to inpatients, excluding those in units not 
paid under the IPPS.''. As we have discussed in connection with 
counting discharges and Medicare inpatient-bed-days, the relevant 
statutory language directs that the denominator of the Medicare share 
fraction incorporate inpatient bed-day counts for the eligible 
hospital. Therefore, the inpatient-bed-day counts included in the 
Medicare share fraction for purposes of the incentive payments

[[Page 44456]]

provision do not extend to inpatient-bed-days in excluded units of the 
hospital, but only to inpatient-bed-days in the acute care portion of 
the hospital that receives payment for Medicare purposes under the 
inpatient PPS.
    We are finalizing our proposal for determining the count of total 
inpatient-bed days in the denominator of the Medicare share fraction as 
including all patient days attributable to inpatients, excluding those 
in units not paid under the IPPS. Accordingly, we will derive this 
information from Worksheet E-1, Part II, line 4 of the pending Medicare 
cost report, Form CMS-2552-10, which is defined as the sum of lines 
1and 8 through 12, in column 8, Worksheet S-3, Part I of the pending 
cost report. As we have just discussed, we are revising the cost report 
data sources from which we are deriving this information in order to be 
consistent with the statutory requirement. In this final rule, we are 
also revising Sec.  495.104(c)(4)(ii)(B)(1) to clarify this point.
    As we noted above, the denominator of the Medicare share fraction 
also includes 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 hospital's charges during such period.'' We discuss 
the data sources and methods for calculating the charges and charity 
care portions of this formula in the next section.
d. Incentive Payment Calculation for Eligible Hospitals: Charity Care 
and Charges
    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 a greater 
charity care 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.
    For the purposes of this final rule, we 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 proposed 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. Line number 19 of the revised Worksheet S-10, as 
proposed, has changed to line number 20 based on the pending OMB 
approved final Form CMS-2552-10. Only the line number has changed as 
the instructions are the same for line 19 as proposed and for line 20 
in the pending final OMB approved Worksheet S-10. Thus, the charity 
care charges used to calculate the final Medicare share is reported on 
line 20 of the pending final OMB approved Worksheet S-10.
    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 20 of the 
pending final OMB approved 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 20, we may question the accuracy of the charges 
used for computing the final 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 line 20 of 
the pending final OMB approved Worksheet S-10, then we proposed to deem 
the portion of the denominator described in section 
1886(n)(2)(D)(ii)(II) of the Act to be 1.
    In the proposed rule, we specifically solicited 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.
    Comment: Some commenters requested that CMS clarify the definition 
of charity care. One commenter believed the CMS incorrectly indicated 
that Medicare does not reimburse for charity care. The commenter 
believed this statement is inconsistent with section 312 of the 
Provider reimbursement Manual (PRM).
    Response: Section 1886(n)(2)(D)(ii)(II) of the Act defines charity 
care charges to compute the Medicare share as such term is used for 
purposes of hospital cost reporting under Medicare. Thus, we are 
adopting our proposed definition of charity care as part of 
uncompensated and indigent care described for Medicare cost reporting 
purposes in the

[[Page 44457]]

Medicare cost report instructions as described above.
    In addition, we believe that our statement is correct in that 
Medicare does not pay for charity care in accordance with the 
regulations and manual instructions. Specifically, section 413.89(b)(1) 
of the Medicare regulations defines bad debts as 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. 
Section 413.89(b)(2) of the Medicare regulations defines charity 
allowances as reductions in charges made by the provider of services 
because of the indigence or medical indigence of the patient. Cost of 
free care (uncompensated services) furnished under a Hill-Burton 
obligation are considered as charity allowances. Furthermore, section 
413.89(g) states that charity allowances have no relationship to 
beneficiaries of the Medicare program and are not allowable costs. 
These charity allowances include the costs of uncompensated services 
furnished under a Hill-Burton obligation.
    Also, section 312 of the PRM states that, for Medicare bad debt 
purposes, a non-Medicaid beneficiary may be considered indigent or 
medically indigent and that once indigence is determined and the 
provider concludes that no improvements in the beneficiary's financial 
condition exist, the debt may be deemed uncollectible without applying 
the collection requirements of section 310 of the PRM. We believe that 
the instructions at section 312 of the PRM specify bad debt amounts 
that may be allowable under section 413.89 of the regulations and, 
thus, these instructions are not related to charity care amounts that 
are not allowable for Medicare.
    After consideration of the public comments received, we are 
finalizing the definition of charity care these provisions as proposed.
    Comment: We received some comments asking if CMS will adopt 
standards to determine if a hospital's charity care policy is 
sufficient to qualify for the inclusion of charges in the formula for 
EHR and whether that same policy would suffice to meet the criteria to 
determine the eligibility for Medicare bad debt.
    Response: Currently for bad debt purposes, section 312 of the PRM 
requires the provider to perform asset/income tests of patient 
resources for non-Medicaid beneficiaries. These tests will be used to 
determine if the beneficiary meets the provider's indigent policy to 
qualify an unpaid deductible and/or coinsurance amount as a Medicare 
bad debt. The provider is responsible for developing its indigent 
policy. Currently, the Medicare contractor will determine if the 
indigent policies are appropriate for determining allowable Medicare 
bad debt under section 312 of the PRM and Sec.  413.89 of the 
regulations. We believe that the Medicare contractor will continue to 
determine if the provider's indigent policy for bad debt purposes is 
appropriate and can determine if the same policy would be sufficient to 
use for charity care purposes.
    Comment: We received many comments on the use of charity care 
charge data from line 19 of the revised worksheet S-10, as proposed. 
Commenters urge CMS to calculate charity care costs by starting with 
the amount of charges a hospital has written off. Commenters noted that 
this modification would help streamline and unify charity care 
reporting across the Federal government (based on the way Internal 
Revenue Service (IRS)) requires charity care to be reported) ensure 
consistency of reporting, and avoid significantly increasing hospitals' 
administrative burden.
    Response: As described above, we use charity care charges from line 
20 of the pending final OMB approved worksheet S-10 that captures 
``total initial payment obligations of the patients who are given full 
or partial discounts, based on the hospital's charity care criteria 
(measured a full charge), for care delivered during the cost reporting 
period for the entire facility.'' Similar comments received on our 
proposed rule were also received on the Agency Information Collection 
Activities: Proposed Collection: Comment Request published in the July 
2, 2009 Federal Register (74 FR 31738). CMS issued a revised package, 
Agency Information Collection Activities: Submission for OMB Review: 
Comment Request, in the April 30, 2010 Federal Register (75 FR 22810). 
The comment period for the submission for OMB review ended June 1, 
2010. OMB will review the comments received and issue an approved Form 
CMS 2552 10. The OMB approved Form CMS-2552-10 will be effective for 
cost reporting periods beginning on or after May 1, 2010.
    Comment: Some commenters noted that the Hospital Uncompensated Care 
and Indigent Care Worksheet S-10 that CMS proposed to revise in the 
July 2, 2009 Federal Register (74 FR 31738) would not be timely (based 
on the anticipated effective date for cost reporting periods beginning 
on or after February 1, 2010 as stated in the proposed rule), and 
therefore, hospitals with cost reporting periods beginning on November 
1, 2009, December 1, 2009 or January 1, 2010 would not have the 
opportunity to report charity care data for the first year of the 
incentive payment. Commenters further highlighted their concern for 
available data necessary to be included in interim payments and for 
final payments for periods that end December 31, 2010. Commenters urged 
CMS to develop an interim mechanism for hospitals to report the 
necessary information so that no hospital receives a charity care 
adjustment of ``1'' merely because of its cost reporting cycle. Some 
commenters suggested that CMS use other charity care data. Some 
commenters suggested that CMS use the current version of the Medicare 
cost report, Form CMS-2552-96, to determine interim incentive payments.
    Response: To calculate the Medicare share, which includes the 
charges for charity care, we proposed in the proposed rule to employ 
data from the hospitals fiscal year that ends during the FY prior to 
the FY that serves as the payment year as the basis for preliminary 
payment. We further stated that 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. After consideration of the public 
comments received, we are revising the provision that for purposes of 
determining preliminary incentive payments, we will employ data on the 
hospital's/CAH's Medicare fee-for-service and managed care inpatient 
bed days, total inpatient bed-days, and charges for charity care from a 
hospital's/CAH's most recently submitted 12-month cost report once the 
hospital has qualified as a meaningful user. For purposes of 
determining final incentive payments, we will employ the first 12-month 
cost reporting period that begins after the start of the payment year, 
in order to settle payments on the basis of the hospital's/CAH's 
Medicare fee-for-service and managed care inpatient bed days, total 
inpatient bed-days, and charges for charity care data from that cost 
reporting period.
    In addition, as described in the proposed rule, hospitals have been 
required to fill out the worksheet S-10 of the Form CMS 2552-96 since 
the BBRA of 1999 was enacted. We recognize that the charity care data 
from the 2552-96 worksheet S-10 may have some limitations because, in 
some cases, providers failed to complete the worksheet either partially 
or in its

[[Page 44458]]

entirety. Furthermore, in the past CMS did not review the worksheet S-
10 because the data had no Medicare payment implications. Thus, in the 
absence of availability of charity care data from the OMB approved Form 
CMS 2552-10, a hospital for the purposes of calculating the charity 
care charges in the interim may use the information from the 2552-96 
worksheet S-10; line 22 until the revised worksheet is available. We 
believe that the Medicare contractor can make a determination if the 
charity care charges from the 2552-96 are appropriate, and if so, use 
such charges in determining the preliminary incentive payment amount 
for hospitals, as described above. Since CAHs were not required to fill 
out the 2552-96 worksheet S-10, charity care charges may not be 
available to determine preliminary incentive payments until the revised 
worksheet is available. However, using data from the first 12-month 
cost reporting period that begins after the start of the payment year, 
as described above, hospitals and CAHs will calculate the final 
incentive payment amount with data from the pending Form CMS-2552-10 
Medicare cost report that is effective for cost reporting periods 
beginning on or after May 1, 2010.
    Comment: Several commenters pointed out that we had failed to 
identify the source of the data for ``estimated total amount of the 
eligible hospital's charges'' in the proposed rule. Some of these 
commenters recommended that we employ Worksheet C, Column 8, line 103 
for this purpose.
    Response: We did neglect to identify the source of the data for 
``estimated total amount of the eligible hospital's charges'' in the 
proposed rule. In the final rule, we are providing that, for this 
purpose, we will employ the data from Worksheet E-1, Part II, line 5 of 
the revised Medicare cost report, Form CMS-2552-10, which in turn 
derives this information from line 200 in column 8, Worksheet C, Part I 
of the pending cost report. We note that line 200 in column 8, 
Worksheet C, Part I of the revised cost report is the equivalent of 
101, Column 8, Worksheet C of the current cost report. We are employing 
the equivalent of line 101, rather than the equivalent of line 103, as 
recommended by the commenters, because line 101 (current line 200) 
includes the charges for observation, and accordingly reflects the 
``total amount of the eligible hospital's charges'' more truly than 
line 103, which excludes those charges.
e. Incentive Payment Calculation for Eligible Hospitals: 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 one (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, then the 
applicable transition factor equals three-fourths (\3/4\) for the first 
payment year (FY 2014), one-half (\1/2\) for the second payment year 
(FY 2015), one-fourth (\1/4\) for the third payment year (FY 2015), and 
zero thereafter. If a hospital's first payment year is FY 2015, then 
the applicable transition factor equals (\1/2\) for the first payment 
year (FY 2015), (\1/4\) 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.

[[Page 44459]]

[GRAPHIC] [TIFF OMITTED] TR28JY10.048

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 
\3/4\), 2013 (transition factor equals \1/2\), and 2014 (transition 
factor equals \1/4\) 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, 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 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 \3/4\), FY 2014 (transition factor 
equals \1/2\), and FY 2015 (transition factor equals \1/4\). 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

[[Page 44460]]

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.
[GRAPHIC] [TIFF OMITTED] TR28JY10.049

    Comment: Several commenters pointed out an apparent inconsistency 
in the regulation text that we proposed to implement the transition 
period and applicable transition factors for EHR incentive payments. 
Specifically, the commenters noted that proposed section 495.104(b)(5) 
states that hospitals ``whose first payment year is FY 2015 may receive 
such payments for FY 2015 through 2017'' (emphasis supplied), while 
proposed section 495.104(c)(5) states that the transition factors for 
hospitals ``whose first payment year is FY 2015'' are:
    (A) \1/2\ for FY 2015; and
    (B) \1/4\ for FY 2016. (Emphasis supplied.)
    Response: These commenters are correct. Our proposed section 
495.104(b)(5) contained a typographical error. In order to be 
consistent with the clear requirements of the statute, section 
495.104(b)(5) should have stated that hospitals ``whose first payment 
year is FY 2015 may receive such payments for FY 2015 through 2016.'' 
In this final rule, we are revising section 495.104(b)(5) of the final 
regulations accordingly.
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 ``33\1/3\ percent for FY 2015, 
66\2/3\ 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 \1/4\, \1/2\, and 
\3/4\ 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.
    In the proposed rule, we noted that specific proposals to implement 
these payment adjustments for subsection (d) hospitals that are not 
meaningful EHR users were not being made at that time, but would be 
subject to future rulemaking prior to the 2015 implementation date. We 
invited comments on these payment adjustments, and stated any comments 
received would be considered in developing future proposals to 
implement these provisions.
    We received a few comments on this provision.
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 final rule.

[[Page 44461]]

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 final rule.
    Comment: We received many comments on the use of the CCN to 
identify CAHs. Most comments were similar to those received on the use 
of the CCN for determining incentive payments to eligible hospitals.
    Response: We responded to the comments for eligible hospitals 
elsewhere in this final rule. Our responses to comments received on 
using the CCN to identify CAHs are the same as the responses for 
eligible hospital.
    After consideration of the public comments received, we are 
finalizing our policy as proposed. For purposes of this provision, we 
will provide incentive payments to qualifying CAHs as they are 
distinguished by the provider number in the CAH's cost reports. 
Incentive payments for qualifying CAHs 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 
qualifying CAHs will be made to each provider of record.
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 Sec.  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 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, or the payment window provisions for preadmission 
services, specified in Sec.  412.2(c)(5) and Sec.  413.40(c)(2). 
Section 1834(g) of the Act and Sec.  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 Sec.  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

[[Page 44462]]

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 case-by-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 1814(l)(3) of the Act and payment 
adjustments under section 1814(l)(4) of the Act; (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 proposed to 
amend Sec.  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 
proposed to include a cross-reference to Sec.  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 proposed to amend Sec.  
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 proposed to 
apply the definitions of certified EHR technology, EHR reporting 
period, meaningful EHR user and qualified EHR in Sec.  495.4 that are 
discussed elsewhere in this final rule.
    In Sec.  495.106(a), we proposed to define a qualifying CAH as a 
CAH that would meet the meaningful EHR user definition for eligible 
hospitals in Sec.  495.4, which is discussed in section II A.1. of this 
final rule if it were an eligible hospital. Also in Sec.  495.106(a), 
for the purposes of computing the CAH incentive payment, we proposed 
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, 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 Sec.  495.4 of this 
final rule. We also proposed to define payment year for CAHs to mean a 
fiscal year beginning after FY 2010 but before FY 2016.
    Under proposed Sec.  495.106(b), we specified that a qualifying CAH 
must 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, we proposed under 
Sec.  495.106(c) that the payment methodology for computing the 
incentive payment for a qualifying CAH for a cost reporting period 
during a payment year would be 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 final rule) plus 20 percentage 
points. However, in no case will the resulting Medicare share for a CAH 
exceed 100 percent. This payment methodology will be used in place of 
payment at 101 percent of reasonable costs typically applied under 
section 1814(l)(1) of the Act and Sec.  413.70(a)(1) 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 final 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 Sec.  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 Sec.  413.70(a)(5), such payment is made in lieu of any 
payment that would have been made under Sec.  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

[[Page 44463]]

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 Sec.  495.106(d)(2), the amount of the incentive 
payment made to a qualifying CAH under this section would be 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 proposed Sec.  495.106(d)(3), the interim incentive payment 
would be subject to a reconciliation process as specified by CMS and 
the final incentive payment as determined by CMS or its Medicare 
contractor would be considered payment in full for the reasonable costs 
incurred for the purchase of certified EHR technology in a payment 
year.
    Under Sec.  495.106(d)(4), we proposed 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 above and in section II.B.4. of this 
final 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 
Sec.  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.
    Comment: We received many comments requesting CMS to provide a list 
of those depreciable items that would be used to determine the CAH 
incentive payment under this provision. The commenters were concerned 
that certain expenses, such as staff training, associated with an EHR 
system may not be included in the CAH's incentive payment. We also 
received comments requesting a further explanation of what 
documentation will be required to support the reasonable costs incurred 
by the CAH.
    Response: Section 1814(l)(3)(C) of the Act, as amended by the 
HITECH Act, provides that the costs for which a CAH may receive an 
incentive payment are reasonable 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. Furthermore, 
section 1814(l)(3)(A) of the Act, as amended by the HITECH Act, 
mandates that the Secretary shall compute reasonable costs for the 
purchase of certified EHR technology 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). As described in the proposed rule, for the 
purposes of computing the CAH incentive payment, we proposed 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, 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 Sec.  495.4 of this final rule.
    CAHs will incur both depreciable and non-depreciable reasonable 
costs in a payment year that are associated with implementing and 
maintaining certified EHR technology. According to the statute, only 
the reasonable costs for the purchase of certified EHR technology to 
which purchase depreciation (excluding interest) would otherwise apply 
are to be included in the CAH incentive payment. Thus, CAHs will not 
have to depreciate these reasonable costs over the useful life of the 
EHR asset purchased as such costs will be expensed in a single payment 
year. Any non-depreciable reasonable costs incurred in that same single 
payment year that are associated with an EHR system may be paid for 
under the current Medicare reasonable cost payment system at 101 
percent.
    Currently, the CAH's Medicare contractor determines if an item 
purchased is a depreciable asset under Medicare principles or other 
accounting standards. The Medicare contractor also determines the CAH's 
reasonable cost for acquiring depreciable assets. For the purposes of 
computing the CAH incentive payment, we are not changing the Medicare 
contractor's current responsibilities described above. We, therefore, 
suggest that CAHs communicate with their Medicare contractors to 
determine the necessary documentation to support their reasonable costs 
incurred for the purchase of certified EHR technology and to determine 
if the items that they purchase are depreciable assets under Medicare 
principles or other accounting standards.
    Comment: We received some comments requesting clarification of how 
the incentive payments will be computed if an eligible CAH converts to 
or from an eligible ``subsection d'' hospital.
    Response: If during a payment year an eligible CAH is converted to 
or from a ``subsection d'' hospital, the CAH may receive an incentive 
payment as long as it incurred the reasonable costs of purchasing 
certified EHR technology in a payment year (or in a previous cost 
reporting period) when it was a CAH and as long as the affected 
providers meet the meaningful use criteria described elsewhere in this 
final rule. When a conversion takes place, the affected CAH and 
``subsection d'' hospital are each required to file a Medicare cost 
report under section 413.24 of the regulations. For instance, if in 
month 6 of a cost reporting period that begins January 1, 2011 and ends 
December 31, 2011, a ``subsection d'' hospital converts to a CAH, the 
``subsection d'' hospital will file a terminating 6-month cost report 
(January 1, 2011 to June 30, 2011). If the CAH retains the same year 
end of December 31, 2011, the CAH will file a 6-month cost report from 
July 1, 2011 to December 31, 2011. In this instance, the CAH's 6-month 
cost report would be used to determine if it incurred reasonable costs 
for the purchase of

[[Page 44464]]

certified EHR technology that may qualify for a CAH incentive payment 
during that period. The ``subsection d'' hospital's 6 month terminating 
cost report would be used to determine the possible amount of any 
incentive payment for that eligible hospital.
    After consideration of the public comments received, with the 
exception of a few minor, technical and conforming changes, we are 
finalizing the applicable provisions as proposed.
    Comment: We received many comments regarding the use of data from 
the revised Medicare cost report (Form CMS-2552-10) described in the 
proposed rule to compute the Medicare share portion of the CAH 
incentive payment. Commenters were also concerned that certain cost 
report data may not be available at the time of computing a CAH's 
incentive payment.
    Response: As discussed elsewhere in this final rule, we are 
addressing concerns with data from the revised cost report in a final 
collection that is currently in the Paperwork Reduction Act clearance 
process. In addition, we address the timing issues with the revised 
cost report data elsewhere in this final rule.
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, we proposed that under Sec.  495.106(e) and Sec.  
413.70(a)(6), if a CAH has not demonstrated meaningful use of certified 
EHR technology for FY 2015, its reimbursement would be reduced from 101 
percent of its reasonable costs to 100.66 percent. For FY 2016, its 
reimbursement would be reduced to 100.33 percent of its reasonable 
costs. For FY 2017 and each subsequent FY, its reimbursement would 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.
    Comment: We received some comments requesting further clarification 
of how CMS will be determining whether a significant hardship exists to 
warrant an exemption.
    Response: We received a few comments on this provision which is not 
effective until FY 2015. We will take these comments into account when 
we develop proposals for implementing this provision at a later date.
    After consideration of the public comments received, we are 
finalizing sections 495.106(e) as proposed. We have renumbered proposed 
section 413.70(a)(6)(iv) as 413.70(a)(7), but are otherwise finalizing 
section 413.70(a)(6) as proposed.
    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 Sec.  413.70(a)(6)(iv) and Sec.  495.106(f), we 
proposed 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.
    Comment: We received some comments requesting clarification of 
whether CAHs will be able to appeal their incentive payment amounts.
    Response: We believe that the limitation of administrative and 
judicial review does not apply to the amount of the CAH incentive 
payment. The CAH may appeal the statistical and financial amounts from 
the Medicare cost report used to determine the CAH incentive payment. 
The CAH would utilize the current provider appeal process pursuant to 
section 1878 of the Act.
    Accordingly, after consideration of the public comments received, 
we are finalizing Sec.  495.106(f) as proposed. We have renumbered 
proposed Sec.  413.70(a)(6)(iv) as Sec.  413.70(a)(7), but are 
otherwise finalizing the provision as proposed.
4. Process for Making Incentive Payments Under the Medicare FFS Program
    As previously discussed in section II.B.1. and 2. of this final 
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 proposed 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 methodology set forth in section II.B.1.b. and B.2.b. of this 
final 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 proposed that the carriers/MACs calculate incentive payment 
amounts for qualifying EPs, where incentive payments would be disbursed 
on a rolling basis, as soon as they ascertained that an EP 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. In accordance with section 
1848(l)(3)(B) of the Act, we proposed that if a qualifying EP is not 
eligible for the maximum incentive payment amount for the payment year 
and if the qualifying EP was also a qualifying MA EP, the qualifying MA 
organization with which the EP is affiliated would receive the 
incentive payment for the EP through

[[Page 44465]]

the MA EHR incentive program. If the qualifying EP either does not also 
qualify as a MA EP or he or she qualifies as a MA EP but is not 
eligible for the maximum incentive payment for the payment year, we 
proposed that the carriers/MAC would calculate the amount of the 
qualifying EP's incentive payment and disburse the incentive payment to 
the qualifying EP in the year following the payment year. The proposed 
rule also outlined that incentive payments would not be issued to 
qualifying EPs if an incentive payment was already made under the 
Medicaid program for the relevant payment year, and as required by 
section 1848(m)(2) of the Act as amended by section 4101(f) of the 
HITECH Act, qualifying EPs who received incentive payments from the 
Medicare EHR incentive payment program would not be eligible to receive 
an e-prescribing incentive payment. Additionally, we proposed that the 
incentive payments would be tracked at the qualifying EP's TIN level, 
and disbursed to the TIN that 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) would 
be paid at the group practice level's TIN. We proposed 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.
    To be clear, we note that financial relationships, including those 
arising from the reallocation/reassignment of incentive payments, 
between physicians and their employers/other entities may implicate 
certain fraud, waste, and abuse laws, regulations, and rules. 
Therefore, we proposed to include specific safeguards to limit the risk 
that the allocation/reassignment of incentive payments could raise 
under those and other applicable laws, regulations and rules. Section 
II.B.1.d. above finalizes our proposal at Sec.  495.10(f) to permit EPs 
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.
    Comment: Several commenters expressed concern that the proposed 
rule contained limited information on how the incentive program for 
Medicare EPs will be operationalized. They requested additional 
information on the expected timeframe and process for payments.
    Response: The HITECH Act requires that EHR incentive program 
payments be separately tracked and monitored because these funds cannot 
be commingled with other Medicare funds. Therefore, to facilitate funds 
control, payments will be made through a single payment contractor 
rather than through the carriers/MACs as was originally proposed. 
Additionally, the Integrated Data Repository (IDR), rather than the 
carriers/MACs, will be accumulating the allowed charges for each 
qualified EP's NPI. Payments would be made on a rolling basis, as soon 
as we ascertain that an EP has successfully demonstrated meaningful use 
for the applicable reporting period (that is, 90 days for the first 
year or a calendar year for subsequent years) and the EP's allowed 
charges has reached the threshold that qualifies an EP for maximum 
incentive payment, for the relevant payment year. Once this 
determination has been made, the National Level Repository (NLR) will 
calculate the EP's incentive payment. The payment will then be made by 
the single payment contractor. We anticipate that it will take anywhere 
from 15 to 46 days from the time an EP successfully attests to being a 
meaningful user to the time an incentive payment is made, and that for 
FY 2011, incentive payments will be made to EPs who successfully 
demonstrate that they were meaningful EHR users for the EHR reporting 
period (that is, 90 days) as early as May 2011. As proposed, we will 
pay a qualifying EP a single consolidated incentive payment for a 
payment year, rather than make periodic installment payments. In order 
to accommodate different attestation dates throughout the first year 
for EPs, our payment cycle is on a monthly basis as previously 
described; however, qualifying EPs will receive one single payment per 
year. In other words, CMS will issue payments as soon as possible after 
a qualifying EP attested to meaningfully using a certified EHR system, 
hence the monthly payment cycle; however, an EP will only receive one 
incentive payment for each year he/she qualifies. For qualifying EPs 
whose allowed charges for the payment year do not reach the maximum 
thresholds, the single payment contractor will disburse an incentive 
payment in the following year.
    Comment: One commenter recommended CMS make semi-annual incentive 
payments for the second and subsequent payment years to ensure 
physician practices have cash flow to deploy certified EHR systems and 
train employees how to use the systems.
    Response: When the EHR reporting period is a full year, no EPs will 
have successfully demonstrated that they are meaningful users at the 
mid-year mark. Therefore, as previously described, qualifying Medicare 
EPs will receive a single payment per year, issued on a monthly payment 
cycle. We intend to finalize this provision as proposed; there will be 
a single successful attestation per year and a single payment following 
the attestation for qualifying EPs.
    Comment: One commenter questioned whether the scopes of work for 
the MACs/Medicare Carriers would be revised to reflect the additional 
work that this program will entail.
    Response: As previously discussed in the first comment and 
response, the IDR, rather than the MACs/Medicare Carriers, will 
accumulate the EPs allowed charges. The MAC/Carrier work related the 
Medicare EHR incentive program will be within their current scope of 
work and will be handled through the normal change request process.
    Comment: One commenter believes an EP's program selection (Medicare 
or Medicaid) is tied to the TIN where the EP assigns incentive 
payments. The commenter recommended CMS permit additional changes in 
program selection if EPs change their TIN. The commenter believes 
allowing only one program change in the life of the program is too 
restricting given that patient mix might change due to a practice being 
purchased by another TIN or an EP becoming a part-time employee of 
another TIN.
    Response: Section II.A.5.b. of this final rule outlines our policy 
decision around changing program selections.
    After consideration of the public comments received, we are 
finalizing our policy as proposed. For purposes of this provision, 
payments will be made through a single payment contractor with the IDR 
accumulating the allowed charges for each qualified EP's NPI. Payments 
will be made on a rolling basis, as soon as we ascertain that an EP has 
successfully 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 then 
the NLR will calculate the incentive payment. We estimate it will take 
anywhere from 15 to 46 days from the time an EP successfully attests to 
being a meaningful user to the time an incentive payment is made.

[[Page 44466]]

b. Incentive Payments to Eligible Hospitals
    We proposed that the FIs/MACs would calculate incentive payments 
for qualifying eligible hospitals, and would 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 final rule, the formula for 
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. We proposed 
that FIs/MACs would 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 final rule, beginning in 2010, cost reports will 
capture charity care data which will be used in calculating the 
Medicare share of the payment. We proposed that the MACs/FIs 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 also proposed 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 would 
reconcile the incentive payment as necessary at settlement of the cost 
report. Additionally, incentive payments for qualifying eligible 
hospitals would be calculated based on the provider number used for 
cost reporting purposes, which is the CCN of the main provider. 
Therefore, incentive payments for qualifying hospitals would be 
disbursed to the CCN rather than the TIN.
    Comment: Several commenters expressed concern that the proposed 
rule contained limited information on how the incentive program for 
hospitals will be operationalized. They requested additional 
information on the expected timeframe and process for payments as well 
as requesting clarification that the incentive payments would be 
distributed as a ``lump sum payment.'' One commenter requested CMS 
disburse one lump sum payment at the start of each eligible year for 
those hospitals that meet all of the meaningful use requirements.
    Response: Hospital EHR incentive payments will be calculated by the 
FIs/MACs; however, to facilitate funds control, payments will be made 
through a single payment contractor. We will direct the payment 
contractor to issue to qualifying hospitals, that is those hospitals 
who successfully demonstrate that they are meaningful EHR users, a 
single initial payment for the year. We anticipate that payments will 
be made to qualifying Medicare hospitals beginning in May 2011. No 
payment will be made prior to an eligible Medicare hospital 
successfully demonstrating that it was a meaningful EHR user during the 
EHR period for the relevant payment year. For purposes of determining 
interim incentive payments, we will employ data on the hospital's 
Medicare fee-for-service and managed care inpatient bed days, total 
inpatient bed-days, and charges for charity care from a hospital's most 
recently submitted 12-month cost report once the hospital has qualified 
as a meaningful user. For purposes of determining final incentive 
payments, we will employ the first 12-month cost reporting period that 
begins after the start of the payment year, in order to settle payments 
on the basis of the hospital's Medicare fee-for-service and managed 
care inpatient bed days, total inpatient bed-days, and charges for 
charity care data from that cost reporting period.
    Comment: One commenter requested that CMS allow hospitals to make 
an interim attestation 90 days after the start of the second and 
subsequent payment years. They suggested the interim attestation would 
note that they are in compliance with the meaningful use rules and 
intend to remain in compliance. They requested that CMS instruct the 
contractor to issue interim EHR payments after receipt of such 
attestation. The commenter believes this would cut down on the time 
frame of 21 months between their first and second hospital interim 
payments.
    Response: The reporting period requirements for a hospital's second 
and subsequent years are 365 days. Due to the year-long reporting 
period, we do not believe we can allow for an interim attestation that 
the provider is a meaningful EHR user. Under our definitions at Sec.  
495.4, a provider is not a meaningful EHR user unless it has ``for an 
EHR reporting period for a payment year,'' demonstrated meaningful use 
``in accordance with Sec.  495.8 by meeting the applicable objectives 
and associated measures under Sec.  495.6.'' Thus, we could not 
determine that the provider is a meaningful user at an interim point in 
time, and there would be no basis for providing the interim payment.
    Comment: One commenter expressed confusion over the term 
``demonstration period'' and questioned if a hospital had to complete 
the full demonstration period before payments would be made.
    Response: We assume the commenter means EHR ``reporting period'' 
when using the phrase, ``demonstration period.'' A hospital must 
demonstrate that it met the requirements for meaningful use for the 
full EHR reporting period for the relevant payment year before we will 
direct the payment contractor to issue an incentive payment to the 
hospital for the payment year. A hospital therefore must complete the 
full EHR reporting period before demonstrating that it was a meaningful 
EHR user and before any payments would be made.
    Comment: Several commenters recommended that CMS' payment process 
for eligible hospitals be consistent with its payment process for EPs, 
and that hospital's initial incentive payment thus be distributed no 
later than two months after the hospital successfully demonstrates 
meaningful use. The same commenters requested CMS specify that the 
final incentive payment be issued no later than two months after the 
hospital submits its cost report from the FY that ends during the 
payment year.
    Response: We anticipate that for FY 2011, interim incentive 
payments will be made to eligible hospitals that successfully 
demonstrate that they were meaningful EHR users for the EHR reporting 
period for FY 2011 (that is, 90 days) as early as May 2011. The exact 
timing of when a qualifying eligible hospital receives its interim 
incentive payment will depend on when the hospital successfully 
demonstrates that it was a meaningful EHR user; the sooner a hospital 
successfully demonstrate that is was a meaningful EHR user during the 
EHR reporting period for the payment year, the sooner it will receive 
its interim incentive payment. For a Medicare hospital's second and 
subsequent participation years, after a hospital successfully 
demonstrates that it was a meaningful EHR user during the EHR reporting 
period (that is, the federal fiscal year) for the payment year, the 
hospital will receive the interim incentive payment in the following 
year; the initial incentive payments will be made on a monthly payment 
cycle beginning shortly after the hospital is determined to be a 
meaningful user. To the commenters' point of requesting that we be 
consistent with the approach to paying EPs, there seems to be confusion 
around what was proposed as to the timing and distribution of the EP's 
incentive payment. The proposal for the EP's incentive payment was that 
EP's

[[Page 44467]]

accumulated allowed charges would be based on claims submitted not 
later than two months after the end of the payment year. The incentive 
payment for a qualifying EP's second and subsequent payment years was 
always to be disbursed in the year following the payment year. We did 
not propose paying an EP within two months of being deemed a meaningful 
user.
    Comment: Several commenters questioned how CMS would treat a 
hospital that qualified for an incentive payment one year, but did not 
qualify the next or subsequent years; what is the impact on the stream 
of incentive payments to the hospital?
    Response: An eligible hospital's first payment year is the first 
year they successfully demonstrate that they were a meaningful EHR user 
for the EHR reporting period for the payment year. Section 
1886(n)(2)(G) of the Act defines the second through fifth payment years 
for a hospital as each successive year immediately following the first 
payment year for such hospital. An eligible hospital's second payment 
year, then, is the year following its first payment year, regardless of 
whether the eligible hospital qualifies for an incentive payment in the 
year following its first payment year. Similarly, an eligible 
hospital's third, fourth, and fifth payment year are the third, fourth, 
and fifth years, respectively, following the hospital's first payment 
year, even if the hospital does not receive an incentive payment for 
one or more of those years.
    Comment: Several commenters requested that CMS clarify that EHR 
incentive payments for which a hospital qualifies or receives under the 
EHR incentive program (whether directly or pursuant to an assignment, 
reassignment or other transfer) shall not affect or be taken into 
account in the calculation or other payments made to the eligible 
hospital under Medicare, Medicaid, or any other state or federal 
healthcare program, such as disproportionate share payments, graduate 
medical education and indirect medical education payments, and payments 
for un-compensated care payments.
    Response: EHR incentive payments will have no bearing on the 
hospital's Medicare disproportionate share, indirect medical education 
or direct graduate medical education payments. This discussion is also 
addressed in the Medicaid section at II.D.4.b.
    After consideration of the public comments received, we are 
finalizing our policy as proposed. For purposes of this provision, 
Hospital incentive payments will be calculated by the FIs/MACs; 
however, to facilitate funds control, payments will be made through a 
single payment contractor. We will direct the payment contractor to 
issue to qualifying hospitals a single initial payment per year, and 
expect initial payment may begin as early as May 2011, for those who 
demonstrate they are meaningful EHR users at the earliest date 
possible. We estimate it will take anywhere from 15 to 46 days from the 
time a hospital successfully attests to being a meaningful user to the 
time an incentive payment is made.
c. Incentive Payments to CAHs
    In the proposed rule, CMS proposed that because CAHs are paid on a 
cost reimbursement basis once a CAH incurs actual EHR costs, it could 
submit supporting documentation to the FI/MAC for review. The FIs/MACs 
would determine an incentive payment amount, as discussed in section 
II.A.3 of the 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.
    As discussed in the proposed rule, the FIs/MACs would reconcile the 
cost report and ensure the EHR expenses are adjusted on the cost report 
to avoid duplicate payments. Incentive payments for qualifying CAHs 
would be calculated based on the provider number used for cost 
reporting purposes, which is the CCN number of the main provider. 
Therefore, incentive payments for qualifying CAHs would be based on the 
CCN rather than the TIN.
    Comment: Several commenters expressed concern that the proposed 
rule contained limited information on how the incentive program would 
be operationalized for CAHs. They requested additional information on 
the expected timeframe and process for payments to CAHs.
    Response: To facilitate funds control, payments will be made 
through a single payment contractor. In order to receive a HITECH 
incentive payment, a CAH will have to attest that it is a meaningful 
user, and submit documentation to its FI/MAC to support the costs 
incurred for its HIT system. Once the FI/MAC reviews the documentation 
and the allowable amount is determined, we will direct the payment 
contractor to release to the CAH a single incentive payment in the next 
HITECH payment cycle. Payment cycles will begin in May 2011.
    Comment: Several commenters requested more information on the 
timing of the distribution of payments to CAHs once the necessary 
documentation has been submitted and that recommended CMS be consistent 
with its proposal on incentive payments for EPs and specify that the 
CAH's initial incentive payment will be distributed no later than two 
months after it submits the necessary documentation. The same 
commenters requested that CMS specify that the final incentive payment 
be issued no later than two months after the CAH submits its cost 
report.
    Response: CAHs will receive a single initial incentive payment per 
year with the initial payments beginning in May 2011. Once the FIs/MACs 
review the documentation and the allowable amount is determined, we 
will direct the payment contractor to release a single incentive 
payment in the next incentive payment cycle to qualifying CAHs. We 
anticipate the initial payments will generally be made within two 
months of the determination of the allowable amount. The final payment 
will be calculated on the cost report, and the process to settle the 
cost report will not be modified for these incentive payments. It will 
continue to follow the normal final settlement process. For the CAHs' 
second and subsequent participation years, CAHs will also receive a 
single initial incentive payment per year and a final incentive payment 
as described above. With respect to the commenters' request that we be 
consistent with the proposed approach to paying EPs, there seems to be 
confusion around what was proposed as to the timing and distribution of 
incentive payments to EPs. The proposal for EP incentive payments was 
that an EP's accumulated allowed charges would be based on claims 
submitted not later than two months after the end of the payment year. 
The incentive payment for a qualifying EP's second and subsequent 
payment years was always to be disbursed in the year following the 
payment year. We did not propose to make incentive payments to an EP 
within two months of the EP being deemed a meaningful user.
    Comment: Several commenters questioned what is considered 
``necessary documentation'' for CAHs to submit in order to receive 
Medicare CAH incentive payments. The same commenters requested CMS 
propose and obtain comments on ``necessary documentation'' and finalize 
a rule before FY 2011.
    Response: The documentation submitted should include information 
reflecting what was purchased, and support the costs incurred. Such 
documentation may include invoices, receipts, or other comparable 
materials.

[[Page 44468]]

    Comment: One commenter recommended CMS (not the MACs/FIs) should 
make all determinations regarding CAHs.
    Response: The documentation review process for Medicare CAH 
incentive payments is similar to processes currently performed by FIs/
MACs. Also, the data needed to calculate the Medicare Share is on the 
cost reports, which are submitted to the FIs/MACs. Accordingly, we 
believe it would be most appropriate for the payment determinations be 
made by the FIs/MACs, and not by CMS.
    After consideration of the public comments received, we are 
finalizing our policy as proposed. For purposes of this provision, CAH 
payments will be calculated by the FIs/MACs; however, as discussed 
above, to facilitate funds control, payments will be made through a 
single payment contractor. Once the FIs/MACs review the documentation 
and the allowable amount is determined, we will direct the payment 
contractor to release to the CAH a single incentive payment in the next 
HITECH payment cycle. Payment cycles will begin in May 2011.
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 through 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.
5. Preclusion of Administrative and Judicial Review
    We did not discuss preclusion of administrative and judicial review 
in our proposed rule. We are now including a discussion, in order to 
make the public aware of the preclusion. Also, the sections of this 
final rule discussing payments to Medicare Advantage (MA) organizations 
and CAHs both include a description of the preclusion, as well as 
accompanying regulation text. Therefore, while we believe statutory 
provisions on preclusion of review are self-implementing, below, we 
include a discussion of the preclusion of review that applies to EPs 
and eligible hospitals. We have also added regulation text to maintain 
consistency with the CAH and MA organization provisions.
    For EPs, section 1848(o)(3)(C) of the Act prohibits administrative 
or judicial review under section 1869, section 1878, or otherwise, of 
all of the following:
     The methodology and standards for determining EP incentive 
payment amounts.
     The methodology and standards for determining the payment 
adjustments that apply to EPs beginning with 2015.
     The methodology and standards for determining whether an 
EP is a meaningful EHR user, including: (1) The selection of clinical 
quality measures; and (2) the means of demonstrating meaningful EHR 
use.
     The methodology and standards for determining the hardship 
exception to the payment adjustments.
     The methodology and standards for determining whether an 
EP is hospital-based.
     The specification of the EHR reporting period, as well as 
whether payment will be made only once, in a single consolidated 
payment, or in periodic installments.
    For eligible hospitals, section 1886(n)(4)(A) of the Act similarly 
prohibits administrative or judicial review under section 1869, section 
1878, or otherwise, of the following:
     The methodology and standards for determining the 
incentive payment amounts made to eligible hospitals, including: (1) 
The estimates or proxies for determining discharges, inpatient-bed-
days, hospital charges, charity charges, and Medicare share; and (2) 
the period used to determine such estimate or proxy.
     The methodology and standards for determining the payment 
adjustments that apply to eligible hospitals beginning with FY 2015.
     The methodology and standards for determining whether an 
eligible hospital is a meaningful EHR user, including: (1) The 
selection of clinical quality measures; and (2) the means of 
demonstrating meaningful EHR use.
     The methodology and standards for determining the hardship 
exception to the payment adjustments.
     The specification of the EHR reporting period, as well as 
whether payment will be made only once, in a single consolidated 
payment, or in periodic installments.

We note that the above listing may summarize or abbreviate portions of 
the statute. For precise language on the preclusion of judicial review, 
readers should always refer to the statute.

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.
    In Sec.  495.200 we proposed to define ``qualifying MA 
organization.'' Specifically, in Sec.  495.202(a)(2), we proposed to 
deem MA organizations offering MA HMO plans that are not federally-
qualified 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 proposed 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

[[Page 44469]]

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 Sec.  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 proposed that the sponsoring 
MA organization would be required 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.
    Although we did not receive any comments on these provisions and 
are finalizing them as proposed, there is one exception. In order to 
bring 422.202(a) into conformance with the change we are making to 
422.202(b)(1), we are changing the date by which MAOs are required to 
identify themselves to us from the bidding deadline in June 2010 (for 
plan year 2011) to the bidding deadline in June 2011 (for plan year 
2012).
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 MA 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 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 final rule, an EP is 
defined as a physician (under section 1861(r) of the Act).
    We said we interpreted ``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 said we interpreted ``to be a partner of'' to mean that the 
qualifying MA EP has an ownership stake in the entity. Under this 
interpretation, a professional that contracts with an entity, but who 
has no ownership stake in the entity, would not be considered a 
qualifying MA EP.
    We said we interpreted ``furnishing at least 80 percent'' of the 
entity's ``patient care services'' to enrollees of the organization to 
mean at least 80 percent of the qualifying entity'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 proposed to interpret the requirement that a qualifying MA EP 
furnish at least 80 percent of their professional services covered 
under Title XVIII to enrollees of the organization to mean 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 
said we believed that in establishing the rule that qualifying MA EPs 
need to furnish at least 80 percent of their 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 said 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 
interpreted the requirement to include both Medicare and non-Medicare 
patient care services. Moreover, we proposed 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 definition of EHR reporting period in section II.A.1.e. of 
this final rule.) Therefore, we said that over the EHR reporting 
period, the qualifying MA EP must provide on average 20 hours per week 
of patient care services. Finally, we interpreted ``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 to a Medicare beneficiary.
    We considered various methods of determining when at least 20 hour 
per week, on average, of patient care services would 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 proposed 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.
    Comment: A few commenters referenced the Report to Congress 
required by section 4101(d) of the HITECH Act. The commenters suggested 
ways in which we could combine original FFS Medicare claims-payment 
data and MA services provided by EPs in order to arrive at a single, 
combined EHR payment. One commenter asked whether payments to a 
provider from a Medicare Advantage plan can contribute to the volume of 
Allowed Charges for the purpose of calculating maximum Meaningful Use 
rewards, saying that he believed that they should. Another commenter 
said that a substantial percentage of senior citizens receive their 
care from EPs providing services by way of Medicare Advantage plans. 
The commenter continued that current proposed rules provide incentive 
payment only to EPs in whose practices 80 percent or more of total 
services are to Medicare Advantage patients. The commenter concluded 
that this would exclude many EPs treating our most vulnerable citizens 
from the opportunity to meaningfully adopt EHRs in their practices and 
that the 80 percent [MA] practice requirement should be eliminated. 
Other commenters argued

[[Page 44470]]

that the regulation was unclear regarding an exclusion of covered 
professional services of an EP not employed by an MAO when determining 
their participation or level of payment because those services are 
provided to MA beneficiaries. The commenter believed that the Secretary 
should provide a mechanism, whereby EPs can supplement their record to 
the appropriate carrier/MAC with their MA charges.
    Response: We do not have statutory authority to combine payments 
across the FFS and MA EHR incentive payment programs. The statutory 
provision at section 1853(l)(3)(B) of the Act, as added by section 4101 
of the HITECH, entitled ``Avoiding Duplication of Payments,'' 
specifically prohibits us from making payments to EPs for both FFS and 
MA services. Additionally, had Congress wanted CMS to combine FFS and 
MA charges it could have included a provision similar to the provision 
in section 1886(n)(2)(D)(i) of the Act, as added by section 4102(a) of 
the HITECH Act, where FFS and MA inpatient-bed-days are added together 
to derive the numerator of the Medicare share fraction. We do not have 
the authority to eliminate the requirement that an EP provide 80 
percent of Medicare services to enrollees of an MA organization, as 
that requirement is set forth in section 1853(l)(2)(A)(i)(II) of the 
Act, as added by the HITECH Act, which is clear in requiring that an MA 
EP provide ``80 percent of * * * professional services * * * covered 
under this title to enrollees of the [MA] organization.''
    Comment: One commenter recommended that CMS retain its proposal 
regarding how the 80 percent and the 20 hours per week criteria will be 
met by MA EPs. Another commenter said that many EPs in Puerto Rico 
would not qualify for incentives under this test. The commenter said 
that the single MA organization requirement of 80 percent revenue and 
20 hours per week for MA EPs would not be met due to the competition 
and market changes from year to year. The commenter suggested 
eliminating the single MA organization requirement. Instead, the 
commenter said we should change the standards to consider all enrollees 
of all MA organizations to which an EP furnishes services. The 
commenter continued by saying that if the requirements are not modified 
to accept multiple MA organizations, the commenter anticipated several 
unintended consequences in the Puerto Rico market. First, the commenter 
said, it would be impossible for providers to meet the single MA 
organization requirement of 80 percent revenue and 20 hours per week, 
and therefore, the standard would create disinterest in adopting EHRs 
in their practice. Second, the commenter said, the single MA 
organization requirement standard would stymie competition. An 
unanticipated consequence of the requirement would be providers 
dropping out of MA plans to consolidate revenue in order to meet the 
standard from a single MA organization. Third, the commenter concluded, 
patients would have fewer options to select among MA plans, and to a 
lesser degree, MA enrollees might be forced to discontinue care with 
long time MA providers in light of the providers' determination to 
consolidate revenue under a single MA organization.
    Response: As noted above, the 80 percent of Medicare revenue 
standard is set forth in the statute, and may not be changed by 
regulation. The 20 hour per week rule is also statutory and based on 
section 1853(l)(2)(B) of the Act, as added by the HITECH Act. We note, 
however, that it is not the case that all 20 hours of patient care 
services per week be provided by an EP to MA enrollees of a single MA 
organization. Rather, the 20 hours of patient care services to 
enrollees of a single MA organization can include both Medicare and 
non-Medicare services and patients.
    Comment: One commenter asked CMS to continue to work with Congress 
to develop an equitable mechanism by which to provide incentives to 
physicians that provide health care services through participation with 
more than one MAO.
    Response: As previously mentioned in the preamble to this final 
rule, the statute clearly limits payment related to any specific MA EP 
to a single qualifying MA organization. Potential changes in the 
statute are outside the scope of this rulemaking.
    After consideration of the public comments received, we are 
implementing the foregoing provisions as proposed.
    As discussed in section II.B. of this final 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 final 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 proposed 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, we 
proposed that for such a hospital-based 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.
    Comment: We received one comment related to hospital-based MA EPs, 
and specifically to our proposal in the proposed rule that ``similar to 
the Medicare FFS incentive program, MA incentive payments would also 
not be available for hospital-based EPs.'' The commenter noted, 
however, that unlike the proposed regulatory definition of ``Qualifying 
Eligible Professional (EP)'' under the Medicare FFS incentive program, 
the proposed regulatory definition of ``Qualifying MA EP'' under the MA 
EHR incentive program did not expressly exclude hospital-based EPs. The 
commenter went on to say that if hospital-based MA EPs are excluded 
from the MA EHR incentive program (for example, because they provide 
90% or more of their covered services in the CY preceding the payment 
year in an outpatient hospital setting), unless there is an exception 
for MA EPs who are hospital-based in qualifying MA-Affiliated Eligible 
Hospitals that would not qualify for an incentive payment under the MA 
Affiliated hospital EHR incentive program payment criteria, Qualifying 
MA Organizations with MA EPs who are hospital-based in such qualifying 
MA-Affiliated Hospitals would not qualify for an incentive, with regard 
to those MA EPs, under any HITECH Act Medicare incentive program. The 
commenter concluded that this outcome would not be consistent with the 
objective of the HITECH Act to promote widespread adoption of HIT 
through the payment of monetary incentives for meaningful use of EHRs. 
The commenter recommended that if hospital-based MA EPs are excluded 
from the MA EHR incentive program, then we should include an exception 
for MA EPs who are hospital-

[[Page 44471]]

based in Qualifying MA-Affiliated Eligible Hospitals that would not 
qualify for an incentive payment (or would only qualify for a very 
minimal incentive payment) under the MA-Affiliated hospital EHR 
incentive program payment criteria.
    Response: We thank the commenter for pointing out our oversight in 
not including the hospital-based physician exclusion in the proposed 
regulation text related to the MA EP EHR incentive program. We will 
include in regulation text the fact that an MA EP is not a ``hospital-
based EP,'' as that term is defined in Sec.  495.4 of this final rule. 
As to a possible exception for hospital-based EPs who are practicing in 
MA-affiliated hospitals that do not qualify for incentive payments (or 
that qualify for very minimal incentive payments), we cannot provide 
such an exception. MA-affiliated eligible hospitals will receive EHR 
incentive payments based on the same statutory formula used to make EHR 
incentive payments to other ``subsection (d)'' hospitals--see section 
II.C.3. of this final rule, below. There is no statutory authority nor 
is there a valid reason to treat MA EPs, in this respect, any 
differently that other EPs that are hospital-based.
    After consideration of the public comment received, we are 
modifying the regulation text related to the definition of MA EP by the 
additional of an item 5) to the definition of ``Qualifying MA EP'' at 
Sec.  495.200 to add a specific hospital-based MA EP exclusion.
    As discussed in the proposed rule, 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 did not propose to define the term 
``entity,'' but instead recognized that there exist a range of entities 
with which MA organizations contract for patient care services, 
including physician groups, Independent Practice Associations (IPAs), 
Exclusive Provider Organizations (EPOs), Physician Hospital 
Organizations (PHOs), and Preferred Provider Organizations (PPOs).
    Moreover, we recognized 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, we said, 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.
    We said that the qualifying MA organization must attest to the fact 
that each MA EP is a meaningful user of certified EHR technology in 
accordance with Sec.  495.4. If all of these conditions are met, such 
an individual is identified as an MA EP. We proposed to define the term 
``MA eligible professional (EP)'' at Sec.  495.200 as an EP who 
satisfies all of these conditions.
    Finally, we discussed section 4101(d) of the HITECH Act which 
directed 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. We 
explained that this rule does not address such individuals, as it is 
limited to codifying in regulation existing statutory language as 
discussed herein.
    We did not receive any comments on these provisions and are 
finalizing them as proposed.
c. Qualifying MA-Affiliated Eligible Hospital
    We proposed to define ``qualifying MA-affiliated eligible 
hospital'' in Sec.  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 Sec.  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 two-thirds of the Medicare hospitals 
discharges (or bed-days) are Medicare individuals enrolled under MA 
plans offered by such organization. As discussed in section II.A.1. of 
this final 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 Sec.  495.200, we also proposed to define 
``under common corporate governance'', as a qualifying MA organization 
and a qualifying MA-affiliated eligible hospital that have a common 
parent corporation, where one is a subsidiary of the other, or where 
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 an MA eligible hospital's discharges (or bed-days) 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 Sec.  495.200 we proposed 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 final rule. 
The term will be used in the same way in computing incentive payments 
due qualifying MA organizations under the qualifying MA-affiliated 
eligible hospital incentive payment program.
    We note that, as discussed in section II.B.2.b. of this final 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 MA-enrollee 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 
final rule for the computation of incentive payments to qualifying MA 
organizations.)
    Therefore, we proposed to make EHR incentive payments to qualifying 
MA-affiliated eligible hospitals under the FFS EHR incentive program. 
Finally, we said that to the extent 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 proposed to require that qualifying MA organizations seeking 
reimbursement for qualifying MA-affiliated eligible hospitals submit 
similar data.
    We did not receive any comments on these provisions and are 
finalizing them as proposed.

