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[Federal Register: January 13, 2010 (Volume 75, Number 8)]
[Proposed Rules]
[Page 1843-2011]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13ja10-24]

[[Page 1843]]

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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, et al.

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

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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-P]
RIN 0938-AP78

Medicare and Medicaid Programs; Electronic Health Record
Incentive Program

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would implement the provisions of the
American Recovery and Reinvestment Act of 2009 (ARRA) (Pub. L. 111-5)
that provide incentive payments to eligible professionals (EPs) and
eligible hospitals participating in Medicare and Medicaid programs that
adopt and meaningfully use certified electronic health record (EHR)
technology. The proposed rule would specify the--initial criteria an EP
and eligible hospital must meet in order to qualify for the incentive
payment; calculation of the incentive payment amounts; payment
adjustments under Medicare for covered professional services and
inpatient hospital services provided by EPs and eligible hospitals
failing to meaningfully use certified EHR technology; and other program
participation requirements. Also, as required by ARRA the Office of the
National Coordinator for Health Information Technology (ONC) will be
issuing a closely related interim final rule that specifies the
Secretary's adoption of an initial set of standards, implementation,
specifications, and certification criteria for electronic health
records. ONC will also be issuing a notice of proposed rulemaking on
the process for organizations to conduct the certification of EHR
technology.

DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than 5 p.m. on March 15, 2010.

ADDRESSES: In commenting, please refer to file code CMS-0033-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one
of the ways listed):
    1. Electronically. You may submit electronic comments on this
regulation to http://www.regulations.gov. Follow the instructions on
the home page.
    2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-0033-P, P.O. Box 8013,
Baltimore, MD 21244-8013.
    Please allow sufficient time for mailed comments to be received
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to
the following address only: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-0033-P, Mail
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments before the close of the comment period
to either of the following addresses:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, Room 445-G, Hubert
H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC
20201.
    (Because access to the interior of the Hubert H. Humphrey Building
is not readily available to persons without Federal government
identification, commenters are encouraged to leave their comments in
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing
by stamping in and retaining an extra copy of the comments being
filed.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, 7500 Security
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address,
please call telephone number (410) 786-9994 in advance to schedule your
arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
    Submission of comments on paperwork requirements. You may submit
comments on this document's paperwork requirements by following the
instructions at the end of the ``Collection of Information
Requirements'' section in this document.
    In the event that CMS must limit the number of employees reporting
for duty during an emergency or for other reasons, submitting comments
on CMS regulations and Paperwork Reduction Act (PRA) notices via
www.regulations.gov will ensure that CMS considers the comments
promptly. Comments mailed or delivered to the CMS headquarters may not
be readily accessible for review if CMS employees are not able to
report to work at the CMS headquarters. CMS wishes to ensure that
public comments on its regulations and PRA notices are promptly
displayed on the regulations.gov Web site for the public to review. To
ensure that comments are displayed as quickly as possible, we request
that the public use only one public comment submission option. These
efforts are intended to ensure that CMS operations continue even during
an emergency and that consideration of public comments and access to
those comments occur timely.
    For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Elizabeth Holland, (410) 786-1309, EHR
incentive program issues. Edward Gendron, (410) 786-1064, Medicaid
incentive payment issues. Jim Hart, (410) 786-9520, Medicare fee for
service payment issues. Terry Kay, (410) 786-4493, Medicare fee for
service payment issues.

SUPPLEMENTARY INFORMATION:
    Submitting Comments: We welcome comments from the public on all
issues set forth in this proposed rule to assist us in fully
considering issues and developing policies. You can assist us by
referencing the file code (CMS-0033-P) and the specific ``issue
identifier'' that precedes the section on which you choose to comment.
    Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following Web
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to
view public comments.
    Comments received timely will also be available for public
inspection as they are received, generally beginning approximately 3
weeks after publication of a document, at the headquarters of the
Centers for Medicare & Medicaid Services, 7500 Security Boulevard,
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30
a.m. to 4 p.m. To schedule an appointment to view public comments,
phone 1-800-743-3951.

[[Page 1845]]

Acronyms

ARRA American Recovery and Reinvestment Act of 2009
CAH Critical Access Hospital
CAHPS Consumer Assessment of Healthcare Providers and Systems
CCN CMS Certification Numbers
CHIP Children's Health Insurance Program
CHIPRA Children's Health Insurance Program Reauthorization Act of
2009
CMS Centers for Medicare & Medicaid Services
CY Calendar Year
EHR Electronic Health Record
EP Eligible Professionals
EPO Exclusive Provider Organization
FACA Federal Advisory Committee Act
FFP Federal Financial Participation
FFS Fee-For-Service
FQHC Federally Qualified Health Center
FTE Full-Time Equivalent
FY Fiscal Year
FFY Federal Fiscal Year
HEDIS Healthcare Effectiveness Data and Information Set
HHS Department of Health and Human Services
HIE Health Information Exchanges
HIT Health Information Technology
HIPPA Health Insurance Portability and Accountability Act of 1996
HITECH Health Information Technology for Economic and Clinical
Health Act
HMO Health Maintenance Organization
HOS Health Outcomes Survey
HPSA Health Professional Shortage Area
HRSA Health Resource Services Administration
IAPD Implementation Advanced Planning Document
IPA Independent Practice Association
IHS Indian Health Services
IT Information Technology
MA Medicare Advantage
MAC Medicare Administrative Contractor
MCO Medicaid Managed Care Organization
MITA Medicaid Information Technology Architecture
MMIS Medicaid Management Information Systems
MSA Medical Savings Account
NCQA National Committee for Quality Assurance
NCVHS National Committee on Vital and Health Statistics
NPI National Provider Identifier
ONC Office of the National Coordinator for Health Information
Technology
PAHP Prepaid Ambulatory Health Plan
PAPD Planning Advanced Planning Document
PIHP Prepaid Inpatient Health Plan
PFFS Private Fee-For-Service
PHO Physician Hospital Organization
PHS Public Health Service
POS Place of Service
PPO Preferred Provider Organization
PSO Provider Sponsored Organization
RHC Rural Health Clinic
RPPO Regional Preferred Provider Organization
SMHP State Medicaid Health Information Technology Plan
TIN Tax Identification Number

Table of Contents

I. Background
    A. Overview of the HITECH Programs Created by the American
Recovery and Reinvestment Act of 2009
    B. Statutory Basis for the Medicare & Medicaid EHR Incentive
Programs
II. Provisions of the Proposed Regulations
    A. Definitions Across the Medicare FFS, Medicare Advantage, and
Medicaid Programs
    1. Definitions
    a. Certified Electronic Health Record (EHR) Technology
    b. Qualified Electronic Health Record
    c. Payment Year
    d. First, Second, Third, Fourth, Fifth and Sixth Payment Year
    e. EHR Reporting Period
    f. Meaningful EHR User
    2. Definition of Meaningful Use
    a. Background
    b. Common Definition of Meaningful Use Under Medicare and
Medicaid
    c. Considerations in Defining Meaningful Use
    d. Stage 1 Criteria for Meaningful Use
    3. Sections 4101(a) and 4102(a)(1) of HITECH Act: Reporting on
Clinical Quality Measures Using EHR by EPs and All Eligible
Hospitals
    a. General
    b. Requirements for the Submission of Clinical Quality Measures
by EPs and Eligible Hospitals
    c. Statutory Requirements and Other Considerations for the
Proposed Selection of Clinical Quality Measures Proposed for
Electronic Submission by EPs or Eligible Hospitals
    (1) Statutory Requirements for the Selection of Clinical Quality
Measures Proposed for Electronic Submission by EPs and Eligible
Hospitals
    (2) Other Considerations for the Proposed Selection of Clinical
Quality Measures for Electronic Submission by EPs and Eligible
Hospitals
    d. Proposed Clinical Quality Measures for Electronic Submission
Using Certified EHR Technology by Eligible Professionals
    e. Clinical Quality Measures Reporting Criteria for Eligible
Professionals
    f. Proposed Clinical Quality Measures for Electronic Submission
by Eligible Hospitals
    g. Request for Public Comment on Potential Measures for Eligible
Professionals and Eligible Hospitals in 2013 Payment Year and
Subsequent Years
    h. Proposed Reporting Method for Clinical Quality Measures
    (1) Reporting Method for 2011 Payment Year
    (2) Reporting Method for 2012
    i. Alternative Reporting Methods for Clinical Quality Measures
    j. Proposed Reporting Criteria for Eligible Professionals and
Eligible Hospitals
    k. Addressing Dually-Eligible Medicare/Medicaid Beneficiaries
Under HITECH
    4. Demonstration of Meaningful Use
    a. Common Methods of Demonstration in Medicare and Medicaid
    b. Methods for Demonstration of the Stage 1 Criteria of
Meaningful Use
    5. Data Collection for Online Posting, Program Coordination and
Accurate Payments
    a. Online Posting
    b. Program Election Between Medicare FFS/MA and Medicaid for EPs
    c. Data To Be Collected
    6. Hospital-Based Eligible Professionals
    7. Interaction With Other Programs
    B. Medicare Fee-for-Service Incentives
    1. Incentive Payments for Eligible Professionals
    a. Definitions
    b. Incentive Payment Limits
    c. Increase in Incentive Payment for EPs who Predominantly
Furnish Services in a Geographic Health Professional Shortage Area
    d. Form and Timing of Payment
    e. Payment Adjustment Effective in CY 2015 and Subsequent Years
for EPs Who Are Not Meaningful Users of Certified EHR Technology
    2. Incentive Payments for Hospitals
    a. Definition of Eligible Hospital for Medicare
    b. Incentive Payment Calculation for Eligible Hospitals
    c. Medicare Share
    d. Charity Care
    e. Transition Factor
    f. Duration and Timing of Incentive Payments
    g. Incentive Payment Adjustment Effective in Federal FY 2015 and
Subsequent Years for Eligible Hospitals Who Are Not Meaningful EHR
Users
    3. Incentive Payments for Critical Access Hospitals
    a. Definition of CAHs for Medicare
    b. Current Medicare Payment of Reasonable Cost for CAHs
    c. Changes made by the HITECH Act
    d. Incentive Payment Calculation for CAHs
    e. Reduction of Reasonable Cost Payment in FY 2015 and
Subsequent Years for CAHs That Are Not Meaningful EHR Users
    4. Process for Making Incentive Payments Under the Medicare FFS
Program
    a. Incentive Payments to EPs
    b. Incentive Payments to Eligible Hospitals
    c. Incentive Payments to CAHs
    d. Payment Accounting under Medicare
    C. Medicare Advantage Organization Incentive Payments
    1. Definitions
    a. Qualifying MA Organization
    b. Qualifying MA Eligible Professional
    c. Qualifying MA-Affiliated Eligible Hospital
    2. Identification of Qualifying MA Organizations, MA EPs, and
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 on Web site and Limitation on Review
    8. Limitation on Review
    9. Conforming Changes

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    10. Payment Adjustment and Future Rulemaking
    D. Medicaid Incentives
    1. Overview of Health Information Technology in Medicaid
    2. General Medicaid Provisions
    3. Identification of Qualifying Medicaid EPs and Eligible
Hospitals
    a. Overview
    b. Program Participation
    1. Acute Care Hospitals
    2. Children's Hospitals
    c. Medicaid Professionals Program Eligibility
    d. Calculating Patient Volume Requirements
    e. Entities Promoting the Adoption of Certified EHR Technology
    4. Computation of Amount Payable to Qualifying Medicaid EPs and
Eligible Hospitals
    (1) General Overview
    (2) Average Allowable Costs
    (3) Net Average Allowable Costs
    (4) Payments for Medicaid Eligible Professionals
    (5) Basis for Medicaid EHR Incentive Program First Payment Year
and Subsequent Payment Years
    (i) Medicaid EP Who Begins Adopting, Implementing or Upgrading
Certified EHR Technology in the First Year
    (ii) Medicaid EP who has Already Adopted, Implemented or
Upgraded Certified EHR Technology and Meaningfully Uses EHR
Technology
    b. Payment Methodology for Eligible Hospitals
    c. Alternative and Optional Early State Implementation to Make
Incentive Payments for Adopting, Implementing or Upgrading Certified
EHR Technology
    d. Process for Making and Receiving Medicaid Incentive Payments
    e. Avoiding Duplicate Payment
    f. Flexibility to Alternate Between Medicare and Medicaid
Incentive Payment Program One Time
    g. One State Selection
    5. National Level Repository and State Data Collection
    6. Collection of Information Related to the Eligible
Professional's National Provider Identifier and the Tax
Identification Number (TIN)
    7. Activities Required to Receive Incentive Payments
    a. General Overview
    b. Definitions Related to Certified EHR Technology and Adopting,
Implementing or Upgrading Such Technology
    (1) Certified EHR Technology
    (2) Adopting, Implementing or Upgrading
    c. Other General Terminology
III. Collection of Information Requirements
    A. ICRs Regarding Demonstration of Meaningful Use Criteria
(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. Response to Comments
V. Regulatory Impact Analysis
    A. Overall Impact
    B. Regulatory Flexibility Analysis
    C. Small Rural Hospitals
    D. Unfunded Mandates Reform Act
    E. Federalism
    F. Anticipated Effects
    G. HITECH Impact Analysis
    H. Accounting Statement

I. Background

A. Overview of the HITECH Programs Created by the American Recovery and
Reinvestment Act of 2009

    The American Recovery and Reinvestment Act of 2009 (ARRA) (Pub. L.
111-5) was enacted on February 17, 2009. ARRA includes many measures to
modernize our nation's infrastructure, enhance energy independence,
expand educational opportunities, provide tax relief, and preserve and
improve affordable health care. Title IV of Division B of ARRA amends
Titles XVIII and XIX of the Social Security Act (the Act) by
establishing incentive payments to eligible professionals (EPs) and
eligible hospitals to promote the adoption and meaningful use of
interoperable health information technology and qualified EHRs.
Expanded use of health information technology (HIT) and EHRs will
improve the quality and value of American health care. These
provisions, together with Title XIII of Division A of ARRA, may be
cited as the Health Information Technology for Economic and Clinical
Health Act'' or the ``HITECH Act.'' The incentive payments for adoption
and meaningful use of HIT and qualified EHRs are part of a broader
effort under the HITECH Act to accelerate the adoption of HIT and
utilization of qualified EHRs. We are developing the incentive programs
which are outlined in Division B, Title IV of the HITECH Act and these
programs are the keys to inducing providers to actively utilize HIT.
    EPs and eligible hospitals qualify for the EHR incentive payments
if, among other requirements, they meaningfully use certified EHR
technology. This proposed rule sets forth a proposed definition of
``meaningful use of certified EHR technology.'' Section 13101 of the
HITECH Act adds a new section 3000 to the Public Health Service Act
(PHSA), which defines ``certified EHR technology'' as a qualified EHR
that has been properly certified as meeting standards adopted under
section 3004 of the PHSA. CMS and ONC have been working closely to
ensure that the definition of meaningful use of certified EHR
technology and the standards for certified EHR technology are
coordinated. ``Meaningful use'' is a term defined by CMS and describes
the use of HIT that furthers the goals of information exchange among
health care professionals. In an upcoming interim final rule, ONC will
identify the initial set of standards and implementation specifications
that EHR technology must implement, as well as the certification
criteria that will be used to certify EHR technology, and will further
define the term ``certified EHR technology.'' In a related proposed
rule, the Department will propose the development of a certification
program for health IT. Specifically, we have sought to ensure that the
definition of meaningful use of certified EHR technology does not
require EPs and eligible hospitals to perform functionalities for which
standards have not been recognized or established. Similarly, the
functionality of certified EHR technology should enable and advance the
definition of meaningful use.
    We urge those interested in this proposed rule to also review the
ONC interim final rule with comment and the related proposed rule when
they are published later this year and to visit http://healthit.hhs.gov
and http://[[Page 1847]]www.cms.hhs.gov/Recovery/11_HealthIT.aspTopOfPage for more
information on the efforts at the Department of Health and Human
Services (HHS) to advance HIT initiatives.

B. Statutory Basis for the Medicare & Medicaid EHR Incentive Programs

    Section 4101(a) of the HITECH Act adds a new subsection (o) to
section 1848 of the Act. Section 1848(o) of the Act establishes
incentive payments for the meaningful use of certified EHR technology
by EPs participating in the original Medicare program or hereinafter
referred to as Medicare 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 are not meaningful
users of certified EHR technology will receive less than 100 percent of
the fee schedule for their professional services. Section 4101(c) of
the HITECH Act adds a new subsection (l) to section 1853 of the Act to
provide incentive payments to Medicare Advantage (MA) organizations for
their affiliated EPs who meaningfully use certified EHR technology and
meet certain other requirements, and a requirement to make a downward
adjustment to Medicare payments to MA organizations for professional
services provided by any of their affiliated EPs who are not meaningful
users of certified EHR technology, beginning in 2015, and avoids
duplicate of payments from the MA EHR incentive program under this
section and the FFS EHR incentive program under section 1848(o)(1)(A).
    Section 4102(a) of the HITECH Act adds a new subsection (n) to
section 1886 of the Act. Section 1886(n) of the Act establishes
incentive payments for the meaningful use of certified EHR technology
by subsection (d) hospitals, as defined under section 1886(d)(1)(B) of
the Act, participating in Medicare FFS program beginning in Federal
fiscal year (FY) 2011. Section 4102(b)(1) of the HITECH Act amends
section 1886(b)(3)(B) of the Act to provide that, beginning in FY 2015,
subsection (d) hospitals that are not meaningful users of certified EHR
technology will receive a reduced annual payment update. Section
4102(b)(2) of the HITECH Act amends section 1814(l) of the Act to
provide an incentive payment to critical access hospitals (CAHs) who
meaningfully use certified EHR technology based on the hospitals'
reasonable cost beginning in FY 2011. In addition, section 4102(a)(2)
of the HITECH Act amends section 1814(l) of the Act to provide for a
downward payment adjustment for hospital services provided by CAHs that
are not meaningful users of certified EHR technology for cost reporting
periods beginning in FY 2015. Section 4102(c) of the HITECH Act adds a
new subsection (m) to section 1853 of the Act to provide incentive
payments to MA organizations for certain affiliated hospitals that
meaningfully use certified EHR technology to address avoidance of
duplicate payments, and to make a downward adjustment to payments to MA
organizations for inpatient hospital services provided by its
affiliated hospitals that are not meaningful users of certified EHR
technology beginning in FY 2015.
    Section 4103 of the HITECH Act provides for implementation funding
for the EHR incentives program under Medicare.
    Section 4201 of the HITECH Act amends section 1903 of the Act to
provide 100 percent Federal financial participation (FFP) to States for
incentive payments to certain eligible providers participating in the
Medicaid program to purchase, implement, and operate (including support
services and training for staff) certified EHR technology and 90
percent FFP for State administrative expenses related to the program
outlined in 1903(t) of the Act. Section 4201(a)(2) of the HITECH Act
adds a new subsection (t) to section 1903 of the Act to establish a
program with input from the States to provide incentives for the
adoption and subsequent meaningful use of certified EHR technology for
providers participating in the Medicaid program.

II. Provisions of the Proposed Regulations

    We propose to add a new part 495 to title 42 of the Code of Federal
Regulations to implement the provisions discussed in this section of
the proposed rule related to certified EHR technology for providers
participating in either the Medicare program or the Medicaid program.
    The HITECH Act creates incentives in the Medicare Fee-for-Service
(FFS), Medicare Advantage (MA), and Medicaid programs for demonstrating
meaning EHR use and payment adjustments in the Medicare FFS and MA
programs for not demonstrating meaningful EHR use. The three incentive
programs contain many common elements and certain provisions of the
HITECH Act encourage avoiding duplication of payments, reporting, and
other requirements, particularly in the area of demonstrating
meaningful use of certified EHR technology. Eligible hospitals may
participate in either one of the Medicare (FFS or MA) programs and the
Medicaid program, assuming they meet each program's eligibility
requirements, which vary across programs. In certain cases, the HITECH
Act has used nearly identical or identical language in defining terms
that are used in the Medicare FFS, MA, and Medicaid programs, including
such terms as ``hospital-based EPs'' and ``certified EHR technology.''
In these cases, we seek to create as much commonality between the three
programs as possible and have structured this proposed rule based on
that premise by beginning with those provisions that cut across the
three programs before moving on to discuss the provisions specific to
Medicare FFS, MA and Medicaid.

A. Definitions Across the Medicare FFS, Medicare Advantage, and
Medicaid Programs

    Title IV, Division B of the HITECH Act establishes incentive
payments under the Medicare and Medicaid programs for certain
professionals and hospitals that meaningfully use certified EHR
technology. Under Medicare, these incentive payments may be made to
qualifying professionals, hospitals, and Medicare Advantage (MA)
organizations on behalf of certain MA affiliated physicians and
hospitals. We refer to the incentive payments made under the original
Medicare program as the Medicare FFS EHR incentive program. We refer to
the incentive payments made to qualifying MA organizations as the MA
EHR incentive program, and the incentive payments made under Medicaid
as the Medicaid EHR incentive program. When referring to Medicare EHR
incentive program, we are referring to both the Medicare FFS EHR and
the MA EHR incentive programs.
1. Definitions
    Sections 4101, 4102, and 4202 of the HITECH Act use many identical
or similar terms. In this section of the preamble, we discuss terms for
which we are proposing uniform definitions for the Medicare FFS,
Medicare Advantage, and Medicaid EHR incentive programs. These
definitions would be included in part 495 subpart A of the regulations.
For definitions specific to an individual program, the definition is
set forth and discussed in the applicable EHR incentive program
section.

[[Page 1848]]

a. Certified Electronic Health Record (EHR) Technology
    The incentive payments are available to EPs (non-hospital-based
physicians, as defined in section 1861(r) of the Act, who either
receive reimbursement for services under the Medicare FFS program or
have an employment or contractual relationship with a qualifying MA
organization meeting the criteria under section 1853(l)(2) of the Act;
or healthcare professionals meeting the definition of ``eligible
professional'' under section 1903(t)(3)(B) of the Act as well as the
patient-volume and non-hospital-based criteria of section 1903(t)(2)(A)
of the Act) and eligible hospitals (subsection (d) hospitals as defined
under subsection 1886(d)(1)(B) of the Act that either receive
reimbursement for services under the Medicare FFS program or are
affiliated with a qualifying MA organization as described in section
1853(m)(2) of the Act; critical access hospitals (CAHs); or acute care
or children's hospitals described under section 1903(t)(2)(B) of the
Act). Under all three EHR incentive programs, EPs and eligible
hospitals must utilize ``certified EHR technology'' if they are to be
considered eligible for the incentive payments. In the Medicare FFS EHR
incentive program this requirement for EPs is found in section
1848(o)(2)(A)(i) of the Act, as added by section 4101(a) of the HITECH
Act, and for eligible hospitals and CAHs in section 1886(3)(A)(i) of
the Act, as added by section 4102(a) of the HITECH Act. In the MA EHR
incentive program this requirement for EPs is found in section
1853(l)(1) of the Act, as added by section 4101(c) of the HITECH Act,
and for eligible hospitals and CAHs, in section 1853(m)(1) of the Act,
as added by section 4201(c) of the HITECH Act. In the Medicaid EHR
incentive program this requirement for EPs and Medicaid eligible
hospitals is found throughout section 1903(t) of the Act, including in
section 1903(t)(6)(C) of the Act, as added by section 4201(a)(2) of the
HITECH Act. While certified EHR technology is a critical component of
the EHR incentive programs, under the authority given to her in the
HITECH Act, the Secretary has charged ONC with developing the criteria
and mechanisms for certification of EHR technology. Therefore, ONC will
be defining certified EHR technology in its upcoming interim final rule
and we propose to use the definition of certified EHR technology
adopted by ONC.
b. Qualified Electronic Health Record
    In order for an EHR technology to be eligible for certification it
must first meet the definition of a qualified electronic health record.
This term will be defined by ONC in its upcoming interim final rule,
and we propose to use the definition of qualified electronic health
record adopted by ONC.
c. Payment Year
    Under section 1848(o)(1)(A)(i) of the Act, as added by section
4101(a) of the HITECH Act, the Medicare FFS EHR incentive payment is
available to EPs for a ``payment year.'' Section 1848(o)(1)(E) of the
Act defines the term ``payment year'' as a year beginning with 2011.
While the HITECH Act does not use the term, ``payment year,'' for the
Medicaid EHR incentive program, it does use the term ``year of
payment'' throughout section 1903(t) of the Act, for example, at
sections 1903(t)(3)(C), 1903(t)(4)(A), and 1903(t)(6)(C) of the Act.
For all EPs, we are proposing a common definition for both ``payment
year'' and ``year of payment,'' as ``any calendar year beginning with
2011'' at Sec.  495.4. (The only exception to this rule, is that in
certain cases, Medicaid EPs would be able to participate in the
Medicaid EHR incentive program starting with CY 2010, for adopting,
implementing, or upgrading certified EHR technology. For further
discussion of this early participation in the Medicaid EHR incentive
program, we refer readers to section II.D.3.c. of this proposed rule.)
    This definition, which is consistent with the statutory definition
of ``payment year'' under Medicare FFS, will simplify the EHR incentive
programs for EPs. As discussed later in this preamble, EPs may have the
opportunity to participate in either the Medicare or Medicaid incentive
programs, and once an EP has picked a program, they are permitted to
make a one-time switch from one program to the other. A common
definition will allow EPs to more easily understand both programs, and
inform decisions regarding whether they are eligible for, and/or wish
to participate in either program. Under section 1886(n)(1) of the Act,
as added by section 4102(a) of the HITECH Act, the Medicare FFS EHR
incentive payment is available to eligible hospitals and CAHs for a
``payment year.'' Section 1886(n)(2)(G) of the Act defines the term
``payment year'' as a fiscal year (FY) beginning in 2011. As hospitals
are paid based on the 12-month Federal fiscal year, we believe the
reference to a ``fiscal year'' means the fiscal year beginning on
October 1 of the prior year and extending to September 30 of the
relevant year. Again, for the Medicaid EHR incentive program, the
HITECH Act uses the term, ``year of payment'' (see section
1903)(t)(5)(D)(ii) of the Act), rather than ``payment year.'' For the
same reasons expressed above for EPs, and because hospitals will have
the opportunity to simultaneously participate in both the Medicare and
Medicaid EHR incentive programs, we propose a common definition of
``payment year'' and ``year of payment'' for both programs. For
purposes of the incentive payments made to eligible hospitals under the
Medicare FFS, MA and Medicaid EHR incentive programs, we propose to
define payment year and year of payment at Sec.  495.4, consistent with
the statutory definition, as ``any fiscal year beginning with 2011''.
(The only exception to this rule, is that in certain cases, Medicaid
eligible hospitals would be able to participate in the Medicaid EHR
incentive program starting with FY 2010, for adopting, implementing, or
upgrading certified EHR technology. For further discussion of this
early participation in the Medicaid EHR incentive program, we refer
readers to section II.D.3.c of this proposed rule.)
    The actual timing of the incentive payment for a given payment year
varies depending on which EHR incentive program an EP or an eligible
hospital is participating in. Details on the timing of incentive
payments for a given payment year can be found in section II.B.of the
proposed rule for Medicare FFS, section II.C. of the proposed rule for
MA and section II.D. of the proposed rule for Medicaid.
d. First, Second, Third, Fourth, Fifth, and Sixth Payment Year
    For EPs and eligible hospitals that qualify for EHR incentive
payments in a payment year, the amount of the payment will depend in
part on how many previous payment years, if any, an EP or eligible
hospital received an incentive payment. We propose to define the first
payment year to mean the first calendar or Federal fiscal year for
which an EP or eligible hospital receives an incentive payment.
Likewise, we propose to define the second, third, fourth, fifth, and
sixth payment year, respectively, to mean the second, third, fourth,
fifth, and sixth calendar or Federal fiscal year, respectively, for
which an EP or eligible hospital receives an incentive payment.
e. EHR Reporting Period
    In order to qualify for an incentive payment under the Medicare
incentive payment program for a payment year, an EP or eligible
hospital must meaningfully use certified EHR technology for the EHR
reporting period of the relevant payment year. Similarly, a Medicaid EP
or eligible hospital may

[[Page 1849]]

in the first payment year and must in subsequent payment years
demonstrate meaningful use of such technology, in order to receive a
payment. A Medicaid EP or eligible hospital may receive an incentive
payment in their first payment year for the adoption, implementation,
or upgrade of certified EHR technology. Although the Medicaid statute
does not specifically use the term, ``EHR reporting period,'' we
believe that the Secretary, pursuant to sections 1903(t)(6)(C) and
1903(t)(8) of the Act, has the authority to define the period that
would be used for demonstrating such adoption/implementation/upgrade or
meaningful use.
    In this proposed rule, we propose a definition of EHR Reporting
Period for purposes of the Medicare and Medicaid incentive payments
under sections 1848(o), 1853(l)(3), 1886(n), 1853(m)(3), 1814(l) and
1903(t) of the Act. For these sections, the EHR reporting period may be
any continuous 90-day period within the first payment year and the
entire payment year for all subsequent payment years. In future
rulemaking, we will propose a definition of EHR Reporting Period for
purposes of Medicare incentive payment adjustments under sections
1848(a)(7), 1853(l)(4), 1886(b)(3)(B)(ix), 1853(m)(4), and 1814(l)(4)
of the Act. Unlike the former group of sections, meaningful EHR users
that would not be subject to adjustments would have to be identified
prior to the application of the latter group of sections. Therefore,
these two groups of sections may have two different definitions of EHR
Reporting Period.
    For the first payment year only, we propose to define the term EHR
reporting period at Sec.  495.4 to mean any continuous 90-day period
within a payment year in which an EP or eligible hospital successfully
demonstrates meaningful use of certified EHR technology. The EHR
reporting period therefore could be any continuous period beginning and
ending within the relevant payment year. For example, for payment year
2011, an EHR reporting period of March 13, 2011 to June 11, 2011 would
be just as valid as an EHR reporting period of January 1, 2011 to April
1, 2011. An example of an unallowable EHR reporting period would be for
an EP to begin on November 1, 2011 and finish on January 31, 2012.
Starting with the second payment year and any subsequent payment years
for a given EP or eligible hospital, we propose to define the term EHR
reporting period at Sec.  495.4 to mean the entire payment year.
    In defining the EHR reporting period, we considered three of its
aspects: (1) Whether it should vary from one payment year to the next;
(2) its length; and (3) starting point. We discuss these three aspects
below.
    The first aspect of the EHR reporting period discussed is whether
it should be the same for each payment year. We believe that there are
considerations that distinguish the first payment year from the
remaining payment years. The foremost being that once an EP or eligible
hospital begins to meaningfully use certified EHR technology they are
unlikely to stop. As discussed below, in the first payment year a
shorter EHR reporting period would provide more flexibility for when an
EP or eligible hospital begins to meaningfully use certified EHR
technology and still qualify for the incentive in the same year.
However, in subsequent years we do not see that flexibility still being
required. Therefore, for purposes of the incentive payments under
sections 1848(o), 1853(l)(3), 1886(n), 1853(m)(3), 1814(l), and 1903(t)
of the Act, we propose that the length of the EHR reporting period be
different for the first payment year than from all other payment years.
We invite interested parties to comment on this proposal if they
believe that the EHR reporting period should vary from payment year to
payment year.
    With respect to the length of the EHR reporting period, we note
that there is an inherent tradeoff between robust verification and time
available to achieve compliance. A longer EHR reporting period provides
a more robust verification that an EP or eligible hospital successfully
met the definition of meaningful use of certified EHR technology than a
shorter period. However, it reduces the time available for an EP or
eligible hospital to reach the point of complying with meaningful use
and still receive an incentive for a given payment year. For example, a
90-day period would allow an EP until October 1, 2011 to begin
meaningful use of their certified EHR technology and receive an
incentive for payment year 2011. A 180-day period (6 months) would move
the date upon which the EP must begin meaningful use of their certified
EHR technology forward to July 1, 2011. We are concerned that an EHR
reporting period that is shorter than 90 days would be insufficient
time to ensure that EPs and eligible hospitals are truly using
certified EHR technology in a meaningful manner consistent with our
proposed criteria for meaningful use. Moreover, as discussed later in
this proposed rule, we will require EPs and hospitals to demonstrate
meaningful use by meeting certain performance thresholds (for example,
EPs will need to use CPOE for 80 percent of all orders, and hospitals
for 10 percent of all orders). We believe a period of fewer than 90
days would not be adequate to create an accurate rate for a given EP or
eligible hospital. We believe that once an EP or hospital has
implemented certified EHR technology to the point of being able to
comply with our proposed meaningful use criteria for 90 days, it is
unlikely that they would adjust their behavior just because the EHR
reporting period has ended. Beginning in the second payment year, an EP
or eligible hospital will already be meaningfully using certified EHR
technology so there are no limitations on the time available for
compliance.
    For the first payment year, therefore, we propose that the EHR
reporting period will be any continuous 90-day period within the first
payment year. However, beginning in the second payment year we see no
compelling reason not to seek the most robust verification possible.
Therefore for the second payment year and all subsequent payment years
we propose the EHR reporting period be the entire payment year. As the
length of the EHR reporting period is based on the discussed trade-off,
we remain open to alternative lengths of time. We invite comments on
the appropriate length for the EHR reporting period. We urge those
commenting to either endorse our proposed initial 90-day period
followed by full year EHR reporting periods or to recommend a specific
alternative.
    With respect to when the EHR reporting period for a payment year
should begin, there are two considerations. The first is determining
the earliest start date available, and the second is the flexibility
given to EPs and eligible hospitals to choose their start date. This
aspect is only applicable for the 90-day EHR reporting period for the
first payment year. The length of the EHR reporting period for the
second payment year and subsequent payment years dictate that the start
date be the first day of the payment year. The earliest start date we
considered was one which would allow an EP or eligible hospital to
demonstrate successful meaningful use of certified EHR technology on
the first day of the relevant payment year. For example, allowing an
EHR reporting period to begin as early as July 3, 2010 would allow an
eligible hospital to successfully demonstrate meaningful use on October
1, 2010, the first day of FY 2011. We have chosen not to propose this
as the earliest start date. There are significant barriers created by
the timeline in the HITECH Act. We anticipate that we will not publish
a final rule until after March

[[Page 1850]]

2010, with the final rule effective 60 days after its publication. We
do not believe this allows enough time for us, the vendor community, or
the provider community to take advantage of this early start date. In
addition, as discussed at sections 1848(o)(2)(B)(iii) and
1886(n)(3)(B)(iii) of the Act, the HITECH Act directs the Secretary to
seek to avoid duplicative reporting of clinical quality and other
measures under the Medicare EHR incentive program and other Medicare
programs. If we were to allow EPs and hospitals to report these
measures to CMS prior to the beginning of the FY, this reporting may be
of questionable value to other Medicare programs requiring reporting of
the same measures. For example, if and when the demonstration of
meaningful use includes the submission of quality measures this
submission could include measures currently in the RHQDAPU program. As
discussed in section II.A.3. of this proposed rule, we do not desire to
have a hospital report the same measure twice for two different
programs. However, if a hospital reports these measures from July
through September 2010 for payment year 2011 for Medicare and/or
Medicaid EHR incentive program, they would not be relevant for FY 2011
under the RHQDAPU. Due to the operational challenges presented and the
statutory requirement to avoid duplication of payments to the extent
possible, we are proposing that the earliest start date for EHR
reporting period be the first day of the payment year. The second
consideration for when the EHR reporting period should begin is whether
to designate specific start dates. As we are not aware of any
compelling reason to limit the start dates available to EPs or eligible
hospitals within the payment year, we propose to allow EPs or eligible
hospitals to begin their EHR reporting period on any date starting with
the first day of the payment year and ending with the latest day in the
payment year that allows for the EHR reporting period to be completed
by the last day of the payment year. We believe that giving EPs and
eligible hospitals flexibility as to the start date of the EHR
reporting is important, as unforeseen circumstances, such as delays in
implementation, higher than expected training needs and other
unexpected hindrances, may cause an EP or eligible hospital to
potentially miss a target start date. We invite comments on the
proposed start dates for the EHR reporting period.
    We acknowledge that all three of these aspects will be affected by
the need to determine which physicians, hospitals, critical access
hospitals and managed care plans are meaningful users before
application of the Medicare payment adjustments (provisions of sections
1848(a)(7), 1853(l)(4), 1886(b)(3)(B)(ix), 1853(m)(4), and 1814(l)(4)
of the Act). We will specify the EHR reporting periods for these
payment adjustment incentives in future rulemaking.
f. Meaningful EHR User
    Section 1848(o)(1)(A)(i) of the Act, as added by section 4101(a) of
the HITECH Act, limits incentive payments in the Medicare FFS EHR
incentive program to an EP who is a ``meaningful EHR user.'' Section
1886(n)(1) of the Act, as added by section 4102(a) of the HITECH Act,
limits incentive payments in the Medicare FFS EHR incentive program to
hospitals described in section 1886(d) of the Act. Section 1814(l) of
the Act limits incentive payments in the Medicare FFS EHR incentive
program to CAHs who are ``meaningful EHR users.'' Section
1903(t)(6)(C)(i)(II) of the Act, as added by section 4201(a)(2) of the
HITECH Act, limits incentive payments for payment years other than the
first payment year to a Medicaid provider who ``demonstrates meaningful
use of certified EHR technology.'' We propose to define at Sec.  495.4
the term ``meaningful EHR user'' as an EP or eligible hospital who, for
an EHR reporting period for a payment year, demonstrates meaningful use
of certified EHR technology in the form and manner consistent with our
standards (discussed below). These standards would include use of
certified EHR technology in a manner that is approved by us.
2. Definition of Meaningful Use
a. Background
    As discussed previously, an EP or eligible hospital must be a
meaningful EHR user in order to receive the incentive payments
available under the EHR incentive programs, except in the first payment
year for certain Medicaid EPs or eligible hospitals. This section
(II.A.2.) of this proposed rule discusses the definition of meaningful
use. Section II.A.3. of this proposed rule, discusses the manner for
demonstrating meaningful use. In Sections 1848(o)(2)(A) and 1886(n)(3)
of the Act, the Congress specified three types of requirements for
meaningful use: (1) Use of certified EHR technology in a meaningful
manner (for example, electronic prescribing); (2) that the certified
EHR technology is connected in a manner that provides for the
electronic exchange of health information to improve the quality of
care; and (3) that, in using certified EHR technology, the provider
submits to the Secretary information on clinical quality measures and
such other measures selected by the Secretary.
    Over the last few months, CMS and ONC have solicited input on
defining meaningful use from both other government agencies and the
public through dialogue, public forums, and solicitation of written
comments. Below we describe the work of the National Committee on Vital
and Health Statistics (NCVHS), the HIT Standards Committee and the HIT
Policy Committee, as well as the public input we have received on
defining meaningful use.
    The NCVHS is the Department of Health and Human Services' statutory
public advisory body on health data, statistics, and national health
information policy. NCVHS derives its authority from 42 U.S.C. 242k,
section 306(k) of the Public Health Service Act, which governs it along
with the provisions of Public Law 92-463 (5 U.S.C. App.2). The full
charter and membership of the NCVHS is available electronically at
http://www.ncvhs.hhs.gov/. The NCVHS held a public hearing on April 28
and 29, 2009 to learn from a broad spectrum of stakeholders their views
of ``meaningful use.'' The NCVHS hearing brought together key
healthcare and information technology stakeholder groups including:
Representatives of patients, and more broadly consumers; providers; the
public health community; public and private payers; vendors; and
certifying entities. The hearing agenda and testimony supplied is
available electronically at http://www.ncvhs.hhs.gov/090428ag.htm. A
report on the hearing was delivered May 15, 2009 to the ONC. The report
is available electronically at http://www.ncvhs.hhs.gov/090518rpt.pdf.
Written comments from interested stakeholders submitted timely to the
NCVHS were also considered by the NCVHS Executive Sub-Committee in the
drafting of the report. Subsequently, the National Coordinator for HIT
requested NCVHS to reflect on the testimony by supplying observations.
Those observations are available electronically at http://www.ncvhs.hhs.gov/090428rpt.pdf.
    In addition to the work completed by the NCVHS, the HIT Policy
Committee, a Federal Advisory Committee to the Department of Health and
Human Services (HHS) created by the HITECH Act, also worked to inform
the definition of meaningful use. The full charter and membership of
the HIT Policy Committee can be found at