[[Page 44472]]

2. Identification of Qualifying MA Organizations, MA EPs, and MA-
Affiliated Eligible Hospitals
    In Sec.  495.202 we proposed to require an MA organization that 
intended 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 proposed to 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 proposed 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 proposed 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 proposed 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 
would seek EHR incentive payments.
    In developing the preliminary and final lists of potentially 
qualifying MA EPs, qualifying MA organizations, we said that qualifying 
MA organizations must exclude hospital-based MA EPs. We proposed that 
qualifying MA organizations identify hospital-based MA EPs using the 
same criteria outlined in section II.A.6 of this final 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 MA-affiliated hospitals, we said that qualifying 
MA organizations would be required to submit an attestation that these 
professionals and hospitals meet the criteria to be considered 
eligible. For example, for hospitals, the qualifying MA organization 
would need to attest that they are under common corporate governance 
with the qualifying MA organization and for EPs, the qualifying MA 
organization would need to attest that the list does not include any 
hospital-based EPs.
    We proposed 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 were sought. We also proposed 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 would be requesting payment under the MA EHR incentive 
payment program.
    We said that 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 
FFS program, we proposed 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 proposed to require qualifying 
MA organizations 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.
    Comment: Two commenters contended that requiring MA organizations 
to provide even a preliminary list of MA EPs by June 2010 (for payment 
year 2011) would be unrealistic and burdensome, especially when 
publication of a Final Rule seems unlikely before May 2010 at the 
earliest. For 2011, any preliminary list will be inaccurate, despite 
good faith efforts and reasonable due diligence. Moreover, CMS has not 
stated any justifiable purpose for requiring such a preliminary list.
    Response: We agree with the commenters that it would be 
unnecessarily burdensome and unrealistic to require MA organizations to 
provide preliminary lists as early as June of 2010 of potential MA EPs 
for incentive payment year 2011. We will change the timing of this 
requirement in Sec.  495.202(b)(1) to say that as part of initial bids 
for plan year 2012 MA organizations will be required to submit 
preliminary lists in June of 2011 (when bids are due for 2012) of 
potential MA EPs for incentive payment year 2011. Thus, we will delay 
the requirement for a full year. The purpose of such preliminary lists 
is to identify potential MA EPs that have, for instance, registered as 
FFS Medicare or Medicaid EPs on the National Level Repository. The 
intent of getting these lists before payment is due, or before a final 
determination of eligibility can be made, is to help qualifying MA 
organizations know of any potential conflicts in time to ``cure'' them 
before final payment determinations are made.
    Comment: One commenter objected to CMS' proposal that MA 
organizations be required to submit final lists of MA EPs and MA 
hospitals by the last day of the payment year, including the 
attestations of meaningful use and accurate payment calculation. The 
commenter argued that this timing would not allow sufficient time to 
ensure that data are complete and accurate, especially considering that 
MA organizations bear the additional burden of having to develop and 
support internal administrative systems to determine eligibility and to 
calculate payment (we will calculate FFS EP payments based on claims 
submitted). The commenter recommended that we extend the deadlines to 
produce both preliminary and final lists of MA EPs and hospitals. The 
commenter suggested that MA organizations be given until 90 to 120 days 
after the close of the payment year to identify and list eligible EPs 
and hospitals (for example, after 31 December 2011 for plan year 2011).
    Response: We agree with the commenter that additional time should 
be permitted and we are therefore adding a due date in Sec.  
495.202(b)(3) for final identification of potentially qualifying MA EPs 
and MA-affiliated eligible hospitals of 60 days after the close of the 
payment year. We believe 60 days is reasonable, since it is the same as 
the time in which FFS EPs have to submit claims for consideration under 
the Medicare FFS EHR incentive payment program.
    After consideration of the public comments received, we are 
modifying the regulation text related to the timing of both preliminary 
and final identification of MA EPs and MA-affiliated eligible 
hospitals. Preliminary

[[Page 44473]]

identification of MA EPs and MA-affiliated hospitals for payment year 
2011 will need to occur by the bidding deadline in June 2011, and final 
identification will need to occur within 60 days of the close of the 
payment year. Accordingly, we are respectively modifying the regulation 
text at Sec.  495.202(b)(1) and Sec.  495.202(b)(3). We are also 
modifying the regulation text at Sec.  495.204(b)(2) to be consistent 
with the change to Sec.  495.202(b)(3), since final identification in 
Sec.  495.202(b)(3) should occur at the same time as final revenue 
reporting under Sec.  495.204(b)(2), so calculations of payments due 
under the MA EP incentive payment program can be finalized. We are also 
modifying the regulation text at Sec.  495.210(b) and (c) to be 
consistent with the changes to Sec.  495.204(b)(2) and Sec.  
495.202(b)(3), since the deadline for attestations of meaningful use 
should be consistent with deadlines for revenue reporting for MA EPs, 
and final identification of MA EPs and MA-affiliated hospitals. 
Finally, as noted (above) in our discussion of the definition of 
qualifying MA organizations, we are modifying the date in Sec.  
495.202(a)(1) by which MAOs are required to identify themselves to us 
from the bidding deadline in June 2010 (for plan year 2011) to the 
bidding deadline in June 2011 (for plan year 2012).
    We also proposed to require all qualifying MA organizations to 
self-report 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 
proposed 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.
    We did not receive any comments on these provisions and are 
finalizing them as proposed.
3. Computation of Incentives to Qualifying MA Organizations for MA EPs 
and Hospitals
    In Sec.  495.204, we proposed 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 
final 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 final rule.)
    Sections 1848(o)(1)(D)(i) and 1886(n)(2)(F) of the Act permit us to 
make incentive payments for a year in installments, although we 
proposed to make a single lump sum payment with respect to MA EPs. With 
respect to MA EP incentive payments, we said 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 earned ``less than [the] maximum incentive 
payment for the same period'' under the Medicare FFS EHR incentive 
program. We noted in the proposed rule 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 rather only for services paid under Part 
B. In a similar manner we proposed 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 said we did 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 proposed, that in calculating qualifying MA EP incentive 
payments, we would only consider covered professional services provided 
to enrollees of MA plans offered by qualifying MA organizations and 
would not include in the calculation any services reimbursed by 
Medicare FFS.
    Comment: Many commenters asked if MA plan beneficiaries and 
services would be counted in the calculation of FFS EHR incentives and, 
if so, if it would require separate submissions to each MA plan in the 
local market.
    Response: As we explained in the preamble of the proposed rule, we 
cannot make MA EP incentive payments for Part B services covered and 
paid for on a fee-for-service basis under the original Medicare 
program. We also cannot make MA EP incentive payments to entities other 
than qualifying MAOs. In short, the Medicare Advantage services 
provided by EPs that are not qualifying MA EPs--defined in statute and 
in this rule at Sec.  495.200--are not reimbursable under the EHR 
incentive payment program.
    Comment: Two commenters contended that the proposed Medicare 
Advantage incentive computation was inconsistent. They said that 
sections II.C.3. through 5. of this final rule discuss compensation, 
but the preamble says that the Secretary may substitute a different 
amount. This discrepancy should be clarified.
    Response: We disagree. The statute says that we can substitute an 
amount ``that is similar to the estimated amount that would be payable 
or based on the fee schedule.'' It does not say that we can substitute 
a different amount.
    After consideration of the public comments received, we are 
implementing these provisions as proposed.
    We also said that under the Medicare FFS EHR incentive program, an 
EP's incentive payment could not exceed the annual limits specified 
under section 1848(o)(1)(B)(i) of the Act. We proposed that similar 
payment limits apply to qualifying MA organizations for their 
qualifying MA EPs. 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.

[[Page 44474]]

     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 proposed 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.
    We did not receive any comments on these provisions and are 
finalizing them as proposed.
    We proposed 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 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 did not receive any comments on these provisions and are 
finalizing them as proposed.
    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 payment data to estimate 
average annual MA revenue for qualifying MA EPs with respect to a 
qualifying MA organization. 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 said we believed such a result is contrary to the legal 
requirement that qualifying MA organizations are to receive 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 
be also 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 eligible-professional-
specific information along with MA patient encounters for nonhospital-
based office visits. Specifically, we examined requiring qualifying MA 
organizations reporting qualifying MA EP encounters with MA plan 
enrollees based on the five levels of office visit codes recognized by 
Medicare FFS.
    We said we believed that such a process would be administratively 
burdensome and difficult to operationalize. Therefore, we proposed an 
alternative approach, but sought input from interested parties as to 
which of the 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.
    Therefore, in Sec.  495.204(b)(1) through (3) we proposed 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 our proposed 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 said 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 were compensated on a salaried basis, we 
proposed in Sec.  495.204(b)(4) 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 proposed to require that salaries 
be prorated to ensure that the amount reported reflects the salary paid 
for the applicable year, where necessary.
    We also said that 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 proposed 
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

[[Page 44475]]

to include an amount for overhead related to such costs not directly 
experienced by salaried qualifying MA EPs. In Sec.  495.204(b)(4)(ii), 
we proposed 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. We said 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 proposed in Sec.  
495.204(b)(5) to require qualifying MA organizations to obtain 
attestations from such EPs and to submit to us 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 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.
    Comment: One commenter recommended that final CMS regulations 
retain the exact requirements outlined in Sec. Sec.  495.204(b)(4) and 
(5). Two commenters said that CMS should allow flexibility in methods 
MA organizations propose for computing incentive payments so long as 
the organization's approach is reasonable, straightforward, and fairly 
equates to the Medicare fee-for-service approach without imposing undue 
burdens on MA organization systems or compromising EP privacy. The 
proposed rule describes how incentive payment amounts will be 
calculated for eligible hospitals and EPs. The proposed rule presents 
options for a MA payment methodology, but expressly solicits comments 
from MA organizations about how such a methodology could be designed to 
fairly approximate the FFS payment calculation. The commenters included 
recommendations about how MA organizations could be reimbursed and what 
methodology would be a reasonable proxy for the Part B-based payment 
applied to FFS physicians, based on the amount of individual physician 
care provided to MA members. The commenters said that MA EPs who are 
employed by their organizations are independent physician group 
practices that contract exclusively with their organizations to meet 
the health needs of their members, including MA enrollees. Their 
organizations do not pay the salaries of MA EPs who provide patient 
care services to their members and patients. They said that CMS has 
proposed that the organization that directly pays the EP salaries would 
perform a calculation and attest to the MA organization about the 
amount of payment. They said that while this would mitigate some of the 
confidentiality concerns related to sharing salary information with the 
health plans, salary information would still be potentially exposed to 
CMS. They said that another disadvantage of using actual salary as a 
basis for calculating the incentive payment is that this approach 
potentially introduces unacceptable variability into the estimation of 
proxy amounts for Medicare services. For example, two MA EPs, whose 
salaries vary significantly but provide the same Medicare services in a 
reporting period, would have different proxy amounts. Further, they 
said, if such EPs were billing under Part B, the amount of Medicare 
services each billed would be the same, regardless of whether their 
incomes were the same. These commenters went on to propose an 
alternative method of computing a proxy Part B amount. They said that 
as a first step, the MA organization would calculate the percentage of 
clinic time each physician spends caring for MA members. This MA 
Practice percentage could be derived by either: (1) Capturing the total 
scheduled appointment time for MA members for each MA EP and dividing 
that amount by the total scheduled time for that MA EP (for all 
appointments); or (2) capturing the number of MA member visits/
procedures for each MA EP and dividing that amount by the total number 
of visits/procedures for that MA EP (for all members). The organization 
would then calculate the average practice cost by specialty for all 
specialties identified in the annual American Medical Group 
Association's (``AMGA'') salary survey. The commenters explained that 
AMGA survey provides the median compensation per physician in most 
specialties as well as the non-compensation related clinic costs per 
physician (staffing, supplies, overhead, etc.) in most specialties. 
Adding specialty specific compensation data (for groups > 100 
physicians) to the combined average non-compensation related clinic 
costs for that specialty (for all sized groups) would provide a 
surrogate amount for each specialty's total operating costs. This would 
produce the Average Operating Costs by Specialty. Multiplying each MA 
EP's MA Practice percentage and the Average Operating Costs by 
Specialty for that MA EP's practice specialty would produce a surrogate 
Medicare Part B amount. For each MA EP, the MA organization would be 
paid an incentive equal to 75 percent of the surrogate Medicare billing 
amount for that physician, such incentive not to exceed the maximum 
incentive for each payment year of the program (for example, $18,000 if 
the first year of participation is 2011).
    Response: While we appreciate the thought and effort that went into 
this proposed alternative method of calculating MA EP incentive 
payments, we are reluctant to adopt it for the simple reason that where 
salaries, practice costs, or actual MA EP compensation can be known, we 
believe it is a better read of statutory requirements to work from that 
actual compensation and cost data than it would be to allow estimation 
of both. In many respects the proposed alternative method is similar to 
the method discussed and disposed of in the proposed rule related to 
estimating physician compensation based on MA bidding and payment data. 
Although the commenters' alternative version factors in actual practice 
time, we believe using AMGA salary survey data would be inferior to 
using actual physician compensation practice cost information. To the 
extent actual salary information is unknown or unavailable to the MA 
organization, we believe it could be provided to us in a manner that 
would protect the privacy of individual MA EPs and physician groups. 
Furthermore, the proposal also estimates ``non-compensation related 
clinic costs'' based on AMGA data, which is, again, inappropriate, when 
actual overhead costs might be quite different in a specific MA 
organization. However, based on the commenters concerns regarding 
provider privacy and the need to develop a consistent and verifiable 
method of computing the amount payable to qualifying MA organizations 
for MA EPs we are modifying the regulation text at Sec.  495.204(b)(5) 
to say that qualifying MA organizations ``may'' obtain attestations 
from qualifying MA EPs and ``may'' submit such information to us--
rather than ``must.'' And, we add a new subparagraph (6) that allows 
the physician group or other payer to

[[Page 44476]]

provide EP reimbursement information directly to us. We also provide 
assurances that we will use the EP reimbursement data for no other 
purpose than to compute the MA EP incentive payment due the qualifying 
MA organization.
    Comment: One commenter said that in the proposed rule the 
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 would require review and approval by CMS; and that 
such methodology ``could be based on the relative share of patient care 
hours spent with MA enrollees of the organization or another reasonable 
method.'' However, the commenter opined, the proposed rule offers no 
details about how the review and approval process would be conducted, 
including dates and timelines for the process. Thus, the commenter 
recommended that CMS permit flexibility in allowing MA organizations to 
develop methodologies that will be reasonable in light of organization 
structure and systems, it is important to provide some guidance about 
how CMS will review and approve such proposals. CMS should permit, the 
commenter said, any reasonable payment methodology method that is fair, 
relatively easy to administer, subject to audit and that provides a 
reliable approximation of Medicare Part B billing. In addition, the 
commenter concluded, CMS should provide a simple process for submission 
and approval of MA payment methodologies.
    Response: In the proposed rule at Sec.  495.204(b)(4) we offered 
flexibility related to the ``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,'' 
said that the methodology had to be ``approved by CMS,'' and that the 
amount could include an ``additional amount related to overhead.'' 
Based on this comment we are adding a new clause (iii) that says that 
such methodological proposals must be submitted to CMS by June of the 
payment year, must be auditable by an independent third-party, and that 
CMS will review and approve or disapprove such proposals in a timely 
manner.
    Comment: One commenter wanted to know what percentage of the 
incentive payments will go to eligible professionals under Medicare 
Advantage.
    Response: No known percentage of incentive payment will go to 
eligible professionals under Medicare Advantage, since MA EP payments 
are made solely to qualifying MA organizations.
    In the proposed rule we said that 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 Sec.  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 final rule discusses our methodology for 
calculating the incentive payment for qualifying eligible hospitals 
under the Medicare FFS EHR program. As set forth in Sec.  
495.204(c)(2), we proposed 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 proposed to require submission of such data to us 
and adopt the same definition of ``inpatient-bed-days'' and other terms 
under the Medicare FFS EHR hospital incentive program specified in 
Sec.  495.104 of this final rule. In such a case we proposed in Sec.  
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 
proposed to use inpatient-bed-day data, discharges, and other 
components of the FFS calculation for each qualifying MA-affiliated 
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 proposed requiring 
qualifying MA organizations seeking reimbursement for their qualifying 
MA-affiliated eligible hospitals to submit similar data.
    We said we can only pay for qualifying MA-affiliated 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 inpatient-bed-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

[[Page 44477]]

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 proposed 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.
    We did not receive any comments on these provisions and are 
finalizing them as proposed.
    To the extent payments are made to qualifying MA organizations for 
qualifying MA EPs or qualifying MA-affiliated eligible hospitals, we 
proposed 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 proposed 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.
    We did not receive any comments on these provisions and are 
finalizing them as proposed.
    Finally, as we indicated above in section II.C.2. of this final 
rule, we are modifying the regulation text at Sec.  495.204(b)(2) to be 
consistent with the change to Sec.  495.202(b)(3), since final 
identification in Sec.  495.202(b)(3) should occur at the same time as 
final revenue reporting under Sec.  495.204(b)(2), in order to ensure 
that calculations of payments due under the MA EP incentive payment 
program can be finalized.
4. Timeframe for Payment
    For payments to qualifying MA EPs, in Sec.  495.206 we proposed the 
timeframe 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 proposed 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 final rule.
    We proposed to define ``payment year'' with respect to qualifying 
MA EPs in Sec.  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 
proposed 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.
    We said that 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 proposed to define ``payment year'' with respect to qualifying 
MA-affiliated eligible hospitals in Sec.  495.200. For incentive 
payments for qualifying MA-affiliated 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 proposed to use 
the hospital inpatient bed-days data from the hospital FY that ends 
during the FFY prior to the FY that serves as the payment year. For 
qualifying MA-affiliated eligible hospitals, we proposed 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 MA-affiliated 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) additional 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 final 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 proposed to make 
payments to MA organizations for MA-affiliated 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.
    Comment: Two commenters said that payments to MA organizations will 
be

[[Page 44478]]

delayed every year by an unspecified amount of time. The commenters 
said that it was understood that CMS is charged by statute to avoid 
making duplicate payments, however MA organizations should be paid 
without unspecified delay. A suggested alternative by the commenters 
was to permit MA organizations to attest that their MA EPs will not 
seek any payment under the Medicare FFS Incentive Program. 
Alternatively, the commenters suggested, CMS could use an installment 
payment system (permitted under statute as stated) for MA 
organizations. The commenters said that this would permit partial 
payment until the resolution of the duplicate payment issue and would 
avoid long delays in paying MA incentives.
    Response: We do not agree that MA organization EHR incentive 
payments are subject to ``unspecified delay.'' Rather, since MA 
organizations will be paid for MA EPs only if such EPs were not paid 
the maximum incentive payment under the FFS EHR incentive payment 
program, and since final claims data will not be available until two 
months after the close of the payment year--see Sec.  495.102(a)(2)--
CMS will not be able to compute MA EP payments until the FFS EHR 
incentive payment program has completed its calculations. This will 
occur in the early spring of the year after the close of a payment 
year. Moreover, MA-affiliated eligible hospitals will receive EHR 
incentive payments on the same schedule as other ``subpart (d)'' 
hospitals. Finally, note that MA EPs are free to leave qualifying MA 
organizations at any time, and since EPs are also free to register for 
eligibility under FFS Medicare or Medicaid EHR incentive payments, an 
attestation by a qualifying MA organization would have little merit. 
For these reasons we cannot accept the suggestion that qualifying MA 
organizations receive interim or partial mid-year payments for MA EPs.
    After consideration of the public comment received, we are 
implementing these provisions as proposed.
5. Avoiding Duplicate Payment
    We proposed duplicate payment avoidance provisions in Sec.  
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 
clause (i) of this paragraph 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 said 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. This will occur in the early 
part of CY 2012. In the MA EHR incentive payment program we proposed to 
follow the FFS EHR incentive payment program schedule--first computing 
Medicare FFS incentive payments for EPs and then computing and paying 
MA EP incentive payments, where appropriate--in all subsequent payment 
years.
    We went on to explain that 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.
    We also said that 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 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 proposed 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 MA-affiliated hospital 
incentive payments. We said 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 MA-affiliated 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.
    Finally, we said that 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 did not receive any comments on these provisions and are 
finalizing them as proposed.
6. Meaningful User Attestation
    We proposed meaningful user attestation requirements in Sec.  
495.210. For each MA EP and MA-affiliated hospital for which a 
qualified MA organization seeks an incentive

[[Page 44479]]

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 proposed to adopt the definitions of meaningful 
user under the Medicare FFS program related to EPs and eligible 
hospitals in Sec.  495.4. We are requiring 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 MA-affiliated 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 MA-affiliated eligible 
hospitals before claiming incentive payments for them.
    In the proposed rule we said that unlike the Medicare FFS EHR 
incentive program, where we will require the reporting of clinical 
quality measures--see Sec.  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 Sec.  422.152 and Sec.  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 
EHR incentive program, we proposed 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 final 
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 MA-affiliated providers and FFS providers 
under the HITECH Medicare incentive program.
    Comment: The meaningful use criteria make reference to checking 
eligibility electronically and submitting claims electronically for 80 
percent of patients seen. This would not be possible for us because, 
for most of our visits, there is no insurance company with which to 
check, and there is no eligibility to submit claims to. We are a 
capitated system and for most of the patient visits, the concept of 
checking eligibility and submitting claims in not relevant.
    Response: This comment points out the difficulty in adopting FFS 
Medicare meaningful use measures for qualifying MA organizations, MA-
affiliated hospitals and MA EPs. For purposes of determining meaningful 
use in a Medicare Advantage environment, we agree that submitting 
claims electronically is not a useful standard in a capitated 
environment where virtually all patients are members of the same 
insurance plan.
    Comment: One commenter said that given the sensitivity of the data, 
and the RHQDAPU program specifications, the commenter believes CMS 
should never request that hospitals submit patient-level data to CMS, 
but that the data submitted should always be at the aggregated, summary 
level. The commenter encouraged us to state specifically that this is 
its intention in FY 2012 and all future years of EHR incentive program 
reporting. Some other commenters said that their health care delivery 
systems were based on an integrated care delivery model, where 
coordination of care is supported through program-wide EHR 
implementation that enables a patient's medical record to be shared 
among the members of the patient's care team. The commenters said they 
believed patient-centric electronic medical record models that 
integrate clinical information across providers align with goals of 
ONC's Strategic Plan and reform efforts that seek to enable more 
patient-centric integration of care. The commenters said that during 
any given reporting period under the EHR incentive payment program, 
patients may receive health care services from various providers (for 
example, the primary care physician, one or more specialists, nurse 
practitioners, etc.). The commenters said they had adopted program-wide 
policies and procedures for using their EHR system to promote 
coordinated delivery of care. Thus, the commenters said they intended 
to use their EHR system to support the functionality and care delivery 
criteria of meaningful use for all providers across their 
organizations. Within their organizations, they said, a single provider 
is never solely responsible for all the information in a given 
patient's electronic medical record. In fact, they said, many providers 
may access the patient's electronic record to view or add information, 
order tests or medications, review results, etc. They said the shared 
record makes it extremely difficult to reliably track all the 
meaningful use criteria to each EP in their organizations without 
adding additional administrative functionality to their systems that 
would do nothing to improve patient care. It would be inappropriate and 
not the intent of the EHR incentive payment program, they said they 
believed, to add unnecessary redundancy in care delivery (that is, 
providers re-entering correct demographic information to get ``credit'' 
for that measure). They said they intended to participate in the EHR 
incentive payment program under provisions for Medicare Advantage 
organizations. They went on to say that since the proposed rule states, 
``the qualifying MA organization must attest to the fact that each MA 
EP is a meaningful user of certified EHR technology * * *, '' they 
believed such attestation can be based on measuring criteria at a MA 
organizational level. While they acknowledged that meeting basic 
eligibility criteria is appropriate on an individual provider level 
(that is,

[[Page 44480]]

the MA EP must meet the same definition for EP under FFS, satisfy 
minimum hours per week delivering patient care services, not be 
hospital-based, etc.), they said they should be able to meet meaningful 
use criteria as a MA organization on behalf of all of their individual 
EPs, so long as they are able to demonstrate that their EHR system 
itself meets the criteria and its use is pervasive and consistent 
throughout their healthcare delivery sites. They recommended that where 
a patient's electronic medical record is shared among a team of 
providers within a MA organization, the meaningful use criteria be 
measured on an organizational versus an individual provider level. As 
an alternative they proposed that for any provider who treats a given 
patient, if the criterion is met in that patient's electronic record, 
all EPs who are members of the patient's care delivery team would 
receive ``credit'' for meeting that measure.
    Response: We agree with the commenters in large part. We believe 
that continued reporting by qualifying MA organizations under the HEDIS 
program is the most appropriate way to protect personally identifiable 
patient information. We also believe that in integrated care delivery 
systems, it does not make sense to require specific individuals to 
enter specific data in order to obtain meaningful user status--
especially in a Medicare Advantage environment where we will require 
only continued HEDIS reporting as a demonstration of meaningful use. 
Finally, we believe that reporting of clinical quality measures at the 
MA organization level is the most effective and appropriate means of 
attaining the ultimate goal of EHR adoption--improved patient outcomes 
and reduced healthcare costs.
    Comment: Some commenters said that the proposed rule states that, 
``unlike the Medicare FFS EHR Incentive Program, where we will require 
the reporting of clinical quality measures * * * we will not require 
qualifying MA organizations to submit clinical quality measures * * * 
with respect to EPs * * * and with respect to eligible hospitals * * *. 
[W]e note that qualifying MA organizations sponsoring coordinated care 
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.'' The proposed rule suggests allowing MA organizations to 
continue reporting these measures, but also considers requiring that MA 
organizations report those HITECH clinical quality measures that do not 
overlap with these currently reported measures ``and are appropriate 
for the MA program.'' We believe this current reporting is both 
appropriate and sufficient to measure the clinical quality of MA 
programs and should be deemed to satisfy the clinical quality reporting 
requirements under the EHR incentive payment program. HEDIS, HOS and 
CAHPS reporting are well-established and subject to audit. The measures 
are specifically chosen to capture quality within MA organizations, in 
particular to measure the clinical quality of the team approach we use 
to deliver care. While we support consistency across the EHR incentive 
payment program, we are concerned that requiring MA organizations to 
create new mechanisms for this additional reporting would be unduly 
burdensome, especially if these additional measures would have to be 
reported at the individual provider or patient level. Another commenter 
said that their considerable experience with developing responses for 
new measures demonstrated how resource and labor intensive clinical 
quality measurement can be. For example, the commenter continued, 
during a recent effort to automate ten TJC (The Joint Commission) 
measures, we identified 87 data elements, only 37 of which are captured 
as discrete data. Of the remaining 50 measures, some are captured using 
discrete data in different places in the EHR, and some are captured 
using free text (for example, clinical trials and other irregular 
exclusion criteria) and will require the creation of new documentation 
tools. We estimate it will take one to two years of work for these ten 
measures to be fully automated, despite our relatively sophisticated 
use of data warehousing tools and our high level of automation in the 
data management process. The burden is especially heavy when 
measurement elements are ill-defined. Under meaningful use clinical 
quality reporting, over 120 measures have been proposed. Of these, 94 
would be measures not currently calculated or reported on a routine 
basis. We anticipate a considerable increase in workload to create and 
maintain these measures. Adding new and duplicate--possibly less 
reliable--measures and reporting systems will be costly, time-consuming 
and may not have an incrementally significant impact on improving 
patient care. While we are not opposed to new metrics (those without 
similar known specifications), such measures should be field tested 
prior to becoming requirements; in particular, subject to rigorous 
testing of the electronic specifications. Such measures should also be 
supported by robust clinical evidence to show they will impact clinical 
outcomes. MA organizations should be deemed to have satisfied all 
clinical quality reporting required in the EHR incentive payment 
program by meeting their current reporting requirements. If additional 
measures are required, we recommend staged adoption, beginning with 
those measures that MA organizations already report or can report in 
the near future. We recommend eliminating measures that have little or 
no evidence to link them to improved outcomes. Overall, we strongly 
recommend that CMS significantly reduce the overall number of clinical 
quality measures that would be required for meaningful use.
    Response: We agree with the commenters and believe that HEDIS, HOS 
and CAHPS are the appropriate means of reporting measures for both MA 
EPs and MA-affiliated hospitals. Where appropriate we will consider 
adding elements to these already existing quality reporting programs. 
We will consider adding HEDIS elements over time, as experience and 
clinical data warrant.
    Comment: One commenter said one of the five priorities specified by 
CMS is to improve care coordination. However, the siloed nature of the 
incentive payments, lack of a robust set of care coordination measures, 
and the narrow definition of eligible professionals do not fully 
support this priority. The commenter also said that the current 
structure of the proposed incentive program, as required by statute, 
maintains the current siloed structure of Medicare and Medicaid 
payments. The selected functionality and quality measures in large part 
do the same. However, this siloed structure does not support or 
encourage integrated coordinated care across providers and settings. As 
greater attention is paid to improving care coordination and the 
quality of care through integrated care models (for example, 
accountable care organizations, patient-centered medical homes), 
greater attention should be given to selecting measures that focus on 
patient-centered episodes of care. Furthermore, consideration should be 
given to refining the incentive payment structure to foster integration 
and accountability among and across providers and settings.
    Response: We believe that HEDIS reporting and other existing 
quality reporting programs (that is, HOS and CAHPS) go a long way 
toward assuring that coordination and integration of care will continue 
to occur in the Medicare Advantage environment. One of the

[[Page 44481]]

purposes of EHR adoption is to facilitate the coordination of care in 
health care environments where care coordination is not currently 
perceived to occur. We are asking providers to pick a program through 
which they are most likely to be eligible for EHR incentive payments. 
For MA organizations that treat Medicare, Medicaid and dually-eligible 
patients, EHR incentive payments will be made only under one program 
(Medicare or Medicaid) with respect to any specific EP. However care 
coordination should occur regardless of health insurance or EHR 
incentive payer. After consideration of the public comments received we 
are not changing our proposed policy to allow qualifying MA 
organizations to establish meaningful use through attestation and to 
demonstrate meaningful use through continued HEDIS reporting.
    Finally, we proposed 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 proposed 
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. In this final rule we 
are modifying the regulation text at Sec.  495.210(b) and (c) to be 
consistent with the changes to Sec.  495.204(b)(2) and Sec.  
495.202(b)(3), since the deadline for attestations of meaningful use 
should be consistent with deadlines for revenue reporting for MA EPs, 
and final identification of MA EPs and MA-affiliated hospitals. We are 
extending the timeframe for reporting meaningful use to 60 days after 
the close of the payment year.
7. Posting Information on the CMS Web Site
    In the proposed rule we said that 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. We said posted 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 Sec.  495.108.
    We did not receive any comments on these provisions and are 
finalizing them as proposed.
8. Limitation on Review
    In the proposed rule we said that 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. We said 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 proposed to codify these requirements in Sec.  
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 proposed to codify these requirements in Sec.  
495.212(c).
    We did not receive any comments on these provisions and are 
finalizing them as proposed.
9. Conforming Changes
    In the proposed rule we said that 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 proposed the following 
conforming changes to the regulations text:
     Revising Sec.  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 subpart C of part 495 of this chapter.)
     Revising Sec.  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 Sec.  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 Sec.  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 Sec.  422.322(b) by adding a reference to Sec.  
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.
    We did not receive any comments on these provisions and are 
finalizing them as proposed.
10. Payment Adjustment and Future Rulemaking
    In the proposed rule we said that 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 solicited 
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

[[Page 44482]]

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.
    Comment: Two commenters said that the EHR Incentive Program (the 
Medicare component) is limited to providers who bill for Part B covered 
services under traditional FFS Medicare or for MA organizations that 
provide equivalent services to MA beneficiaries. In addition to 
incentive payments, the program will impose penalties on providers who 
do not adopt technology and meet criteria for meaningful use of 
electronic health records; those penalties will be in the form of 
percentage reductions in Medicare reimbursements, beginning in 2016. 
Medicare section 1876 (of the Act) cost contract programs by statute 
are not eligible for the EHR Incentive Program. The proposed rule does 
not expressly state whether physicians paid under a cost plan will be 
required to meet meaningful use criteria to avoid the payment 
adjustments that will take effect after 2015. CMS should clearly state 
that those providers who are not eligible to participate in the EHR 
Incentive Program will not be subject to reductions in payment for not 
achieving meaningful use, for instance any providers reimbursed under 
Medicare cost contract arrangements.
    Response: While it is true that current statute applies payment 
adjustments beginning in 2015 only to FFS and MA providers, it is also 
true that cost plan providers might provide either FFS or MA services 
to which adjustments would apply. So, while it is true that cost plan 
payments are unaffected, a blanket statement that cost plan providers 
are unaffected is not possible.
    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 MA-affiliated 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 33\1/3\ percent reduction in 2015, by a 
66\2/3\ 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 received no additional comments.

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 reasonable administrative expenses 
related to administration of those incentive payments as long as the 
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.
    Finally, as required by section 1903(t)(10) of the Act, CMS 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.
    Comment: A commenter requested additional discussion in the final 
rule of the many challenges that exist to adopting electronic health 
record technology experienced by the Medicaid Transformation Grantees.
    Response: The primary challenges faced by the Medicaid 
Transformation Grantees involved assisting providers to adopt the EHRs 
and to successfully integrate utilization of the EHRs into their 
practice workflow. Workflow redesign is unique to each practice based 
upon practice size, clinical specialty area, practice operation (for 
example, medical home teams or specialty care) and the providers' 
hardware and software. In addition, Grantees reported that providers 
value the EHRs only in so far as the patient data in the EHR is timely 
and complete. Therefore lagging data feeds or gaps in data from certain 
sources, such as labs or Part D claims for dual eligibles, were 
observed to discourage providers from investing their time and effort 
into learning how to use the EHRs. Many Grantees noted that early 
negative experiences with workflow or with timely and accurate access 
to relevant data discouraged providers from using the system. They 
reported needing to dedicate significant time and resources to provider 
outreach, technical assistance and training. Some Grantees focused on 
identifying or developing the right EHR product only to conclude 
afterwards that their focus needed to be equally, if not more, on 
supporting their providers' use of the EHR, including fostering health 
information exchange through interface development. In summary, the 
Medicaid Transformation Grantees affirmed that the barriers faced by 
Medicaid providers to EHR adoption and use were not unique to Medicaid. 
There were several challenges to HIT/EHR implementation that were 
specific to Medicaid programs that may be useful for States in light of 
HITECH. These include, integration of HIT into the State Medicaid 
Management Information System (MMIS); churning

[[Page 44483]]

of Medicaid patients on/off Medicaid eligibility; issues of consent 
with patients with diminished capacity, children and their parents and 
caregivers, and foster children/wards of the State; costs associated 
with transaction fees for pharmacy hubs on a statewide scale; and how 
to calculate return on investment and quality outcomes as a result of 
HIT programs that are running concurrent with other quality initiatives 
with the same goals, such as the medical home model, disease 
management/care coordination and provider pay-for-performance.
    While this information is valuable in terms of understanding and 
addressing the challenges to EHR adoption, we continue to believe that 
the benefits of meaningful use of EHRs far outweigh the implementation 
challenges.
2. General Medicaid Provisions
    In Sec.  495.320 and Sec.  495.322 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.
    We did not receive any comments and we are finalizing these 
provisions as proposed.
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 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 
federally-qualified health center (FQHC) or a rural health clinic 
(RHC). Regulations relating to these requirements may be found at Sec.  
495.304 through Sec.  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 ``hospital-based.'' We will 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. for a 
definition of ``hospital-based,'' and for a thorough discussion of our 
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)(A)(iii) of the Act does not 
define ``practices predominantly,'' we specify that an EP 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 define these 
terms in Sec.  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 Sec.  495.306. Children's 
hospitals do not have patient volume requirements for Medicaid 
incentive program participation.
    Comment: Commenters expressed confusion about the restrictions on 
physician assistants' (PAs) participation. Numerous commenters 
suggested that PAs should be eligible without conditions, particularly 
the condition that they are practicing in an FQHC or RHC that is ``so 
led by a physician assistant'' and/or CMS should exercise flexibility 
in defining ``so led,'' in order to capture the highest number of PAs. 
We received specific comments on how to define ``so led'' to provide 
the greatest flexibility to PAs. Suggestions included allowing clinics 
under a larger FQHC to be led by a PA, but not necessarily the entire 
FQHC. Also, commenters asked that we consider ``led'' to mean the 
dominant clinical provider, which is the case for PAs in many RHCs.
    Response: As stated in the statute at 1903(t)(3)(B)(v), regarding 
the program eligibility for PAs, PAs are eligible when they are a 
``physician assistant insofar as the assistant is practicing in a rural 
health clinic that is led by a physician assistant or is practicing in 
a Federally qualified health center that is so led.'' These conditions 
on PAs' eligibility apply whether the PA is qualifying because they 
meet Medicaid patient volume requirements or if they are qualifying 
because they practice predominantly in an FQHC or RHC. Since this 
language requiring that a PA must be leading the FQHC or RHC is derived 
from statute, we have no flexibility to change or remove it.
    However, we agree that we have the authority to interpret what it 
means for a PA to lead an FQHC or RHC, and we believe a PA would be 
leading an FQHC or RHC under any of the following circumstances:
    (1) When a PA is the primary provider in a clinic (for example, 
when there is a part-time physician and full-time PA, we would consider 
the PA as the primary provider);
    (2) When a PA is a clinical or medical director at a clinical site 
of practice; or
    (3) When a PA is an owner of an RHC.
    We agree that FQHCs and RHCs that have PAs in these leadership 
roles can be considered ``PA-led.'' Furthermore, since RHCs can be 
practitioner owned (FQHCs cannot), we will allow ownership to be 
considered ``PA-led.''
    With the exception of this clarification of PA-led, we are adopting 
this language as proposed. We have not changed our regulatory language, 
as we consider this clarification to be an interpretation of our 
regulations as to what it means to be a PA to be leading an FQHC or 
RHC.
    Comment: We received questions about eligibility related to FQHC 
look-alikes, tribal clinics, and other similar facilities.
    Response: As previously mentioned, in accordance with section 
1903(t)(2)(B), the only two facilities eligible for incentives are 
acute care and children's hospitals. However, EPs at facilities such as 
FQHCs, RHCs, and tribal clinics may be eligible for participation when 
they practice predominantly at an FQHC or RHC or meet the other patient 
volume requirements. The statute defines FQHCs at 1905(l)(2)(B) and 
defines RHCs at 1905(l)(1) by essentially incorporating the definition 
in 1861(aa).
    Comment: Numerous commenters opposed the proposed definition for 
``hospital-based.''
    Response: This is a consideration for Medicare and Medicaid and is 
addressed in II.A.