[[Page 1851]]

http://healthit.hhs.gov. The HIT Policy Committee formed a Meaningful
Use workgroup. On June 16, 2009, the HIT Policy Committee heard and
discussed the recommendations from their Meaningful Use workgroup, and
subsequently submitted its own recommendations on meaningful use to the
National Coordinator for Health IT. These recommendations are available
electronically at http://healthit.hhs.gov. At the conclusion of the
June 16 meeting, ONC announced a public comment period to solicit
stakeholder input on the recommendations and published a notice in the
Federal Register (74 FR 28937). The public comment period lasted
through June 26, 2009. Over 700 public comments were received by the
ONC. A summary, as well as the text of the comments, is available
electronically at http://healthit.hhs.gov. The Meaningful Use workgroup
presented its revised recommendations to the full committee based on
comments by the full HIT Policy Committee and by the public at the July
16, 2009 meeting. In developing its recommendations, the HIT Policy
Committee considered a report entitled ``National Priorities and
Goals'' (http://www.nationalprioritiespartnership.org/uploadedFiles/NPP/08-253-NQF%20ReportLo%5b6%5d.pdf) generated by the National
Priorities Partnership, convened by the National Quality Forum (NQF).
Of the national health care priorities set forward by the NQF report,
the HIT Policy Committee chose as priority areas patient engagement;
reduction of racial disparities; improved safety; increased efficiency;
coordination of care; and improved population health to drive their
recommendations. Those recommendations are available electronically at
http://healthit.hhs.gov.
    The HIT Standards Committee, another Federal Advisory Committee
created by the HITECH Act, provided recommendations related to
meaningful use to ONC. The HIT Standards Committee work focuses
primarily on the standards surrounding certified EHR technology.
Further information on the HIT Standards Committee role and
recommendations can be found in a future rulemaking document to be
provided by ONC for certification of EHR technology (HHS-0151-IFC) and
at http://healthit.hhs.gov.
    Finally, from June 22 to June 26, 2009, the ONC and CMS hosted 21
teleconference listening sessions with rural providers, small
practices, small hospitals, CAHs, and urban safety net providers to
hear their perspectives and obtain their input on the definition of
meaningful use. Because of the documentation that these types of
providers have below average adoption rates of HIT, we solicited
comments directly from these communities. Section V. of this proposed
rule discusses the current adoption rates of HIT. Over 200
representatives from these target audiences participated on the calls.
The vast majority of callers were rural providers, although
representatives from vendor organizations or provider associations also
participated. One session was held to specifically hear from national
organizations representing rural communities and providers. Summaries
of these listening sessions are available at http://healthit.hhs.gov/meaningfuluse. Both CMS and the ONC have reviewed input from these and
additional sources to help inform the definition of meaningful use.
b. Common Definition of Meaningful Use Under Medicare and Medicaid
    Under sections 1848(o)(1)(A)(i) and 1886(n)(1) of the Act, as added
by sections 4101(a) and 4102(a) of the HITECH Act, respectively, an EP
or eligible hospital must be a meaningful EHR user for the relevant EHR
reporting period in order to qualify for the incentive payment for a
payment year. Sections 1848(o)(2)(A) and 1886(n)(3)(A) of the Act
provide that an EP and an eligible hospital shall be considered a
meaningful EHR user for an EHR reporting period for a payment year if
they meet the following three requirements: (1) Demonstrates use of
certified EHR technology in a meaningful manner; (2) demonstrates to
the satisfaction of the Secretary that certified EHR technology is
connected in a manner that provides for the electronic exchange of
health information to improve the quality of health care such as
promoting care coordination, in accordance with all laws and standards
applicable to the exchange of information; and (3) using its certified
EHR technology, submits to the Secretary, in a form and manner
specified by the Secretary, information on clinical quality measures
and other measures specified by the Secretary. The HITECH Act requires
that to receive a Medicaid incentive payment in the initial year of
payment, an EP or eligible hospital may demonstrate that they have
engaged in efforts to ``adopt, implement, or upgrade certified EHR
technology.'' Details, including special timeframes, on how we define
and implement ``adopt, implement, and upgrade'' are proposed in section
II.D.7.b.2 of this proposed rule. For subsequent payment years, or the
first payment year if an EP or eligible hospital chooses, section
1903(t)(6)(C)(i)(II) of the Act, as added by section 4201(a)(2) of
HITECH, prohibits receipt of an incentive payment, unless ``the
Medicaid provider demonstrates meaningful use of certified EHR
technology through a means that is approved by the State and acceptable
to the Secretary, and that may be based upon the methodologies applied
under section 1848(o) or 1886(n).'' (Sections 1848(o) and 1886(n) of
the Act refer to the Medicare incentive programs for EPs and eligible
hospitals respectively.) Under section 1903(t)(8) of the Act to the
maximum extent practicable, we are directed to avoid duplicative
requirements from Federal and State governments to demonstrate
meaningful use of certified EHR technology. Provisions included at
section 1848(o)(1)(D)(iii) of the Act also contain a Congressional
mandate to avoid duplicative requirements for meaningful use, to the
extent practicable. Finally section 1903(t)(8) of the Act allows the
Secretary to deem satisfaction of the requirements for meaningful use
of certified EHR technology for a payment year under Medicare to
qualify as meaningful use under Medicaid.
    We believe that given the strong level of interaction on meaningful
use encouraged by the HITECH Act, there would need to be a compelling
reason to create separate definitions for Medicare and Medicaid. We
have found no such reasons for disparate definitions in our internal or
external discussions. To the contrary, stakeholders have expressed
strong preferences to link the Medicare and Medicaid EHR incentive
programs wherever possible. Hospitals are entitled to participate in
both programs, and we are proposing to offer EPs an opportunity to
switch between the Medicare and Medicaid EHR incentive programs.
Therefore, we propose to create a common definition of meaningful use
that would serve as the definition for providers participating in the
Medicare FFS and MA EHR incentive program, and the minimum standard for
EPs and eligible hospitals participating in the Medicaid EHR incentive
program. We clarify that under Medicaid this common definition would be
the minimum standard. While we would allow States to add additional
objectives to the definition of meaningful use or modify how the
existing objectives are measured, the Secretary would not accept any
State proposed alternative that does not further promote the use of
EHRs and healthcare quality or that would require additional
functionality beyond that of certified EHR technology. See section

[[Page 1852]]

II.D.7.b.2.of this proposed rule for further details on how a State may
propose an alternative.
    For hospitals, we propose to exercise the option granted under
section 1903(t)(8) of the Act and deem any Medicare provider who is a
meaningful EHR user under the Medicare EHR incentive program and is
otherwise eligible for the Medicaid incentive payment to be classified
as a meaningful EHR user under the Medicaid EHR incentive program. This
is applicable only to eligible hospitals, as EPs cannot receive an
incentive payment under both Medicare and Medicaid.
    We solicit comments as to whether there exist compelling reasons to
give the states additional flexibility in creating disparate
definitions beyond what is proposed. Also if commenting in favor of
such disparate definitions, we ask that interested parties also comment
on whether the proposal of deeming meeting Medicare as sufficient for
meeting those of Medicaid remains appropriate under the disparate
definitions. This is applicable only to hospitals eligible for both the
Medicare and Medicaid incentive programs. Furthermore, if a State has
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.
c. Considerations in Defining Meaningful Use
    In sections 1848(o)(2)(A) and 1886(n)(3)(A) of the Act, as added by
sections 4101(a) and 4102(a) of the HITECH Act, the Congress identifies
the broad goal to be accomplished through the definition of meaningful
use of certified EHR technology for expanding the use of EHRs.
Certified EHR technology used in a meaningful way by providers is one
piece of a broader HIT infrastructure needed to reform the health care
system and improve health care quality, efficiency, and patient safety.
Our goal is for this ultimate vision to drive the definition of
meaningful use consistent with applicable provisions of Medicare and
Medicaid law.
    In defining meaningful use through the creation of criteria, we
have balanced competing considerations of proposing a definition that
best ensures reform of health care and improved healthcare quality,
encourages widespread EHR adoption, promotes innovation, and avoids
imposing excessive or unnecessary burdens on healthcare providers,
while at the same time recognizing the short time-frame available under
the HITECH Act for providers to begin using certified EHR technology.
    Based on public and stakeholder input, we consider a phased
approach to be most appropriate. Such a phased approach encompasses
reasonable criteria for meaningful use based on currently available
technology capabilities and provider practice experience, and builds up
to a more robust definition of meaningful use, based on anticipated
technology and capabilities development. The HITECH Act acknowledges
the need for this balance by granting the Secretary the discretion to
require more stringent measures of meaningful use over time.
Ultimately, consistent with other provisions of law, meaningful use of
certified EHR technology should result in health care that is patient-
centered, evidence-based, prevention-oriented, efficient, and
equitable.
    Under this phased approach to meaningful use, we intend to update
the criteria of meaningful use through future rulemaking. We refer to
the initial meaningful use criteria as ``Stage 1.'' We currently
anticipate two additional updates, which we refer to as Stage 2 and
Stage 3, respectively. We are considering updating the meaningful use
criteria on a biennial basis, with the Stage 2 criteria proposed by the
end of 2011 and the Stage 3 definition proposed by the end of 2013. The
stages represent a graduated approach to arriving at the ultimate goal.
Thus, our goals for ``Stage 3'' meaningful use criteria represent
overarching goals which, we believe, are attainable by the end of the
EHR incentive programs. We will continue to evaluate the progression of
the meaningful use definition for consistency with legislative intent
and new statutory requirements relating to quality measurement. We
solicit comments on this proposed pathway of meaningful use.
     Stage 1: The Stage 1 meaningful use criteria focuses on
electronically capturing health information in a coded format; using
that information to track key clinical conditions and communicating
that information for care coordination purposes (whether that
information is structured or unstructured, but in structured format
whenever feasible); consistent with other provisions of Medicare and
Medicaid law, implementing clinical decision support tools to
facilitate disease and medication management; and reporting clinical
quality measures and public health information.
     Stage 2: Our goals for the Stage 2 meaningful use
criteria, consistent with other provisions of Medicare and Medicaid
law, expand upon the Stage 1 criteria to encourage the use of health IT
for continuous quality improvement at the point of care and the
exchange of information in the most structured format possible, such as
the electronic transmission of orders entered using computerized
provider order entry (CPOE) and the electronic transmission of
diagnostic test results (such as blood tests, microbiology, urinalysis,
pathology tests, radiology, cardiac imaging, nuclear medicine tests,
pulmonary function tests and other such data needed to diagnose and
treat disease). Additionally we may consider applying the criteria more
broadly to both the inpatient and outpatient hospital settings.
     Stage 3: Our goals for the Stage 3 meaningful use criteria
are, consistent with other provisions of Medicare and Medicaid law, to
focus on promoting improvements in quality, safety and efficiency,
focusing on decision support for national high priority conditions,
patient access to self management tools, access to comprehensive
patient data and improving population health.
    We will continue to evaluate the progression of the meaningful use
definition for consistency with legislative instructions and new
statutory requirements relating to quality measurement and
administrative simplification. We are aware that the appropriate
approach raises complex questions and we solicit comments on the
proposed approach and alternative possibilities. A different approach
might, for example, move aspects of Stage 2 into Stage 3 or vice versa.
We seek comments on how best to balance the relevant goals, including
promoting adoption of EHRs, avoiding excessive or unnecessary burdens,
and improving health care.
    As the purpose of these incentives is to encourage the adoption and
meaningful use of certified EHR technology, we believe it is desirable
to account for whether an EP or eligible hospital is in their first,
second, third, fourth, fifth, or sixth payment year when deciding which
definition of meaningful use to apply in the beginning years of the
program. The HIT Policy Committee in its public meeting on July 16,
2009 also voiced its approval of this approach. However, we do not wish
to create an additional burden on EPs or eligible hospitals for
becoming a meaningful EHR user before 2015 by creating a higher
standard for them relative to an EP or eligible hospital who first
becomes a meaningful EHR user in

[[Page 1853]]

2015. The following paragraphs describe our intended alignment in the
beginning years that brings all EPs and eligible hospitals to the same
level of meaningful use by 2015. As we are only proposing criteria for
Stage 1 of meaningful use in this notice of proposed rulemaking, Stage
1 will be the criteria for meaningful use for all payment years until
updated by future rulemaking. Medicaid EHR incentive program EPs and
eligible hospitals have the option to earn their incentive for their
first payment year through the adoption, implementation or upgrade of
certified EHR technology. Those EPs and eligible hospitals doing so
will not have to demonstrate meaningful use in their first payment
year. We intend for their progression to be the same as those who
demonstrate meaningful use in their first payment year. In other words,
the second payment year is the second payment year regardless of how
the incentive was earned in the first payment year.
    We intend that Medicaid EPs and eligible hospitals who qualify for
an incentive payment for adopting, implementing, or upgrading in their
first payment year would follow the same meaningful use progression
outlined below as if their second payment year was their first payment
year. For instance a Medicaid EP who received an incentive for his or
her first payment year in 2010 for adopting, implementing, or upgrading
would follow the same guidance starting in their second payment year
(2011) as a Medicare EP who received an incentive for their first
payment year in 2011 for meaningful use of certified EHR technology.
Another example would be a Medicaid eligible hospital that received an
incentive for its first payment year in 2012 for adopting,
implementing, and upgrading would follow the same guidance starting in
their second payment year (2013) as a Medicare eligible hospital who
received an incentive for their first payment year in 2013 for
meaningful use of certified EHR technology.
    We propose that EPs and eligible hospitals whose first payment year
is 2011 must satisfy the requirements of the Stage 1 criteria of
meaningful use in their first and second payment years (2011 and 2012)
to receive the incentive payments. We anticipate updating the criteria
of meaningful use to Stage 2 in time for the 2013 payment year and
therefore anticipate for their third and fourth payment years (2013 and
2014), an EP or eligible hospital whose first payment year is 2011
would have to satisfy the Stage 2 criteria of meaningful use to receive
the incentive payments. We anticipate updating the criteria of
meaningful use to Stage 3 in time for the 2015 payment year and
therefore anticipate for their fifth payment year (2015), if
applicable, an EP or eligible hospital whose first payment year is 2011
would have to satisfy the Stage 3 criteria of meaningful use to receive
the incentive payments. For their sixth payment year (2016), if
applicable, an EP or eligible hospital whose first payment year is 2011
would have to satisfy the Stage 3 criteria of meaningful use or a
subsequent update to the criteria if one is established through
rulemaking to receive the incentive payments.
    We propose that EPs and eligible hospitals whose first payment year
is 2012 must satisfy the Stage 1 criteria of meaningful use in their
first and second payment years (2012 and 2013) to receive the incentive
payments. We anticipate updating the criteria of meaningful use to
Stage 2 in time for the 2013 payment year and anticipate for their
third payment year (2014), an EP or eligible hospital whose first
payment year is 2012 would have to satisfy the Stage 2 criteria of
meaningful use to receive the incentive payments. We anticipate
updating the criteria of meaningful use to Stage 3 in time for the 2015
payment year and therefore anticipate for their fourth payment year
(2015), if applicable, an EP or eligible hospital whose first payment
year is 2012 would have to satisfy the Stage 3 criteria of meaningful
use to receive the incentive payments. For their fifth and sixth
payment years (2016 and 2017), if applicable, an EP or eligible
hospital whose first payment year is 2012 would have to satisfy the
Stage 3 criteria of meaningful use or a subsequent update to the
criteria if one is established through rulemaking to receive the
incentive payments.
    We propose that EPs and eligible hospitals whose first payment year
is 2013 must satisfy the Stage 1 criteria of meaningful use in their
first payment year (2013) to receive the incentive payments. We
anticipate updating the criteria of meaningful use to Stage 2 in time
for the 2013 payment year and therefore anticipate for their second
payment year (2014), an EP or eligible hospital whose first payment
year is 2013 would have to satisfy the Stage 2 criteria of meaningful
use to receive the incentive payments. We anticipate updating the
criteria of meaningful use to Stage 3 in time for the 2015 payment year
and therefore anticipate for their third payment year (2015), if
applicable, an EP or eligible hospital whose first payment year is 2013
would have to satisfy the Stage 3 criteria of meaningful use to receive
the incentive payments. For their fourth, fifth, and sixth payment year
(2016, 2017 and 2018), if applicable, an EP or eligible hospital whose
first payment year is 2013 would have to satisfy the Stage 3 criteria
of meaningful use or a subsequent update to the criteria if one is
established through rulemaking to receive the incentive payments.
    We propose that EPs and eligible hospitals whose first payment year
is 2014 must satisfy the Stage 1 criteria of meaningful use in their
first payment year (2014) to receive the incentive payments. We
anticipate updating the criteria of meaningful use to Stage 3 in time
for the 2015 payment year and therefore anticipate for their second
payment year (2015), if applicable, an EP or eligible hospital whose
first payment year is 2014 would have to satisfy the Stage 3 criteria
of meaningful use to receive the incentive payments. For their third,
fourth, fifth and sixth payment year (2016, 2017, 2018, and 2019), if
applicable, an EP or eligible hospital whose first payment year is 2014
would have to satisfy the Stage 3 criteria of meaningful use or a
subsequent update to the criteria if one is established through
rulemaking to receive the incentive payments.
    We anticipate updating the criteria of meaningful use to Stage 3 in
time for the 2015 payment year and therefore anticipate for all their
payment years, an EP or eligible hospital whose first payment year is
2015 would have to satisfy the Stage 3 criteria of meaningful use for
2015. For all subsequent payment years, if applicable, an EP or
eligible hospital whose first payment year is 2015 would have to
satisfy the Stage 3 criteria of meaningful use or a subsequent update
to the criteria if one is established through rulemaking to receive the
incentive payments.
    In addition to the equitable concerns discussed earlier in the
transition from incentive payments to payment adjustments, the primary
reasoning for developing different stages of meaningful use is the
current lack of HIT infrastructure and penetration of qualified EHRs
necessary to support the ambitious goals of the Stage 3 criteria of
meaningful use. Given the anticipated maturity of HIT infrastructure
inherent in the strengthening criteria and the increased adoption of
certified EHR technology predicted in section V. of this proposed rule,
these barriers to meeting the Stage 3 criteria of meaningful use will
be removed.
    Table 1 outlines our proposal to apply the respective criteria of
meaningful use for each payment year (1st, 2nd, 3rd, etc.) for EPs and
eligible hospitals that

[[Page 1854]]

become meaningful EHR users before 2015. Please note that nothing in
this discussion limits us to proposed changes to meaningful use beyond
Stage 3 through future rulemaking.

                            Table 1--Stage of Meaningful Use Criteria by Payment Year
----------------------------------------------------------------------------------------------------------------
                                                                  Payment year
      First payment year       ---------------------------------------------------------------------------------
                                      2011             2012            2013            2014          2015 +**
----------------------------------------------------------------------------------------------------------------
2011..........................  Stage 1........  Stage 1........  Stage 2.......  Stage 2.......  Stage 3.
2012..........................  ...............  Stage 1........  Stage 1.......  Stage 2.......  Stage 3.
2013..........................  ...............  ...............  Stage 1.......  Stage 2.......  Stage 3.
2014..........................  ...............  ...............  ..............  Stage 1.......  Stage 3.
2015+ *.......................  ...............  ...............  ..............  ..............  Stage 3.
----------------------------------------------------------------------------------------------------------------
* Avoids payment adjustments only for EPs in the Medicare EHR Incentive Program.
** Stage 3 criteria of meaningful use or a subsequent update to the criteria if one is established through
  rulemaking.

    Please note that the number of payment years available and the last
payment year that can be the first payment year for an EP or eligible
hospital varies between the EHR incentive programs. The applicable
payment years for each program are discussed in section II.B. of this
proposed rule for the Medicare FFS EHR incentive program, in section
II.D. for the MA EHR incentive program, and in section II.E. for the
Medicaid EHR incentive program.
    The stages of criteria of meaningful use and how they are
demonstrated are described further in this proposed rule and will be
updated in subsequent proposed rules to reflect advances in HIT
products and infrastructure. This could include updates to the Stage 1
criteria in future rulemaking.
    We invite comments on our alignment between payment year and the
criteria of meaningful use particularly in regard to the need to create
alignment across all EPs and eligible hospitals in all EHR incentive
programs in 2015.
d. Stage 1 Criteria for Meaningful Use
    To qualify as a meaningful EHR user for 2011, we propose that an EP
or eligible hospital must demonstrate that they meet all of the
objectives and their associated measures as set forth in Sec.  495.6.
Except as otherwise indicated, each objective must be satisfied by an
individual EP as determined by unique National Provider Identifiers
(NPIs) and an individual hospital as determined by unique CMS
certification numbers (CCN). Below we describe each objective and its
associated measures in detail. While we welcome comments on all aspects
of the Stage 1 criteria of meaningful use, we specifically encourage
comments on the following considerations.
    While we believe that requiring satisfaction of all objectives is
appropriate for the majority of providers, we are concerned that
certain providers may have difficulty meeting one or more of the
proposed objectives. We solicit comments on whether this may be the
case, and invite commenters to identify the objectives and associated
measures that may prove out of reach for certain provider types or
specialties, and to suggest specific objective criteria we could use to
determine whether an objective and associated measure is appropriate
for different provider types or specialists.
    In discussing the objectives that constitute the stage 1 criteria
of meaningful use, we adopted a structure derived from recommendations
of the HIT Policy Committee of grouping the objectives under care
goals, which are in turn grouped under health outcomes policy
priorities. We believe this structural grouping provides context to the
individual objectives; however, the grouping is not itself an aspect of
meaningful use. The criteria for meaningful use are based on the
objectives and their associated measures. CMS and ONC have carefully
reviewed the objectives and measures proposed by the HIT Policy
Committee. We found many objectives to be well suited to meaningful
use, while others we found to require modification or clarification. In
our discussion we will focus on those areas where our proposal is a
modification of the recommendation of the HIT Policy Committee. For
those areas where we elected not to propose a modification to the
recommendation of the HIT Policy Committee, we note that there already
has been extensive public debate and explanation of these
recommendations, which can be accessed at http://healthit.hhs.gov/meaningfuluse. Even if we do not propose to modify a specific
recommendation of the HIT Policy Committee, we nevertheless welcome
comment on whether to do so in the final rule.
(1) Objectives
    The first health outcomes policy priority specified by the HIT
Policy Committee is improving quality, safety, efficiency and reducing
health disparities. The HIT Policy Committee identified the following
care goals to address this priority:
     Provide access to comprehensive patient health data for
patient's healthcare team.
     Use evidence-based order sets and computerized provider
order entry (CPOE).
     Apply clinical decision support at the point of care.
     Generate lists of patients who need care and use them to
reach out to those patients.
     Report information for quality improvement and public
reporting.

With respect to this last care goal, the HIT Policy Committee proposed
a goal of ``Report to patient registries for quality improvement,
public reporting, etc.'' We propose to modify this care goal because we
believe that patient registries are too narrow a reporting requirement
to accomplish the goals of quality improvement and public reporting. We
note that the HIT Policy Committee's recommended objectives include the
reporting of quality measures to CMS. We do not believe that CMS would
normally be considered a ``patient registry.'' We also removed the
phrase ``etc.'' We believe that the level of ambiguity created by
``etc.'' is not appropriate for Federal regulations.
    For EPs, we propose the following objectives in the Stage 1
criteria of meaningful use to further the care goal of improving
quality, safety, efficiency and reducing health disparities.
     Use CPOE. We believe that the term ``CPOE'' requires
additional clarification. We propose to define CPOE as entailing the
provider's use of computer assistance to directly enter medical orders
(for example, medications,

[[Page 1855]]

consultations with other providers, laboratory services, imaging
studies, and other auxiliary services) from a computer or mobile
device. The order is also documented or captured in a digital,
structured, and computable format for use in improving safety and
organization. For Stage 1 criteria, we propose that it will not include
the electronic transmittal of that order to the pharmacy, laboratory,
or diagnostic imaging center. We encourage comments on whether
additional specificity is required on the types of orders encompassed
within CPOE.
     Implement drug-drug, drug-allergy, drug-formulary checks.
     Maintain an up-to-date problem list of current and active
diagnoses based on ICD-9-CM or SNOMED CT[supreg].

We believe the term ``problem list'' requires additional clarification.
We describe a ``problem list'' as a list of current and active
diagnoses as well as past diagnoses relevant to the current care of the
patient.
     Generate and transmit permissible prescriptions
electronically (eRx).

The concept of only permissible prescriptions refers to the current
restrictions established by the Department of Justice on electronic
prescribing for controlled substances. (The restrictions can be found
at http://www.deadiversion.usdoj.gov/schedules/schedules.htm.)
     Maintain active medication list.
     Maintain active medication allergy list.
     Record the following demographics: Preferred language,
insurance type, gender, race and ethnicity, and date of birth.

We note that race and ethnicity codes should follow current federal
standards published by the Office of Management and Budget (http://www.whitehouse.gov/omb/inforeg_statpolicy/#dr).
     We do not propose to include the objective ``Record
Advance directives.''

The HIT Policy Committee recommended that EPs ``record advance
directives.'' It is unclear whether by this terminology they meant that
the contents of the advance directive be recorded or merely the fact
that a patient has an advance directive be noted. Depending on the
interpretation, this objective could interfere with current State law
which varies significantly from State to State in this matter. We also
believe that this objective is only relevant to a limited and undefined
patient population when compared to the patient populations to which
other objectives listed here apply. The limits could be based on age,
health status, whether a chronic condition is present, to patients
scheduled for certain types of procedures or a host of other factors.
Similarly, many EPs would not record this information under current
standards of practice. Dentists, pediatricians, optometrists,
chiropractors, dermatologists, and radiologists are just a few examples
of EPs who would only in rare circumstances require information about a
patient's advance directive. For these reasons, we do not propose to
include ``Record advance directives'' as an objective of the Stage 1
criteria of meaningful use for EPs.
     Record and chart changes in the following vital signs:
Height, weight and blood pressure and calculate and display body mass
index (BMI) for ages 2 and over; plot and display growth charts for
children 2-20 years, including BMI.

This is a modification to the HIT Policy Committee recommendation to
require eligible professionals to record vital signs: Height, weight,
blood pressure and calculate BMI. We added ``plot and display growth
charts for children 2-20 years, including BMI'' to the objective
recommended by the HIT Policy Committee, as BMI itself does not provide
adequate information for children. Trends in height, weight, and BMI
among children must be interpreted and understood in the context of
expected parameters of children of the same age and sex to determine
whether the child is growing appropriately. For example, a BMI of 18 is
normal for a 12-year-old boy, and a marker of obesity for a 5-year-old
(http://www.cdc.gov/growthcharts/data/set1clinical/cj411023.pdf).
     Record smoking status for patients 13 years old or older.

The HIT Policy Committee recommended the objective of recording smoking
status for patients. We propose to add ``for patients 13 years old or
older,'' as we do not believe this objective is applicable to patients
of all ages and there is not consensus in the health care community as
to what the appropriate cut off age may be. We encourage comments on
whether this age limit should be lowered or raised.
     Incorporate clinical lab-test results into EHR as
structured data. Structured data are data that have specified data type
and response categories within an electronic record or file.
     Generate lists of patients by specific conditions to use
for quality improvement, reduction of disparities, research, and
outreach.
     Report ambulatory quality measures to CMS (or, for EPs
seeking the Medicaid incentive payment, the States). The HIT Policy
Committee did not include ``or the States'' in its recommended
objective. We propose to add the option to report directly to the
States for EPs participating in the Medicaid EHR incentive program.
Additional discussion of this objective can be found in section II.A.3
of this proposed rule.
     Send reminders to patients per patient preference for
preventive/follow-up care. Patient preference refers to the patient's
choice of delivery method between internet based delivery or delivery
not requiring internet access.
     Implement five clinical decision support rules relevant to
specialty or high clinical priority, including for diagnostic test
ordering, along with the ability to track compliance with those rules.
    This is a modification to the HIT Policy Committee recommendation
to require EPs to implement one clinical decision support rule relevant
to specialty or high clinical priority. We made this change to align
with and support eligible professionals in reporting their clinical
quality measures proposed in section II.A.3. of this proposed rule. We
anticipate that EPs will report on at least five clinical quality
measures.
    We propose to describe clinical decision support as health
information technology functionality that builds upon the foundation of
an EHR to provide persons involved in care processes with general and
person-specific information, intelligently filtered and organized, at
appropriate times, to enhance health and health care.
     We do not propose to include the objective ``Document a
progress note for each encounter''. Documentation of progress notes is
a medical-legal requirement and a component of basic EHR functionality,
and is not directly related to advanced processes of care or
improvements in quality, safety, or efficiency.
    Finally, the HIT Policy Committee further recommended the following
two objectives related to administrative simplification. Consistent
with that recommendation--and consistent with any forthcoming statutory
requirements regarding administrative simplifications--we propose the
following objectives, with slight modification.
     Check insurance eligibility electronically from public and
private payers. Deleted ``where possible'' from the HIT Policy
Committee recommendation. The checking for

[[Page 1856]]

eligibility electronically is already a HIPAA Standard Exchange.
     Submit claims electronically to public and private payers.
    For eligible hospitals, we propose the following objectives in the
stage 1 criteria of meaningful use to further these care goals:
     Use CPOE for orders (any type) directly entered by the
authorizing provider (for example, MD, DO, RN, PA, NP).
    We believe that the term ``CPOE'' requires additional
clarification. We propose to define CPOE as entailing the provider's
use of computer assistance to directly enter medical orders (for
example, medications, consultations with other providers, laboratory
services, imaging studies, and other auxiliary services) from a
computer or mobile device. The order is also documented or captured in
a digital, structured, and computable format for use in improving
safety and organization. It does not include the electronic transmittal
of that order to the pharmacy, laboratory, or diagnostic imaging center
in 2011 or 2012. CPOE is the same as defined above for EPs. We welcome
comment on whether use of CPOE varies between hospitals and EPs in ways
that should be addressed.
     Implement drug-drug, drug-allergy, drug-formulary checks.
     Maintain an up-to-date problem list of current and active
diagnoses based on ICD-9-CM or SNOMED CT[supreg].

We believe the term ``problem list'' requires additional clarification.
We describe a ``problem list'' as a list of current and active
diagnoses, as well as past diagnoses relevant to the current care of
the patient.
     Maintain active medication list.
     Maintain active medication allergy list.
     Record the following demographics: preferred language,
insurance type, gender, race and ethnicity, date of birth, and date and
cause of death in the event of mortality.

We are interested in public comments on how States and hospitals could
work together to facilitate linkage between the EHR and the full birth
and death certificate information that States currently require
hospitals to collect. We note that race and ethnicity codes should
follow current federal standards published by the Office of Management
and Budget (http://www.whitehouse.gov/omb/inforeg_statpolicy/#dr).
     We do not propose to include the objective ``Record
Advance directives.''
The HIT Policy Committee recommended that eligible hospitals ``record
advance directives.'' It is unclear whether by this terminology they
meant that the contents of the advance directive be recorded or merely
the fact that a patient has an advance directive be noted. Depending on
the interpretation, this objective could interfere with current State
law which varies significantly from state to state in this matter. We
also believe that this objective is only relevant to a limited and
undefined patient population when compared to the patient populations
to which other objectives listed here apply. The limits could be based
on age, health status, whether a chronic condition is present, to
patients scheduled for certain types of procedures or a host of other
factors. For these reasons, we do not propose to include ``Record
advance directives'' as an objective of the Stage 1 criteria of
meaningful use for eligible hospitals.
     Record the following vital signs: height, weight and blood
pressure and calculate and display body mass index (BMI) for patients 2
and over; plot and display growth charts for children 2-20 years,
including BMI.
    We added ``plot and display growth charts for children 2-20 years,
including BMI'' to the objective recommended by the HIT Policy
Committee, as BMI itself does not provide adequate information for
children. Trends in height, weight, and BMI among children must be
interpreted and understood in the context of expected parameters of
children of the same age and sex to determine whether the child is
growing appropriately. For example, a BMI of 18 is normal for a 12-
year-old boy, and a marker of obesity for a 5-year-old (ref. http://www.cdc.gov/growthcharts/data/set1clinical/cj41l023.pdf).
     Record smoking status for patients 13 years old or older.

We added ``for patients 13 years old or older'' as this objective is
not applicable to patients of all ages. The discussion as to why we
chose 13 can be found under the EP objective for ``Record smoking
status''.
     Incorporate clinical lab-test results into EHR as
structured data. Structured data are data that have specified data type
and response categories within a record or file.
     Generate lists of patients by specific conditions to use
for quality improvement, reduction of disparities, and outreach.

The HIT Policy Committee did not recommend the phrase ``to use for
quality improvement, reduction of disparities, and outreach'' for
eligible hospitals as they did for EPs. We believe this aspect of the
objective is just as relevant to eligible hospitals as EPs and
therefore includes it for both. We invite comments as to why this
phrase may not be applicable to eligible hospitals.
     Report ambulatory quality measures to CMS (or, for
eligible hospitals seeking the Medicaid incentive payment, the States).
The HIT Policy Committee did not include ``or the States'' in their
recommended objective. We propose to add the option to report directly
to the States for Medicaid eligible hospitals participating in the
Medicaid EHR incentive program. Additional discussion can be found in
section II.A.3. of this proposed rule.
     Implement five clinical decision support rules relevant to
specialty or high clinical priority, including for diagnostic test
ordering, along with the ability to track compliance with those rules.
    This is a modification to the HIT Policy Committee recommendation
to require eligible professionals to implement one clinical decision
support rule relevant to specialty or high clinical priority. We made
this change to align with and support eligible professionals in
reporting their clinical quality measures proposed in section II.A.3.
of this proposed rule. We anticipate that most EPs will report on at
least five clinical quality measures from section II.A.3 of this
proposed rule and eligible hospitals will all report on at least five.
    We believe greater clarification is required around the term
clinical decision support. We propose to describe clinical decision
support as health information technology functionality that builds upon
the foundation of an EHR to provide persons involved in care processes
with general and person-specific information, intelligently filtered
and organized, at appropriate times, to enhance health and health care.
    Finally, the HIT Policy Committee further recommended the following
two objectives related to administrative simplification. Consistent
with that recommendation--and consistent with any forthcoming statutory
requirements regarding administrative simplifications--we propose the
following objectives, with slight modification.
     Check insurance eligibility electronically from public and
private payers. Deleted ``where possible'' from the HIT Policy
Committee recommendation. The checking for eligibility electronically
is already a HIPAA Standard Exchange.
     Submit claims electronically to public and private payers.
    The second health outcomes policy priority identified by the HIT
Policy

[[Page 1857]]

Committee is to engage patients and families in their healthcare. The
following care goal for meaningful use addresses this priority:
     Provide patients and families with timely access to data,
knowledge, and tools to make informed decisions and to manage their
health. We do not propose to preempt any existing Federal or State law
regarding the disclosure of information to minors, their parents, or
their guardians in setting the requirements for meaningful use. For
this reason when it comes to information provided to the family, we let
existing Federal and State laws dictate what is appropriate for
disclosure to the patient or the family. For purposes of all objectives
of the Stage 1 criteria of meaningful use involving the disclosure of
information to a patient, a disclosure made to a family member or a
patient's guardian consistent with Federal and State law may substitute
for a disclosure to the patient.
    For EPs, we propose the following objectives in the stage 1
criteria of meaningful use to further this care goal:
     Provide patients with an electronic copy of their health
information (including diagnostics test results, problem list,
medication lists, allergies) upon request.

Consistent with the HIT Policy Committee's recommendations, we propose
the following additional clarification of this objective. Electronic
copies may be provided through a number of secure electronic methods
(for example, personal health record (PHR), patient portal, CD, USB
drive).
     Provide patients with timely electronic access to their
health information (including lab results, problem list, medication
lists, allergies) within 96 hours of the information being available to
the EP.

Also, consistent with the HIT Policy Committee recommendations, we
propose the following additional clarification of this objective.
Electronic access may be provided by a number of secure electronic
methods (for example, PHR, patient portal, CD, USB drive). Timely is
defined as within 96 hours of the information being available to the EP
either through the receipt of final lab results or a patient
interaction that updates the EP's knowledge of the patient's health. We
judge 96 hours to be a reasonable amount of time to ensure that
certified EHR technology is up to date. We welcome comment on if a
shorter or longer time is advantageous.
     We do not propose to include the objective ``Provide
access to patient-specific education resources upon request.''
Providing patients with information and education that is relevant to
their condition, actionable, culturally competent, and of the
appropriate health literacy level is a critical component of patient
engagement and empowerment. Unfortunately, there is currently a paucity
of knowledge resources that are integrated within EHRs, that are widely
available, and that meet these criteria, particularly in multiple
languages. We intend to work with the policy committee, the National
Library of Medicine (provider of Medline Plus), and experts in this
area to ensure the feasibility of this measure in the future.
     Provide clinical summaries for patients for each office
visit.
    Changed from encounter to office visit. The HIT Policy Committee
recommended the objective ``Provide clinical summaries for patients for
each encounter.'' We believe this objective requires further
clarification in order to make the distinction that it is not meant to
apply to alternative encounters such as telephone or Web visits. As a
result, we propose to revise this objective to ``Provide clinical
summaries for patients for each office visit.''
    For eligible hospitals, we propose the following objectives in the
stage 1 criteria of meaningful use to further this care goal:
     Provide patients with an electronic copy of their health
information (including diagnostic test results, problem list,
medication lists, allergies, discharge summary, procedures), upon
request. Consistent with the HIT Policy Committee's recommendations, we
propose the following additional clarification of this objective.
Electronic copies may be provided through a number of secure electronic
methods (for example, Personal Health Record (PHR), patient portal, CD,
USB drive).
     Provide patients with an electronic copy of their
discharge instructions and procedures at time of discharge, upon
request.

Also, consistent with the HIT Policy Committee recommendations, we
propose the following additional clarification of this objective.
Electronic access may be provided by a number of secure electronic
methods (for example, PHR, patient portal, CD, USB drive).
     We do not propose to include the objective ``Provide
access to patient-specific education resources upon request.''
Providing patients with information and education that is relevant to
their condition, actionable, culturally competent, and of the
appropriate health literacy level is a critical component of patient
engagement and empowerment. Unfortunately, there is currently a paucity
of knowledge resources that are integrated within EHRs, that are widely
available, and that meet these criteria, particularly in multiple
languages. We intend to work with the policy committee, the National
Library of Medicine (provider of Medline Plus), and experts in this
area to ensure the feasibility of this measure in the future.
    The third health outcomes policy priority identified by the HIT
Policy Committee is to improve care coordination. The HIT Policy
Committee recommended the following care goals to address this
priority:
     Exchange meaningful clinical information among
professional health care team.
    For EPs and eligible hospitals, we propose the following objectives
in the stage 1 criteria of meaningful use to further this care goal:
     Capability to exchange key clinical information (for
example, problem list, medication list, allergies, and diagnostic test
results), among providers of care and patient authorized entities
electronically.

By ``diagnostic test results'' we mean all data needed to diagnose and
treat disease, such as blood tests, microbiology, urinalysis, pathology
tests, radiology, cardiac imaging, nuclear medicine tests, and
pulmonary function tests. Where available in structured electronic
format (for example, drug and clinical lab data), we expect that this
information would be exchanged in electronic format. However, where the
information is available only in unstructured electronic formats (for
example, free text and scanned images), we would allow the exchange of
unstructured information. Patient authorized entities could include any
individual or organization to which the patient has granted access to
their clinical information. Examples would include an insurance company
that covers the patient or a personal health record vendor identified
by the patient.
     Perform medication reconciliation at relevant encounters
and each transition of care.

We believe greater clarification is needed around the term ``medication
reconciliation''. Public input received by the NCVHS Executive
Subcommittee and the HIT Policy Committee and our prior experiences
indicate confusion in the healthcare industry as to what constitutes
medication reconciliation. We propose to describe medication
reconciliation as the process of identifying the most accurate list of
all

[[Page 1858]]

medications that the patient is taking, including name, dosage,
frequency and route, by comparing the medical record to an external
list of medications obtained from a patient, hospital or other
provider. Also we would clarify transition of care as transfer of a
patient from one clinical setting (inpatient, outpatient, physician
office, home health, rehab, long-term care facility, etc.) to another
or from one EP or eligible hospital (as defined by CCN) to another. A
relevant encounter would be any encounter that the EP or eligible
hospital judges performs a medication reconciliation due to new
medication or long gaps in time between patient encounters or other
reasons determined by the EP or eligible hospital. We encourage
comments on whether our descriptions of ``transition of care'' and
``relevant encounter'' are sufficiently clear and medically relevant.
     Provide summary care record for each transition of care or
referral.

This objective was not explicitly included in the HIT Policy
Committee's recommended objectives. However, they did include a measure
for the ``percent of transitions in care for which summary care record
is shared. We believe that in order for a measure to be relevant it
must correspond to an objective in the definition of meaningful use.
Therefore, we propose to add this objective in order to be able to
include the recommended measure. Furthermore, we add referrals because
the sharing of the patient care summary from one provider to another
communicates important information that the patient may not have been
able to provide, and can significantly improve the quality and safety
of referral care, and reduce unnecessary and redundant testing.
    The fourth health outcomes policy priority identified by the HIT
Policy Committee is improving population and public health. The HIT
Policy Committee identified the following care goal to address this
priority:
     The patient's health care team communicates with public
health agencies. The goal as recommended by the HIT Policy Committee is
``communicate with public health agencies.'' We found this goal to be
somewhat ambiguous, as it does not specify who must communicate with
public health agencies. We propose to specify ``the patient's health
care team'' as who would communicate with public health agencies.
    For EPs, we propose the following objectives in the stage 1
criteria of meaningful use to further this care goal:
     Capability to submit electronic data to immunization
registries and actual submission where possible and accepted.
     Capability to provide electronic syndromic surveillance
data to public health agencies and actual transmission according to
applicable law and practice.
    For eligible hospitals, we propose the following objectives in the
stage 1 criteria of meaningful use to further this care goal:
     Capability to submit electronic data to immunization
registries and actual submission where required and accepted.
     Capability to provide electronic submission of reportable
(as required by state or local law) lab results to public health
agencies and actual submission where it can be received.
     Capability to provide electronic syndromic surveillance
data to public health agencies and actual transmission according to
applicable law and practice.
    The fifth health outcomes policy priority is to ensure adequate
privacy and security protections for personal health information. The
following care goals for meaningful use address this priority:
     Ensure privacy and security protections for confidential
information through operating policies, procedures, and technologies
and compliance with applicable law.
     Provide transparency of data sharing to patient.
    For EPs and eligible hospitals, we propose the following objective
in the stage 1 criteria of meaningful use to further these care goals:
     Protect electronic health information created or
maintained by the certified EHR technology through the implementation
of appropriate technical capabilities.

This objective is different from the two objectives recommended by the
HIT Policy Committee. Those objectives were ``Compliance with HIPAA
Privacy and Security Rules'' and ``Compliance with fair data sharing
practices set forth in the Nationwide Privacy and Security Framework''.
While we presume that the HIT Policy Committee is referring to the
certified EHR technology and its use being in compliance with the HIPAA
Privacy and Security Rules, it is not explicit. Compliance with HIPAA
privacy and security rules is required for all covered entities,
regardless of whether they participate in the EHR incentive programs or
not. Furthermore, compliance constitutes a wide range of activities,
procedures, and infrastructure. We propose to rephrase the objective to
ensure that meaningful use of the certified EHR technology supports
compliance with the HIPAA Privacy and Security Rules and compliance
with fair sharing data practices outlined in the Nationwide Privacy and
Security Framework (http://healthit.hhs.gov/portal/server.pt/gateway/PTARGS_0_10731_848088_0_0_18/NationwidePS_Framework-5.pdf), but
do not believe meaningful use of certified EHR technology is the
appropriate regulatory tool to ensure such compliance with the HIPAA
Privacy and Security Rules.
(2) Health IT Functionality Measures
    In order for an EP or an eligible hospital to demonstrate that it
meets these proposed objectives, we believe a measure is necessary for
each objective. To provide structure to these measures, we group the
measures into two categories: Health IT functionality measures and
clinical quality measures. The health IT functionality measures are
discussed in this section, while the clinical quality measures are
discussed in section II.A.3 of this proposed rule.
    Without a measure for each objective, we believe that the
definition of meaningful use becomes too ambiguous to fulfill its
purpose. The use of measures also creates the flexibility to account
for realities of current HIT products and infrastructure and the
ability to account for future advances. The HIT Policy Committee did
recommend some measures; however, they did not explicitly link each
measure to an objective. Therefore, the proposed measures set forth
below are a significant departure from the recommendation of the HIT
Policy Committee.
    For each of these measures utilizing a percentage and the reporting
of clinical quality measures, we propose at Sec.  495.10 that EPs and
eligible hospitals submit numerator and denominator information to CMS.
We invite comment on our burden estimates associated with reporting
these measures (see section III. of this proposed rule).
    EP Objective: Use CPOE.
    EP Measure: CPOE is used for at least 80 percent of all orders.
    CPOE is a capability included in the certification criteria for
certified EHR technology (to be defined by the ONC in its upcoming
interim final rule). We believe it is important to ensure that this
capability is continuously utilized. Therefore, we believe in order to
meet this objective it is not sufficient to demonstrate use of this
capability once, but rather, an EP must utilize this capability as part
of his or her daily work process.

[[Page 1859]]

    We consider two methods of for measuring use of the CPOE
functionality: the percentage of orders entered using CPOE or a count
of orders entered using CPOE. To illustrate the difference, an example
of measuring percentage use of the CPOE functionality would be 80
percent of all of an EP's orders were entered using the CPOE
functionality of certified EHR technology during the EHR reporting
period. An example of counting orders using the CPOE functionality
would be requiring that the EP entered at least 100 orders using CPOE
during the EHR reporting period. A count of orders entered using CPOE
would be easier to document than a percentage of orders, as an EP would
only have to count the number of times he or she entered an order using
CPOE, as opposed to tabulating both when he or she did so and when he
or she failed to do so. However, a count does not enable variations
between EPs to be accounted for. For instance, a count-based
measurement would not take into consideration differences in patient
volume among EPs, which may be a concern to those EPs with a low
patient volume. A percentage-based measurement would account for
variations in volume and would allow for a more revealing measurement
of an EP's individual performance in meeting the objective. Therefore,
we are proposing that an EP's successful completion of this objective
be based on a percentage.
    To calculate the percentage, CMS and ONC have worked together to
define the following:
     The numerator.
     The denominator.
     The required percentage for demonstrating successful
attainment of an objective.
    The numerator for this objective is orders issued by the EP entered
using the CPOE functionality of certified EHR technology during the EHR
reporting period. The denominator for this objective is all orders
issued by the EP during the EHR reporting period. These are orders
issued by an EP for both their Medicare/Medicaid population and all
other patients. We believe it is unlikely that an EP would use one
record keeping system for one patient population and another system for
another patient population at one location. Requiring reporting
differences based on payers would actually increase the burden of
meeting meaningful use. We are concerned about the application of this
denominator for EPs who see patients in multiple practices or multiple
locations. If an EP does not have certified EHR technology available at
each location/practice where they see patients it could become
impossible to reach the thresholds set for measuring the objectives. We
do not seek to exclude EPs who meaningfully use certified EHR
technology when it is available because they also provide care in
another practice where certified EHR technology is not available.
Therefore we are proposing all measures be limited to actions taken at
practices/locations equipped with certified EHR technology. A practice
is equipped if certified EHR technology is available at the beginning
of the EHR reporting period for a given location. Equipped does not
mean the certified EHR technology is functioning on any given day in
the EHR reporting period. Allowances for downtime and other technical
issues with certified EHR technology are made in the establishment of
the measure thresholds. We are concerned that seeing a patient without
certified EHR technology available does not advance the health care
policy priorities of the definition of meaningful use. We are also
concerned about possible inequality between EPs receiving the same
incentive, but using certified EHR technology for different proportions
of their patient population. We believe that an EP would have the
greatest control of whether certified EHR technology is available in
the practice in which they see the greatest proportion of their
patients. We are proposing that to be a meaningful EHR user an EP must
have 50 percent or more of their patient encounters during the EHR
reporting period at a practice/location or practices/locations equipped
with certified EHR technology. An EP for who does not conduct 50
percent of their patient encounters in any one practice/location would
have to meet the 50 percent threshold through a combination of
practices/locations. While control is less assured in this situation,
CMS still needs to advance the health care priorities of the definition
of meaningful use and provide some level of equity. We invite comments
as to whether this denominator is feasible to obtain for EPs, whether
this exclusion (the denominator for patients seen when certified EHR
technology is not available) is appropriate, whether a minimum
threshold is necessary and whether 50 percent is an appropriate
threshold. We note that in evaluating the 50 percent threshold, our
proposal is to review all locations/organizations at which an EP
practices. So, for example, if the EP practices at both an FQHC and
within his or her individual practice, we would include in our review
both of these locations.
    As this objective relies solely on a capability included as part of
certified EHR technology and is not, for purposes of Stage 1 criteria,
reliant on the electronic exchange of information, we believe it would
be appropriate to set a high percentage threshold. We therefore propose
to set the percentage required for successful demonstration at 80
percent. Though full compliance (that is, 100 percent) is the ultimate
goal, 80 percent seemed an appropriate standard for Stage 1 meaningful
use as it creates a high standard, while still allowing room for
technical hindrances and other barriers to reaching full compliance.
    For other objectives that are reliant on the electronic exchange of
information, we are cognizant that in most areas of the country, the
infrastructure necessary to support such exchange is not yet currently
available. We anticipate raising the threshold for these objectives in
future definitions of meaningful use as the capabilities of HIT
infrastructure increases. The intent and policy goal with raising this
threshold is to ensure that meaningful use encourages patient-centric,
interoperable health information exchange across provider organizations
regardless of provider's business affiliation or EHR platform.
    Eligible Hospital Objective: Use of CPOE for orders (any type)
directly entered by authorizing provider (for example, MD, DO, RN, PA,
NP).
    Eligible Hospital Measure: CPOE is used for at least 10 percent of
all orders.
    To calculate the percentage, CMS and ONC have worked together to
define the following:
     The numerator.
     The denominator.
     The required percentage for demonstrating successful
attainment of an objective.
    The numerator for this objective is orders entered in an inpatient
facility/department that falls under the eligible hospital's CCN and by
an authorized provider using CPOE functionality of certified EHR
technology during the EHR reporting period. Inpatient facility/
department is defined by the place of service code 21. Further
discussion about POS 21 is available at section II.A.6. of this
proposed rule and at http://www.cms.hhs.gov/PlaceofServiceCodes/. The
denominator for this objective is all orders entered in an inpatient
facility/department that falls under the eligible hospital's CCN and
issued by the authorized providers in the hospital during the EHR
reporting period. These are orders are those issued are for both their
Medicare/Medicaid population and all other

[[Page 1860]]

patients. The rationale for the establishment of this measure is
identical to that of the EP, except in the establishment of the
threshold percentage. In considering CPOE, the HIT Policy Committee did
specify this lower percentage (10 percent) for eligible hospitals.
Public input described previously in this proposed rule indicated that
CPOE is traditionally one of the last capabilities implemented at
hospitals. Also, many hospitals choose to implement one department at a
time. Detailed comments can be found at http://healthit.hhs.gov/meaningfuluse. For these reasons the HIT Policy Committee recommended
this lower threshold. We agree with the lower threshold for the same
reasons.
    EP/Eligible Hospital Objective: Implement drug-drug, drug-allergy,
drug-formulary checks.
    EP/Eligible Hospital Measure: The EP/eligible hospital has enabled
this functionality.
    The capability of conducting automated drug-drug, drug-allergy, and
drug-formulary checks is included in the certification criteria for
certified EHR technology (to be determined by ONC in its upcoming
interim final rule). This automated check provides information to
advise the EP or eligible hospital's decisions in prescribing drugs to
a patient. The only action taken by the EP or eligible hospital is to
consider this information. Many current EHR technologies have the
option to disable these checks and the certification process does not
require the removal of this option. Therefore, in order to meet this
objective, an EP or eligible hospital would be required to enable this
functionality. While this does not ensure that an EP or an eligible
hospital is considering the information provided, it does ensure that
the information is available.
    EP/Eligible Hospital Objective: Maintain an up-to-date problem list
of current and active diagnoses based on ICD-9-CM or SNOMED CT[supreg].
    EP/Eligible Hospital Measure: At least 80 percent of all unique
patients seen by the EP or admitted to the eligible hospital have at
least one entry or an indication of none recorded as structured data.
    The capability to maintain an up-to-date problem list of current
and active diagnoses based on ICD-9-CM or SNOMED CT[supreg] is included
in the certification criteria for certified EHR technology (to be
defined by ONC in its upcoming interim final rule). Meaningful use
seeks to ensure that those capabilities are utilized. Therefore, we
believe in order to meet this objective it is not sufficient to
demonstrate this capability once, but rather to comply with the
objective, an EP or an eligible hospital must utilize this capability
as part of the daily work process.
    As discussed under CPOE, we will use a percentage. To calculate the
percentage, CMS and ONC have worked together to define the following
for this objective:
     The numerator.
     The denominator.
     The required percentage for demonstrating successful
attainment of an objective.
    The numerator for this objective is the number of unique patients
seen by an EP or admitted to an inpatient facility/department (POS 21)
that falls under the eligible hospital's CCN during the EHR reporting
period that have at least one ICD-9-CM or SNOMED CT[supreg] -coded
entry or an indication of none in the problem list. A unique patient
means that even if a patient is seen multiple times during the EHR
reporting period they are only counted once. The reason we propose to
base the measure on unique patients as opposed to every patient
encounter, is that a problem list would not necessarily have to be
updated at every visit. The denominator for this objective is the
number of unique patients seen by the EP or admitted to an inpatient
facility/department (POS 21) that falls under the eligible hospital's
CCN during the EHR reporting period. As this objective relies solely on
a capability included as part of certified EHR technology and is not
reliant on the electronic exchange of information, we propose to set
the percentage required for successful demonstration at 80 percent. The
reasoning for this is the same as under CPOE for EPs. Though full
compliance (that is, 100 percent) is the ultimate goal, 80 percent
seemed an appropriate standard for Stage 1 meaningful use as it creates
a high standard, while still allowing room for technical hindrances and
other barriers to reaching full compliance.
    EP Objective: Generate and transmit permissible prescriptions
electronically (eRx).
    EP Measure: At least 75 percent of all permissible prescriptions
written by the EP are transmitted electronically using certified EHR
technology.
    The capability to generate and transmit permissible prescriptions
electronically is included in the certification criteria for certified
EHR technology (to be defined by ONC in its upcoming interim final
rule). Meaningful use seeks to ensure that those capabilities are
utilized. Therefore, we believe in order to meet this objective it is
not sufficient to demonstrate this capability once, but rather to
comply with the objective, an EP must utilize this capability as part
of the daily work process.
    As discussed under CPOE, we will use a percentage. To calculate the
percentage, CMS and ONC have worked together to define the following
for this objective:
     The numerator.
     The denominator.
     The required percentage for demonstrating successful
attainment of an objective.
    The numerator for this objective is the number of prescriptions for
other than controlled substances generated and transmitted
electronically during the EHR reporting period. The denominator for
this objective is the number of prescriptions written for other than
controlled substances during the EHR reporting period. While this
measure does rely on the electronic exchange of information based on
the public input previously discussed and our own experiences with e-Rx
programs, we believe this is the most robust electronic exchange
currently occurring and propose 75 percent as an achievable threshold
for the Stage 1 criteria of meaningful use. Though full compliance
(that is, 100 percent) is the ultimate goal, 75 percent seemed an
appropriate standard for Stage 1 meaningful use as it creates a high
standard, while still allowing room for technical hindrances and other
barriers to reaching full compliance.
    EP/Eligible Hospital Objective: Maintain active medication list.
    EP/Eligible Hospital Measure: At least 80 percent of all unique
patients seen by the EP or admitted by the eligible hospital have at
least one entry (or an indication of ``none'' if the patient is not
currently prescribed any medication) recorded as structured data.
    The capability to maintain an active medication list is included in
the certification standards for certified EHR technology (to be defined
by ONC in its upcoming interim final rule). Meaningful use seeks to
ensure that those capabilities are utilized. Therefore, we believe in
order to meet this objective it is not sufficient to demonstrate this
capability once, but rather to comply with the objective, an EP or
eligible hospital must utilize this capability as part of the daily
work process.
    As discussed under CPOE, we will use a percentage. To calculate the
percentage, CMS and ONC have worked together to define the following
for this objective:
     The numerator.

[[Page 1861]]

     The denominator.
     The required percentage for demonstrating successful
attainment of an objective.
    The numerator for this objective is the number of unique patients
seen by the EP or admitted to an inpatient facility/department (POS 21)
that falls under the eligible hospital's CCN during the EHR reporting
period who have at least one entry (or an indication of ``none'' if the
patient is not currently prescribed any medication) recorded as
structured data in their medication list. A unique patient is discussed
under the objective of maintaining an up-to-date problem list. The
denominator for this objective is the number of unique patients seen by
the EP or admitted to an inpatient facility/department (POS 21) that
falls under the eligible hospital's CCN during the EHR reporting
period. As this objective relies solely on a capability included as
part of certified EHR technology and is not reliant on the electronic
exchange of information, we propose to set the percentage required for
successful demonstration at 80 percent. The reasoning for this is the
same as under CPOE for EPs. Though full compliance (that is, 100
percent) is the ultimate goal, 80 percent seemed an appropriate
standard for Stage 1 meaningful use as it creates a high standard,
while still allowing room for technical hindrances and other barriers
to reaching full compliance.
    EP/Eligible Hospital Objective: Maintain active medication allergy
list.
    EP/Eligible Hospital Measure: At least 80 percent of all unique
patients seen by the EP or admitted to the eligible hospital have at
least one entry (or an indication of ``none'' if the patient has no
medication allergies) recorded as structured data.
    The capability to maintain an active medication allergy list using
structured data is included in the certification standards for
certified EHR technology (to be defined by ONC in its upcoming interim
final rule). Meaningful use seeks to ensure that those capabilities are
utilized. Therefore, we believe in order to meet this objective it is
not sufficient to demonstrate this capability once, but rather to
comply with the objective, an EP or eligible hospital must utilize this
capability as part of the daily work process.
    As discussed under CPOE, we will use a percentage. To calculate the
percentage, CMS and ONC have worked together to define the following
for this objective:
     The numerator.
     The denominator.
     The required percentage for demonstrating successful
attainment of an objective.
    The numerator for this objective is the number of unique patients
seen by the EP or admitted to an inpatient facility/department (POS 21)
that falls under the eligible hospital's CCN during the EHR reporting
period who have at least one entry (or an indication of ``none'')
recorded as structured data in their medication allergy list. A unique
patient is discussed under the objective of maintaining an up-to-date
problem list. The denominator for this objective is the number of
unique patients seen by the EP or admitted to an inpatient facility/
department (POS 21) that falls under the eligible hospital's CCN during
the EHR reporting period. As this objective relies solely on a
capability included as part of certified EHR technology and is not
reliant on the electronic exchange of information, we propose to set
the percentage required for successful demonstration at 80 percent. The
reasoning for this is the same as under CPOE for EPs. Though full
compliance (that is, 100 percent) is the ultimate goal, 80 percent
seemed an appropriate standard for Stage 1 meaningful use as it creates
a high standard, while still allowing room for technical hindrances and
other barriers to reaching full compliance.
    EP/Eligible Hospital Objective: Record demographics.
    EP/Eligible Hospital Measure: At least 80 percent of all unique
patients seen by the EP or admitted to the eligible hospital have
demographics recorded as structured data.
    The capability to record demographics as structured data is
included in the certification standards for certified EHR technology
(to be defined by ONC in its upcoming interim final rule). Meaningful
use seeks to ensure that those capabilities are utilized. Therefore, we
believe in order to meet this objective it is not sufficient to
demonstrate this capability once, but rather to comply with the
objective, an EP or eligible hospital must utilize this capability as
part of the daily work process.
    As discussed under CPOE, we will use a percentage. To calculate the
percentage, CMS and ONC have worked together to define the following
for this objective:
     The numerator.
     The denominator.
     The required percentage for demonstrating successful
attainment of an objective.
    The numerator for this objective is the number of unique patients
seen by the EP or admitted to an inpatient facility/department (POS 21)
that falls under the eligible hospital's CCN during the EHR reporting
period who have all required demographic elements (preferred language,
insurance type, gender, race, and ethnicity, date of birth and, for
hospitals, date and cause of death in the case of mortality) recorded
as structured data in their electronic record. A unique patient is
discussed under the objective of maintaining an up-to-date problem
list. The denominator for this objective is the number of unique
patients seen by the EP or admitted to an inpatient facility/department
(POS 21) that falls under the eligible hospital's CCN during the EHR
reporting period. As this objective relies solely on a capability
included as part of certified EHR technology and is not, for purposes
of Stage 1 criteria, reliant on the electronic exchange of information,
we propose to set the percentage required for successful demonstration
at 80 percent. The reasoning for this is the same as under CPOE for
EPs.
    EP/Eligible Hospital Objective: Record and chart changes in vital
signs.
    EP/Eligible Hospital Measure: For at least 80 percent of all unique
patients age 2 and over seen by the EP or admitted to the eligible
hospital, record blood pressure and BMI; additionally, plot growth
chart for children age 2 to 20.
    The capability to record vital signs is included in the
certification standards for certified EHR technology (to be defined by
ONC in its upcoming interim final rule). Meaningful use seeks to ensure
that those capabilities are utilized. Therefore, we believe in order to
meet this objective it is not sufficient to demonstrate this capability
once, but rather to comply with the objective, an EP or eligible
hospital must utilize this capability as part of the daily work
process.
    As discussed under CPOE, we will use a percentage. To calculate the
percentage, CMS and ONC have worked together to define the following
for this objective:
     The numerator.
     The denominator.
     The required percentage for demonstrating successful
attainment of an objective.
    The numerator for this objective is the number of unique patients
age 2 and over seen by the EP or admitted to an inpatient facility/
department (POS 21) that falls under the eligible hospital's CCN during
the EHR reporting period who have a record of their blood pressure, and
BMI (growth chart for children 2-20) in their record. A unique patient
is discussed under the objective of maintaining an up-to-date problem

[[Page 1862]]

list. The denominator for this objective is the number of unique
patients age 2 or over seen by the EP or admitted to an inpatient
facility/department (POS 21) that falls under the eligible hospital's
CCN during the EHR reporting period. As this objective relies solely on
a capability included as part of certified EHR technology and is not,
for purposes of Stage 1 criteria, reliant on the electronic exchange of
information, we propose to set the percentage required for successful
demonstration at 80 percent. The reasoning for this is the same as
under CPOE for EPs. Though full compliance (that is, 100 percent) is
the ultimate goal, 80 percent seemed an appropriate standard for Stage
1 meaningful use as it creates a high standard, while still allowing
room for technical hindrances and other barriers to reaching full
compliance.
    EP/Eligible Hospital Objective: Record smoking status for patients
13 years old or older.
    EP/Eligible Hospital Measure: At least 80 percent of all unique
patients 13 years old or older seen by the EP or admitted to the
eligible hospital have ``smoking status'' recorded.
    The capability to record smoking status is included in the
certification standards for certified EHR technology (to be defined by
ONC in its upcoming interim final rule). Meaningful use seeks to ensure
that those capabilities are utilized. Therefore, we believe in order to
meet this objective it is not sufficient to demonstrate this capability
once, but rather to comply with the objective, an EP or eligible
hospital must utilize this capability as part of the daily work
process.
    As discussed under CPOE, we will use a percentage. To calculate the
percentage, CMS and ONC have worked together to define the following
for this objective:
     The numerator.
     The denominator.
     The required percentage for demonstrating successful
attainment of an objective.
    The numerator for this objective is the number of unique patients
age 13 or older seen by the EP or admitted to an inpatient facility/
department (POS 21) that falls under the eligible hospital's CCN during
the EHR reporting period who have a record of their smoking status. A
unique patient is discussed under the objective of maintaining an up-
to-date problem list. The denominator for this objective is the number
of unique patients age 13 or older seen by the EP or admitted to an
inpatient facility/department (POS 21) that falls under the eligible
hospital's CCN during the EHR reporting period. As this objective
relies solely on a capability included as part of certified EHR
technology and is not, for purposes of Stage 1 criteria, reliant on the
electronic exchange of information, we propose to set the percentage
required for successful demonstration at 80 percent. The reasoning for
this is the same as under CPOE by the EP. Though full compliance (that
is, 100 percent) is the ultimate goal, 80 percent seemed an appropriate
standard for Stage 1 meaningful use as it creates a high standard,
while still allowing room for technical hindrances and other barriers
to reaching full compliance.
    EP/Eligible Hospital Objective: Incorporate clinical lab-test
results into EHR as structured data.
    EP/Eligible Hospital Measure: At least 50 percent of all clinical
lab tests results ordered by the EP or by an authorized provider of the
eligible hospital during the EHR reporting period whose results are in
either in a positive/negative or numerical format are incorporated in
certified EHR technology as structured data.
    The capability to incorporate lab-test results is included in the
certification standards for certified EHR technology (to be defined by
ONC in its upcoming interim final rule). Meaningful use seeks to ensure
that those capabilities are utilized. Therefore, we believe in order to
meet this objective it is not sufficient to demonstrate this capability
once, but rather to comply with the objective, an EP or eligible
hospital must utilize this capability as part of the daily work
process.
    As discussed under CPOE, we will use a percentage. To calculate the
percentage, CMS and ONC have worked together to define the following
for this objective:
     The numerator.
     The denominator.
     The required percentage for demonstrating successful
attainment of an objective.
    The numerator for this objective is the number of lab tests ordered
during the EHR reporting period by the EP or authorized providers of
the eligible hospital for patients admitted to an inpatient facility/
department (POS 21) that falls under the eligible hospital's CCN whose
results are expressed in a positive or negative affirmation or as a
number and are incorporated as structured data into certified EHR
technology. The denominator for this objective is the number of lab
tests ordered during the EHR reporting period by the EP or authorized
providers of the eligible hospital for patients admitted to an
inpatient facility/department (POS 21) that falls under the eligible
hospital's CCN whose results are expressed in a positive or negative
affirmation or as a number. This objective is reliant on the electronic
exchange of information. We are cognizant that in most areas of the
country, the infrastructure necessary to support such exchange is still
being developed. Therefore, we believe that 80 percent is too high a
threshold for the Stage 1 criteria of meaningful use. We propose 50
percent as the threshold based on our discussions with EHR vendors,
current EHR users, and laboratories. We invite comment on whether this
50 percent is feasible for the Stage 1 criteria of meaningful use. We
anticipate raising the threshold for this objective in future stages of
the criteria of meaningful use as the capabilities of HIT
infrastructure increases.
    EP/Eligible Hospital Objective: Generate lists of patients by
specific conditions to use for quality improvement, reduction of
disparities, research, and outreach.
    EP/Eligible Hospital Measure: Generate at least one report listing
patients of the EP or eligible hospital with a specific condition.
    The capability to generate lists of patients by specific conditions
is included in the certification criteria for certified EHR technology
(to be defined by ONC in its upcoming interim final rule). Meaningful
use seeks to ensure that those capabilities are utilized. Therefore, we
believe in order to meet this objective an EP or eligible hospital
should utilize this capability at least once during the EHR reporting
period so this information would be available to them for their use. An
EP or eligible hospital is best positioned to determine which reports
are most useful to their care efforts. Therefore, we do not propose to
direct certain reports be created, but rather to require EPs and
hospitals to attest to the ability of the EP or eligible hospital to do
so and to attest that they have actually done so at least once.
    EP Objective: Report ambulatory quality measures to CMS or the
States.
    EP Measure: For 2011, an EP would provide the aggregate numerator
and denominator through attestation as discussed in section II.A.3 of
this proposed rule. For 2012, an EP would electronically submit the
measures are discussed in section II.A.3. of this proposed rule.
    Eligible Hospital Objective: Report hospital quality measures to
CMS or the States.
    Eligible Hospital Measure: For 2011, an eligible hospital would
provide the aggregate numerator and denominator

[[Page 1863]]

through attestation as discussed in section II.A.3 of this proposed
rule. For 2012, an eligible hospital would electronically submit the
measures are discussed in section II.A.3. of this proposed rule.
    EP Objective: Send reminders to patients per patient preference for
preventive/follow-up care.
    EP Measure: Reminder sent to at least 50 percent of all unique
patients seen by the EP or admitted to the eligible hospital that are
50 and over.
    The capability to generate reminders for preventive/follow-up care
is included in the certification standards for certified EHR technology
(to be defined by ONC in its upcoming interim final rule). Meaningful
use seeks to ensure that those capabilities are utilized. Therefore, we
believe in order to meet this objective it is not sufficient to
demonstrate this capability once, but rather to comply with the
objective an EP must utilize this capability as part of the daily work
process.
    As discussed under CPOE, we will use a percentage. To calculate the
percentage, CMS and ONC have worked together to define the following
for this objective:
     The numerator.
     The denominator.
     The required percentage for demonstrating successful
attainment of an objective.
    The numerator for this objective is the number of unique patients
age 50 or over seen by the EP during the EHR reporting period who are
provided reminders. A unique patient is discussed under the objective
of maintaining an up-to-date problem list. We propose to limit the
patient population for this measure to patients age 50 or over as they
are more likely than the norm to require additional preventive or
follow-up care. The denominator for this objective is the number of
unique patients seen by the EP during the EHR reporting period. We
propose to set the percentage required for successful demonstration at
50 percent. While the objective relies on a capability included as part
of certified EHR technology there is still the added component of
determining patient preference. Also while we believe we greatly
increase the likelihood that additional preventive or follow up care
will be required by limiting the patient population to age 50 or over,
there may still be instances where there is not an additional
preventive or follow up care step needed. For these reasons, we propose
the lower threshold of 50 percent. We specifically invite comments on
whether limiting the patient population by age is the best approach.
    EP/Eligible Hospital Objective: Implement five clinical decision
support rules relevant to specialty or high clinical priority,
including for diagnostic test ordering, along with the ability to track
compliance with those rules.
    EP/Eligible Hospital Measure: Implement five clinical decision
support rules relevant to the clinical quality metrics the EP/Eligible
Hospital is responsible for as described further in section II.A.3.
    The capability to provide clinical decision support is included in
the certification standards for certified EHR technology (to be defined
by ONC in its upcoming interim final rule). Clinical decision support
at the point of care is a critical aspect of improving quality, safety,
and efficiency. Research has shown that decision support must be
targeted and actionable to be effective, and that ``alert fatigue''
must be avoided. Establishing decision supports for a small set of high
priority conditions, ideally linked to quality measures being reported,
is feasible and desirable. Meaningful use seeks to ensure that those
capabilities are utilized. Therefore, we believe in order to meet this
objective an EP or eligible hospital should implement five clinical
decision support rules relevant to the clinical quality metrics
described in section II.A.3 before the end of the EHR reporting period
and attest to that implementation.
    EP/Eligible Hospital Objective: Check insurance eligibility
electronically from public and private payers.
    EP/Eligible Hospital Measure: Insurance eligibility checked
electronically for at least 80 percent of all unique patients seen by
the EP or admitted to an eligible hospital.
    The capability to check insurance eligibility electronically is
included in the certification criteria for certified EHR technology (to
be defined by ONC in its upcoming interim final rule). Meaningful use
seeks to ensure that those capabilities are utilized. Therefore, we
believe in order to meet this objective it is not sufficient to
demonstrate this capability once, but rather to comply with the
objective an EP or eligible hospital must utilize this capability as
part of the daily work process.
    As discussed under CPOE, we will use a percentage. To calculate the
percentage, CMS and ONC have worked together to define the following
for this objective:
     The numerator.
     The denominator.
     The required percentage for demonstrating successful
attainment of an objective.
    The numerator for this objective is the number of unique patients
seen by the EP or admitted to an inpatient facility/department (POS 21)
that falls under the eligible hospital's CCN during the EHR reporting
period whose insurance eligibility is checked electronically. A unique
patient is discussed under the objective of maintaining an up-to-date
problem list. The denominator for this objective is the number of
unique patients seen by the EP or admitted to an inpatient facility/
department (POS 21) that falls under the eligible hospital's CCN during
the EHR reporting period whose insurer allows for the electronic
verification of eligibility. While this objective does rely on the
electronic exchange of information this particular exchange is an
established HIPAA standard transaction, therefore we propose to set the
percentage required for successful demonstration at 80 percent. The
additional reasoning for this is the same as under CPOE for EPs. Though
full compliance (that is, 100 percent) is the ultimate goal, 80 percent
seemed an appropriate standard for Stage 1 meaningful use as it creates
a high standard, while still allowing room for technical hindrances and
other barriers to reaching full compliance.
    EP/Eligible Hospital Objective: Submit claims electronically to
public and private payers.
    EP/Eligible Hospital Measure: At least 80 percent of all claims
filed electronically by the EP or the eligible hospital.
    The capability to submit claims electronically to public and
private payers is included in the certification criteria for certified
EHR technology (to be defined by ONC in its upcoming interim final
rule). Meaningful use seeks to ensure that those capabilities are
utilized. Therefore, we believe in order to meet this objective it is
not sufficient to demonstrate this capability once, but rather to
comply with the objective, an EP or eligible hospital must utilize this
capability as part of the daily work process.
    As discussed under CPOE, we will use a percentage. To calculate the
percentage, CMS and ONC have worked together to define the following
for this objective:
     The numerator.
     The denominator.
     The required percentage for demonstrating successful
attainment of an objective.
    The numerator for this objective is the number of claims submitted

[[Page 1864]]

electronically using certified EHR technology for patients seen by the
EP or admitted to an inpatient facility/department (POS 21) that falls
under the eligible hospital's CCN during the EHR reporting period. The
denominator for this objective is the number of claims filed seen by
the EP or admitted to an inpatient facility/department (POS 21) that
falls under the eligible hospital's CCN during the EHR reporting
period. While this objective relies on the electronic exchange of
information, nearly all public and private payers accept electronic
claims. Given the advance state of this aspect of electronic exchange
of information, we propose to set the percentage required for
successful demonstration at 80 percent. The additional reasoning for
this is the same as under CPOE for EPs. Though full compliance (that
is, 100 percent) is the ultimate goal, 80 percent seemed an appropriate
standard for Stage 1 meaningful use as it creates a high standard,
while still allowing room for technical hindrances and other barriers
to reaching full compliance.
    EP Objective: Provide patients with an electronic copy of their
health information (including diagnostic test results, problem list,
medication lists, and allergies) upon request.
    Eligible Hospital Objective: Provide patients with an electronic
copy of their health information (including diagnostic test results,
problem list, medication lists, allergies, discharge summary, and
procedures), upon request.
    EP/Eligible Hospital Measure: At least 80 percent of all patients
who request an electronic copy of their health information are provided
it within 48 hours.
    The capability to create an electronic copy of a patient's health
information is included in the certification criteria for certified EHR
technology (to be defined by ONC in its upcoming interim final rule).
Meaningful use seeks to ensure that those capabilities are utilized.
Therefore, we believe in order to meet this objective it is not
sufficient to demonstrate this capability once, but rather to comply
with the objective, an EP or eligible hospital must utilize this
capability as part of the daily work process. In addition, all patients
have a right under ARRA to an electronic copy of their health
information. This measure seeks to ensure that this requirement is met
in a timely fashion. Providing patients with an electronic copy of
their health information demonstrates one of the many benefits health
information technology can provide and we believe that it is an
important part of becoming a meaningful EHR user. We also believe that
certified EHR technology will provide EPs and eligible hospitals more
efficient means of providing copies of health information to patients
which is why we have proposed that a request for an electronic copy be
provided to the patient within 48 hours.
    As discussed under CPOE, we will use a percentage. To calculate the
percentage, CMS and ONC have worked together to define the following
for this objective:
     The numerator.
     The denominator.
     The required percentage for demonstrating successful
attainment of an objective.
    The numerator for this objective is the number of patients seen by
the EP or admitted to an inpatient facility/department (POS 21) that
falls under the eligible hospital's CCN during the EHR reporting period
that request an electronic copy of their health information and receive
it within 48 hours. The denominator for this objective is the number of
patients seen by the EP or admitted to an inpatient facility/department
(POS 21) that falls under the eligible hospital's CCN who request an
electronic copy of their health information during the EHR reporting
period. As this objective relies solely on a capability included as
part of certified EHR technology and is not, for purposes of Stage 1
criteria, reliant on the electronic exchange of structured information
between health care providers, we propose to set the percentage
required for successful demonstration at 80 percent. The reasoning for
this is the same as under CPOE for EPs. Though full compliance (that
is, 100 percent) is the ultimate goal, 80 percent seemed an appropriate
standard for Stage 1 meaningful use as it creates a high standard,
while still allowing room for technical hindrances and other barriers
to reaching full compliance.
    Eligible Hospital Objective: Provide patients with an electronic
copy of their discharge instructions and procedures at time of
discharge, upon request.
    Eligible Hospital Measure: At least 80 percent of all patients who
are discharged from an eligible hospital and who request an electronic
copy of their discharge instructions and procedures are provided it.
    The capability to produce an electronic copy of discharge
instructions and procedures is included in the certification criteria
for certified EHR technology (to be defined by ONC in its upcoming
interim final rule). Meaningful use seeks to ensure that those
capabilities are utilized. Therefore, we believe in order to meet this
objective it is not sufficient to demonstrate this capability once, but
rather to comply with the objective an eligible hospital must utilize
this capability as part of the daily work process.
    As discussed under CPOE, we will use a percentage. To calculate the
percentage, CMS and ONC have worked together to define the following
for this objective:
     The numerator.
     The denominator.
     The required percentage for demonstrating successful
attainment of an objective.
    The numerator for this objective is the number of patients
discharged from an inpatient facility/department (POS 21) that falls
under the eligible hospital's CCN during the EHR reporting period that
request an electronic copy of their discharge instructions and
procedures and receive it. The denominator for this objective is the
number of patients discharged from an inpatient facility/department
(POS 21) that falls under the eligible hospital's CCN who request an
electronic copy of their discharge instructions and procedures during
the EHR reporting period. As this objective relies solely on a
capability included as part of certified EHR technology and is not, for
purposes of Stage 1 criteria, reliant on the electronic exchange
between health care providers of structured information, we propose to
set the percentage required for successful demonstration at 80 percent.
The reasoning for this is the same as under CPOE for EPs. Though full
compliance (that is, 100 percent) is the ultimate goal, 80 percent
seemed an appropriate standard for Stage 1 meaningful use as it creates
a high standard, while still allowing room for technical hindrances and
other barriers to reaching full compliance.
    EP Objective: Provide patients with timely electronic access to
their health information (including lab results, problem list,
medication lists, allergies).
    EP Measure: At least 10 percent of all unique patients seen by the
EP are provided timely electronic access to their health information
    The capability to provide timely electronic access to health
information is included in the certification criteria for certified EHR
technology (to be defined by ONC in its upcoming interim final rule).
Meaningful use seeks to ensure that those capabilities are utilized.
Therefore, we believe in order to meet this objective it is not
sufficient to demonstrate this capability once, but rather to comply
with the objective, an EP must utilize this capability as part of the
daily work process.