[[Page 44484]]

    After consideration of the public comments received, we are making 
changes under II.A.
(1) Acute Care Hospitals
    For purposes of Medicaid incentive payments, we proposed to define 
an ``acute care hospital'' as a health care facility where the average 
length of patient stay is 25 days or fewer and with a CCN that has the 
last four digits in the series 0001 through 0879 (that is, short-term 
general hospitals and the 11 cancer hospitals in the United States).
    We excluded from this proposed definition a category of long-term 
care hospitals, which are defined for Medicare purposes in regulations 
at Sec.  412.23(e). Specifically Sec.  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).
    Comment: We received numerous comments recommending that CAHs be 
included in the definition of acute care hospitals for purposes of the 
Medicaid EHR incentive payment program. Commenters pointed out that the 
CAHs would qualify on all criteria except for the requirement to have a 
CCN in the range 0001-0879. CAHs have CCNs in the range 1300-1399. 
Moreover, many commenters pointed out that, because of their rural 
location and distance from other hospitals to which they frequently 
transfer patients, the CAHs would benefit from having electronic 
records that could be shared with the subsequent provider of care to 
the patient. Commenters also asked what reimbursement methodology CMS 
would use if it decided to include CAHs in the Medicaid incentive 
payment program.
    Response: We agree with the commenters that CAHs conform to our 
definitional criteria for acute care hospital except for the CCN range. 
Moreover, we recognize the positive impact on quality that may ensue 
from the CAH's being able to electronically communicate with the 
hospitals to which it transfers patients. Therefore, in the final rule, 
we are amending the definition of acute care hospital for purposes of 
the Medicaid EHR incentive payment program as ``those hospitals with an 
average patient length of stay of 25 days or fewer, and with a CCN that 
falls in the range 0001-0879 or 1300-1399.'' This definition will now 
encompass general short-term hospitals, cancer hospitals, and critical 
access hospitals that meet the Medicaid patient volume criteria. Since 
we are including CAHs under the category of ``acute care hospital,'' we 
are not developing a separate Medicaid incentive payment calculation 
for CAHs. States will pay the incentive payment to qualifying CAHs 
using the acute care methodology described at section 495.310(g). In 
summary, CAHs will be eligible for the Medicaid hospital incentive 
insofar as they meet the requirements under an acute care hospital 
described here. While the statute issued specific calculation 
requirements for CAHs under Medicare, there is no special Medicaid 
calculation. Like other acute care hospitals, some CAHs may be eligible 
for Medicare and Medicaid incentives.
    We will reflect this definitional change in the final regulation at 
section 495.302.
    Comment: Further guidance was requested on the determination of 
average length of stay. Commenters questioned whether the average 
length of stay should be calculated relative to the fiscal year prior 
to the payment year or relative to the calendar year prior to the 
payment year. Commenters also questioned whether outliers in terms of 
extremely long length of stay could be left out of the calculation, and 
if so, could CMS provide detail on this and any similar exclusions; for 
example, other exclusions with respect to observation stays.
    Response: After consideration of these comments, we believe the 
best policy is to allow the States to decide whether they will use a 
fiscal year or calendar year for calculating length of stay, as the 
State will be in the best position to determine what documentation 
exists in order to support any length of stay calculation. With respect 
to outliers, we point readers to the State Operations Manual, page 303, 
Revision 57, dated January 29, 2010 and we note that these long (and 
short) stay outliers are included in average length of stay 
calculations for other purposes, such as reporting statistics to 
States, Medicare, and other payers. We do not find a basis for 
excluding outliers from the average length of stay for purposes of the 
incentive payment. In fact, since acute care hospitals have CCNs in 
either the 0001-0879 or the 1300-1399 range, and length of stay is one 
of the definitional criteria for CCNs in these ranges, all of the acute 
care hospitals are very likely to meet length of stay criteria. 
Observation stays are considered to be outpatient services and, 
therefore, cannot be included in average length of stay calculations. 
This is consistent with the treatment of observation days under 
Medicare.
    In summary we are making no revisions to the regulation as a result 
of this comment.
(2) Children's Hospitals
    For purposes of the Medicaid EHR incentive program, in the proposed 
rule, we proposed 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 defining 
``children's hospital'' in this way, we: (1) Prevented general acute 
care hospitals, which could not themselves qualify for the incentive 
because they did 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) excluded 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-within-hospital children's hospitals; and (3) excluded some 
pediatric specialty hospitals which have CCNs as psychiatric or 
rehabilitation hospitals.
    An alternative definition of a ``children's hospital'' was also 
proposed to 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, applied only to those freestanding hospitals within the above 
mentioned series that exclusively furnish services to individuals under 
age 21.
    This broader definition still: (1) Prevented 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) allowed for participation in the incentive 
program by the greatest number of children's hospitals, including 
rehabilitative and psychiatric specialty hospitals; and (3) aligned 
with Federal efforts aimed at improving healthcare quality for all 
children, including those with physical and mental diseases/
disabilities.
    Comment: CMS received several comments on this issue. Specifically, 
the commenters stated that the proposed rule limited the definition of 
children's

[[Page 44485]]

hospitals to those that provide care to individuals under the age of 
21; the commenters stated that children's hospitals actually may 
provide care to older individuals who have conditions such as 
congenital cardiac problems, sickle cell disease and cystic fibrosis.
    Response: We agree with the commenters that children's hospitals do 
on occasion treat patients who are over the age of 21, especially if 
the patient is on a continued course of treatment for a condition that 
began in childhood, such as those conditions mentioned. Accordingly, in 
the proposed rule published on January 13, 2010 at section 495.302, we 
defined a children's hospital for purposes of the HIT incentive payment 
program as a hospital that is separately certified as a children's 
hospital, with a CCN in the 3300-3399 series and predominantly treats 
individuals under the age of 21. We used the term ``predominantly'' to 
recognize that not all patients of the children's hospital are in fact 
under age 21.
    This definition addresses the commenters' concerns and we are not 
revising it in the final rule. The commenter's may have been responding 
to the alternate definition in which we requested comments. While that 
alternate definition mentioned specialty hospitals that exclusively 
treat individuals under the age of 21, we are not adopting that 
definition in this final rule, as noted in the response to the comment 
below.
    Comment: CMS also received a few comments that supported our 
proposed definition of children's hospital as those that are separately 
certified and predominantly treating individuals under 21 years of age. 
The commenters urged us to adopt this definition rather than the 
alternate definition discussed in the proposed rule and on which we 
requested comments.
    Response: We agree with the commenters and are adopting the 
definition that we originally proposed at section 495.302. See the 
response to the comment below.
    Comment: CMS received one comment that recommended use of the 
alternative definition as providing more opportunity for hospital 
participation.
    Response: We considered the merits of both definitions and we have 
decided to maintain the definition originally proposed in section 
495.302 as representing the clearest definition of a children's 
hospital. As previously stated, we only intend to include children's 
hospitals with CCNs within a specific range; this will not include 
pediatric wings of larger hospitals.
    In summary, after considering the comments, we are adopting the 
definition of children's hospital as originally proposed.
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; our proposed methodologies which follow, are based on this 
discretion. To establish such patient volume, we proposed that the EP 
have a minimum of 30 percent of all patient encounters attributable to 
Medicaid over any continuous, representative 90-day period within the 
most recent calendar year prior to reporting. There are two statutory 
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 medical 
assistance 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 proposed to use was that the 
pediatrician have a minimum 20 percent of all patient encounters 
attributable to Medicaid over any continuous, representative 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 would 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.
    Comment: Many commenters requested that CMS consider groups outside 
of the statute eligible for incentive payments. These facilities and 
practitioners included: Community mental health centers and other 
behavioral health providers (including psychiatric clinics); nursing 
homes, nursing facilities, and skilled nursing facilities; long-term 
care providers (community and institutional), including home health 
care providers; pharmacists and pharmacies; social workers; blood 
centers; provider based departments; professional societies; Medicaid-
participating health plans; speech-language pathologists and 
audiologists; FQHCs, RHCs, tribal providers, and other community 
clinics; health aides; and podiatrists. The commenters included 
numerous testimonials, research, and statements to note that these 
providers are critical partners in improving the quality and 
coordination of care for the Medicaid population. Some of the 
commenters acknowledged that this is a statutory issue but assert that 
exclusion of such providers impacts Medicaid's ability to improve the 
quality and efficiency of care. Furthermore, some of these commenters 
based several additional comments upon presumed eligibility. For 
example, some commenters said that social workers could not afford EHRs 
and should not be required to participate.
    Another group of comments came from health care professionals that 
sought eligibility for incentives by virtue of early adoption of EHRs 
but who do not participate in either Medicaid or Medicare. They 
suggested a third incentive option available for providers that either 
do not participate with Medicaid/Medicare or would not reach the 
threshold of patient visits to receive Medicaid incentive payments.
    Response: We note that the commenters are correct to recognize that 
this is a statutory issue. The definition of a ``Medicaid EP,'' at 
1903(t)(3)(B) of the Act, lists five types of professionals that are 
eligible for Medicaid incentive payments: physicians, dentists, 
certified nurse-midwives, nurse practitioners, and physician assistants 
practicing in an FQHC that is led by a physician assistant or RHC that 
is so led. Additionally, the statute at 1903(t)(2)(B) designates acute 
care hospitals and children's hospitals as the only two types of 
facilities eligible for the Medicaid incentives. These providers must 
also meet all other program requirements, including Medicaid patient 
volume thresholds.
    Since the commenters recommend including providers that are not 
among those explicitly mentioned in the statute, these providers cannot 
be eligible for the incentive payments.
    Additionally, professionals who do not participate in either 
Medicaid or

[[Page 44486]]

Medicare are also not eligible for incentives due to the statutory 
requirements associated with each program. Specifically, the Medicaid 
incentives program requires providers to meet Medicaid patient volume 
thresholds or practice predominantly in an FQHC or RHC, where they must 
serve needy individuals (as defined at section 495.10). Additionally, 
the hospital calculations for Medicare and Medicaid are based, in part, 
on Medicare or Medicaid inpatient bed-days. For Medicare EPs, the 
incentive is based on the associated Medicare claims. Hence, these 
professionals cannot meet the statutory requirements for eligibility.
    After consideration of these comments, we are maintaining the list 
of providers eligible for the Medicaid incentive payment program as 
originally proposed and as identified by statute.
    It is worth noting that while the facilities recommended for 
inclusion by the commenters will not be considered eligible to 
participate in these incentives, some of the EPs at these facilities 
may be eligible. One example is that a psychiatrist (physician) or NP 
is likely to treat individuals at a behavioral health facility. Per our 
rules at section 495.10, the EP must identify a TIN to which the 
incentive payment should be made. We believe that, in accordance with 
1903(t)(6)(A) of the Act, an EP could reassign payment to a TIN 
associated with his or her employer or the facility in which she or he 
works. This facility could be one of those recommended for inclusion by 
the commenters. Any reassignment of payment must be voluntary and we 
believe the decision as to whether an EP does reassign incentive 
payments to a specific TIN is an issue which EPs and these other 
parties should resolve. Any reassignment of payment must be consistent 
with applicable laws, rules, and regulations, including, without 
limitation, those related to fraud, waste and abuse.
    We have provided clarifying language at section 495.10(f) to 
further clarify the reassignment of incentive payments by EPs to 
specific TINs.
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 define ``patient volume'' in Sec.  495.302 to be a minimum 
participation threshold for each individual Medicaid provider (with the 
exception of children's hospitals). In the proposed rule, we proposed 
methodologies for estimating the patient volume thresholds and listed 
them by entity type.
    Further, we proposed that States could submit alternative 
approaches to the established timeframe for estimating patient volume, 
through their State Medicaid HIT Plans (SMHP) and we would make a 
determination of whether it was an acceptable alternative.
    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 require the 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 Sec.  413.89(b)(1). In order to remain as consistent as 
possible between the Medicare and Medicaid EHR incentive programs, 
States will be required to downward adjust the uncompensated care 
figure. 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 Sec.  495.302 and Sec.  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 a Medicaid managed care plan be included. 
We interpret this to mean that individuals enrolled in 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.
    Comment: Commenters recommended that CMS provide flexibility in the 
specific volume thresholds required for program participation (for 
example, 30 percent for most EPs, 20 percent for pediatricians) and 
apply a lower percentage or a minimum number of encounters. Some 
commenters referenced research stating that practices with a 30 percent 
patient volume may not be financially viable.
    Response: The patient volume thresholds of 30 percent and 20 
percent are required by statute and cannot be changed in the rulemaking 
process.
    After consideration of the public comments received, we are not 
making any changes to these statutory requirements.
    Comment: Commenters suggested that CMS define ``encounter'' and 
take a menu approach to patient volume to allow States several options, 
based on their data sources. Some commenters provided specific 
suggestions for patient volume ``menu'' items. Some commenters further 
noted that there were inconsistencies in how we applied ``encounter'' 
data. Finally, one commenter noted that we should consider how 
``encounter'' data is applied to EPs that bill services through another 
provider (for example, PAs that bill through MDs). Other commenters 
asked for a clarification of how ``encounters'' would apply to the 
dually-eligible Medicare/Medicaid beneficiaries. Additionally, several 
commenters provided specific suggestions for alternative methods making 
an approximate determination of providers' patient volume by [not using 
patient volume] and extending the look-back period to two years.
    Response: We agree with the approach of offering at least some 
options to States regarding patient volume. This approach allows States 
to audit their programs using the data sources available to them, while 
also including the largest number of providers that may treat Medicaid 
patients. We believe our new approach will correct the inconsistencies 
in how we applied ``encounter.'' Furthermore, our new definition of 
encounter will capture the dually-eligible beneficiaries, as well as 
individuals who are in a Title XIX-funded 1115 demonstration project. 
Specifically, the statute at 1903(t)(2) states that Medicaid patient 
volume will be ``attributable to individuals who are

[[Page 44487]]

receiving medical assistance under [Title XIX],'' and also states that 
the patient volume calculation for those practicing predominantly in an 
FQHC or RHC will be ``attributable to needy individuals.'' Needy 
individual is defined at 1903(t)(3)(F) as ``an individual--(i) who is 
receiving assistance under Title XIX; (ii) who is receiving assistance 
under Title XXI; (iii) who is furnished uncompensated care by the 
provider; or (iv) for whom charges are reduced by the provider on a 
sliding scale basis based on the individual's ability to pay.'' We 
believe our final rule definition of ``encounter'' captures care to all 
of these individuals.
    Additionally, consistent with the statute, we expect providers and 
States to make estimation in accordance with the methodologies we 
established here. This estimation would need to be made with reasonable 
effort, using verifiable data sources by the provider and the State.
    Finally, we do not agree with any of the suggestions from 
commenters that involve using a benchmark number of Medicaid patients 
or other suggestions that involve a deviation from the statutory 
language. The statute is clear that Medicaid patient volume must be 
considered and explicitly specified percentages of caseload mix 
compositions attributable to either Medicaid and/or ``needy'' 
individuals that must be achieved for participation in the incentive 
program. We also do not agree with allowing the provider to consider a 
period longer than a year prior to registering because that is not a 
current, accurate portrayal of the provider's participation in 
Medicaid.
    After consideration of the public comments received, we are 
revising the patient volume approach to the following two options. The 
State may choose one of the two options listed below (or both options), 
or a State-proposed alternative, if approved by CMS. The State's 
strategy must be submitted for review and approval through the SMHP, in 
accordance with all requirements at section 495.332.
    A Medicaid provider may demonstrate patient volume by:
    (1) Having patient encounters within the 90-day period by using the 
same methodology we proposed in the proposed rule.
    This first option preserves the methodology we proposed in the 
proposed rule, however we clarify ``encounter'' below. For the Medicaid 
patient volume, the methodology for estimating patient volume would 
require calculation of a threshold (represented below) 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'' 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 representative 
continuous 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 methodology for 
estimating patient volume would require the same calculation, 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 Individual) patient encounters in any representative 
continuous 90-day period in the preceding calendar year/Total patient 
encounters in that same 90-day period] * 100

    Table 15, below, demonstrates the above-referenced patient volume 
thresholds. (This same Table appeared in the proposed rule, with a few 
minor clarifications included in this Table).
[GRAPHIC] [TIFF OMITTED] TR28JY10.050

    (2) Having a Medicaid enrollee on the panel assigned to the EP (for 
example, managed care or medical homes) within that representative 90-
day period.
    With more than 70 percent of Medicaid and CHIP enrollees receiving 
care in a managed care delivery system, and additional enrollees in 
medical homes, we determined that it was necessary to look for 
flexibility in how we applied these requirements. Under this option, we 
wanted to capture the EP's panel assignments, as well as any additional 
unduplicated Medicaid encounters. In other words, we do not intend for 
the EP to count an assigned patient who was also an encounter more than 
once.
    The methodology for estimating the Medicaid patient volume 
threshold (represented above) would use as the numerator the individual 
hospital's or EP's total number of Medicaid patients assigned through a 
Medicaid managed

[[Page 44488]]

care panel, medical or health home program panel, or similar provider 
structure with capitation and/or case assignment, plus all other 
Medicaid encounters for that EP. The assignment must be current within 
the 90-day period and we will consider as a proxy for this an encounter 
with any patient on the panel within the previous calendar year prior 
to the representative 90-day period when the patient was on the panel. 
Note that, as stated above, while the EP may add in encounters with 
other, non-panel Medicaid patients to the numerator, these encounters 
must be patients who are not assigned to a panel and would be 
encounters that occurred during the representative 90-day period. The 
denominator is all patients assigned to the EP or hospital for the same 
90-day period, also with whom the provider had at least one encounter 
in the prior calendar year as a proxy, as well as any other 
unduplicated Medicaid encounters during the representative 90-day 
period.

{[Total (Medicaid) patients assigned to the provider in any 
representative continuous 90-day period in the preceding calendar year, 
with at least one encounter taking place during the calendar year 
preceding the start of the 90-day period] + [Unduplicated (Medicaid) 
encounters in the same 90-day period]/[Total patients assigned to the 
provider in that same 90-day period, with at least one encounter taking 
place during the calendar year preceding the start of the 90-day 
period] + [All unduplicated encounters in that same 90-day 
period]{time}  * 100

    For the needy individual patient volume for EPs enrolled in managed 
care and medical homes, the threshold (represented below) would be 
calculated in the same manner, but with the numerator equal to the EP's 
total number of needy individuals assigned to the patient panel in any 
representative 90-day period in the preceding calendar year with at 
least one encounter within that year.

    {[Total (Needy Individual) patients assigned to the provider in any 
representative continuous 90-day period in the preceding calendar year, 
with at least one encounter taking place during the year preceding the 
90-day period] + [Unduplicated (Needy Individual) encounters in the 
same 90-day period]/[Total patients assigned to the provider in that 
same 90-day period, with at least one encounter taking place during the 
year preceding the 90-day period] + [All unduplicated encounters in 
that same 90-day period]{time}  * 100

    Table 15 demonstrates the above-referenced patient volume 
thresholds per provider type.
    In order to resolve any inconsistencies with the definitions of 
``encounter,'' for purposes of EP patient volume, we have allowed the 
following to be considered Medicaid encounters:
    (1) Services rendered on any one day to an individual where 
Medicaid or a Medicaid demonstration project under section 1115 of the 
Act paid for part or all of the service; or
    (2) Services rendered on any one day to an individual for where 
Medicaid or a Medicaid demonstration project under section 1115 of the 
Act paid all or part of their premiums, co-payments, and/or cost-
sharing.
    For purposes of calculating hospital patient volume, we have 
allowed the following to be considered Medicaid encounters:
    (1) Services rendered to an individual per inpatient discharges 
where Medicaid or a Medicaid demonstration project under section 1115 
paid for part or all of the service;
    (2) Services rendered to an individual per inpatient discharge 
where Medicaid or a Medicaid demonstration project under section 1115 
of the Act paid all or part of their premiums, co-payments, and/or 
cost-sharing;
    (3) Services rendered to an individual in an emergency department 
on any one day where Medicaid or a Medicaid demonstration project under 
section 1115 of the Act either paid for part or all of the service; or
    (4) Services rendered to an individual in an emergency department 
on any one day where Medicaid or a Medicaid demonstration project under 
section 1115 of the Act paid all or part of their premiums, co-
payments, and/or cost-sharing.
    We wanted to adequately reflect what an encounter looked like for a 
hospital and apply these concepts consistently across the numerous 
areas of this final rule. We used inpatient discharges and emergency 
department services for the hospitals because this is consistent with 
how we will make hospital-based determinations for EPs and how we 
collect meaningful use information for hospitals. We decided that 
services rendered on one day would be an encounter. An emergency 
department must be part of the hospital under the qualifying CCN.
    For purposes of calculating needy individuals patient volume, we 
have allowed the following to be considered needy patient encounters:
    (1) Services rendered on any one day to an individual where 
Medicaid or CHIP or a Medicaid or CHIP demonstration project under 
section 1115 of the Act paid for part or all of the service;
    (2) Services rendered on any one day to an individual where 
Medicaid or CHIP or a Medicaid or CHIP demonstration project under 
section 1115 of the Act paid all or part of their premiums, co-
payments, and/or cost-sharing; or
    (3) Services rendered to an individual on any one day on a sliding 
scale or that were uncompensated.
    We understand that multiple providers may submit an encounter for 
the same individual. For example, it may be common for a PA or NP to 
provide care to a patient, then a physician to also see that patient. 
It is acceptable in circumstances like this to include the same 
encounter for multiple providers when it is within the scope of 
practice.
    We considered whether Medicaid providers or States should pick from 
the two options provided above. Since States are responsible for 
auditing the program and must have reliable sources of data, we agree 
with commenters that it must be States that make a determination as to 
whether either option will be permitted (or both).
    In the proposed rule, we also proposed that if States had an 
alternative approach for the timeframe in accounting for the 
methodology, they would be allowed to submit it in the SMHP for review 
and approval. For the final rule, we are modifying this option. As 
stakeholders' understanding of the program matures and new technologies 
become available, there may be new solutions that we did not consider 
here, but would be a better option for one or several States. To that 
end, in this final rule we are providing flexibility to consider 
States' alternative methodologies for measuring not just the timeframe 
that is used in establishing patient volume, but all of the elements 
included in the patient volume calculation (except the thresholds 
established by statute). Therefore, we have revised our final 
regulations to allow States to offer alternatives regarding the 
methodology used to establish patient volume, and for the Secretary to 
adopt these options, so that they may be used by other States as well. 
An alternative would need a verifiable data source. A State also would 
need to provide us with an analysis to demonstrate that the methodology 
being proposed by the State did not result, in the aggregate, in fewer 
providers becoming eligible than under the two options presented in 
this final rule. Finally, if a State is reviewed and approved for an 
alternative

[[Page 44489]]

methodology, we will post this alternative methodology on the CMS 
internet Web site, and allow other States to adopt the methodology as 
well, thereby ensuring that the alternative is a methodology that is 
``established by the Secretary.'' While we believe that States will not 
submit alternative methodologies until after the first year of the 
program, allowing for such alternatives will permit the patient volume 
calculation to evolve along with State and provider experience of the 
program.
    We believe that these solutions will help address issues for 
providers practicing across State lines, who may have their Medicaid 
patient volume derived from more than one State. We encourage States to 
build partnerships, particularly through data sharing agreements. 
Medicaid providers must still annually re-attest to meeting the patient 
volume thresholds.
    After consideration of the comments, we are revising Sec.  495.302, 
Sec.  495.306, and Sec.  495.332 regarding patient volume, patient 
encounters and the associated revisions to the SMHP requirements.
    Comment: Commenters asked CMS to include all individuals receiving 
services through section 1115 demonstrations as eligible encounters.
    Response: Although the commenter did not elaborate, we believe the 
commenter is referring to section 1115 demonstrations under the 
authority of section 1115(a)(2) of the Act. Our final regulations allow 
two alternate methods for States to estimate Medicaid patient volume. 
Under both methods, however, the State must review whether a Medicaid 
``patient encounter'' occurred. Our regulations, at 495.306(e) state 
that a Medicaid encounter will exist where Medicaid (or a Medicaid 
demonstration project approved under section 1115) paid for part or all 
of the service; or where Medicaid (or a Medicaid demonstration project 
approved under section 1115) paid all or part of the individual's 
premiums, co-payments and/or cost-sharing. Because our methodology is 
based upon Medicaid payment for an encounter, and because we believe it 
will be difficult or impossible for EPs and eligible hospitals to 
distinguish between payment that is due to patients receiving medical 
assistance under Title XIX and payment that is due to expansion 
populations (who are not receiving Title XIX medical assistance), we 
will allow providers to include in the patient volume calculation 
individuals who are part of expansion populations under section 
1115(a)(2) of the Act. The statute confers broad authority on the 
Secretary to establish the methodology that is used to estimate the 
patient volume percentage. Thus, although individuals in section 
1115(a)(2) demonstrations are not receiving Title XIX medical 
assistance, we use our broad authority to allow a methodology that 
considers these individuals in the estimate that is used. (Limited to 
Medicaid patient volume determinations, the same reasoning would not 
apply to CHIP demonstrations or to State-only programs, because no 
Title XIX funding is received for these projects. However, in 
calculating Needy Individual patient volume, it is permissible to 
consider Medicaid or CHIP demonstration projects approved under section 
1115.) Our above discussion noting what will be considered a patient 
encounter includes encounters which were paid for with Title XIX funds 
under a section 1115 Medicaid demonstration.
    Comment: Several commenters asked that CMS allow CHIP patients to 
be considered in the Medicaid patient volume requirements, particularly 
for pediatricians.
    Response: The requirement that the methodology for estimating 
Medicaid patient volume is based on Medicaid and not CHIP is related to 
the statutory language at section 1903(t)(2)(A)(i)-(ii)). Such language 
requires that the Secretary establish a methodology that can be used to 
estimate ``Medicaid'' patient volume for those individuals receiving 
medical assistance under Title XIX. However, the statute at 
1903(t)(2)(A)(iii) allows for an EP practicing predominantly in an FQHC 
or RHC to consider CHIP patients under the needy individual patient 
volume requirements.
    After consideration of these public comments, we are making no 
further revisions to this section of the rule.
    Comment: Many commenters urged CMS to allow practice- or clinic-
level patient volume data to apply to practitioners as a proxy to 
establish patient volume. This would apply for both Medicaid and needy 
individual patient volume calculations. The commenters stated that many 
clinics and group practices do not necessarily track the pay or data 
per EP and it would be very disruptive to their current practice to 
begin collecting data like this.
    Response: We agree with commenters and acknowledge that it is not 
our intent to disrupt the practice with new additional burdens, but 
rather to leverage efficiencies. We will allow clinics and group 
practices to use the practice or clinic Medicaid patient volume (or 
needy individual patient volume, insofar as it applies) and apply it to 
all EPs in their practice under three conditions: (1) The clinic or 
group practice's patient volume is appropriate as a patient volume 
methodology calculation for the EP (for example, if an EP only sees 
Medicare, commercial, or self-pay patients, this is not an appropriate 
calculation); (2) there is an auditable data source to support the 
clinic's patient volume determination; and (3) so long as the practice 
and EPs decide to use one methodology in each year (in other words, 
clinics could not have some of the EPs using their individual patient 
volume for patients seen at the clinic, while others use the clinic-
level data). The clinic or practice must use the entire practice's 
patient volume and not limit it in any way. EPs may attest to patient 
volume under the individual calculation or the group/clinic proxy in 
any participation year. Furthermore, if the EP works in both the clinic 
and outside the clinic (or with and outside a group practice), then the 
clinic/practice level determination includes only those encounters 
associated with the clinic/practice.
    We have revised our regulations to make clear that when patient 
volume is calculated on a group-practice/clinic level, the above rules 
will apply.
    Comment: Similar to the last comment, we received comments 
requesting clarification on how the patient volume requirements will 
apply in States with seamless eligibility determinations and payments 
for their program. For example, some States have streamlined their 
programs so that the potential beneficiary is applying for any public 
health care program for which they might be eligible (for example, 
Medicaid, CHIP, State-only) in one application. Often these States have 
one enrollment card as well. In other words, it is likely that both the 
beneficiary and the health care provider might have no indication as to 
whether the beneficiary is receiving assistance under Title XIX, Title 
XXI, or State-only funds. This becomes a problem when attempting to 
determine if the provider meets the patient volume requirements.
    Response: If there is a combined program like the one in the 
example, this does not mean that all the encounters are being paid for 
with Title XIX funds (or the individual's premium or cost-sharing is 
funded through Title XIX), which is how we explained we would determine 
Medicaid patient encounters. We do not believe it would be reasonable 
to allow an encounter that is paid for with Title XXI or State-only 
funds to be considered a ``Medicaid encounter.'' Thus, States with 
combined programs (for example, Medicaid/CHIP expansion programs), may 
indeed have difficulty determining who is eligible

[[Page 44490]]

for participation in this incentive program.
    Considering these States have made enormous strides to reduce the 
confusion and burden associated with eligibility and payment for these 
programs, and also to reduce the stigma sometimes associated with 
Medicaid, we want to support the work they have done.
    After consideration of the public comments received, we believe 
that the best course of action is to work with these States on a case-
by-case basis through providing guidance as they develop the SMHP. We 
believe that each State will have different data and information 
available to them. The States should make sure that the health IT 
coordinators are working closely with the Medicaid (and CHIP, as it 
pertains to this program) policy staff on all aspects of the program. 
The goal will be to find a solution that leverages the State's existing 
and/or future data sources, as well as looking for flexible 
alternatives, while still honoring Congress' intent for the patient 
volume requirements, as established in the statute.
    Comment: Some commenters pointed out that not all Medicaid 
providers use an EHR or submit electronic claims, making it tedious to 
capture a numerator and denominator for patient volume until the 
providers have adopted an EHR. Additionally, some commenters expressed 
concern about how providers would determine the denominator for patient 
volume and how States would audit the resulting percentage.
    Response: While the commenters may be correct about the assertion 
that not all providers use an EHR or submit electronic claims, we do 
not believe it will prevent EPs and eligible hospitals from 
participating. These providers are businesses and there is an 
expectation that they are tracking their receivables from all entities 
(including Medicaid) associated with specific patients. In other words, 
we do not see a connection between electronic claims and current EHR 
use and calculation of the patient volume. Furthermore, when EHRs are 
used with practice management systems, we believe that in most cases, 
this data should be derived from the electronic systems.
    When States consider their audit strategies, they should leverage 
existing data sources to the extent possible, but also consider future 
data sources. Part of the Medicaid Information Technology Architecture 
(MITA) principles associated with the SMHP development includes 
consideration of the ``as is'' world, as well as the ``to be'' world. 
While States may not have the systems in place today for a complete 
picture, we expect a longer-term strategy leveraging better data 
systems.
    After consideration of the public comments received, we are not 
making any change on the basis of this comment. We provided additional 
flexibility in the patient volume requirements, which may help 
providers more easily calculate their patient volume and provide for 
flexibility when States begin to audit providers.
    Comment: Commenters requested clarification on how to determine 
eligibility for the five types of Medicaid EPs. Commenters also noted 
that there was a potential difference between Medicare and Medicaid for 
the definition of ``physician.'' Finally, other commenters were 
confused if, as a specialty practitioner, they qualified as one of the 
EP types.
    Response: We agree with the commenters that there is a distinction 
between the Medicare and Medicaid definitions of physician. The 
Medicare statute at section 1848(o)(5)(C) defines an eligible 
professional as including all the professionals listed in section 
1861(r) of the Act (which, generally stated, includes podiatrists, 
chiropractors and optometrists), the Medicaid statute does not 
incorporate all of 1861(r). Rather, the Medicaid statute defines what 
are physician services for purposes of qualifying as medical assistance 
under section 1905(a)(5)(A) of the Act, and states that physician 
services constitutes services furnished by a physician as defined in 
section 1861(r)(1) (which includes only doctors of medicine or 
osteopathy legally authorized to practice medicine and surgery by their 
State). In addition, section 1905(e) permits States the option to 
consider optometrist services as physician services. In this case, the 
State plan must specifically provide that the term ``physicians' 
services'' includes services of the type which an optometrist is 
legally authorized to perform.
    Thus, in keeping with the statute, a physician would be limited to 
doctors of medicine or osteopathy legally authorized to practice in 
their State, and, in cases where States have specifically adopted the 
option of 1905(e) in their State plans, optometrists.
    In addition, States would need to refer to their own scope of 
practice rules to determine whether an individual qualifies as 
providing dental, nurse practitioner, physician assistant, or certified 
nurse midwife services. Also, States and EPs would need to refer to CMS 
regulations. These regulations, at 42 CFR 440.60 require that 
practitioners be licensed and that they are within the scope of 
practice defined under State law (see also 1905(a)(6)). 42 CFR 
440.100(b), defines a dentist as an individual licensed to practice 
dentistry or dental surgery in his or her State. 42 CFR 440.165 defines 
a nurse midwife as a registered professional nurse who meets the 
following requirements: (1) Is currently licensed to practice in the 
State as a registered professional nurse; (2) is legally authorized 
under State law or regulations to practice as a nurse-midwife, (3) has 
completed a program of study and clinical experience for nurse-midwives 
as specified in the State, unless the State does not specify such a 
program. (4) In the case where the State has not specified a particular 
program of study and clinical experience, the regulation provides 
alternative means for demonstrating this training. See also section 
1905(a)(17), defining certified nurse midwife with reference to section 
1861(g). 42 CFR 440.166 contains a definition of what qualifies as 
nurse practitioner services and requires a nurse practitioner to be a 
registered professional nurse who meets the State's advanced 
educational and clinical practice requirements, if any, beyond the 2 to 
4 years of basic nursing education required of all registered nurse. 
States will have a Medicaid State Plan (and often State regulations) 
that designates how each provider is eligible to participate in the 
Medicaid program by practice type. All of these practitioners must meet 
all other eligibility requirements (including Medicaid patient volume) 
in order to participate.
    Regarding the confusion by some specialty providers (for example, 
advanced practice nurses, pediatricians, physician sub-specialties, 
etc.), so long as an EP qualifies as a practitioner within the State's 
scope of practice rules for each of the five EP types, they are 
eligible for this program. In other words, since pediatricians are 
physicians, they must meet the physician scope of practice rules and 
then they may be eligible for an incentive when they meet all other 
requirements. Advanced practice nurses who meet their State's criteria 
for qualifying as a nurse practitioner would qualify as nurse 
practitioners. We believe most States would recognize APNs as NPs 
within their scope of practice rules. Eligible provider types must be 
specified in a State's SMHP.
    After consideration of the public comments received, we are 
revising the definition of these EPs under section

[[Page 44491]]

495.304 to clarify additional scope of practice requirements.
    Comment: Commenters requested clarification on how full- or part-
time status impacts an EP's eligibility for incentives.
    Response: Full or part-time status does not affect patient volume 
calculations or whether an EP's practice is predominantly in an FQHC or 
RHC. There is no mention of requisite number of hours in the statute or 
this final rule as a pre-condition for eligibility.
    After consideration of the public comments received, we are not 
making any revisions to this section of the final rule.
    e. Entities Promoting the Adoption of Certified EHR Technology
    We define ``promoting the adoption of certified EHR technology'' in 
Sec.  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 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 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. Under 1903(t)(6)(A)(ii) of the Act and as proposed in Sec.  
495.332, 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 proposed 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 definition for 
promoting the adoption of certified EHR technology is in Sec.  495.302.
    Comment: A commenter recommended that CMS require that entities 
designated by States that promote the adoption of EHR technology must 
use qualified EHR technology and be able to capture, query and/or 
exchange data from beyond a practice or closed system in order to 
foster interoperability, and to promote competition among EHR vendors 
with vendor-neutral and provider-neutral solutions. The commenter 
recommended that entities that promote the adoption of certified EHR 
technology be certified to an electronic hub that permits the exchange 
of electronic structured data on a provider-neutral basis.
    Commenters also requested that the Regional Extension Centers 
funded by ONC be permissible as entities designated by the State to be 
eligible to receive EPs assigned incentive payments.
    Response: States will have the discretion to identify entities that 
promote the adoption of certified EHR technology in accordance with our 
definition in regulation. We do not agree that the definition of 
``promotion of the adoption of EHR technology'' requires the designated 
entity itself to utilize certified EHR technology. A variety of 
entities might offer services that meet the language included in this 
final rule defining promoting EHR adoption. We wish to point out that 
there is also a discussion of reassignment of payments in Section 
II.B.1.d. of this rule.
    After consideration of the comments, we are adopting the language 
as written with the additional clarification that we encourage States 
to consider how they will verify on an ongoing basis that the entities 
that they designate are in fact promoting EHR adoption, per the 
requirements. Their responsibility to audit this element might be a 
factor in identifying which entities they wish to designate, in terms 
of tangible EHR promotion activities.
    We agree that our definition of ``promoting EHR adoption'' does not 
preclude the ONC-funded Regional Extension Centers from being 
designated by States for this role.
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

[[Page 44492]]

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.
    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 set the average allowable cost at $54,000. We 
established this average allowable cost at the high end of the range 
since the data we reviewed is based on certification criteria that may 
not be appropriate moving forward. Specifically, since the ONC is 
establishing new certification criteria for EHR technology, we believe 
the average cost of certified EHR technology incorporating the new 
criteria 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 requirements in the ONC 
interim final rule for the adoption of an initial set of standards, 
implementation specifications, and certification criteria for EHRs and 
the health measures data discussed in this final 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 originally 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 set the average allowable cost at $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. 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.
    Comment: Several commenters are concerned that States are required 
to develop a method to determine the payment amount for each provider. 
Commenters believed that incentive payments should be based on the 
maximum amount and that individual calculations are cumbersome and a 
difficult process for both States and eligible professionals.
    Response: We would like to clarify the requirements in the statute 
and the process by which incentive payments will be established. 
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 is also 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. CMS conducted a literature review of recent studies on EHR 
technology to determine the average allowable cost of implementing

[[Page 44493]]

and using such technology. CMS reviewed the results from four recent, 
comprehensive studies and determined that these costs are $54,000 per 
professional. We recognize that this cost is variable and since the ONC 
is establishing certification criteria for EHR technology, we believe 
this cost is reasonable since we expect that current EHR technology 
will need to be upgraded in order to meet the new certification 
criteria.
    Next, in accordance with the statute, in order to determine the net 
average allowable costs for each provider, average allowable costs for 
each provider must be adjusted in order to subtract any payment that is 
made to Medicaid eligible professionals and is directly attributable to 
payment for certified EHR technology or support services of such 
technology. The only exception to this requirement, as discussed above, 
is that payments from State, or local governments do not reduce the 
average allowable costs. The resulting figure is the net average 
allowable costs. The statute further indicates that Medicaid eligible 
professionals can receive up to 85 percent of a maximum of the net 
average allowable cost. In year one the maximum net average allowable 
cost is $25,000 and in subsequent years is $10,000. Additionally, the 
statute indicates that Medicaid eligible professionals are responsible 
for the remaining 15 percent of the net average allowable cost 
(1903(t)(6)(B)). We believe the commenters are concerned with the 85 
percent of net average allowable cost maximum incentive payment amount 
and the responsibility of the Medicaid professional for the remaining 
15 percent of the net average allowable cost.
    Since the statute is clear that to get to the net average allowable 
cost, payments made to the EP that are directly attributable to the 
payment for certified EHR technology or support services for such 
technology for each provider have to be subtracted from the average 
allowable cost, this must be an individual provider calculation. We do 
not believe we have discretion to change this netting process directed 
by the Congress. We have provided an example calculation so that in 
using the average allowable cost established by the Secretary of 
$54,000 professionals could receive as much as $29,000 in payments from 
outside sources and still receive 85 percent of the maximum capped net 
average allowable cost of $25,000. We have also required that States 
must have a process in place and a methodology for verifying that 
payment incentives are not paid at amounts higher than 85 percent of 
the net average allowable cost and a process in place and a methodology 
for verifying that professionals pay 15 percent of the net average 
allowable cost of the certified EHR technology.
    States may wish to establish a process whereby individuals attest 
to having completed their forms correctly and risk the circumstance of 
audit in the event the State has reason to believe individuals did not 
complete the forms appropriately. States could develop a process for 
providers to attest to having received no other sources of funding from 
other than State and local governments as payment that is directly 
attributable to the cost of the technology. States could select a 
random sample of providers to audit after the incentive payment has 
been paid. Additionally, States could determine that certain types of 
providers should be selected for a more extensive review since it may 
be true that this particular provider group was most likely to have 
received payment for certified EHR technology from sources other than 
State, or local governments. This process could eliminate some of the 
burden.
    Comment: Commenters also asked that we provide some examples of the 
costs that must be subtracted to get to the net average allowable cost 
and therefore the incentive payment amount. Commenters do not want to 
be penalized because they did not have a fair chance at understanding 
the rule before participating in the program. Commenters further argued 
that reducing incentive payments due to other non-State/local resources 
could immobilize innovation and temper research activities.
    Response: When States begin to think through the payments that are 
not considered acceptable and that must be subtracted from the average 
allowable cost to get to the net average allowable costs and 
consequently, the incentive payment, we believe that States should 
consider the situation in which professionals may have been provided 
with the certified EHR technology through, for example, an employer/
employee relationship. We do not believe in this case that there could 
be any payments directly attributable to the professional for the 
certified EHR technology; therefore, there are no payments that must be 
subtracted. This situation would apply in the case of clinics like 
FQHCs/RHCs or IHS facilities. Additionally, States should consider that 
any in-kind contributions such as EHR technology or free software 
provided by vendors are not cash payments and therefore are also not 
costs that must be subtracted. Further, in the case of grants like the 
HRSA Capital Improvement Program grants that are used to finance many 
projects within an organization; for example, research projects, 
infrastructure, construction or repair and renovation of health 
centers, health care services, etc., we do not believe these grants are 
directly attributable as payments for the certified technology but 
rather are payments for several projects of the organization. Again, we 
do not believe that these costs are directly attributable to payment 
costs for the certified technology and therefore must be subtracted. 
These are just some examples but the clarifying point is that any costs 
that are subtracted from the average allowable cost to get to the net 
average allowable cost have to be cash payment that is ``directly 
attributable to the professional for the certified EHR technology.'' 
Aside from specific costs related to computer hardware, software, staff 
training, and/or upgrades of the technology, we believe there are 
limited situations that exist in which cash payment has been made that 
is directly attributable to the professional solely for the purpose of 
certified EHR technology.
    In any case, we are requiring that States submit to CMS for review 
and approval a description of their process and methodology for 
verifying payment incentives in State Medicaid HIT plans. CMS has the 
flexibility to approve State Medicaid HIT plans that require provider 
attestation initially with subsequent auditing of either a random 
sample, or a sample of payment incentive recipients most likely to have 
received funding from other sources.
    We also would like to provide clarifying information concerning the 
responsibility of the professional for 15 percent of the net average 
allowable cost. Section 1903(t)(6)(B) of the Act dictates that EPs are 
responsible for payment of the remaining 15 percent of the net average 
allowable cost and States are responsible for ensuring that the 
Secretary pays no more than 85 percent of the net average allowable 
cost as incentive payments. In ensuring EPs' responsibility for the 
remaining 15 percent, we believe States may consider funding that the 
EP receives from other sources as essentially meeting the EPs 
responsibility. For example, as stated earlier, States should consider 
the previous examples of employer/employee relationship, certain 
grants, and in-kind contributions. Specifically, if a professional is 
an employee at an FQHC/RHC or IHS facility, since the employer has 
provided the technology to the employee it is assumed that the employer 
has contributed the 15 percent

[[Page 44494]]

to the net average allowable cost on behalf of the employee. 
Additionally, in the case of in-kind contributions, the professional's 
15 percent responsibility to the net average allowable cost is of no 
consequence since the entity has assumed that responsibility for the 
professional. It should be noted that in the case of a vendor supplying 
the 15 percent on behalf of the EP because the technology, training, 
support services, etc. was either in-kind contributions or free, 
conflict of interest safeguards apply and the parties should be mindful 
of the requirement to comply with applicable fraud, waste, and abuse 
laws, rules, and regulations.
    In those cases in which the professional himself must satisfy the 
responsibility for the 15 percent net average allowable costs, we 
believe in determining the calculation, States should consider costs 
related to the providers' efforts to address workflow redesign and 
training to facilitate meaningful use of EHRs as contributing to the 
providers' 15 percent share.
    Considering the costs of training, preparing for, and installing or 
upgrading EHR technology, we believe the vast majority of EPs will 
spend, or receive funding from other sources in the amount of 15 
percent of the maximum net average allowable cost (or $3,750 in the 
first year and $1,500 in subsequent years). We also believe that for 
providers' first payment for having adopted, implemented or upgraded 
certified EHR technology, States should take into consideration 
providers' verifiable contributions up through the date of attestation. 
For example, if a provider adopted EHR technology for $100 in January 
2010 and then paid for the upgrade to the newly certified version for 
an additional $100 in December of 2010, the sum of both investments; 
that is, $200, should be applicable to their 15 percent of the net 
average allowable cost.
    In summary, in response to these comments, we are clarifying in the 
final rule that State Medicaid HIT plans must explain the process and 
methodology States will put in place to ensure that Medicaid eligible 
professionals comply with this responsibility (see section 495.332). 
Additionally, we have clarified the rules at section 495.310 that 
providers are responsible for 15 percent of the net average allowable 
costs of the certified EHR technology.
    The following chart is useful in depicting the effect of this 
calculation.
[GRAPHIC] [TIFF OMITTED] TR28JY10.051

    Comment: Several commenters have raised questions about the cost of 
the certified EHR technology for hospitals. Specifically, commenters 
believed that $54,000 is identified as the initial costs for providers 
with 20 percent per year thereafter for ongoing costs; and $5 million 
for initial costs for hospitals with 20 percent per year thereafter for 
ongoing costs. The commenters believed that the $54,000 assumption for 
providers may be accurate; however, the $5 million assumption for 
hospitals could be off by a factor of 4 or 5. Other commenters believed 
that even the $54,000 assumption seriously underestimates the total 
cost of ownership for EHR systems and their ongoing expenses and argued 
that this assumption does not account for the training and labor costs 
associated with implementation of an EHR system, nor does it account 
for the lost revenues resulting from the decreases in productivity 
during the initial implementation phase. One commenter questioned 
whether the $54,000 average allowable cost for certified EHR technology 
takes into account leasing of an ASP (applicable service provider web 
based) model as an allowable cost.
    Response: As explained above, we conducted a literature review of 
recent studies on EHR technology and determined that these costs are 
$54,000 per professional. We are not establishing an average allowable 
cost for hospitals. The reference to the costs of EHRs for hospitals 
was only to make the point that the costs of EHRs vary greatly because 
of the size and type of provider practices, differences in available 
features of systems, and the additional costs associated with 
licensing, support, training and maintenance. Additionally, there is no 
reason to establish the average allowable costs of EHR technology for 
hospitals since the hospital incentive payments are based on a formula 
that is defined in the statute and that does not rely on the

[[Page 44495]]

average allowable cost. In terms of the $54,000 average allowable cost 
figure, we indicated that we believe this is a reasonable figure but 
recognize that there are many variables to determining the average 
allowable cost of certified EHR technology because of practice size, 
the differences in available features of systems, and the additional 
costs associated with licensing, support, training and maintenance. The 
$54,000 average allowable cost figure does take into account web based 
models since the Secretary is tasked to study the average costs 
associated with the purchase, initial implementation, and upgrade of 
certified EHR technology, including support services, and integral 
related training.
    We are making no additional revisions to this section of the final 
rule as a result of this comment.
    Comment: One commenter requested that CMS make clear that any 
funding an FQHC receives because the Medicaid eligible professional 
voluntarily chooses to reassign his/her incentive payment or any funds 
the center may have received through HRSA Capital Improvement Funds 
cannot be the basis for a State reducing its per visit payment to FQHCs 
required under Section 1902(bb).
    Response: We agree with the commenter with respect to the incentive 
payments authorized under section 1903(t); however, we are not 
addressing the HRSA Capital Improvement funds, as this funding is 
outside the scope of this rulemaking. Since FQHCs are not eligible 
providers, incentive payments will not be made to FQHCs. It is true, 
however, that an eligible professional could choose to reassign his/her 
incentive payment to the FQHC. Any reassignment of payments must be 
consistent with applicable laws, rules, and regulations, including, 
without limitation, those related to fraud, waste, and abuse. Incentive 
payments are payments designed to promote the adoption and meaningful 
use of certified EHR technology and are not payments for medical 
assistance provided in the FQHC. We do not have the authority under 
this program to provide that these funds be the basis for the State to 
reduce its per visit payment to the FQHC.
    After consideration of this comment, we are making no further 
additions to this section of the final rule.
    (4) Payments for Medicaid Eligible Professionals
    One important difference we proposed 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 final 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.
    As previously discussed in this final rule, based on the 85 percent 
threshold applied to the net average allowable costs, we proposed 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 hospital-based, 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 to up a maximum of 
$5,667 in the 5 subsequent incentive payment years, or no more than 
$42,500 over the maximum 6 year period.
[GRAPHIC] [TIFF OMITTED] TR28JY10.052

[[Page 44496]]

    All State Medicaid EHR incentive program calculations, payments, 
and limits under this section are subject to our review.
    Comment: Commenters suggested that CMS apply the health 
professional shortage area (HPSA) bonus offered under Medicare to 
Medicaid providers.
    Response: There is no statutory authority for HPSA bonuses in the 
Medicaid incentive program. However, it is worth noting that in 
comparing the maximum participation period for EPs in Medicare and 
Medicaid, EPs can earn higher total incentive payments under Medicaid, 
even when compared to the Medicare payments with the HPSA bonus.
    We are not making any changes to this rule as a result of this 
comment.
    Comment: Commenters requested clarification on how the Medicare 
payment adjustments apply to Medicaid providers. Commenters suggested 
that if these apply to Medicaid providers, it could be a reason not to 
participate. One commenter asked about a provider who began in the 
Medicare incentive program and then switched to Medicaid, but then 
stopped meaningfully using the certified EHR.
    Response: The Medicaid program does not have the payment 
adjustments that apply, beginning in 2015, in the Medicare program. 
However, all Medicare providers will have a payment reduction in 2015 
if they are not demonstrating meaningful use, regardless of whether 
they participate in the Medicare or Medicaid EHR incentive program. 
Whether an EP, hospital or CAH is a meaningful user of certified EHR 
technology will continue to be determined on a year-by-year basis. A 
provider who stops meaningfully using certified EHR cannot receive an 
incentive payment. This is discussed in greater detail in II.A.
    We are not making any changes to this rule as a result of this 
comment.
    (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 17 demonstrates the payment scenarios available to a Medicaid 
EP who begins in their first year by adopting, implementing, or 
upgrading certified EHR technology, and receives all six years of 
payments consecutively. 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.
[GRAPHIC] [TIFF OMITTED] TR28JY10.053

    (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 proposed 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

[[Page 44497]]

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 18.
[GRAPHIC] [TIFF OMITTED] TR28JY10.054

    We also requested comment on an alternative approach that would 
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. We refer readers to 
our proposed rule (75 FR 1937) for a discussion of this approach.
    Medicaid EPs are not required to participate on a consecutive 
annual basis, however, the last year an EP may begin receiving payments 
is 2016, and the last year the EP can receive payments is 2021. See our 
discussion on consecutive versus non-consecutive payments in section 
II.A. of this final rule. We wish to point out to readers that this is 
one area where the Medicare and Medicaid incentive payment programs 
differ. That is, Medicare EPs do not have the same flexibility afforded 
to Medicaid EPs, who are permitted to participate in a non-consecutive 
annual basis, or to skip years, in other words, without the omitted 
years necessarily reducing the total number of years for which they may 
receive payment. 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, non-State/local sources.
    Comment: Some commenters rejected the alternative scenario 
(including 5 years of payment instead of 6), as it would effectively 
result in a penalty for early adopters, and reward those who delayed 
adoption.
    Response: We agree that early adopters should not be penalized. 
Further, we agree that Medicaid EPs that have adopted EHR technology 
before the first year should have an opportunity for the same maximum 
incentive payments as EPs that are meaningful users in the first year. 
Accordingly, the alternative scenario we presented in Table 30 of the 
proposed rule will not be used for incentive payments.
    As we are adopting our proposed policy as final, we are not making 
any changes to the regulations as a result of this comment.
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. Section 
1905(t)(5)(D) requires that no payments can be made to hospitals after 
2016 unless the provider have been paid a payment in the previous year; 
thus, while Medicaid EPs are afforded flexibility to receive six years 
of payments on a non-consecutive, annual basis, hospitals receiving a 
Medicaid

[[Page 44498]]

incentive payment must receive payments on a consecutive, annual basis 
after the year 2016. Prior to 2016, Medicaid incentive payments to 
hospitals can be made on a non-consecutive, annual basis. 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.
    States are responsible for using auditable data sources to 
calculate Medicaid 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 hospital 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 year (for subsequent 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 
require that States 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 first payment year.
    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 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 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.
    The overall hospital EHR amount requires that a transition factor 
be applied to each year. This transition factor equals 1 for year 1, 
[frac34] for year 2, [frac12] for year 3, and [frac14] 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-bed-days 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 interpreted these managed care individuals to be individuals 
enrolled in an 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 sub-acute wing or skilled nursing wing, so long as 
States and contracting entities are in compliance with the actuarial 
soundness rules in Sec.  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 
proposed 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 
Sec.  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

[[Page 44499]]

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.
    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.
    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 19 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 19 is to 
illustrate the general timeline for Medicaid hospital incentives.
[GRAPHIC] [TIFF OMITTED] TR28JY10.055

    Comment: Many commenters recommended that CMS instruct States to 
provide hospitals the maximum incentive payments possible in their 
first two payment years. Commenters provided many examples of how CMS 
should instruct States to make payments. For instance, commenters 
suggested that CMS require States to pay 50 percent of hospitals' 
aggregate incentive payment in the first year and another 40 percent in 
the second year--as a limited source of capital for adoption, 
implementation, and upgrades. Many commenters stated that it is 
critical that EHR incentive payments be made in a timely manner and not 
delayed or affected by State budgetary problems or changes.
    Response: After consideration of the public comments received, we 
are finalizing these provisions as originally proposed, with one 
clarification to ensure the statutory requirement that eligible 
hospitals, after 2016, may not receive an incentive payment, unless a 
payment was received in the prior year. The statute is imposing 
maximums on what the State is authorized to pay eligible hospitals. At 
section 1903(t)(5)(A) the statute requires that a State can make no 
more than 50 percent of the hospital's aggregate incentive payment in 
any one year. Likewise, over a 2-year period, the State cannot pay more 
than 90 percent of the aggregate incentive. Finally, under 
1903(t)(5)(D) no more than six years of payment may be made, and 
payment may not be paid

[[Page 44500]]

for any year beginning after 2016, unless the hospital was provided an 
incentive payment for the preceding year. However, these are limits on 
State payments, not required minimums. We believe that States should 
work with their provider communities to determine the best timeframes 
for implementing their EHR programs and making payments to providers.
    Comment: Some commenters indicated that incentive payments should 
not be included in any calculation of total Medicaid payments for the 
purpose of determining Medicaid shortfalls, disproportionate share 
payments, upper payment limits, or any general Medicaid program 
service.
    Response: According to the statute, Medicaid HIT incentive payments 
are made to encourage the adoption and use of certified EHR technology 
defined by the statute, as well as support services including 
maintenance and training that is for, or is necessary for the adoption 
and operation of, such technology. Payments to providers under this 
rule are not being made for the provision of services or the cost of 
the provision of services to Medicaid beneficiaries or the uninsured. 
Therefore, we are clarifying that EHR incentive payments made to 
providers in accordance with the statute and final regulation are not 
subject to the same limits as payments for items and services provided 
to Medicaid beneficiaries and the uninsured including Medicaid upper 
payment limits and disproportionate share hospital limits. This comment 
is also addressed in the Medicare section at II.B.4.b.
    Comment: One commenter noted a technical error in the proposed rule 
at 495.310 (g) (2) Medicaid Share. The commenter questioned whether 
(2)(iii) meant to qualify (2)(ii) or (2)(i), noting that the latter 
would result in dual eligibles being removed from Medicaid days (the 
numerator) and would not conform to the Act which would require that 
they be removed from the denominator.
    Response: We agree that the regulation includes a technical error, 
and we read the statute as requiring that dually eligible individuals 
be excluded from the denominator. Section 1903(t)(5)(C) states that the 
Medicaid share should be calculated using a numerator that does not 
include individuals ``described in section 1886(n)(2)(D)(i).'' 
Individuals described in that section are individuals for whom payment 
may be made under Medicare Part A as well as individuals enrolled with 
a Medicare Advantage Organization under Part C. Thus, dually eligible 
individuals are excluded from the numerator in determining the Medicaid 
share.
    We are therefore revising section 495.310(g)(2)(iii) to ensure that 
it refers to clause (i), rather than clause (ii), of Sec.  
495.310(g)(2).
    Comment: One commenter highlighted a technical error in the 
proposed rule at Sec.  495.310(g)(1)(i)(B) when he requested 
clarification for that section which reads: ``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.'' He interpreted the language to mean that if the payment 
year begins in 2011, the Federal fiscal year would be 2010; and the 
discharge related amount would be for 2009.
    Response: Section 495.310(g)(1)(i)(B) is improperly worded in the 
proposed rule and should read, ``The discharge related amount for a 12-
month period selected by the State, but ending in the Federal fiscal 
year before the hospital's fiscal year that serves as the first payment 
year.'' For 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, the State would 
employ the relevant data from the hospital's cost reporting period 
ending June 30, 2010 in order to determine the EHR incentive payment 
amount for the hospital.
    We are revising this language in the final rule at section 
495.310(g)(1)(i)(B) to be clear.
    Comment: Some commenters indicated that CMS should specify an 
alternative source of charity care data that States may use so that 
Medicare and Medicaid incentive payments can be determined 
appropriately. Others commented that while CMS has proposed the 
Medicare cost report, Medicaid cost report data, MMIS data, hospital 
financial statements, and accounting records to determine Medicaid EHR 
incentives, there is no absence of State-level usable data to implement 
this definition.
    Response: We agree that there are a number of data sources 
available at the State and hospital levels that would allow States to 
accurately capture charity care data for the purposes of calculating 
hospital EHR amounts. However, we have no vehicle for identifying which 
of these tools exist in individual States or across the country. 
Medicare cost reports, Medicaid cost report data, MMIS data, hospital 
financial statements, and accounting records are all items that we feel 
confident are accessible to all States and providers. Additionally, we 
believe that States and their provider communities are better versed at 
determining the tools that will be most beneficial for their individual 
programs. As such, we included the standard items listed as auditable 
data sources, but did not prohibit the use of other appropriate 
auditable data sources. States must describe their auditable data 
sources in their SMHP and submit to CMS for review and approval.
    After consideration of this comment, we are making no further 
additions to this section of the final rule.
    Comment: One commenter asked whether the criteria for determining 
Medicaid eligible days and Medicaid managed care days in the Medicaid 
share portion of the hospital incentive payment calculation is the same 
criteria for determining Medicare DSH payments.
    Response: The criteria for determining Medicaid eligible days and 
Medicaid managed care days for Medicare DSH and Medicaid managed care 
days for EHR incentive payments are not the same. Medicare DSH includes 
unpaid days, while the EHR incentive payment calculation requires the 
inclusion of only paid inpatient-bed days.
    After consideration of this comment, we are making no further 
additions to this section of the final rule.
    Comment: One commenter asked for clarification of the term 
``estimated'' Medicaid inpatient bed days.
    Response: We are unclear about the commenter's question. 
Specifically, the statute permits the use of ``estimated'' days in the 
Medicaid share portion of the EHR hospital incentive payment 
calculation. Therefore, we refer the reader to the hospital calculation 
at section 1903(t)(5) and section 495.310 of this rule.
    After consideration of this comment, we are making no further 
additions to this section of the final rule.
    Comment: One commenter requested that for purposes of accurately 
calculating and auditing the Medicaid Share, CMS should eliminate data 
provisions at 2080.18 of the State Medicaid Manual.
    Response: We disagree. The provisions at 2080.18 of the State 
Medicaid Manual do not adversely impact the calculation or auditing of 
the Medicaid Share.
    We have not made any changes to the regulation related to this 
comment.
    Comment: On commenter requested that we include as an auditable 
data sources, data acquired through authorized trading partners, such 
as clearing houses, eligibility systems maintained by CMS, state 
Medicaid programs, and/or their agents.