[[Page 1865]]

    As discussed under CPOE, we will use a percentage. To calculate the
percentage, CMS and ONC have worked together to define the following
for this objective:
     The numerator.
     The denominator.
     The required percentage for demonstrating successful
attainment of an objective.
    The numerator for this objective is the number of unique patients
seen during the EHR reporting period who have timely, electronic access
to their health information (for example, have established a user
account and password on a patient portal). A unique patient is
discussed under the objective of maintaining an up-to-date problem
list. The denominator for this objective is the number of unique
patients seen during the EHR reporting period. We recognize that many
patients may not have internet access, may not be able or interested to
use a patient portal. Health systems that have actively promoted such
technologies have been able to achieve active use by over 30 percent of
their patients, but this may not be realistic for many practices in the
short term.
    EP Objective: Provide clinical summaries to patients for each
office visit.
    EP Measure: Clinical summaries provided to patients for at least 80
percent of all office visits.
    The capability to provide a clinical summary is included in the
certification standards for certified EHR technology (to be defined by
ONC in its upcoming interim final rule). Meaningful use seeks to ensure
that those capabilities are utilized. Therefore, we believe in order to
meet this objective it is not sufficient to demonstrate this capability
once, but rather to comply with the objective, an EP must utilize this
capability as part of the daily work process.
    As discussed under CPOE, we will use a percentage. To calculate the
percentage, CMS and ONC have worked together to define the following
for this objective:
     The numerator.
     The denominator.
     The required percentage for demonstrating successful
attainment of an objective.
    The numerator for this objective is the number of unique patients
seen in the office during the EHR reporting period who are provided a
clinical summary of their visit. A unique patient is discussed under
the objective of maintaining an up-to-date problem list. The clinical
summary can be provided through a PHR, patient portal on the Web site,
secure e-mail, electronic media such as CD or USB fob, or printed copy.
The after-visit clinical summary contains an updated medication list,
laboratory and other diagnostic test orders, procedures and other
instructions based on clinical discussions that took place during the
office visit. The denominator for this objective is the number of
unique patients seen in the office during the EHR reporting period. As
this objective relies solely on a capability included as part of
certified EHR technology and is not, for purposes of Stage 1 criteria,
reliant on the electronic exchange of structured information, we
propose to set the percentage required for successful demonstration at
80 percent. The reasoning for this is the same as under CPOE for EPs.
Though full compliance (that is, 100 percent) is the ultimate goal, 80
percent seemed an appropriate standard for Stage 1 meaningful use as it
creates a high standard, while still allowing room for technical
hindrances and other barriers to reaching full compliance.
    EP Objective: Capability to exchange key clinical information (for
example, problem list, medication list, allergies, and diagnostic test
results), among providers of care and patient authorized entities
electronically.
    Eligible Hospital Objective: Capability to exchange key clinical
information (for example, discharge summary, procedures, problem list,
medication list, allergies, diagnostic test results), among providers
of care and patient authorized entities electronically.
    EP/Eligible Hospital Measure: Performed at least one test of
certified EHR technology's capacity to electronically exchange key
clinical information.
    The capability to send key clinical information electronically is
included in the certification criteria for certified EHR technology (to
be defined by ONC in its upcoming interim final rule). Meaningful use
seeks to ensure that those capabilities are utilized. However, this
objective is reliant on the electronic exchange of information. We are
cognizant that in most areas of the country, the infrastructure
necessary to support such exchange is still being developed. Therefore,
for the Stage 1 criteria of meaningful use we propose that EPs and
eligible hospitals test their ability to send such information at least
once prior to the end of the EHR reporting period. The testing could
occur prior to the beginning of the EHR reporting period. If multiple
EPs are using the same certified EHR technology in a shared physical
setting, the testing would only have to occur once for a given
certified EHR technology, as we do not see any value to running the
same test multiple times just because multiple EPs use the same
certified EHR technology. To be considered an ``exchange'' in this
section alone the clinical information must be sent between different
clinical entities with distinct certified EHR technology and not
between organizations that share a certified EHR.
    EP/Eligible Hospital Objective: Perform medication reconciliation
at relevant encounters and each transition of care.
    EP/Eligible Hospital Measure: Perform medication reconciliation for
at least 80 percent of relevant encounters and transitions of care.
    The capability to perform medication reconciliation is included in
the certification standards for certified EHR technology (to be defined
by ONC in its upcoming interim final rule). Meaningful use seeks to
ensure that those capabilities are utilized. Therefore, we believe in
order to meet this objective it is not sufficient to demonstrate this
capability once, but rather to comply with the objective, an EP or
eligible hospital must utilize this capability as part of the daily
work process.
    As discussed under CPOE, we will use a percentage. To calculate the
percentage, CMS and ONC have worked together to define the following
for this objective:
     The numerator.
     The denominator.
     The required percentage for demonstrating successful
attainment of an objective.
    The numerator for this objective is the number of relevant
encounters and transitions of care for which the EP or an inpatient
facility/department (POS 21) that falls under the eligible hospital's
CCN was a participant during the EHR reporting period where medication
reconciliation was performed. Relevant encounter and transition of care
are defined in the previous discussion of this objective in this
proposed rule. The denominator for this objective is the number of
relevant encounters and transitions of care for which the EP or an
inpatient facility/department (POS 21) that falls under the eligible
hospital's CCN was a participant during the EHR reporting period. As
this objective relies solely on a capability included as part of
certified EHR technology and is not, for the purposes of Stage 1
criteria, reliant on the electronic exchange of information, we propose
to set the percentage required for successful demonstration at 80
percent. The reasoning for this is the same as under CPOE for EPs.
Though full compliance (that is, 100 percent) is

[[Page 1866]]

the ultimate goal, 80 percent seemed an appropriate standard for Stage
1 meaningful use as it creates a high standard, while still allowing
room for technical hindrances and other barriers to reaching full
compliance.
    EP/Eligible Hospital Objective: Provide summary care record for
each transition of care and referral.
    EP/Eligible Hospital Measure: Provide summary of care record for at
least 80 percent of transitions of care and referrals.
    The capability to provide a summary of care record is included in
the certification standards for certified EHR technology (to be defined
by ONC in its upcoming interim final rule). Meaningful use seeks to
ensure that those capabilities are utilized. Therefore, we believe in
order to meet this objective it is not sufficient to demonstrate this
capability once, but rather to comply with the objective an EP or
eligible hospital must utilize this capability as part of the daily
work process.
    As discussed under CPOE, we will use a percentage. To calculate the
percentage, CMS and ONC have worked together to define the following
for this objective:
     The numerator.
     The denominator.
     The required percentage for demonstrating successful
attainment of an objective.
    The numerator for this objective is the number of transitions of
care and referrals for which the EP or an inpatient facility/department
(POS 21) that falls under the eligible hospital's CCN was the
transferring or referring provider during the EHR reporting period
where a summary of care record was provided. Summary of care record and
transitions of care are defined in the discussion of this objective in
this proposed rule. The summary of care record can be provided through
an electronic exchange, accessed through a secure portal, secure e-
mail, electronic media such as CD or USB fob, or printed copy. The
denominator for this objective is the number of transitions of care for
which the EP or an inpatient facility/department (POS 21) that falls
under the eligible hospital's CCN was the transferring or referring
provider during the EHR reporting period. As this objective can be
completed with or without the use of electronic exchange of
information, we propose to set the percentage required for successful
demonstration at 80 percent. The reasoning for this is the same as
under CPOE for EPs. Though full compliance (that is, 100 percent) is
the ultimate goal, 80 percent seemed an appropriate standard for Stage
1 meaningful use as it creates a high standard, while still allowing
room for technical hindrances and other barriers to reaching full
compliance.
    EP/Eligible Hospital Objective: Capability to submit electronic
data to immunization registries and actual submission where required
and accepted.
    EP/Eligible Hospital Measure: Performed at least one test of
certified EHR technology's capacity to submit electronic data to
immunization registries.
    The capability to send electronic data to immunization registries
is included in the certification standards for certified EHR technology
(to be defined by ONC in its upcoming interim final rule). Meaningful
use seeks to ensure that those capabilities are utilized. However, this
objective is reliant on the electronic exchange of information. We are
cognizant that in many areas of the country, the infrastructure
necessary to support such exchange is still being developed. Therefore,
for the Stage 1 criteria of meaningful use we propose that EPs and
eligible hospitals test their ability to send such information at least
once prior to the end of the EHR reporting period. The testing could
occur prior to the beginning of the EHR reporting period. EPs in a
group setting using identical certified EHR technology would only need
to conduct a single test, not one test per EP. More stringent
requirements may be established for EPs and hospitals under the
Medicaid program in states where this capability exists. This is just
one example of a possible State proposed modification to meaningful use
in the Medicaid EHR incentive program. States may propose any
modification or addition to CMS in accordance with the discussion in
II.A.2.c. of this proposed rule.
    Eligible Hospital Objective: Capability to provide electronic
submission of reportable lab results to public health agencies and
actual submission where it can be received.
    Eligible Hospital Measure: Performed at least one test of certified
EHR technology capacity to provide electronic submission of reportable
lab results to public health agencies (unless none of the public health
agencies to which eligible hospital submits such information have the
capacity to receive the information electronically).
    The capability to send reportable lab results is included in the
certification standards for certified EHR technology (to be defined by
ONC in its upcoming interim final rule). Meaningful use seeks to ensure
that those capabilities are utilized. However, this objective is
reliant on the electronic exchange of information. We are cognizant
that in most areas of the country, the infrastructure necessary to
support such exchange is still being developed. Therefore, for the
Stage 1 criteria of meaningful use we propose that eligible hospitals
test their ability to send such information at least once prior to the
end of the EHR reporting period. The testing could occur prior to the
beginning of the EHR reporting period. More stringent requirements may
be established for hospitals under the Medicaid program in States where
this capability exists. This is just one example of a possible State
proposed modification to meaningful use in the Medicaid EHR incentive
program. States may propose any modification or addition to CMS in
accordance with the discussion in II.A.2.c. of this proposed rule.
    EP/Eligible Hospital Objective: Capability to provide electronic
syndromic surveillance data to public health agencies and actual
transmission according to applicable law and practice.
    EP/Eligible Hospital Measure: Performed at least one test of
certified EHR technology's capacity to provide electronic syndromic
surveillance data to public health agencies (unless none of the public
health agencies to which an EP or eligible hospital submits such
information have the capacity to receive the information
electronically).
    The capability to send electronic data to immunization registries
is included in the certification standards for certified EHR technology
(to be defined by ONC in its upcoming interim final rule). Meaningful
use seeks to ensure that those capabilities are utilized. However, this
objective is reliant on the electronic exchange of information. We are
cognizant that in most areas of the country, the infrastructure
necessary to support such exchange is still being developed. Therefore,
for the Stage 1 criteria of meaningful use we are proposing that EPs
and eligible hospitals test their ability to send such information at
least once prior to the end of the EHR reporting period. The testing
could occur prior to the beginning of the EHR reporting period. EPs in
a group setting using identical certified EHR technology would only
need to conduct a single test, not one test per EP. More stringent
requirements may be established for EPs and hospitals under the
Medicaid program in States where this capability exists. This is just
one example of a possible State proposed modification to meaningful use
in the Medicaid EHR incentive program. States may propose any

[[Page 1867]]

modification or addition to CMS in accordance with the discussion in
II.A.2.c. of this proposed rule.
    EP/Eligible Hospital Objective: Protect electronic health
information maintained using certified EHR technology through the
implementation of appropriate technical capabilities.
    EP/Eligible Hospital Measure: Conduct or review a security risk
analysis in accordance with the requirements under 45 CFR 164.308(a)(1)
and implement security updates as necessary.
    The capability to protect electronic health information maintained
using certified EHR technology is included in the certification
standards for certified EHR technology (to be defined by ONC in its
upcoming interim final rule). Meaningful use seeks to ensure that those
capabilities are utilized. While certified EHR technology provides
tools for protecting health information, it is not a full protection
solution. Processes and possibly tools outside the scope of certified
EHR technology are required. Therefore, for the Stage 1 criteria of
meaningful use we propose that EPs and eligible hospitals conduct or
review a security risk analysis of certified EHR technology and
implement updates as necessary at least once prior to the end of the
EHR reporting period and attest to that conduct or review. The testing
could occur prior to the beginning of the EHR reporting period. This is
to ensure that the certified EHR technology is playing its role in the
overall strategy of the EP or eligible hospital in protecting health
information.

                                  Table 2--Stage 1 Criteria for Meaningful Use
----------------------------------------------------------------------------------------------------------------
                                                               Stage 1 objectives
                                                    ----------------------------------------
Health outcomes policy priority      Care goals           Eligible                             Stage 1 measures
                                                        professionals         Hospitals
----------------------------------------------------------------------------------------------------------------
Improving quality, safety,       Provide access to   Use CPOE..........  Use of CPOE for     For EPs, CPOE is
 efficiency, and reducing         comprehensive                           orders (any type)   used for at least
 health disparities.              patient health                          directly entered    80% of all orders.
                                  data for                                by authorizing     For eligible
                                  patient's health                        provider (for       hospitals, CPOE is
                                  care team.                              example, MD, DO,    used for 10% of
                                                                          RN, PA, NP).        all orders.
                                 Use evidence-based  Implement drug-     Implement drug-     The EP/eligible
                                  order sets and      drug, drug-         drug, drug-         hospital has
                                  CPOE.               allergy, drug-      allergy, drug-      enabled this
                                                      formulary checks.   formulary checks.   functionality.
                                 Apply clinical      Maintain an up-to-  Maintain an up-to-  At least 80% of all
                                  decision support    date problem list   date problem list   unique patients
                                  at the point of     of current and      of current and      seen by the EP or
                                  care.               active diagnoses    active diagnoses    admitted to the
                                 Generate lists of    based on ICD-9-CM   based on ICD-9-CM   eligible hospital
                                  patients who need   or SNOMED           or SNOMED           have at least one
                                  care and use them   CT[supreg].         CT[supreg].         entry or an
                                  to reach out to                                             indication of none
                                  patients.                                                   recorded as
                                                                                              structured data.
                                 Report information  Generate and        ..................  At least 75% of all
                                  for quality         transmit                                permissible
                                  improvement and     permissible                             prescriptions
                                  public reporting.   prescriptions                           written by the EP
                                                      electronically                          are transmitted
                                                      (eRx).                                  electronically
                                                                                              using certified
                                                                                              EHR technology.
                                                     Maintain active     Maintain active     At least 80% of all
                                                      medication list.    medication list.    unique patients
                                                                                              seen by the EP or
                                                                                              admitted to the
                                                                                              eligible hospital
                                                                                              have at least one
                                                                                              entry (or an
                                                                                              indication of
                                                                                              ``none'' if the
                                                                                              patient is not
                                                                                              currently
                                                                                              prescribed any
                                                                                              medication)
                                                                                              recorded as
                                                                                              structured data.
                                                     Maintain active     Maintain active     At least 80% of all
                                                      medication          medication          unique patients
                                                      allergy list.       allergy list.       seen, by the EP or
                                                                                              admitted to the
                                                                                              eligible hospital
                                                                                              have at least one
                                                                                              entry or (an
                                                                                              indication of
                                                                                              ``none'' if the
                                                                                              patient has no
                                                                                              medication
                                                                                              allergies)
                                                                                              recorded as
                                                                                              structured data.
                                                     Record              Record              At least 80% of all
                                                      demographics.       demographics.       unique patients
                                                     [cir] preferred     [cir] preferred      seen by the EP or
                                                      language.           language.           admitted to the
                                                     [cir] insurance     [cir] insurance      eligible hospital
                                                      type.               type.               have demographics
                                                     [cir] gender......  [cir] gender......   recorded as
                                                     [cir] race........  [cir] race........   structured data.
                                                     [cir] ethnicity...  [cir] ethnicity...
                                                     [cir] date of       [cir] date of
                                                      birth.              birth.
                                                                         [cir] date and
                                                                          cause of death in
                                                                          the event of
                                                                          mortality.

[[Page 1868]]

                                                     Record and chart    Record and chart    For at least 80% of
                                                      changes in vital    changes in vital    all unique
                                                      signs:              signs:              patients age 2 and
                                                     [cir] height......  [cir] height......   over seen by the
                                                     [cir] weight......  [cir] weight......   EP or admitted to
                                                     [cir] blood         [cir] blood          eligible hospital,
                                                      pressure.           pressure.           record blood
                                                     [cir] Calculate     [cir] Calculate      pressure and BMI;
                                                      and display: BMI..  and display: BMI..  additionally plot
                                                     [cir] Plot and      [cir] Plot and       growth chart for
                                                      display growth      display growth      children age 2-20.
                                                      charts for          charts for
                                                      children 2-20       children 2-20
                                                      years, including    years, including
                                                      BMI..               BMI..
                                                     Record smoking      Record smoking      At least 80% of all
                                                      status for          status for          unique patients 13
                                                      patients 13 years   patients 13 years   years old or older
                                                      old or older.       old or older.       seen by the EP or
                                                                                              admitted to the
                                                                                              eligible hospital
                                                                                              have ``smoking
                                                                                              status'' recorded.
                                                     Incorporate         Incorporate         At least 50% of all
                                                      clinical lab-test   clinical lab-test   clinical lab tests
                                                      results into EHR    results into EHR    ordered whose
                                                      as structured       as structured       results are in a
                                                      data.               data.               positive/negative
                                                                                              or numerical
                                                                                              format are
                                                                                              incorporated in
                                                                                              certified EHR
                                                                                              technology as
                                                                                              structured data.
                                                     Generate lists of   Generate lists of   Generate at least
                                                      patients by         patients by         one report listing
                                                      specific            specific            patients of the EP
                                                      conditions to use   conditions to use   or eligible
                                                      for quality         for quality         hospital with a
                                                      improvement,        improvement,        specific
                                                      reduction of        reduction of        condition.
                                                      disparities, and    disparities, and
                                                      outreach.           outreach.
                                                     Report ambulatory   Report hospital     For 2011, provide
                                                      quality measures    quality measures    aggregate
                                                      to CMS or the       to CMS or the       numerator and
                                                      States.             States.             denominator
                                                                                              through
                                                                                              attestation as
                                                                                              discussed in
                                                                                              section II(A)(3)
                                                                                              of this proposed
                                                                                              rule.
                                                                                             For 2012,
                                                                                              electronically
                                                                                              submit the
                                                                                              measures as
                                                                                              discussed in
                                                                                              section II(A)(3)
                                                                                              of this proposed
                                                                                              rule.
                                                     Send reminders to   ..................  Reminder sent to at
                                                      patients per                            least 50% of all
                                                      patient                                 unique patients
                                                      preference for                          seen by the EP
                                                      preventive/follow                       that are age 50 or
                                                      up care.                                over.
                                                     Implement 5         Implement 5         Implement 5
                                                      clinical decision   clinical decision   clinical decision
                                                      support rules       support rules       support rules
                                                      relevant to         related to a high   relevant to the
                                                      specialty or high   priority hospital   clinical quality
                                                      clinical            condition,          metrics the EP/
                                                      priority,           including           Eligible Hospital
                                                      including           diagnostic test     is responsible for
                                                      diagnostic test     ordering, along     as described
                                                      ordering, along     with the ability    further in section
                                                      with the ability    to track            II(A)(3).
                                                      to track            compliance with
                                                      compliance with     those rules.
                                                      those rules.
                                                     Check insurance     Check insurance     Insurance
                                                      eligibility         eligibility         eligibility
                                                      electronically      electronically      checked
                                                      from public and     from public and     electronically for
                                                      private payers.     private payers.     at least 80% of
                                                                                              all unique
                                                                                              patients seen by
                                                                                              the EP or admitted
                                                                                              to the eligible
                                                                                              hospital.
                                                     Submit claims       Submit claims       At least 80% of all
                                                      electronically to   electronically to   claims filed
                                                      public and          public and          electronically by
                                                      private payers.     private payers.     the EP or the
                                                                                              eligible hospital.
Engage patients and families in  Provide patients    Provide patients    Provide patients    At least 80% of all
 their health care.               and families with   with an             with an             patients who
                                  timely access to    electronic copy     electronic copy     request an
                                  data, knowledge,    of their health     of their health     electronic copy of
                                  and tools to make   information         information         their health
                                  informed            (including          (including          information are
                                  decisions and to    diagnostic test     diagnostic test     provided it within
                                  manage their        results, problem    results, problem    48 hours.
                                  health.             list, medication    list, medication
                                                      lists,              lists, allergies,
                                                      allergies), upon    discharge
                                                      request.            summary,
                                                                          procedures), upon
                                                                          request.

[[Page 1869]]

                                                                         Provide patients    At least 80% of all
                                                                          with an             patients who are
                                                                          electronic copy     discharged from an
                                                                          of their            eligible hospital
                                                                          discharge           and who request an
                                                                          instructions and    electronic copy of
                                                                          procedures at       their discharge
                                                                          time of             instructions and
                                                                          discharge, upon     procedures are
                                                                          request.            provided it.
                                                     Provide patients    ..................  At least 10% of all
                                                      with timely                             unique patients
                                                      electronic access                       seen by the EP are
                                                      to their health                         provided timely
                                                      information                             electronic access
                                                      (including lab                          to their health
                                                      results, problem                        information.
                                                      list, medication
                                                      lists, allergies)
                                                      within 96 hours
                                                      of the
                                                      information being
                                                      available to the
                                                      EP.
                                                     Provide clinical    ..................  Clinical summaries
                                                      summaries for                           are provided for
                                                      patients for each                       at least 80% of
                                                      office visit.                           all office visits.
Improve care coordination......  Exchange            Capability to       Capability to       Performed at least
                                  meaningful          exchange key        exchange key        one test of
                                  clinical            clinical            clinical            certified EHR
                                  information among   information (for    information (for    technology's
                                  professional        example, problem    example,            capacity to
                                  health care team.   list, medication    discharge           electronically
                                                      list, allergies,    summary,            exchange key
                                                      diagnostic test     procedures,         clinical
                                                      results), among     problem list,       information.
                                                      providers of care   medication list,
                                                      and patient         allergies,
                                                      authorized          diagnostic test
                                                      entities            results), among
                                                      electronically.     providers of care
                                                                          and patient
                                                                          authorized
                                                                          entities
                                                                          electronically.
                                                     Perform medication  Perform medication  Perform medication
                                                      reconciliation at   reconciliation at   reconciliation for
                                                      relevant            relevant            at least 80% of
                                                      encounters and      encounters and      relevant
                                                      each transition     each transition     encounters and
                                                      of care.            of care.            transitions of
                                                                                              care.
                                                     Provide summary     Provide summary     Provide summary of
                                                      care record for     care record for     care record for at
                                                      each transition     each transition     least 80% of
                                                      of care and         of care and         transitions of
                                                      referral.           referral.           care and
                                                                                              referrals.
Improve population and public    Communicate with    Capability to       Capability to       Performed at least
 health.                          public health       submit electronic   submit electronic   one test of
                                  agencies.           data to             data to             certified EHR
                                                      immunization        immunization        technology's
                                                      registries and      registries and      capacity to submit
                                                      actual submission   actual submission   electronic data to
                                                      where required      where required      immunization
                                                      and accepted.       and accepted.       registries.
                                                                         Capability to       Performed at least
                                                                          provide             one test of the
                                                                          electronic          EHR system's
                                                                          submission of       capacity to
                                                                          reportable lab      provide electronic
                                                                          results (as         submission of
                                                                          required by state   reportable lab
                                                                          or local law) to    results to public
                                                                          public health       health agencies
                                                                          agencies and        (unless none of
                                                                          actual submission   the public health
                                                                          where it can be     agencies to which
                                                                          received.           eligible hospital
                                                                                              submits such
                                                                                              information have
                                                                                              the capacity to
                                                                                              receive the
                                                                                              information
                                                                                              electronically).
                                                     Capability to       Capability to       Performed at least
                                                      provide             provide             one test of
                                                      electronic          electronic          certified EHR
                                                      syndromic           syndromic           technology's
                                                      surveillance data   surveillance data   capacity to
                                                      to public health    to public health    provide electronic
                                                      agencies and        agencies and        syndromic
                                                      actual              actual              surveillance data
                                                      transmission        transmission        to public health
                                                      according to        according to        agencies (unless
                                                      applicable law      applicable law      none of the public
                                                      and practice.       and practice.       health agencies to
                                                                                              which an EP or
                                                                                              eligible hospital
                                                                                              submits such
                                                                                              information have
                                                                                              the capacity to
                                                                                              receive the
                                                                                              information
                                                                                              electronically).

[[Page 1870]]

Ensure adequate privacy and      Ensure privacy and  Protect electronic  Protect electronic  Conduct or review a
 security protections for         security            health              health              security risk
 personal health information.     protections for     information         information         analysis per 45
                                  confidential        created or          created or          CFR 164.308(a)(1)
                                  information         maintained by the   maintained by the   and implement
                                  through operating   certified EHR       certified EHR       security updates
                                  policies,           technology          technology          as necessary.
                                  procedures, and     through the         through the
                                  technologies and    implementation of   implementation of
                                  compliance with     appropriate         appropriate
                                  applicable law.     technical           technical
                                 Provide              capabilities.       capabilities.
                                  transparency of
                                  data sharing to
                                  patient.
----------------------------------------------------------------------------------------------------------------

e. Request for Public Comment on Potential Health IT Functionality
Measures for Eligible Professionals and Eligible Hospitals in 2013
Payment Year and Subsequent Years
    As noted previously, we are cognizant that in most areas of the
country, the infrastructure necessary to support the electronic
exchange of structured information is not yet currently available. For
that reason, we excluded the electronic exchange of structured
information from many Stage 1 objectives or set relatively low
performance thresholds for measures that do rely on the electronic
exchange of structured data. For example, we set the threshold at 50
percent for the incorporation of lab data in structured format, and we
excluded other types of diagnostic test data (for example, radiology
reports, pathology reports, etc.) from that measure. We also excluded
the transmission of orders from the definition of ``CPOE use'' for
Stage 1 criteria.
    In future rulemaking (for example, for Stage 2 and Stage 3
criteria), however, we anticipate raising the threshold for these
objectives as the capabilities of HIT infrastructure increases. We also
anticipate redefining our objectives to include not only the capturing
of data in electronic format but also the exchange (both transmission
and receipt) of that data in increasingly structured formats. The
intent and policy goal with raising these thresholds and expectations
is to ensure that meaningful use encourages patient-centric,
interoperable health information exchange across provider organizations
regardless of provider's business affiliation or EHR platform.
    We specifically intend to build up the following health IT
functionality measures for Stage 2 meaningful use criteria:
     ``CPOE use'' will include not only the percentage of
orders entered directly by providers through CPOEs but also the
electronic transmission of those orders;
     ``Incorporate clinical lab-test results into EHR as
structured data'' will be expanded to include the full array of
diagnostic test data used for the treatment and diagnosis of disease,
where feasible, including blood tests, microbiology, urinalysis,
pathology tests, radiology, cardiac imaging, nuclear medicine tests,
and pulmonary function tests;
     Measures that currently allow the provision and exchange
of unstructured data (for example, the provision of clinical care
summaries on paper) will require the provision and exchange of
electronic and structured data, where feasible;
     Measures that currently require the performance of a
capability test (for example, capability to provide electronic
syndromic surveillance data to public health agencies) will be revised
to require the actual submission of that data;

We invite comment on our intent to propose the above measure for Stage
2 in future rulemaking and also invite comment on any other health IT
functionality measures not included in this list.
3. Sections 4101(a) and 4102(a)(1) of HITECH Act: Reporting on Clinical
Quality Measures Using EHRs by EPs and Eligible Hospitals
a. General
    As discussed in the meaningful use background section, there are
three elements of meaningful use. In this section, we discuss the third
requirement using its certified EHR technology, the EP or eligible
hospital submits to the Secretary, in a form and manner specified by
the Secretary, information for the EHR reporting period on clinical
quality measures and other measures specified by the Secretary. The
submission of other measures is discussed in section II.A.2.d.2 of this
proposed rule and the other two requirements are discussed in section
II.A.2.d.1 of this proposed rule.
b. Requirements for the Submission of Clinical Quality Measures by EPs
and Eligible Hospitals
    Sections 1848(o)(2)(B)(ii) and 1886(n)(3)(B)(ii) of the Act provide
that the Secretary may not require the electronic reporting of
information on clinical quality measures unless the Secretary has the
capacity to accept the information electronically, which may be on a
pilot basis.
    We do not anticipate that HHS will complete the necessary steps for
us to have the capacity to electronically accept data on clinical
quality measures from EHRs for the 2011 payment year. It is unlikely
that by 2011 there will be adequate testing and demonstration of the
ability to receive the required transmitted information on a widespread
basis. The capacity to accept information on clinical quality measures
also depends upon the Secretary promulgating technical specifications
for EHR vendors with respect to the transmission of information on
clinical quality measures sufficiently in advance of the EHR reporting
period for 2011, so that adequate time has been provided either for
such specifications to be certified, or for EHR vendors to code such
specifications into certified systems. Therefore, for 2011, we propose
that EPs and eligible hospitals use an attestation methodology to
submit summary information to CMS on clinical quality measures as a
condition of demonstrating meaningful use of certified EHR technology.
    From the Medicaid perspective, delaying the onset of clinical
quality measures reporting until 2012 addresses concerns about States
having the ready infrastructure to receive and store

[[Page 1871]]

clinical quality measures data before then. More importantly, we
recognize that since Medicaid providers are eligible to receive
incentive payments for adopting, implementing, or upgrading certified
EHR technology. Medicaid EPs may not be focused on demonstrating
meaningful use until 2012 or later.
    We anticipate that for the 2012 payment year we will have completed
the necessary steps to have the capacity to receive electronically
information on clinical quality measures from EHRs including the
promulgation of technical specifications for EHR vendors to use for
obtaining certification of their systems. Therefore, for the Medicare
EHR incentive program, we propose that beginning in CY 2012 an EP using
a certified EHR technology or beginning in FY 2012 an eligible hospital
using a certified EHR technology, as appropriate for clinical quality
measures, must submit information on clinical quality measures
electronically in addition to submitting other measures described in
section II.2.d.2 of this proposed rule in order for the EP or eligible
hospital to be a meaningful EHR user, regardless of whether CY 2012 is
their first or second payment year. However, if the Secretary does not
have the capacity to accept the information on clinical quality
measures electronically in 2012, consistent with sections
1848(o)(2)(B)(ii) and 1886(n)(3)(B)(ii) of the Act, we will continue to
rely on an attestation methodology for reporting of clinical quality
measures as a requirement for demonstrating meaningful use of certified
EHR technology for payment year 2012. Should we not have the capacity
to accept information on clinical quality measures electronically in
2012, we will inform the public of this fact by publishing a notice in
the Federal Register and providing instructions on how this information
should be submitted to us.
    For purposes of the requirements under sections 1848(o)(2)(A)(iii)
and 1886 (n)(3)(iii) of the Act, we define ``clinical quality
measures'' to consist of measures of processes, experience, and/or
outcomes of patient care, observations or treatment that relate to one
or more quality aims for health care such as effective, safe,
efficient, patient-centered, equitable, and timely care. We note that
certain statutory limitations apply only to the reporting of clinical
quality measures, such as the requirement discussed in the previous
paragraph prohibiting the Secretary from requiring the electronic
reporting of information on clinical quality measures unless the
Secretary has the capacity to accept the information electronically, as
well as other statutory requirements for clinical quality measures that
are discussed below in section II.A.3.c.1 of this proposed rule. These
limitations apply solely to the submission of clinical quality
measures, and do not apply to other measures of meaningful EHR use. The
proposed clinical quality measures on which EPs or eligible hospitals
will be required to submit information using certified EHR technology,
the statutory requirements and other considerations that were used to
select these proposed measures, and the proposed reporting requirements
are described below.
    With respect to Medicaid EPs and eligible hospitals, we note that
section 1903(t)(6) of the Act recognizes that the demonstration of
meaningful use may also include the reporting of clinical quality
measures to the States. In the interest of simplifying the program and
guarding against duplication of meaningful use criteria, we propose
that the clinical quality measures adopted for the Medicare EHR
incentive program, listed in Tables 3 and 20, will also apply to EPs
and eligible hospitals in the Medicaid EHR incentive program. However,
we are including alternative Medicaid-specific measures for use by
eligible hospitals as shown in Table 21.
    Despite the statutory limitation prohibiting the Secretary from
requiring the electronic submission of clinical quality measures if HHS
does not have the capacity to accept this information electronically,
as previously discussed, the Secretary has broad discretion to
establish requirements for meaningful use of certified EHR technology
and for the demonstration of such use by EPs and eligible hospitals.
Although we propose to first require the electronic submission of
information on clinical quality measures in 2012, we do not desire this
to delay the use of certified EHR technology by EPs and eligible
hospitals to measure and improve clinical quality. Specifically, we
believe that the use of those functionalities that support measurement
of clinical quality is highly important to an overall goal of the
HITECH Act, to improve health care quality. We believe that measurement
and acting on the results of such measurement is an important aspect to
improving quality.
    Accordingly, although we are not proposing under sections
1848(o)(2)(A)(iii) and 1886(n)(3)(A)(iii) of the Act to require that
for 2011 EPs and eligible hospitals report clinical quality measures to
CMS or States electronically, we propose to require as an additional
condition of demonstrating meaningful use of certified EHR technology
under sections 1848(o)(2)(A)(i) and 1886(n)(3)(A)(ii) of the Act that
EPs and eligible hospitals use certified EHR technology to capture the
data elements and calculate the results for the applicable clinical
quality measures discussed below. We further propose that EPs and
eligible hospitals demonstrate that they have satisfied this
requirement during the EHR reporting period for 2011 through
attestation. We further propose to require that Medicare EPs and
eligible hospital attest to the accuracy and completeness of the
numerators and denominators for each of the applicable measure.
Finally, in accordance with our authority under sections
1848(o)(C)(i)(V) and 1886(n)(3)(C)(i)(V) of the Act, which grants us
broad discretion to specify the means through which EPs and eligible
hospitals demonstrate compliance with the meaningful use criteria, we
propose that EPs and eligible hospitals demonstrate their use of
certified EHR technology to capture the data elements and calculate the
results for the applicable clinical quality measures by reporting the
results to CMS for all applicable patients. For the Medicaid incentive
program, States may accept provider attestations in the same manner to
demonstrate meaningful use in 2011. However, we expect that Medicaid
providers will qualify for the incentive payment by adopting,
implementing, or upgrading to certified EHR technology, and therefore;
will not need to attest to meaningful use of EHRs in 2011, for their
first payment year.
    We recognize that considerable work needs to be done by measure
owners and developers with respect to the clinical quality measures
included in this proposed rule. This includes completing electronic
specifications for measures, implementing such specifications into EHR
technology to capture and calculate the results, and implementing the
systems, themselves. We also recognize that some measures are further
developed than others, as discussed in the proposed measures section.
Nevertheless, we believe that overall there is sufficient time to
complete work on measures and measures specifications to allow vendors,
and EPs and eligible hospitals to implement such systems. Should the
necessary work on measure specification not be completed for particular
measures according to the timetable we discuss below, it is our intent
not to finalize those specific measures.

[[Page 1872]]

c. Statutory Requirements and Other Considerations for the Proposed
Selection of Clinical Quality Measures Proposed for Electronic
Submission by EPs or Eligible Hospitals
(1) Statutory Requirements for the Selection of Clinical Quality
Measures Proposed for Electronic Submission by EPs and Eligible
Hospitals
    Sections 1848(o)(2)(B)(i)(II) and 1886(n)(3)(B)(i) of the Act also
require that prior to any clinical quality measure being selected, the
Secretary will publish in the Federal Register such measure and provide
for a period of public comment on such measure. The proposed clinical
quality measures for EPs and eligible hospitals for 2011 and 2012
payment are listed in Tables 3 through 21.
    For purposes of selecting clinical quality measures on which EPs
will be required to submit information using certified EHR technology,
section 1848(o)(2)(B)(i)(I) of the Act, as added by section 4101 of the
HITECH Act, states that the Secretary shall provide preference to
clinical quality measures that have been endorsed by the entity with a
contract with the Secretary under section1890(a) of the Act, as added
by section 183 of the Medicare Improvement for Patients and Providers
Act (MIPPA) of 2008. For submission of clinical quality measures by
eligible hospitals, section 1886(n)(3)(B)(i)(I) of the Act, as added by
section 4102(a) of the HITECH Act, requires the Secretary to provide
preference to those clinical quality measures that have been endorsed
by the entity with a contract with the Secretary under subsection
1890(a) of the Act, as added by section 183 of the MIPPA, or clinical
quality measures that have been selected for the purpose of applying
section 1886(b)(3)(B)(viii) of the Act (that is, measures that have
been selected for the Reporting Hospital Quality Data for Annual
Payment Update (RHQDAPU) program.
    On January 14, 2009, the U.S. Department of Health and Human
Services awarded the contract required under section 1890(a) of the Act
to the National Quality Forum (NQF). Therefore, when selecting the
clinical quality measures EPs must report in order to demonstrate
meaningful use of certified EHR technology in accordance with section
1848(o)(2)(B)(i)(I) of the Act, we propose to give preference to the
clinical quality measures endorsed by the NQF, including NQF endorsed
measures that have previously been selected for the Physician Quality
Reporting Initiative (PQRI) program. Similarly when selecting the
clinical quality measures eligible hospitals must report in order to
demonstrate meaningful use of certified EHR technology in accordance
with section 1886(n)(3)(B)(i)(I) of the Act, we propose to give
preference to the clinical quality measures selected from those
endorsed by the NQF or that have previously been selected for the
RHQDAPU program. In some instances we have proposed measures for EPs
and eligible hospitals that are not currently NQF endorsed in an effort
to include a broader set of clinical quality measures. However, the
HITECH Act does not require the use of NQF endorsed measures, nor limit
the measures to those included in PQRI or RHQDAPU. If we, professional
societies, or other stakeholders identify clinical quality measures
which may be appropriate for the EHR incentive programs, we will
consider those measures even if they are not endorsed by the NQF or
have not been selected for the PQRI or RHQDAPU programs, subject to the
requirement to publish in the Federal Register such measure(s) for a
period of public comment.
    We propose the clinical quality measures for EPs and eligible
hospitals in Tables 3 through 21 of this proposed rule for use in the
2011 and 2012 payment years for the Medicare EHR incentive program will
be effective 60 days after the publication of the final rule in the
Federal Register. No changes (that is, additions or deletions of
clinical quality measures) will be made after publication of the final
rule, except through further rulemaking. However, we may make
administrative and/or technical modifications or refinements, such as
revisions to the clinical quality measures titles and code additions,
corrections, or revisions to the detailed specifications for the 2011
and 2012 payment year measures. The 2011 specifications for user
submission of clinical quality measures will be available on our Web
site when they are sufficiently developed or finalized. Specifications
for the EHR incentive programs, even if already published as a part of
another incentive payment programs, must be obtained only from the
specifications documents for the EHR incentive program clinical quality
measures. We note also that the final clinical quality measure
specifications for eligible hospitals for any given clinical quality
measure may be different from specifications for the same clinical
quality measure used for the previously described testing of EHR-based
data submission. We are targeting finalization and publication of the
detailed specifications documents for all 2011 payment year Medicare
EHR incentive program clinical quality measures for eligible hospitals
on the CMS Web site on or before April 1, 2010. We intend that a
detailed specifications document for all 2012 payment year Medicare EHR
incentive program clinical quality measures for EPs be posted on the
our Web site on or before April 1, 2011. This would provide final
specifications documents at least 9 months in advance of the start of
the applicable payment year for clinical quality measure EHR reporting
period. We invite comments on our proposed timelines to post
specification documents for these clinical quality measures to the CMS
Web site.
(2) Other Considerations for the Proposed Selection of Clinical Quality
Measures for Electronic Submission by EPs and Eligible Hospitals
    In addition to the requirements under sections 1848(o)(2)(B)(i)(I)
and 1886(n)(3)(B)(i)(I) of the Act and the other statutory requirements
described above, other considerations that we applied to the selection
of the proposed clinical quality measures for electronic submission
under the Medicare and Medicaid EHR incentive programs include the
following:
     Clinical quality measures that are included in, facilitate
alignment with, or allow determination of satisfactory reporting in
other Medicare (for example, PQRI or the RHQDAPU program), Medicaid,
and Children's Health Insurance Program (CHIP) program priorities.
     Clinical quality measures that are widely applicable to
EPs and eligible hospitals based on the services provided for the
population of patients seen.
     Clinical quality measures that promote CMS and HHS policy
priorities related to improved quality and efficiency of care for the
Medicare and Medicaid populations that would allow us to track
improvement in care over time. These current and long term priority
topics include: Prevention; management of chronic conditions; high cost
and high volume conditions; elimination of health disparities;
healthcare-associated infections and other conditions; improved care
coordination; improved efficiency; improved patient and family
experience of care; improved end-of-life/palliative care; effective
management of acute and chronic episodes of care; reduced unwarranted
geographic variation in quality and efficiency; and adoption and use of
interoperable HIT.
     Clinical quality measures that address or relate to known
gaps in the quality of care and measures that

[[Page 1873]]

through the PQRI program, performed at low or highly variable rates.
     Clinical quality measures that have been recommended to
CMS for inclusion in the EHR incentive by FACA committees, such as the
HIT Policy Committee.
    In addition, we note that the statutory requirements under sections
1848(o) and 1886(n) of the Act discussed above do not provide guidance
with respect to the development of the clinical quality measures which
may then be submitted to the NQF for endorsement. The basic steps for
developing clinical quality measures applicable to EPs may be carried
out by a variety of different organizations. We do not believe there
needs to be any special restrictions on the type or infrastructure of
the organizations carrying out this basic development of EP or eligible
hospital measures, such as restricting the initial development to EP or
eligible hospital organizations. Any such restriction would unduly
limit the basic development of clinical quality measures, and the scope
and utility of such measures that may be considered for NQF endorsement
as voluntary consensus standards.
    With respect to the Children's Health Insurance Program
Reauthorization Act (CHIPRA) of 2009 (Pub. L. 111-3) Title IV, section
401 requires that the Secretary publish a core set of clinical quality
measures for the pediatric population. To the extent possible, we will
align the clinical quality measures selected under this Medicaid EHR
incentive program with the measures selected under the CHIPRA core
measure set. Included in the proposed definition of meaningful use are
nine proposed clinical quality measures that pertain to pediatric
providers. Four of the nine measures are also on the list of CHIPRA
initial core measures that were recommended to the Secretary by the
Subcommittee to AHRQ's National Advisory Committee (SNAC). Not all
CHIPRA initial measures recommended to the Secretary are applicable to
EHR technology or to the Medicaid EHR incentive payment program. For
example, some of the measures are population-based, survey-derived, or
not yet NQF-endorsed. New or additional measures for the next iteration
of the CHIPRA core set will have EHR-extractability as a priority. The
full CHIPRA core measure set will be published for comment in a
forthcoming Federal Register notice that is expected out before the end
of the year.
    However, as many providers, including primary care professionals,
hospitals, dentists, and specialists provide care to the pediatric
population in the Medicaid and CHIP programs. We saw consistency as
paramount to avoid redundancy and duplication for these providers and
States.
    Provider quality measure reporting under CHIPRA for this initial
core measure set will initially be voluntary. The intent is to begin
standardizing measurement data collection. Due to the concurrent CHIPRA
and ARRA HIT implementation activities, we believe there is an exciting
opportunity to align the two programs and strive to create efficiencies
for States and pediatric providers, where applicable. As both programs
move forward, we will continue to prioritize consistency in measure
selection for pediatric providers when possible.
    We welcome comments on the inclusion or exclusion of any given
clinical quality measure or measures proposed herein in the EHR
incentive programs clinical quality measure set for EPs or eligible
hospitals for the 2011 and 2012 payment years, and to our approach in
selecting clinical quality measures. Our goal is for EPs and eligible
hospitals to use EHRs to transmit clinical quality measures to the
Secretary that would allow determination of their satisfactory
reporting under the PQRI and RHQDAPU programs. Even if the clinical
quality measures are not the same for PQRI and RHQDAPU satisfactory
reporting and EHR meaningful use, our aim is to encourage EPs and
eligible hospitals to use EHRs as the mechanism to report PQRI and
RHQDAPU measures rather than reporting measures on claims and other
reporting mechanisms. We plan to move to this approach as soon as
practicable. To the extent that the same clinical quality measures are
used in the PQRI and RHQDAPU programs and for EHR meaningful use, we
believe that this approach would be consistent with the statutory
requirement to avoid duplicate reporting to the extent practicable. We
believe that allowing the measures reporting for the PQRI and RHQDAPU
program to be reported via EHRs would provide an added incentive for
EPs and eligible hospitals to adopt EHRs.
    In addition, we do not intend to use notice and comment rulemaking
as a means to update or modify clinical quality measure specifications.
A clinical quality measure that has completed the consensus process
through NQF has a designated party (usually, the measure developer/
owner) who has accepted responsibility for maintenance of the clinical
quality measure. In general, it is the role of the clinical quality
measure owner, developer, or maintainer to make basic changes to a
clinical quality measure in terms of the numerator, denominator, and
exclusions. However, the clinical quality measures selected for the
2011 and 2012 payment year will be supplemented by CMS technical
specifications for EHR submission. As discussed earlier, we propose to
post the complete clinical quality measures specifications including
technical specifications on our Web site and solicit comment on our
approach.
d. Proposed Clinical Quality Measures for Electronic Submission Using
Certified EHR Technology by EPs
    For the 2011 and 2012 EHR reporting periods, based upon the
considerations for selecting clinical quality measures discussed above,
we propose the set of clinical quality measures identified in Table 3.
The Table 3 lists the applicable PQRI and NQF measure number, title,
description, the owner/developer, and a link to existing electronic
specifications where applicable. Tables 4 through 19 describes further
the reporting requirements of the Core and Specialty measure groups.
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    As previously stated, we believe that there is sufficient time to
implement the measures in EHR systems for 2011 through 2012. However,
we recognize also that there are measures that we propose, which are in
a lower state of readiness, for implementation in certified EHR's and
present a higher degree of risk in terms of completion of the necessary
work. We would note that the purpose of this quality reporting is to
begin the process of quality benchmarking and iterative improvements in
the ability of providers to benchmark themselves against their peers.
As part of the public comment process, we welcome comment on not only
the clinical utility of the measures we have proposed, but also their
state of readiness for use in the EHR incentive programs. For those
measures where electronic specifications do not currently exist, we
solicit comment on how quickly electronic specifications can be
developed and the period of time that might be required for effective
implementation from the time the electronic specifications of final
measures are posted and made available to vendors. We intend to publish
electronic specifications for the proposed clinical quality measures on
the CMS Web site as soon as they become available from the measure
developer(s). Electronic specifications may be developed concurrently
with the development of measures themselves and potentially with the
NQF endorsement processes.
    All of the PQRI measures included in the above clinical quality
measures meet one or more of the criteria previously discussed. These
measures have been through notice and comment rulemaking for PQRI.
Nearly all proposed PQRI clinical quality measures are NQF endorsed.
Additionally, they have broad applicability to the range of Medicare
designated specialties, and the services provided by EPs who render
services to Medicare and Medicaid beneficiaries and many others.
Further, 9 of the 90 clinical quality measures listed above (PQRI
numbers 1, 2, 3, 5, 7, 110, 111, 112, and 113) have specifications for
the electronic submission of these clinical quality measures have
already been developed for the purpose of testing the electronic
submission of clinical quality data extracted from an EHR for the PQRI
program. The user specifications for the electronic submission of these
9 clinical quality measures for the most current PQRI program year can
be found on the PQRI section of the CMS Web site at http://www.cms.hhs.gov/PQRI/20_AlternativeReportingMechanisms.asp#TopOfPage.
    In terms of CMS and HHS healthcare quality priorities, clinical
quality PQRI measures numbered 1, 2, 3, 5, and 7 address high priority
chronic conditions, namely diabetes, coronary artery disease, and heart
disease. Clinical quality PQRI measures numbered 110, 111, 112, 113,
114, 115, and 128 support prevention which is a high CMS and HHS
priority. The PQRI clinical quality measure specifications for claims-
based or registry-based submission of these clinical quality measures
for the most current PQRI program year can be found on the PQRI section
of the CMS Web site at http://www.cms.hhs.gov/PQRI/15_MeasuresCodes.asp#TopOfPage. A description of the clinical quality
measure, including the clinical quality measure's numerator and
denominator, can be found in the PQRI clinical quality measure
specifications.
    The PQRI clinical quality measures that we have included largely
align with the recommendations of the HIT Standards Committee. However,
we have also included certain clinical quality measures not part of
PQRI that we believe are of high importance to the overall population.
These clinical quality measures are IVD: Use of Aspirin or another
Antithrombotic; IVD: Complete Lipid Profile; IVD: Low Density
Lipoprotein (LDL-C) Control, and Blood Pressure Management. Finally, we
have included an array of other measures which address important
aspects of clinical quality.
    In summary, we believe that this initial set of clinical quality
measures is broad enough to allow for reporting for EPs and addresses
high priority conditions. We recognize the importance of integrating
the measures into certified EHR products for calculation of measures
results, and that not all measures may be feasible for 2011 and 2012.
We invite comment on the advisability of including the measures
proposed for payment years 2011 and 2012. Although we recognize many
other important clinical quality measures of health care provided by
EPs, we anticipate expanding the set of clinical quality measures in
future years and list a number of clinical quality measures for future
consideration in section II.A.3.g of this preamble, on which we also
invite comment.
    We invite comments on our proposed clinical quality measures for
EPs.
e. Clinical Quality Measures Reporting Criteria for EPs
    For the 2011 and 2012 EHR reporting periods, to satisfy the
requirements for reporting on clinical quality measures for Medicare
under section 1848(o)(2)(A)(i) and (iii) of the Act and for Medicaid
under section 1903(t)(6)(C) of the Act for the 2012 payment year, we
propose to require each EP submit information on two measure groups, as
shown in Table 4 and Tables 5 through 19, of this proposed rule. These
are the core measures group in Table 4, and the subset of clinical
measures most appropriate given the EPs specialty as described further
in Tables 5 through 19 specialty group measures below. For the core
measure group, in Table 4, we believe that the clinical quality
measures are sufficiently general in application and of such importance
to population health, we propose to require that all EPs treating
Medicare and Medicaid patients in the ambulatory setting report on all
of the core measures as applicable for their patients.

     Table 4--Measure Group: Core for All EPs, Medicare or Medicaid
------------------------------------------------------------------------
            Measure No.                Clinical quality measure title
------------------------------------------------------------------------
PQRI 114..........................  Title: Preventive Care and
NQF 0028..........................   Screening: Inquiry Regarding
                                     Tobacco Use.
NQF 0013..........................  Title: Blood pressure measurement.
NQF 0022..........................  Title: Drugs to be avoided in the
                                     elderly:
                                    a. Patients who receive at least one
                                     drug to be avoided.
                                    b. Patients who receive at least two
                                     different drugs to be avoided.
------------------------------------------------------------------------

    The second required measure set for each EP is to submit
information on at least one of the sets listed in Tables 5 and 19 as
specialty groups. The specialty groups are Cardiology, Pulmonology,
Endocrinology, Oncology,

[[Page 1891]]

Proceduralist/Surgery, Primary Care Physicians, Pediatrics, Obstetrics
and Gynecology, Neurology, Psychiatry, Ophthalmology, Podiatry,
Radiology, Gastroenterology, and Nephrology.
    We recognize that clinical quality measures as specified by
measures developers and as endorsed by the NQF are not specialty
specific. Rather, the denominator of clinical quality measures and the
applicability of a measure is determined by the patient population to
whom the measure applies and the services rendered by the particular
EP.
    Nevertheless, we have grouped measures according to the types of
patients commonly treated and services rendered by EPs of various
specialties. We have done this for purposes similar to measures groups
used in PQRI which, however, are based on clinical conditions, rather
than specialty types. The general purpose of each type of measures
grouping is to have standardized sets of measures all of which must be
reported by the EP in order to meet the reporting requirements. We
expect to narrow down each proposed set to a required subset of 3 to 5
measures based on the availability of electronic measure specifications
and comments received.
    We propose to require for 2011 and 2012 that EP's will select a
specialty measures group, on which to report on all applicable cases
for each of the measures in the specialty group. The same specialty
measures group selected for the first payment year would be required
for reporting for the second payment year. We invite comment on whether
there are EPs who believe no specialty group will be applicable to
them. In accordance with public comments, we will specify in the final
rule which EP specialties will be exempt from selecting and reporting
on a specialty measures group. EPs that are so-designated will be
required to attest, to CMS or the State, to the inapplicability of any
of the specialty groups and will not be required to report information
on clinical quality measures from a specialty group for 2011 or 2012,
though the EP will still be required to report information on all of
the clinical quality measures listed in the core measure set in, Table
4, as applicable for their patients.

                   Table 5--Measure Group: Cardiology
------------------------------------------------------------------------
            Measure No.                Clinical quality measure title
------------------------------------------------------------------------
PQRI 5............................  Title: Heart Failure: Angiotensin-
NQF 0081..........................   Converting Enzyme (ACE) Inhibitor
                                     or Angiotensin Receptor Blocker
                                     (ARB) Therapy for Left Ventricular
                                     Systolic Dysfunction (LVSD).
PQRI 6............................  Title: Coronary Artery Disease
NQF 0067..........................   (CAD): Oral Antiplatelet Therapy
                                     Prescribed for Patients with CAD.
PQRI 7............................  Title: Coronary Artery Disease
NQF 0070..........................   (CAD): Beta-Blocker Therapy for CAD
                                     Patients with Prior Myocardial
                                     Infarction (MI).
PQRI 8............................  Title: Heart Failure: Beta-Blocker
NQF 0083..........................   Therapy for Left Ventricular
                                     Systolic Dysfunction (LVSD).
PQRI 118..........................  Title: Coronary Artery Disease
NQF 0066..........................   (CAD): Angiotensin-Converting
                                     Enzyme (ACE) Inhibitor or
                                     Angiotensin Receptor Blocker (ARB)
                                     Therapy for Patients with CAD and
                                     Diabetes and/or Left Ventricular
                                     Systolic Dysfunction (LVSD).
PQRI 128..........................  Title: Preventive Care and
NQF 0421..........................   Screening: Body Mass Index (BMI)
                                     Screening and Follow-Up.
PQRI 197..........................  Title: Coronary Artery Disease
NQF 0074..........................   (CAD): Drug Therapy for Lowering
                                     LDL-Cholesterol.
PQRI 200..........................  Title: Heart Failure: Warfarin
NQF 0084..........................   Therapy Patients with Atrial
                                     Fibrillation.
PQRI 204..........................  Title: Ischemic Vascular Disease
NQF 0068..........................   (IVD): Use of Aspirin or Another
                                     Antithrombotic.
Not applicable....................  Title: Statin after Myocardial
                                     Infarction.
------------------------------------------------------------------------

                   Table 6--Measure Group: Pulmonology
------------------------------------------------------------------------
            Measure No.                Clinical quality measure title
------------------------------------------------------------------------
PQRI 52...........................  Title: Chronic Obstructive Pulmonary
NQF 0102..........................   Disease (COPD): Bronchodilator
                                     Therapy.
PQRI 53...........................  Title: Asthma: Pharmacologic
NQF 0047..........................   Therapy.
PQRI 111..........................  Title: Preventive Care and
NQF 0043..........................   Screening: Pneumonia Vaccination
                                     for Patients 65 Years and Older.
PQRI 114..........................  Title: Preventive Care and
NQF 0028..........................   Screening: Inquiry Regarding
                                     Tobacco Use.
PQRI 115..........................  Title: Preventive Care and
NQF 0027..........................   Screening: Advising Smokers to
                                     Quit.
NQF 0001..........................  Title: Asthma assessment.
NQF 0036..........................  Title: Use of appropriate
                                     medications for people with asthma.
Not applicable....................  Title: Use of CT scans.
------------------------------------------------------------------------

                  Table 7--Measure Group: Endocrinology
------------------------------------------------------------------------
            Measure No.                Clinical quality measure title
------------------------------------------------------------------------
PQRI 1............................  Title: Diabetes Mellitus: Hemoglobin
NQF 0059..........................   A1c Poor Control in Diabetes
                                     Mellitus.
PQRI 2............................  Title: Diabetes Mellitus: Low
NQF 0064..........................   Density Lipoprotein (LDL-C) Control
                                     in Diabetes Mellitus.

[[Page 1892]]

PQRI 3............................  Title: Diabetes Mellitus: High Blood
NQF 0061..........................   Pressure Control in Diabetes
                                     Mellitus.
PQRI 117..........................  Title: Diabetes Mellitus: Dilated
NQF 0055..........................   Eye Exam in Diabetic Patient.
PQRI 119..........................  Title: Diabetes Mellitus: Urine
NQF 0062..........................   Screening for Microalbumin or
                                     Medical Attention for Nephropathy
                                     in Diabetic Patients.
PQRI 128..........................  Title: Preventive Care and
NQF 0421..........................   Screening: Body Mass Index (BMI)
                                     Screening and Follow-Up.
PQRI 204..........................  Title: Ischemic Vascular Disease
NQF 0068..........................   (IVD): Use of Aspirin or Another
                                     Antithrombotic.
NQF 0060..........................  Title: Hemoglobin A1c test for
                                     pediatric patients.
Not applicable....................  Title: Comprehensive Diabetes Care:
                                     HbA1c Control (< 8.0 percent).
------------------------------------------------------------------------

                    Table 8--Measure Group: Oncology
------------------------------------------------------------------------
                                      Clinical quality measure title &
            Measure No.                          description
------------------------------------------------------------------------
PQRI 71...........................  Title: Breast Cancer: Hormonal
NQF 0387..........................   Therapy for Stage IC-IIIC Estrogen
                                     Receptor/Progesterone Receptor (ER/
                                     PR) Positive Breast Cancer.
PQRI 72...........................  Title: Colon Cancer: Chemotherapy
NQF 0385..........................   for Stage III Colon Cancer
                                     Patients.
PQRI 102..........................  Title: Prostate Cancer: Avoidance of
NQF 0389..........................   Overuse of Bone Scan for Staging
                                     Low-Risk Prostate Cancer Patients.
PQRI 112..........................  Title: Preventive Care and
NQF 0031..........................   Screening: Screening Mammography.
PQRI 113..........................  Title: Preventive Care and
NQF 0034..........................   Screening: Colorectal Cancer
                                     Screening.
NQF 0032..........................  Title: Cervical Cancer Screening.
------------------------------------------------------------------------

              Table 9--Measure Group: Proceduralist/Surgery
------------------------------------------------------------------------
                                      Clinical quality measure title &
            Measure No.                          description
------------------------------------------------------------------------
PQRI 20...........................  Title: Perioperative Care: Timing of
NQF 0270..........................   Antibiotic Prophylaxis--Ordering
                                     Physician.
PQRI 21...........................  Title: Perioperative Care: Selection
NQF 0268..........................   of Prophylactic Antibiotic--First
                                     OR Second Generation Cephalosporin.
PQRI 22...........................  Title: Perioperative Care:
NQF 0271..........................   Discontinuation of Prophylactic
                                     Antibiotics (Non-Cardiac
                                     Procedures).
PQRI 23...........................  Title: Perioperative Care: Venous
NQF 0239..........................   Thromboembolism (VTE) Prophylaxis
                                     (When Indicated in ALL Patients).
NQF 0299..........................  Title: Surgical Site Infection Rate.
Not Applicable....................  Title: 30 day Readmission Rate.
------------------------------------------------------------------------

                  Table 10--Measure Group: Primary Care
------------------------------------------------------------------------
                                      Clinical quality measure title &
            Measure No.                          description
------------------------------------------------------------------------
PQRI 114..........................  Title: Preventive Care and
NQF 0028..........................   Screening: Inquiry Regarding
                                     Tobacco Use.
PQRI 115..........................  Title: Preventive Care and
NQF 0027..........................   Screening: Advising Smokers to
                                     Quit.
PQRI 202..........................  Title: Ischemic Vascular Disease
NQF 0075..........................   (IVD): Complete Lipid Profile.
PQRI 203..........................  Title: Ischemic Vascular Disease
NQF 0075..........................   (IVD): Low Density Lipoprotein (LDL-
                                     C) Control.
PQRI 204..........................  Title: Ischemic Vascular Disease
NQF 0068..........................   (IVD): Use of Aspirin or Another
                                     Antithrombotic.
NQF 0038..........................  Title: Childhood Immunization
                                     Status.
PQRI 112..........................  Title: Preventive Care and
NQF 0031..........................   Screening: Screening Mammography.
PQRI 113..........................  Title: Preventive Care and
NQF 0034..........................   Screening: Colorectal Cancer
                                     Screening.
PQRI 1............................  Title: Diabetes Mellitus: Hemoglobin
NQF 0059..........................   A1c Poor Control in Diabetes
                                     Mellitus.
NQF 0052..........................  Title: Low back pain: use of imaging
                                     studies.
NQF 0018..........................  Title: Controlling High Blood
                                     Pressure.
PQRI 128..........................  Title: Preventive Care and
NQF 0421..........................   Screening: Body Mass Index (BMI)
                                     Screening and Follow-Up.

[[Page 1893]]

PQRI 65...........................  Title: Treatment for Children with
NQF 0069..........................   Upper Respiratory Infection (URI):
                                     Avoidance of Inappropriate Use.
PQRI 66...........................  Title: Appropriate Testing for
NQF 0002..........................   Children with Pharyngitis.
PQRI 110..........................  Title: Preventive Care and
NQF 0041..........................   Screening: Influenza Immunization
                                     for Patients >= 50 Years Old.
PQRI 197..........................  Title: Coronary Artery Disease
NQF 0074..........................   (CAD): Drug Therapy for Lowering
                                     LDL-Cholesterol.
NQF 0001..........................  Title: Asthma Assessment
NQF 0004..........................  Title: Initiation and Engagement of
                                     Alcohol and Other Drug Dependence
                                     Treatment:
                                       (a) Initiation,
                                       (b) Engagement.
NQF 0024..........................  Title: Body Mass Index (BMI) 2
                                     through 18 years of age.
NQF 0032..........................  Title: Cervical Cancer Screening.
NQF 0036..........................  Title: Use of appropriate
                                     medications for people with asthma.
NQF 0060..........................  Title: Hemoglobin A1c test for
                                     pediatric patients.
NQF 0105..........................  Title: New Episode of Depression:
                                       (a) Optimal Practitioner Contacts
                                        for Medication Management.
                                       (b) Effective Acute Phase
                                        Treatment.
                                       (c) Effective Continuation Phase
                                        Treatment.
NQF 0106..........................  Title: Diagnosis of attention
                                     deficit hyperactivity disorder
                                     (ADHD) in primary care for school
                                     age children and adolescents.
NQF 0107..........................  Title: Management of attention
                                     deficit hyperactivity disorder
                                     (ADHD) in primary care for school
                                     age children and adolescents.
NQF 0108..........................  Title: ADHD: Follow-Up Care for
                                     Children Prescribed Attention-
                                     Deficit/Hyperactivity Disorder
                                     (ADHD) Medication.
NQF 0110..........................  Title: Bipolar Disorder and Major
                                     Depression: Appraisal for alcohol
                                     or chemical substance use.
Not applicable....................  Title: Comprehensive Diabetes Care:
                                     HbA1c Control (< 8.0 percent).
Not applicable....................  Title: Appropriate antibiotic use
                                     for ear infections.
------------------------------------------------------------------------

                   Table 11--Measure Group: Pediatrics
------------------------------------------------------------------------
                                      Clinical quality measure title &
            Measure No.                          description
------------------------------------------------------------------------
PQRI 66...........................  Title: Appropriate Testing for
NQF 0002..........................   Children with Pharyngitis.
NQF 0060..........................  Title: Hemoglobin A1c test for
                                     pediatric patients.
NQF 0106..........................  Title: Diagnosis of attention
                                     deficit hyperactivity disorder
                                     (ADHD) in primary care for school
                                     age children and adolescents.
NQF 0107..........................  Title: Management of attention
                                     deficit hyperactivity disorder
                                     (ADHD) in primary care for school
                                     age children and adolescents.
NQF 0108..........................  Title: ADHD: Follow-Up Care for
                                     Children Prescribed Attention-
                                     Deficit/Hyperactivity Disorder
                                     (ADHD) Medication.
NQF 0024..........................  Title: Body Mass Index (BMI) 2
                                     through 18 years of age.
NQF 0026..........................  Title: Measure pair--
                                       a. Tobacco use prevention for
                                        infants, children and
                                        adolescents,
                                       b. Tobacco use cessation for
                                        infants, children and
                                        adolescents.
NQF 0038..........................  Title: Childhood Immunization
                                     Status.
Not applicable....................  Title: Appropriate antibiotic use
                                     for ear infections.
------------------------------------------------------------------------

           Table 12--Measure Group: Obstetrics and Gynecology
------------------------------------------------------------------------
                                      Clinical quality measure title &
            Measure No.                          description
------------------------------------------------------------------------
PQRI 112..........................  Title: Preventive Care and
NQF 0031..........................   Screening: Screening Mammography.
PQRI 128..........................  Title: Preventive Care and
NQF 0421..........................   Screening: Body Mass Index (BMI)
                                     Screening and Follow-Up.
NQF 0032..........................  Title: Cervical Cancer Screening.
NQF 0033..........................  Title: Chlamydia screening in women.
NQF 0471..........................  Title: Cesarean Rate for low-risk
                                     first birth women (aka NTSV CS
                                     rate).
NQF 0012..........................  Title: Prenatal Screening for Human
                                     Immunodeficiency Virus (HIV).
NQF 0014..........................  Title: Prenatal Anti-D Immune
                                     Globulin.
Not applicable....................  Title: Hysterectomy rates.
Not applicable....................  Title: 30 Readmission Rate following
                                     deliveries.
------------------------------------------------------------------------

[[Page 1894]]

                   Table 13--Measure Group: Neurology
------------------------------------------------------------------------
                                      Clinical quality measure title &
            Measure No.                          description
------------------------------------------------------------------------
PQRI 33...........................  Title: Stroke and Stroke
NQF 0241..........................   Rehabilitation: Anticoagulant
                                     Therapy Prescribed for Atrial
                                     Fibrillation at Discharge.
PQRI 201..........................  Title: Ischemic Vascular Disease
NQF 0073..........................   (IVD): Blood Pressure Management
                                     Control.
PQRI 202..........................  Title: Ischemic Vascular Disease
NQF 0075..........................   (IVD): Complete Lipid Profile.
PQRI 203..........................  Title: Ischemic Vascular Disease
NQF 0075..........................   (IVD): Low Density Lipoprotein (LDL-
                                     C) Control.
PQRI 204..........................  Title: Ischemic Vascular Disease
NQF 0068..........................   (IVD): Use of Aspirin or Another
                                     Antithrombotic.
------------------------------------------------------------------------

                   Table 14--Measure Group: Psychiatry
------------------------------------------------------------------------
                                      Clinical quality measure title &
            Measure No.                          description
------------------------------------------------------------------------
PQRI 9............................  Title: Major Depressive Disorder
NQF 0105..........................   (MDD): Antidepressant Medication
                                     During Acute Phase for Patients
                                     with MDD.
PQRI 106..........................  Title: Major Depressive Disorder
NQF 0103..........................   (MDD): Diagnostic Evaluation.
PQRI 107..........................  Title: Major Depressive Disorder
NQF 0104..........................   (MDD): Suicide Risk Assessment.
NQF 0004..........................  Title: Initiation and Engagement of
                                     Alcohol and Other Drug Dependence
                                     Treatment: (a) Initiation, (b)
                                     Engagement.
NQF 0105..........................  Title: New Episode of Depression:
                                     (a) Optimal Practitioner Contacts
                                     for Medication Management, (b)
                                     Effective Acute Phase Treatment,
                                     (c) Effective Continuation Phase
                                     Treatment.
NQF 0110..........................  Title: Bipolar Disorder and Major
                                     Depression: Appraisal for alcohol
                                     or chemical substance use.
------------------------------------------------------------------------

                 Table 15--Measure Group: Ophthalmology
------------------------------------------------------------------------
                                      Clinical quality measure title &
            Measure No.                          description
------------------------------------------------------------------------
PQRI 12...........................  Title: Primary Open Angle Glaucoma
NQF 0086..........................   (POAG): Optic Nerve Evaluation.
PQRI 18...........................  Title: Diabetic Retinopathy:
NQF 0088..........................   Documentation of Presence or
                                     Absence of Macular Edema and Level
                                     of Severity of Retinopathy.
PQRI 19...........................  Title: Diabetic Retinopathy:
NQF 0089..........................   Communication with the Physician
                                     Managing On-going Diabetes Care.
------------------------------------------------------------------------

                    Table 16--Measure Group: Podiatry
------------------------------------------------------------------------
                                      Clinical quality measure title &
            Measure No.                          description
------------------------------------------------------------------------
PQRI 127..........................  Title: Diabetes Mellitus: Diabetic
NQF 0416..........................   Foot and Ankle Care, Ulcer
                                     Prevention--Evaluation of Footwear.
PQRI 163..........................  Title: Diabetes Mellitus: Foot Exam.
NQF 0056..........................
NQF 0519..........................  Title: Diabetic Foot Care and
                                     Patient Education Implemented.
------------------------------------------------------------------------

                   Table 17--Measure Group: Radiology
------------------------------------------------------------------------
                                      Clinical quality measure title &
            Measure No.                          description
------------------------------------------------------------------------
PQRI 10...........................  Title: Stroke and Stroke
NQF 0246..........................   Rehabilitation: Computed Tomography
                                     (CT) or Magnetic Resonance Imaging
                                     (MRI) Reports.
PQRI 195..........................  Title: Stenosis Measurement in
NQF 0507..........................   Carotid Imaging Studies.
PQRI 145..........................  Title: Radiology: Exposure Time
NQF 0510..........................   Reported for Procedures Using
                                     Fluoroscopy.
PQRI 146..........................  Title: Radiology: Inappropriate Use
NQF 0508..........................   of ``Probably Benign'' Assessment
                                     Category in Mammography Screening.
PQRI 147..........................  Title: Nuclear Medicine: Correlation
NQF 0511..........................   with Existing Imaging Studies for
                                     All Patients Undergoing Bone
                                     Scintigraphy.
NQF 0052..........................  Title: Low back pain: use of imaging
                                     studies.
NQF 0513..........................  Title: Use of Contrast: Thorax CT.
------------------------------------------------------------------------

[[Page 1895]]

                Table 18--Measure Group: Gastroenterology
------------------------------------------------------------------------
                                      Clinical quality measure title &
            Measure No.                          description
------------------------------------------------------------------------
PQRI 86...........................  Title: Hepatitis C: Antiviral
NQF 0397..........................   Treatment Prescribed.
PQRI 89...........................  Title: Hepatitis C: Counseling
NQF 0401..........................   Regarding Risk of Alcohol
                                     Consumption.
PQRI 113..........................  Title: Preventive Care and
NQF 0034..........................   Screening: Colorectal Cancer
                                     Screening.
PQRI 183..........................  Title: Hepatitis C: Hepatitis A
NQF 0399..........................   Vaccination in Patients with HCV.
PQRI 184..........................  Title: Hepatitis C: Hepatitis B
NQF 0400..........................   Vaccination in Patients with HCV.
PQRI 185..........................  Title: Endoscopy & Polyp
AQA adopted.......................   Surveillance: Colonoscopy Interval
                                     for Patients with a History of
                                     Adenomatous Polyps--Avoidance of
                                     Inappropriate Use.
------------------------------------------------------------------------

                   Table 19--Measure Group: Nephrology
------------------------------------------------------------------------
                                      Clinical quality measure title &
            Measure No.                          description
------------------------------------------------------------------------
PQRI 81...........................  Title: End Stage Renal Disease
NQF 0323..........................   (ESRD): Plan of Care for Inadequate
                                     Hemodialysis in ESRD Patients.
PQRI 82...........................  Title: End Stage Renal Disease
NQF 0321..........................   (ESRD): Plan of Care for Inadequate
                                     Peritoneal Dialysis.
PQRI 121..........................  Title: Chronic Kidney Disease (CKD):
AQA adopted.......................   Laboratory Testing (Calcium,
                                     Phosphorus, Intact Parathyroid
                                     Hormone (iPTH) and Lipid Profile).
PQRI 122..........................  Title: Chronic Kidney Disease (CKD):
AQA adopted.......................   Blood Pressure Management.
PQRI 123..........................  Title: Chronic Kidney Disease (CKD):
AQA adopted.......................   Plan of Care--Elevated Hemoglobin
                                     for Patients Receiving
                                     Erythropoiesis-Stimulating Agents
                                     (ESA).
PQRI 153..........................  Title: Chronic Kidney Disease (CKD):
AQA adopted.......................   Referral for Arteriovenous (AV)
                                     Fistula.
------------------------------------------------------------------------

    With the inclusion of measures applicable to targeting children and
adolescents and the wide applicability of the measures like Blood
Pressure Management, we believe this core set of clinical quality
measures and specialty measures is broad enough to enable reporting by
all EPs. However, if the public believes that other EPs would not have
sufficient patients in the denominator of these core measures, we
encourage commenters to identify the EPs in question and propose
specific remedies.
    Although we do not propose to require clinical quality measure
reporting electronically until 2012, we propose to begin clinical
quality reporting through attestation in the 2011 payment year. We
solicit comment on whether it may be more appropriate to defer some or
all clinical quality reporting until the 2012 payment year. If
reporting on some but not all measures in 2011 is feasible, we solicit
comment on which key measures should be chosen for 2011 and which
should be deferred until 2012 and why.
    We further propose that starting in payment year 2012, in addition
to meeting requirements for measures on meaningful EHR use and other
requirements, EPs would be required to electronically submit this
quality reporting information directly to CMS and States using
certified EHR technology. We encourage comments on these reporting
criteria, particularly on the requirement that all EPs-would report on
the set of ``core measures.'' We are also interested in comments as to
whether some Medicare or Medicaid EPs may not be able to meet the
proposed reporting requirements, why that might be the case, and
whether commenters believe other alternative options are preferable.
f. Proposed Clinical Quality Measures for Electronic Submission by
Eligible Hospitals
    Based on the considerations for clinical quality measures
previously discussed in this proposed rule, we propose that eligible
hospitals will be required to report summary data to CMS on the set of
clinical quality measures identified in Table 20 starting in the 2011
payment year. We further propose that for the 2012 payment year,
hospitals will be required to submit these measures to CMS
electronically using certified EHR technology on a set of clinical
quality measures identified in Table 20, which would be sufficient to
meet the requirements for both the Medicare and the Medicaid EHR
incentive (for hospitals eligible for both incentive programs), with
respect to the requirement to report clinical quality measures. For
hospitals eligible for only the Medicaid EHR incentive program, such
reporting will be to States. For eligible hospitals to which the
measures in Table 20 do not apply to their patient population,
hospitals have the option to select clinical quality measures
identified in Table 21 to meet the requirements for the reporting of
clinical quality measures for the Medicaid program incentive. Tables 20
and 21, convey the clinical quality measure's title, number, owner/
developer and contact information, and a link to existing electronic
specifications where applicable.

[[Page 1896]]

  Table 20--Proposed Clinical Quality Measures for Electronic Submission by Eligible Hospitals for Payment Year
                                                    2011-2012
----------------------------------------------------------------------------------------------------------------
                                             Measure title, description & measure         Electronic measure
         Measure No. identifier                            developer                  specifications information
----------------------------------------------------------------------------------------------------------------
ED-1....................................  Title: Emergency Department Throughput--    http://www.hitsp.org/                                           admitted patients. Median time from ED      ConstructSet_Details.asp
                                           arrival to ED departure for admitted        x?&PrefixAlpha=5&PrefixNu
                                           patients.                                   meric=906.
NQF 0495................................  Description: Median time from emergency
                                           department arrival to time of departure
                                           from the emergency room for patients
                                           admitted to the facility from the
                                           emergency department.
                                          Measure Developer: CMS/Oklahoma Foundation
                                           for Medical Quality (OFMQC).
ED-2....................................  Title: Emergency Department Throughput--    http://www.hitsp.org/                                           admitted patients. Admission decision       ConstructSet_Details.asp
                                           time to ED departure time for admitted      x?&PrefixAlpha=5&PrefixNu
                                           patients.                                   meric=906.
NQF 0497................................  Description: Median time from admit
                                           decision time to time of departure from
                                           the emergency department of emergency
                                           department patients admitted to inpatient
                                           status.
                                          Measure Developer: CMS/OFMQ.
ED-3....................................  Title: Emergency Department Throughput--
                                           discharged patients. Median Time from ED
                                           Arrival to ED Departure for Discharged ED
                                           Patients.
NQF 0496................................  Description: Median Time from ED arrival
                                           to time of departure from the ED for
                                           patients discharged from the ED.
                                          Measure Developer: CMS/OFMQ.
Stroke-2................................  Title: Ischemic stroke--Discharge on anti-  http://www.hitsp.org/                                           thrombotics.                                ConstructSet_Details.asp
                                                                                       x?&PrefixAlpha=5&PrefixNu
                                                                                       meric=906.
NQF 0435................................  Description: Ischemic stroke patients
                                           prescribed antithrombotic therapy at
                                           hospital discharge.
                                          Measure Developer: The Joint Commission.
Stroke-3................................  Title: Ischemic stroke--Anticoagulation     http://www.hitsp.org/                                           for A-fib/flutter.                          ConstructSet_Details.asp
                                                                                       x?&PrefixAlpha=5&PrefixNu
                                                                                       meric=906.
NQF 0436................................  Description: Ischemic stroke patients with
                                           atrial fibrillation/flutter who are
                                           prescribed anticoagulation therapy at
                                           hospital discharge.
                                          Measure Developer: The Joint Commission.
Stroke-4................................  Title: Ischemic stroke--Thrombolytic        http://www.hitsp.org/                                           therapy for patients arriving within 2      ConstructSet_Details.asp
                                           hours of symptom onset.                     x?&PrefixAlpha=5&PrefixNu
                                                                                       meric=906.
NQF 0437................................  Description: Acute ischemic stroke
                                           patients who arrive at this hospital
                                           within 2 hours of time last known well
                                           and for whom IV t-PA was initiated at
                                           this hospital within 3 hours of time last
                                           known well.
                                          Measure Developer: The Joint Commission.
Stroke-5................................  Title: Ischemic or hemorrhagic stroke--     http://www.hitsp.org/                                           Antithrombotic therapy by day 2.            ConstructSet_Details.asp
                                                                                       x?&PrefixAlpha=5&PrefixNu
                                                                                       meric=906.
NQF 0438................................  Description: Ischemic stroke patients
                                           administered antithrombotic therapy by
                                           the end of hospital day 2.
                                          Measure Developer: The Joint Commission.
Stroke-6................................  Title: Ischemic stroke--Discharge on        http://www.hitsp.org/                                           statins.                                    ConstructSet_Details.asp
                                                                                       x?&PrefixAlpha=5&PrefixNu
                                                                                       meric=906.
NQF 0439................................  Description: Ischemic stroke patients with
                                           LDL > 100 mg/dL, or LDL not measured, or,
                                           who were on a lipid-lowering medication
                                           prior to hospital arrival are prescribed
                                           statin medication at hospital discharge.
                                          Measure Developer: The Joint Commission.
Stroke-8................................  Title: Ischemic or hemorrhagic stroke--     http://www.hitsp.org/                                           Stroke education.                           ConstructSet_Details.asp
                                                                                       x?&PrefixAlpha=5&PrefixNu
                                                                                       meric=906.

[[Page 1897]]

NQF 0440................................  Description: Ischemic or hemorrhagic
                                           stroke patients or their caregivers who
                                           were given educational materials during
                                           the hospital stay addressing all of the
                                           following: activation of emergency
                                           medical system, need for follow-up after
                                           discharge, medications prescribed at
                                           discharge, risk factors for stroke, and
                                           warning signs and symptoms of stroke.
                                          Measure Developer: The Joint Commission.
Stroke-10...............................  Title: Ischemic or hemorrhagic stroke--     http://www.hitsp.org/                                           Rehabilitation assessment.                  ConstructSet_Details.asp
                                                                                       x?&PrefixAlpha=5&PrefixNu
                                                                                       meric=906.
NQF 0441................................  Description: Ischemic or hemorrhagic
                                           stroke patients who were assessed for
                                           rehabilitation services.
                                          Measure Developer: The Joint Commission.
VTE-1...................................  Title: VTE prophylaxis within 24 hours of   http://www.hitsp.org/                                           arrival.                                    ConstructSet_Details.asp
                                                                                       x?&PrefixAlpha=5&PrefixNu
                                                                                       meric=906.
NQF 0371................................  Description: This measure assesses the
                                           number of patients who received VTE
                                           prophylaxis or have documentation why no
                                           VTE prophylaxis was given the day of or
                                           the day after hospital admission or
                                           surgery end date for surgeries that start
                                           the day of or the day after hospital
                                           admission.
                                          Measure Developer: The Joint Commission.
VTE-2...................................  Title: ICU VTE prophylaxis................  http://www.hitsp.org/                                                                                       ConstructSet_Details.asp
                                                                                       x?&PrefixAlpha=5&PrefixNu
                                                                                       meric=906.
NQF 0372................................  Description: This measure assesses the
                                           number of patients who received VTE
                                           prophylaxis or have documentation why no
                                           VTE prophylaxis was given the day of or
                                           the day after the initial admission (or
                                           transfer) to the Intensive Care Unit
                                           (ICU) or surgery end date for surgeries
                                           that start the day of or the day after
                                           ICU admission (or transfer).
                                          Measure Developer: The Joint Commission.
VTE-3...................................  Title: Anticoagulation overlap therapy....  http://www.hitsp.org/                                                                                       ConstructSet_Details.asp
                                                                                       x?&PrefixAlpha=5&PrefixNu
                                                                                       meric=906.
NQF 0373................................  Description: This measure assesses the
                                           number of patients diagnosed with
                                           confirmed VTE who received an overlap of
                                           parenteral (intravenous [IV] or
                                           subcutaneous [subcu]) anticoagulation and
                                           warfarin therapy. For patients who
                                           received less than five days of overlap
                                           therapy, they must be discharged on both
                                           medications. Overlap therapy must be
                                           administered for at least five days with
                                           an international normalized ratio (INR)
                                           >= 2 prior to discontinuation of the
                                           parenteral anticoagulation therapy or the
                                           patient must be discharged on both
                                           medications.
                                          Measure Developer: The Joint Commission.
VTE-4...................................  Title: Platelet monitoring on               http://www.hitsp.org/                                           unfractionated heparin.                     ConstructSet_Details.asp
                                                                                       x?&PrefixAlpha=5&PrefixNu
                                                                                       meric=906.
NQF 0374................................  Description: This measure assesses the
                                           number of patients diagnosed with
                                           confirmed VTE who received intravenous
                                           (IV) UFH therapy dosages AND had their
                                           platelet counts monitored using defined
                                           parameters such as a nomogram or
                                           protocol.
                                          Measure Developer: The Joint Commission.
VTE-5...................................  Title: VTE discharge instructions.........  http://www.hitsp.org/                                                                                       ConstructSet_Details.asp
                                                                                       x?&PrefixAlpha=5&PrefixNu
                                                                                       meric=906.
NQF 0375................................  Description: This measure assesses the
                                           number of patients diagnosed with
                                           confirmed VTE that are discharged to
                                           home, to home with home health, home
                                           hospice or discharged/transferred to
                                           court/law enforcement on warfarin with
                                           written discharge instructions that
                                           address all four criteria: compliance
                                           issues, dietary advice, follow-up
                                           monitoring, and information about the
                                           potential for adverse drug reactions/
                                           interactions.