[[Page 44501]]

    Response: We agree that there are a number of data sources 
available that would allow States to accurately data for the purposes 
of calculating the Medicaid Share. However, we have no vehicle for 
identifying which of these tools exist in individual States or across 
the country. Medicare cost reports, Medicaid cost report data, MMIS 
data, hospital financial statements, and accounting records are all 
items that we feel confident are accessible to all States and 
providers. Additionally, we believe that States and their provider 
communities are better versed at determining the tools that will be 
most beneficial for their individual programs. As such, we included the 
standard items listed as auditable data sources, but did not prohibit 
the use of other appropriate auditable data sources.
    After consideration of this comment, we are making no further 
additions to this section of the final rule.
    Comment: One commenter asked whether the Medicaid payment is based 
on an annually-calculated Medicaid Share, or is the Medicaid Share 
established in the base year only and to be applied to the duration of 
payments.
    Response: For purposes of calculating the Medicaid hospital 
incentive, the Medicaid Share is established in the base year.
    After consideration of this comment, we are making no further 
additions to this section of the final rule.
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. In our proposed rule we discussed the 
fact that some States might be prepared to implement their programs and 
make EHR incentive payments to Medicaid providers in 2010 for adopting, 
implementing, or upgrading certified EHR technology. We proposed to 
allow States to initiate implementation of these payments to Medicaid 
EPs and hospitals after the effective date of the final rule if they 
could successfully demonstrate to CMS that they are ready to make 
timely and accurate payments through the SMHP. States would include an 
additional attestation for providers assuring that they are not 
accepting payment in any other State.
    We also proposed that to be approved for early implementation, a 
State would be required to have an electronic system for provider 
registration capable of collecting the relevant information (this 
information is identified in section II.A.5.c of this final rule, where 
we describe the data collection requirements).
    Participating States would be responsible for transmitting the 
required data to CMS so that CMS could ensure that no duplicate 
payments were made to providers. We proposed to use the single provider 
election repository described in section II.A.5.c. of this final rule 
to assure no duplicative payments were made between States.
    We did not propose that States would be able to make early payments 
to meaningful users. Rather, our proposal was intended to offer 
Medicaid providers an early opportunity for capital so that they would 
be more likely to have the certified EHR technology required to 
demonstrate meaningful use in successive periods. We stated that since 
hospitals may qualify under both programs, we hoped that they would use 
the early capital to qualify as meaningful users under the Medicare 
program in the first year.
    Comment: We received comments suggesting that our proposal on early 
State implementation creates unreasonable pressure on States, 
particularly given the status and timeline of the ONC rule on 
certification criteria.
    Response: We agree with commenters. We proposed this option in 
order for States with very mature programs to proceed with early 
incentive payments for adoption, implementation, and upgrading 
certified EHR technology. However, in considering the complexity 
associated with States establishing an electronic registration system 
(which would only be temporary), as well as the fact that very few 
providers (if any) will have certified EHR technology early enough for 
this option, we believe that this may not be an efficient, cost-
effective option for many States.
    Consequently, as a result of these comments, we are removing this 
option. States will not be permitted to make payments until January 
2011. Additionally, we wish to reiterate that States must have a SMHP 
approved by CMS before making any payments to EPs and eligible 
hospitals.
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 eligible hospitals, State Medicaid agencies (or their 
contractors) are fully responsible for administering and disbursing the 
incentive payments to Medicaid eligible providers.
    We proposed to 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 would 
be required to choose only one State from which to receive Medicaid 
incentive payments in each payment year. (We note that readers should 
also refer to section section II.A of this final rule for additional 
information regarding the EHR reporting period and the single provider 
election repository).
    As we noted in the proposed rule, the statute anticipates 
coordination between the Medicare and Medicaid EHR incentive programs 
to ensure no duplicate payments are made to EPs (see 1903(t) and 
1848(o)(1)(D)(iii). Additionally, section 1848(o)(1)(B) of the Act 
requires that Medicare incentive payments for eligible professionals 
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 further direction 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 January 1, 2011. This also gives CMS, ONC, 
and States an opportunity to coordinate between Medicare and Medicaid, 
which will simplify administrative complexity in the EHR incentive 
program and facilitate provider adoption.
    Under this final rule Medicaid EPs, as discussed in section II.D.5 
and II.A.5.c, will enroll in the program through the single provider 
election repository. Once an EP selects the Medicaid EHR incentive 
program, States must have a system for reporting and tracking necessary 
information to qualify an EP for an incentive payment. In addition, as 
detailed in Sec.  495.316 States are required to submit to CMS data on 
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 de-identified data on meaningful use. States' systems 
and processes must receive prior approval, concurrent with the 
requirements described in section II.D.8 of this final rule for review 
and approval of the SMHP.
    The specific timeframes for EPs and eligible hospitals to report 
and submit

[[Page 44502]]

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 discussed in section 
II.A.1.e. of this final rule. As discussed in that section, for the 
first payment year based on meaningful use, the reporting period for 
eligible hospitals and EPs will be a continuous 90-day period that both 
starts and ends within the payment year. As long as the period spans 
the 90-day continuous period and ends within the payment year (fiscal 
year for hospitals, calendar year for EPs), the reporting period can 
begin at any time during such payment year. States also are expected to 
process payments on a rolling basis. We will issue further guidance 
regarding the timing expectations needed for State systems to 
coordinate with CMS and make timely payments
    Comment: Several commenters were concerned that Medicaid EPs and 
eligible hospitals that qualify for incentive payments in their first 
year by adopting, implementing or upgrading certified EHR technology 
are not afforded the same flexibility as Medicare EPs and eligible 
hospitals in their second payment year. The commenters wrote that they 
would be required to demonstrate meaningful use for the full year, 
rather than 90 days in their second payment year, (even though it will 
be their first year demonstrating meaningful use). The commenters 
recommended that Medicaid EPs and eligible hospitals be subject to a 
90-day reporting period in their second payment year when it is the 
first year they are demonstrating meaningful use.
    Response: We agree with the commenters and as discussed in section 
II.A., we clarify that there is no EHR reporting period for adopting, 
implementing, or upgrading certified EHR technology for Medicaid 
provider's first payment year. In order to offer parity with Medicare 
providers who must achieve meaningful use in the first year over a 90-
day period and over 12 months in subsequent years, the same policy will 
apply to Medicaid providers. In other words, Medicaid providers in 
their second participation year (or in their first payment year if they 
are qualifying based on meaningful use) shall demonstrate meaningful 
use over a 90-day reporting period and over 12-months for their third 
and subsequent years.
e. Avoiding Duplicate Payment
    In our proposed rule, we discussed the statutory requirement at 
section 1903(t)(7) of the Act that the Medicare and Medicaid programs 
coordinate payments to avoid duplication, and that CMS and the States 
coordinate payments through a data matching process, utilizing NPIs to 
the extent practicable. We also discussed section 1903(t)(2) of the 
Act, which states that Medicaid EPs must waive rights to Medicare 
incentive payments under sections 1848(o) and 1853(l) of the Act; 
hospitals, however, may qualify for incentives under both programs. We 
also proposed requirements under the review and approval of SMHPs in 
part 495 subpart D for States to verify that providers meet these 
requirements.
    In section II.A of this final rule, we discuss the final 
requirements we are adopting in order to avoid duplicate payments in 
the Medicare and Medicaid incentive programs. We also respond to 
comments in that section (see section II.A.5.c. of this final rule). As 
discussed in that section of the final rule, 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, we will collect this data 
in a single provider election repository. Next, in administering each 
State Medicaid EHR incentive program, States will 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 requirements that a 
State must have an approved SMHP that will include a mechanism for 
cross-checking this information prior to payment.
f. Flexibility for EPs To Alternate Between Medicare and Medicaid EHR 
Incentive Programs One Time
    We refer readers to section II.A.5.b of this final rule, which 
discusses rules that would allow Medicare and Medicaid EPs to make one 
EHR incentive program election change prior to the 2015 payment year, 
and not to permit any switching after the 2014 payment year. 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 (assuming the professional meets all 
eligibility criteria for the Medicaid incentives program). Similarly, 
an EP who initially selected the Medicaid EHR incentive program could 
switch to the Medicare program one time prior to 2015. (In other words, 
the last payment year an EP could switch would be the 2014 payment 
year.)
    Comments received on these policies are addressed in section 
II.A.5.b. of this final rule.
g. One State Selection
    In the proposed rule, we proposed that EPs and hospitals with 
multi-State Medicaid practice locations 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. Medicaid EPs and hospitals could annually 
change the State they select when they re-attest to program 
requirements.
    We considered the possible impact of this proposed approach with 
respect to patient volume calculations on Medicaid EPs and hospitals in 
border State areas, stating that because the Medicaid incentive payment 
for EPs will remain the same--regardless of whether they receive 
payment from one State or from multiple States--we did not think the 
administrative complexity associated with dividing and administering 
payments between or among more than one State could be justified. We 
recommended, however, that States consider border State providers when 
developing their policies on patient volume and the attestation 
methodology. We afforded additional flexibility in the patient volume 
at proposed Sec.  495.306 to account for unique circumstances and data 
collection.
    Comment: Providers inquired whether it is permissible for an EP who 
practices in more than one State to aggregate patient encounters in 
order to achieve the 30 percent Medicaid patient volume criteria.
    Response: First, it is not clear that aggregating patient volume 
across States will be an issue once EPs actually begin tallying up 
patient volume. Patient volume is calculated as a percentage, and not 
an absolute number. Thus, it does not appear that, but for aggregating 
patient volume across multiple States, an EP would not be able to 
qualify for incentive payments in any State. For example, if an EP has 
10 percent patient volume in one State (10 of 100 encounters are 
Medicaid) and 20 percent patient volume in a second State (20 of 100 
encounters are Medicaid), this does not add up to 30 percent patient 
volume (but, rather, results in a 15 percent patient volume

[[Page 44503]]

as a result of dividing 30 by 200). To restate, we do not believe that 
an EP will need to sum patient encounters across multiple States in 
order to reach the 30 percent patient volume--as in order to reach this 
patient volume threshold, the EP would likely meet the 30 percent in at 
least one State. Indeed, it appears that the only benefit of 
aggregating patient volume across States would be to permit an EP who 
has more than a 30 percent patient volume in one State to receive 
incentive payments from another State in which s/he does not meet the 
30 percent threshold.
    Nevertheless, we recommend that States consider the circumstances 
of border State providers when developing their policies and 
attestation methodologies. To afford States maximum flexibility to 
develop such policies, we will not be prescriptive about whether a 
State may allow a Medicaid EP to aggregate his/her patients across 
practice sites, if the State has a way to verify the patient volume 
attestation when necessary. States will propose their policies and 
attestation methodologies to CMS for approval in their State Medicaid 
HIT plans.
    We are making no additional revisions to this section of the rule 
as a result of this comment.
5. Single Provider Election Repository and State Data Collection
    We refer readers to section II.A.5.c of this final rule for a 
discussion of the single provider election repository and the comments 
received on this policy. 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
    In our proposed rule, we proposed that EPs in multiple group 
practices or multiple types of practice locations would be required to 
select one TIN for Medicaid EHR payment disbursement. In other words, 
such EPs would not be permitted to require a State to divide payments 
among different practices or practice locations based upon group TINs. 
We explained that 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 
stated that requiring reimbursement to be made to one TIN would reduce 
opportunities for fraud or abuse, as States would be able to cross-
check EP and TIN combinations more easily to verify EP attestations.
    We also stated that although the State would not divide payments 
among the various TINs of an individual EP, Medicaid EPs could, 
themselves, decide to divide payment. These EPs could independently 
distribute funds among their respective group practices or practice 
locations after the initial disbursement from the State to their 
designated TIN.
    Comment: We received comments suggesting that EPs should be allowed 
to proportion their payments and give multiple TINs.
    Response: For these reasons advanced in the proposed rule, we 
believe that permitting an EP to divide the incentive payment among 
multiple TINs would introduce an unnecessary level of administrative 
complexity into this temporary program. It also could increase the 
opportunities for fraud and abuse as it would be more administratively 
cumbersome for States to track multiple payments (to ensure correct 
payments) and to track and verify multiple eligibility-related EP 
attestations. Once a payment is disbursed from the State, nothing 
precludes the EP from further disbursing the incentive payment, subject 
to the applicable fraud, waste, and abuse laws, regulations, and rules.
    After consideration of the public comments received, we are 
finalizing these provisions as proposed.
7. Activities Required To Receive Incentive Payments
a. General Overview
    As we discussed in our proposed rule, to qualify to receive a first 
year Medicaid incentive payment, section 1903(t)(6)(C)(i) of the Act 
indicates that EPs and eligible hospitals 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 Public 
Health Service Act) that is certified pursuant to section 3001(c)(5) of 
such Act as meeting standards adopted under section 3004 of such 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 II.A of this final 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'' certified EHR technology. 
In proposed Sec.  495.302, we define adopting, implementing or 
upgrading certified EHR technology as the process by which providers 
have installed and commenced utilization of certified EHR 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, we proposed that 
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. We proposed that 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

[[Page 44504]]

other requirements in this section, including verifying that 
attestations are consistent with methodologies to combat fraud and 
abuse (see proposed Sec.  495.366 through 370, Financial Oversight, 
Program Integrity, and Provider Appeals). We proposed that the State's 
SMHP would detail these processes.
    The CMS Medicaid Transformation Grants 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 proposed to include staff training and efforts to 
redesign provider workflow under the definition of implementing 
certified EHR technology. We explained that 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 proposed that there be 
evidence that a provider demonstrated actual installation prior to the 
incentive, rather than ``efforts'' to install. We stated that this 
evidence would 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. As 
Medicaid incentive payments are intended to stimulate meaningful use of 
EHR technology, we stated our belief that the payments need to result 
in tangible adoption, implementation, or upgrading of certified EHR 
technology. We stated that States would be responsible for verifying 
this evidence of EHR adoption.
    In establishing criteria for the ``implementation'' portion of 
``adopt, implement or upgrade'' requirement, we proposed 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 proposed ``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. We proposed that States 
describe in their SMHPs the process that would be in place 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.
    Comment: Several commenters recommended that CMS clarify if 
``upgrade'' does or does not apply to an already certified EHR. They 
recommended that CMS confirm that an upgrade is intended to enable a 
provider to expand existing functionality of an EHR so that it meets 
the new certification criteria.
    Response: To clarify this question, an example of upgrading that 
would qualify for the EHR incentive payment would be upgrading from an 
existing EHR to a newer version that is certified per the EHR 
certification criteria promulgated by ONC related to meaningful use. 
Upgrading may also mean expanding the functionality of an EHR in order 
to render it certifiable per the ONC EHR certification criteria.
    We are making no additional revisions to this section of the final 
rule as a result of this comment.
    Comment: Commenters wrote that given that adopt/implement/upgrade 
(AIU) involves significant practice workflow redesign and that the 
States' overarching goal is to increase the level of provider 
participation, the commenters recommended that CMS require only AIU for 
participation Year 1 and Year 2. They further recommended that CMS 
allow AIU compliance to be further defined as the provider developing, 
submitting, and following a customized plan for the necessary workflow 
changes with timelines (whose development can be assisted by the 
Regional Extension Centers); the provider would have to meet their 
timelines for each year in Stage 1 to qualify for the incentive 
payment; and the AIU plan timelines would have to be structured so 
submission of HIT and clinical quality measures would begin in Stage 2.
    Response: The statute at section 1903(t)(6)(C) permits Medicaid 
providers to receive the EHR incentives for adopting, implementing or 
upgrading to certified EHR technology in their first participation 
year. A provider's first participation year may be any year between 
2011 through 2016. In their State Medicaid HIT Plans, States will 
propose to CMS how they will audit and oversee Medicaid providers' 
adoption, implementation or upgrading to certified EHR technology. 
States should propose further details to CMS about how they will verify 
that providers have met this requirement.
    After consideration of the comments received, we do not believe 
that just the development and submission of an implementation plan for 
EHR adoption is a significant enough commitment to warrant the AIU 
incentive payment. There is nothing binding, nor is there any financial 
contribution towards such a plan.
    We are making no additional revisions to this section of the final 
rule as a result of this comment.
    Comment: Many commenters suggested that they believe the goal of 
this incentive is to help defray some of the costs of adopting, 
implementing, and upgrading to certified EHR technology. As such, the 
commenters believe ``proof'' of AIU should not require completion of 
AIU but demonstrated commitment to AIU. For example, a proof of 
purchase, a schedule for training and implementation, and periodic 
reporting from practices on progress on the schedule could suffice. The 
commenters requested that States have flexibility to define what is 
sufficient to trigger payment.
    Response: States should provide details to CMS on how they will 
audit and oversee Medicaid providers' adoption, implementation or 
upgrading to certified EHR technology in their SMHP. States' SMHP 
should include further details about how they will verify that 
providers have met this requirement. However, while States may propose 
how they will determine what AIU activities are sufficient for the EHR 
incentive payment; CMS must approve their proposals via the SMHP. The 
definitions included in this final regulation by CMS for adopt, 
implement or upgrade do imply completion of at least one of the three 
tasks. A proof of purchase or signed contract would likely be an 
acceptable indicator of EHR adoption per the States. Implementation is 
on-going, therefore working actively with Regional Health IT Extension 
Centers on implementation, completion of specific benchmarks or other 
activities towards implementation would be acceptable.
    We are making no additional revisions to this section of the final 
rule as a result of this comment.
    Comment: A commenter recommended that State Medicaid agencies 
provide eligible hospitals with

[[Page 44505]]

the maximum incentive payments for their first two payment years as a 
limited source of capital for AIU.
    Response: The Medicaid hospital calculation was part of the HITECH 
statute and not defined by CMS. Eligible Medicaid hospitals can receive 
their first year's payment for AIU and not meaningful use, but must 
meet the meaningful use requirement in their second and subsequent 
participation years.
    We are making no additional revisions to this section of the final 
rule as a result of this comment.
    Comment: A commenter recommended that a Medicaid provider be 
permitted to qualify for their first year Medicaid EHR incentive even 
if they have not actually installed certified EHR technology but have 
spent or are committed to spend an amount equal to at least the lesser 
of $50,000 or 5 percent of the Medicaid EHR incentive amount.
    Response: In consideration of the comments, we are clarifying that 
the final definition of adopt, implement or upgrade is inclusive of 
providers' acquisition, such as a purchase, of a certified EHR. 
Providers will be responsible for providing documentation which 
substantiates AIU as required by the State Medicaid Agency.
    We are revising the definition of adopt, implement, and upgrade as 
a result of these comments, see section 495.302.
c. Other General Terminology
    In our proposed rule, we proposed definitions for ``EHR reporting 
period'' and ``payment period,'' stating that these definitions 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 demonstrate meaningful use of 
certified EHR 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 were specified in proposed Sec.  495.332). In 
the proposed rule, we specified that States would 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, States would need to 
refer to providers' reports on meaningful use, including reporting of 
clinical quality measures (see section II.A. of this final rule for 
requirements for clinical quality measures), in accordance with the 
appropriate EHR reporting period. States could not appropriately make 
incentive payments in the absence of such reporting.
    We proposed that 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, hospital-based requirements, and all other 
requirements. States would develop their own administration, payment 
and audit processes, and as described in Sec.  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. We proposed that permissible means for 
ensuring patient volume and all of the requirements described in this 
section would include survey, attestation, or the creation of special 
codes on claims, subject to our prior approval.
    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 our proposed rule, we discussed our expectation that the bar for 
demonstrating meaningful use of certified EHR technology will rise in 
years to come. In this final rule, meaningful use and its evolving 
criteria are discussed in section II.A. In order to receive Medicaid 
incentive payments, providers will be required to demonstrate (and 
States will be required to track and validate) meaningful use, as 
described in section II.A.2. of this final rule. In section II.D.8 of 
this final rule, we also discuss our policies regarding States' ability 
to require additional objectives in the demonstration of ``meaningful 
use,'' or otherwise add to the Federal definition of meaningful use. We 
also discuss the requirement that States receive prior approval of any 
such additions.
    As we discussed in the proposed rule, we believe that 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 the extent practicable, 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 will be evaluating States' HIT Planning Advanced Planning Documents 
(PAPDs) and SMHPs with this objective in mind, as described section 
II.D.8 of this final rule.
    As we discussed in the proposed rule, States' system requirements 
for monitoring meaningful use must include the capacity to determine 
the appropriate stage of meaningful use and the appropriate incentive 
payment amount, depending upon the providers' payment year. 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 a provider's year of entry into the Medicaid EHR 
incentive program to determine the correct eligibility criteria and 
generate the appropriate Medicaid incentive payments.
    Once States are giving providers the Medicaid EHR incentive 
payments for being meaningful users of EHRs, and in 2012 begin 
receiving clinical quality measures data from those providers, we 
proposed that States would 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 
the Medicare and Medicaid EHR incentive programs, we proposed that we 
would use the meaningful use measures hospitals report to us to make 
quality data on Medicaid eligible hospitals available to States.
    Comment: Commenters requested clarification on the reporting period 
for

[[Page 44506]]

adopting, implementing, and upgrading, and whether this period is 
similar to the 90-day period for demonstrating meaningful use in the 
first year.
    Response: As discussed earlier, we are clarifying that there is a 
no reporting period for AIU for the providers' first participation 
year. However, there is a 90-day reporting period for the first 
participation year in which Medicaid providers qualify by demonstrating 
meaningful use. The rationale is that we understand that not all AIU 
activities require 90 days, such as EHR acquisition. States will 
determine how they plan to implement this requirement.
    As a result of this comment and a similar comment above, we are 
revising section 495.4 to indicate that there is no EHR reporting 
period for adopting, implementing, or upgrading in Medicaid providers' 
first participation year, if they qualify based on AIU, and there is a 
90-day reporting period for both the first year that a Medicaid 
provider demonstrates MU (regardless of whether they demonstrated AIU 
in their first participation year or are qualifying based on MU in 
their first participation year).
    Comment: Several commenters requested that CMS clarify the process 
that will assure Medicaid access to Medicare meaningful use data, at a 
minimum for (1) hospitals who receive both Medicaid and Medicare 
payments and (2) eligible providers that may switch once between the 
Medicaid and Medicare incentive programs. Commenters requested that CMS 
provide States with Medicare quality reporting/data in a timely fashion 
(for example, within 30 days of receipt of such information). 
Alternatively, commenters suggested that the providers could be 
required to report separately to both Medicare and Medicaid.
    Response: We are finalizing our policy as proposed. We believe that 
it would represent an undue burden on hospitals eligible for both EHR 
incentive payments to report their data to both CMS and the States. We 
will issue further guidance about how States will be able to access the 
meaningful use data submitted to CMS by hospitals eligible for both 
Medicare and Medicaid EHR incentive payments in order for the State to 
meet its audit and oversight requirements. It is not clear to CMS why a 
State would require access from CMS to an eligible professional's 
meaningful use data if they were a Medicare EHR Incentive Program 
participant in the prior year. States can only base a Medicaid 
provider's EHR incentive payment, as it pertains to meaningful use, on 
the current participation year's EHR reporting period.
    We are making no additional revisions to our regulations as a 
result of this comment.
    Other than the changes explained above, we are finalizing the 
remainder of our proposed policies as they were proposed.
d. Quality Measures
    We refer readers to section II.A.3 of this final rule-for a 
discussion of the clinical quality measure reporting required for 
demonstrating meaningful use of certified EHR technology. As discussed 
previously, we intend to update our definition of meaningful use 
biennially, 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 quality measures (see section II.B.1.d. of this 
final rule).
    Comment: Several commenters believe that the current clinical 
measures do not reflect key clinical services and issues for the 
Medicaid population, including behavioral health, dental, long-term 
care, and care coordination (particularly across physical and 
behavioral health care).
    The commenters recommend that CMS work with the Medicaid Medical 
Directors and ONC and consider the development and inclusion of 
clinical and non-clinical quality measures that are more representative 
of the Medicaid population. Alternatively they wrote that CMS and ONC 
should have a ``placeholder'' to accommodate data and interoperability 
for these measures. Commenters wrote that the areas with gaps are 
behavioral health, dental care, long-term care, special needs 
populations and care coordination, particularly across physical and 
behavioral health. The commenters recommended that new clinical quality 
measures be added as ``placeholders'' for care provided by non-
eligible, but critical Medicaid providers, such as Community Mental 
Health Centers, Home Health, and Renal Dialysis Centers.
    Many commenters noted that with regard to pediatric clinical 
quality measures, they recommend that first-year measures focus on 
immunizations, diabetes, asthma, autism, and lead screening. They also 
recommend measures to introduce in 2012 and beyond to include smoking, 
obesity, disease- or condition-specific measures, and measures aimed at 
reducing disparities. They further recommended measures to introduce in 
2013 and beyond include the development of clinical quality measures on 
psychology, child abuse, developmental delays, and efficiency measures.
    Response: We agree that these measures (listed directly above) have 
clinical relevance for providers. However we are aligning with the 
Medicare Stage 1 meaningful use provisions regarding publication and 
opportunity for public comment on quality measures before they are 
finalized. We are not including additional meaningful use objectives 
and measures that were not discussed in the proposed rule.
    Comment: Several commenters believed that the quality measures 
proposed in the interim rule do not match the quality measures that 
HRSA currently requires FQHCs to report. The commenters would like to 
work with CMS and HRSA to move forward and harmonize the quality 
measures by 2013 but requested that until quality measures are 
harmonized across the federal government system, FQHCs and the EPs who 
qualify and assign their Medicaid incentive payments to the FQHC should 
be allowed to report on the current HRSA measures.
    Response: Meaningful use applies to each individual EP. Therefore 
the HRSA quality measures, which are facility-based, not necessarily 
NQF-endorsed, or reportable from EHRs are not an acceptable alternative 
for EPs who practice at an FQHC. Furthermore, as explained in section 
II.A. of this final rule, we are not including in the final rule 
quality measures that were not included in the proposed rule. To ensure 
uniformity across both programs, we have adopted this same policy for 
Medicaid. We believe it is important to offer Medicaid providers and 
stakeholders the same opportunity for public comment on quality 
measures.
    We agree with the goal of harmonizing quality measure reporting 
across Federal programs and will engage with stakeholders and experts 
to address this priority as part of the development of the Stage 2 
definition of meaningful use.
    We are finalizing these provisions as proposed and we will continue 
to work to identify, and develop electronic specifications for 
additional clinical quality measures that address current gaps, such as 
long-term care, behavioral health, pediatrics and oral health for Stage 
2 of meaningful use. In particular, we recognize the lack of endorsed 
oral health clinical quality measures, with identified and tested 
electronic specifications. This poses a challenge for dentists, who are 
eligible professionals for the Medicaid EHR

[[Page 44507]]

incentives, to demonstrate meaningful use, other than with the general, 
profession-neutral measures.
    While an eligible professional can report ``zero'' for the 
denominator of any measure for which s/he does not have any relevant 
patients, we will work to include in Stage 2 of meaningful use, 
clinical quality measures that would provide useful data to CMS and 
States on oral health care as reported by EHRs.
    In addition, in order to minimize provider burden, and to maximize 
measure reporting efforts and resources, we seek to align the quality 
measures for the Stage 2 definition of meaningful use with other 
quality measures development and reporting related to health care 
reform and other CMS quality measures programs, as appropriate and 
feasible. Stage 1 of meaningful use is limited to objectives and 
measures that are already in existence, not those still under 
development. Measures will be included that have operational relevance 
to the care provided to Medicaid and CHIP beneficiaries by eligible 
professionals and hospitals defined in the HITECH Act.
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. (See 1903(t)(9) of the Act.)
    This section of the final 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 Sec.  495.302, we defined 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 proposed to separately include definitions in 
part 495.
    We proposed to include in our regulations the requirements that in 
order to qualify to receive FFP for administering the incentive 
program, States must develop a SMHP, an HIT Planning APD (PAPD), and an 
HIT Implementation APD (IAPD). These documents lay out the process used 
by States to implement and oversee the EHR incentive program, and will 
help States to construct an HIT roadmap to develop the systems 
necessary to support eligible providers in their adoption and 
meaningful use of certified EHR technology. The development of a SMHP 
(see also Sec.  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, while reducing 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 (SMD) letter on 
September 1, 2009, on this process and the State efforts necessary to 
receive the 90 percent FFP for planning-related expenditures. As stated 
in that letter, and as further required through this rulemaking, our 
review process ensures that States are complying with requirements of 
the HITECH 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 would not ensure the 90 percent FFP. As explained 
in the letter, and as further reflected in this rulemaking, we must 
review and prior approve all elements of the State's SMHP, and APD 
documents, and work with States to determine the appropriate level and 
type of FFP.
    States are required to submit these advance planning documents in 
order for us to approve receipt of the 90 percent Federal match. 
Specifically, prior approval is required for the HIT PAPD (see also 
Sec.  495.336). The deliverable resulting from the HIT PAPD is the 
SMHP. The SMHP must be reviewed and approved before it is included in 
an IAPD (see also Sec.  495.338). The IAPD also must be prior approved. 
Until approval is granted States cannot draw down funds.
    For purposes of the Medicaid EHR incentive program, we believe 
there are 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 includes initial planning, including an 
assessment of the State EHR environmental landscape, and development of 
the SMHP. As explained in our September 1, 2009 letter, the vehicle for 
informing us of Phase I activities is the HIT PAPD, and indeed, over 40 
States have already submitted their PAPDs and have received funding to 
begin Phase I activities. Phase II then involves further development 
and full implementation of the SMHP. Consequently, the HIT IAPD is the 
vehicle for reporting of Phase II activities. As discussed in the SMD 
letter, and as further reflected in this final rule, States need to 
receive prior approval of their planning documents. In fact, we have 
already worked closely with the majority of States in developing their 
HIT PAPDs, prior to them initiating their EHR planning activities, and 
we expect this close coordination to continue between the States and 
CMS.
    Also, as proposed, in this final rule we will require States 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, we designed the prior approval conditions, and the 
prior approval process, to mirror what is presently used in support of 
acquiring automated data processing equipment and services in 
conjunction with development and operation of State MMIS (the State's 
automated mechanized claims processing and information retrieval system 
approved by CMS).
    As proposed, this final rule (at 495.348) will require State 
Medicaid programs to comply with current procurement standards. 
Specifically, at 495.348 we have included language that accords with 
the procurement requirements in 45 CFR part 95 subpart F and 
incorporates many of the procurement standards previously contained in 
42 CFR part 74. Inclusion of these procurement requirements maintains 
the long-standing procurement standards and policies for State 
information technology contracts.

[[Page 44508]]

Under these standards the State must ensure that when procuring HIT 
equipment and/or services, there is maximum practical open and free 
competition, and that any procured materials or services are obtained 
in a cost-effective manner. The regulations also make clear that the 
State, as the grantee, is responsible for meeting its contractual 
responsibilities under any of its procurements, and will not have 
recourse to the Federal government to settle or satisfy its contractual 
and administrative issues. Further, States must have written standards 
of conduct regarding the performance of its employees that are engaged 
in the award and administration of the HIT equipment/services contracts 
(including conflict of interest rules contained in 495.348(c)). States 
must have written procurement procedures that accord with 495.348(e) 
and a system for administering contracts in accordance with 495.348(f). 
Procurement contracts must meet the additional requirements contained 
in 495.348(g) as well as describe the conditions under which the 
contract may be terminated for default or because of circumstances 
beyond the control of the contractor (see 495.348(h)). Procurement 
contracts must include provisions allowing State and Federal access to 
the materials and staff of the contractor, in accordance with 
495.348(i).
    As was proposed, our final regulations at 495.346 also will require 
the State agency to allow the Department access to all records and 
systems operated by the State in support of the program. Final 
regulations at 495.352 impose reporting requirements on States to 
submit to the Department, on a quarterly basis, a progress report 
documenting specific implementation and oversight activities performed 
during the quarter. Regulations at 495.354 through 495.360 contain 
rules for charging equipment, non-discrimination requirements, 
requirements for cost allocation plans, and requirements for ownership 
rights in software. Our rules would require termination of FFP in the 
case of States failing to provide access to information relating to any 
of the requirements we have included in this subpart. We believe the 
procurement and other rules discussed above are authorized under 
section 1902(a)(4) of the Act, as well as under section 1903(t)(9) of 
the Act requiring a State to conduct adequate oversight of its program, 
and use its funds to administer the incentive payments. In addition, 
any reporting and other requirements will assist us in submitting the 
reports that are required under section 1903(t)(10) of the Act, which 
requires us to monitor and report on the progress of implementation of 
the EHR provisions.
    As proposed, State Medicaid agencies will be required to attest, as 
required by section 1903(t)(6)(A)(i) of the Act, that States 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. States must also attest that payments 
to an entity promoting the adoption of certified EHR technology, as 
designated by the State, will 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. 
(See 495.332 of our final rules). States are required to attest that 
the entire incentive payment has been forwarded to the eligible 
Medicaid provider, and that no Medicaid eligible professional or 
hospital is required to return any portion of the incentive payment to 
the State Medicaid agency. States must establish a process to ensure 
that any existing fiscal relationships with eligible professionals or 
hospitals 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 Sec.  438.6(c)(5)(iii) and a 
methodology for verifying such information.
    Additionally, we are requiring 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 have allowed for 
claiming of such reasonable costs incurred on or after February 18, 
2009, prior to publication of the final rule. Specifically, a State 
that can show that 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 may potentially receive retroactive FFP back to the date in 
which these efforts began, with CMS approval, but not before February 
18, 2009.
    Comment: Several commenters expressed concerns about the timing of 
planning and implementation and request flexibility in this area. 
Commenters indicated that there will be a need for ongoing planning 
while rules and guidelines are being promulgated. Commenters indicated 
that they envision a phased approach to implementation, and request 
that CMS permit simultaneous expenditure of both planning and 
implementation funds.
    Response: We proposed specific requirements for States to request 
FFP from CMS for the Medicaid EHR incentive program modeled on the 
process States use to request FFP from CMS for Medicaid Management 
Information Systems technology projects. CMS proposed to utilize 
information and documentation that will result from the process 
described in this section to evaluate approaches proposed by States, 
track and monitor progress of implementation, and perform the statutory 
program and financial oversight required for this new program.
    In establishing the requirements we believe States will have 
flexibility to request FFP for planning and implementation activities 
to implement the provisions of the EHR incentive program in a manner 
that is similar to and consistent with current approaches to receive 
enhanced FFP for MMIS systems under the Medicaid program. This will 
enable States to modify or adapt as changes occur during the planning 
and implementation phases envisioned under this proposed rule. Further, 
we believe that the information required is consistent with section 
1903(t)(9) of the Act that States must demonstrate to the satisfaction 
of the Secretary that the State is conducting adequate oversight.
    We agree with the need for flexibility in planning for the Medicaid 
incentive program, and the conduct of implementation activities to 
ensure the program is successful in the long-term. We have added 
additional clarifying information in the sections regarding the HIT 
PAPD, HIT IAPD, As-needed HIT PAPD update and as-needed HIT IAPD 
update, Annual HIT IAPD requirements, and SMHP requirements. These 
clarifications are consistent with guidance issued in our State 
Medicaid Director's letter on September 1, 2009, which indicated that 
CMS anticipates a phased approach to planning and implementation 
activities.
    Finally, for the final rule we are making numerous changes in order 
to be more specific and provide additional clarity regarding certain 
terms and

[[Page 44509]]

requirements. These revisions are reflected here; however, regulations 
text is not updated since the concepts of these terms remain the same. 
Clarifications are as follows:
    We have further defined the terms ``service oriented architecture 
(SOA)'', or ``service component based architecture'' to indicate that 
they are 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 
health IT projects authorized under the Act to ensure that different 
systems and programming languages provide a basis for interoperability 
among and between applications that may reside on different platforms 
through a communication protocol to achieve health information exchange 
required under the Act. CMS anticipates that States will describe 
proposed HIT projects in the context of SOA principles, and intends to 
evaluate plans for health information exchange, and interoperable 
health IT based on these commonly used information technology 
principles.
    We have also further defined the term ``State self-assessment (SS-
A),'' a component of MITA, as a process that a State will use to review 
its Medicaid information technology strategic goals and objectives, 
measure its current baseline business processes and capabilities 
against defined MITA business capabilities, and develop targeted future 
capabilities to transform the Medicaid enterprise to be consistent with 
the MITA principles of interoperability and exchange of health 
information. Although we are including a definition of State self 
assessment in this final rule, we are deleting the requirement that a 
State provide the MITA SS-A, as we believe the as-is assessment 
supercedes the need for a separate MITA SS-A. However, we believe it is 
important to keep a definition of SS-A, because there is an inter-
connection between activities accomplished under the Medicaid EHR 
Incentive Program and States' MMIS enhancements. For example, data 
exchanges between various State systems that comprise the Medicaid 
enterprise of the State might also support the State's administration 
of the EHR Incentive Program.
    We are further defining MITA, because we expect that States will 
describe proposed health IT projects as well as their ``as is'' 
landscapes using MITA concepts and principles. We intend to evaluate 
States' proposed strategies and plans for development of Medicaid 
health information exchange and interoperable health IT using these 
MITA principles, as applicable. These strategies and plans must be 
included in the State Medicaid Health Information Technology Plan 
(SMHP), a term discussed below. We have previously published a document 
entitled ``MITA Framework 2.0'' on the CMS Web site at http://www.cms.hhs.gov/MedicaidInfoTechArch. The MITA Framework 2.0 was 
developed by CMS in collaboration with State Medicaid agencies and 
information technology vendors to facilitate the adoption of 
information technology principles and practices that will lead to 
increased deployment of state-of-the-art technologies and improved 
management of the Medicaid program. States presently are utilizing MITA 
and the SS-A for Medicaid IT projects approved by CMS, and application 
of these principles for activities required under this proposed rule 
will not add additional burden to State efforts to adopt HIT as 
envisioned under the Section 1903(a)(3)(F) of the Act.
    The MITA principles and tools foster integrated business processes 
and IT transformation for all States. It achieves this in part by 
demonstrating that planned enhancements to Medicaid systems, including 
MMIS, support State and Medicaid strategic goals and how intra-state 
systems other than the MMIS have been considered in developing the 
solutions. We believe that as States and providers implement EHRs, it 
will be necessary and essential to plan technology upgrades that will 
facilitate health information exchange with Medicaid providers 
receiving incentive funding.
    We are further clarifying that we are defining the Medicaid 
Management Information System (MMIS) as it relates to specific 
requirements for Medicaid claims processing and information retrieval 
contained in current regulations at 42 CFR part 433, subpart C. We 
proposed a definition of the term MMIS because it is the common term 
that CMS, State Medicaid agencies, and industry use to refer to the 
Mechanized Claims Processing and Information Retrieval Systems 
specified in section 1903(a)(3) of the Social Security Act. MMIS means 
the system of software and hardware used to process Medicaid claims 
from providers of medical care and services for the medical care and 
services furnished to recipients under the medical assistance program 
and to retrieve and produce service utilization and management 
information required by the Medicaid single State agency and Federal 
Government for program administration and audit purposes. The 
objectives of the MMIS 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. The MMIS is also compatible with the claims 
processing and information retrieval systems used in the administration 
of the Medicare program.
    We believe that States will utilize their MMIS extensively in 
administering the provisions of this proposed rule, including but not 
limited to payment and tracking of Medicaid incentive payments, access 
to data and information necessary to establish the vision for Medicaid 
health IT, and achieving interoperability and health information 
exchange envisioned in the Act.
    In the proposed regulation at Sec.  495.332 we proposed a 
definition of the term State Medicaid Health Information Technology 
Plan (SMHP) as an integral part of planning and implementation of the 
EHR incentive program. The SMHP is a comprehensive document that 
describes the State's current and future health IT activities in 
support of the Medicaid EHR incentive program. We further clarify that 
we require that the SMHP will be developed by the State Medicaid 
agency, after consulting with other stakeholders across the State. The 
SMHP will be reviewed and approved by CMS prior to any activities 
described in the SMHP being funded and implemented. We anticipate State 
agencies will engage a wide range of stakeholders within and outside of 
State and Federal government to develop a vision of how the Medicaid 
EHR incentive program will operate in concert with the larger health 
system and statewide efforts. The SMHP is required to participate in 
the Medicaid incentive program because we believe that States must 
develop a strategic vision and plan that includes clear targets and 
measurable outcomes to be consistent with the intent of section 
1903(a)(3)(F) of the Act to encourage the adoption and meaningful use 
of certified EHR technology.
    The SMHP is intended to serve as the vision for developing the 
desired future state for the Medicaid IT environment that furthers the 
goals of health information exchange and meaningful use envisioned 
under the Act. The SMHP should be coordinated and integrated with the 
Statewide plan for health IT developed under section 3013 of the Public 
Health Service Act, which is developed by the designated statewide 
entity. To ensure that the SMHP is coordinated and integrated