[[Page 1898]]

                                          Measure Developer: The Joint Commission.
VTE-6...................................  Title: Incidence of potentially             http://www.hitsp.org/                                           preventable VTE.                            ConstructSet_Details.asp
                                                                                       x?&PrefixAlpha=5&PrefixNu
                                                                                       meric=906.
NQF 0376................................  Description: This measure assesses the
                                           number of patients diagnosed with
                                           confirmed VTE during hospitalization (not
                                           present on arrival) who did not receive
                                           VTE prophylaxis between hospital
                                           admission and the day before the VTE
                                           diagnostic testing order date.
                                          Measure Developer: The Joint Commission.
RHQDAPU AMI-8a..........................  Title: Primary PCI Received Within 90
                                           Minutes of Hospital Arrival.
NQF 0163................................  Description: Acute myocardial infarction
                                           (AMI) patients with ST-segment elevation
                                           or LBBB on the ECG closest to arrival
                                           time receiving primary PCI during the
                                           hospital stay with a time from hospital
                                           arrival to PCI of 90 minutes or less.
                                          Measure Developer: CMS/OFMQ.
RHQDAPU PN-3b...........................  Title: Blood Cultures Performed in the
                                           Emergency Department Prior to Initial
                                           Antibiotic Received in Hospital.
NQF 0148................................  Description: Pneumonia patients whose
                                           initial emergency room blood culture
                                           specimen was collected prior to first
                                           hospital dose of antibiotics. This
                                           measure focuses on the treatment provided
                                           to Emergency Department patients prior to
                                           admission orders.
                                          Measure Developer: CMS/OFMQ.
RHQDAPU AMI-2...........................  Title: Aspirin Prescribed at Discharge....
NQF 0142................................  Description: Acute myocardial infarction
                                           (AMI) patients who are prescribed aspirin
                                           at hospital discharge.
                                          Measure Developer: CMS/OFMQ.
RHQDAPU AMI-3...........................  Title: Angiotensin Converting Enzyme
                                           Inhibitor (ACEI) or Angiotensin Receptor
                                           Blocker (ARB) for Left Ventricular
                                           Systolic Dysfunction (LVSD).
NQF 0137................................  Description: Acute myocardial infarction
                                           (AMI) patients with left ventricular
                                           systolic dysfunction (LVSD) who are
                                           prescribed an ACEI or ARB at hospital
                                           discharge. For purposes of this measure,
                                           LVSD is defined as chart documentation of
                                           a left ventricular ejection fraction
                                           (LVEF) less than 40% or a narrative
                                           description of left ventricular systolic
                                           (LVS) function consistent with moderate
                                           or severe systolic dysfunction.
                                          Measure Developer: CMS/OFMQ.
RHQDAPU AMI-5...........................  Title: Beta-Blocker Prescribed at
                                           Discharge.
NQF 0160................................  Description: Acute myocardial infarction
                                           (AMI) patients who are prescribed a
                                           betablocker at hospital discharge.
                                          Measure Developer: CMS/OFMQ.
RHQDAPU AMI-READ........................  Title & Description: Hospital Specific 30
                                           day Risk-Standardized Readmission Rate
                                           following AMI admission.
NQF 0505................................  Measure Developer: CMS.
Not applicable..........................  Title: Hospital Specific 30 day Rate
                                           following AMI admission.
RHQDAPU HF-READ.........................  Title & Description: Hospital Specific 30
                                           day Risk-Standardized Readmission Rate
                                           following Heart Failure admission.
NQF 0330................................  Measure Developer: CMS/OFMQ.
Not applicable..........................  Title: Hospital Specific 30 day Rate
                                           following Heart Failure admission.
RHQDAPU PNE-READ........................  Title & Description: Hospital Specific 30
                                           day Risk-Standardized Readmission Rate
                                           following Pneumonia admission.
NQF 0506................................  Measure Developer: CMS.
Not applicable..........................  Title: Hospital Specific 30 day Rate
                                           following Pneumonia admission.
NQF 0528................................  Title: Infection SCIP Inf-2 Prophylactic
                                           antibiotics consistent with current
                                           recommendations.
                                          Description: Surgical patients who
                                           received prophylactic antibiotics
                                           consistent with current guidelines
                                           (specific to each type of surgical
                                           procedure).
                                          Measure Developer: CMS/OFMQ.
NQF 0302................................  Title: Ventilator Bundle.
                                          Description: Percentage of intensive care
                                           unit patients on mechanical ventilation
                                           at time of survey for whom all four
                                           elements of the ventilator bundle are
                                           documented and in place. The ventilator
                                           bundle elements are:
                                              Head of bed (HOB) elevation 30
                                              degrees or greater (unless medically
                                              contraindicated); noted on 2 different
                                              shifts within a 24 hour period.

[[Page 1899]]

                                              Daily ``sedation
                                              interruption'' and daily assessment of
                                              readiness to extubate; process
                                              includes interrupting sedation until
                                              patient follow commands and patient is
                                              assessed for discontinuation of
                                              mechanical ventilation; Parameters of
                                              discontinuation include: resolution of
                                              reason for intubation; inspired oxygen
                                              content roughly 40%; assessment of
                                              patients ability to defend airway
                                              after extubation due to heavy
                                              sedation; minute ventilation less than
                                              equal to 15 liters/minute; and
                                              respiratory rate/tidal volume less
                                              than or equal to 105/min/L (RR/TV <
                                              105).
                                              SUD (peptic ulcer disease)
                                              prophylaxis DVT (deep venous
                                              thrombosis) prophylaxis.
                                          Measure Developer: IHI.
NQF 0298................................  Title: Central Line Bundle Compliance.
                                          Description: Percentage of intensive care
                                           patients with central lines for whom all
                                           elements of the central line bundle are
                                           documented and in place. The central line
                                           bundle elements include:
                                              Hand hygiene..................
                                              Maximal barrier precautions
                                              upon insertion.
                                              Chlorhexidine skin antisepsis.
                                              Optimal catheter site
                                              selection, with subclavian vein as the
                                              preferred site for non-tunneled
                                              catheters in patients 18 years and
                                              older.
                                              Daily review of line necessity
                                              with prompt removal of unnecessary
                                              lines.
                                          Measure Developer: IHI.
NQF 0140................................  Title: Ventilator-associated pneumonia for
                                           ICU and high-risk nursery (HRN) patients.
                                          Description: Percentage of ICU and HRN
                                           patients who over a certain amount of
                                           days have ventilator-associated
                                           pneumonia.
                                          Measure Developer: CDC.
NQF 0138................................  Title: Urinary catheter-associated urinary
                                           tract infection for intensive care unit
                                           (ICU) patients.
                                          Description: Percentage of intensive care
                                           unit patients with urinary catheter-
                                           associated urinary tract infections.
                                          Measure Developer: CDC.
NQF 0139................................  Title: Central line catheter-associated
                                           blood stream infection rate for ICU and
                                           high-risk nursery (HRN) patients.
                                          Description: Percentage of ICU and high-
                                           risk nursery patients, who over a certain
                                           amount of days acquired a central line
                                           catheter-associated blood stream
                                           infections over a specified amount of
                                           line-days.
                                          Measure Developer: CDC.
NQF 0329................................  Title: All-Cause Readmission Index (risk
                                           adjusted).
                                          Description: Overall inpatient 30-day
                                           hospital readmission rate.
                                          Measure Developer: United Health Group.
Not applicable..........................  Title: All-Cause Readmission Index.
                                          Description: Overall inpatient 30-day
                                           hospital readmission rate.
----------------------------------------------------------------------------------------------------------------

        Table 21--Proposed Alternative Medicaid Clinical Quality Measures for Medicaid Eligible Hospitals
----------------------------------------------------------------------------------------------------------------
                                             Measure title, description & measure         Electronic measure
                 NQF No.                                   developer                  specifications information
----------------------------------------------------------------------------------------------------------------
0341....................................  Title: PICU Pain Assessment on Admission.
                                          Description: Percentage of PICU patients
                                           receiving:
                                          a. Pain assessment on admission.
                                          b. Periodic pain assessment.
                                          Measure Developer: Vermont Oxford Network.
0348....................................  Title: Iotrogenic pneumothorax in non-
                                           neonates (pediatric up to 17 years of
                                           age).
                                          Description: Percent of medical and
                                           surgical discharges, age under 18 years,
                                           with ICD-9-CM code of iatrogenic
                                           pneumothorax in any secondary diagnosis
                                           field.
                                          Measure Developer: AHRQ.
0362....................................  Title: Foreign body left after procedure,
                                           age under 18 years.
                                          Description: Discharges with foreign body
                                           accidentally left in during procedure per
                                           1,000 discharges.
                                          Measure Developer: AHRQ.
0151....................................  Title: Pneumonia Care PNE-5c Antibiotic.
                                          Description: Percentage of pneumonia
                                           patients 18 years of age and older who
                                           receive their first dose of antibiotics
                                           within 6 hours after arrival at the
                                           hospital.
                                          Measure Developer: CMS/OFMQ.
0147....................................  Title: Pneumonia Care PN-6 Antibiotic
                                           selection.
                                          Description: Percentage of pneumonia
                                           patients 18 years of age or older
                                           selected for initial receipts of
                                           antibiotics for community-acquired
                                           pneumonia (CAP).

[[Page 1900]]

                                          Measure Developer: CMS/OFMQ.
0356....................................  Title: Pneumonia Care PN-3a Blood culture.
                                          Description: Percent of pneumonia
                                           patients, age 18 years or older,
                                           transferred or admitted to the ICU within
                                           24 hours of hospital arrival who had
                                           blood cultures performed within 24 hours
                                           prior to or 24 hours after arrival at the
                                           hospital.
                                          Measure Developer: CMS/OFMQ.
0527....................................  Title: Infection SCIP Inf-1 Prophylactic
                                           antibiotic received within 1 hour prior
                                           to surgical incision.
                                          Description: Surgical patients with
                                           prophylactic antibiotics initiated within
                                           1 hour prior to surgical incision.
                                           Patients who received vancomycin or a
                                           fluoroquinolone for prophylactic
                                           antibiotics should have the antibiotics
                                           initiated within 2 hours prior to
                                           surgical incision. Due to the longer
                                           infusion time required for vancomycin or
                                           a fluoroquinolone, it is acceptable to
                                           start these antibiotics within 2 hours
                                           prior to incision time.
                                          Measure Developer: CMS/OFMQ.
0529....................................  Title: Infection SCIP Inf-3 Prophylactic
                                           antibiotics discontinued within 24 hours
                                           after surgery end time.
                                          Description: Surgical patients whose
                                           prophylactic antibiotics were
                                           discontinued within 24 hours after
                                           Anesthesia End Time.
                                          Measure Developer: CMS/OFMQ.
----------------------------------------------------------------------------------------------------------------

    We have included in the hospital measures set several clinical
quality measures which have undergone development of electronic
specifications. These clinical quality measures have been developed for
future RHQDAPU consideration. The electronic specifications were
developed through an interagency agreement with ONC to develop
interoperable standards for EHR submission of the ED throughput,
stroke, and VTE clinical quality measures on Table 20, to be determined
by a future rulemaking document provided by ONC. We also have planned
to test the submission of these clinical quality measures in Medicare
(see 74 FR 43893). The specifications for the RHQDAPU clinical quality
measures for eligible hospitals that are being used for testing EHR-
based submission of these clinical quality measures can be found at
http://www.hitsp.org/ConstructSet_Details.aspx?&PrefixAlpha=5&PrefixNumeric=906. A description of the
clinical quality measure, including the clinical quality measure's
numerator and denominator, can be found here as well. Other measures
are currently in the RHQDAPU program or are measures of importance for
measuring or preventing adverse outcomes. In addition to Risk
Standardized readmission clinical quality measures, we have proposed
Readmission rates to be reported which are not risk adjusted. We have
also reviewed the recommendations of the HIT Standards Committee that
apply to hospitals which include Atrial Fibrillation Receiving
Anticoagulation Therapy. We note that Atrial Fibrillation Receiving
Anticoagulation Therapy is one of the clinical quality measures
included on Table 20, identified in the table as Stroke-3. We note that
we have not included the HIT Standards Committee recommended clinical
quality measure on surgery patients who received VTE prophylaxis within
24 hours period to surgery to 24 hours after surgery end time because
it is a current clinical quality measure collected in the RHQDAPU
program through chart abstraction for all applicable patients (SCIP-
VTE-2). The VTE-2 clinical quality measure in Table 20 is a parallel
clinical quality measure to SCIP-VTE-2, includes non-surgical patients,
and is a more feasible to implement because the electronic
specifications have been completed. We have however added SCIP-VTE-2
for future consideration.
    To satisfy the requirements of reporting on clinical quality
measures under sections 1886(n)(3)(A)(iii) and 1903(t)(6)(C) of the Act
for the 2011-2012 payment year, we propose to require eligible
hospitals to report on all EHR incentive clinical quality measures for
which they have applicable cases, without regard to payer. Medicare
eligible hospitals, who are also participating in the Medicaid EHR
incentive program, will also be required to report on all Medicaid
clinical quality measures for which the eligible hospital has
applicable cases. To demonstrate that it is an eligible meaningful EHR
user, the eligible hospital is required to electronically submit
information on each clinical quality measures for each patient to whom
the clinical quality measure applies, regardless of payer, discharged
from the hospital during the EHR reporting period and for whom the
clinical quality measure is applicable. Although we do not propose to
require clinical quality reporting electronically until 2012, we
propose to begin clinical quality reporting though attestation in the
2011 payment year. We solicit comment on whether it may be more
appropriate to defer some or all clinical quality reporting until the
2012 payment year. If reporting on some but not all measures in 2011 is
feasible, we solicit comment on which key measures should be chosen for
2011 and which should be deferred until 2012 and why.
    We invite comments on these proposed clinical quality measures for
eligible hospitals and our proposed timelines to post specification
documents for these clinical quality measures to the CMS Web site.
g. Request for Public Comment on Potential Measures for EPs and
Eligible Hospitals in 2013 Payment Year and Subsequent Years
    We expect that the number of clinical quality measures for which
EPs and eligible hospitals will be able to electronically submit
information will rapidly expand in 2013 and beyond.
    We plan to consider measures from the 2010 PQRI program. These
clinical quality measures can be found at http://www.cms.hhs.gov/PQRI/05_StatuteRegulationsProgramInstructions.asp
    For future considerations of clinical quality measures for 2013 and
beyond for eligible hospitals, we will also

[[Page 1901]]

consider other clinical quality measures from the RHQDAPU program which
are identified in the FY 2010 IPPS final rule (74 FR 43868 through
43882). We invite comments on inclusion of clinical quality measures
for the 2013 and beyond HITECH Act Medicare and Medicaid incentive
program, based on Stage 2 and Stage 3 meaningful use criteria.
    For the 2013 payment year, we are considering expanding the
Medicaid EHR incentive programs clinical quality measure set for EPs
and eligible hospitals to include clinical quality measures that
address the following clinical areas, to address quality of care for
additional patient populations, and facilitate alignment with Medicaid
and CHIP programs:
     Additional pediatrics measures (such as completed growth
charts, electronic prescriptions with weight-based dosing support and
documentation of newborn screening).
     Long-term care measures.
     Additional obstetrics measure.
     Dental care/oral health measures.
     Additional mental health and substance abuse measures.

The above lists do not constitute a comprehensive list of all clinical
quality measures that may be considered. Specific measures for payment
years 2013 and beyond will be addressed by CMS in future notice and
comment rulemaking. To assist us in identifying potential clinical
quality measures for future consideration for years 2013 and beyond, we
welcome comments on the potential topics and/or clinical quality
measures listed above as well as suggestions for additional clinical
quality measure topics and/or specific clinical quality measures.
h. Proposed Reporting Method for Clinical Quality Measures for 2011 and
2012 Payment Year
(1) Reporting Method for 2011 Payment Year
    As we previously discussed, we propose to use attestation as a
means for EPs and eligible hospitals, for purposes of the Medicare
incentive program, to demonstrate the meaningful use requirement for
the calculation and submission of clinical quality measure results to
CMS.
    Specifically, for 2011, we propose to require that Medicare EPs and
hospitals attest to the use of a certified EHR system to capture the
data elements and calculate the results for the applicable clinical
quality measures.
    We further propose to require that Medicare EPs and eligible
hospitals attest to the accuracy and completeness of the numerators,
denominators, and exclusions submitted for each of the applicable
measures, and report the results to CMS for all applicable patients.
    Attestation will utilize the same system for other attestation for
meaningful use, and we propose to require for Medicare EPs that they
attest to the following:
     The information submitted with respect to clinical quality
measures was generated as output of an identified certified electronic
health record.
     The information submitted is accurate to the best of the
knowledge and belief of the EP.
     The information submitted includes information on all
patients to whom the clinical quality measure applies.
     The NPI and TIN of the EP submitting the information, and
the specialty group of clinical quality measures that are being
submitted.
     For an EP who is exempt from reporting each of the core
measures, an attestation that one or more of the core measures do not
apply to the scope of practice of the EP.
     For an EP who is exempt from reporting on a specialty
group, an attestation that none of the specialty groups applies to the
scope of practice of the EP.
     For an EP who does report on a specialty group, but is
exempt from reporting on each of the clinical quality measures in the
group, an attestation that the clinical quality measures not reported
do not apply to any patients treated by the EP.
     The numerators, denominators, and exclusions for each
clinical quality measure result reported, providing separate
information for each clinical quality measure including the numerators,
denominators, and exclusions for all patients irrespective third party
payer or lack thereof; for Medicare FFS patients; for Medicare
Advantage patients; and for Medicaid patients.
     The beginning and end dates for which the numerators,
denominators, and exclusions apply.
    For eligible hospitals, we propose to require that they attest to
the following:
     The information submitted with respect to clinical quality
measures was generated as output from an identified certified EHR.
     The information submitted to the knowledge and belief of
the official submitting on behalf of the eligible hospital.
     The information submitted includes information on all
patients to whom the measure applies.
     The identifying information for the eligible hospital.
     For eligible hospitals that do not report one or more
measures an attestation that the clinical quality measures not reported
do not apply to any patients treated by the eligible hospital during
the reporting period.
     The numerators, denominators, and exclusions for each
clinical quality measure result reported, providing separate
information for each clinical quality measure including the numerators,
denominators, and exclusions for all patients irrespective third party
payer or lack thereof; for Medicare FFS patients; for Medicare
Advantage patients; and for Medicaid patients.
     The beginning and end dates for which the numerators,
denominators, and exclusions apply.
(2) Reporting Method for 2012
    In accordance with sections 1848(o)(2)(A)(iii) and
1886(n)(3)(A)(iii) of the Act, an EP or eligible hospital,
respectively, must submit summary information (that is, information
that is not personally identifiable) on the clinical quality measures
selected by the Secretary using certified EHR technology in order to
demonstrate their meaningful use of certified EHR technology.
Additionally, for the 2012 payment year, we propose that EPs and
eligible hospitals be required to electronically submit the summary
information for a selected clinical quality measure from those listed
in Tables 3 through 21 using certified EHR technology as defined in
section II.A.1.a of this proposed rule for the Medicare and Medicaid
incentives. The required Medicare incentive information will be
identified in the measures specifications, which we intend will be on
our Web site 9 months before the start of the payment year. For
Medicaid, EPs and hospitals eligible only for the Medicaid EHR
incentive program must report their clinical quality measures data to
States. States will propose to CMS how they plan to accept and validate
Medicaid providers' clinical quality measures data in their State
Medicaid HIT Plans, subject to CMS review and approval, as described in
section II.D.7. of this proposed rule.
    Sections 1848(o)(A)(2)(iii) and 1886(n)(3)(A)(iii) of the Act
broadly state that as a condition of demonstrating meaningful use of
certified EHR technology, an EP, CAH or eligible hospital must ``submit
information'' for the EHR reporting period on the clinical quality or
other measures selected by the Secretary ``in a form and manner
specified by the

[[Page 1902]]

Secretary.'' This language does not limit us to collecting only that
information pertaining to Medicare and Medicaid beneficiaries.
Therefore, we believe that we have the authority to collect summarized
clinical quality measures selected by the Secretary, with respect to
all patients to whom the clinical quality measure applies, treated by
the EP or eligible hospital. We believe that it is necessary for the EP
or eligible hospital to report on all cases to which a clinical quality
measures applies in order to accurately assess the quality of care
rendered by the particular EP or eligible hospital generally. Otherwise
it would only be possible to evaluate the care being rendered for a
portion of patients and lessen the ability to improve quality
generally. We solicit comments on the impact of requiring the
submission of clinical quality measures data on all patients, not just
Medicare and Medicaid beneficiaries.
    Sections 1848(o)(2)(B)(iii) and 1886(n)(3)(B)(iii) of the Act
requires that in selecting clinical quality measures, the Secretary
shall seek to avoid redundant or duplicative reporting otherwise
required, including reporting under section 1848(k)(2)(C) of the Act
(the PQRI program) and eligible reporting under section
1886(b)(3)(B)(viii) of the Act (RHQDAPU program). We interpret
``redundant or duplicative reporting'' to mean requiring the reporting
of data on the same clinical quality measure separately for two or more
quality reporting programs under Medicare. Similarly, we seek to align
clinical quality measure reporting activities under CHIPRA with those
proposed here, to avoid duplication of reporting and to strengthen the
quality reporting infrastructure more broadly. Therefore, when a
clinical quality measure is included in more than one quality reporting
incentive program, we will seek to avoid requiring EPs and eligible
hospitals to report the same clinical quality measure under separate
programs. In instances in which a particular clinical quality measure
is included in the Medicare EHR incentive program and another Medicare
quality reporting incentive program, an EP or eligible hospital would
only need to report the measure under the Medicare EHR incentive
program, and the reporting of such clinical quality measure using
certified EHR technology would be considered as the EP or eligible
hospitals having satisfied the parallel reporting requirement under all
other applicable Medicare programs. With respect to any clinical
quality measures that may be included in the measure sets for both the
Medicare EHR Incentive Programs for EPs and the PQRI, we note that
there is no existing statutory authority to make PQRI incentive
payments for services furnished in 2011 and subsequent years.
    We propose that Medicare EPs and eligible hospitals would be
required to report the required clinical quality measures information
electronically using certified EHR technology via one of three methods.
The primary method would require the EP or eligible hospital to log
into a CMS-designated portal. Once the EP or eligible hospital has
logged into the portal, they would be required to submit, through an
upload process, data payload based on specified structures, such as
Clinical Data Architecture (CDA), and accompanying templates produced
as output from their certified EHR technology.
    As an alternative to this data submission method, we propose to
permit Medicare EPs and eligible hospitals to submit the required
clinical quality measures data using certified EHR technology through
Health Information Exchange (HIE)/Health Information Organization
(HIO). This alternative data submission method would be dependent on
the Secretary's ability to collect data through a HIE/HIO network and
would require the EP or eligible hospital who chooses to submit data
via an HIE/HIO network to be a participating member of the HIE/HIO
network. Medicare EPs and eligible hospitals would be required to
submit their data payload based on specified structures or profiles,
such as Clinical Data Architecture (CDA), and accompanying templates.
The EP's or eligible hospital's data payload should be an output from
their respective certified EHR products, in the form and manner
specified from their HIE/HIO adopted architecture into the CMS HIE/HIO
adopted architecture.
    As another potential alternative, we propose to accept submission
through registries dependent upon the development of the necessary
capacity and infrastructure to do so using certified EHRs.
    We intend to post the technical requirements for portal submission
and the alternative HIE/HIO submission, the HIE/HIO participating
member definition, and other specifications for submission on our Web
site for Medicare EPs on or before July 1, 2011 and for Medicare
eligible hospitals on or before April 1, 2011 for EHR adoption and
incorporation and to accommodate EHR vendors.
    We invite comments on our three proposed clinical quality measures
data submission methodologies as they pertain to CMS for Medicare and
to States for Medicaid.
i. Alternative Reporting Methods for Clinical Quality Measures
    There are several alternative reporting methods we considered to
create a dataset of provider-submitted summary data. One such
alternative is the development of a distributed network of EHRs where
health information is retained locally in individual EP or eligible
hospital EHRs and only summary reports are submitted to CMS. Another
alternative is the creation of databases of patient-level EHR data
stored at the state or regional level. We invite comment on our
proposed approach, as well as our two alternatives. We also invite
comment on all other alternative reporting methods.
j. Proposed Reporting Criteria for EPs and Eligible Hospitals
    Sections 1848(o)(A)(2)(iii) and 1886(n)(3)(A)(iii) of the Act state
that to demonstrate meaningful use of certified EHR technology for an
EHR reporting period, an EP and eligible hospital must submit
information ``for such period'' on the clinical quality measures and
other measures selected by the Secretary. We therefore propose that for
2011 and 2012, the reporting period for the clinical quality measures
selected by the Secretary be the EHR reporting period as previously
defined in section II.A.1.e. of this proposed rule.
    Another alternative we considered was a fixed reporting period of
four quarterly reporting periods, or 2, 6-month reporting periods. In
terms of practice and precedent for other Medicare clinical quality
measure reporting programs, all submit data to us at specific reporting
intervals.
    We invite industry and interested stakeholder comments on our
proposal, especially those who may feel that a fixed period would be
more advantageous.
k. Addressing Dually Eligible Medicare/Medicaid Beneficiaries Under
HITECH
    Since the EHR incentives are based on Medicare or Medicaid EPs
choosing one program or the other, we are concerned that the Medicare
and Medicaid incentive programs address the HIT needs of dually
eligible program beneficiaries. Since this population requires special
coordination between the State and Federal government, we intend to
engage in new efforts to promote Medicare health information exchange
with States, as well as look for other new ways to meet the care
management objectives of this population through HIT. As such, we

[[Page 1903]]

are requesting comments on potential measures to reach our goal.
4. Demonstration of Meaningful Use
    Section 1848(o)(3)(C) of the Act, as added by section 4101(a) of
the HITECH Act, requires that as a condition of eligibility for the
incentive payment, an EP must demonstrate meaningful use of certified
EHR technology (other than the reporting on clinical quality and other
measures) as discussed in section II.A.3 of this proposed rule in the
manner specified by the Secretary, which may include the following: An
attestation, the submission of claims with appropriate coding, a survey
response, reporting of clinical quality or other measures, or other
means. Similarly, section 1886(n)(3)(c) of the Act, as added by section
4102(a) of the HITECH Act, requires that hospitals seeking the
incentive payment demonstrate meaningful use of certified EHR
technology in the manner specified by the Secretary. Section
1903(t)(6)(C)(i)(II) of the Act, as added by section 4201(a)(2) under
the HITECH Act, states that a Medicaid EP or eligible hospital must
demonstrate meaningful use through a ``means that is approved by the
State and acceptable to the Secretary.'' In addition, pursuant to
section 1903(t)(9) of the Act, a State must demonstrate to the
satisfaction of the Secretary that the State is conducting adequate
oversight, including the routine tracking of meaningful use
attestations and reporting mechanisms.
a. Common Methods of Demonstration in Medicare and Medicaid
    We propose to create a common method for demonstrating meaningful
use in both the Medicare and Medicaid EHR incentive programs, for the
same reasons we have proposed a uniform definition of meaningful use.
The demonstration methods we adopt for Medicare would automatically be
available to the States for use in their Medicaid programs. The
Medicare methods are segmented into two parts, as discussed below.
States seeking to modify or propose alternative demonstration methods
must submit the proposed methods for prior CMS approval. This process
is discussed more fully in Section II.D.7.b.2.c. of this proposed rule.
b. Methods for Demonstration of the Stage 1 Criteria of Meaningful Use
    We are proposing at Sec.  495.8 that for CY 2011 and FY 2011, EPs
and eligible hospitals demonstrate that they satisfy each of the
proposed meaningful use objectives specified in Sec.  495.6 through
attestation. For payment years beginning in CY and FY 2012 and
subsequent years, we are proposing at Sec.  495.8 that EPs and eligible
hospitals demonstrate that they satisfy each of the proposed meaningful
use objectives other than ``Submitting quality measures to CMS or the
States'' through attestation, and demonstrate that they satisfy the
objective ``Submitting quality measure to CMS or the States'' through
electronic reporting of clinical quality measures to CMS or the States,
as specified in section II.A.3 of this proposed rule. Specifically, we
propose that EPs and eligible hospitals provide attestation through a
secure mechanism, such as through claims based reporting or an online
portal. We propose that an EP or eligible hospital would through a 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 objectives of meaningful use. We chose to propose
attestation through a secure mechanism because we do not believe that
HIT will advance enough from its current state to allow for more
automated and/or documented options of demonstrating meaningful use. As
HIT matures we expect to base demonstration more on automated reporting
by certified EHR technologies, such as the direct electronic reporting
of measures both clinical and non clinical and documented participation
in HIE. The first example is to the move from attestation for clinical
quality measures to direct reporting in 2012 and subsequent years for
EPs and eligible hospitals. As HIT advances we expect to move more of
the objectives away from being demonstrated through attestation.
However, given the current state of HIT, we believe that imposing such
demonstration requirements for 2011 would pose significant barriers to
participation in the EHR incentive programs.
    We believe that the means by which EPs and eligible hospitals
demonstrate meaningful use should work for all provider types. We also
believe that uniform means of demonstration for EPs and eligible
hospitals are preferable and that a greater burden should not be placed
on one or the other. In addition, we do not believe that demonstration
of meaningful use should require use of certified EHR technology beyond
the capabilities certified to be determined by a future rulemaking
document provided by ONC.
    In addition to requiring electronic reporting of clinical quality
measures in 2012 in Medicare and Medicaid, we also propose for CMS and/
or the States to test options to utilize existing and emerging HIT
products and infrastructure capabilities to satisfy other objectives of
the meaningful use definition. The optional testing could involve the
use of registries or the direct electronic reporting of some measures
associated with the objectives of the meaningful use definition. We do
not propose to require any EP or eligible hospital to participate in
this testing in either 2011 or 2012 in order to receive an incentive
payment. However, in order to make progress towards our goal of
meaningful use being demonstrated through the electronic exchange of
information we encourage States to explore the available options. The
state of electronic exchange varies widely across the country and is
dependent on numerous Federal, State, local, 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 and eligible
hospitals who wish to join in our efforts to explore the electronic
exchange of information. Any testing should be based on the principal
of electronic exchange of information from certified EHR technology
either directly to the States or through an intermediary. For purposes
of the programs in this proposed rule it would be counterproductive for
an intermediary to collect information through paper abstraction.
    We will issue further instructions on the specifics for submitting
attestation through established outreach venues.
5. Data Collection for Online Posting, Program Coordination, and
Accurate Payments
    As described below, the HITECH Act requires the Secretary to post
online the names of Medicare EPs and eligible hospitals and CAHs who
are meaningful EHR users for the relevant payment year. Section
1903(t)(2) of the Act also requires us to ensure that EPs do not
receive an EHR incentive payment under both Medicare and Medicaid. To
fulfill these mandates, we must collect several data elements from EPs
and eligible hospitals. Beyond these two direct HITECH Act
requirements, CMS and the States also require certain data in order to
accurately calculate and distribute the incentive payments.
a. Online Posting
    Section 1848(o)(3)(D) of the Act requires the Secretary to list in
an easily understandable format the names, business addresses, and
business phone numbers of the Medicare EPs and, as

[[Page 1904]]

determined appropriate by the Secretary, of group practices receiving
incentive payments for being meaningful EHR users under the Medicare
FFS program on our internet Web site. We do not propose to post
information on group practices because we do not propose to base
incentive payments at the group practice level. Section 1886(n)(4)(B)
of the Act, as added by section 4102(c) of the HITECH Act, requires the
Secretary to list in an easily understandable format the names and
other relevant data, as she determines appropriate, of eligible
hospitals and CAHs who are meaningful EHR users under the Medicare FFS
program, on our internet Web site. Eligible hospitals and CAHs will
have the opportunity to review the list before the list is publicly
posted. Sections 1853(m)(5) and 1853(l)(7) of the Act, as added by
sections 4101(c) and 4102(c) of the HITECH Act, require the Secretary
to post the same information for EPs and eligible hospitals in the MA
program as would be required if they were in the Medicare FFS program.
Additionally, the Secretary must post the names of the MA organizations
receiving the incentive payment or payments. We propose to collect the
information necessary to post the name, business address and business
phone numbers of all EPs, eligible hospitals and CAHs participating in
the Medicare FFS and MA EHR incentive programs, and to post this
information on our Web site.
b. Program Election Between Medicare FFS/MA and Medicaid for EPs
    Section 1903(t)(2) of the Act prohibits an EP from receiving
incentive payments under the Medicaid program unless the EP has waived
any rights to incentive payments under the Medicare FFS or MA programs.
Furthermore, section 1903(t)(7) of the Act requires the Secretary to
assure no duplication of funding with respect to the Medicaid program,
and the physician and MA incentive payments under sections 1848(o) and
1853(l) of the Act. This waiver and non-duplication requirement applies
only to EPs meeting both the Medicare FFS/MA and Medicaid EHR incentive
programs eligibility criteria, and does not apply to hospitals (which
are eligible to receive incentive payments from both Medicare and
Medicaid simultaneously). Proposed Sec.  495.10 would allow an EP
meeting the eligibility criteria for both the Medicare FFS/MA and
Medicaid programs to participate in either program. Further, the EP
would be permitted to change his or her election once during the life
of the EHR incentive programs after making the initial election. We
believe this one-time election rule would allow an EP whose patient
volume no longer makes him or her eligible for the Medicaid program to
nevertheless continue to receive incentive payments that would
encourage the meaningful use of certified EHR technology. For example,
an EP who moves to a different practice or geographically relocates
practices may reduce his or her Medicaid patient volume, and therefore
become ineligible for the Medicaid incentive payments. Allowing this EP
to continue to receive incentive payments under Medicare (if eligible)
would continue the incentive for meaningfully using EHR technology, and
would allow EPs a certain amount of flexibility in their operations.
While allowing this flexibility creates administrative complexity, we
believe a significant number of EPs could have their participation in
the EHR incentive programs endangered due to changing circumstances
unrelated to the EHR incentive programs.
    Under our proposal, if an EP does decide to switch programs, we
propose that the EP would continue in the next program at whichever
payment year he or she would have attained had the EP not chosen to
switch. For example, if an EP decides to switch after receiving his or
her Medicare FFS incentive payment for their second payment year, then
the EP would be in its third payment year for purposes of the Medicaid
incentive payments. Even after lining up the payment years, it is
possible for an EP to exceed the payment cap under Medicaid by
switching programs at the right time. We do not believe that the
Congress intended for the payment caps to be exceeded under any
circumstance, and therefore propose that no EP should receive more than
the maximum incentive available to them under Medicaid, which is the
higher of the two caps. The last year incentive payment would be
reduced if awarding the EP the full amount would exceed the overall
maximum available under Medicaid. This is possible if an EP receives
their first two payment years from Medicare and then the last four from
Medicaid, as the cap would be exceeded by $250. An EP who switches from
Medicaid to Medicare could exceed the Medicare threshold in a number of
circumstances; however, since they cannot exceed the Medicaid threshold
under any circumstance, we propose to pay the incentive for which they
are eligible for a given payment year in whichever program they are in
for that payment year. Finally, we propose that the last year for
making an incentive payment program switch would be CY 2014. In making
this proposal, we considered that it is both the last year an EP can
enroll in the Medicare EHR incentive program, and also the last year
before the payment adjustments under Medicare can begin. We request
comments on the necessity of the ability to switch and the allowed
timing for such switches.
c. Data To Be Collected
    In addition to information regarding the demonstration of
meaningful use, in Sec.  495.10 of this proposed rule we propose to
collect the following administrative data for the Medicare and Medicaid
EHR incentive programs to fulfill our requirements of online posting,
avoidance of duplication of incentive payments, and to ensure accurate
and timely incentive payments:
     Name, NPI, business address, and business phone of each EP
or eligible hospital.
     Taxpayer Identification Number (TIN) to which the EP or
eligible hospital wants the incentive payment made. For Medicaid EPs
this must be consistent with assignment rules at 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, their CCN.
    To coordinate with the States to avoid duplication of payments, we
further propose to make available to the States through a single
repository the following additional data:
     Whether an EP or eligible hospital is a meaningful EHR
user, and
     The remittance date and amount of any incentive payments
made to an EP or eligible hospital.
    CMS, our contractors, and the States will have access to these six
data elements through a single repository maintained by CMS. The States
will have to provide information to us on whether EPs or eligible
hospitals are eligible for the Medicaid incentive program, whether EPs
or eligible hospitals participating in the Medicaid program are
meaningful EHR users, and when any Medicaid incentive payments are made
and the amount of the payment. We will put in place processes for an EP
or eligible hospital to change their information, including the one-
time switch in EHR incentive program election by EPs.
6. Hospital-Based Eligible Professionals
    Section 1848(o)(1)(C)(i) of the Act, as added by section 4101(a) of
the HITECH Act, states that hospital-based EPs are not eligible for the
Medicare incentive

[[Page 1905]]

payments. Similarly, the majority of hospital-based EPs will not be
eligible for Medicaid incentive payments under 1903(t)(2)(A) of the Act
(the only exception to this rule is for those practicing predominantly
in an FQHC or RHC). Section 1848(o)(1)(C)(ii) of the Act defines the
term ``hospital-based eligible professional'' to mean an EP, such as a
pathologist, anesthesiologist, or emergency physician, who furnishes
substantially all of his or her Medicare-covered professional services
during the relevant EHR reporting period in a hospital setting (whether
inpatient or outpatient) through the use of the facilities and
equipment of the hospital, including the hospital's qualified EHRs.
This section indicates that the determination of whether an EP is a
hospital-based EP shall be made on the basis of the site of service, as
defined by the Secretary, and without regard to the type of service
provided by the EP or any employment or billing arrangement between the
EP and any other provider (for example, the hospital-based
determination for an EP would not be affected by whether the EP is an
employee of the hospital, under a contractual relationship with the
hospital, or with respect to where he or she has made a reassignment to
the hospital for Part B billing purposes). Section 1903(t)(3)(D) of the
Act defines hospital-based EP in nearly identical terms.
    In addition, as discussed below, section 1848(a)(7)(D) of the Act,
as added by section 4101(b) of the HITECH Act, exempts hospital-based
EPs from the downward payment adjustment applied under section
1848(a)(7)(A)(i) of the Act to covered professional services provided
during a payment year by EPs who are not meaningful EHR users for the
relevant payment year beginning in 2015.
    If an EP is providing ``substantially all'' of their services in
the hospital, we believe it is reasonable to assume that the EP is also
using the facilities and equipment of the hospital, including any
qualified EHR implemented by the hospital. The statute uses
``facilities and equipment'' to determine whether an EP is a hospital-
based EP. As ``facilities and equipment'' would generally be understood
to apply to the hospital building and its medical and other equipment
that is used in furnishing medical services, we believe it is
reasonable to assume that an EP providing substantially all of their
services in a hospital is providing these services in the hospital
building and generally is also using its equipment, including qualified
EHRs, and not bringing his or her own equipment to the hospital to
provide medical services. Similarly, it seems reasonable to assume that
the statute contemplates that an EP that uses the hospital's facilities
and equipment would also be using the hospital's EHR system and should
be ineligible for an incentive payment. We seek comment as to whether
EPs are using qualified EHR of the hospital in ambulatory care
settings.
    As noted previously, the statute provides that hospital-based EPs,
``such as a pathologist, anesthesiologist, or emergency physician,''
are those EPs that provide substantially all of their Medicare-covered
professional services in a ``hospital setting (whether inpatient or
outpatient).'' Because the HITECH Act does not define the term
``hospital setting,'' we looked to existing statutes and regulations
that define and describe hospital settings for guidance in defining
``hospital setting'' for purposes of this proposed rule. We welcome
comments on alternative approaches to interpreting the meaning of
``hospital setting.''
    First, section 1861(e) of the Act defines the term a ``hospital''
to mean an institution that ``is primarily engaged in providing, by or
under the supervision of physicians, to inpatients (A) diagnostic
services and therapeutic services for medical diagnosis, treatment, and
care of injured, disabled, or sick persons, or (B) rehabilitation
services for the rehabilitation of injured, disabled, or sick
persons.'' Therefore, we propose that EPs that practice primarily in
inpatient hospital settings, as referenced in section 1861(e) of the
Act, be considered hospital-based EPs.
    Because the parenthetical after the term ``hospital setting'' in
the statutory definition of hospital-based EP specifically refers to
both inpatient and outpatient hospital settings, we believe the term
``hospital setting'' should be defined to also include the outpatient
setting. So although a ``hospital'' is an institution that primarily
provides inpatient services, we propose to define the term ``hospital
setting'' for purposes of the Medicare and Medicaid EHR incentive
payment programs to also include all outpatient settings where hospital
care is furnished to registered hospital outpatients. For purposes of
Medicare payment and conditions of participation, it is CMS's
longstanding policy to consider as outpatient hospital settings those
outpatient settings that are owned by and integrated both operationally
and financially into the entity, or main provider, that owns and
operates the inpatient setting. For example, we consider as outpatient
hospital settings all types of outpatient care settings in the main
provider, on-campus and off-campus provider-based departments (PBDs) of
the hospital, and entities having provider-based status, as these
entities are defined in Sec.  413.65.
    In accordance with our regulations at Sec.  413.65, a provider-
based department or entity must operate under the ownership and
financial and administrative control of the main provider. We also note
that the provider-based department or entity of the hospital comprises
both the physical facility where services are furnished and the
personnel and equipment used to care for patients in those settings. In
addition, Sec.  413.65(d) specifies that the financial operations of
provider-based departments or entities must be fully integrated within
the financial system of the main provider. Medicare makes payment to
the hospital under the outpatient payment system for the facility
resources required for care that is furnished to hospital outpatients
in its provider-based departments and entities, regardless of the
specific type of hospital outpatient setting. Moreover, Medicare pays
EPs for their professional services furnished to hospital outpatients
at the facility rate under the Medicare Physician Fee Schedule (MPFS),
also regardless of the specific type of hospital outpatient setting,
recognizing that in all hospital outpatient settings the hospital bears
the cost of personnel, equipment, and supplies for which payment would
otherwise be made to the EP under the MPFS for services furnished in a
non-facility setting. Section 413.65(d) also requires that the medical
records for patients treated in the provider-based department or entity
must be integrated into a unified retrieval system (or cross reference)
of the main provider. Moreover, an eligible hospital will receive an
incentive payment for its medical records system if such system is
considered certified EHR technology and is meaningfully used by the
hospital consistent with the requirements of the final rule to this
rule. Because, by definition of the requirements for provider-based
departments and entities, EPs who furnish substantially all of their
covered professional services to hospital outpatients use the
hospital's facility and equipment, including the integrated medical
record system, for which payment is made by Medicare to the hospital,
we believe these EPs should be considered hospital-based EPs, and thus
excluded from the Medicare EP EHR incentive payments. This is fully
consistent with the definition of hospital-based EPs in section
1848(o)(1)(C)(ii) of the Act.