[[Page 44510]]

with the Statewide plan, we will develop criteria and processes for the 
evaluation of the SMHP consistent with ONC's review of the Statewide 
plans. The SMHP must contain: (a) A current health IT landscape 
assessment; (b) a vision of the State's HIT future landscape, and (c) 
the specific actions necessary to implement the incentive payments 
program, including a health IT roadmap to achieve those actions. This 
deliverable will be the ``plan'' to determine how the incentive 
payments will be administered; however, it is not the implementation of 
such plan. The SMHP must include all of the elements listed in 495.332; 
however, we realize that States may not have all of the answers 
initially. States will not be permitted to make incentive payments to 
providers unless they have a comprehensive EHR incentive payment 
program established. However, if States are not completely clear, for 
example, about their ``to be'' world at the time of the submission of 
their SMHP, States can present the components that are finalized and 
revise the SMHP to further discuss their ``to be'' world at a later 
time. Additionally, as stated previously in this final rule, we have 
revised the rule to include a requirement that the SMHP must describe 
the process in place and the methodology for verifying that eligible 
professionals meet their responsibility for 15 percent of the net 
average allowable cost for certified EHR technology and that the SMHP 
include information about how States will validate the patient volume 
consistent with the menu of options listed in Sec.  495.306.
    For this final rule, we are also explaining our understanding that 
the elements of the SMHP, as listed in Sec.  495.332, may be separated 
into four categories, as follows:
    (1) Assessment and Planning. This category of SMHP elements 
addresses requirements in the Act relating to increasing the use of 
health IT, including EHR, ensuring interoperability, and meaningful use 
of certified EHRs. As proposed, States will perform comprehensive 
assessments of the current health IT landscape environment in the 
State, including the inventory of existing health IT in the State, 
including ``as is'' and ``to be'' landscape assessments. Also, as 
proposed, States will develop a 5-year strategic plan, and a 
description of how the State Medicaid HIT plan will be planned, 
designed, developed and implemented, including how it will be 
implemented, and a description of how intrastate systems, including the 
MMIS, and other claims systems, have been considered in developing a 
health IT solution. The SMHP will include a description of data-sharing 
components of proposed health IT solutions, including security 
provisions, and description of how the State will support integration 
of clinical and administrative data.
    (2) Ensuring improvements in health outcomes, clinical quality, and 
efficiency. This category of SMHP elements will address requirements in 
the Act relating to improving healthcare quality and lowering costs. As 
proposed, States will include components that describe a process for 
ensuring improvements in health outcomes, clinical quality, or 
efficiency resulting from the adoption of certified EHR technology by 
recipients of Medicaid EHR incentive payments and a methodology for 
verifying such information. As proposed, we are requiring a description 
of how the State will address, in the long-term, 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. We 
proposed that in order to obtain approval for their SMHP and 
implementation funding, a State would have to detail how their EHR 
Incentive Program addressed the concepts of self-direction including 
budget development and expenditure tracking for persons with 
disabilities. After additional consideration, CMS decided that these 
concepts are not directly applicable to electronic health records or 
meaningful use, per se, and while important, are more associated with 
other e-Health tools, such as personal health records. Furthermore, the 
provider types to whom this is most directly relevant, such as home, 
institutional and community-based providers and facilities, are not 
eligible for EHR incentives so including planning for this issue was 
not perceived as rising to the level of a requirement. It is 
anticipated that Stage 2 of meaningful use will include greater levels 
of patient engagement, including via personal health records. However, 
we think it is premature to require that States fully address this 
issue in their SMHPs order to initiate their EHR Incentive Programs for 
Stage 1.
    As proposed, we will also require a description of the process in 
place for ensuring that any certified EHR technology used as the basis 
for incentive payments 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.
    (3) Interoperability and Health Information Exchange. This category 
of SMHP elements will address requirements in the Act relating to 
ensuring interoperability and increasing health information exchange. 
We proposed a series of elements that explain how the State will adopt 
national data standards for health and data exchange and open standards 
for technical solutions as they become available. These elements of the 
SMHP also are included in our final rule.
    (4) Administration and Oversight. This category of SMHP elements 
address the requirements in the Act relating to implementation and 
financial oversight of the program. For provider eligibility, we 
proposed that States provide a description of the process they will use 
for ensuring that each EP and eligible hospital meets provider 
enrollment eligibility criteria upon enrollment and re-enrollment to 
the Medicaid EHR payment incentive program, and the process for 
ensuring patient volume consistent with the criteria in Sec.  495.304 
and Sec.  495.306, and for ensuring that each Medicaid EP is not 
hospital-based and that there is a methodology in place used to verify 
such information. We are finalizing most of these requirements, as 
proposed. However, in response to comments suggesting that CMS define 
the term ``encounter'' and take a menu approach to patient volume to 
allow States several options, based on their data sources, CMS has 
included changes to the SMHP requirements for the patient volume 
requirement in Sec.  495.302, Sec.  495.306, and Sec.  495.332. These 
changes are discussed under the patient volume section of this final 
rule. We note that States that wish to offer an alternative for 
estimating patient volume would be required to involve key stakeholders 
in the determination of such alternative. We also proposed, and are 
finalizing, specific elements in the SMHP relating to monitoring and 
validation of information, including a method of ensuring all 
information from provider attestations is captured, stored, and 
verified, and any information added to the CMS Single Provider 
Repository is all true and accurate. We also proposed, and are 
finalizing, that States include a list of the specific actions planned 
to implement the EHR incentive program, including a description and 
organizational charts for workgroups within State government and 
external partners. As proposed, States will need to describe the 
process they have in place to ensure that no

[[Page 44511]]

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 incentive payment program, and a 
methodology for verifying such information is available and the process 
to ensure that no amounts higher than 90 percent of FFP will be claimed 
for CMS-approved administrative expenses in administering the certified 
EHR technology incentive payment program, including a methodology for 
verifying such information. As proposed, States will need to include 
mechanisms for making timely and accurate payments and a requirement 
that providers attest that they are not receiving a payment in any 
other State under the Medicaid EHR incentive program. This category 
also includes elements relating to financial management and auditing 
necessary to ensure the proper and efficient management and oversight 
of the program and FFP.
    Finally, we proposed that the States may propose in the SMHP 
alternatives to measuring patient volume or achieving meaningful use. 
The rules for proposing alternatives are discussed elsewhere in this 
final rule.
    We are further clarifying the definition of Health Information 
Technology Planning Advance Planning Document (HIT PAPD) (and any 
necessary update documents) to mean a plan of action that requests FFP 
and approval to initiate and accomplish planning activities necessary 
for a State agency to determine the need for and plan the acquisition 
of HIT equipment and services, and to acquire information necessary to 
prepare a HIT Implementation Advanced Planning Document (HIT IAPD), 
described below, or common procurement instruments, such as requests 
for proposals, or requests for qualifications and quotations, necessary 
to implement the SMHP. CMS is including a definition of the HIT PAPD so 
that States may submit proposed resources and planning activities, 
which are described in further detail in our State Medicaid Director's 
letter on September 1, 2009, to receive the 90 percent FFP match for 
initial planning activities related to the Medicaid EHR incentive 
payment program. In order to qualify for the 90 percent FFP 
administrative match, section 1903(t)(9) of the Act requires a State to 
demonstrate, to the satisfaction of the Secretary, compliance with 
three specific criteria:
    (A) The State uses the funds for purposes of administering the 
incentive payments, including the tracking of meaningful use of 
certified EHR technology by Medicaid providers;
    (B) The State conducts adequate oversight of the incentive program, 
including routine tracking of meaningful use attestations and reporting 
mechanisms; and
    (C) The State pursues initiatives to encourage adoption of 
certified EHR technology to promote health care quality and the 
exchange of health care information under Medicaid, subject to 
applicable laws and regulations governing such exchange, while ensuring 
privacy and security of data provided to its data exchange partners.
    We are further clarifying the definition of Health Information 
Technology Implementation Advance Planning Document (HIT IAPD) (and any 
necessary update documents) to mean a plan of action that requests 
approval of FFP to acquire necessary resources to implement and 
administer the activities and objectives of the State's proposed SMHP, 
once the SMHP is approved by CMS, including the allocation or 
acquisition of human resources, services and equipment. To qualify to 
receive FFP for administering the incentive program, States must 
develop an HIT PAPD, SMHP, 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 and maintain a 
health IT roadmap to develop the systems necessary to support providers 
in their adoption and meaningful use of certified EHR technology.
    With respect to FFP under the Medicaid incentive program, we are 
clarifying that the incentive payments to providers are matched at 100 
percent FFP as described above, and therefore there is no non-Federal 
share for these payments. However, there is a non-Federal share 
necessary for the administration of the payment incentives. That is, 
CMS is reimbursing States at 90 percent FFP for reasonable expenses 
related to the administration of the payment incentives. States must 
fund the 10 percent non-Federal share of Medicaid health information 
technology (health IT) administrative payments consistent with existing 
rules and regulations regarding funding of the non-Federal share. We 
review non-Federal share funding sources to ensure compliance with 
existing statute and regulations. Consistent with current practice, we 
will review non-Federal share funding sources on an individual basis 
using information provided by the State and gathered by CMS staff. 
Existing rules permit States to provide the non-Federal share of 
administrative claims through various sources, including 
appropriations, intergovernmental transfers, certified public 
expenditures, bona fide donations, and permissible health care related 
taxes. CMS' regional financial management staff will review funding 
sources and will review the Medicaid Budget and Expenditure System to 
ensure that all claims for reimbursement are appropriate. Additionally, 
States are required to submit SMHPs outlining their process for making 
payments and ensuring that all claims for reimbursement are appropriate 
to CMS for review and approval.
    At Sec.  495.324 we proposed to review and prior approve all 
elements of the State's APD documents and SMHP described in this rule 
to ensure that all of the intended objectives of the program are 
addressed. We are finalizing this proposal. States are required to 
submit these APD documents and the SMHP in order for us to approve FFP. 
Specifically, prior approval is required for the HIT PAPD (see also 
Sec.  495.336). The deliverable resulting from the HIT PAPD is the 
SMHP. The SMHP will be reviewed and approved before it is included in 
an HIT Implementation APD (HIT IAPD) (see also Sec.  495.338). The HIT 
IAPD also must be prior approved. After a HIT PAPD is approved for 
planning activities, and these planning activities are complete, we 
anticipate that in certain cases, States may decide to submit the SMHP 
and HIT IAPD together in one submission for CMS review and approval. In 
all cases, until approval is granted, States cannot draw down Federal 
funds. We envision that the prior approval process described at Sec.  
495.324 will permit States to work closely with CMS in developing the 
HIT PAPD prior to initiating EHR planning activities and prior to 
submission of the initial HIT PAPD.
    We are defining ``as needed'' and ``annual'' updates to the HIT 
PAPD and HIT IAPD at Sec.  495.340 and Sec.  495.342. In consultation 
with States and other key stakeholders, CMS has determined that 
planning and implementing the Medicaid EHR incentive payment program 
will be a complex process that will result in a need for ``as needed'' 
and ``annual'' updates to the original scope of work. Therefore, we 
proposed that the APD process would allow States to update their APD 
documents when they anticipate changes in the amount of FFP, duration 
of the project, or scope of work or activities under the APD. We are 
finalizing this proposal, as it allows States flexibility to add 
additional tasks and milestones as the project evolves, as determined 
since the date the APD was

[[Page 44512]]

initially approved or since the most recently updated and approved APD.
    We initially proposed that we envision two phases in the process of 
planning and implementing the incentive program, as well as the 
promotion of adoption and meaningful use of EHR. We are further 
clarifying that based on submission of HIT PAPDs in response to 
guidance provided in our State Medicaid Director's letter of September 
1, 2009, initial planning timelines are ranging from 6 months to 18 
months to develop the SMHP. CMS envisions that States will begin to 
administer the EHR incentive program on January 1, 2011, once the SMHP 
and IAPD are approved. As proposed, we will issue additional written 
guidance, similar to our earlier SMD letter, concerning timelines for 
implementation of the EHR incentive program as States develop the SMHP.
    We require the HIT IAPD as the vehicle for informing us of Phase II 
activities. We anticipate that States will also have ongoing planning 
needs as implementation activities, once approved under the IAPD, are 
under way. We further envision that the IAPD ``annual'' or ``as 
needed'' updates may also include requests for approval of FFP for 
other Phase II that are necessary to continue planning and development 
for the ongoing implementation phases of the program. In section 
495.388, we proposed to require that States submit information in the 
IAPD regarding an estimate of prospective cost allocation (OMB Circular 
A-87, Cost Principles for State, Local, and Indian Tribal Governments) 
to the various State and Federal funding sources and the proposed 
procedures for distributing costs including a detailed payment list 
file to include NPI, name, and type of provider for which the State 
will provide incentive payments. For the final rule, we are continuing 
to require the estimate of prospective cost distribution and the 
procedures for distributing costs; however, we are eliminating the 
requirement that States have to submit NPI, name and provider type as 
part of the estimates for cost distribution since we realize that in 
continuing to require this information States will not be able to 
submit approvable IAPDs to CMS because States will not have this 
information at the time of submittal; hence, States will not be 
successful in implementing this program.
    We wish to further clarify that in proposing termination of funding 
if the State fails to meet the requirements and undertakings of the 
approved HIT PAPD, SMHP, and HIT IAPD, or fails to provide access to 
the required information, this requirement is necessary to ensure the 
proper and efficient use of FFP and is consistent with present 
authority under the Act and existing regulations that are promulgated 
by CMS, including at 45 CFR Part 95, Subpart F.
    Comment: One commenter questioned whether the EHR incentive 
payments will be required to be processed through the Medicaid 
Management Information System (MMIS).
    Response: Payments under the Medicaid EHR incentive program are 
authorized under Title XIX of the Social Security Act as part of the 
Medicaid program. We require that States have an automated claims 
processing and information and retrieval system, known as MMIS to 
manage health care provider payments for health care services, and 
provide information for program management, administration, and 
auditing. As such, we believe that most States will choose to process, 
monitor, and report Medicaid incentive payments to eligible 
professionals and hospitals participating in the Medicaid EHR incentive 
program using the MMIS. States may propose alternative methods to 
process, monitor, and report Medicaid incentive payments in their SMHP. 
Any proposed method to process, monitor, and report Medicaid incentive 
payments, including utilization of the State's MMIS, must be approved 
by CMS. Through guidance issued in a State Medicaid Directors Letter 
and via case by case analysis of APDs, CMS will collaborate with States 
to approve system development and enhancement expenditures under the 
most appropriate funding source, HITECH or MMIS.
    Comment: One commenter provided comments on Sec.  495.348(d), 
Procurement standards; Competition, and Sec.  495.360(a). The commenter 
agrees that procurement transactions are conducted to provide, to the 
maximum extent practicable, open and free competition and recommends 
that procurement transactions require that bidders bid specifically for 
the EHR portion of any project (to ensure that the discrete costs are 
clearly identified), (2) no certified EHR technology may be excluded 
from bidding, and (3) all projects must be both EHR-neutral and 
provider-neutral. They further comment that CMS could consider having 
either a cap or percentage limits on the amount of administrative costs 
or consulting fees to ensure that the bulk of the award is used for the 
hard costs of the project: equipment, connectivity, and training.
    Response: The requirement in Sec.  495.348(d) is limited to States 
and other grantees of Federal funds authorized under Title XIX of the 
Social Security Act and does not apply to procurement standards for 
vendors bidding on EHR technology for eligible providers. However, CMS 
will encourage States to include adoption of interoperable solutions 
that align with the MITA principles that address IT architectural and 
platform neutrality.
    We are making no additional revisions to this section of the rule 
as a result of this comment.
    Comment: One commenter recommended that CMS reconsider the general 
rule set forth in Sec.  495.360 that ``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.'' The 
commenter states that it is typical for the vendor to own the 
underlying software, and State or local governments are provided a 
license to use the software, and this is contrary to the proposed 
general rule.
    Response: We disagree with the recommendation to exclude a clause 
in all State procurement instruments that provides that the State or 
local government will have all ownership rights in software developed 
or modified using Federal funding. This is a long-standing principal 
for use of FFP associated with the development of information 
technology solutions that may be licensed for use by other State or 
Federal government agencies to benefit the Medicaid program, at no 
additional cost for the license. CMS clarifies that costs of the 
license agreements for proprietary software may be reimbursable under 
the provisions of 1903(a)(3)(F)(ii) of the Act that provides for 90 
percent FFP for costs associated with certain administrative activities 
performed by a State. However, costs associated with developing or 
modifying software may not be funded with Federal funds unless the 
State has ownership rights to that software. This provision does not 
apply to eligible providers or hospitals purchasing software for which 
Federal funding has been provided by States through the Medicaid EHR 
incentive program. Proposed costs may be submitted for review and 
consideration for approval by CMS as part of the HIT PAPD and HIT IAPD 
requirements described in this proposed rule under Sec.  495.336 and 
Sec.  495.338.
    We are making no additional revisions to this section of the rule 
as a result of this comment.

[[Page 44513]]

    Comment: One commenter indicated that the process for State 
Medicaid plans seems to be lengthy, with no timeframes specified for 
initial submission from the State to the Department, nor is there a 
timeline for the approval process from CMS back to the State. There is 
also no timeline for the implementation of the health IT programs after 
a State receives approval. The commenter also notes that with the 
burden for administration on the States, there may not be adequate time 
to get all of the activities completed to have infrastructure and 
processes in place to accept data or attestations from the Eligible 
Providers and Eligible Hospitals.
    Response: We provided specific guidance on timelines and process 
prior to the initial planning period regarding State planning 
activities and administrative expenses for provider incentive payments 
in our State Medicaid Director's letter on September 1, 2009. We also 
indicated in our letter that CMS will work with States to determine 
when each State is ready to begin making payments. We have provided 
additional rationale about the process for submitting documents and 
required content in the final rule. In the near future, CMS will issue 
more guidance on specific implementation activities and timelines, 
prior to States submission of their SMHP and IAPD.
    We are making no additional revisions to this section of the rule 
as a result of this comment.
    Comment: One commenter requested that CMS require that States pass 
through the matching funds to providers.
    Response: The regulation at section 495.366 requires that States 
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. This language is consistent with the statutory language at 
1903(t)(6). We will require that this process be established in the 
SMHP.
    We are making no additional revisions to this section of the rule 
as a result of this comment.
    Comment: One commenter requested that CMS clarify that use of 
certified public expenditures (CPE) or intergovernmental transfers in 
the context of the Medicaid EHR incentive payments would be 
inappropriate, since these payments do not have a non-federal share. If 
CMS does permit use of CPEs in the Medicaid EHR incentive program 
context, CMS must require that States pass through the matching funds 
to providers.
    Response: We believe the commenter is not clear. As explained above 
incentive payments to providers are matched at 100 percent; thus, there 
is no non-Federal share for these payments. However, there is a non-
Federal share necessary for the administration of the payment 
incentives. CMS is reimbursing States at 90 percent for reasonable 
expenses related to the administration of the payment incentives and 
States must fund the 10 percent non-Federal share of Medicaid health 
information technology administrative payments consistent with existing 
rules and regulations regarding funding of the non-Federal share. 
Please see our above discussion of this issue for further detail.
    We are making no additional revisions to this section of the rule 
as a result of this comment.
    Comment: One commenter questioned why Medicaid is allowed to 
determine its own requirements and the impact this may have on other 
stakeholders.
    Response: We are clarifying that we have provided specific guidance 
for State planning activities that must be addressed in order to 
qualify to receive FFP for administering the incentive program. We 
provided guidance in a State Medicaid Director's letter published on 
September 1, 2009, on this process. CMS intends to require submission 
of documentation that will enable the agency to evaluate whether the 
activities for which FFP was, or may be approved for, are being 
completed according to Federal requirements, including any terms and 
conditions of FFP approval. States must develop a HIT PAPD, a SMHP, and 
a HIT IAPD. These documents would describe the processes and resources 
States will use to implement and oversee the EHR incentive program, and 
would help States to construct an health IT 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 
Sec.  495.332) also 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. Our 
review process ensures 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 CMS is responsible for overseeing States 
in their administration of the Medicaid program, as well as ensuring 
the overall financial integrity of the program, States cannot simply 
propose activities in order to secure the 90 percent FFP. We propose to 
review and prior approve all elements of the State's SMHP, and APD 
documents described in this rule to ensure that all of the intended 
objectives of the program are addressed. One of the key components of 
the SMHP is stakeholder collaboration and coordination to ensure that 
an integrated strategy is developed addressing stakeholder needs.
    We are making no additional revisions to this section of the rule 
as a result of this comment.
    Comment: One commenter recommended that all the source materials 
needed to create the quality measure registry, is submitted to the MITA 
Information Architecture Review Board (IARB) for approval as a MITA 
standard and all the source materials be added to the MITA artifact 
repository. Doing this will prevent duplicative efforts and associated 
expense both by CMS and the participating States.
    Response: We agree with the commenter. We support the concept that 
States should apply MITA principles to any IT development work 
performed for the EHR incentive program, where applicable. If a State 
chooses to integrate a clinical data warehouse into its MMIS system, 
all recommended steps, and required approvals, for MMIS development, 
including application of MITA guidelines, should apply. The goal of 
MITA is not to focus on creating new standards so much as utilizing 
data standards developed by other national organizations, such as those 
responsible for implementation of HITECH and also defining information 
requirements for new business processes. If a State is going to develop 
its own clinical data repository to store Medicaid providers' submitted 
clinical quality measures data (one of the MU objectives), then use of 
the MITA Governance boards would be a recommended approach. States 
whose SMHPs successfully apply MITA to their EHR incentive program 
systems are encouraged to store approved artifacts in the Clemson 
University MITA repository so that other States may benefit: http://mita.clemson.edu.
    We are making no additional revisions to this section of the rule 
as a result of this comment.
    Comment: One commenter, as a large pediatric provider with five 
physicians and four nurses in a relatively rural area, is concerned 
that States have not yet sent, or had approved by CMS, the State's 
Medicaid requirements.

[[Page 44514]]

    Response: States are in the process of developing their SMHPs. 
States could not be approved to start offering incentives prior to a 
final rule becoming effective.
    We are making no additional revisions to this section of the rule 
as a result of this comment.
    Comment: Some commenters asked for clarification on how managed 
care entities would be involved in this program besides potentially 
being used to disburse incentive payments, as mentioned in the proposed 
rule. Examples included things like monitoring providers in the health 
plans to ensure compliance. The commenters suggested that any work done 
by the managed care entity should be reflected in the capitation rate.
    Response: Service agreements between States and their managed care 
contractors are not governed by this regulation, but must be in 
compliance with 42 CFR part 438. We agree there are many opportunities 
to leverage the efficiencies of the managed care entities' activities 
and role with the larger goals and State responsibilities for 
administering the payments. We suggest that activities like 
distributing informational materials about the incentive program and 
health IT to health plan providers and enrollees would fall under most 
current contracts and would be considered part of the cost of doing 
business, which may be reflected in the administrative portion of the 
capitation rate.
    If more significant activities are expected, such as monitoring and 
reporting information on the providers, health plans may exceed the 
normal costs of doing business and what would be adequately reflected 
in the administrative portion of the capitation rate. An alternative 
option would be for the State and managed care organization to have 
contractual requirements and deliverables separate from the capitation 
rate, including the administrative component. In the latter scenario, 
it would be acceptable to develop a contract amendment specifying the 
terms.
    We are making no additional revisions to this section of the rule 
as a result of this comment.
    Comment: A commenter asked whether or not a State would need to 
file a State Plan Amendment that incorporates the SMHP into their State 
Plan, or if the SMHP can stand alone. The commenter further asked that 
if the SMHP can stand alone, then would the state need to file a State 
Plan Amendment that references the SMHP in their plan.
    Response: CMS clarifies that the State does not need to file a 
State Plan Amendment or reference the SMHP in their State Plan. As part 
of the Advance Planning Document process, the SMHP is a deliverable 
that is submitted to CMS for review and approval prior to expending 
funds for the incentive program implementation activities.
    We are making no additional revisions to this section of the rule 
as a result of this comment.
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 Sec.  495.366, we 
proposed requirements for States' financial oversight and monitoring of 
expenditures. Additionally, we proposed at Sec.  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). 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. 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 (data-mining) 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, which may include an 
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. 
Additionally, we would monitor provider demonstration of meaningful 
use.
    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 
also are requiring States to establish Sec.  495.370, Provider Appeals. 
This section specifies 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

[[Page 44515]]

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 Sec.  447.253(e).
    Comment: One individual commented on potential fraud and abuse 
opportunities if large amounts of medical data can be mined, as a 
result of electronic health records.
    Response: First, it is important to note that as part of 
demonstrating meaningful use providers will be submitting only 
aggregated, not individually identifiable data, to States. Second, we 
wish to clarify that providers will be required to comply with the 
Health Insurance Portability and Accountability Act of 1996 (HIPAA) to 
the extent that they are covered entities. States must provide CMS with 
details about how their implementation of the EHR incentive program 
will address Federal and State privacy laws and how all data will be 
secured in the SMHP.
    Additionally, the act of preventing fraud should be paramount in 
implementing this program. In accordance with Section 1903(t)(9) of the 
Social Security Act, States must demonstrate to the satisfaction of the 
Secretary that they are conducting adequate oversight of this program 
and that they are complying with Federal requirements to: (a) Ensure 
the qualifications of providers who request Medicaid EHR incentive 
payments, (b) detect improper payments and (c) refer suspected cases of 
fraud and abuse to the Medicaid fraud control unit. In conducting 
required oversight responsibilities, States can receive 90 percent 
matching funds for allowable expenditures. States are required to 
assure CMS through the State's Medicaid HIT plan that they have 
processes in place to prevent against fraud and abuse. CMS will review 
and approve each State's Medicaid HIT plan.
    We are making no additional revisions to this section of the rule 
as a result of this comment.
    Comment: One commenter noted that use of electronic health records 
may provide claims adjudication auditors with documentation to verify 
that items or services provided are reasonable and necessary, 
supporting an upfront clean claims process and the opportunity to 
conduct pre- and post-pay audits without the need to request 
documentation in retrospect. Another commenter wanted an assurance that 
CMS will perform audits of a random sample of attestation surveys and 
that any providers that are found to be making false claims would be 
penalized and listed in a public report posted on CMS' Web site.
    Response: We thank the commenter for the comments, but point out 
that meaningful use currently would not include using EHRs to provide 
electronic documentation in support of claims adjudication. We do, 
however, want to address the issue of pre- and post-audits. While one 
commenter is concerned with the process for adjudicating claims, the 
other commenter is concerned that there are other areas of this program 
that will necessitate pre- and post-pay audits. For Medicaid, States 
are required to provide information to CMS in the State Medicaid HIT 
plan outlining the processes and methodologies they will use to ensure 
that payments are being made to the right person, at the right time, 
for the right reason. Specifically, in year one in order to receive an 
incentive payment, providers will be attesting to, among other things, 
whether they are using a certified EHR, demonstrating meaningful use, 
demonstrating adopting, implementing or upgrading certified EHR 
technology, etc. States will be required to ``look behind'' provider 
attestations. We believe that this will require audits both pre- and 
post-pay. CMS believes a combination of approaches is in order which 
should result in accurate payments. CMS wishes to point out that States 
must provide assurances to CMS that they are conducting adequate 
oversight in order to receive the 90 percent FFP for administration of 
the incentive payments. Additionally, it should be noted that this 
program is consistent with other programs under Title XIX. States must 
properly administer the program or risk FFP. All costs claimed under 
the program are subject to review or audit. Furthermore, CMS' approval 
of the State Medicaid HIT plan does not relieve the State of its 
responsibility to comply with changes in Federal laws and regulations 
and to ensure that claims for Federal funding are consistent with all 
applicable requirements. We should point out that for Medicaid there is 
no statutory requirement to post individual provider's name and/or 
incentive payment program information to the CMS Web site.
    We are making no additional revisions to this section of the rule 
as a result of this comment.
    Comment: One commenter is concerned about the circumstances under 
which Medicaid is required to recoup incentive payments from providers. 
Specifically, the commenter requests clarification on the scenario in 
which a provider receives a payment for demonstrating adoption, 
implementation, or upgrading EHR technology in year one, demonstrating 
meaningful use in years two and three, but receives no payment in year 
four because the provider could not demonstrate meaningful use. The 
commenter is concerned that Medicaid will be responsible for recouping 
payments made in years one, two, and three.
    Response: First, it should be noted that it is possible for a 
provider to be able to demonstrate meaningful use in one year, but not 
others. Thus, the failure of the provider to demonstrate meaningful use 
in year four would not necessarily mean that the provider failed to 
demonstrate meaningful use in prior years, although it could possibly 
alert the State to more closely review a specific provider's prior year 
attestations or demonstrations of meaningful use. For hospitals 
demonstrating meaningful use in both the Medicare and Medicaid 
incentive payment programs, CMS will issue further guidance about how 
States will be able to access the meaningful use data submitted to CMS 
in order for the State to meet its audit and oversight requirements. 
States will be required to outline in the SMHP the process for 
``looking behind'' provider attestations and the demonstration of 
meaningful use including any record retention requirements.
    In accordance with section 1903(t)(9) of the Social Security Act 
and Sec.  495.332(c) and (e) of the regulations as well as Sec.  
495.368, States are required to include in their State's Medicaid HIT 
plan processes for detecting improper payments and for combating fraud 
and abuse. This would mean that States will be responsible for 
conducting audits of providers and ensuring that any requests for 
reimbursement for FFP meet all requirements of this subpart. When 
States conduct audits and determine that improper payments have been 
made, States are responsible for recovering and returning to CMS FFP 
for any incentive payments that are discovered to be improper.
    We are making no additional revisions to this section of the rule 
as a result of this comment.
    Comment: Another commenter is concerned with a similar issue. That 
is, the commenter requested that CMS identify and develop ``safe 
harbor''

[[Page 44516]]

processes and methods for administering the incentive program that 
would assure States that if these processes/methods are used, States 
would not be at risk if the processes/methods are less successful than 
anticipated. An example would include a process for auditing the 
adoption, implementation, and upgrading process. If an audit approach 
was agreed to but ended up being less than effective when applied, the 
State should not be responsible for re-auditing providers for previous 
years, nor would it be denied participation in the incentive program 
and lose the FFP. Another commenter is similarly concerned that this is 
a new program and they requested that CMS explicitly recognize the 
States' ability to revise and redirect the program without penalty from 
CMS.
    Response: Our focus is on ensuring that EHR incentive payments are 
made to the eligible provider, and are for the correct amount in the 
appropriate payment year (or payment cycle). CMS will ensure 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.
    States can receive FFP if they are conducting adequate oversight 
and States must provide their plans for financial oversight and the 
processes and methodologies they will use to verify provider 
information to CMS for review and approval as part of its State's 
Medicaid HIT plan. We believe States may want to consider multiple ways 
in which to audit their providers; for example, to ensure that a 
provider is not excluded from the program, the State should review on a 
prepay basis the Office of the Inspector General's List of Excluded 
Individuals and Entities to determine if providers are excluded. 
Additionally, States may wish to consider attestation in year one for 
demonstrating adopting, implementing, or upgrading or meaningfully 
using certified EHR technology. States will have to ``look behind'' 
these attestations and we assume this will be done on a post-pay basis. 
One size does not fit all and we believe several audit options should 
be used by States to ensure ``adequate oversight.'' However, if it is 
determined that the State's audit methodologies are proving to be less 
than effective we will require that the State update its State Medicaid 
HIT plan and present more effective audit strategies that will work to 
accomplish conducting adequate oversight of the program. States must 
ensure due diligence in conducting adequate oversight and all 
requirements of this subpart must be met or FFP could be at risk.
    We are making no additional revisions to this section of the rule 
as a result of this comment.
    Comment: One commenter requested information regarding the appeals 
process.
    Response: For Medicaid, CMS has specified the appeals process for a 
Medicaid provider receiving electronic health record incentive payments 
in Sec.  495.370. Specifically, the State must have a process in place 
consistent with the requirements established at Sec.  447.253(e) to 
allow for providers 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. CMS is requiring that the State Medicaid HIT plan describe 
the process in place for provider appeals. We believe the States, not 
the Federal government, are in the best position to determine the 
administrative process that would best meet their needs and we believe 
States are in a position to design an effective appeal procedure; thus, 
we are providing for a great deal of State flexibility. Within the 
parameters of the regulation, States are free to establish reasonable 
criteria for appeals, to limit the issues on appeal that may be 
appropriate, or to adopt other procedures to prevent frivolous appeals. 
However, State appeal processes should be consistent with the 
requirement in Sec.  447.253(e) for prompt administrative review. 
(States define what would constitute a prompt review, and we have not 
specified a time period for conducting or concluding a provider 
appeal.) This requirement is in keeping with providing States 
flexibility while retaining for providers an opportunity to avail 
themselves of an exception process when they believe an exception is 
warranted. Additionally, Sec.  447.253(e) provides that the Medicaid 
agency must allow providers an opportunity to submit additional 
evidence. Our regulations at Sec.  495.370 also require that the 
appeals processes established by the States comply with the State's own 
administrative procedure laws and that the State provide any additional 
appeal rights that would otherwise be available under the procedures 
established by the State.
    We are making no additional revisions to this section of the rule 
as a result of this comment.

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 final rule. This analysis finalizes our projections which were 
proposed in the January 13, 2010 Federal Register (75 FR 1844 through 
2011). 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 32 
in section IV of this final rule.

A. ICRs Regarding Demonstration of Meaningful Use Criteria (Sec.  
495.8)

    Section 495.8(a)(1) of the proposed rule contained requirements for 
EPs, in CY 2011, to attest, through a secure mechanism, to meeting 
meaningful use criteria. As described in the proposed rule (75 FR 
1949), we divided meaningful use objectives/measures into Sets A and B. 
We estimated that the total burden for an EP to attest to Sec.  
495.8(a)(1)(i) and (ii) for Set A meaningful use objectives/measures 
and ambulatory quality measures would be one hour. For all 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), the 
burden therefore equaled 442,600 hours. We estimated that the 
associated cost burden was $79.33 for an EP to attest to Sec.  
495.8(a)(1)(i) and (ii) for Set A meaningful use objectives/measures 
and ambulatory quality measures, and the total associated annual cost 
burden for all EPs to attest was $35,111,458. We invited comments on 
the estimated percentages and the numbers of (registered) EPs that will 
attest to the above including Set A meaningful use

[[Page 44517]]

objectives/measures in CY 2011, but did not receive any on this issue.
    In the proposed rule, we also estimated that it would take 8 hours 
for an EP to attest to meeting the Set B meaningful use objectives/
measures. We estimated that the total annual burden for all 442,600 
non-hospital-based EPs to attest to Set B meaningful use objectives and 
measures was 3,540,800 hours. We estimated the associated cost burden 
for an EP to attest was $634.64 and the total cost burden for all non-
hospital-based EPs to attest was $280,891,664. We solicited comments on 
the estimated percentages and the numbers of (registered) EPs that will 
attest to Set B objectives and measures in CY 2011, but did not receive 
any on this issue.
    Although, as we proposed, we continue to have an attestation 
requirement in Sec.  495.8(a)(1), we are revising the burden estimates 
for two reasons. First, as described elsewhere in this final rule, the 
definition of hospital-based EP has changed, resulting in about 73,000 
outpatient hospital EPs becoming potentially eligible to participate in 
the EHR incentive program. Therefore, we are increasing the number of 
EPs in our burden estimates. We estimate that in CY 2011, there will be 
521,600 non-hospital-based Medicare and Medicaid EPs (382,000 Medicare 
EPs, 95,500 dual Medicare/Medicaid EPs, and 44,100 Medicaid-eligible-
only EPs) participating in the EHR incentive program. Second, in 
response to public comments, we have made significant changes in Sec.  
495.6 meaningful use objectives and measures for EPs, eligible 
hospitals and CAHs, which has changed the burden estimates.
    In section II.A.2.d. of this final rule, Stage 1 Criteria for 
Meaningful Use in this final rule, we have re-categorized meaningful 
use objectives/measures as core criteria and menu criteria. Unless an 
exception applies, Sec.  495.6(a) requires that an EP must meet all 15 
Stage 1 meaningful use core criteria under Sec.  495.6(d) and 5 out of 
10 meaningful use menu criteria under Sec.  495.6(e). The burden 
associated with the requirements in Sec.  495.8 and Sec.  495.6 is the 
time and effort required to attest to the required elements.
    To comply with Sec.  495.8(a)(1), we estimate that it would take an 
EP 8 hours 52 minutes to prepare and attest that during the EHR 
reporting period, the EP used certified technology, specify the 
technology, and satisfied all 15 mandatory Stage 1 meaningful use core 
criteria. We estimate that it would take an EP an additional 0.5 hours 
to select and attest to the clinical quality measures, in the format 
and manner specified by CMS. We estimate the total burden associated 
with this requirement for an EP is 9 hours 22 minute (8 hours 52 
minutes + 0.5 hours) and the total burden for all the EPs to attest to 
these requirements is 4,855,827 hours (521,600 EPs x 9 hours 22 
minutes). We estimate the associated cost burden for an EP to attest to 
these requirements is $743.08 (9 hours 22 minutes x $79.33 (mean hourly 
rate for physicians based on the May 2008 Bureau of Labor Statistics)), 
and the total cost burden for all EPs to attest to these requirements 
is $387,592,672 (4,855,827 hours x $79.33).
    We recognize that some Stage 1 meaningful use menu set measures are 
easier to accomplish than others. We cannot predict which of the 
measures in the menu set an EP will select. Therefore, our burden 
estimates are based on two scenarios to illustrate how different 
scenarios would impact the burden incurred. Our ``least burdensome'' or 
``low'' scenario of meaningful use demonstration assumes that an EP 
defers the five most burdensome objectives/measures while our ``most 
burdensome'' or ``high'' scenario of meaningful use demonstration 
assumes that an EP defers the five least burdensome meaningful use menu 
set measures. We recognize that in reality, nothing is absolute, and we 
have no basis for estimating the ``all low'' or ``all high'' scenario 
and have therefore created estimates for both. To compensate for the 
uncertainties of selection of meaningful use criteria by an EP, we use 
the averages of the ``high'' and ``low'' scenario estimates in Table 
33. Section 495.6(a) requires that an EP must meet five out of 10 Stage 
1 meaningful use menu set measures (unless exceptions apply). The 
burden involved is the time and effort to select and attest to the 
meaningful use menu set measures. In the ``low'' scenario, we estimate 
that an EP may defer the five most burdensome meaningful use measures. 
We estimate it will take an EP 42 minutes to comply with the remaining 
five Stage 1 meaningful use menu set measures. We estimate the total 
burden for all 521,600 EPs to comply with the meaningful use menu set 
criteria is 365,120 hours (521,600 EPs x 42 minutes). In the high 
scenario, we estimate that an EP may defer the five least burdensome 
meaningful use criteria. We estimate that it will take an EP 2 hours 40 
minutes to comply with the remaining five Stage 1 meaning use menu 
measures. We estimate that the total burden for all 521,600 EPs to 
comply with the meaningful use menu set criteria is 1,390,586 hours 
(521,600 EPs x 2 hours 40 minutes). Based on the two scenarios, the 
average burden for an EP to comply with meaningful use menu set 
criteria is 1 hour 41 minutes ((42 minutes + 2 hours 40 minutes)/2). 
Based on the two scenarios, the average burden for all EPs to comply 
with meaningful use menu set criteria is 877,853 hours ((365,120 hours 
+ 1,390,586 hours)/2). We estimate the cost burden for an EP to comply 
with the ``low'' scenario Stage 1 meaningful use menu criteria is 
$55.53 (42 minutes x $79.33 (mean hourly rate for physicians based on 
the May 2008 Bureau of Labor Statistics)), and the total cost burden 
for all 521,600 EPs to comply is $28,964,970 (521,600 EPs x $55.53). We 
estimate that the cost burden for an EP to comply with the ``high'' 
scenario Stage 1 meaningful use menu criteria is $211.49 (2 hours 40 
minutes x $79.33), and the total cost burden for all EPs is 
$110,315.156 (521,600 EPs x $211.49). The average cost burden estimate 
for an EP to comply with the meaningful use menu set criteria is 
$133.51 (($55.53 + $211.49)/2). The average cost burden estimate for 
all 521,600 EPs to comply with meaningful use menu set criteria is 
$69,640,063 (($28,964,970 + $110,315.156)/2).
    In the proposed rule, we expected that there would be steady growth 
in the number of participating EPs. We estimated that in 2012, there 
would be 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) qualified to receive EHR incentive payment. We 
estimated that the burden for meeting Sec.  495.8(a)(2), which required 
attestation for most meaningful use measures, and electronic reporting 
of clinical quality measures in CY 2012, would be 0.5 hours for an EP 
to attest to the Set A objectives and measures and 8 hours to gather 
information and attest to the Meaningful Use Set B objectives/measures. 
For burden estimate purposes, we estimated that all 447,400 non-
hospital-based Medicare, and Medicaid EPs might attest. We estimated 
that the total annual attestation burden for all EPs was 223,700 hours 
for the Set A objectives/measures and 3,579,200 hours for Set B 
objectives/measures. We estimated that the associated cost burden was 
$39.67 for the Set A meaningful use objectives/measures and $634.64 for 
the Set B meaningful use objectives/measures. The total cost burden for 
all EPs was $17,746,121 for Set A and $283,937,936

[[Page 44518]]

for Set B. We invited comments on the estimated percentages and the 
numbers of registered EPs that would attest to EHR technology used and 
Meaningful Use Set A and Set B objectives/measures in CY 2012, but we 
did not receive any comments on this issue.
    We expect steady growth in EPs in CY 2012. In the final rule, based 
on legislation altering the definition of ``hospital-based,'' we are 
increasing our estimates of participating EPs, and estimate that in CY 
2012, there will be about 527,254 non-hospital-based Medicare and 
Medicaid EPs (385,954 Medicare EPs, 96,500 dual Medicare/Medicaid EPs 
and 44,800 Medicaid-eligible-only EPs) who are qualified to receive EHR 
incentive payments. The Stage 1 meaningful use criteria (core and menu 
sets) are the same for CY 2011 and CY 2012. We estimate that it would 
take 8 hours 52 minutes for an EP to attest that during the EHR 
reporting period, the EP used certified technology, specify the 
technology, and satisfied all 15 mandatory Stage 1 meaningful use core 
criteria. We estimate the total burden associated with this requirement 
for all EPs is -4,675,161 hours (527,254 EPs x 8 hours 52 minutes). The 
associated cost burden for an EP to comply with this requirement is 
$703.42 (8 hours 52 minute x $79.33) and the associated cost burden for 
all EPs is $370,880.589 (44,675,161 hours x $79.33 (mean hourly rate of 
physicians based on the May 2008 Bureau of Labor Statistics)).
    The Stage 1 meaningful use objectives and measures are the same for 
CY 2011 and CY 2012. Therefore, in CY 2012, the burden associated with 
attesting to Stage 1 meaningful use core and menu criteria for an EP is 
the same as CY 2011. Again, we cannot predict which of the measures in 
the menu set will be selected by an EP. Therefore, as explained above, 
we use a ``low'' and ``high'' scenario to estimate burden. For the 
``low'' scenario, we estimate it will take an EP 42 minutes to attest 
to five Stage 1 meaningful use menu-set measures. The total burden for 
all 527,254 EPs, therefore, would be estimated at 369,078 hours 
(527,254 EPs x 42 minutes). Under the ``high'' scenario, we estimate it 
will take 2 hours 40 minutes for an EP to attest to five Stage 1 
meaningful use menu-set criteria. The total burden for all 527,254 EPs, 
therefore, is estimated to be 1,405,659 hours (527,254 EPs x 2 hours 40 
minutes). Based on the two scenarios, the average burden hours for an 
EP to attest to meaningful use menu set measures is 1 hour 41 minutes 
((42 minutes + 2 hours 40 minutes)/2), and the total average burden for 
all EPs is 887,369 hours ((369,078 hours + 1,405,659 hours)/2). Under 
the ``low scenario,'' we estimate that the cost burden for an EP is 
$55.53 (42 minutes x $79.33 (mean hourly rate for physicians based on 
the May 2008 Bureau of Labor Statistics)), and the total cost burden 
for all 527,254 EPs to comply with is $29,278,942 (527,254 EPs x 
$55.53). For the ``high scenario,'' we estimate that the cost burden is 
$211.49 (2 hours 40 minutes x $79.33), and the total cost burden for 
all EPs is $111,510,942 (527,254 EPs x $211.49). The average cost 
burden is $133.51 (($55.53 + $211.49)/2). The average cost burden for 
all 527,254 EPs is $70,394,942 (($29,278,942 + 111,510,942)/2).
    Section 495.8(a)(2)(iii) requires that for CY 2012, EPs must report 
electronically to CMS, or, in the case of Medicaid EPs, the States, 
clinical quality information in the form and manner specified by CMS. 
We have limited the required measures only to those that can be 
automatically calculated by a certified EHR, and to those for which we 
have electronic specifications currently available and we are able to 
post as final by the date of display of this final rule. The burden 
associated with this requirement is the time and efforts to report the 
required clinical quality measures. We estimate the burden for an EP to 
comply with this requirement is 0.5 hours and the total burden for all 
EPs to comply with this requirement is 263,627 hours (527,254 EPs x 0.5 
hours). We believed that an EP may assign a medical secretary to submit 
the specific clinical quality measures to CMS or the States. We 
estimate the cost burden for an EP to comply with this requirement is 
$7.40 (0.5 hours x $14.81 (mean hourly rate of medical secretaries 
based on the May 2008 Bureau of Labor Statistics)) and the cost burden 
for all EPs to comply with this requirement is $3,904,316 (263,627 
hours x $14.81).
    To estimate capital costs for EPs, we assume a certified EHR system 
will cost roughly $54,000. If 521,600 EPs adopt these EHRs, total 
capital costs prior to incentives would be roughly $23.9 billion. We 
also estimate that in 2011, $0.2 billion of Medicare incentive payments 
and $0.2 billion of Medicaid incentive payments would be provided to 
EPs under a low scenario, and $0.6 billion Medicare incentive payments 
and $0.9 billion of Medicaid incentive payments would be provided to 
EPs under a high scenario to help offset those costs. Therefore, we 
estimate that total net capital costs for EPs in 2011 would be $23.5 
billion ($23.9 billion-$0.2 billion-$0.2 billion) under a low scenario 
and $22.4 billion ($23.9 billion-$0.6 billion-$0.9 billion). 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 $22.1 billion ($23.5 billion-
$1.0 billion of Medicare incentives-$0.4 billion of Medicaid 
incentives) under the low scenario and 419.0 billion ($22.4 billion-
$2.3 billion-$1.1 billion) under the high scenario.
    As with EPs, for eligible hospitals and CAHs, we proposed, at 
section 495.8(b) of the proposed rule, that hospitals demonstrate they 
are meaningful EHR users through an attestation mechanism. As with EPs, 
we divided meaningful use criteria into Sets A and B. We estimated that 
it would take an eligible hospital or CAH 0.5 hours to attest to the 
requirements in Sec.  495.8(b)(1)(i) and (ii) including the Set A 
meaningful use objectives/measures, .0.5 hours to select and attest to 
the hospital quality measures, and 7 hours to comply with gathering the 
information, attesting and reporting Set B objectives/measures. 
Therefore, the estimated the total burden for all 5,011 Medicare and 
Medicaid eligible hospitals and CAHs (3,620 acute care hospitals, 1,302 
critical access hospitals, 78 Medicaid children's hospitals, and 11 
Medicaid cancer hospitals) equaled 5,011 hours. For Set B objectives 
and measures, we estimated the total burden at 35,077 hours.
    We believed that an eligible hospital or CAH might assign an 
attorney to attest on their behalf. We estimated the cost burden for an 
eligible hospital or CAH to attest to the Set A and hospital quality 
requirements was $59.98 and the total estimated annual cost burden for 
all eligible hospitals and CAHs to attest was $300,560. For Set B 
objectives/measures, we estimated a per-hospital cost burden of 
$419.86, and a total cost burden of $2,103,918, not including capital 
costs. We solicited public comments on the estimated percentages and 
the numbers of (registered) eligible hospitals and CAHs that would 
attest in FY 2011, but we did not receive any comments on this issue. 
We also invited comments on the type of personnel or staff that would 
mostly likely attest on behalf of eligible hospitals and CAHs, but we 
did not receive any comments on this issue.
    For the final rule, as proposed, Sec.  495.8(b) will require 
demonstration of meaningful use through an attestation mechanism. 
However, as with EPs, we have revised the burden estimates due to the 
changes in meaningful use

[[Page 44519]]

objectives and measures, in response to comments. Unless an exception 
applies, Sec.  495.6(b) requires that an eligible hospital or CAH must 
meet all 14 Stage 1 meaningful use core criteria under Sec.  495.6(f) 
and five out of 10 meaningful use menu criteria under Sec.  495.6(g). 
The burden associated with the requirements in Sec.  495.8 and Sec.  
495.6 is the time and effort required to attest to the required 
elements.
    To comply with Sec.  495.8(b)(1), we estimate that it would take an 
eligible hospital or CAH 8 hours 42 minutes to prepare and attest that 
during the EHR reporting period, the hospital or CAH used certified 
technology, specify the technology, and satisfied all 14 mandatory 
Stage 1 meaningful use core criteria. We estimate that it will take an 
eligible hospital or CAH an extra 0.5 hours to select and attest to the 
hospital quality measure, in the format and manner specified by CMS. We 
estimate the total burden associated with this requirement for an 
eligible hospital or CAH is 9 hours 12 minutes (8 hours 42 minutes + 
0.5 hours) and the total burden all eligible hospitals and CAHs to 
attest to these requirements is 46,101 hours (9 hours 12 minutes x 
5,011 hospitals). We believe an eligible hospital or CAH may use an 
attorney to attest on their behalf. We estimate the associated cost 
burden for an eligible hospital or CAH to attest to these requirements 
is $551.82 (9 hours 12 minutes x $59.98 (mean hourly rate for attorneys 
based on the May 2008 Bureau of Labor Statistics)) and the total cost 
burden for all eligible hospitals and CAHs to attest to these 
requirements is $2,765,150 ($551.82 x 5,011 hospitals and CAHs)).
    We recognize that some Stage 1 meaningful use menu criteria are 
easier to accomplish than others. Therefore, as with the EPs, our 
burden estimates are based on a ``low'' and ``high'' scenario. Unless 
an exception applies, Sec.  495.6(b) requires that an eligible hospital 
or CAH must meet five out of 10 Stage 1 meaningful use menu criteria. 
The burden involved is the time and effort to select and attest to the 
meaningful use menu-set measures. Under the ``low'' scenario, we 
estimate it will take an eligible hospital or CAH 42 minutes to attest 
to five Stage 1 meaningful use menu-set measures, resulting in a total 
burden for all 5,011 eligible hospitals and CAHs of 3,508 hours (5,011 
hospitals x 42 minutes). Under the high scenario, we estimate it will 
take an eligible hospital or CAH 3 hours 30 minutes to attest to five 
Stage 1 meaningful use menu-set measures, resulting in a total burden 
for all 5,011 eligible hospitals and CAHs of 17,539 hours (5,011 
hospitals x 3 hours 30 minutes). Based on the two scenarios, the 
average burden is 2 hours 6 minutes (42 minutes + 3 hours 30 minutes)/
2), and the average burden for all eligible hospitals and CAHs is 
10,523 hours (3,508 hours + 17,539 hours)/2).
    We believe an eligible hospital or CAH may use an attorney to 
attest on their behalf. For menu-set meaningful use criteria, low 
scenario, we estimate the associated cost burden for an eligible 
hospital or CAH is $41.99 (42 minutes x $59.98 (mean hourly rate for 
attorneys based on the May 2008 Bureau of Labor Statistics)) and the 
total cost burden for all eligible hospitals and CAHs is $210,392 
($41.99 x 5,011 hospitals and CAHs). For menu-set meaningful use 
criteria, high scenario, we estimate the associated cost burden for an 
eligible hospital or CAH is $209.93 (3 hours 30 minutes x $59.98) and 
the total cost burden for all eligible hospitals and CAHs is $1,051,959 
($209.93 x 5,011 hospitals and CAHs). Based on the two scenarios, the 
average cost burden for an eligible hospital or CAH to attest to 
meaningful use menu set criteria is $125.96 (($41.99 + $209.93)/2). The 
average burden for all eligible hospitals and CAHs to attest to 
meaningful use menu set criteria is $631,176 (($210,392 + $1,051,959)/
2).
    As with EPs, our proposed regulations (at Sec.  495.8(b)(2)) 
required that for FY 2012 and subsequent years, eligible hospitals and 
CAHs demonstrate meeting most meaningful use criteria through 
attestation, and electronically report hospital quality measures. As 
with EPs, we divided meaningful use objectives and measures into Sets A 
and B. For Set A, we estimated that it would take an eligible hospital 
or CAH 0.5 hours to attest to the requirements in Sec.  495.8(b)(2). 
For Set B, we estimated it would take an eligible hospital or CAH 7 
hours to gather information and attest. Assuming that 5,011 hospitals 
might attest, we estimated that the total annual attestation burden for 
all eligible hospitals and CAHs was 2,506 hours (Set A) and 35,077 
hours (Set B). We estimated the total annual cost burden for all 
eligible hospitals and CAHs to attest was $150,310 (Set A) and 
$2,103,918 (Set B). We invited public comments on the estimated 
percentages and the numbers of registered EPs that would attest to EHR 
technology used in CY 2012, but we did not receive any comments on this 
issue.
    In the final rule, we also require that for FY 2012, eligible 
hospitals and CAHs demonstrate meeting meaningful use criteria through 
attestation, except for clinical quality measures, which must be 
electronically reported to CMS or the States. We do not expect growth 
in the number of eligible hospitals or CAHs. The meaningful use 
criteria (core and menu sets) are the same for FY 2011 and FY 2012. To 
comply with Sec.  495.8(b)(1), we estimate that it would take an 
eligible hospital or CAH 8 hours 41 minutes to prepare and attest that 
during the EHR reporting period, the eligible hospital or CAH used 
certified technology, specify the technology, and satisfied all 14 
mandatory Stage 1 meaningful use core criteria. We estimate the total 
burden associated with this requirement for all eligible hospitals and 
CAHs to attest to these requirements is 43,596 hours (8 hours 42 
minutes x 5,011 hospitals). We believe an eligible hospital or CAH may 
use an attorney to attest on their behalf. We estimate the associated 
cost burden for an eligible hospital or CAH to attest to these 
requirements is $521.83 (8 hours 42 minutes x $59.98 (mean hourly rate 
for attorneys based on the May 2008 Bureau of Labor Statistics)) and 
the total cost burden for all eligible hospitals and CAHs to attest to 
these requirements is $2,614,870 ($521.83 x 5,011 hospitals and CAHs).
    We recognize that some Stage 1 meaningful use menu criteria are 
easier to accomplish than others. We cannot predict which of the 
measures in the menu criteria will be selected by an eligible hospital 
or CAH. Therefore, as with EPs, our burden estimates are based on a 
``low'' and ``high'' scenario. Unless an exception applies, Sec.  
495.6(b) requires that an eligible hospital or CAH must meet five out 
of 10 Stage 1 meaningful use menu criteria. The burden involved is the 
time and effort to select and attest to the meaningful use menu 
criteria. Under the ``low'' scenario, we estimate it will take an 
eligible hospital or CAH 42 minutes to attest to five Stage 1 
meaningful use menu-set measures, resulting in a total burden of 3,508 
hours (5,011 hospitals x 42 minutes). Under the high scenario, we 
estimate it will take an eligible hospital or CAH 3 hours 30 minutes to 
attest to five Stage 1 meaningful use menu-set measures, resulting in a 
total burden of 17,539 hours (5,011 hospitals x 3 hours 30 minutes). 
Based on the two scenarios, the average burden for an eligible hospital 
or CAH to attest to meaningful use menu set criteria is 2 hours 6 
minutes ((42 minutes + 3 hours 30 minutes)/2), and the average burden 
hours for all eligible hospitals and CAHs is 10,523 hours ((3,508 hours 
+ 17,539 hours)/2).
    We believe an eligible hospital or CAH may use an attorney to 
attest on their behalf. For menu-set meaningful use criteria, low 
scenario, we estimate

[[Page 44520]]

the associated cost burden for an eligible hospital or CAH is $41.99 
(42 minutes x $59.98) and the total cost burden for all eligible 
hospitals and CAHs is $210,392 ($41.99 x 5,011 hospitals and CAHs). For 
menu-set meaningful use criteria, high scenario, we estimate the 
associated cost burden for an eligible hospital or CAH is $209.93 (3 
hours 30 minutes x $59.98) and the total cost burden for all eligible 
hospitals and CAHs is $1,051,959 ($209.93 x 5,011 hospitals and CAHs). 
Based on the two scenarios, the average cost burden for an eligible 
hospital or CAH to attest to meaningful use menu set criteria is 
$125.96 (($41.99 + $209.93)/2). The average burden for all eligible 
hospitals and CAHs to attest to meaningful use menu set criteria is 
$631,175 (($210,392 + $1,051,959)/2).
    Section 495.8(b)(2)(iii) requires that for FY 2012, eligible 
hospitals or CAHs must report electronically to CMS, or, in the case of 
Medicaid hospitals, the States, clinical quality information in the 
format and manner specified by CMS. Given that we limit the required 
measures only to those that can be automatically calculated by a 
certified EHR and to those for which we have electronic specifications 
currently available that we are able to post as final by date of 
display of this final rule. The burden associated with this requirement 
is the time and effort to report the required hospital quality 
measures. We estimate the burden for an eligible hospital or CAH to 
comply with this requirement is 0.5 hours and the total burden for all 
eligible hospitals or CAHs to comply with this requirement is 2,506 
hours (5,011 hospitals and CAHs x 0.5 hours). We believe that an 
eligible hospital or CAH may assign a medical secretary to submit the 
specific hospital clinical quality measures to CMS or the States. We 
estimated the cost burden for an eligible hospital or CAH to comply 
with this requirement is $7.40 (0.5 hours x $14.81 (mean hourly rate of 
medical secretary based on May 2008 Bureau of Labor Statistics)) and 
the cost burden for all eligible hospitals or CAHs to comply with this 
requirement is $37,107 (2,506 hours x $14.81).
    To estimate capital costs for eligible hospitals and CAHs, 
consistent with the sources cited in section V.G.4 of this final rule, 
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, $0.2 billion of 
Medicare incentive payments and $0.4 billion of Medicaid incentive 
payments would be provided to eligible hospitals and CAHs under the low 
scenario, and $0.5 billion of Medicare incentive payments and $0.8 
billion of Medicaid incentive payments would be provided to eligible 
hospitals and CAHs under the high scenario to help offset those costs. 
Therefore, we estimate that total net capital costs for hospitals in 
2011 would be $24.5 billion ($25.1 billion-$0.2 billion-$0.4 billion) 
under the low scenario and $23.8 billion ($25.1 billion-$0.5 billion-
$0.8 billion) under the high scenario. 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 $23.5 billion ($24.5 billion-$0.9 billion 
of Medicare incentives-$0.1 billion of Medicaid incentives) under the 
low scenario, and $21.4 billion ($23.8 billion-$2.1 billion of Medicare 
incentives-$0.3 billion of Medicaid incentives) under the high 
scenario.
    Comment: Some commenters believed that CMS grossly underestimated 
the cost and hour burden for EPs, eligible hospitals and CAHs to comply 
with meaningful use Set A and Set B measures. Some commenters stated 
that we should take into consideration all the time required to prepare 
all attestation of meaningful use measures, including the manual 
counting of numerators and denominators in our burden estimates.
    Response: Prior to and after the publication of the proposed rule, 
we have worked with ONC to ensure that our meaningful use objectives/
measures are well aligned with certified EHR technology. In the final 
rule, we only require meaningful use measures that can be achieved by 
the functionality and capability of certified EHR technology. 
Furthermore, based on comments, we have explained in section II.A.2.d. 
of this final rule that we are including a substantial amount of 
flexibility in the final rule to lower the burden for EPs, eligible 
hospitals and CAHs in meeting the attestation and demonstration of 
meaningful use criteria. Some examples of such flexibility are the 
categorization of Stage 1 meaningful use core and menu (optional) 
criteria, reducing the number of meaningful use objectives/measures for 
2011 and 2012, limiting the denominators, in certain cases, only to 
patients whose records are maintained using certified EHR technology, 
and lowering thresholds for many of the meaningful use measures. We 
believe these changes reduce burden without compromising the intent of 
the Congress, and the ability of EHR technology to begin to improve 
health care quality, efficiency, and outcomes. We have considered the 
comments and we have made some revisions on our previous burden 
estimates. While this requirement is subject to PRA, we have no way of 
accurately quantifying the burden. We will continue to monitor the 
burden associated with the implementation of EHR technology as our 
experience continues to grow and as EHR technology continues to evolve.
    Comment: CMS received numerous comments regarding the burden 
(economic and other) of reporting on the large number of measures and 
the overall quality reporting burden this will add to EPs and other 
healthcare providers. Others suggested reporting on significantly 
smaller set of measures.
    Response: As we have explained in section II.A.3.(d) of this final 
rule, we have reduced the reporting burden by decreasing the number of 
required clinical quality measures and limiting measures to those that 
can be automatically calculated by a certified EHR. We believe that the 
proposed burden estimate, which was estimated to be an additional 0.5 
hours in 2011 and 2012, is reasonable and we are finalizing it.
    Table 20 below lists the objectives and associated measures in 
which we estimate the burden to fulfill ``core set,'' ``menu set'', and 
clinical quality measures requirements. Estimates of total capital 
costs at the bottom of Table 20 are derived from the estimates used in 
the ``Industry Costs'' section in Section V.G.4. of this final rule.
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[[Page 44532]]

B. ICRs Regarding Participation Requirements for EPs, Eligible 
Hospitals, and CAHs (Sec.  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.
    For the proposed rule, Sec.  495.10(a) through (c), we estimated 
that all 442,600 non-hospital-based Medicare, and Medicaid EPs would 
register in 2011 to receive an EHR incentive payment, and that it would 
take no more than 0.5 hours to complete the registration, resulting in 
a total estimated annual registration burden for all EPs of 221,300 
hours (442,600 EPs x 0.5 hours). As we could not predict whether an EP 
or a medical secretary (on the EP's behalf) would register, we did one 
high-end and one low-end burden estimate. The cost burden for an EP who 
chose to register in the EHR incentive payment program himself or 
herself was $39.67 (0.5 hours x $79.33 (mean hourly rate for physicians 
based on the May 2008 Bureau of Labor Statistics)), with a total 
estimated annual cost burden for all EPs of $17,555,729 (221,300 hours 
x $79.33). Similarly, the cost burden for an EP who chose to use a 
medical secretary to register on their behalf was $7.41 (0.5 hours x 
$14.81), with a total estimated annual cost burden for all EPs of 
$3,277,453 (221,300 hours x $14.81). We used the average of the two 
estimates in the tally in Table 34 of the proposed rule. We invited 
comments on whether we should use the higher cost burden estimate 
($17,555,729) or the lower cost burden estimate ($3,277,453), but we 
did not receive any comments on this issue. We invited public comments 
on the estimated percentages or the numbers of EPs that will register 
in CY 2011 and subsequent years, but we did not receive any comments on 
this issue.
    We are finalizing both the lower cost estimate using the medical 
secretary as the personnel registering for the EP and the high cost 
estimate of the EP registering him or herself. Due to the revised 
estimates of non-hospital-based EPs eligible for the EHR incentive 
program, we are revising our burden estimates to reflect this change. 
In the final rule, we estimate that 521,600 non-hospital-based 
Medicare, and Medicaid EPs may register in CY 2011 to receive an EHR 
incentive payment. We believe that an EP may use a medical secretary to 
register on his/her behalf (low burden) or the EP may register him or 
herself (high burden). We estimate that it would take no more than 0.5 
hours to complete the registration. The low cost burden for a medical 
secretary to register an EP is $7.41 (0.5 hours x $14.81 (mean hourly 
rate of medical secretaries based on the May 2008 Bureau of Labor 
statistics)). The total estimated annual registration burden hours for 
the low cost estimate is 260,800 (521,600 EPs x 0.5 hours) in the first 
payment year. The total estimated low cost burden for all EPs to 
register in CY 2011 is $3,862,448 (260,800 hours x $14.81). The high 
cost burden for an EP to register him or herself is $39.67 (0.5 hours x 
$79.33 (mean hourly rate for physicians based on the May 2008 Bureau of 
Labor Statistics)). In the first payment year, the total estimated 
annual registration burden hours for the high cost estimate is 260,800 
(521,600 EPs x 0.5 hours). The total estimated high cost burden for all 
EPs to register in CY 2011 is $20,689,264 (260,800 hours x $79.33). We 
only use the average of the two estimates in the tally in Table 34.
    Section 495.10(d) proposed that if there were subsequent changes in 
the initial registration information, the EP was responsible for 
providing us with updated changes in the manner specified by us. Based 
on our experience with provider enrollment, we estimated that about 11 
percent of the Medicare and Medicaid EPs might need to update their 
registration information during a 1-year period. We estimated that 
49,214 EPs (11 percent) might only have one occasion that required 
updating of information in a given year. For each occasion, we 
estimated that it would take no more than 0.5 hours to notify us of the 
changes. With that, we estimated that the annual total burden hours for 
49,214 EPs to update changes were 24,607. However, we could not predict 
if the EP would update the registration information himself or herself 
or assign a medical secretary to do it. Therefore, we did two burden 
estimates for an EP and his/her medical secretary. The cost burden for 
an EP who chose to update the registration information himself or 
herself was $39.67. The total estimated annual cost burden for all 
49,214 EPs to update registration information themselves was 
$1,952,073. Similarly, the cost burden for the EP who chose to use a 
medical secretary to update registration information on his/her behalf 
was $7.41. The total estimated annual cost burden for 49,214 EPs who 
chose to use medical secretaries to update registration information on 
their behalf was $364,429. We used the average of the two estimates in 
the tally in Table 34. We invited comments on whether we should use the 
higher cost burden estimate ($1,952,073) or the lower cost burden 
estimate ($364,429) but we did not receive any comments on this issue. 
We also invited 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 but we did 
not receive any comments on this issue.
    We are finalizing both the lower cost estimate using the medical 
secretary as the personnel to update registration information for the 
EP and the high cost estimate of the EP updating their registration 
information. Due to the revised estimates of non-hospital-based EPs 
eligible for the EHR incentive program pursuant to legislative 
inclusion of EPs who practice in outpatient hospital setting, we are 
revising our burden estimate for this requirement to reflect this 
change. In the final rule, we estimate that about 11 percent of the 
Medicare and Medicaid EPs may need to update their registration 
information during a 1-year period. We estimate that 57,998 EPs 
(527,254 (revised estimated number of EPs for CY 2012) x 11 percent) 
may only have one occasion that requires them to update their 
information in a given year. For each occasion, we estimate that it 
will take no more than 0.5 hours to notify us of the changes. With 
that, we estimate that the annual total burden hours for 57,998 EPs to 
update registration changes are 28,999. The lower cost burden estimate 
for a medical secretary to update an EP's registration is $7.41 ($14.81 
(mean hourly rate for medical secretary based on the May 2008 Bureau of 
Labor Statistics) x 0.5 hours). The total lower cost burden for all EPs 
to update registration information is $429,475 (28,999 hours x $14.81). 
The high cost burden for an EP to update their own registration 
information is $39.67 (0.5 hours x $79.33 (mean hourly rate for 
physicians based on May 2008 Bureau of Labor Statistics)). The total 
estimated annual high cost burden to update registration information is 
$2,300,491 (28,999 hours x $79.33). We only use the average of the two 
estimates in the tally in Table 34.

[[Page 44533]]

    In Sec.  495.10(a) and (b), 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 hours for an eligible hospital or CAH to 
register. We estimate the total annual burden hours for registration 
will be 2,506 (5,011 hospitals x 0.5 hours). 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 hours x $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 x 0.5 hours x $14.81) 
(mean hourly rate for medical secretaries based on the May 2008 Bureau 
of Labor Statistics)). We invited 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 but we did not receive any comments on this issue. We are 
finalizing the burden estimates as proposed.
    In Sec.  495.10(d), we proposed that if there were subsequent 
changes in the initial registration information, the eligible hospital 
or CAH was responsible for providing us with updated information in the 
manner specified by us. Based on our experience with provider 
enrollment, we estimated that about 8 percent of the Medicare and 
Medicaid eligible hospitals and CAHs (5,011 hospitals and CAHs x 8 
percent = 401 hospitals) might need to update their registration 
information during a 1-year period. We estimated that eligible 
hospitals in this 8 percent pool might only have 1 occasion that 
required updating of registration information in a given year. For each 
occasion, we estimated that it would take no more than 0.5 hours to 
notify us of the changes. With that, we estimated that the total annual 
burden hours for eligible hospitals and CAHs to update CMS of 
registration changes were 201 (401 hospitals and CAHs x 0.5 hours). We 
believe that eligible hospitals or CAHs might assign a medical 
secretary to update the registration information. We estimated the 
total annual cost burden for eligible hospitals and CAHs to update CMS 
of registration changes is $2,969 (401 hospitals and CAHs x 0.5 hours x 
$14.81) (mean hourly rate for medical secretaries based on the May 2008 
Bureau of Labor Statistics)). We invited 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 but we did not receive any 
comments on this issue. We are finalizing the estimated burden for 
hospitals and CAHs that will be making subsequent registration changes 
for FY 2012 as proposed.
    In Sec.  495.10(e)(1), we proposed 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 
estimated that in 2011, there would be about 80,900 dual Medicare/
Medicaid EPs who might 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 believed that all of the 80,900 dual Medicare/Medicaid EPs 
might make the Medicaid program selection. We estimated that it would 
take no more than 0.5 hours to submit the initial Medicare or Medicaid 
selection notification to us. We could not predict if the EP would 
submit the notification to CMS himself or herself or assign a secretary 
to do it. Therefore, we did 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 were 40,450 in the first payment year. 
The cost burden for these EPs who notify CMS of Medicare or Medicaid 
program selection himself or herself was $39.67. The total estimated 
annual cost burden for all dual Medicare/Medicaid EPs to notify CMS of 
program selection themselves was $3,208,899. Similarly, the cost burden 
for an EP who chose to use a medical secretary to notify CMS of program 
selection was $7.41. The total estimated annual cost burden for all 
dual Medicare/Medicaid EPs who use medical secretaries to notify CMS of 
program selection was $599,065. We used the average of the two 
estimates in the tally in Table 34. We invited comments on whether we 
should use the higher cost burden estimate ($3,208,899) or the lower 
cost burden estimate ($599,065), but we did not receive any comments on 
this issue. We also invited public comments on the estimated 
percentages and the number of dual Medicare/Medicaid EPs that would 
submit initial Medicare or Medicaid program selection in 2011, 2012, 
2013, or 2014 but we did not receive any comments.
    In the final rule, we are finalizing both the low burden cost 
estimate using a medical secretary for dual-Medicare/Medicaid EPs to 
notify CMS of program selection and the high burden cost estimate of an 
EP who may do this him or herself. We have revised the total number of 
dual-Medicare/Medicaid EPs and the associated burden estimates pursuant 
to the legislative inclusion of EPs, who practice in outpatient 
hospital, in the incentive program. We estimate that in CY 2011, there 
will be 95,500 dual Medicare/Medicaid EPs who may use a medical 
secretary to notify CMS of the initial Medicare and Medicaid program 
selection. We estimate that it would take no more than 0.5 hours to 
submit the initial Medicare or Medicaid selection notification to us. 
The estimated burden for all the dual-Medicare/Medicaid EPs to comply 
with this requirement is 47,750 hours (95,500 EPs x 0.5 hours). The 
associated low cost burden for a dual-Medicare/Medicaid EP is $7.41 
(0.5 hours x $14.81 (mean hourly rate for medical secretaries based on 
May 2008 Bureau of Labor Statistics) and the total low cost burden for 
all the dual-Medicare/Medicaid EPs is $707,178 (47,750 hours x $14.81). 
The associated high cost burden for a dual-Medicare/Medicaid EP is 
$39.67 (0.5 hours x $79.33 (mean hourly rate for physicians based on 
the May 2008 Bureau of Labor Statistics)) and the total high cost 
burden estimate for all dual-Medicare/Medicaid EPs is $3,788,008 
(47,750 hours x $79.33). We only use the average of the two estimates 
in the tally in Table 34.
    In Sec.  495.10(e)(2) we proposed that EPs might switch from 
Medicare to Medicaid EHR incentive program or vice versa one time, and 
only for payment year 2014 or earlier. The burden associated with this 
requirement was the time required for the EP to make the Medicare/
Medicaid program selection. Since we had no knowledge of how many EPs 
will make the subsequent changes in program selection, we assumed that 
all 81,700 (estimated number of dual-Medicare/Medicaid EPs for CY 2012) 
dual Medicare/Medicaid EPs might make subsequent program selection 
changes

[[Page 44534]]

for burden estimate purposes. We estimated that it would take no more 
than 0.5 hours to submit the Medicare/Medicaid selection change to us. 
We could not predict if the EP would submit the change to CMS himself 
or herself or assign a secretary to do it. Therefore, we did one high 
end burden estimate for an EP and one low end estimate for a medical 
secretary. We used the average of the two estimates in the tally in 
Table 34. The total estimated burden hours for all dual-Medicare/
Medicaid EPs to notify CMS of program changes were 40,850 in a given 
year. The higher cost burden for the EP who chose to notify CMS of 
Medicare/Medicaid program change him or herself was $39.67. The total 
estimated annual cost burden for all dual Medicare/Medicaid EPs to 
notify CMS of program changes themselves was $3,240,630. Similarly, the 
lower cost burden for an EP who chose to use a medical secretary to 
notify CMS of program changes was $7.41. The total estimated annual 
cost burden for all dual-Medicare/Medicaid EPs who use medical 
secretaries to notify CMS of program changes was $604,989. We invited 
comments on whether we should use the higher cost burden estimate 
($3,240,630) or the lower cost burden estimate ($604,989) but we did 
not received any comments on this issue. We also invited comments on 
the estimated percentages and the number of dual-Medicare/Medicaid EPs 
that would submit initial Medicare or Medicaid program changes in 2012, 
2013, or 2014 but we did not receive any comments on this issue.
    We are finalizing both the lower cost burden for EPs for may assign 
medical secretaries as the personnel to submit Medicare/Medicaid 
program selection changes to CMS and the high cost burden for EPs who 
may do this him or herself. We revised our burden estimates and the 
number of dual-Medicare/Medicaid EPs, pursuant to legislative inclusion 
of EPs who practice at outpatient hospital setting in the incentive 
program. For CY 2012, we estimate that there will be 96,500 dual-
Medicare/Medicaid EPs. The notification will take 0.5 hours and the 
total burden for all dual-Medicare/Medicaid EPs will be 48,250 hours 
(96,500 EPs x 0.5 hours). The lower cost burden for each EP is $7.41 
(0.5 hours x $14.81 (mean hourly rate for medical secretaries based on 
the May 2008 Bureau of Labor Statistics) and the total lower cost 
burden for all the dual-Medicare/Medicaid EPs will be $714,583 (48,250 
hours x $14.81). The high cost burden for each EP is $39.67 (0.5 hours 
x $79.33 (mean hourly rate for physicians based on the May 2008 Bureau 
of Labor Statistics)) and the total high cost burden for all dual-
Medicare/Medicaid EPs is $3,827,673 (48,250 hours x $79.33). We only 
use the average of the two estimates in the tally in Table 34.

C. ICRs Regarding Identification of Qualifying MA Organizations, MA-EPs 
and MA-Affiliated Eligible Hospitals (Sec.  495.202)

    Section 495.202(a)(1) states that beginning with bids due in June 
2011 (for plan year 2012), 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. There is no burden 
associated with this requirement for qualifying MA organizations 
offering MA HMO plans, since they are deemed to meet the definition of 
HMO in 42 U.S.C. 300gg-91(b)(3) of the PHS Act in accordance with Sec.  
495.202(a)(2). However, per Sec.  495.202(a)(3), for MA organizations 
offering types of MA plans other than HMOs, the burden is the amount of 
time it will take them to attest to the fact that they meet the 
definition of HMO in 42 U.S.C. 300gg-91(b)(3). We believe the burden 
associated with this requirement for MA organizations not offering HMO 
type plans would be approximately 1 hour per MA organization. We do not 
believe that there are any MA organizations that are not offering MA 
HMO type plans that will request reimbursement for qualifying MA EPs or 
MA-affiliated eligible hospitals under the MA EHR incentive payment 
program. Although the timeframe goes beyond the effective date of the 
proposed information collection period (3 years from the effective date 
of the final rule), we do not believe there are any MA organizations 
with potentially qualifying MA EPs or potentially qualifying MA-
affiliated eligible hospitals that will need to report to us beginning 
in 2014 (for plan year 2015) per Sec.  495.202(a)(4). Therefore, we 
believe there will be no burden associated with identification of 
qualifying MA organizations per Sec.  495.202(a)(1) through (4).
    Section 495.202(b)(1) and (2) require a qualifying MA organization, 
as part of its initial bid starting with its bid for plan year 2012, to 
make preliminary identification of potentially qualifying MA EPs and 
potentially qualifying MA-affiliated eligible hospitals for which the 
organization is seeking incentive payments for the current plan year 
(2011). The burden associated with this requirement would be the time 
required for a MA organization to identify their MA-affiliated 
hospitals to CMS. In the proposed rule, we explained that when MAOs 
identify amounts of compensation per Sec.  422.204(b)(2) and (5) they 
will also be identifying MA EPs per this requirement, and therefore 
there is will be no additional burden related to this requirement with 
respect to MA EPs. There are approximately 29 MA-affiliated eligible 
hospitals and approximately 12 MA organizations, or an average of 2.42 
eligible hospitals for each MA organization. In the proposed rule, we 
estimated that the total burden hours for all MA organizations to 
identify their affiliated hospitals to CMS would be 3 hours. We believe 
a MA organization may use a billing clerk to identify the eligible 
hospital to us. The total cost burden for all MA organizations to 
identify their eligible hospitals to us would be $46.32.
    Sections 495.202(b)(1) and (2), state that a MA organization, as 
part of its initial bid starting with plan year 2012, must make a 
preliminary identification of potentially qualifying MA EPs and 
potentially qualifying MA-affiliated eligible hospitals for which the 
organization is seeking incentive payments for the current plan year. A 
qualifying MA organization must provide the following information on 
their MA-affiliated EPs and eligible hospitals: (A) name of the EP or 
eligible hospital; (B) address of the EP's practice or eligible 
hospital's location; and (C) NPI. We believe that it is within the 
customary business practices of an MA organization to keep the 
information in (A), (B), and (C) on file. The burden associated with 
this requirement would be the time required to provide this information 
to CMS along with an attestation that the MA EPs or MA-affiliated 
eligible hospitals meet the eligibility criteria. In the proposed rule, 
we estimated that it would take 0.5 hours for a MA organization to 
comply with this attestation requirement. We estimated that the total 
burden for all MA organizations to attest would be 6 hours. We believe 
that MA organizations may use an attorney to attest on their behalf. In 
the proposed rule, we estimated that the cost burden for a MA 
organization to attest is $29.99 and the total estimated cost burden 
for all MA organizations to attest would be $359.88.
    Section 495.202(b)(4) states that all qualifying MA organizations, 
as part of their initial bids in June 2015 for plan year 2016, must 
identify potentially qualifying MA EPs and potentially

[[Page 44535]]

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 (Sec.  495.204)

    Section 495.204(b)(2) requires a qualifying MA organization to 
report to CMS within 60 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 would be 
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. In the proposed rule, we estimated that there were 12 MA 
organizations and 28,000 MA EPs. 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 would be 480. We believe 
MA organizations may involve a billing clerk to report the required 
data to CMS. We estimated that the cost burden for a MA organization to 
report was $617.6 (40 hours x $15.44 (mean hourly rate of billing clerk 
based on the May 2008 Bureau of Labor Statistics)) and we estimated the 
total annual cost burden for all MA organizations to comply with this 
requirement would be $7,411.
    Section 495.204(b)(4) states 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; (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; and (iii) methodological proposals 
must be submitted to CMS by June of the payment year and must be 
auditable by an independent third party. CMS will review and approve or 
disapprove such proposals in a timely manner. In the proposed rule, we 
estimated that it might take a MA organization one and a half hour to 
develop the methodology. We estimated that there are about two MA 
organizations that may have the need to develop the methodology. We 
estimated the total burden hours for the two MA organizations to 
develop the methodology would be 3 hours. We believed that a MA 
organization may use an accountant to develop the methodology. We 
estimated the cost burden for a MA organization was $47.48 (1.5 hours x 
$31.65 (mean hourly rate for accountants based on the May 2008 Bureau 
of Labor Statistics)), and the total cost burden for the two MA 
organizations to develop the methodology would be $94.95 (47.48 x 2 MA 
organizations).
    Section 495.204(b)(5) states that for qualifying MA EPs who are not 
salaried, qualifying MA organizations may 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 were not 
salaried and that was an average of 233 non-salaried EPs in each MA 
organization. Further, we estimate that it might take 0.25 hour to 
electronically obtain and compile each attestation into a document for 
transmission to CMS. We estimate the total burden hours for a MA 
organization would be 58.3, and the total estimated burden hours for 
all MA organizations would be 699.6 (58.3 hours x 12 MA organizations). 
We believe an MA organization may involve a billing clerk to compile 
and submit the compensation information from such attestations. We 
estimate the cost burden for a MA organizations to comply with this 
requirement would be $900.15 (58.3 hours x $15.44 (mean salary of a 
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 would be $10,801.82 ($900.15 x 12 MA 
organizations).
    Section 495.204(b)(6) states that for qualifying MA EPs who are not 
salaried, qualified MA organizations may also have qualifying MA EPs 
send MA organization compensation information directly to CMS. We 
estimated the burden associated with this requirement is the time it 
would take the MA EP to send the information directly to CMS. However, 
we believe that the non-salaried MA EPS are employed by a third-party 
physician group which will be responsible for sending the required 
information to CMS. Again, we estimate that about 10 percent of the MA 
EPs are not salaried and that there is an average of 233 non-salaried 
EPs in each of the third-party physician groups. Further, we estimate 
that it might take 0.25 hour to electronically obtain and compile the 
information into a document for transmission to CMS. We estimate the 
total burden hours for a third-party physician group will be 58.3, and 
the total estimated burden hours for all third-party physician groups 
will be 699.6 (58.3 hours x 12 third-party physician group). We believe 
a third-party physician group may involve a billing clerk to compile 
and submit the compensation information. We estimate the cost burden 
for a third-party physician group to comply with this requirement will 
be $900.15 (58.3 hours x $15.44 (mean salary of a billing clerk based 
on the May 2008 Bureau of Labor Statistics)). We estimate the total 
annual cost burden for all third-party physician groups to comply with 
this requirement will be $10,801.82 ($900.15 x 12 third-party physician 
groups). Note that this is the same burden we estimate with respect to 
Sec.  422.204(b)(5). Further, an MAO will either submit non-salary 
information directly to CMS, or it will have someone else do it on 
behalf of the MA EPs with respect to that MAO. We believe the burden 
related to Sec.  422.204(b)(6) is counted in the burden we already 
projected with respect to Sec.  422.204(b)(5). We do not believe any 
MAO will submit under both Sec.  422.204(b)(5) and (6).

E. ICRs Regarding Meaningful User Attestation (Sec.  495.210)

    Section 495.210(b) requires qualifying MA organizations to attest 
within 60 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. We estimate the burden 
associated with this requirement would be the time necessary to attest 
to the required information. We estimated that there were approximately 
12 MA organizations and approximately 28,000 MA EPs, or an average of 
approximately 2,333 MA EPs affiliated with each qualifying MA 
organization. We believe that it would take a MA organization about 40 
hours annually to attest whether each qualifying MA EP is a

[[Page 44536]]

meaningful user, given that all the data are captured in the certified 
EHR technology and that meaningful use will be demonstrated through the 
continued reporting of HEDIS data. We estimate the total estimated 
annual burden hours for all MA organizations to comply with this 
requirement will be 480. We believe MA organizations might involve an 
attorney to attest on their behalf. We estimate the cost burden for a 
MA organization to attest will be $2,399 (40 hours x $59.98 (mean 
hourly rate of attorney 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 will be $28,790.
    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 Sec.  495.210(c), we proposed that qualifying MA 
organizations be required to attest within 60 days after the close of a 
calendar year whether each qualifying MA-affiliated eligible hospital 
is a meaningful EHR user. While the EHR incentive payments for Medicare 
FFS and MA-affiliated hospitals are treated the same as all Medicare-
certified MA affiliated hospitals they will demonstrate clinical 
quality measures through the continued reporting of HEDIS data. This 
means that Sec.  495.210(c) generally applies to a MA-affiliated 
hospital that is not Medicare certified, and such a type of hospitals 
does 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 Sec.  495.10(b)(2)(i)(ii) and 
through our existing PRA package related to HEDIS reporting by MA 
organizations--OMB control number 0938-NEW.

F. ICRs Regarding Establishing Patient Volume (Sec.  495.306)

    This section of the final rule contains patient volume 
requirements, and requires EPs and certain hospitals to attest to 
meeting such requirement using representative periods in order to 
qualify for a Medicaid EHR incentive. The minimum patient volume 
requirements are as follows: 30 percent Medicaid patient volume for 
most EPs, 20 percent Medicaid patient volume for pediatricians, 30 
percent needy individual patient volume for EPs practicing 
predominantly in an FQHC or RHC, and 10 percent Medicaid patient volume 
for acute-care hospitals. The burden associated with the requirements 
in this section is the time and effort necessary to submit the 
information to CMS. In the proposed rule, in each instance, we 
estimated it would take no longer than 0.5 hours to submit the 
necessary information to CMS. We estimated that 119,000 entities would 
submit the required information to meet 30 percent (or 20 percent 
pediatrician) requirements for most EPs. We estimated the total annual 
burden to be 59,500 hours, with total labor cost amounting to 
$4,720,135 (assuming that physicians (rather than staff assistants) 
establish patient volume ($79.33 mean hourly rate for physicians based 
on May 2008 Bureau of Labor Statistics).
    For hospitals to attest to patient volume, we estimated that 3,631 
entities would submit required information, and estimated a total 
burden of 1,815.50 hours (3,631 entities x .5 hours). The total labor 
cost associated with this requirement is $25,617. This cost burden was 
based on a secretary reporting patient volume on behalf of the acute 
care hospital at $14.11 (mean hourly rate for secretaries based on May 
2008 Bureau of Labor Statistics).
    We received no comments on this section; however, since we have 
revised our definition of hospital-based EP, the burden is revised to 
account for the additional number of Medicaid EPs that could now be 
eligible to receive Medicaid incentive payments. We currently estimate 
that there are an additional Medicare/Medicaid 75,700 EPs that could be 
eligible for an incentive payment because of the new definition of 
hospital-based EP. We believe there are 553,200 Medicare EPs of which 
86 percent are non-hospital based or 477,500. We believe 20 percent or 
95,500 will meet patient volume requirements, and therefore, 
potentially qualify for Medicaid EHR incentive payments. Additionally, 
there are 44,100 Medicaid-only EPs (nurse practitioners, certified 
nurse-midwives, dentists, and physician assistants) that we believe 
will meet patient volume. Specifically, we believe that 139,600 EPs 
(95,500 + 44,100) could be reporting patient volume information. Thus, 
the updated annual burden associated with the requirements in Sec.  
495.306 at 0.5 hours for EPs is 69,800.
    The total labor cost associated with the requirement is (69,800 x 
79.33) $5,537,234. The total labor cost associated with each 
requirement is $5,537,234.
    For hospitals reporting patient volume, we have updated the burden 
to account for the additional CAHs that meet the definition of acute 
care hospital. Specifically, there are 3,620 acute care hospitals, 11 
cancer hospitals, and 1,302 CAHs that must report 10 percent Medicaid 
patient volume, or 4,933 entities. The updated annual burden associated 
with the requirement, at 0.5 hours is 2,466.5 (4,933 x .05). The total 
labor cost is $34,803.30.

G. ICRs Regarding Process for Payments (Sec.  495.312)

    Section 495.312(b) states that in order to receive a Medicaid EHR 
incentive payment, a provider must report all necessary data (including 
data required by subpart A of the regulations, such as meaningful use 
data) within the EHR reporting period. We believe the information 
collections associated with this requirement are discussed in the 
relevant sections discussing each particular requirement that would 
necessitate data reporting (for example, the burden for demonstrating 
meaningful use is discussed in the information collection section on 
meaningful use). Therefore, we have not calculated a separate 
information collection burden for this requirement.

H. ICRs Regarding Activities Required To Receive an Incentive Payment 
(Sec.  495.314)

    Section 495.314(a)(1) states that in the first payment year, to 
receive an 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 Sec.  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 Sec.  495.4.
    The burden associated with the requirements in proposed Sec.  
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 
Sec.  495.314(a)(1)(i) through (ii). We believe we already accounted 
for this burden in the earlier discussion of the burden associated with 
Sec.  495.8.
    Section 495.314(a)(2) states that a provider may notify the State 
of its nonbinding intention to participate in

[[Page 44537]]

the incentives program prior to having fulfilled all of the eligibility 
criteria. This requirement constitutes a third-party disclosure. The 
burden associated with this requirement is the time and effort 
necessary for a provider to send notification to the State. We 
estimated that this burden will be the same burden associated with 
Sec.  495.10 since the information necessary to notify the State of the 
providers non-binding 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.
    Section 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 Sec.  495.4. 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 
Sec.  495.6 and 495.8.
    We did not receive any comments on the information collection 
burdens we estimated for the proposed rule.

I. ICRs Regarding State Monitoring and Reporting Regarding Activities 
Required To Receive an Incentive Payment (Sec.  495.316)

    Section 495.316(a) requires 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 Sec.  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.
    For the proposed rule, we estimated that it would take 5 hours per 
State to accomplish this. The estimated annual burden for States 
associated with the aforementioned submission requirements is 280 hours 
(56 States-Territories x 5.0 hours/State-Territory). The cost burden 
was estimated based on an employee contracting with the State Agency. 
The burden associated with Sec.  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).
    Comment: Some commenters asked CMS to clarify if States are 
responsible for collecting the MU measure data or if providers will 
report data directly to CMS. If the collection and reporting of MU data 
are States' responsibility, this would create tremendous burden on 
States. The commenters also asked CMS to clarify if States are 
responsible for validating attestations by eligible providers.
    Response: For EPs and some hospitals, States are responsible for 
collecting the MU measure data; for hospitals that are eligible for 
both the Medicare and Medicaid incentives, hospitals that meet the 
Medicare MU objectives are deemed to have met MU for Medicaid; thus, 
since hospitals are required to report MU data to CMS for the Medicare 
EHR incentives program, these hospitals do not, in addition, have to 
report MU data to States. States are required to submit a State 
Medicaid HIT plan to CMS for review and approval outlining their 
methodology for collecting MU measure data and other required 
information outlined in this final rule. States are also responsible 
for validating attestations by providers. We do not believe collecting 
data or validating attestations is a tremendous burden on States as 
noted by our estimates. States can receive 90 percent FFP for 
administering the incentive payments to providers and for conducting 
adequate monitoring and oversight. In addition, it should be noted that 
States voluntarily participate in the Medicaid EHR incentive program.

J. ICRs Regarding State Responsibilities for Receiving FFP (Sec.  
495.318)

    Section 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 Sec.  495.318(a) through (c). This burden is the 
same as that listed above in the burden discussion for Sec.  495.316.

K. ICRs Regarding Prior Approval Conditions (Sec.  495.324)

    Section 495.324(a) requires 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, Sec.  
495.324(b) states that to receive 90 percent match, each State must 
receive prior approval for all of the requirements listed in Sec.  
495.324(b)(1) through (3).
    Section 495.324(c) requires 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 subpart D of Part 495 in the regulations, 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. This burden is the same 
as that listed above in the burden discussion for Sec.  495.316.

L. ICRs Regarding Termination of Federal Financial Participation (FFP) 
for Failure To Provide Access to Information (Sec.  495.330)

    Section 495.330(a) states that the Department can terminate 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. Section 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 estimated 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. For States to collect and submit the information required, 
we estimated it would take 5 hours per State. The estimated annual 
burden for States associated with the aforementioned submission 
requirements is 280 hours (56 States-Territories x 5.0 hours/State-
Territory).
    The annual cost burden for a State employee to provide the above 
information is $9,904 (280 hours x $35.37 (mean hourly rate for a 
management analyst based on the May 2008 Bureau of Labor Statistics)). 
We believe 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 x 
$14.11 (mean hourly rate for secretaries based on the May 2008 Bureau 
of Labor Statistics)).

[[Page 44538]]

M. ICRs Regarding State Medicaid Agency and Medicaid EP and Hospital 
Activities (Sec.  495.332 Through Sec.  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 providers to demonstrate 
that they have adopted, implemented, or upgraded certified EHR 
technology or that they are meaningful users of such technology. We 
believe much of the burden associated with these requirements has 
already been accounted for in our discussion of the burden for Sec.  
495.316.

N. ICRs Regarding Access to Systems and Records (Sec.  495.346)

    Section 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.
    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 Sec.  495.330.

O. ICRs Regarding Procurement Standards (Sec.  495.348)

    Section 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. Although most States may 
already have these written standards of conduct, we have estimated the 
burden associated with this requirement as the time and effort 
necessary for a grantee to develop and maintain written standards of 
conduct. We estimate it will take each of the 56 grantees 0.5 hours to 
develop and maintain standards of conduct. The total estimated annual 
burden is 28 hours (56 grantees x 0.5 hours). The annual cost burden 
for a grantee to develop and maintain standards of conduct is $990 (28 
hours x $35.37 (mean hourly rate for a management analyst based on the 
May 2008 Bureau of Labor Statistics)).
    Section 495.348(e) requires that all grantees establish written 
procurement procedures. At a minimum, the standards must provide for 
the information listed in Sec.  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. 
Although most States probably have these procedures already, we 
estimate that it will take each of the 56 grantees 0.5 hours to develop 
and maintain written procurement procedures. The total estimated annual 
burden is 28 hours (56 grantees x 0.5 hours). The annual cost burden 
for a grantee to develop and maintain written procurement procedures is 
$990 (28 hours x $35.37 (mean hourly rate for a management analyst 
based on the May 2008 Bureau of Labor Statistics)).
    Section 495.348(f) imposes 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 x 5 hours). The 
annual cost burden for a grantee to develop and maintain a system for 
contract administration is $9,904 (280 hours x $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 (Sec.  495.350)

    Section 495.350 requires 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 hours to verify the 
information and 0.5 hours to submit the attestation to the Department, 
for a total of 1 hour. The estimated annual burden for States 
associated with the aforementioned submission requirements is 56 hours 
(56 States-Territories x 1 hour State-Territory). The annual cost 
burden for a State employee to provide the above information is $1,981 
(56 hours x $35.37 (mean hourly rate for a management analyst based on 
the May 2008 Bureau of Labor Statistics)). We believe that 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 x $14.11 (mean hourly 
rate for secretaries based on the May 2008 Bureau of Labor 
Statistics)).

Q. ICRs Regarding Reporting Requirements (Sec.  495.352)

    Section 495.352 requires 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 time and effort 
necessary for a State to draft and submit quarterly progress reports to 
the Department. 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

[[Page 44539]]

(56 States-Territories x 5 hours/State-Territory).
    The annual cost burden for a State employee to provide the above 
information is $9,904 (280 hours x $35.37 (mean hourly rate for a 
management analyst based on the May 2008 Bureau of Labor Statistics)). 
We believe 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 x 
$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 (Sec.  495.362)

    Section 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 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 Sec.  495.332 through 
Sec.  495.344.

S. ICRs Regarding Financial Oversight and Monitoring Expenditures 
(Sec.  495.366)

    Section 495.366(a)(2) requires a State to have a process in place 
to report actual expenditures for the Medicaid EHR 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. The estimated annual 
burden for States associated with the aforementioned requirements is 
280 hours (56 States-Territories x 5 hours State-Territory).
    The annual cost burden for a State employee to provide the above 
information is $9,904 (280 hours x $35.37 (mean hourly rate for a 
management analyst based on the May 2008 Bureau of Labor Statistics)). 
We believe 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 x 
$14.11 (mean hourly rate for secretaries based on the May 2008 Bureau 
of Labor Statistics)).
    Section 495.366(a)(3) requires 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.
    Section 495.366(b) lists the information collection requirements 
associated with provider eligibility as a basis for making payment. 
States must, subject to Sec.  495.332, collect and verify information 
on Medicaid providers. This burden is the same as that listed above in 
the discussion of Sec.  495.316.
    Section Sec.  495.366(c)(1) states that subject to Sec.  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 Sec.  495.8.
    Section 495.366(d)(1) states that subject to paragraph Sec.  
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. Section 495.366(d)(2) specifies that 
subject to Sec.  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. Section 495.366(d)(3) states that 
subject to Sec.  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 Sec.  495.316.
    Section 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 Sec.  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 Sec.  495.316.

T. ICRs Regarding Appeals Process for a Medicaid Provider Receiving 
Electronic Health Record Incentive Payments (Sec.  495.370)

    Section 495.370(a) requires states to have a process in place 
consistent with the requirements established in Sec.  447.253(e) 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 Sec.  495.316.
    We continue to believe that 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.

U. General Comments Regarding the Information Collection Requirements

    Comment: Some commenters recommended that EPs and eligible 
hospitals should start tracking time and resources estimates on their 
overall cost for complying with all the required data collection to 
achieve meaningful use during the reporting period. They believed the 
information is beneficial for CMS in developing and assessing future 
meaningful use objectives and measures.
    Response: We welcome provider input on the required resources to 
comply with the meaningful use requirements. We believe the information 
would help us to fine-tune burden estimates for future rulemaking for 
subsequent stages of meaningful use demonstration.
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    We will accept comments on the aforementioned information 
collection requirements for 60 days from the date of display for this 
final rule. At the conclusion of the 60-day comment period, we will 
publish an additional notice announcing the submission of the 
information collection request associated with this final rule for OMB 
approval. At that time, the public will have an additional 30 days to 
submit public comments to OMB for consideration.
    To obtain copies of the supporting statement associated with the 
information collection requirements contained herein, access CMS' Web 
site at http://www.cms.hhs.gov/PaperworkReductionActof1995, or E-mail 
your request, including your address, phone number, OMB number, and CMS 
document identifier, to Paperwork@cms.hhs.gov, or call the Reports 
Clearance Office on (410) 786-1326.
    In commenting on the information collection requirements, please 
reference the information collection request identifier (CMS-10336). To 
be assured consideration, comments and recommendations must be 
submitted in one of the following ways by September 13, 2010:
    1. Electronically. You may submit your comments electronically to 
http://www.regulations.gov. Follow the instructions for ``Comment or 
Submission'' or ``More Search Options'' to find the information 
collection document(s) accepting comments.
    2. By regular mail. You may mail written comments to the following 
address: CMS, Office of Strategic Operations and Regulatory Affairs, 
Division of Regulations Development, Attention: Document Identifier/OMB 
Control Number, Room C4-26-05, 7500 Security Boulevard, Baltimore, 
Maryland 21244-1850.