[[Page 1906]]

    In summary, we propose that EPs that provide substantially all of
their professional services in the inpatient hospital setting, in any
type of outpatient hospital setting, or in any combination of inpatient
and outpatient hospital settings, be considered hospital-based EPs.
    We propose to consider the use of place of service (POS) codes on
physician claims to determine whether an EP furnishes substantially all
of their professional services in a hospital setting and is, therefore,
hospital-based. This code set is required for use in the implementation
guide adopted as the national standard for electronic transmission of
professional health care claims under the provisions of the Health
Insurance Portability and Accountability Act of 1996 (HIPAA). HIPAA
directed the Secretary of HHS to adopt national standards for
electronic transactions. These standard transactions require all health
plans and providers to use standard code sets to populate data elements
in each transaction. The Transaction and Code Set Rule (65 FR 50312)
adopted the ASC X12N-837 Health Care Claim: Professional, volumes 1 and
2, version 4010, as the standard for electronic submission of
professional claims. This standard names the POS code set currently
maintained by CMS as the code set to be used for describing sites of
service in such claims and is available at http://www.cms.hhs.gov/PlaceofServiceCodes/Downloads/POS_09_10_07_Rev_2_508.pdf.
    From this code set, we propose to consider the use of the following
POS codes indicating that the EP provided the service in an inpatient
or any type of outpatient hospital setting (including a PBD of a
hospital) to determine whether an EP is a hospital-based eligible
professional:
     21--Inpatient Hospital--is a facility, other than
psychiatric, which primarily provides diagnostic, therapeutic (both
surgical and nonsurgical), and rehabilitation services by, or under,
the supervision of physicians, to patients admitted for a variety of
medical conditions.
     22--Outpatient Hospital--is a portion of a hospital which
provides diagnostic, therapeutic (both surgical and nonsurgical), and
rehabilitation services to sick or injured persons who do not require
hospitalization or institutionalization.
     23--Emergency Room, Hospital--is a portion of a hospital
where emergency diagnosis and treatment of illness or injury is
provided.
    Place of service codes 22 (Outpatient Hospital) and 23 (Emergency
Room, Hospital) are commonly recognized to be outpatient departments of
the hospital. An outpatient department of a hospital will either meet
the definition of the ``main provider,'' a ``department of a
provider,'' or of having ``provider-based status'' as those terms are
used in Sec.  413.65. Place of service codes 22 and 23 are used to
describe hospital outpatient settings that meet these definitions under
Sec.  413.65 and are also subject to the conditions of participation
under part 482.
    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, which we propose to encompass all hospital inpatient and
outpatient settings, including all settings that meet the definition of
the main provider, department of a provider, or of having provider-
based status. Therefore, we must identify the minimum percentage of an
EP's covered professional services that must be provided in a hospital
setting in order for the EP to be considered as providing
``substantially all'' of his or her covered professional services in a
hospital setting. We would define ``substantially all'' as furnishing
at least 90 percent of services in a hospital setting, either inpatient
or outpatient. We believe this threshold appropriately balances our
competing goals of ensuring that professionals are encouraged to
participate in the incentive program and avoid duplicate payments to a
professional who is primarily using the EHR technology of the hospital
in which he or she furnishes services. While we considered using 75
percent as a threshold for determining whether an EP is an hospital-
based EP, we are concerned that such a standard could exclude EPs from
receiving incentive payments that perform a minority but significant
percentage of their services outside of inpatient or outpatient
hospital settings and would have offices separate and independent from
the hospital where they provide patient care services and for which
they would have costs to obtain an EHR system. Based on an analysis of
2008 Medicare claims data, if we define ``substantially all'' of
covered services in a hospital setting to mean that 75 percent or more
of an EP's allowed services are associated with one of the place of
service codes listed above, we estimate that 65 percent of EPs would be
considered eligible to receive an EHR incentive payment. If we increase
this criterion to 90 percent, we estimate that 68 of percent of EPs
would be eligible for the EHR incentive payment. In other words, 3
percent fewer EPs would be ineligible for the EHR incentive payments if
we define ``substantially all'' to mean at least 90 percent rather than
at least 75 percent.
    Because EPs providing 90 percent or more of their services in one
of these sites as described above are not likely to expend significant
resources related to EHRs in other, non-hospital settings, we believe
this proposal is most consistent with the law's intent of not providing
incentive payments to EPs that are providing substantially all of their
services in a hospital setting (whether inpatient or outpatient).
However, we are open to comments on other proposals that are consistent
with the law's intent of not providing incentive payments to hospital-
based physicians as defined in HITECH. In our proposed approach, a
hospital-based eligible professional would be ineligible to receive an
EHR incentive payment under either Medicare or Medicaid, regardless of
the type of service provided, if more than 90 percent of their services
are identified as being provided in places of service classified under
place of service codes 21, 22, or 23.
    Accordingly, for both Medicare and Medicaid incentive payment
purposes, we propose that a hospital-based eligible professional is
defined as an EP who furnishes 90 percent or more of their covered
professional services in any of the above listed places of service. A
hospital-based EP would be ineligible to receive EHR incentive
payments. (Based on preliminary claims data from the first 9 months of
2009, CMS currently estimates that, under this proposed definition,
about 27 percent of Medicare EPs (physicians) would be considered
hospital-based and thus not eligible to receive any incentive payments.
We do not have any data on Medicaid practitioners.) We propose to make
this determination, for Medicare incentive payment purposes, as to
whether or not an EP is hospital-based by annually analyzing an EP's
claims history from the prior year. Therefore, for example, based on
such analysis, an otherwise EP would be considered a hospital-based EP
and be ineligible for incentive payments in 2011 if he/she provided 90
percent or more of his/her allowed services in one of the above listed
places of service based on their 2010 Medicare claims data. The
hospital-based status of each EP would be reassessed each year, using
claims data from the year immediately preceding the payment year. For
Medicaid purposes, we are proposing that State Medicaid agencies make
the determination about whether or not an

[[Page 1907]]

EP is hospital-based by analyzing an EP's Medicaid claims data, or in
the case of EPs who deliver care via Medicaid managed care programs, by
analyzing either encounter data or other equivalent data sources, at
the State's option. There is an interest in assuring that nearly all
primary care providers are meaningful users of EHR technology by 2014.
However, this objective may not be reached because of several factors.
     Some primary care EPs who provide services to Medicare and
Medicaid beneficiaries would be ineligible for the incentive payments.
For example, we currently estimate that under this proposal, 12-13
percent of family practitioners under Medicare would be considered
hospital-based under our proposed definition of hospital-based EP, and
therefore would not be eligible for the EHR incentive payments. (Note
that we believe that these data could be applied generally to Medicaid
physicians as well. However, Medicaid EPs include other practitioners
who also must meet hospital-based eligibility requirements, some of
whom provide primary care services such as nurse practitioners.)
Although many of these family practitioners may be serving in
nonprimary care roles within the hospital setting (such as in emergency
departments or functioning as hospitalists), those EPs performing
primary care services in the hospital setting would also not be
eligible to receive EP incentive payments. If these EPs were eligible
to receive incentive payments, some might reassign them to the
hospital, and the hospital could then use the EP's incentive payments
for additional integrated outpatient EHR systems.
     As will be explained in the next section of this proposed
rule, the hospital's total incentive payment is based on total
inpatient services. As result, a hospital with a large outpatient
department will not receive a higher incentive payment as a result of
their outpatient services.
     Finally, as previously discussed, we are proposing that
the Stage 1 meaningful use criteria for eligible hospitals apply only
to a hospital's inpatient setting.
    Because of these factors, we are concerned that hospital investment
in their outpatient primary care sites is likely to lag behind their
investment in their inpatient EHR systems. To address these concerns,
as part of future rulemaking, we plan to consider ways to realign the
meaningful use objectives and criteria to include a broader definition
of hospital care to include outpatient services. We believe this could
provide an important incentive for hospital investment in EHRs for
their outpatient primary care sites. We welcome comments on these
issues including other ways that CMS, under the current statute, could
help meet the objective that nearly all primary care providers are
meaningful users of EHR technology by 2014.
    We also seek comment on the extent to which hospitals install EHRs
in their outpatient clinics as part of their adoption of EHRs. In
addition, we seek comment on the way that hospitals with provider-based
entities meet the provider-based requirements at 42 CFR 413.65(d) if
they have EHRs in any or all parts of the hospital.
    Finally, we seek comment on whether we should use another method
for defining hospital-based EPs than what we have proposed here. Any
comments should address implementation based on the specific POS codes
identified, and/or any complexities that would result from not
including all outpatient settings owned and operated by and integrated
with the hospital in the determination of whether an EP is hospital-
based.
7. Interaction With Other Programs
    The HITECH Act addresses interactions between the Medicare EHR
incentive program and the E-prescribing Incentive Program authorized by
MIPPA. Under section 1848(m)(2)(D) of the Act, as added by section
4101(f)(2)(B) of the HITECH Act, if a Medicare FFS or MA EP receives an
incentive payment from the Medicare EHR incentive program, the EP (or
group practice) is not eligible to also receive the incentive payment
under the E-prescribing Incentive Program created by MIPPA. Given the
payment timelines proposed in this rule for the Medicare EHR incentive
program and the existing payment timeline for the E-prescribing
Incentive Program, we will know whether an EP received a Medicare EHR
incentive payment before the 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 proposed rule, we discuss how we will avoid duplication of
reporting requirements for clinical quality measures.

B. Medicare Fee-for-Service Incentives

1. Incentive Payments for Eligible Professionals (EP)
    Section 1848(o)(1)(A) of the Act, as amended by section 4101(a) of
the HITECH Act, provides for incentive payments to EPs who are
meaningful users of certified EHR technology during the relevant EHR
reporting periods. Section 1848(o)(1)(A)(i) of the Act provides that
EPs who are meaningful EHR users during the relevant EHR reporting
period are entitled to an incentive payment amount, subject to an
annual limit, equal to 75 percent of the Secretary's estimate of the
Medicare allowed charges for covered professional services furnished by
the EP during the relevant payment year. Under section
1848(o)(1)(B)(ii)(VI) of the Act, an EP is entitled to an incentive
payment for up to 5 years. In addition, in accordance with section
1848(o)(1)(A)(ii) of the Act, there shall be no incentive payments made
with respect to a year after 2016. The incentive payments would be
disbursed from the Federal Supplementary Medical Insurance Trust Fund,
as provided for under section 1848(o)(1)(A)(i) of the Act. As noted in
section II.A. of this proposed rule, EPs who qualify for both the
Medicare and Medicaid incentive payments must elect to receive payments
from one program or the other.
a. Definitions
    In accordance with section 1848(o)(5)(C) of the Act, we propose to
add a definition of the term ``eligible professional'' in our
regulations at 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
proposed rule, in accordance with section 1848(o)(1)(C) of the Act,
hospital-based EPs are not eligible for an incentive payment.

[[Page 1908]]

    Section 1848(o)(5)(A) of the Act defines covered professional
services as having the same meaning as in section 1848(k)(3) of the
Act, that is, services furnished by an eligible professional for which
payment is made under, or is based on, the Medicare physician fee
schedule.
    In accordance with section 1848(a)(1) of the Act, the Medicare
allowed charge for covered professional services is the lesser of the
actual charge or the Medicare physician fee schedule amount established
in section 1848 of the Act. As specified under section
1848(o)(1)(A)(i), the Secretary's estimate of allowed charges is based
on claims submitted to Medicare no later than 2 months following the
end of the relevant payment year. We propose to codify these
specifications and definitions in our regulations at [cite proposed
regulation range].
b. Incentive Payment Limits
    Section 1848(o)(1)(B)(i) of the Act sets forth the annual limits on
the 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) of the Act provides that if the EP's first payment
year is after 2014, then the applicable incentive payment limit for
such year and any subsequent year shall be $0. In other words, an EP
who does not qualify to receive an EHR-related incentive payment prior
to 2015 will not receive any of these incentive payments. Table 22
shows the maximum incentive payment amounts available to EPs under
Medicare FFS. (As noted above and discussed further below, these limits
are increased by 10 percent for EPs who predominantly furnish services
in an HPSA.)

  Table 22--Maximum Total Amount of EHR Incentive Payments for a Medicare EP Who Does Not Predominantly Furnish
                                               Services in a HPSA
----------------------------------------------------------------------------------------------------------------
                                              First CY in which the EP receives an incentive payment
                                 -------------------------------------------------------------------------------
          Calendar year                                                                                2015-
                                       2011            2012            2013            2014         subsequent
                                                                                                       years
----------------------------------------------------------------------------------------------------------------
2011............................         $18,000  ..............  ..............  ..............  ..............
2012............................          12,000         $18,000  ..............  ..............  ..............
2013............................           8,000          12,000         $15,000  ..............  ..............
2014............................           4,000           8,000          12,000         $12,000  ..............
2015............................           2,000           4,000           8,000           8,000              $0
2016............................  ..............           2,000           4,000           4,000               0
                                 -------------------------------------------------------------------------------
    Total.......................          44,000          44,000          39,000          24,000               0
----------------------------------------------------------------------------------------------------------------

    The following examples illustrate how the payment amount would be
determined:

     Example 1:  EP that receives the maximum
payment. For payment year 2011, the incentive payment for an EP
would be, subject to a payment limit of $18,000, equal to 75 percent
of the EP's Medicare physician fee schedule allowed charges for CY
2011 (in this case, the maximum allowed charges recognized for the
purposes of the incentive, or $24,000 x .75 = $18,000), estimated
based on claims for covered professional services furnished by the
EP from January 1, 2011 through December 31, 2011, and submitted to
the appropriate Medicare administrative contractor (MAC/carrier) on
or before February 29, 2012.
     Example 2:  EP that receives less than the
maximum payment. Assume for this example that the EP's estimated
total allowed charges for covered professional services are $10,000
which is less than the $24,000 maximum allowed charges that could be
recognized for purposes of this incentive. Therefore, for payment
year 2011, the incentive payment in this case would be, $10,000 x
.75 = $7,500, based on claims for covered professional services
furnished by the EP from January 1, 2011 through December 31, 2011,
and submitted to the appropriate Medicare administrative contractor
(MAC) or carrier on or before February 29, 2012.

    We propose, for each subsequent payment year, to use the annual
allowed charges and claims in a similar manner to calculate the
Secretary's estimate of allowed charges for purposes of computing the
incentive payment.

     Example: For payment year 2012, the incentive
payment issued to an EP would be, subject to a payment limit (that
is, $18,000 if it is the first payment year, $12,000 if it is the
second payment year), equal to 75 percent of the EP's Medicare
physician fee schedule allowed charges for CY 2012, based on claims
for covered professional services performed by the EP from January
1, 2012 through December 31, 2012, and submitted to the appropriate
Medicare administrative contractor (MAC/carrier) on or before
February 28, 2013.
c. Increase in Incentive Payment for EPs Who Predominantly Furnish
Services in a Geographic Health Professional Shortage Area (HPSA)
    Section 1848(o)(1)(B)(iv) of the Act provides that the amount of
the annual incentive payment limit for each payment year be increased
by 10 percent for EPs who predominantly furnish services in an area
that is designated by the Secretary (under section 332(a)(1)(A) of the
PHS Act) as a geographic health professional shortage area (HPSA).
Section 332(a)(1)(A) of the PHS Act refers to geographic HPSAs, or
areas that have been determined to have a shortage of

[[Page 1909]]

health professionals, based on the population-to-provider ratio and
other factors. HPSAs are located in every State, and in both rural and
urban areas.
    Geographic HPSAs are defined in 42 CFR Part 5 and include primary
medical care, dental, and mental health HPSAs. In accordance with the
statute, we will increase the limits per payment year by 10 percent for
EHR-related incentive payments to EPs who predominantly furnish covered
professional services in a geographic primary medical care, dental, or
mental health HPSA.
    We propose that an EP be considered as ``predominantly'' furnishing
covered professional services in a geographic HPSA if more than 50
percent of the EP's Medicare covered professional services are
furnished in a geographic HPSA. Using ``more than 50 percent'' as the
criterion to define ``predominantly'' is consistent with how the term
is defined in general parlance as well as how the definition is used
for purposes of other aspects of the Medicare program.
    To determine whether an EP has furnished more than 50 percent of
his/her covered professional services in a geographic HPSA, we propose
to utilize frequency of services provided over a 1-year period from
January 1 to December 31, rather than basing it on the percentage of
allowed charges. Our data indicates that most physicians either provide
all or none of their services in a geographic HPSA, so we believe that
our proposal to base eligibility for the 10 percent EHR HPSA payment
limit increase on frequency, rather than allowed charges, will have
little or no impact on the determination of whether an EP is eligible
for the EHR HPSA payment limit increase. To apply the payment limit
increase, we will first need to determine whether more than 50 percent
of an EP's covered professional services were furnished in a geographic
HPSA during a particular payment year. We propose to first make the
generally applicable incentive payment to the EP based on an EP's
estimated allowed charges for the relevant payment year.
    Once we compile a full year of data, we would determine eligibility
for the EHR HPSA payment limit increase for the payment year based on
whether the EP provided more than 50 percent of his/her services in a
geographic HPSA during the payment year. The determination would be
made based on claims submitted not later than 2 months after the end of
the year. If we determine that the EP provided more than 50 percent of
his/her services in a geographic HPSA and is therefore eligible for the
EHR HPSA payment limit increase, we would then make an additional lump
sum payment to reflect that increased limit amount based on the
estimated allowable charges for that EP for the prior year. We propose
that the additional amount would be paid no later than 120 days after
the end of the prior year for which the EP was eligible for the 10
percent EHR HPSA payment limit increase.
    Most physicians furnishing services in a HPSA furnish 100 percent
of their covered services in a HPSA. Based on our data, we found very
few physicians provide even a modest percentage of their services
across HPSA and non-HPSA areas. We estimate that about 17 percent of
EPs would qualify for the 10 percent EHR HPSA payment limit increase,
provided they satisfy the other requirements for the incentive payment.
Section 1848(o)(1)(B)(iv) of the Act also authorizes us to apply the
provisions of sections 1833(m) and (u) of the Act in implementing this
10 percent EHR HPSA payment limit increase, as the Secretary determines
appropriate. Section 1833(m) of the Act establishes the HPSA bonus
program, which provides a 10 percent bonus to physicians who furnish
Medicare covered professional services in a geographic HPSA. Section
1833(u) of the Act establishes the Physician Scarcity Area bonus
program, which provided a 5 percent bonus to physicians who furnish
Medicare covered professional services in areas that are determined to
physician scarcity areas. (Note: The authority for the Physician
Scarcity Area program ended on June 31, 2008.)
    Section 1833(m)(1) of the Act provides that physicians who furnish
covered professional services in a year in an area that is designated
as a geographic HPSA prior to the beginning of the year are eligible to
receive the HPSA bonus for services furnished during the current year.
We have interpreted this to mean that bonus payments should continue
throughout the current year, even if the area loses its designation as
a geographic HPSA during the current year. Physicians furnishing
covered professional services in an area that is not designated as a
geographic HPSA by December 31 of the prior year are not eligible to
receive the HPSA bonus for the current year, even if the area is
subsequently designated as a geographic HPSA during the current year.
We propose to apply these same rules for the 10 percent EHR HPSA
payment limit increase provided under section 1848(o)(1)(B)(iv) of the
Act. Specifically, we propose that EPs who predominately furnish
covered professional services in an area that is designated as a
geographic HPSA as of December 31 of the prior year would be eligible
to receive the 10 percent EHR HPSA payment limit increase during the
current year, provided the EP qualifies for the EHR HPSA payment limit
for the current year. For example, an EP furnishing a covered
professional service in an area that was designated as a geographic
HPSA as of December 31, 2010, and who qualifies to receive the EHR HPSA
payment in 2011, also would receive a 10 percent EHR incentive payment
limit increase for 2011.
    Section 1833(m)(2) of the Act also provides that geographic HPSAs
that consist of an entire county be identified and the bonus paid
automatically. We publish a list annually of the zip codes that are in
these areas on our Web site at http://www.cms.hhs.gov/HPSAPSAPhysicianBonuses/01_Overview.asp#TopOfPage. Physicians
furnishing Medicare covered professional services in a zip code that is
on this list automatically receive the HPSA bonus payment. Physicians
furnishing Medicare covered professional services in a zip code that is
not on this list but that was designated as a geographic HPSA as of
December 31 of the prior year must use a modifier when submitting a
Medicare claim in order to receive the HPSA bonus.
    We note that we would only list a zip code on our Web site if the
entire geographic area encompassed by the zip code is designated as a
geographic HPSA. If a zip code encompasses both areas designated as a
geographic HPSA and areas that are not a geographic HPSA, we will not
list the zip code on our Web site. Our list also will not include zip
codes for areas designated as geographic HPSAs after we create the zip
code list (but before December 31). EPs furnishing Medicare covered
professional services in an area eligible for the EHR HPSA payment
limit increase that is not included in the list of zip codes for
automatic payment would need to use a modifier when submitting a claim
to identify their eligibility for the HPSA EHR payment limit increase.
    Table 23 shows the maximum total EHR HPSA payment limit for an EP
who predominantly furnishes covered professional services in a HPSA as
described previously above for CYs 2011 through 2016. Table 24 shows
the maximum additional amount of incentive payments for a Medicare EP
who predominantly furnishes services in a HPSA. (That is, Table 24
shows the difference between Tables 22 and 23.)

[[Page 1910]]

 Table 23--Maximum Total Amount of Incentive Payments for a Medicare EP Who Predominantly Performs Services in a
                                                      HPSA
----------------------------------------------------------------------------------------------------------------
                                              Year that EP becomes EHR user in a HPSA                2015 and
          Calendar year          ----------------------------------------------------------------   subsequent
                                       2011            2012            2013            2014            years
----------------------------------------------------------------------------------------------------------------
2011............................         $19,800  ..............  ..............  ..............  ..............
2012............................          13,200         $19,800  ..............  ..............  ..............
2013............................           8,800          13,200         $16,500  ..............  ..............
2014............................           4,400           8,800          13,200         $13,200  ..............
2015............................           2,200           4,400           8,800           8,800              $0
2016............................  ..............           2,200           4,400           4,400               0
                                 -------------------------------------------------------------------------------
    Total.......................          48,400          48,400          42,900          26,400               0
----------------------------------------------------------------------------------------------------------------

 Table 24--Maximum Additional Amount of Incentive Payments for a Medicare EP Who Predominantly Performs Services
                                                    in a HPSA
----------------------------------------------------------------------------------------------------------------
                                     Year that an EP first receives the incentive payment for
                                       Medicare covered professional services furnished in a          2015 and
          Calendar year                                   geographic HPSA                           subsequent
                                 ----------------------------------------------------------------      years
                                       2011            2012            2013            2014
----------------------------------------------------------------------------------------------------------------
2011............................          $1,800  ..............  ..............  ..............  ..............
2012............................           1,200          $1,800  ..............  ..............  ..............
2013............................             800           1,200          $1,500  ..............  ..............
2014............................             400             800           1,200          $1,200  ..............
2015............................             200             400             800             800              $0
2016............................  ..............             200             400             400               0
                                 -------------------------------------------------------------------------------
    Total.......................           4,400           4,400           3,900           2,400               0
----------------------------------------------------------------------------------------------------------------

d. Form and Timing of Payment
    Section 1848(o)(1)(D)(i) of the Act, as amended by section 4101(a)
of the HITECH Act, provides that the incentive payments may be
disbursed as a single consolidated payment or in periodic installments
as the Secretary may specify. We propose to make a single,
consolidated, annual incentive payment to EPs. We believe that making a
single, consolidated payment would be the least administratively
burdensome for both CMS and most EPs. We expect that many EPs who
demonstrate meaningful use of certified EHR technology will receive the
maximum incentive payments. We propose that payments would be made on a
rolling basis, as soon as we ascertain that an EP has demonstrated
meaningful use for the applicable reporting period (that is, 90 days
for the first year or a calendar year for subsequent years), and
reached the threshold for maximum payment.
    Section 1848(o)(1)(A) of the Act provides that ``with respect to
covered professional services provided by an eligible professional,''
the incentive payment ``shall be paid to the eligible professional (or
to an employer or facility in the cases described in clause (A) of
section 1842(b)(6)).'' Section 1842(b)(6)(A) of the Act allows for
reassignment to an employer or entity with which the physician has a
valid contractual arrangement allowing the entity to bill for the
physician's services. Therefore, EPs are allowed to reassign their
incentive payment to their employer or an entity which they have a
valid employment agreement or contract providing for such reassignment,
consistent with all rules governing reassignments. The statute does not
address the case where the EP has multiple employers/contractual
arrangements, and it would be difficult operationally for CMS to
allocate the incentive payment among two or more individuals/entities.
Therefore, in Sec.  495.10(e) we are proposing to preclude an EP from
reassigning the incentive payment to more than one employer or entity.
We believe that the question of whether the EP has reassigned the
incentive payment to the employer/entity under his or her contract with
the employer/entity, including any pre-existing contract between the
parties, is a matter of contract interpretation that should be resolved
by the parties themselves. We note that nothing in the statute or our
existing regulations would prohibit an EP from assigning to the
employer/entity only the allowable charges for his or her professional
services, with the EP retaining any incentive payment, or vice versa.
If an EP will reassign his or her incentive payment to an employer/
entity with which the EP has a contractual arrangement, the parties
will need to review their existing contract to determine whether it
currently provides for reassignment of the incentive payment to the
employer/entity or needs to be revised.
    The statute provides that the incentive payment shall be paid to
the employer or facility in the cases described in clause (A) of
section 1842(b)(6) of the Act. This clause provides that payment for a
service provided to an individual may not be paid to anyone other than
the individual or the practitioner who provided the service, except
that the practitioner may reassign his or her right to payment to his
or her employer or an entity with whom he or she has a contractual
arrangement if certain conditions are met. Any such authorization must
be in accordance with our regulations at 42 CFR 424.73 and 42 CFR
424.80.
    Section 1848(o)(1)(D)(ii) of the Act requires the Secretary to
establish rules to coordinate the incentive payments made among
practices for an EP furnishing covered professional services in more
than one practice, including the application of the limits on the
amounts of the incentive payments. To implement this requirement, we
propose to use the EP's Medicare enrollment information to determine
whether an EP belongs to more than one practice (that is, whether the
EP's National Provider Identifier (NPI) is

[[Page 1911]]

associated with more than one practice). In cases where the EP is
associated with more than one practice, we propose that EPs select one
tax identification number to receive any applicable EHR incentive
payment.
    Although it would not be impossible for Medicare contractors to
make proportional EHR incentive payments to each TIN associated with a
provider, we believe this option would entail the creation of highly
complex and potentially unwieldy administrative systems. Therefore, we
believe our proposal to permit the EP to select one TIN to which we
will make any EHR incentive payment is the most efficient alternative.
We have proposed that payments would be made on a rolling basis, as
soon as we ascertain that an EP has demonstrated meaningful use for the
applicable reporting period (that is, 90 days for the first year or a
calendar year for subsequent years), and reached the threshold for
maximum payment. If we were to adopt an alternative policy, permitting
EHR incentive payments to be made to multiple TINs, we would need to
calculate the percentage of covered professional services billed by
each TIN for that EP, and the total of any incentive payment amount
would be divided and paid accordingly. Thus, a policy permitting
payment to multiple TINs would conflict with our proposal to make
payment on a rolling basis as EPs meet the criteria to receive the
maximum EHR incentive payment. An additional confounding factor is the
possibility that an EP might change group affiliations during the year.
Therefore, we believe the most judicious policy would be to permit the
EP to designate one TIN to which payment will be made.
e. Payment Adjustment Effective in CY 2015 and Subsequent Years for EPs
Who Are Not Meaningful Users of Certified EHR Technology
    Section 1848(a)(7) of the Act, as amended by section 4101(b) of the
HITECH Act, provides for payment adjustments effective for CY 2015 and
subsequent years for EPs who are not meaningful EHR users during the
relevant EHR reporting period for the year. In general, beginning in
2015, if an EP is not a meaningful EHR user for any EHR reporting
period for the year, then the Medicare physician fee schedule amount
for covered professional services furnished by the EP during the year
(including the fee schedule amount for purposes of determining a
payment based on the fee schedule amount) is adjusted to equal the
`applicable percent' of the fee schedule amount (defined below) that
would otherwise apply. The HITECH Act includes a significant hardship
exception, discussed below, which, if applicable, could exempt certain
EPs from this payment adjustment. The payment adjustments will not
apply to hospital-based EPs, as defined elsewhere.
    The term `applicable percent' means: ``(I) for 2015, 99 percent
(or, in the case of an EP who was subject to the application of the
payment adjustment if the EP is not a successful electronic prescriber
under section 1848(a)(5) for 2014, 98 percent);'' ``(II) for 2016, 98
percent; and (III) for 2017 and each subsequent year, 97 percent.''
    In addition, section 1848(a)(7)(iii) of the Act provides that if
for 2018 and subsequent years the Secretary finds that the proportion
of EPs who are meaningful EHR users is less than 75 percent, the
applicable percent shall be decreased by 1 percentage point from the
applicable percent in the preceding year, but in no case shall the
applicable percent be less than 95 percent. Significant Hardship
Exception--Section 1848(a)(7)(B) of the Act provides that the Secretary
may, on a case-by-case basis, exempt an EP who is not a meaningful EHR
user for the year from the application of the payment adjustment if the
Secretary determines that compliance with the requirements for being a
meaningful EHR user would result in a significant hardship, such as in
the case of an EP who practices in a rural area without sufficient
Internet access. The exemption is subject to annual renewal, but in no
case may an EP be granted a hardship exemption for more than 5 years.
    We will include specific proposals to implement these payment
adjustments for EPs who are not meaningful EHR users in future
rulemaking prior to the 2015 effective date. We welcome comments on
these payment adjustments and any comments received will be considered
in developing future proposals to implement these provisions, including
comments on the possible circumstances for which we should allow an EP
to qualify for the significant hardship exception.
2. Incentive Payments for Hospitals
a. Definition of Eligible Hospital for Medicare
    Section 1886(n) of the Act, as amended by section 4102(a)(1) of the
HITECH Act, provides for incentive payments, beginning in FY 2011 (that
is, October 1, 2010 through September 30, 2011) for eligible hospitals
that are meaningful users of certified EHR technology during the EHR
reporting period for the payment year. We are proposing a new Sec.
495.104 to implement this provision. For purposes of this provision,
section 1886(n)(6)(B) of the Act defines ``eligible hospitals'' as
``subsection (d) hospitals,'' as that term is defined in section
1886(d)(1)(B) of the Act. Section 1886(d)(1)(B) of the Act generally
defines a ``subsection (d) hospital'' as a ``hospital located in one of
the fifty States or the District of Columbia.'' The term therefore does
not include hospitals located in the territories or hospitals located
in Puerto Rico. Section 1886(d)(9)(A) of the Act separately defines a
``subsection (d) Puerto Rico hospital'' as a hospital that is located
in Puerto Rico and that ``would be a subsection (d) hospital * * * if
it were located in one of the 50 states.'' Therefore, because section
4102(a)(1) of the HITECH Act does not refer to ``subsection (d) Puerto
Rico hospitals,'' incentive payments for meaningful users of certified
EHR technology are not available under this provision to hospitals
located in Puerto Rico. The provision does apply to inpatient, acute
care hospitals located in the State of Maryland. These hospitals are
not currently paid under the IPPS in accordance with a special waiver
provided by section 1814(b)(3) of the Act. Despite this waiver, the
Maryland hospitals continue to meet the definition of a ``subsection
(d) hospital'' because they are located in the 50 states. The statutory
definition of a subsection (d) hospital also does not apply to
hospitals and hospital units excluded under section 1886(d)(1)(B) from
the IPPS, such as psychiatric, rehabilitation, long term care,
children's, and cancer hospitals. For purposes of this provision, we
will provide incentive payments to hospitals as they are distinguished
by provider number in hospital cost reports. Incentive payments for
eligible hospitals will be calculated based on the provider number used
for cost reporting purposes, which is the CCN of the main provider
(also referred to as OSCAR number). Payments to eligible hospitals are
made to each provider of record. The criteria for being a meaningful
EHR user, and the manner for demonstrating meaningful use, are
discussed in section B.2. of this proposed rule.
b. Incentive Payment Calculation for Eligible Hospitals
    Section 1886(n)(2) of the Act, as amended by 4102(a) of HITECH,
describes the methodology for determining the incentive payment amount
for eligible hospitals that are meaningful users of certified EHR
technology during the EHR reporting period for a payment year. In
general,

[[Page 1912]]

that section requires the incentive payment for each payment year to be
calculated as the product of: (1) An initial amount; (2) the Medicare
share; and (3) a transition factor applicable to that payment year.
    As amended by section 4201(a) of the HITECH Act, section
1886(n)(2)(A)(i) of the Act defines the initial amount as the sum of a
``base amount,'' as defined in section 1886(n)(2)(B) of the Act, and a
``discharge related amount,'' as defined in section 1886(n)(2)(C) of
the Act. The base amount is $2,000,000, as defined in section
1886(n)(2)(B) of the Act. The term ``discharge related amount'' is
defined in section 1886(n)(2)(C) of the Act as ``the sum of the amount,
estimated based upon total discharges for the eligible hospital
(regardless of any source of payment) for the period, for each
discharge up to the 23,000th discharge as follows:

    (i) For the first through the 1,149th discharge, $0.
    (ii) For the 1,150th through the 23,000th discharge, $200.
    (iii) For any discharge greater than the 23,000th, $0.

    In addition to the base amount, the discharge related amount
provides an additional $200 for each hospital discharge during a
payment year, beginning with a hospital's 1,150th discharge of the
payment year, and ending with a hospital's 23,000th discharge of the
payment year. No additional payment is made for discharges prior to the
1,150th discharge, or for those discharges subsequent to the 23,000th
discharge.
    Section 1886(n)(2)(C) of the Act, as amended by section 4102(a) of
the HITECH Act, specifies that a ``12-month period selected by the
Secretary'' may be employed for purposes of determining the discharge
related amount. While the statute specifies that the payment year is
determined based on a Federal fiscal year (FY), section 1886(n)(2)(C)
of the Act provides the Secretary with authority to determine the
discharge related amount on the basis of discharge data from a relevant
hospital cost reporting period, for use in determining the incentive
payment during a FY. FYs begin on October 1 of each calendar year, and
end on September 30 of the subsequent calendar year. Hospital cost
reporting periods can begin with any month of a calendar year, and end
on the last day of the 12th subsequent month. For purposes of
administrative simplicity and timeliness, we propose, for each eligible
hospital during each incentive payment year, to use data on the
hospital discharges from the hospital fiscal year that ends during the
FY prior to the FY that serves as the payment year as the basis for
making preliminary incentive payments. Final payments would be
determined at the time of settling the cost report for the hospital
fiscal year that ends during the payment year, and settled on the basis
of the hospital discharge data from that cost reporting period.

    Example: FY 2011 begins on October 1, 2010 and ends on September
30, 2011. For an eligible hospital with a cost reporting period
running from July 1, 2010 through June 30, 2011, we would employ the
relevant data from the hospital's cost reporting period ending June
30, 2010 in order to determine the incentive payment for the
hospital during FY 2011. This timeline would allow us to have the
relevant data available for determining payments in a timely manner
for the first and subsequent payment years. This timeline would also
render it unnecessary to develop a cumbersome process to extract and
employ discharge data across more than one hospital cost reporting
period in order to determine the discharge related amount for a FY-
based payment period. However, final payments would be based on
hospital discharge data from the cost report ending June 30, 2011,
and determined at the time of settlement for that cost reporting
period.
c. Medicare Share
    As previously discussed, the initial amount must be multiplied by
the Medicare share and an applicable transition factor to determine the
incentive payment to an eligible hospital for an incentive payment
year. As added by section 4102(a) of the HITECH Act, section
1886(n)(2)(D) of the Act defines the Medicare share for purposes of
calculating incentive payments as a fraction based on estimated
Medicare FFS and managed care inpatient bed days, divided by estimated
total inpatient bed-days, modified by charges for charity care. This
section specifies that the Medicare share fraction is determined for
the incentive payment year ``for an eligible hospital for a period
selected by the Secretary.'' As in the case of the discharge data
discussed above, this clause provides the Secretary with authority to
determine the Medicare share fraction on the basis of data from a
relevant hospital cost reporting period, for use in determining the
incentive payment during a FY. For purposes of administrative
simplicity and timeliness equivalent to those discussed above with
regard to discharge data, we propose, for each eligible hospital during
each incentive payment year, to employ data on the hospital's Medicare
fee-for-service and managed care inpatient bed days, total inpatient
bed-days, and charges for charity care from the hospital fiscal year
that ends during the FY prior to the FY that serves as the payment year
as the basis for preliminary payment. Final payment would be made on
the basis of the data from the hospital fiscal year that ends during
the FY that serves as the payment year at the time of the settlement of
the cost report for the latter period.
    Section 1886(n)(2)(D) of the Act, as amended by section 4102 of the
HITECH Act, defines the numerator and denominator of this fraction in
terms of estimated Medicare FFS and managed care inpatient bed days,
estimated total inpatient bed-days, and charges for charity care.
Specifically, section 1886(n)(2)(D)(i) of the Act defines the numerator
of the Medicare share fraction as the sum of--
     The estimated number of 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 propose 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 propose to derive ``the estimated number
of inpatient-bed-days * * * attributable to individuals with respect to
whom payment may be made under part A'' from lines 1, 6 through 9, 10
and 14 in column 4 on Worksheet S-3, Part I of the Medicare cost
report. The data entered on these lines in the cost report include all
patient days attributable to Medicare inpatients, excluding those in
units not paid under the IPPS and excluding nursery days. Similarly, we
propose to derive the ``estimated number of inpatient-bed-days
attributable * * * to individuals who are enrolled with a MA
organization under Part C'' from line 2 in column 4 on Worksheet S-3,
Part I of the Medicare cost report. The methodology and data sources
for making these bed day determinations are not only well established,
but also well known and understood within the hospital community. We
therefore see no reason to develop or propose any alternative approach
for determining the ``subsection (d) hospital'' numbers of Medicare
Part A and Part C inpatient-bed-days for purposes of calculating these
incentive payments.