IV. Regulatory Impact Analysis

A. Overall Impact

    We have examined the final impacts of this rule as required by 
Executive Order 12866, the Regulatory Flexibility Act, 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 final 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 final rule.
    This final 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 HHS' final rule on EHR certification programs. Each rule 
assessed the direct economic effects of its provisions. This final rule 
on Medicare and Medicaid EHR Incentive Programs addresses the impacts 
related to the actions taken by EPs or eligible hospitals, or CAHs to 
demonstrate meaningful use 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 
final analysis, but also the final provisions of the other rules. 
Readers should understand that these forecasts are also subject to 
substantial uncertainty since demonstration of meaningful use will 
depend not only on the standards and requirements for FYs 2011 and 2012 
for eligible hospitals and CYs 2011 and 2012 for EPs, but on future 
rulemakings issued by the HHS.
    The HITECH Act provides Medicare and Medicaid incentive payments 
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 payment reductions under the sustainable 
growth rate (SGR) formula for determining Medicare payments. Under the 
current law, physician payments were reduced by 23 percent beginning 
December 1, 2010, and are scheduled for further reductions in CY 2011. 
Such reductions could 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 Medicare physician payment 
reductions are not included in our estimate and likewise we do not 
assume any additional behavioral changes from EHR incentive payments 
for Medicare 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 show two scenarios, which illustrate how 
different scenarios would 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.'' 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, eligible hospitals and CAHs may choose not to adopt and 
meaningfully use EHRs if the total costs of purchasing certified EHRs 
and the total costs of complying with this rule are higher than the 
value

[[Page 44545]]

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'' scenario estimate for the demonstration of meaningful 
use each year, which assumes less robust adoption and meaningful use. 
Our ``low'' scenario of meaningful use demonstration assumes that 
roughly a decade from now, nearly 95.6 percent of hospitals and 36 
percent of EPs will be ``meaningful users.''
    Both the high and low scenario estimates are based on current law, 
which includes a scheduled physician payment cut of 23 percent on 
December 1, 2010. Such a reduction could cause major changes in 
physician behavior, enrollee care, and other Medicare provider 
payments, but the specific nature of these changes is exceptionally 
uncertain. In our estimates, we did not assume changes in physician 
behavior as a result of these payment cuts, as this 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, and 
the Office of the Actuary in HHS.
    Since this RIA was published in the proposed rule, legislation has 
been enacted that increases the number of EPs that may be eligible to 
receive an incentive payment by changing the determination of hospital-
based. A complete discussion of the issue, including comments and 
responses are available in section 2 of this rule stated. The 
determination of whether an EP is hospital-based will be based upon 
whether substantially all of the EP's services are furnished in places 
of service classified under place of service codes 21 (Inpatient 
Hospital) or 23 (Emergency Room, Hospital). Previously under the old 
definition, CMS estimated that 27 percent of EPs would meet the 
definition of hospital-based, however, now, under this final definition 
of hospital-based EPs, about 14 percent of Medicare EPs would be 
considered hospital-based and thus not eligible to receive any 
incentive payments.
    There are many estimates of current EHR adoption and usage rates. 
There is one EHR function--e-prescribing--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 ONC's 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 
peer-reviewed 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 electronic-records 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 (CPOE) 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 advanced 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 likely 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, despite, as those 
providers have commented, not being included in this final rule.
    Overall, we expect spending under the EHR incentive program for 
transfer payments to Medicare and Medicaid providers over 10 years to 
be $9.7 billion under the low scenario, and $27.4 billion under the 
high scenario (these estimates include net payment adjustments for 
Medicare providers who do not achieve meaningful use in 2015 and beyond 
in the amount of $3.9 billion under the high scenario and $8.1 billion 
under the low scenario). We have also estimated ``per entity'' costs 
for EPs, eligible hospitals, and CAHs. 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. We remain 
persuaded after consideration of the public comments that 
implementation costs will be significant for each participating entity 
because providers who would like to qualify as meaningful users of EHRs 
will need to purchase certified EHR technology. We further acknowledge 
that certified EHRs may differ in many important respects from the 
types of EHRs noted in these comments and the functionalities they 
contain may differ. However, we still 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. Thus it remains that although 
both cost and benefit estimates are highly uncertain, the RIA that we 
have prepared to the best of our ability presents the costs and 
benefits of the final rulemaking.

B. Regulatory Flexibility Analysis

    The Regulatory Flexibility Act requires agencies to prepare an 
Initial Regulatory Flexibility Analysis to describe and analyze the 
impact of the final 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 Regulatory Flexibility Act, 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 Regulatory Flexibility Act's 
definitions, it is the normal practice of HHS simply to assume that all 
affected providers are ``small'' under the Regulatory Flexibility Act. 
In this case, most 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

[[Page 44546]]

significant. Accordingly, this RIA section, in conjunction with the 
remainder of the preamble, constitutes the required Initial Regulatory 
Flexibility Analysis. We believe that the adoption and meaningful use 
of EHRs will have an impact on virtually every EP and eligible 
hospital, as well as CAHs and some EPs and hospitals affiliated with MA 
organizations. 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, CAHs 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 may 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 that EPs, CAHs and eligible 
hospitals 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, implement this new technology, and train 
their staff on its use. The 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.
1. Number of Small Entities
    In total, we estimate that there are approximately 624,000 
healthcare organizations (EPs, eligible hospitals, or CAHs 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 nonphysicians (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 and implement a certified EHR and 
$10,000 annually for ongoing maintenance according to the CBO. In that 
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. 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 to achieve meaningful use. We estimate $1 
million for maintenance, upgrades, and training each year. See the 
Costs of EHR adoption in section a under Background and Assumptions 
portion of this analysis for a discussion regarding the costs of 
adoption and variation by size and details on our estimates for the 
number of entities that are eligible for the incentive within each 
eligibility type category.
    Comment: One commenter suggested that the Regulatory Flexibility 
Act analysis did not include an assessment of the cost to implement the 
rule at state and local health departments. State and local health 
departments do operate clinics and provide care to the public. Some 
state and local health departments would be considered small businesses 
under the Regulatory Flexibility Act and an assessment of the 
implementation costs for these entities would allow us to work together 
to identify possible funding sources and cost savings strategies.
    Response: Under Medicaid, clinics such as rural health clinics or 
FQHCs are not eligible providers that can receive incentive payments. 
However, EPs within these clinics can receive incentive payments if 
they meet all other eligibility requirements. The Federal costs and 
payments associated with EHR implementation for EPs are captured on in 
Tables 32 and 33.
2. Alternatives Considered
    This final rule implements new provisions of the Act for providing 
incentives for EPs, eligible hospitals, and CAHs that adopt and 
demonstrate meaningful use of certified EHR technology. HHS has no 
discretion to change the incentive payments or Medicare 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 
through the definition of 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 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 HITECH Act. We note that with regard 
to reporting of clinical quality measures for purposes of demonstrating 
meaningful use, we initially 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 final rule, is to 
require reporting of quality measures in phases. In 2011, there will be 
a requirement to report clinical quality measures through attestation 
with a numerator, denominator, and exclusions. Electronic clinical 
quality measure reporting will begin in FY 2012 for hospitals and CY 
2012 for EPs. We expect that additional clinical 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 time period for demonstrating adequate 
patient volume, and the requirements and methods for demonstrating 
meaningful use are

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discussed in section II.D. of this final 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 Regulatory Flexibility 
Act to minimize burden on small entities are met by this rule as final.
    Comment: Commenters cited the variation in the costs of EHR 
adoption across EP settings. For example, smaller practices believe 
their costs of EHR adoption to be higher per physician than larger 
counterparts. They believe they cannot realize the staff reductions and 
related cost savings from EHR adoption due to greater cross-
functionality for their staff.
    Response: We acknowledge the different experiences EPs have with 
EHR adoption and implementation. Two additional studies relating to the 
costs of adoption among small practices (Miller et al. (2005) ``The 
Value Of Electronic Health Records In Solo Or Small Group Practices'' 
Health Affairs 24(5): 1127-1137, and Zaroukian and Sierra (2006) 
``Benefiting from Ambulatory EHR Implementation: Solidarity, Six Sigma, 
and Willingness to Strive'' The Journal of Healthcare Information 
Management 20(1): 53-60) estimate the cost per physician to be $44,000 
per year with roughly $8,500 to $13,000 in ongoing maintenance. 
However, even among these studies there was still variation in 
experience. The per provider design of meaningful use incentive 
payments and orientation of other government health IT grant programs 
is to facilitate adoption and positive return on investment across 
health care settings. Thus we continue to hold that our cost estimates 
are reasonable estimations of provider experience while acknowledging 
that variations in experiences will be inevitable.

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 604 of the Regulatory Flexibility Act. 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 final 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 Medicare payments. As stated above, we have determined 
that this final rule would create a significant impact on a substantial 
number of small entities, and have prepared a Regulatory Flexibility 
Analysis as required by the Regulatory Flexibility Act 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.
    Comment: Several commenters have disagreed with our assessment, 
noting that the unique circumstances of small rural hospitals will not 
lead to efficiency and lower costs as it might with urban hospitals, 
but would lead to increased costs related to loss of productivity among 
the staff for implementing and learning an EHR system, and in later 
years, Medicare payment adjustments because of the lack of broadband 
access in these areas among other reasons.
    Response: Although we agree that small rural hospitals will have 
challenges inherent in their location, size and staffing complexity, we 
also acknowledge that smaller, more rural hospitals could experience 
added burden in achieving meaningful use. Supplemental funding to 
Regional Extension Centers to assist CAHs will work to lessen disparity 
between urban and rural hospitals. We also believe that the presence of 
incentive payments, market demands and rewards for data exchange, and 
future cost savings resulting from meaningful use will increase 
hospital adoption and meaningful use of EHRs.

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 2010, 
that threshold is approximately $135 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 of, State, local, or tribal governments under 
entitlement programs.
    This rule imposes no substantial mandates on States. This program 
is voluntary for States and States offer the incentives at their 
option. 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 State's related 
administrative costs, 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 $135 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.

E. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a final rule that imposes 
substantial direct requirement costs on State and local governments, 
preempts State law, or otherwise has Federalism implications. This 
final 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 for expenses associated with administering the program. 
As previously stated, we believe that State administrative costs are 
minimal. We note that this final rule does add a new

[[Page 44548]]

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. States will interface with the NLR since registration of 
providers will be stored in the NLR. For tracking and making payments, 
we believe that most States will use their current MMIS system to make 
payments. States must inform us of their plans for payments, systems, 
etc, via the SMHP, PAPD and IAPD; additionally, States will indicate 
the costs associated with these activities in their PAPD and IAPD. CMS 
is providing 90 percent FFP to States for building the interface and/or 
for updates to the MMIS related to EHR incentive payment 
administration. We believe the Federal share of the 90 percent match 
will protect the States from burdensome financial outlays and, as noted 
above, States offer the Medicaid EHR incentive program at their option.

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 final rule would implement the provisions of the American 
Recovery and Reinvestment Act of 2009 (ARRA) (Pub. L. 111-5) that 
provide incentive payments to EPs, eligible hospitals, and CAHs 
participating in Medicare and Medicaid programs that adopt and 
meaningfully use certified EHR technology. The final rule specifies the 
initial criteria that an EP, eligible hospital, or CAH 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. As noted 
earlier in this RIA, changes both in legislation and policy based on 
comments from the public have been taken into account for the 
preparation of this final impact analysis.
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 demonstrate meaningful 
use of certified EHR technology. However, we have discretion around how 
best to meet the HITECH Act requirements for meaningful use for FY 2011 
and beyond, which we have exercised in this final rule. Additionally, 
we have used our discretion to appropriately time the registration, 
attestation and payment requirements to allow EPs and eligible 
organizations as much time as possible in coordination with the 
anticipated certification of EHR technology to obtain and meaningfully 
use certified EHRs. 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 HITECH Act, 
however, those costs cannot be estimated and are not captured in this 
analysis.
3. Background and Assumptions
    The principal costs of this final rule are the additional 
expenditures that will be undertaken by eligible entities in order to 
obtain the Medicare and Medicaid incentive payments to adopt, implement 
or upgrade and/or 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 has 
been finalized for stage one but will change over time; (3) the HHS 
certification process although defined, has yet to be implemented;, 
and, (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. The net costs and savings 
shown for this program represent two possible scenarios and actual 
impacts could differ substantially.
    As written in the preamble, this final 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 well as general implementation costs for eligible 
hospitals, CAHs 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 final 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, 
including CAHs under Medicare, Medicaid, and MA and used them 
throughout the analysis.
     About 553,200 Medicare FFS EPs in 2011 (some of which will 
also be Medicaid EPs).
     About 14 percent of the total EPs are hospital-based 
Medicare EPs, and are not eligible for the program. This leaves 
approximately 477,500 nonhospital-based Medicare EPs in 2011.
     Twenty percent of the nonhospital-based Medicare EPs 
(approximately 95,500 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. We assume that any EP in this 
situation will choose to receive the Medicaid incentive payment, 
because it is larger.
     About 44,100 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
    ++ 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 third quarter 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 continue 
to estimate for EPs, the average adopt/implement/

[[Page 44549]]

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. Although reports vary widely, we anticipate that the average 
would be $5 million to achieve meaningful use, 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 EHRs currently in use and 
may differ in the functionalities they contain. We estimate $1 million 
for maintenance, upgrades, and training each year. 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.
    For an eligible Medicaid EP, the first year incentive can be based 
on 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 studied 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 (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. 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 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 95,500 in 2011). Since the Medicaid 
incentive payments are higher than those for Medicare and EPs can only 
receive payments from one program, we assume the dually eligible EPs 
will receive their payments through the Medicaid program. It is also 
important to note that just as there is overall variation in state 
Medicaid programs, we anticipate there will be variation in the design 
and timing of state Medicaid EHR incentive programs. New data on the 
pace of state planning for meaningful use was used to adjust Medicaid 
adoption scenarios. Thus, how and when providers apply for meaningful 
use through Medicaid will likely differ by state. Medicaid also offers 
incentive payments for dentists, certified nurse-midwives, 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
    The American Hospital Association (AHA) conducts annual surveys 
that among other measures, track hospital spending. We have updated 
these data to reflect the latest figures from the 2008 AHA Survey. 
Costs at these levels of adoption were significantly higher in 2008 
than 2007. This may better reflect the costs of implementing additional 
functionalities. We have also updated the number of discharges using 
the most recent cost report data available. The range in yearly 
information technology spending among hospitals is large--from $36,000 
to over $32 million based on 2007 and 2008 AHA data. EHR system costs 
specifically 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 aforementioned AHA study, 
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 decision-
making that included treatment guidelines. 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. Applying a similar standard 
to the 2008 AHA data results in roughly 3-4 percent of hospitals having 
comprehensive systems and 12 to 13 percent having basic systems. 
According to hospital CEOs, the main barrier to adoption is the cost of 
the

[[Page 44550]]

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 of advanced 
systems is low, it is difficult to get a solid average estimate for 
implementation and maintenance costs that can be applied across the 
industry. In addition, 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.
5. Medicare Incentive Program Costs
a. Medicare Eligible Professionals (EPs)
    In the proposed rule, CMS said that an EP would be a hospital-based 
EP and therefore ineligible to receive a Medicare or Medicaid EHR 
incentive payment if more than 90 percent of their services are 
provided in the following place of service (POS) codes for HIPAA 
standard transactions: 21--Inpatient Hospital, 22--Outpatient Hospital, 
23--Emergency Room.
    However, as previously noted here and discussed elsewhere in this 
final rule, Congress amended the law to include only POS codes 21 
(inpatient) and 23 (emergency room), excluding 22 (outpatient 
hospital), thereby permitting some hospital-based EPs to qualify for 
the incentive payment. Accordingly we have updated our tables to 
reflect the increased number of EPs that may now qualify for the 
incentive payments, and those revisions to the numbers flow throughout 
these updated tables.
    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 14 percent of those EPs are hospital-based, based 
on the definition final in Sec.  495.4, and therefore, do not qualify 
for incentive payments. This percentage of EPs were 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 
hospital-based 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 is uncertain, so we established high and low 
scenarios 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 a 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 21.3 percent beginning 
June 1, 2010, and are scheduled to be further reduced beginning in CY 
2011. 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 Medicare 
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 non-hospital based Medicare EPs, (including those 
additional EPs who may now qualify under the revised definition), who 
will demonstrate meaningful use of certified EHR technology over the 
period CYs 2011 through 2019 is as shown in Table 22.
[GRAPHIC] [TIFF OMITTED] TR28JY10.071

[[Page 44551]]

    Under the HITECH Act, EPs can receive up to 5 years of Medicare 
incentive payments for the demonstration of 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 (2011 or 2012) 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, (with some 
limitations on switching programs) 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: of $63,750 versus $44,000 for Medicare. 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 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 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 organizations 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 use 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 started with the estimated rate of EHR 
adoption from the study with the most rigorous definition, but note 
that the meaningful criteria are not equivalent to a fully functional 
system as defined in this study. (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). For the low scenario, 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.
    Given the revisions to the meaningful use criteria in this final 
rule and the nationwide implementation of the Regional Extension Center 
Program, the likelihood of reaching the high scenario has increased. 
However, actual adoption trends could be significantly different from 
these assumptions, given the elements of uncertainty we describe 
throughout this analysis.
    Net costs for the low scenario of the Medicare EP portion of the 
HITECH Act are shown in Table 23.

[[Page 44552]]

[GRAPHIC] [TIFF OMITTED] TR28JY10.072

    The estimated net costs for the high scenario of the Medicare EP 
portion of the HITECH Act are shown in Table 24.
[GRAPHIC] [TIFF OMITTED] TR28JY10.073

[[Page 44553]]

b. Medicare Eligible Hospitals and CAHs
    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 assumptions about how rapidly hospitals would 
adopt given the fraction of their costs that were covered. In addition, 
our estimates have been updated to reflect that the additional 
challenges likely to be experienced in the adoption of EHRs among CAHs 
will be partially ameliorated by supplements to Regional Extension 
Center funding to assist CAHs with EHR adoption.
    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 patients). The total incentive 
payments potentially payable over a 4-year period vary significantly by 
hospitals' inpatient caseloads, ranging from a low of about $11,000 to 
a high of $12.9 million, with the median being $3.8 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 2008 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 
final meaningful use definition will be the hardest one for hospitals 
to meet. Table 25 provides these proportions.
[GRAPHIC] [TIFF OMITTED] TR28JY10.074

    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 have updated these data to 
reflect the latest figures from the 2008 AHA Survey. Costs at these 
levels of adoption were significantly higher in 2008 than 2007. This 
may better reflect the costs of implementing additional 
functionalities. We have also updated the number of discharges using 
the most recent cost report data available. 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 first 
demonstrating meaningful use in FY 2016 or later are not eligible for 
incentive payments. Medicare 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 to illustrate the uncertainty, we are providing two scenarios 
for our estimates. Our high scenario estimated net costs for section 
4102 of the HITECH Act are shown in Table 26: Estimated costs (+) and 
savings (-) for eligible hospitals adopting certified EHRs. This 
provision is estimated to increase Medicare hospital expenditures by a 
net total of $10.1 billion during FYs -2011 through 2019.

[[Page 44554]]

[GRAPHIC] [TIFF OMITTED] TR28JY10.075

    We are also providing the estimates for a low scenario in Table 27.
    [GRAPHIC] [TIFF OMITTED] TR28JY10.076
    

[[Page 44555]]

    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 28, 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 28 shows the high scenario 
estimates:
[GRAPHIC] [TIFF OMITTED] TR28JY10.077

    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 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 two 
scenarios which are examples of what we believe are possible low rates 
and high rates of adoption.
    Table 29 shows the low scenario estimates.
    [GRAPHIC] [TIFF OMITTED] TR28JY10.078
    

[[Page 44556]]

    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 29, 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 30 shows our 
high scenario estimated 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.
[GRAPHIC] [TIFF OMITTED] TR28JY10.079

    For instance in FY 2012 under the high scenario, 53.5 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, 92.6 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 54.2 
percent of all possible incentive payments actually paid in that year.
    Table 31 shows the low scenario estimates.
    [GRAPHIC] [TIFF OMITTED] TR28JY10.080
    
    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

[[Page 44557]]

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.
    Comment: The AHA surveyed 795 hospitals in January 2010 asking 
whether their EHR systems could meet each of the meaningful use 
objectives now and in coming years: 45 percent reported they could meet 
all Stage 1 objectives by 2015 meaning that the remainder might be 
subject to penalties.
    Response: Their survey was based on our proposed definition of 
meaningful use. The definition of meaningful use in this final rule 
offers more flexibility and lower thresholds which we believe will make 
it easier for eligible hospitals to qualify for incentives. However we 
do acknowledge that the meaningful use criteria described in this final 
rule may still challenge hospitals to use their IT in ways that improve 
patient care and outcomes. We also acknowledge that smaller, more rural 
hospitals could experience added burden in achieving meaningful use 
related to timing and costs of implementation. Supplemental funding to 
Regional Extension Centers to assist CAHs will work to lessen disparity 
between urban and rural hospitals. We also believe that the presence of 
incentive payments, market demands and rewards for data exchange, and 
future cost savings resulting from meaningful use will increase 
hospital adoption and meaningful use of EHRs.
c. Critical Access Hospitals (CAHs)
    We estimate that there are 1,302 CAHs eligible to receive EHR 
incentive payments. Given the financial assistance available under 
HITECH for Regional Extension Centers, whose priorities include 
assisting CAHs in EHR adoption, we estimate that the 19 percent of CAHs 
with relatively advanced EHR systems will achieve meaningful use before 
2016. We also estimate that most of the remaining CAHs that have 
already adopted some kind of EHR system (48 percent of CAHs) will also 
achieve meaningful use by 2016. Our estimates regarding the incentives 
that will be paid to CAHs are incorporated into the overall Medicare 
and Medicaid program costs.
    We note that in response to comments this final rule amends the 
definition of acute care hospital for purposes of the Medicaid EHR 
incentive payment program to generally include critical access 
hospitals that meet the Medicaid patient volume criteria. Thus, the 
change in the definition has required that we update our tables to 
reflect the increased number of hospitals that now may qualify for the 
Medicaid EHR incentive payment program under this new definition. The 
numbers and percentages from the revised tables are reflected 
throughout this final impact analysis. Additionally, EHR adoption rates 
have been adjusted now that CAHs will be eligible for both Medicare and 
Medicaid EHR incentive payments.
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 qualify for a Medicaid incentive payment 
for adopting, implementing, or upgrading in their first participation 
year, or for meaningful use, and up to an additional 5 years of 
incentive payments for demonstrating meaningful use of certified EHR 
technology. Under Medicaid, EPs include physicians (including 
pediatricians), dentists, certified nurse-midwives, nurse 
practitioners, and certain physician assistants. Initial incentive 
payments are available through 2016, and incentive payments cannot be 
made after 2021. The Medicaid hospital incentives are similar to those 
specified in section 4102 of the HITECH Act for Medicare, except that 
they must be paid out over at least 3 years and are spread out over a 
maximum of 6 years, are based on the ratio of Medicaid inpatient days 
to total days, and are not phased down as quickly as the Medicare 
payments based on the first year of payment. Medicaid hospitals can 
begin incentive payments through 2016, and incentive payments cannot be 
made after 2021. 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 non-adoption 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 32 shows our high estimates for the net 
Medicaid costs for eligible hospitals and EP.

[[Page 44558]]

[GRAPHIC] [TIFF OMITTED] TR28JY10.081

    Table 33 shows the low estimates for Medicaid costs and savings.
    [GRAPHIC] [TIFF OMITTED] TR28JY10.082
    
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.

[[Page 44559]]

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 use 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 34.
    [GRAPHIC] [TIFF OMITTED] TR28JY10.083
    
    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 has demonstrated a meaningful use or 
because he or she has adopted, implemented, or upgraded certified EHR 
technology, these participation rates include not only meaningful users 
but eligible providers implementing certified EHR technology as well. 
Table 35 shows our low scenario estimates.
[GRAPHIC] [TIFF OMITTED] TR28JY10.084

[[Page 44560]]

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 
36. 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 spread aggregate Medicaid 
incentive payments over no less than 3 years, but no more than 6 years 
of payments, and acute care hospitals 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 
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 non-children's 
hospitals.
[GRAPHIC] [TIFF OMITTED] TR28JY10.085

    Table 37 shows our low scenario estimates.
    [GRAPHIC] [TIFF OMITTED] TR28JY10.086
    
7. Benefits for All EPs and All Eligible Hospitals
    In this final 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

[[Page 44561]]

Technology: New Trends from the Literature'' Health Affairs.)
    Nonetheless, we believe there are benefits that can be obtained by 
eligible hospitals and EPs, including: reductions in medical record-
keeping 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 Center http://www.journalacs.org/article/S1072-7515%2807%2900390-0/abstract-article-footnote-1s.) 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, the 
study states that EHRs 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 claims that 
there is a potential to gain both internal and external savings from 
widespread adoption of 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 final 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.
    Since the CBO study, additional research has emerged documenting 
the association of EHRs with improved outcomes among diabetics (Hunt, 
JS et al. (2009) ``The impact of a physician-directed health 
information technology system on diabetes outcomes in primary care: a 
pre- and post-implementation study'' Informatics in Primary Care 
17(3):165-74; Pollard, C et al. (2009) ``Electronic patient registries 
improve diabetes care and clinical outcomes in rural community health 
centers'' Journal of Rural Health 25(1):77-84) and trauma patients 
(Deckelbaum, D. et al. (2009) ``Electronic medical records and 
mortality in trauma patients ``The Journal of Trauma: Injury, 
Infection, and Critical Care 67(3): 634-636), enhanced efficiencies in 
ambulatory care settings (Chen, C et al. (2009) ``The Kaiser Permanente 
Electronic Health Record: Transforming and Streamlining Modalities Of 
Care.''Health Affairs 28(2):323-333), and improved outcomes and lower 
costs in hospitals (Amarasingham, R. et al. (2009) ``Clinical 
information technologies and inpatient outcomes: a multiple hospital 
study'' Archives of Internal Medicine 169(2):108-14).
9. General Considerations
    The estimates for the HITECH Act provisions were based on the 
economic assumptions underlying the President's 2011 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, CAHs and EPs will adopt EHRs and other HIT. 
Nonetheless, we believe that the Medicare incentive payments and the 
prospect of significant payment penalties for not demonstrating 
meaningful use 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 expect to 
administer the requirements in such a way as to encourage adoption of 
certified EHR technology and facilitate qualification for incentive 
payments, and expect to adopt progressively demanding standards at each 
stage 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 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.
    All financial analysis is calculated over a 10-year planning 
horizon, because though the incentive payments for Medicare EPs, CAHs 
and eligible

[[Page 44562]]

hospitals will only be paid for 5 years, the Medicaid incentives will 
cease in CY 2021. Starting in CY 2015, Medicare payment adjustments 
will begin.
10. Summary
    The total cost to the Medicare and Medicaid programs is estimated 
to be $9.7 billion in transfers under the low scenario, and $27.4 
billion under the high scenario, over a 10-year timeframe. The main 
reasons for the changes from the proposed rule are revised definitions 
of hospital-based eligible professional and Medicaid acute care 
hospitals, and updated data on discharges and costs of adoption among 
hospitals. 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.
[GRAPHIC] [TIFF OMITTED] TR28JY10.087

    Table 39 shows the total costs from 2011 through 2019 for the high 
scenario after which the payment adjustments will be invoked.
[GRAPHIC] [TIFF OMITTED] TR28JY10.088

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, and the like, are still unable 
to be quantified at this time.

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

[[Page 44563]]

classification of the expenditures associated with the provisions of 
this final rule. Monetary annualized benefits and nonbudgetary 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 range might 
be to implement EHR technology in this final rule.
    Expected qualitative benefits include improved quality of care, 
better health outcomes, reduced errors and the like. Private industry 
costs would include the impact of EHR activities such as temporary 
reduced staff productivity related to learning how to use the EHR, the 
need for additional staff to work with HIT issues, and administrative 
costs related to reporting.
[GRAPHIC] [TIFF OMITTED] TR28JY10.089

    In accordance with the provisions of Executive Order 12866, this 
final 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.

0
For the reasons set forth in the preamble, the Centers for Medicare & 
Medicare Services amends 42 CFR Chapter IV as follows:

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
SERVICES

0
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

0
2. Section 412.64 is amended as follows:
0
A. Revising paragraph (d)(2)(i)(B).
0
B. Adding new paragraphs (d)(2)(i)(C) and (d)(3).
    The revision and additions read as follows:

Sec.  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-fourths of the applicable percentage 
change specified in paragraph (d)(1) of this section is reduced--
    (i) For fiscal year 2015, by 33\1/3\ percent;
    (ii) For fiscal year 2016, by 66\2/3\ percent; and
    (iii) For fiscal year 2017 and subsequent fiscal years, by 100 
percent.
* * * * *

[[Page 44564]]

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR 
END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED 
PAYMENT RATES FOR SKILLED NURSING FACILITIES

0
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

0
4. Section 413.70 is amended as follows:
0
A. Revising paragraph (a)(1).
0
B. Adding new paragraphs (a)(5), (a)(6) and (a)(7).
    The revision and additions read as follows:

Sec.  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 Sec.  412.2(c)(5) of this subchapter and Sec.  
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 Sec.  
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 Sec.  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.
    (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 Sec.  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.
    (7) There is no administrative or judicial review under section 
s1869 and 1878 of the Actor otherwise of the following:
    (i) The methodology and standards for determining the amount of 
payment under paragraph (a)(5) of this section, including the 
calculation of reasonable costs under Sec.  495.106(c) of this chapter.
    (ii) The methodology and standards for determining the amount of 
payment adjustments made under paragraph (a)(6).
    (iii) The methodology and standards for determining a CAH to be a 
qualifying CAH under Sec.  495.106 of this chapter.
    (iv) The methodology and standards for determining if the hardship 
exemption applies to a CAH under paragraph (a)(6)(ii) of this section.
    (v) The specification of the cost reporting periods, payment years, 
or fiscal years as applied under this paragraph.
* * * * *

PART 422--MEDICARE ADVANTAGE PROGRAM

0
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

0
6. Section 422.304 is amended by adding a new paragraph (f) to read as 
follows:

Sec.  422.304  Monthly payments.

* * * * *
    (f) Separate payment for meaningful use of certified EHRs. In the 
case of qualifying MA organizations, as defined in Sec.  495.200 of 
this chapter, entitled to MA EHR incentive payments per Sec.  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.

0
7. Section 422.306 is amended as follows:
0
A. Removing ``and'' from the end of paragraph (b)(2)(ii).
0
B. Removing the period at the end of paragraph (b)(2)(iii) and adding 
``; and'' in its place.
0
C. Adding a new paragraph (b)(2)(iv).
    The addition reads as follows:

Sec.  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.
* * * * *

0
8. Section 422.308 is amended as follows:
0
A. Redesignating paragraph (a) as paragraph (a)(1).
0
B. Adding a new paragraph (a)(2).
    The addition reads as follows:

Sec.  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.
* * * * *

0
9. Section 422.322 is amended as follows:
0
A. Adding paragraph (a)(3).
0
B. Revising paragraph (b).
    The addition and revision read as follows:

Sec.  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

[[Page 44565]]

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 Sec.  412.105(g), 
Sec.  413.86(d), and Sec.  495.204 of this chapter and Sec. Sec.  
422.109, 422.316, and 422.320, CMS' payments under a contract with an 
MA organization (described in Sec.  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

0
10. A new part 495 is added to read as follows:

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, eligible hospitals, and 
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.
495.110 Preclusion on administrative and judicial review.
Subpart C--Requirements Specific to Medicare Advantage (MA) 
Organizations
495.200 Definitions.
495.202 Identification of qualifying MA organizations, MA-EPs, and 
MA-affiliated eligible hospitals.
495.204 Incentive payments to qualifying MA organizations for MA-EPs 
and MA-affiliated eligible hospitals.
495.206 Timeframe for payment to qualifying MA organizations.
495.208 Avoiding duplicate payment.
495.210 Meaningful EHR 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 FFP.
495.328 Request for reconsideration of adverse determination.
495.330 Termination of FFP for failure to provide access to 
information.
495.332 State Medicaid health information technology (HIT) plan 
requirements.
495.334 Reserved.
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

Sec.  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 eligible professionals who adopt and 
meaningfully use certified electronic health record (EHR) technology.
    (b) Section 1853(1) of the Act to provide incentive payments to 
Medicare Advantage organizations for certain 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 the Medicare FFS program.
    (d) Section 1814(l) of the Act to provide an incentive payment to 
critical access hospitals that 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)(B)(ix)(I), 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 
EHR technology, and for covered professional services furnished on or 
after January 1, 2015 to Medicare beneficiaries by certain 
professionals who are not meaningful users of certified EHR technology.

Sec.  495.4  Definitions.

    In this part, unless otherwise indicated--
    Certified electronic health record technology has the same 
definition as this term is defined at 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

[[Page 44566]]

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 eligible professional (EP)--
    (i) For the first payment year, any continuous 90-day period within 
a calendar year;
    (ii)(A) Except as specified in paragraph (1)(ii)(B) of this 
definition, for the second, third, fourth, fifth, or sixth payment 
year, the calendar year.
    (B) For Medicaid providers who are demonstrating they are 
meaningful EHR users for the first time in their second payment year, 
the EHR reporting period during such second payment year is any 
continuous 90-day period within the calendar year.
    (2) For an eligible hospital or a CAH--
    (i) For the first payment year, any continuous 90-day period within 
a federal fiscal year; and
    (ii)(A) Except as specified in paragraph (2)(ii)(B) of this 
definition, for the second, third, fourth, fifth, or sixth payment 
year, the Federal fiscal year.
    (B) For Medicaid providers who are demonstrating they are 
meaningful EHR users for the first time in their second payment year, 
the EHR reporting period during such second payment year is any 
continuous 90-day period within the Federal fiscal year.
    Eligible hospital means an eligible hospital as defined under Sec.  
495.100 or Medicaid eligible hospital under subpart D of this part.
    Eligible professional (EP) means an eligible professional as 
defined under Sec.  495.100 or a Medicaid eligible professional under 
subpart D of 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 a hospital setting in the year preceding the payment year. 
For Medicare, this will be calculated based on the Federal FY prior to 
the payment year. For Medicaid, it is at the State's discretion if the 
data is gathered on the Federal FY or CY prior to the payment year. A 
setting is considered a hospital setting if it is a site of service 
that would be identified by the codes used in the HIPAA standard 
transactions as an inpatient hospital, or emergency room setting.
    Meaningful EHR user means:
    (1) Subject to paragraph (3) of this definition, an EP, eligible 
hospital or CAH that, for an EHR reporting period for a payment year, 
demonstrates in accordance with Sec.  495.8 meaningful use of certified 
EHR technology by meeting the applicable objectives and associated 
measures under Sec.  495.6; and
    (2)(i) Except as specified in paragraph (2)(ii) of this definition, 
a Medicaid EP or Medicaid eligible hospital, that meets the 
requirements of paragraph (1) of this definition and any additional 
criteria for meaningful use imposed by the State and approved by CMS 
under Sec.  495.316 and Sec.  495.332.
    (ii) An eligible hospital or CAH is deemed to be a meaningful EHR 
user for purposes of receiving an incentive payment under subpart D of 
this Part, if the hospital participates in both the Medicare and 
Medicaid EHR incentive programs, and the hospital meets the 
requirements of paragraph (1) of this definition.
    (3) To be considered a meaningful EHR user, at least 50 percent of 
an EP's patient encounters during the EHR reporting period during the 
payment year must occur at a practice/location or practices/locations 
equipped with certified EHR technology.
    Payment year means:
    (1) For an EP, a calendar year beginning with CY 2011; and
    (2) For a CAH or an eligible hospital, a Federal fiscal year 
beginning with FY 2011.
    Qualified EHR has the same definition as this term is defined at 45 
CFR 170.102.
    First, second, third, fourth, fifth, or sixth payment years mean as 
follows:
    (1) The first payment year is: with respect to an EP, the first 
calendar year for which the EP receives an incentive payment under this 
part; and with respect to an eligible hospital or CAH, the first FY for 
which the hospital receives an incentive payment under this part.
    (2) The second, third, fourth, fifth, or sixth payment year is:
    (i) With respect to a Medicare EP, the second, third, fourth or 
fifth successive CY immediately following the first payment year; and 
with respect to a Medicare eligible hospital or CAH, the second, third, 
or fourth successive Federal FY immediately following the first payment 
year. (Note: Medicare EPs are not eligible for a sixth payment year and 
Medicare eligible hospitals are not eligible for a fifth or sixth 
payment year.)
    (ii)(A) With respect to a Medicaid EP, the second, third, fourth, 
fifth, or sixth CY for which the EP receives an incentive payment under 
subpart D, regardless of whether the year immediately follows the prior 
payment year; and
    (B) With respect to a Medicaid eligible hospital, for years prior 
to FY 2017, the second, third, fourth, fifth, or sixth Federal FY for 
which the hospital receives an incentive payment under subpart D of 
this part, regardless of whether the year immediately follows the prior 
payment year. Beginning with FY 2017, payments to Medicaid eligible 
hospitals must be consecutive, and the hospital is not eligible for an 
incentive payment under subpart D of this part unless it received such 
incentive payment for the prior fiscal year.

Sec.  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 paragraphs 
(a)(2) and (a)(3) of this section, EPs must meet all objectives and 
associated measures of the Stage 1 criteria specified in paragraph (d) 
of this section and five objectives of the EP's choice from paragraph 
(e) of this section to meet the definition of a meaningful EHR user.
    (2) Exclusion for non-applicable objectives. (i) An EP may exclude 
a particular objective contained in paragraphs (d) or (e) of this 
section, if the EP meets all of the following requirements:
    (A) Must ensure that the objective in paragraph (d) or (e) of this 
section includes an option for the EP to attest that the objective is 
not applicable.
    (B) Meets the criteria in the applicable objective that would 
permit the attestation.
    (C) Attests.
    (ii) An exclusion will reduce (by the number of exclusions 
applicable) the number of objectives that would otherwise apply. For 
example, an EP that has an exclusion from one of the objectives in 
paragraph (e) of this section must meet four (and not five) objectives 
of the EP's choice from such paragraph to meet the definition of a 
meaningful EHR user.
    (3) 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 (d) and (e) 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 paragraphs (b)(2) and (b)(3) 
of this section, eligible hospitals and CAHs must meet all objectives 
and associated measures of

[[Page 44567]]

the Stage 1 criteria specified in paragraph (f) of this section and 
five objectives of the eligible hospital's or CAH's choice from 
paragraph (g) of this section to meet the definition of a meaningful 
EHR user.
    (2) Exclusions for nonapplicable objectives. (i) An eligible 
hospital or CAH may exclude a particular objective that includes an 
option for exclusion contained in paragraphs (f) or (g) of this 
section, if the hospital meets all of the following requirements:
    (A) The hospital meets the criteria in the applicable objective 
that would permit an exclusion.
    (B) The hospital so attests.
    (ii) An exclusion will reduce (by the number of exclusions 
received) the number of objectives that would otherwise apply. For 
example, an eligible hospital that is excluded from one of the 
objectives in paragraph (g) of this section must meet four (and not 
five) objectives of the hospital's choice from such paragraph to meet 
the definition of a meaningful EHR user.
    (3) Exception for Medicaid eligible hospitals that adopt, implement 
or upgrade in their first payment year. For Medicaid eligible hospitals 
that 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 (f) and (g) of 
this section apply beginning with the second payment year, and do not 
apply to the first payment year.
    (c) Many of the objective and associated measures in paragraphs (d) 
through (g) of this section rely on measures that count unique patients 
or actions.
    (1) If a measure (or associated objective) in paragraphs (d) 
through (g) of this section references paragraph (c) of this section, 
then the measure may be calculated by reviewing only the actions for 
patients whose records are maintained using certified EHR technology. A 
patient's record is maintained using certified EHR technology if 
sufficient data was entered in the certified EHR technology to allow 
the record to be saved, and not rejected due to incomplete data.
    (2) If the objective and associated measure does not reference this 
paragraph (c) of this section, then the measure must be calculated by 
reviewing all patient records, not just those maintained using 
certified EHR technology.
    (d) Stage 1 core criteria for EPs. An EP must satisfy the following 
objectives and associated measures, except those objectives and 
associated measures for which an EP qualifies for an exclusion under 
paragraph (a)(2) of this section specified in this paragraph:
    (1)(i) Objective. Use computerized provider order entry (CPOE) for 
medication orders directly entered by any licensed healthcare 
professional who can enter orders into the medical record per state, 
local and professional guidelines.
    (ii) Measure. Subject to paragraph (c) of this section, more than 
30 percent of all unique patients with at least one medication in their 
medication list seen by the EP have at least one medication order 
entered using CPOE.
    (iii) Exclusion in accordance with paragraph (a)(2) of this section 
Any EP who writes fewer than 100 prescriptions during the EHR reporting 
period.
    (2)(i) Objective. Implement drug-drug and drug-allergy interaction 
checks.
    (ii) Measure. The EP has enabled this functionality for the entire 
EHR reporting period.
    (3)(i) Objective. Maintain an up-to-date problem list of current 
and active diagnoses.
    (ii) Measure. More than 80 percent of all unique patients seen by 
the EP have at least one entry or an indication that no problems are 
known for the patient recorded as structured data.
    (4)(i) Objective. Generate and transmit permissible prescriptions 
electronically (eRx).
    (ii) Measure. Subject to paragraph (c) of this section, more than 
40 percent of all permissible prescriptions written by the EP are 
transmitted electronically using certified EHR technology.
    (iii) Exclusion in accordance with paragraph (a)(2) of this section 
Any EP who writes fewer than 100 prescriptions during the EHR reporting 
period.
    (5)(i) Objective. Maintain active medication list.
    (ii) Measure. More than 80 percent of all unique patients seen by 
the EP have at least one entry (or an indication that the patient is 
not currently prescribed any medication) recorded as structured data.
    (6)(i) Objective. Maintain active medication allergy list.
    (ii) Measure. More than 80 percent of all unique patients seen by 
the EP have at least one entry (or an indication that the patient has 
no known medication allergies) recorded as structured data.
    (7)(i) Objective. Record all of the following demographics:
    (A) Preferred language.
    (B) Gender.
    (C) Race.
    (D) Ethnicity.
    (E) Date of birth.
    (ii) Measure. More than 50 percent of all unique patients seen by 
the EP have demographics recorded as structured data.
    (8)(i) Objective. Record and chart changes in the following vital 
signs:
    (A) Height.
    (B) Weight.
    (C) Blood pressure.
    (D) Calculate and display body mass index (BMI).
    (E) Plot and display growth charts for children 2-20 years, 
including BMI.
    (ii) Measure. Subject to paragraph (c) of this section, more than 
50 percent of all unique patients age 2 and over seen by the EP, 
height, weight and blood pressure are recorded as structured data.
    (iii) Exclusion in accordance with paragraph (a)(2) of this 
section. Any EP who either see no patients 2 years or older, or who 
believes that all three vital signs of height, weight, and blood 
pressure of their patients have no relevance to their scope of 
practice.
    (9)(i) Objective. Record smoking status for patients 13 years old 
or older.
    (ii) Measure. Subject to paragraph (c) of this section, more than 
50 percent of all unique patients 13 years old or older seen by the EP 
have smoking status recorded as structured data.
    (iii) Exclusion in accordance with paragraph (a)(2) of this 
section. Any EP who sees no patients 13 years or older.
    (10)(i) Objective. Report ambulatory clinical quality measures to 
CMS or, in the case of Medicaid EPs, the States.
    (ii) Measure. Subject to paragraph (c) of this section, 
successfully report to CMS (or, in the case of Medicaid EPs, the 
States) ambulatory clinical quality measures selected by CMS in the 
manner specified by CMS (or in the case of Medicaid EPs, the States).
    (11)(i) Objective. Implement one clinical decision support rules 
relevant to specialty or high clinical priority along with the ability 
to track compliance with that rule.
    (ii) Measure. Implement one clinical decision support rule.
    (12)(i) Objective. Provide patients with an electronic copy of 
their health information (including diagnostics test results, problem 
list, medication lists, medication allergies) upon request.
    (ii) Measure. Subject to paragraph (c) of this section, more than 
50 percent of all patients who request an electronic copy of their 
health information are provided it within 3 business days.
    (iii) Exclusion in accordance with paragraph (a)(2) of this 
section. Any EP that has no requests from patients or their agents for 
an electronic copy of patient health information during the EHR 
reporting period.
    (13)(i) Objective. Provide clinical summaries for patients for each 
office visit.
    (ii) Measure. Subject to paragraph (c) of this section, clinical 
summaries

[[Page 44568]]

provided to patients for more than 50 percent of all office visits 
within 3 business days.
    (iii) Exclusion in accordance with paragraph (a)(2) of this 
section. Any EP who has no office visits during the EHR reporting 
period.
    (14)(i) 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.
    (ii) Measure. Performed at least one test of certified EHR 
technology's capacity to electronically exchange key clinical 
information.
    (15)(i) Objective. Protect electronic health information created or 
maintained by the 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 and correct identified security 
deficiencies as part of its risk management process.
    (e) Stage 1 menu set criteria for EPs. An EP must meet five of the 
following objectives and associated measures, one of which must be 
either paragraph (e)(9) or (e)(10) of this section, except that the 
required number of objectives and associated measures is reduced by an 
EP's paragraph (a)(2) of this section exclusions specified in this 
paragraph:
    (1)(i) Objective. Implement drug-formulary checks.
    (ii) Measure. The EP has enabled this functionality and has access 
to at least one internal or external formulary for the entire EHR 
reporting period.
    (2)(i) Objective. Incorporate clinical lab-test results into EHR as 
structured data.
    (ii) Measure. Subject to paragraph (c) of this section, more than 
40 percent of all clinical lab tests results ordered by the EP 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.
    (iii) Exclusion in accordance with paragraph (a)(2) of this 
section. An EP who orders no lab tests whose results are either in a 
positive/negative or numeric format during the EHR reporting period.
    (3)(i) Objective. Generate lists of patients by specific conditions 
to use for quality improvement, reduction of disparities, research, or 
outreach.
    (ii) Measure. Subject to paragraph (c) of this section, generate at 
least one report listing patients of the EP with a specific condition.
    (4)(i) Objective. Send reminders to patients per patient preference 
for preventive/follow-up care.
    (ii) Measure. Subject to paragraph (c) of this section, more than 
20 percent of all patients 65 years or older or 5 years old or younger 
were sent an appropriate reminder during the EHR reporting period.
    (iii) Exclusion in accordance with paragraph (a)(2) of this 
section. An EP who has no patients 65 years old or older or 5 years old 
or younger with records maintained using certified EHR technology.
    (5)(i) Objective. Provide patients with timely electronic access to 
their health information (including lab results, problem list, 
medication lists, and allergies) within 4 business days 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 (available to the patient within four 
business days of being updated in the certified EHR technology) 
electronic access to their health information subject to the EP's 
discretion to withhold certain information.
    (iii) Exclusion in accordance with paragraph (a)(2) of this 
section. Any EP that neither orders nor creates any of the information 
listed at 45 CFR 170.304(g) during the EHR reporting period.
    (6)(i) Objective. Use certified EHR technology to identify patient-
specific education resources and provide those resources to the patient 
if appropriate.
    (ii) Measure. More than 10 percent of all unique patients seen by 
the EP are provided patient-specific education resources.
    (7)(i) Objective. The EP who receives a patient from another 
setting of care or provider of care or believes an encounter is 
relevant should perform medication reconciliation.
    (ii) Measure. Subject to paragraph (c) of this section, the EP 
performs medication reconciliation for more than 50 percent of 
transitions of care in which the patient is transitioned into the care 
of the EP.
    (iii) Exclusion in accordance with paragraph (a)(2) of this 
section. An EP who was not the recipient of any transitions of care 
during the EHR reporting period.
    (8)(i) Objective. The EP who transitions their patient to another 
setting of care or provider of care or refers their patient to another 
provider of care should provide summary care record for each transition 
of care or referral.
    (ii) Measure. Subject to paragraph (c) of this section, the EP who 
transitions or refers their patient to another setting of care or 
provider of care provides a summary of care record for more than 50 
percent of transitions of care and referrals.
    (iii) Exclusion in accordance with paragraph (a)(2) of this 
section. An EP who neither transfers a patient to another setting nor 
refers a patient to another provider during the EHR reporting period.
    (9)(i) Objective. Capability to submit electronic data to 
immunization registries or immunization information systems and actual 
submission according to applicable law and practice.
    (ii) Measure. Performed at least one test of certified EHR 
technology's capacity to submit electronic data to immunization 
registries and follow up submission if the test is successful (unless 
none of the immunization registries to which the EP submits such 
information has the capacity to receive the information 
electronically).
    (iii) Exclusion in accordance with paragraph (a)(2) of this 
section. An EP who administers no immunizations during the EHR 
reporting period or where no immunization registry has the capacity to 
receive the information electronically.
    (10)(i) Objective. Capability to submit electronic syndromic 
surveillance data to public health agencies and actual submission 
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 and follow-up submission if the test is 
successful (unless none of the public health agencies to which an EP 
submits such information has the capacity to receive the information 
electronically).
    (iii) Exclusion in accordance with paragraph (a)(2) of this 
section. An EP who does not collect any reportable syndromic 
information on their patients during the EHR reporting period or does 
not submit such information to any public health agency that has the 
capacity to receive the information electronically.
    (f) Stage 1 core criteria for eligible hospitals or CAHs. An 
eligible hospital or CAH must meet the following objectives and 
associated measures except those objectives and associated measures for 
which an eligible hospital or CAH qualifies for a paragraph (b)(2) of 
this section exclusion specified in this paragraph:
    (1)(i) Objective. Use CPOE for medication orders directly entered 
by any licensed healthcare professional who can enter orders into the 
medical

[[Page 44569]]

record per State, local, and professional guidelines.
    (ii) Measure. Subject to paragraph (c) of this section, more than 
30 percent of all unique patients with at least one medication in their 
medication list admitted to the eligible hospital's or CAH's inpatient 
or emergency department (POS 21 or 23) have at least one medication 
order entered using CPOE.
    (2)(i) Objective. Implement drug-drug and drug-allergy interaction 
checks.
    (ii) Measure. The eligible hospital or CAH has enabled this 
functionality for the entire EHR reporting period.
    (3)(i) Objective. Maintain an up-to-date problem list of current 
and active diagnoses.
    (ii) Measure. More than 80 percent of all unique patients admitted 
to the eligible hospital's or CAH's inpatient or emergency department 
(POS 21 or 23) have at least one entry or an indication that no 
problems are known for the patient recorded as structured data.
    (4)(i) Objective. Maintain active medication list.
    (ii) Measure. More than 80 percent of all unique patients admitted 
to the eligible hospital's or CAH's inpatient or emergency department 
(POS 21 or 23) have at least one entry (or an indication that the 
patient is not currently prescribed any medication) recorded as 
structured data.
    (5)(i) Objective. Maintain active medication allergy list.
    (ii) Measure. More than 80 percent of all unique patients admitted 
to the eligible hospital's or CAH's inpatient or emergency department 
(POS 21 or 23) have at least one entry (or an indication that the 
patient has no known medication allergies) recorded as structured data.
    (6)(i) Objective. Record all of the following demographics;
    (A) Preferred language.
    (B) Gender.
    (C) Race.
    (D) Ethnicity.
    (E) Date of birth.
    (F) Date and preliminary cause of death in the event of mortality 
in the eligible hospital or CAH.
    (ii) Measure. More than 50 percent of all unique patients admitted 
to the eligible hospital's or CAH's inpatient or emergency department 
(POS 21 or 23) have demographics recorded as structured data.
    (7)(i) Objective. Record and chart changes in the following vital 
signs:
    (A) Height.
    (B) Weight.
    (C) Blood pressure.
    (D) Calculate and display body mass index (BMI).
    (E) Plot and display growth charts for children 2-20 years, 
including BMI.
    (ii) Measure. Subject to paragraph (c) of this section, for more 
than 50 percent of all unique patients age 2 and over admitted to the 
eligible hospital's or CAH's inpatient or emergency department (POS 21 
or 23), height, weight, and blood pressure are recorded as structured 
data.
    (8)(i) Objective. Record smoking for patients 13 years old or 
older.
    (ii) Measure. Subject to paragraph (c) of this section, more than 
50 percent of all unique patients 13 years old or older or admitted to 
the eligible hospital's inpatient or emergency department (POS 21 or 
23) have smoking status recorded as structured data.
    (iii) Exclusion in accordance with paragraph (b)(2) of this 
section. Any eligible hospital or CAH that admits no patients 13 years 
or older to their inpatient or emergency department (POS 21 or 23).
    (9)(i) Objective. Report hospital clinical quality measures to CMS 
or, in the case of Medicaid eligible hospitals, the States.
    (ii) Measure. Subject to paragraph (c) of this section, 
successfully report to CMS (or, in the case of Medicaid eligible 
hospitals or CAHs, the States) hospital clinical quality measures 
selected by CMS in the manner specified by CMS (or, in the case of 
Medicaid eligible hospitals or CAHs, the States).
    (10)(i) Objective. Implement one clinical decision support rule 
related to a high priority hospital condition along with the ability to 
track compliance with that rule.
    (ii) Measure. Implement one clinical decision support rule.
    (11)(i) Objective. Provide patients with an electronic copy of 
their health information (including diagnostic test results, problem 
list, medication lists, medication allergies, discharge summary, 
procedures), upon request.
    (ii) Measure. Subject to paragraph (c) of this section, more than 
50 percent of all patients of the inpatient or emergency departments of 
the eligible hospital or CAH (POS 21 or 23) who request an electronic 
copy of their health information are provided it within 3 business 
days.
    (iii) Exclusion in accordance with paragraph (b)(2) of this 
section. Any eligible hospital or CAH that has no requests from 
patients or their agents for an electronic copy of patient health 
information during the EHR reporting period.
    (12)(i) Objective. Provide patients with an electronic copy of 
their discharge instructions at time of discharge, upon request.
    (ii) Measure. Subject to paragraph (c) of this section, more than 
50 percent of all patients who are discharged from an eligible hospital 
or CAH's inpatient or emergency department (POS 21 or 23) and who 
request an electronic copy of their discharge instructions are provided 
it.
    (iii) Exclusion in accordance with paragraph (b)(2) of this 
section. Any eligible hospital or CAH that has no requests from 
patients or their agents for an electronic copy of the discharge 
instructions during the EHR reporting period.
    (13)(i) Objective. Capability to exchange key clinical information 
(for example, problem list, medication list, medication allergies, and 
diagnostic test results), among providers of care and patient 
authorized entities electronically.
    (ii) Measure. Performed at least one test of certified EHR 
technology's capacity to electronically exchange key clinical 
information.
    (14)(i) Objective. Protect electronic health information created or 
maintained by the 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 and correct identified security 
deficiencies as part of its risk management process.
    (g) Stage 1 menu set criteria for eligible hospitals or CAHs. 
Eligible hospitals or CAHs must meet five of the following objectives 
and associated measures, one which must be specified in paragraph 
(g)(8), (g)(9), or (g)(10) of this section, except that the required 
number of objectives and associated measures is reduced by a hospital's 
paragraph (b)(2) of this section exclusions specified in this 
paragraph:
    (1)(i) Objective. Implement drug-formulary checks.
    (ii) Measure. The eligible hospital or CAH has enabled this 
functionality and has access to at least one internal or external 
formulary for the entire EHR reporting period.
    (2)(i) Objective. Record advance directives for patient 65 years 
old or older.
    (ii) Measure. Subject to paragraph (c) of this section, more than 
50 percent of all unique patients 65 years old or older admitted to the 
eligible hospital's or CAH's inpatient (POS 21) have an indication of 
an advance directive status recorded as structured data.
    (iii) Exclusion in accordance with paragraph (b)(2) of this 
section. An eligible hospital or CAH that admits no

[[Page 44570]]

patients age 65 years old or older during the EHR reporting period.
    (3)(i) Objective. Incorporate clinical lab-test results into EHR as 
structured data.
    (ii) Measure. Subject to paragraph (c) of this section, more than 
40 percent of all clinical lab test results ordered by an authorized 
provider of the eligible hospital or CAH for patients admitted to its 
inpatient or emergency department (POS 21 and 23) 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.
    (4)(i) Objective. Generate lists of patients by specific conditions 
to use for quality improvement, reduction of disparities, research, or 
outreach.
    (ii) Measure. Subject to paragraph (c) of this section, generate at 
least one report listing patients of the eligible hospital or CAH with 
a specific condition.
    (5)(i) Objective. Use certified EHR technology to identify patient-
specific education resources and provide those resources to the patient 
if appropriate.
    (ii) Measure. More than 10 percent of all unique patients admitted 
to the eligible hospital's or CAH's inpatient or emergency department 
(POS 21 or 23) are provided patient-specific education resources.
    (6)(i) Objective. The eligible hospital or CAH who receives a 
patient from another setting of care or provider of care or believes an 
encounter is relevant should perform medication reconciliation.
    (ii) Measure. Subject to paragraph (c) of this section, the 
eligible hospital or CAH performs medication reconciliation for more 
than 50 percent of transitions of care in which the patient is admitted 
to the eligible hospital's or CAH's inpatient or emergency department 
(POS 21 or 23).
    (7)(i) Objective. The eligible hospital or CAH that transitions 
their patient to another setting of care or provider of care or refers 
their patient to another provider of care should provide summary care 
record for each transition of care or referral.
    (ii) Measure. Subject to paragraph (c) of this section, the 
eligible hospital or CAH that transitions or refers their patient to 
another setting of care or provider of care provides a summary of care 
record for more than 50 percent of transitions of care and referrals.
    (8)(i) Objective. Capability to submit electronic data to 
immunization registries or immunization information systems and actual 
submission according to applicable law and practice.
    (ii) Measure. Performed at least one test of certified EHR 
technology's capacity to submit electronic data to immunization 
registries and follow up submission if the test is successful (unless 
none of the immunization registries to which the eligible hospital or 
CAH submits such information has the capacity to receive the 
information electronically).
    (iii) Exclusion in accordance with paragraph (b)(2) of this 
section. An eligible hospital or CAH that administers no immunizations 
during the EHR reporting period or where no immunization registry has 
the capacity to receive the information electronically.
    (9)(i) Objective. Capability to submit electronic data on 
reportable (as required by State or local law) lab results to public 
health agencies and actual submission according to applicable law and 
practice.
    (ii) Measure. Performed at least one test of certified EHR 
technology's capacity to provide electronic submission of reportable 
lab results to public health agencies and follow-up submission if the 
test is successful (unless none of the public health agencies to which 
an eligible hospital or CAH submits such information has the capacity 
to receive the information electronically).
    (iii) Exclusion in accordance with paragraph (b)(2) of this 
section. No public health agency to which the eligible hospital or CAH 
submits such information has the capacity to receive the information 
electronically.
    (10)(i) Objective. Capability to submit electronic syndromic 
surveillance data to public health agencies and actual submission 
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 and follow-up submission if the test is 
successful (unless none of the public health agencies to which an 
eligible hospital or CAH submits information has the capacity to 
receive the information electronically).
    (iii) Exclusion in accordance with paragraph (a)(2) of this 
section. No public health agency to which the eligible hospital or CAH 
submits information has the capacity to receive the information 
electronically.
    (h) Stage 2 criteria for EPs. Beginning when final regulations for 
Stage 2 are effective, an EP must satisfy the following objectives and 
associated measures:
    (1)(i) Objective. Use computerized provider order entry (CPOE) for 
medication orders directly entered by any licensed healthcare 
professional who can enter orders into the medical record per state, 
local and professional guidelines.
    (ii) Measure. More than 60 percent of all unique patients with at 
least one medication in their medication list seen by the EP have at 
least one medication order entered using CPOE.
    (iii) Exclusion. Any EP who writes fewer than 100 prescriptions 
during the EHR reporting period.
    (2) [Reserved].
    (i) Stage 2 criteria for eligible hospitals or CAHs. Beginning when 
final regulations for Stage 2 are effective, an eligible hospital or 
CAH must satisfy the following objectives and associated measures:
    (1)(i) Objective. Use computerized provider order entry (CPOE) for 
medication orders directly entered by any licensed healthcare 
professional who can enter orders into the medical record per state, 
local and professional guidelines.
    (ii) Measure. More than 60 percent of all unique patients with at 
least one medication in their medication list admitted to the eligible 
hospital's or CAH's inpatient or emergency department (POS 21 or 23) 
have at least one medication order entered using CPOE.
    (2) [Reserved].

Sec.  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 Sec.  495.6 of this subpart as follows:
    (1) For CY 2011--(i) Attestation. 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--
    (A) Used certified EHR technology, and specify the technology used;
    (B) Satisfied the required objectives and associated measures under 
Sec.  495.6(d) and Sec.  495.6(e) of this subpart;
    (C) 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;
    (ii) Additional requirements for Medicaid EPs. For Medicaid EPs, 
if, in accordance with Sec.  495.316 and Sec.  495.332, CMS has 
approved a State's revised definition for meaningful use, in addition 
to meeting paragraphs (a)(1)(i) through (ii) of this section, the EP 
must

[[Page 44571]]

also demonstrate meeting the State revised definition using the method 
approved by CMS; and
    (iii) Exception for Medicaid EPs. If a Medicaid EP has adopted, 
implemented or upgraded certified EHR technology in the first payment 
year, the EP need not demonstrate meaningful use until the second 
payment year, as described in Sec.  495.6 and Sec.  495.8 of this 
subpart.
    (2) For CY 2012 and subsequent years--
    (i) Attestation. 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--
    (A) Used certified EHR technology and specify the technology used.
    (B) Satisfied the required objectives and associated measures under 
Sec.  495.6(d) and Sec.  495.6(e), except Sec.  495.6(d)(10) ``Report 
ambulatory clinical quality measures to CMS or, in the case of Medicaid 
EPs, the States.''
    (C) 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.
    (ii) Reporting of clinical quality information. For Sec.  
495.6(d)(10), ``Report ambulatory clinical quality measures to CMS or, 
in the case of Medicaid EPs, the States,'' report the ambulatory 
clinical quality measures selected by CMS electronically to CMS (or in 
the case of Medicaid EPs, the States) in the manner specified by CMS 
(or in the case of Medicaid EPs, the States).
    (iii) Additional requirements for Medicaid EPs. For Medicaid EPs, 
if, in accordance with Sec.  495.316 and Sec.  495.332, CMS has 
approved a State's additional criteria for meaningful use, in addition 
to meeting paragraphs (a)(2)(i) through (iii), the EP must also 
demonstrate meeting such additional criteria using the method approved 
by CMS.
    (iv) Exception for Medicaid EPs. If a Medicaid EP has adopted, 
implemented, or upgrade certified EHR technology in the first payment 
year, the EP need not demonstrate that it is a meaningful EHR user 
until the second payment year, as described in Sec.  495.6 and Sec.  
495.8 of this subpart.
    (3) For all CYs, an EP who practices in multiple physical 
locations, not all of which have certified EHR technology available, 
will demonstrate meaningful use using only the locations where the EP 
has certified EHR technology available. (See also Sec.  495.4 regarding 
the definition of meaningful EHR user).
     (b) Demonstration by eligible hospitals and CAHs. To successfully 
demonstrate that it is a meaningful EHR user, an eligible hospital or 
CAH must the following requirements:
    (1) For FY 2011--
    (i) Attestation. 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--
    (A) Used certified EHR and specify the technology used.
    (B) Satisfied the required objectives and associated measures under 
Sec.  495.6(f) and Sec.  495.6(g).
    (C) Must specify the EHR reporting period and provide the result of 
each applicable measure for all patients admitted to the inpatient or 
emergency department (POS 21 or 23) of the hospital during the EHR 
reporting period for which a selected measure is applicable.
    (ii) Additional requirements for Medicaid eligible hospitals. For 
Medicaid eligible hospitals, if, in accordance with Sec.  495.316 and 
Sec.  495.332, CMS has approved a State's revised definition for 
meaningful use, in addition to meeting paragraphs (b)(1)(i) through 
(ii) of this section, the eligible hospital must also demonstrate 
meeting the State's revised definition using the method approved by 
CMS.
    (iv) Exception for Medicaid eligible hospitals. If a Medicaid 
eligible hospital has adopted, implemented or upgraded certified EHR 
technology in the first payment year, the eligible hospital need not 
demonstrate meaningful use until the second payment year, as described 
in Sec.  495.6 and Sec.  495.8 of this subpart.
    (2) For FY 2012 and subsequent years--
    (i) Attestation. 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--
    (A) Used certified EHR and specify the technology used;
    (B) Satisfied the required objectives and associated measures under 
Sec.  495.6(f) and Sec.  495.6(g), except Sec.  495.6(f)(9) ``Report 
hospital clinical quality measures to CMS or, in the case of Medicaid 
eligible hospitals, the States;''
    (C) Must specify the EHR reporting period and provide the result of 
each applicable measure for all patients admitted to the inpatient or 
emergency department (POS 21 or 23) of the hospital during the EHR 
reporting period for which a selected measure is applicable.
    (ii) Reporting clinical quality information. For Sec.  495.6(f)(9) 
``Report hospital clinical quality measures to CMS or, in the case of 
Medicaid eligible hospitals, the States,'' report the hospital quality 
measures selected by CMS electronically to CMS (or in the case of 
Medicaid eligible hospitals, the States), in the manner specified by 
CMS (or in the case of Medicaid eligible hospitals, the States).
    (iv) Additional requirements for Medicaid eligible hospitals. For 
Medicaid eligible hospitals if, in accordance with Sec.  495.316 and 
Sec.  495.332, CMS has approved a State's revised definition for 
meaningful use, in addition to meeting paragraphs (b)(2)(i) through 
(iii) of this section, the eligible hospital must also demonstrate 
meeting the State's revised definition using the method approved by 
CMS.
    (v) Exception for Medicaid eligible hospitals. If a Medicaid 
eligible hospital has adopted, implemented, or upgraded certified EHR 
technology in the first payment year, the eligible hospital need not 
demonstrate that it is a meaningful EHR user until the second payment 
year, as described in Sec.  495.6 and Sec.  495.8 of this subpart.
    (c) Review of meaningful use. (1) CMS (and in the case of Medicaid 
EPs and eligible hospitals, States) may review an EP, eligible hospital 
or CAH's demonstration of meaningful use.
    (2) All EPs, eligible hospitals, and CAHs must keep documentation 
supporting their demonstration of meaningful use for 6 years.

Sec.  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.
    (4) Such other information as specified by CMS.
    (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) which may be the EP's Social Security Number

[[Page 44572]]

(SSN) 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, eligible hospital or CAH 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) After receiving at least one EHR incentive payment, may switch 
between the two EHR incentive programs only one time, and only for a 
payment year before 2015;
    (3) Must, for each payment year, meet all of the applicable 
requirements, including applicable patient volume requirements, for the 
program in which he or she chooses to participate (Medicare or 
Medicaid);
    (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; and
    (5) Is placed in the payment year the EP would have been in had the 
EP begun in and remained in the program to which he or she has 
switched. 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. (1) EPs are 
permitted to reassign their incentive payments to their employer or to 
an entity with which they have a contractual arrangement allowing the 
employer or entity to bill and receive payment for the EP's covered 
professional services.
    (2)(i) Assignments in Medicare must be consistent with Section 
1842(b)(6)(A) of the Act and 42 CFR part 424 subpart F.
    (ii) Medicaid EPs may also assign their incentive payments to a TIN 
for an entity promoting the adoption of EHR technology, consistent with 
subpart D of this part.
    (3) Each EP may reassign the entire amount of the incentive payment 
to only one employer or entity.

Subpart B--Requirements Specific to the Medicare Program

Sec.  495.100  Definitions.

    In this subpart unless otherwise indicated--
    Covered professional services means (as specified in section 
1848(k)(3) of the Act) services furnished by an EP for which payment is 
made under, or is based on, the Medicare physician fee schedule.
    Eligible hospital means a hospital subject to the prospective 
payment system specified in Sec.  412.1(a)(1) of this chapter, 
excluding those hospitals specified in Sec.  412.23 of this chapter, 
and excluding those hospital units specified in Sec.  412.25 of this 
chapter.
    Eligible professional (EP) means a physician as defined in section 
1861(r) of the Act, which includes, with certain limitations, 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 a 
geographic 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 (qualifying EP) means an EP who is 
a meaningful EHR user for the EHR reporting period for a payment year 
and who is not a hospital-based EP, as determined for that payment 
year.
    Qualifying hospital means an eligible hospital that is a meaningful 
EHR user for the EHR reporting period for a payment year.

Sec.  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 must be paid to a qualifying EP (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 to 75 percent of the estimated allowed charges for 
covered professional services furnished by the EP during the payment 
year.
    (2) For purposes of this paragraph (a) of this section, 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 paragraphs (b)(2) and (c) of 
this section, the amount of the incentive payment under paragraph (a) 
of this section 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 EP 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 EP is 2014, then 
the payment limit for a payment year for the qualifying EP is the same 
as the amount specified in paragraph (b)(1) of this section 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 payment limit specified in this paragraph for such EP for such 
year and any subsequent year is $0.
    (c) Increase in incentive payment limit for EPs who predominantly 
furnish services in a geographic HPSA. In the case of a qualifying EP 
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 that is designated as of December 31 of such year, the 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 hospital-based EP for the year, the payment amount 
for such services is equal the product of the applicable percent 
specified in paragraph (d)(2) of this section 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 EP is not subject to the payment 
adjustment for an EP who is not a successful electronic prescriber 
under section 1848(a)(5) of the Act, or 98 percent if the EP is subject 
to the payment adjustment

[[Page 44573]]

for an EP 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. (i) 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 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.
    (ii) The Secretary's determination to grant an EP an exemption 
under paragraph (d)(3)(i) of this section may be renewed on an annual 
basis, provided that in no case may an EP be granted an exemption under 
paragraph (d)(3)(i) of this section for more than 5 years.

Sec.  495.104  Incentive payments to eligible hospitals.

    (a) General rule. A qualifying hospital (as defined in this 
subpart) must 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 paragraph (d) of this section 
and the payment formula specified in paragraph (c) 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 2016.
    (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.
    (iii) The transition factor determined under paragraph (c)(5) of 
this section.
    (2) Interim and final payments. CMS uses data on hospital acute 
care inpatient discharges, Medicare Part A acute care inpatient-bed-
days, Medicare Part C acute care inpatient-bed-days, and total acute 
care inpatient-bed-days, from the latest submitted 12-month hospital 
cost report as the basis for making preliminary incentive payments. 
Final payments are determined at the time of settling the first 12-
month hospital cost report for the hospital fiscal year that begins on 
or after the first day of 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 acute care inpatient discharges or 
fewer, $2,000,000.
    (ii) For each hospital with at least 1,150 but no more than 23,000 
acute care inpatient discharges, $2,000,000 + [$200 x (n - 1,149)], 
where n is the number of discharges for the hospital.
    (iii) For each hospital with more than 23,000 acute care inpatient 
discharges, $6,370,200.
    (4) Medicare share fraction--(i) General. (A) CMS determines the 
Medicare share fraction for an eligible hospital by using the number of 
Medicare Part A, Medicare Part C, and total acute care 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 which are attributable to 
individuals with respect to whom payment may be made under Part A, 
including individuals enrolled in section 1876 Medicare cost plans; and
    (2) The number of inpatient-bed-days which are attributable to 
individuals who are enrolled with a Medicare Advantage organization (as 
defined in Sec.  422.2 of this chapter).
    (B) A denominator which is the product of--
    (1) The total number of acute care inpatient-bed-days; and
    (2) The total amount of the eligible hospital's charges, not 
including any charges that are attributable to charity care, divided by 
the estimated total amount of the hospitals charges.
    (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) For 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) For 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) For 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) For hospitals whose first payment year is FY 2015--
    (A) \1/2\ for FY 2015; and
    (B) \1/4\ for FY 2016.
    (d) No incentive payment for nonqualifying hospitals. After the 
first payment year, an eligible hospital will not receive an incentive 
payment for any payment year during which it is not a qualifying 
hospital.

Sec.  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 Sec.  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 Sec.  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.

[[Page 44574]]

    (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 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 Sec.  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 Sec.  495.104(c)(4) 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 Sec.  413.70(a)(5) of this chapter, such payment is made 
in lieu of payment that would have been made under Sec.  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 
Sec.  413.70(a) of this chapter is adjusted by the applicable 
percentage described in Sec.  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 
qualifying 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.

Sec.  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 addressee.
    (3) Business phone number.
    (4) Such other information as specified by CMS.
    (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.

Sec.  495.110  Preclusion on administrative and judicial review.

    There is no administrative or judicial review under sections 1869 
or 1878 of the Act, or otherwise, of the following:
    (a) For EPs--
    (1) The methodology and standards for determining EP incentive 
payment amounts;
    (2) The methodology and standards for determining the payment 
adjustments that apply to EPs beginning with 2015;
    (3) The methodology and standards for determining whether an EP is 
a meaningful EHR user, including--
    (i) The selection of clinical quality measures; and
    (ii) The means of demonstrating meaningful EHR use.
    (4) The methodology and standards for determining the hardship 
exception to the payment adjustments;
    (5) The methodology and standards for determining whether an EP is 
hospital-based; and
    (6) The specification of the EHR reporting period, as well as 
whether payment will be made only once, in a single consolidated 
payment, or in periodic installments.
    (b) For eligible hospitals--
    (1) The methodology and standards for determining the incentive 
payment amounts made to eligible hospitals, including--
    (i) The estimates or proxies for determining discharges, inpatient-
bed-days, hospital charges, charity charges, and Medicare share; and
    (ii) The period used to determine such estimate or proxy;
    (2) The methodology and standards for determining the payment 
adjustments that apply to eligible hospitals beginning with FY 2015;
    (3) The methodology and standards for determining whether an 
eligible hospital is a meaningful EHR user, including--
    (i) The selection of clinical quality measures; and
    (ii) The means of demonstrating meaningful EHR use.
    (4) The methodology and standards for determining the hardship 
exception to the payment adjustments; and
    (5) The specification of the EHR reporting period, as well as 
whether payment will be made only once, in a single consolidated 
payment, or in periodic installments.

[[Page 44575]]

Subpart C--Requirements Specific to Medicare Advantage (MA) 
Organizations

Sec.  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 section 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 Sec.  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 to a Medicare beneficiary.
    Payment year means--
    (1) For a qualifying MA EP, a calendar year (CY) beginning with CY 
2011 and ending with CY 2016; and
    (2) For an eligible hospital, a Federal fiscal year (FY) 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, for which at 
least two thirds of the Medicare hospital discharges (or bed-days) are 
of (or for) Medicare individuals enrolled under MA plans, and that is a 
meaningful user of certified EHR technology as defined by Sec.  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 must 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 Sec.  495.4 of this part.
    (5) Is not a ``hospital-based EP'' as that term is defined in Sec.  
495.4 of this Part.
    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 MA-affiliated 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.

Sec.  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 2011 (for plan year 2012), 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. ``Potentially qualifying MA EPs'' and 
``potentially qualifying MA-affiliated eligible hospitals'' are those 
EPs and hospitals that meet the respective definitions of ``qualifying 
MA EP'' and ``qualifying MA-affiliated eligible hospital'' in Sec.  
495.200 but who (or which) are not meaningful users of certified EHR 
technology.
    (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 2012, must make a preliminary identification of 
potentially qualifying MA EPs and potentially qualifying MA-affiliated 
eligible hospitals for which the organization is seeking incentive 
payments for the current plan year.
    (2) A qualifying MA organization must provide CMS with the 
following for each MA EP or eligible hospital when reporting under 
either paragraph (b)(1) or (b)(3) of this section:
    (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 
MA-affiliated eligible hospital meets the eligibility criteria.
    (3) Final identification of potentially qualifying MA EP or MA-
affiliated eligible hospital must be made within 60 days of the close 
of the payment year as defined in Sec.  495.200 for which MA EHR 
incentive payments are being sought.

[[Page 44576]]

    (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 MA-affiliated 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.

Sec.  495.204  Incentive payments to qualifying MA organizations for 
MA-EPs and MA-affiliated eligible 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 Sec.  495.102 of this part.
    (2) The qualifying MA organization must report to CMS within 60 
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 section 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 MA-enrollee related Part B 
practice costs of the salaried qualifying MA EP.
    (iii) Methodological proposals must be submitted to CMS by June of 
the payment year and must be auditable by an independent third-party. 
CMS will review and approve or disapprove such proposals in a timely 
manner.
    (5) For qualifying MA EPs who are not salaried, qualifying MA 
organizations may obtain attestations from such qualifying MA EPs (or 
from entities that the MA EPs are employed by or with which they have a 
partnership interest) as to the amount of compensation received by such 
EPs for MA plan enrollees of the MA organization. The organizations may 
submit to CMS compensation information for each such MA EP based on 
such attestations.
    (6) For qualifying MA EPs who are not salaried, qualified MA 
organizations may have qualifying MA EPs (or from entities that the MA 
EPs are employed by or with which they have a partnership interest) 
send MA organization compensation information directly to CMS. CMS will 
use the information provided in this subparagraph or paragraph (b)(5) 
of this section for no other purpose than to compute the amount of EHR 
incentive payment due the MA organization.
    (c) Amount payable to qualifying MA organization for qualifying MA-
affiliated eligible hospitals. (1)(i) CMS substitutes an amount 
determined to be equivalent to the amount computed under Sec.  495.104, 
to the extent data are not available to compute payments for qualifying 
MA-affiliated eligible hospitals under the Medicare FFS EHR hospital 
incentive program.
    (ii) CMS uses the same methodology and defines ``inpatient-bed-
days''and other terms as used under the Medicare FFS EHR hospital 
incentive program in Sec.  495.104 of this part in computing amounts 
due qualifying MA organizations for MA-affiliated eligible hospitals.
    (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 EHR users in accordance with Sec.  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 6 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.

Sec.  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 
Sec.  495.102.
    (b) Payments to qualifying MA organizations for qualifying MA-
affiliated eligible hospitals under common corporate governance are 
made under the Medicare FFS EHR incentive program, following the 
timeline in specified in Sec.  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 Sec.  495.104 of this part.

Sec.  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 made under the MA EHR incentive program to a 
qualifying MA organization.
    (b) Payment to qualifying MA organizations for a qualifying MA-
affiliated eligible hospital under common governance only occurs under

[[Page 44577]]

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 Sec.  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 Sec.  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 Sec.  495.202(b) is 
provided to CMS.

Sec.  495.210  Meaningful EHR 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 60 
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 60 
days after close of the FY whether each qualifying MA-affiliated 
eligible hospital is a meaningful EHR user.

Sec.  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

Sec.  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 authorize States, at their option, to provide for incentive 
payments to Medicaid providers for adopting, implementing, or upgrading 
certified EHR technology or for meaningful use of such technology. This 
subpart also provides enhanced Federal financial participation (FFP) to 
States to administer these incentive payments.

Sec.  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 or 1300-1399
    Adopt, implement or upgrade means--
    (1) Acquire, purchase, or secure access to certified EHR 
technology;
    (2) Install or commence utilization of certified EHR technology 
capable of meeting meaningful use requirements; or
    (3) Expand the available functionality of certified EHR technology 
capable of meeting meaningful use requirements at the practice site, 
including staffing, maintenance, and training, or upgrade from existing 
EHR technology to certified EHR technology per the ONC EHR 
certification criteria.
    Children's hospital means a separately certified children's 
hospital, either freestanding or hospital-within-hospital 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 certified EHR technology 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 eligible providers.
    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

[[Page 44578]]

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. (or a Medicaid or CHIP demonstration project 
approved under section 1115 of the Act).
    (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 (as 
described at Sec.  495.304(c) through (e)) that is estimated through a 
numerator and denominator, consistent with the SMHP, and that meets the 
requirements of Sec.  495.306.
    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.

Sec.  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 an EHR 
incentive payment is limited to the following when consistent with the 
scope of practice regulations, as applicable for each professional 
(Sec.  440.50, Sec.  440.60, Sec.  440.100; Sec.  440.165, and Sec.  
440.166):
    (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 (FQHC) led by a physician assistant or a rural health 
clinic (RHC), that 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, for each year for which the 
EP seeks an EHR incentive payment, not be hospital-based as defined at 
Sec.  495.4 of this subpart, and meet one of the following criteria:
    (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 
Sec.  495.302.
    (d) Exception. The hospital-based exclusion in paragraph (c) of 
this section 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.

Sec.  495.306  Establishing patient volume.

    (a) General rule. A Medicaid provider must annually meet patient 
volume requirements of Sec.  495.304, as these requirements are 
established through the State's SMHP in accordance with the remainder 
of this section.
    (b) State option(s) through SMHP. A State must submit through the 
SMHP the option or options it has selected for measuring patient 
volume. A State must select the methodology described in either 
paragraph (c) or paragraph (d) of section (or both methodologies). In 
addition, or as an alternative, a State may select the methodology 
described in paragraph (g) of this section.
    (c) Methodology, patient encounter.
    (1) EPs. To calculate Medicaid patient volume, an EP must divide:
    (i) The total Medicaid patient encounters in any representative, 
continuous 90-day period in the preceding calendar year; by
    (ii) The total patient encounters in the same 90-day period.
    (2) Eligible hospitals. To calculate Medicaid patient volume, an 
eligible hospital must divide--
    (i) The total Medicaid encounters in any representative, continuous 
90-day period in the preceding fiscal year; by
    (ii) The total encounters in the same 90-day period.
    (3) Needy individual patient volume. To calculate needy individual 
patient volume, an EP must divide--
    (i) The total needy individual patient encounters in any 
representative, continuous 90-day period in the preceding calendar 
year; by
    (ii) The total patient encounters in the same 90-day period.
    (d) Methodology, patient panel.
    (1) EPs. To calculate Medicaid patient volume, an EP must divide:
    (i) (A) The total Medicaid patients assigned to the EP's panel in 
any representative, continuous 90-day period in the preceding calendar 
year when at least one Medicaid encounter took place with the Medicaid 
patient in the year prior to the 90-day period; plus
    (B) Unduplicated Medicaid encounters in the same 90-day period; by
    (ii)(A) The total patients assigned to the provider in that same 
90-day period with at least one encounter taking place with the patient 
during the year prior to the 90-day period; plus
    (B) All unduplicated patient encounters in the same 90-day period.
    (2) Needy individual patient volume. To calculate needy individual 
patient volume an EP must divide--
    (i)(A) The total Needy Individual patients assigned to the EP's 
panel in any representative, continuous 90-day period in the preceding 
calendar year when at least one Needy Individual encounter took place 
with the Medicaid patient in the year prior to the 90-day period; plus
    (B) Unduplicated Needy Individual encounters in the same 90-day 
period, by
    (ii)(A) The total patients assigned to the provider in that same 
90-day period with at least one encounter taking place with the patient 
during the year prior to the 90-day period, plus
    (B) All unduplicated patient encounters in the same 90-day period.
    (e) For purposes of this section, the following rules apply:

[[Page 44579]]

    (1) For purposes of calculating EP patient volume, a Medicaid 
encounter means services rendered to an individual on any one day 
where--
    (i) Medicaid (or a Medicaid demonstration project approved under 
section 1115 of the Act) paid for part or all of the service; or
    (ii) Medicaid (or a Medicaid demonstration project approved under 
section 1115 of the Act) paid all or part of the individual's premiums, 
co-payments, and cost-sharing.
    (2) For purposes of calculating hospital patient volume, both of 
the following definitions in paragraphs (e)(2)(i) and (e)(2)(ii) of 
this section may apply:
    (i) A Medicaid encounter means services rendered to an individual 
per inpatient discharge where--
    (A) Medicaid (or a Medicaid demonstration project approved under 
section 1115 of the Act) paid for part or all of the service; or
    (B) Medicaid (or a Medicaid demonstration project approved under 
section 1115 of the Act) paid all or part of the individual's premiums, 
co-payments, and/or cost-sharing.
    (ii) A Medicaid encounter means services rendered in an emergency 
department on any one day where--
    (A) Medicaid (or a Medicaid demonstration project approved under 
section 1115 of the Act) paid for part or all of the service; or
    (B) Medicaid (or a Medicaid demonstration project approved under 
section 1115 of the Act) paid all or part of the individual's premiums, 
co-payments, and cost-sharing.
    (3) For purposes of calculating needy individual patient volume, a 
needy patient encounter means services rendered to an individual on any 
one day where--
    (i) Medicaid or CHIP (or a Medicaid or CHIP demonstration project 
approved under section 1115 of the Act) paid for part or all of the 
service;
    (ii) Medicaid or CHIP (or a Medicaid or CHIP demonstration project 
approved under section 1115 of the Act) paid all or part of the 
individual's premiums, co-payments, or cost-sharing;
    (iii) The services were furnished at no cost; and calculated 
consistent with Sec.  495.310(h); or
    (iv) The services were paid for at a reduced cost based on a 
sliding scale determined by the individual's ability to pay.
    (f) Exception. A children's hospital is not required to meet 
Medicaid patient volume requirements.
    (g) Establishing an alternative methodology. A State may submit to 
CMS for review and approval through the SMHP an alternative from the 
options included in paragraphs (c) and (d) of this section, so long as 
it meets the following requirements:
    (1) It is submitted consistent with all rules governing the SMHP at 
Sec.  495.332.
    (2) Has an auditable data source.
    (3) Has received input from the relevant stakeholder group.
    (4) It does not result, in the aggregate, in fewer providers 
becoming eligible than the methodologies in either paragraphs (c) and 
(d) of this section.
    (h) Group practices. Clinics or group practices will be permitted 
to calculate patient volume at the group practice/clinic level, but 
only in accordance with all of the following limitations:
    (1) The clinic or group practice's patient volume is appropriate as 
a patient volume methodology calculation for the EP.
    (2) There is an auditable data source to support the clinic's or 
group practice's patient volume determination.
    (3) All EPs in the group practice or clinic must use the same 
methodology for the payment year.
    (4) The clinic or group practice uses the entire practice or 
clinic's patient volume and does not limit patient volume in any way.
    (5) If an EP works inside and outside of the clinic or practice, 
then the patient volume calculation includes only those encounters 
associated with the clinic or group practice, and not the EP's outside 
encounters.

Sec.  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, implementation 
or upgrade 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.

Sec.  495.310   Medicaid provider incentive payments.

    (a) Rules for Medicaid EPs. The Medicaid EP's incentive payments 
are subject to all of the following limitations:
    (1) First payment year. (i) For the first payment year, payment 
under this subpart may not exceed 85 percent of the maximum threshold 
of $25,000, which equals $21,250.
    (ii) Medicaid EPs are responsible for payment for the remaining 15 
percent of the net average allowable cost of certified EHR technology, 
or $3,750 for the first payment year.
    (iii) An EP may not begin receiving payments any later than CY 
2016.
    (2) Subsequent annual payment years.
    (i) For subsequent payment years, payment may not exceed 85 percent 
of the maximum threshold of $10,000, which equals $8,500.
    (ii) Medicaid EPs are responsible for payment for the remaining 15 
percent of the net average allowable cost of certified EHR technology, 
or $1,500 per payment year.
    (iii) Payments after the first payment year may continue for a 
maximum of 5 years.
    (iv) Medicaid EPs may receive payments on a non-consecutive, annual 
basis.
    (v) No payments may be made after CY 2021.
    (3) Maximum incentives. In no case may a Medicaid EP participate 
for more than a total of 6 years, and 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 payment is limited as follows:
    (i) The maximum payment in the first payment year is further 
reduced by two-thirds, which equals $14,167.
    (ii) The maximum payment in subsequent payment years is further 
reduced by 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 Sec.  495.304 and Sec.  
495.306, but who meets the 20 percent patient volume requirements 
described in such sections.
    (c) Limitation to only one EHR incentive program. An EP may only 
receive an incentive payment from either Medicare or Medicaid in a 
payment year, but not both.
    (d) Exception for EPs to switch programs. An EP may change his or 
her EHR incentive payment program election once, consistent with Sec.  
495.10 of this part.
    (e) Limitation to one State only. A Medicaid EP or eligible 
hospital may receive an incentive payment from only one State in a 
payment year.
    (f) Incentive payments to hospitals. Incentive payments to an 
eligible

[[Page 44580]]

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 FY 2016, and after FY 2016, a hospital may not receive an 
incentive payment unless it received an incentive payment in the prior 
fiscal year.
    (6) Prior to FY 2016, payments can be made to an eligible hospital 
on a non-consecutive, annual basis for the fiscal year.
    (7) 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 ending in the Federal fiscal year before the hospital's 
fiscal year that serves as the first 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.
    (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 paragraph (g)(2)(i) of 
this section, a State may not include estimated inpatient-bed-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 provider'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) of 
this section 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 in the payment year.
    (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 reassign his or her incentive payment to an 
entity promoting the adoption of certified EHR technology, as defined 
in Sec.  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 Sec.  495.302.
    (ii) The State publishes and makes available to all EPs a voluntary 
mechanism for reassigning annual payments and includes information 
about the verification mechanism the State will use to ensure that the 
reassignment 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].

Sec.  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 Sec.  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.

[[Page 44581]]

    (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 verification of eligibility 
for the payment year.
    (2) Medicaid eligible hospitals. States disburse payments 
consistent with the Federal fiscal year on a rolling basis following 
verification of eligibility for the payment year.

Sec.  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 payment year, it has adopted, 
implemented, or upgraded certified EHR technology, as defined in Sec.  
495.302.
    (ii) Demonstrate that during the EHR reporting period for a payment 
year, it is a meaningful EHR user as defined in Sec.  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 Sec.  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.

Sec.  495.316  State monitoring and reporting regarding activities 
required to receive an incentive payment.

    (a) Subject to Sec.  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 Sec.  495.314.
    (b) Subject to Sec.  495.332, the State must submit a State 
Medicaid HIT Plan to CMS that includes--
    (1) A detailed plan for monitoring, verifying and periodic auditing 
of the requirements for receiving incentive payments, as described in 
Sec.  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 Sec.  495.332 and Sec.  495.352 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, or 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 demonstrating that 
they are meaningful users 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) Subject to Sec.  495.332, the State may propose a revised 
definition of meaningful use of certified EHR technology, subject to 
CMS prior approval, but only with respect to the following objectives:
    (i) Generate lists of patients by specific conditions to use for 
quality improvement, reduction of disparities, research or outreach.
    (ii) Capability to submit electronic data to immunization 
registries or immunization information systems and actual submission in 
accordance with applicable law and practice.
    (iii) Capability to provide electronic submission of reportable (as 
required by State or local law) lab results to public health agencies 
and actual submission in accordance with applicable law and practice; 
and
    (iv) Capability to provide electronic syndromic surveillance data 
to public health agencies and actual transmission in accordance with 
applicable law and practice.
    (e) State failure to submit the required reports to CMS may result 
in discontinued or disallowed funding.

Sec.  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 HHS, 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) Is 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.

Sec.  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.

Sec.  495.322  FFP for reasonable administrative expenses.

    Subject to prior approval conditions at Sec.  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.

Sec.  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 meaningful 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 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 of Health and Human Services, prior to 
release of the request for proposal or prior to execution of a 
contract.

[[Page 44582]]

    (3) For contract amendments, unless specifically exempted by HHS, 
before execution of the contract amendment, involving contract cost 
increases exceeding $100,000 or contract time extensions of more than 
60 days.
    (4) The State Medicaid HIT plan.
    (c) Failure to submit any of the information specified in paragraph 
(b) of this section to the satisfaction of HHS may result in 
disapproval or suspension of project funding.
    (d) A State must obtain prior written approval from HHS 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.

Sec.  495.326  Disallowance of FFP.

    If the HHS 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, suspension 
would occur in the same manner as 45 CFR 205.37(c) and 307.40(a).

Sec.  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.

Sec.  495.330  Termination of FFP for failure to provide access to 
information.

    (a) HHS 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.

Sec.  495.332  State Medicaid health information technology (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--
    (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) and other requirements included in ARRA.
    (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; and
    (iv) 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 
Sec.  495.304 and Sec.  495.306 for each EP who practices predominantly 
in a FQHC or RHC and for each Medicaid EP who is a

[[Page 44583]]

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 or eligible hospital is a provider who 
meets patient volume consistent with the criteria in Sec.  495.304 and 
Sec.  495.306 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 a 
methodology for verifying such information.
    (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 including meaningful use, efforts 
to adopt, implement, or upgrade and any information added to the CMS 
Single Provider Repository including all information related to patient 
volume, NPI, Tax identification number (TIN), 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 Sec.  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 EHR reporting 
period, and that they have adopted, implemented, or upgraded certified 
EHR technology 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 their participation year and a methodology 
for verifying such information.
    (6) A list of the specific actions planned to implement the 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 by the State for 
reimbursement of expenditures for State payments to Medicaid eligible 
providers for the certified EHR technology incentive payment program 
and a methodology for verifying such information.
    (8) A description of the process in place to ensure that no amounts 
higher than 90 percent of FFP will be claimed by the State for 
administrative expenses in administering the certified EHR technology 
incentive payment program and a methodology for verifying such 
information.
    (9) A description of the process and methodology for ensuring and 
verifying 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 incentive payment reassignments 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 EP 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. For payments, States 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 Sec.  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 the 
methodology for verifying such information.
    (4) The process in place and the methodology for verifying that 
information is available in order to ensure that Medicaid EHR incentive 
payments are made for no more than a total of 6 years; that no EP or 
eligible hospital begins receiving payments after 2016; that incentive 
payments cease after 2021; and that an eligible hospital does not 
receive incentive payments after FY 2016 unless the hospital received 
an incentive payment in the prior fiscal year.
    (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.
    (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.
    (7) The process in place to provide for the timely and accurate 
payment of incentive payments to EPs and eligible hospitals, including 
the timeframe 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

[[Page 44584]]

in compliance with this subpart will be recouped and FFP will be 
repaid.
    (9) The process in place and the methodology for verifying that EPs 
meet their responsibility for 15 percent of the net average allowable 
cost for certified EHR technology.
    (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 Sec.  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 Sec.  495.306(g).
    (2)(i) A revised definition of meaningful use of certified EHR 
technology consistent with Sec.  495.4 and Sec.  495.316(d)(2) of this 
part.
    (ii) Any revised definition of meaningful use may not require 
additional functionality beyond that of certified EHR technology and 
conform with CMS guidance on Stage 1. See also Sec.  495.316(d)(2).

Sec.  495.334  [Reserved]

Sec.  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.
    (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.

Sec.  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 including:
    (1) Planned annual payment amounts;
    (2) Total of planned payment amounts; and
    (3) Calendar year of each planned annual payment amount.
    (4) 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.

Sec.  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.

Sec.  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/

[[Page 44585]]

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.

Sec.  495.344  Approval of the State Medicaid HIT plan, the HIT PAPD 
and update, the HIT IAPD and update, and the annual HIT IAPD.

    HHS will not approve the State Medicaid HIT plan, HIT PAPD and 
update, HIT-IAPD and update, or annual IAPD if any of these documents 
do not include all of the information required under this subpart.

Sec.  495.346  Access to systems and records.

    The State agency must allow HHS 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.

Sec.  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 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 sub agreements.
    (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 offer or 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 offer or 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.

[[Page 44586]]

    (iv) Encourage contracting with consortia of small businesses, 
minority-owned 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-of-cost'' 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 2 CFR part 376.
    (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, 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.

Sec.  495.350  State Medicaid agency attestations.

    (a) The State must provide assurances to HHS 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.

Sec.  495.352  Reporting requirements.

    Each State must submit to HHS 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.

Sec.  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.

Sec.  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 CFR 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.

Sec.  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.

Sec.  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. HHS reserves a royalty-free, non-exclusive, 
and irrevocable license to reproduce, publish or otherwise use and to 
authorize others to use for Federal government purposes, the software, 
modifications, and documentation designed, developed or installed with 
FFP under this Subpart.
    (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

[[Page 44587]]

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.

Sec.  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.

Sec.  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 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.

Sec.  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 
Sec.  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 Sec.  495.312, 495.314, and Sec.  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.
    (d) Claiming Federal reimbursement for State expenditures. Subject 
to Sec.  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 Sec.  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 Sec.  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 Sec.  495.332, the State must have a process in 
place to assure that that Medicaid EHR incentive payments are made for 
no more than 6 years; that no EP or eligible hospital begins receiving 
payments after 2016; that incentive payments cease after 2021; and that 
an eligible hospital does not receive incentive payments after FY 2016 
unless the hospital received an incentive payment in the prior fiscal 
year.
    (4) Subject to Sec.  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 Sec.  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 Sec.  495.332, the State must have a process in 
place to assure that for those entities promoting the adoption of EHR 
technology, the

[[Page 44588]]

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 Sec.  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 Sec.  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.

Sec.  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 Sec.  455.15 and Sec.  455.21 of this 
chapter, 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. For any forms on which a provider 
submits information necessary to the determination of eligibility to 
receive EHR payments, the State must obtain a statement that meets the 
following requirements:
    (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 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 of 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).

Sec.  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 Sec.  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.

    Authority:  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: June 16, 2010.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: July 9, 2010.
Kathleen Sebelius,
Secretary.
[FR Doc. 2010-17207 Filed 7-13-10; 8:45 am]
BILLING CODE 4120-01-P
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