[[Page 1913]]

    Section 1886(n)(2)(D)(ii) of the Act defines the denominator of the
Medicare share fraction as the product of--
     The estimated total number of inpatient-bed-days with
respect to the eligible hospital during such period; and
     The estimated total amount of the eligible hospital's
charges during such period, not including any charges that are
attributable to charity care (as such term is used for purposes of
hospital cost reporting under Title XVIII), divided by the estimated
total amount of the hospitals charges during such period.
    As in the case of Medicare Part A and Part C inpatient-bed days,
for purposes of determining total inpatient-bed days in the denominator
of the Medicare share fraction, we propose to use the same data
sources, and the same methods, that we employ in determining Medicare's
share for purposes of making payments for direct graduate medical
education costs. Specifically, we will derive the relevant data from
lines 1, 6 through 9, 10 and 14 in column 6 on Worksheet S-3, Part I of
the Medicare cost report. The data entered on these lines in the cost
report include all patient days attributable to inpatients, excluding
those in units not paid under the IPPS.
d. Charity Care
    In determining the denominator of the Medicare share fraction, we
also must determine any charges that are attributable to charity care
furnished by an eligible hospital or CAH. The exclusion of charges
attributable to charity care has the effect of decreasing the
denominator of the Medicare share fraction as the proportion of charity
care (charity care charge ratio) provided by a hospital increases. This
is because the ratio of estimated total hospital charges, not including
charges attributable to charity care, to estimated total hospital
charges during a period decreases, relatively speaking, as a hospital
provides a greater proportion of charity care. The effect of this
factor on the denominator of the Medicare share fraction is therefore
to decrease the denominator (as the total number of inpatient-bed days
is multiplied by a relatively lower charity care charge ratio), as a
hospital provides a greater proportion of charity care. A smaller
denominator increases the Medicare share factor, providing for higher
incentive payments, to a hospital that provides a greater proportion of
charity care. Conversely, as a hospital provides a lower proportion of
charity care, the ratio of estimated total hospital charges, not
including charges attributable to charity care, to estimated total
hospital charges during a period increases. In this case, the effect of
this factor on the denominator of the Medicare share fraction is
therefore to increase the denominator (as the total number of
inpatient-bed days is multiplied by a relatively higher charity care
charge ratio), as a hospital provides a smaller proportion of charity
care. A larger denominator in turn decreases the Medicare share factor,
providing for lower incentive payments, as a hospital provides a lower
proportion of charity care.
    The data and methods for determining this charity factor for
purposes of the Medicare share fraction warrants more extensive
discussion. Section 112 of the Medicare, Medicaid, and State Children's
Health Insurance Program (SCHIP) Balanced Budget Refinement Act of 1999
(Pub. L. 106-113) directs the Secretary to require prospective payment
system hospitals to submit data on the costs incurred by the hospitals
for providing inpatient and outpatient hospital services for which the
hospitals are not compensated, including non-Medicare bad debt, charity
care, and charges for medical and indigent care as part of the Medicare
cost report.
    In the August 1, 2000 Federal Register (65 FR 47054), we published
a final rule that set forth changes to the IPPS and FY 2001 rates. In
that final rule we responded to comments on implementing section 112 of
Public Law 106-113. We informed the public that the hospital Medicare
cost report and instructions would be revised to collect uncompensated
care data. As a result of meeting with, and receiving input from,
various hospital industry groups, ``Worksheet S-10; Hospital
Uncompensated and Indigent Care Data'', was added to the Medicare cost
reporting forms to implement section 112 of Public Law 106-113. The
Worksheet S-10 was placed in effect for cost reporting periods
beginning on or after April 30, 2002.
    In May 2005, the Medicare Payment Advisory Commission (MedPAC)
convened an expert panel to address concerns on the usefulness of the
Worksheet S-10 data. Based on the panel discussion, MedPAC issued a
list of recommended changes to the Worksheet S-10. In addition, in its
March 2007 report to Congress, MedPAC recommended that the Secretary
should improve the form and accompanying instructions for collecting
data on uncompensated care in the Medicare cost report; and require
hospitals to report using the revised form as soon as possible.
(Recommendation 2A-3)
    In the August 22, 2007 Federal Register (72 FR 47406), we published
a final rule responding to the MedPAC recommendation. We stated in that
final rule that we were undertaking a major update to the Worksheet S-
10 form and accompanying instructions based on the panel's discussions
with MedPAC.
    In the July 2, 2009 Federal Register (74 FR 31738), we accordingly
published a proposed collection to revise the Hospital and Hospital
Health Care Complex Cost Report, Form CMS-2552-10, which included a
revised Worksheet S-10 form. This worksheet may change based on public
comments. The revised cost report and accompanying instructions that
include the definition of charity care based on MedPAC's
recommendations are currently in the Paperwork Reduction Act clearance
process. We anticipate that the revised hospital cost report will be
effective for cost reporting periods beginning on or after February 1,
2010.
    For the purposes of this proposed rule, we propose to define
charity care as part of uncompensated and indigent care described for
Medicare cost reporting purposes in the Medicare cost report
instructions at section 4012 of the Provider Reimbursement Manual
(PRM), Part 2; Worksheet S-10; Hospital Uncompensated and Indigent Care
Data. Subsection (d) hospitals and CAHs are required to complete the
Worksheet S-10.
    As part of the Form CMS-2552-10 described above, the revised
Worksheet S-10 instructions define uncompensated care as follows: ``* *
* charity care and bad debt which includes non-Medicare bad debt and
non-reimbursable Medicare bad debt. Uncompensated care does not include
courtesy allowances or discounts given to patients.'' These
instructions further define charity care to include health services for
which a hospital demonstrates that the patient is unable to pay.
Charity care results from a hospital's policy to provide all or a
portion of services free of charge to patients who meet certain
financial criteria. For Medicare purposes, charity care is not
reimbursable, and unpaid amounts associated with charity care are not
considered as an allowable Medicare bad debt. Therefore, we are
proposing to use the charity care charges that are reported on line 19
of the revised Worksheet S-10 in the computation of the Medicare share
of the incentive payments. The revised instructions for line 19 of
Worksheet S-10 state the following:

[[Page 1914]]

    Enter the total initial payment obligation of patients who are
given a full or partial discount, based on the hospital's charity
care criteria (measured at full charges), for care delivered during
this cost reporting period for the entire facility. For uninsured
patients, including patients with coverage from an entity that does
not have a contractual relationship with the provider (column 1),
this is the patient's total charges. For patients covered by a
public program or private insurer with which the provider has a
contractual relationship (column 2), this is the deductible and
coinsurance payments required by the payer. Include charity care for
all services except physician and other professional services. Do
not include charges for either uninsured patients given discounts
without meeting the hospital's charity care criteria or patients
given courtesy discounts. Charges for non-covered services provided
to patients eligible for Medicaid or other indigent care program
(including charges for days exceeding a length of stay limit) can be
included, if such inclusion is specified in the hospital's charity
care policy and the patient meets the hospital's charity care
criteria.

Under section 1886(n)(2)(D) of the Act, if the Secretary determines
that data are not available on charity care necessary to calculate the
portion of the formula specified in clause (ii)(II) of section
1886(n)(2)(D) of the Act, the Secretary shall use data on uncompensated
care and may adjust such data so as to be an appropriate proxy for
charity care including a downward adjustment to eliminate bad debt data
from uncompensated care data. In the absence of the data necessary for
the Secretary to compute the amount described in clause (ii)(II) of
section 1886(n)(2)(D) of the Act, the amount under such clause shall be
deemed to be 1.
    We believe that the charity care charges reported on line 19 of the
Worksheet S-10 represent the most accurate measure of charity care
charges as part of the hospital's overall reporting of uncompensated
and indigent care for Medicare purposes. Therefore, since eligible
hospitals and CAHs are required to complete the Worksheet S-10, if a
hospital has not properly reported any charity care charges on line 19,
we may question the accuracy of the charges used for computing the
Medicare share of the incentive payments. With appropriate resources,
we believe the charity care data can be obtained by the MAC. This data
would be used to determine if the hospital's charity care criteria are
appropriate, if a hospital should have reported charity care charges,
and if the reported charges are proper. If we determine, as based on
the determination of the MAC, that the hospital did not properly report
charity care charges on the Worksheet S-10, then we propose to deem the
denominator in section 1886(n)(2)(D)(ii)(II) of the Act to be 1.
    In this proposed rule, we are specifically soliciting public
comments on the charity care financial criteria established by each
hospital and reviewed by the MACs, the collection of charity care data
on the Worksheet S-10, and whether proxies for charity care may be
developed with other data available to us.
e. Transition Factor
    As we have previously discussed, the initial amount must be
multiplied not only by the Medicare share fraction, but also by an
applicable transition factor in order to determine the incentive
payment to an eligible hospital for an incentive payment year. Section
1886(n)(2)(E)(i) of the Act designates that the applicable transition
factor equals 1 for the first payment year, three-fourths for the
second payment year, one-half for the third payment year, one-fourth
for the fourth payment year, and zero thereafter. However, section
1886(n)(2)(E)(ii) of the Act provides that if ``the first payment year
for an eligible hospital is after 2013, then the transition factor
specified in this subparagraph for a payment year for such hospital is
the same as the amount specified in clause (i) for such payment year
for an eligible hospital for which the first payment year is 2013.''
Accordingly, if a hospital's first payment year is FY 2014, the
applicable transition factor equals three-fourths for the first payment
year (FY 2014), one-half for the second payment year (FY 2015), one-
fourth for the third payment year (FY 2015, and zero thereafter.) If a
hospital's first payment year is FY 2015, the applicable transition
factor equals one-half for the first payment year (FY 2015), one-fourth
for the second payment year (FY 2016), and zero thereafter. As
discussed in more detail below, under section 1886(n)(2)(E)(ii) of the
Act, the transition factor for a hospital for which the first payment
year is after 2015 equals zero for all years. In other words, 2015 is
the last year for which eligible hospitals may begin participation in
the Medicare EHR Incentive Program.

Figure 1--Incentive Payment Calculation for Subsection D Hospitals

Incentive Amount = [Initial Amount] x [Medicare Share] x [Transition
Factor]
Initial Amount = $2,000,000 + [$200 per discharge for the 1,150th -
23,000th discharge]
Medicare Share = Medicare/(Total*Charity Care) = [M/(T*C)]

M = [ of Inpatient Bed Days for Part A Beneficiaries] +
[ of Inpatient Bed Days for MA Beneficiaries]
T = [ of Total Inpatient Bed Days]
C = [Total Charges - Charges for Charity Care*]/[Total Charges]
    *If data on charity care is not available, then the Secretary
would use data on uncompensated care as a proxy. If the proxy data
is not also available, then ``C'' would be equal to 1.

                            Transition factor
------------------------------------------------------------------------
                                                            Transition
                Consecutive payment year                      factor
------------------------------------------------------------------------
1.......................................................               1
2.......................................................           \3/4\
3.......................................................           \1/2\
4.......................................................           \1/4\
------------------------------------------------------------------------

f. Duration and Timing of Incentive Payments
    Section 1886(n)(2)(E)(i) of the Act establishes that an eligible
hospital that is a meaningful user of certified EHR technology could
receive up to 4 years of financial incentive payments. The transition
factor phases down the incentive payments over the 4-year period.
Therefore, an eligible hospital that is a meaningful user of certified
EHR technology during the relevant EHR reporting period, in payment
year FY 2011, could receive incentive payments beginning with FY 2011
(transition factor equals 1), and for FY 2012 (transition factor equals
three-fourths), 2013 (transition factor equals one-half), and 2014
(transition factor equals one-fourth) if they continue to be a
meaningful user of certified EHR technology during the relevant EHR
reporting periods.
    Section 1886(n)(2)(E)(ii) of the Act establishes the range of time
during which a hospital may begin to receive incentive payments, and
the applicable transition periods for hospitals that are permitted to
begin receiving incentive payments after FY 2011. Specifically, that
section provides that if the ``first payment year for an eligible
hospital is after 2015, then the transition factor * * * for such
hospital and for such year and subsequent year shall be 0.'' This
clause in effect provides that no incentive payments will be available
to a hospital that would begin to receive such payments after FY 2015.
In other words, FY 2015 is the last FY in which a hospital can begin to
receive incentive payments. Taken together, sections 1886(n)(2)(G)(i)
and 1886(n)(2)(E)(ii) of the Act allow hospitals to begin receiving
incentive payments during FYs 2011 through 2015. Section
1886(n)(2)(E)(ii) of the Act also establishes the transition periods
and

[[Page 1915]]

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 three-fourths), FY 2014 (transition
factor equals one-half), and FY 2015 (transition factor equals one-
fourth). Similarly, an eligible hospital that is a meaningful EHR user
could receive incentive payments beginning with FY 2013 (transition
factor equals 1), and for FYs 2014 (transition factor equals \3/4\),
2015 (transition factor equals \1/2\), and 2016 (transition factor
equals \1/4\).
    However, this section also specifically provides that the
transition factor is modified for those eligible hospitals that first
become meaningful users of certified EHR technology beginning in 2014
or 2015. Such hospitals would receive payments as if they became
meaningful EHR users beginning in 2013. In other words, if a hospital
were to begin to demonstrate meaningful use of EHR certified technology
in 2014, the transition factor used for that year (2014) would be \3/4\
instead of 1, \1/2\ for the second year (2015), \1/4\ for the third
year (2016), and zero thereafter. Similarly, if a hospital were to
begin meaningful use of certified EHR technology in 2015, the
transition factor used for that year would be \1/2\ instead of 1, \1/4\
for the second year (2016), and zero thereafter.
    Table 25 shows the possible years an eligible hospital could
receive an incentive payment and the transition factor applicable to
each year.

                        Table 25--Transaction Factor for Medicare FFS Eligible Hospitals
----------------------------------------------------------------------------------------------------------------
                                      Fiscal year that eligible hospital first receives the incentive payment
           Fiscal year           -------------------------------------------------------------------------------
                                       2011            2012            2013            2014            2015
----------------------------------------------------------------------------------------------------------------
2011............................            1.00  ..............  ..............  ..............  ..............
2012............................            0.75            1.00  ..............  ..............  ..............
2013............................            0.50            0.75            1.00  ..............  ..............
2014............................            0.25            0.50            0.75            0.75  ..............
2015............................  ..............            0.25            0.50            0.50            0.50
2016............................  ..............  ..............            0.25            0.25            0.25
----------------------------------------------------------------------------------------------------------------

    We welcome comments from the public on our discussion of these
statutory requirements regarding the computation of the incentive
payment amounts, and the issues regarding the sources and timing of
data for use in these computations.
g. Incentive Payment Adjustment Effective in FY 2015 and Subsequent
Years for Eligible Hospitals Who Are Not Meaningful EHR Users
    In addition to providing for incentive payments for meaningful use
of EHRs during a transition period, section 1886(b)(3)(B) of the Act,
as amended by section 4102(b)(1) of the HITECH Act, provides for an
adjustment to the market basket update to the IPPS payment rate for
those eligible hospitals that are not meaningful EHR users for the EHR
reporting period for a payment year, beginning in FY 2015.
Specifically, section 1886(b)(3)(B) of the Act provides that, ``for FY
2015 and each subsequent FY,'' an eligible hospital that is not ``a
meaningful EHR user * * * for an EHR reporting period'' will receive a
reduced update to the IPPS standardized amount. This reduction will
apply to ``three-quarters of the percentage increase otherwise
applicable.'' For FY 2015 and each subsequent FY, the reduction to
three-quarters of the applicable update for an eligible hospital that
is not a meaningful EHR user will be ``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 one-quarter, one-
half, and three-quarters reductions of their market basket updates in
FY 2015, FY 2016, and FY 2017 and subsequent years respectively.
Section 4102(b)(1)(B) of the HITECH Act also provides that such
``reduction shall apply only with respect to the FY involved and the
Secretary shall not take into account such reduction in computing the
applicable percentage increase * * * for a subsequent FY.'' This
provision establishes a continuing incentive for hospitals to become
meaningful EHR users, because a hospital that does become a meaningful
EHR user in any year after the effective date of the update reduction
will receive the same, fully updated standardized amount for that year,
and subsequent years, as those hospitals that were already meaningful
EHR users at the time when the update reduction went into effect
(although hospitals would remain subject to a separate reduction for
failure to report quality data under RHQDAPU). In order to conform with
this new update reduction, section 4102(b)(1)(A) of the HITECH Act
revises section 1886(b)(3)(B)(viii)(1) of the Act to provide that,
beginning with FY 2015, the reduction to the IPPS applicable percentage
increase for failure to submit data on quality measures to the
Secretary shall be one-quarter of the applicable market basket update.
In this way, even the combined reductions for EHR use and quality data
reporting will not produce an update of less than zero for a hospital
in a given FY as long as the hospital market basket remains a positive
number.
    The following example illustrates how this payment reduction would
work. Suppose that the market basket ``percentage increase otherwise
applicable'' to the IPPS standardized

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amount is 2.0 percent. Of this 2.0 percent, one-quarter (0.5 percent)
of the market basket update would be subject to a reduction for any
hospital that fails to submit data on quality measures, and up to
three-quarters (1.5 percent) would be subject to a reduction for any
hospital that is not a meaningful EHR user. For FY 2015, hospitals
could receive one of four different updates, depending upon their
reporting of quality data and their use of EHRs:
     A hospital that reports quality data and qualifies as a
meaningful EHR user would receive the full update of 2.0 percent.
     A hospital that fails to report quality data but is a
meaningful EHR user would receive an update of 1.5 percent, which
represents the full 2.0 percent update minus the reduction of one-
quarter (0.5 percentage point) for failing to report quality data.
     A hospital that reports quality data but does not qualify
as a meaningful EHR user would receive an update of 1.5 percent, which
represents the full 2.0 percent update minus 0.5 percentage point
(33\1/3\ percent of three-quarters of the full update: \1/3\ times 1.5
equals 0.5).
     A hospital that fails to report quality data and does not
qualify as a meaningful EHR user would receive an update of 1.0
percent, which represents the full 2.0 percent update minus the
reduction of one-quarter (0.5 percentage point) for failing to report
quality data, and a further reduction of 0.5 percentage point (33\1/3\
percent of three-quarters of the full update: \1/3\ times 1.5 equals
0.5).
    For FY 2016, hospitals could receive one of four different updates
(assuming a 2 percent update that is otherwise applicable), depending
upon their reporting of quality data and their use of EHRs:
     A hospital that reports quality data and qualifies as a
meaningful EHR user would receive the full update of 2.0 percent.
     A hospital that fails to report quality data, but is a
meaningful EHR user would receive an update of 1.5 percent, which
represents the full 2.0 percent update minus the reduction of one-
quarter (0.5 percentage point) for failing to report quality data.
     A hospital that reports quality data, but does not qualify
as a meaningful EHR user would receive an update of 1.0 percent, which
represents the full 2.0 percent update minus 1.0 percentage point
(66\2/3\ percent of three-quarters of the full update: \2/3\ times 1.5
equals 1.0).
     A hospital that fails to report quality data, and does not
qualify as a meaningful EHR user would receive an update of 0.5
percent, which represents the full 2.0 percent update minus the
reduction of one-quarter (0.5 percentage point) for failing to report
quality data, and a further reduction of 1.0 percentage point (66\2/3\
percent of three-quarters of the full update: \2/3\ times 1.5 equals
1.0).
    For FYs 2017 and subsequent FYs, the possibilities (assuming a 2
percent update that is otherwise applicable) are as follows:
     A hospital that reports quality data and qualifies as a
meaningful EHR user would receive the full update of 2.0 percent.
     A hospital that fails to report quality data, but is a
meaningful EHR user would receive an update of 1.5 percent, which
represents the full 2.0 percent update minus the reduction of one-
quarter (0.5 percentage point) for failing to report quality data.
     A hospital that reports quality data, but does not qualify
as a meaningful EHR user would receive an update of 0.5 percent, which
represents the full 2.0 percent update minus 1.5 percentage points (100
percent of three-quarters of the full update, which equals 1.5) for
failing to be a meaningful EHR user.
     A hospital that fails to report quality data, and does not
qualify as a meaningful EHR user would receive an update of 0.0
percent, which represents the full 2.0 percent update minus the
reduction of one-quarter (0.5 percentage point) for failing to report
quality data, and a further reduction of 1.5 percentage points (100
percent of three-quarters of the full update, which equals 1.5) for
failing to be a meaningful EHR user.
    These examples are illustrative of current law. Specific proposals
to implement these payment adjustments for subsection (d) hospitals
that are not meaningful EHR users are not being made at this time but
will be subject to future rule-making prior to the 2015 implementation
date. We welcome comments on these payment adjustments and any comments
received will be considered in developing future proposals to implement
these provisions.
3. Incentive Payments for Critical Access Hospitals (CAHs)
    Section 1814(l)(3)(A) of the Act, as amended by section 4102(a)(2)
of the HITECH Act, also provides for incentive payments for CAHs that
are meaningful users of certified EHR technology during an EHR
reporting period for a cost reporting period beginning during a payment
year after FY 2010 but before FY 2016. The criteria for being a
meaningful EHR user, and the manner for demonstrating meaningful use,
are discussed in section II.A.2. of this proposed rule.
a. Definition of CAHs for Medicare
    Section 1861(mm)(1) of the Act defines a CAH as a facility that has
been certified as a critical access hospital under section 1820(c).
CAHs are reimbursed for services furnished to Medicare beneficiaries
under section 1814(l) of the Act for inpatient services and section
1834(g) of the Act for outpatient services. Incentive payments for CAHs
under section 1814(l)(3)(A) of the Act will be calculated based on the
provider number used for cost reporting purposes, which is the CCN of
the main provider. The process for making incentive payments to CAHs is
discussed in section II.B.4.c. of this proposed rule.
b. Current Medicare Payment of Reasonable Cost for CAHs
    For Medicare purposes, CAHs are paid for most inpatient and
outpatient services to Medicare beneficiaries on the basis of
reasonable cost under section 1814(l) and section 1834(g) of the Act,
respectively. Thus, CAHs are not subject to the IPPS and Hospital
Outpatient Prospective Payment System (OPPS).
    Section 1861(v)(1)(A) of the Act is the statutory basis for
reasonable cost reimbursement in Medicare. Under the reasonable cost
reimbursement methodology, payments to providers are based on the
reasonable cost of furnishing Medicare-covered services to
beneficiaries. Reasonable cost includes all necessary and proper costs
in furnishing the services, subject to the principles of reasonable
cost reimbursement relating to certain specific items of revenue and
cost. Reasonable cost takes into account both direct and indirect costs
of providers of services, including normal standby costs. The objective
of the reasonable cost methodology is to ensure that the costs for
individuals covered by the program are not borne by others not so
covered, and the costs for individuals not so covered are not borne by
the program. The reasonable costs of services and the items to be
included are determined in accordance with the regulations at 42 CFR
part 413, manual guidance, and other CMS instructions.
    Currently, under section 1814(l)(1) of the Act and 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

[[Page 1917]]

section 1861(v)(1)(A) of the Act and with the applicable principles of
cost reimbursement in Parts 413 and 415 of the regulations. However,
payment for inpatient CAH services is not subject to the reasonable
cost principles of the lesser of cost or charges, the reasonable
compensation equivalent limits for physician services to providers, the
ceilings on hospital operating costs, and the payment window provisions
for preadmission services, specified in 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 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 1813(l)(3) and payment adjustments
under section 1814(l)(4); (2) the methodology and standards for
determining a CAH to be a meaningful EHR user; (3) the methodology and
standards for determining if the hardship exemption applies to a CAH;
(4) the specification of EHR reporting periods; and (5) the
identification of reasonable costs used to compute CAH incentive
payments.
d. Incentive Payment Calculation for CAHs
    Consistent with section 1814(l)(3)(A) of the Act, we are proposing
to amend 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
are proposing 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 are proposing 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 propose to
apply the definitions of certified EHR technology, EHR reporting
period, meaningful EHR user and qualified EHR in proposed Sec.  495.4
that are discussed elsewhere in this proposed rule.
    In proposed Sec.  495.106(a), we are proposing to define a
qualifying CAH as a CAH that meets the meaningful EHR user definition
for eligible hospitals in Sec.  495.4, which is discussed in section II
A.1. of this proposed rule. Also in proposed Sec.  495.106(a), for the
purposes of computing the CAH incentive payment, we are proposing that
the reasonable costs for the purchase of certified EHR technology mean
the reasonable acquisition costs, excluding any depreciation and
interest expenses associated with the acquisition,

[[Page 1918]]

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 proposed rule. We also propose to define payment year for
CAHs to mean a fiscal year beginning after FY 2010 but before FY 2016.
    Under proposed Sec.  495.106(b), we specify that a qualifying CAH
shall receive an incentive payment for its reasonable costs incurred
for the purchase of certified EHR technology. The CAH incentive payment
will be for a cost reporting period that begins during a payment year
after FY 2010 but before FY 2016.
    Consistent with section 1814(l)(3)(A) of the Act, under proposed
Sec.  495.106(c), the proposed payment methodology for computing the
incentive payment for a qualifying CAH for a cost reporting period
during a payment year is equal to the product of--(1) the reasonable
costs incurred for the purchase of certified EHR technology in that
cost reporting period and any similarly incurred costs from previous
cost reporting periods to the extent they have not been fully
depreciated as of the cost reporting period involved and (2) the CAH's
Medicare share which equals the Medicare share as computed for eligible
hospitals including the adjustment for charity care (described in
sections II.A.2.b. and A.3. of this proposed rule) plus 20 percentage
points. However, in no case will the resulting Medicare share for a CAH
exceed 100 percent. This percentage adjustment will be used in place of
the 101 percent typically applied to a CAH's reasonable costs under
section 1814(l)(1) of the Act and Sec.  413.70(a) of the regulations.
    For example, a CAH first requests an incentive payment for its cost
reporting period beginning on January 1, 2012 which is in FY 2012. The
CAH incurred reasonable costs of $500,000 for the purchase of certified
EHR technology in its previous cost reporting period beginning on
January 1, 2011. This CAH is a meaningful user of certified EHR
technology during the relevant EHR reporting period and thus qualifies
for an incentive payment for FY 2012. (For illustrative purposes this
example assumes no salvage value of the assets acquired.) The CAH
depreciated $100,000 of the costs of these items in the cost reporting
period beginning on January 1, 2011. As a result, the amount used to
compute the incentive payment will be the remaining $400,000 of
undepreciated costs. The CAH's Medicare share is 90 percent (its
Medicare share of 70 percent using the methodology described in section
II.A.2.b. of this proposed rule plus 20 percentage points). Therefore,
the CAH's incentive payment for FY 2012 is $360,000 ($400,000 times 90
percent). This CAH's first payment year is FY 2012, and it can receive
incentive payments through 4 consecutive payment years which, in this
example, would be FYs 2012 through 2015.
    If, in the above example, the CAH also incurred reasonable costs of
$300,000 for the purchase of certified EHR technology in its cost
reporting period beginning in FY 2012 that will not be depreciated,
then the incentive payment for FY 2012 is $630,000 ($700,000 ($400,000
in FY 2011 plus $300,000 in FY 2012) times 90 percent).
    (The preceding examples are offered for illustrative purposes only
and are not intended to encompass all possible computations of the CAH
incentive payment.)
    Under proposed 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 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 is paid through a
prompt interim payment for the applicable payment year after--(1) The
CAH submits the necessary documentation, as specified by CMS or its
Medicare contractor, to support the computation of the incentive
payment amount; and (2) CMS or its Medicare contractor reviews such
documentation and determines the interim amount of the incentive
payment.
    Under Sec.  495.106(d)(3), the interim incentive payment is subject
to a reconciliation process as specified by CMS and the final incentive
payment as determined by CMS or its Medicare contractor is considered
payment in full for the reasonable costs incurred for the purchase of
certified EHR technology in a payment year.
    Under Sec.  495.106(d)(4), we propose that an incentive payment may
be made with respect to a cost reporting period beginning during a
payment year beginning with FY 2011 (October 1, 2010 through September
30, 2011) through FY 2015 (October 1, 2014 through September 30, 2015),
but in no case may a CAH receive an incentive payment with respect to
more than four consecutive payment years. Therefore, a CAH, that is a
meaningful EHR user, may begin receiving an incentive payment for its
cost reporting period beginning in FY 2011 for the incurred reasonable
costs for the purchase of certified EHR technology during that cost
reporting period and in previous cost reporting periods to the extent
that the item or items have not been fully depreciated. These incentive
payments will continue for no more than 4 consecutive payment years and
will not be made for a cost reporting period beginning during a payment
year after 2015. As discussed in section II.B.4. of this proposed rule,
the CAH must submit supporting documentation for its incurred costs of
purchasing certified EHR technology to its Medicare contractor (Fiscal
Intermediary (FI)/MAC).
    CAHs cannot receive an incentive payment for a cost reporting
period that begins in a payment year after FY 2015. If the first
payment year for a CAH is FY 2013 then the fourth consecutive payment
year would be 2016. However, the CAH cannot be paid an incentive
payment for FYs 2016 and beyond. For FY 2016 and beyond, payment to
CAHs for the purchase of additional EHR technology will be made under
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.
e. Reduction of Reasonable Cost Payment in FY 2015 and Subsequent Years
for CAHs That Are Not Meaningful EHR Users
    Section 4102(b)(2) of the HITECH Act amends section 1814(l) to
include an adjustment to a CAH's reimbursement at 101 percent of its
reasonable costs if the CAH has not met the meaningful EHR user
definition for an EHR reporting period that begins in FY 2015, FY 2016,
FY 2017, and each subsequent FY thereafter. Consistent with this
provision, under proposed 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 will be reduced from

[[Page 1919]]

101 percent of its reasonable costs to 100.66 percent. For FY 2016, its
reimbursement will be reduced to 100.33 percent of its reasonable
costs. For FY 2017 and each subsequent FY, its reimbursement will be
reduced to 100 percent of reasonable costs.
    However, as provided for eligible hospitals, a CAH may, on a case-
by-case basis, be exempted from this adjustment if CMS or its Medicare
contractor determines, on an annual basis, that requiring the CAH to be
a meaningful EHR user would result in a significant hardship, such as
in the case of a CAH in a rural area without sufficient Internet
access. However, in no case may a CAH be granted an exemption under
this provision for more than 5 years.
    Section 1814(l)(5) of the Act exempts the determinations made under
paragraphs (l)(3) and (l)(4) from administrative and judicial review.
Accordingly, under proposed Sec.  413.70(a)(6)(iv) and Sec.
495.106(f), we are proposing that there shall be no administrative or
judicial review under sections 1869 or 1878 of the Act, or otherwise,
of the following:
     The methodology and standards for determining the amount
of payment under section 1814(l)(3) of the Act and payment adjustments
under section 1814(l)(4) of the Act for CAHs, including selection of
periods under section 1886(n)(2) of the Act for determining, and making
estimates or using proxies of, inpatient-bed-days, hospital charges,
charity charges, and the Medicare share under subparagraph (D) of
section 1886(n)(2) of the Act;
     The methodology and standards for determining a CAH to be
a meaningful EHR user under section 1886(n)(3) of the Act as would
apply if the CAH was treated as an eligible hospital under section
1886(n) of the Act;
     The methodology and standards for determining if the
hardship exemption under section 1814(l)(4)(C) of the Act applies to a
CAH;
     The specification of EHR reporting periods under section
1886(n)(6)(B) of the Act as applied under section 1814(l)(3) and (4) of
the Act for CAHs; and
     The identification of reasonable costs used to compute the
CAH incentive payment under section 1814(l)(3)(C) of the Act.
4. Process for Making Incentive Payments Under the Medicare FFS Program
    As previously discussed in section II.B.1. and 2. of this proposed
rule and sections 1848(o)(1) and 1886(n)(1) of the Act, the statute
provides for incentive payments to eligible professionals, eligible
hospitals, and CAHS who are meaningful users of certified EHR
technology as early as FY 2011 for qualifying eligible hospitals and
CAHs and CY 2011 for qualifying EPs. The statute does not specify the
process for making these payments to qualifying EPs and qualifying
eligible hospitals and CAHs participating in the FFS Medicare incentive
payment program, but instead leaves the payment process to the
Secretary's discretion.
    We propose that FIs, carriers, and MACs, as appropriate, would be
responsible for determining the incentive payment amounts for
qualifying EPs and qualifying eligible hospitals and CAHs in accordance
with the proposed methodology set forth in section II.B.1.b. and B.2.b.
of this proposed rule based on the previously discussed meaningful use
criteria, disbursing the incentive payments to qualifying EPs and
qualifying eligible hospitals and CAHs, and resolving any
reconciliation issues.
a. Incentive Payments to EPs
    We propose that the carriers/MACs calculate incentive payment
amounts for qualifying EPs. Incentive payments will be disbursed on a
rolling basis, as soon as they ascertain that an EP has demonstrated
meaningful use for the applicable reporting period (i.e., 90 days for
the first year or a calendar year for subsequent years), and reached
the threshold for maximum payment. As discussed previously in section
II.A.1.b. of this proposed rule, once a qualifying EP's allowed charges
reach the minimum threshold of allowed charges for the payment year,
the qualifying EP is eligible to receive the maximum incentive payment;
the carrier/MAC would be authorized to disburse the full incentive
payment to that qualifying EP. If a qualifying EP's allowed charges do
not reach the minimum threshold during the payment year (including
subsequent claims submitted not later than 2 months after the end of
the payment year per statute) and if the qualifying EP is also a
qualifying MA EP, the qualifying MA organization with which the EP is
affiliated will receive the incentive payment for the EP from the MA.
If the qualifying EP does not also qualify as a MA EP, then the
carriers/MAC will calculate the amount of the qualifying EP's incentive
payment an amount determined by statute as 75 percent of the
accumulated allowed charges based on claims submitted not later than 2
months after the end of the payment year), and disburse the incentive
payment to the qualifying EP in the year following payment year. The
carriers/MACs will issue incentive payments to qualifying EPs after
ensuring payment has not already been made under the Medicaid program
for the relevant payment year. As required by section 1848(m)(2) of the
Act as amended by section 4101(f) of the HITECH Act, qualifying EPs
receiving incentive payments from the Medicare EHR incentive payment
program may not also receive an e-prescribing incentive payment. The
carriers/MACs will also track the incentive payment at the qualifying
EP's TIN level, and disburse the electronic payment to the TIN provided
by the qualifying EP indicated during the registration process;
qualifying EPs who do not have individual TINs (that is, a qualifying
EP who works solely in a group practice) will be paid at the group
practice level's TIN. Since some EPs work in multiple group practices,
we considered allowing these EPs to direct that their incentive payment
be allocated among the multiple practices based on individual and/or
group TINs. However, as discussed more fully in section II.B.1.d of
this proposed rule, we determined that this would create a significant
administrative burden for us and therefore are proposing that
qualifying EPs select one TIN for disbursement of their Medicare EHR
incentive payment. Of course, after the payment is disbursed to their
designated TIN, qualifying EPs may decide to allocate their incentive
payment among the multiple practices in which they furnish covered
professional services. subject to applicable laws, regulations and
rules, including, without limitation, those related to fraud, waste,
and abuse.
    In addition, we recognize that financial relationships between
physicians and their employers/entities with which they have
contractual arrangements may implicate certain fraud, waste, and abuse
laws, regulations, and rules. Therefore, we are considering including
specific safeguards to limit the risk that the allocation/reassignment
of incentive payments could raise under those and other applicable
laws, regulations and rules; we appreciate public comments on this
consideration.
b. Incentive Payments to Eligible Hospitals
    The FIs/MACs will calculate incentive payments for qualifying
eligible hospitals, and will disburse such payments on an interim basis
once the hospital has demonstrated it is a meaningful EHR user for the
EHR reporting period for the payment year. As discussed above in
section B.2.b. of the proposed rule, the formula for

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calculating a qualifying eligible hospital's incentive payment requires
the following data: (1) An initial amount; (2) the Medicare share; and
(3) a transition factor applicable to that payment year. FIs/MACs will
use the prior-year cost report, Provider Statistical and Reimbursement
(PS&R) System data, and other estimates to calculate the interim
incentive payment. As discussed in section II.B.2.c. of this proposed
rule, beginning in 2010, cost reports will capture charity care data
which will be used in calculating the Medicare share of the payment. As
discussed in section II.B.2.b. of this proposed rule, we are proposing
to calculate a qualifying hospital's final incentive payment using data
from the cost report for the hospital's fiscal year that ends during
the FY prior to the FY that serves as the payment year. We therefore
are proposing that the FIs/MACs calculate the final incentive payment
using actual cost report data report for the hospital's fiscal year
that ends during the FY prior to the fiscal year that serves as the
payment year, and will reconcile the incentive payment as necessary at
settlement of the cost report. Incentive payments for qualifying
eligible hospitals will be calculated based on the provider number used
for cost reporting purposes, which is the CCN of the main provider.
Therefore, the FIs/MACs would disburse incentive payments to qualifying
hospitals based on the CCN rather than the TIN.
c. Incentive Payments to CAHs
    CAHs are paid on a cost reimbursement basis; once a CAH incurs
actual EHR costs, it can submit supporting documentation to the FI/MAC
for review. The FIs/MACs will determine an incentive payment amount, as
previously discussed in section II.A.3. of this proposed rule by
substituting for the Medicare share amount that would otherwise be
applied under the formula used for computing payments for eligible
hospitals, a percent (not to exceed 100 percent) equal to the sum of--
(1) The Medicare share for such CAH, and (2) 20 percentage points.
    The FIs/MACs will reconcile the cost report and ensure the EHR
expenses are adjusted on the cost report to avoid duplicate payments.
Incentive payments for qualifying CAHs will be calculated based on the
provider number used for cost reporting purposes, which is the CCN
number of the main provider. Therefore, the FIs/MACs will disburse
incentive payments to qualifying CAHs based on the CCN number rather
than the TIN.
d. Payment Accounting Under Medicare
    We will conduct selected compliance reviews of EPs, eligible
hospitals, and qualified CAHs who register for the incentive programs
and of recipients of incentive payments for the meaningful use of
certified EHR technology. The reviews will validate provider
eligibility and their meaningful use attestations including
verification of meaningful use and would also review components of the
payment formulas.
    We will identify and recoup overpayments made under the incentive
payment programs that result from incorrect or fraudulent attestations,
quality measures, cost data, patient data, or any other submission
required to establish eligibility or to qualify for a payment. The
overpayment will be recouped by CMS or its agents from the EP, eligible
hospital, MA organization, CAH, other entities to whom the right to
payment has been assigned/reassigned, or, in the case of Medicaid, from
the State Medicaid agencies. Medicare FFS EPs and eligible hospitals
will need to maintain evidence of qualification to receive incentive
payments for 10 years after the date they register for the incentive
program.

C. Medicare Advantage (MA) Organization Incentive Payments

1. Definitions
a. Qualifying MA Organization
    Section 1853(l)(1) of the Act, as added by section 4101(c) of the
HITECH Act, provides for incentive payments to qualifying MA
organizations for certain of their affiliated EPs who are meaningful
users of certified EHR technology during the relevant EHR reporting
period for a payment year. Section 1853(l)(5) of the Act defines the
term ``qualifying MA organization'' as an MA organization that is
organized as a health maintenance organization (HMO) as defined in
section 2791(b)(3) of the PHS Act. Section 2791(b)(3) of the PHS Act in
turn defines a health maintenance organization as a federally qualified
HMO, an organization recognized as an HMO under State law, or a similar
organization regulated for solvency under State law in the same manner
and to the same extent as an HMO. Since there are few federally
qualified HMOs, we expect MA organizations to primarily qualify for
incentive payments as State-licensed HMOs, or as organizations
regulated for solvency under State law in the same manner and to the
same extent as HMOs. Therefore, in Sec.  495.200 we propose to define
``qualifying MA organization.''
    In Sec.  495.202(a)(2), we propose 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 propose to offer, and meet solvency
standards that are adequate for these purposes. For each MA
organization offering MA HMO plans, the State has thus recognized that
the organization is able to assume risk as an HMO. Therefore, we have
determined that absent evidence to the contrary, an MA organization
offering HMO plans is recognized by the State as a health maintenance
organization, or that it is subject to State solvency standards in the
same manner and to the same extent as an HMO and therefore provides
sufficient assurance that the section 2791(b)(3) of the PHS Act
definition is met.
    In proposed 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 would require
the sponsoring MA organization to attest that the MA organization is
recognized under State law as an HMO, or that it is a similar
organization regulated under State law for solvency in the same manner
and to the same extent as an HMO before we would make a determination
that the MA organization is a qualifying MA organization for purposes
of incentive payments.
b. Qualifying MA Eligible Professional (EP)
    A qualifying MA organization may receive an incentive payment only
for those EPs described under section 1853(l)(2) of the Act, as added
by section 4101(c) of the HITECH Act. Section 1853(l)(2) of the Act
provides that these EPs must be ``eligible professionals'' as defined
under section 1848(o) of the Act as added by section 4101(a) of the
HITECH Act, and must either--
     Be employed by the qualifying MA organization; or
     Be employed by, or be a partner of, an entity that through
contract with the

[[Page 1921]]

qualifying MA organization furnishes at least 80 percent of the
entity's Medicare patient care services to enrollees of the qualifying
MA organization.
    Further, the EP must furnish at least 80 percent of his or her
professional services covered under Title XVIII (Medicare) to enrollees
of the qualifying MA organization and must furnish, on average, at
least 20 hours per week of patient care services.
    As discussed in section II.A.1. of this proposed rule, an EP is
defined as a physician (under section 1861(r) of the Act).
    We interpret ``employed by'' to mean that the EP is considered an
employee of a qualifying MA organization or qualifying entity under the
usual common law rules applicable in determining the employer-employee
relationship under section 3121(d)(2) of the Internal Revenue Code of
1986.
    We interpret ``to be a partner of'' to mean that the qualifying MA
EP has an ownership stake in the entity. Under this proposed
interpretation, a professional that contracts with an entity, but has
no ownership stake in the entity, would not be considered a qualifying
MA EP.
    We interpret ``furnishing at least 80 percent'' of the entity's
``patient care services'' to mean at least 80 percent of the qualifying
MA EP's total Medicare revenue in a year (that is, total revenue from
Medicare FFS as well as from all MA organizations) must be from a
single qualifying MA organization.
    We propose to interpret the requirement that a qualifying MA EP
furnish at least 80 percent of their professional services covered
under Title XVIII means that at least 80 percent of the professional's
total Medicare revenue in a year (that is, total revenue from Medicare
FFS as well as from all MA organizations) must be from a single
qualifying MA organization. We believe that in establishing the rule
that qualifying MA EPs need to furnish at least 80 percent of the EP's
Title XVIII covered services ``to enrollees of the organization,'' the
statute limits payment related to any specific qualifying MA EP to a
single qualifying MA organization. Thus, if a qualifying MA EP provided
an average of 20 hours per week of patient care services to two
distinct qualifying MA organizations, we would pay the qualifying MA
organization for the MA EP only if such a qualifying EP provided at
least 80 percent of his or her professional services covered under
Title XVIII to enrollees of that organization.
    For purposes of determining whether a qualifying MA EP furnishes,
on average, at least 20 hours per week of patient care services, we
interpret the requirement to include both Medicare and non-Medicare
patient care services. Moreover, we propose that the relevant time
period for determining whether an MA EP furnishes at least 20 hours per
week of patient care services should be the EHR reporting period. (We
discuss the proposed definition of EHR reporting period in section
II.A. 1. e. of this proposed rule.) Therefore, over the EHR reporting
period, the qualifying EP must provide on average 20 hours per week of
patient care services. Finally, we interpret ``patient care services''
to mean services that would be considered ``covered professional
services'' under sections 1848(o)(5)(A) and (k)(3) of the Act. That is,
health care services for which payment would be made under, or for
which payment would be based on, the fee schedule established under
Medicare Part B if they were furnished by an eligible professional.
    We considered various methods of determining when at least 20 hours
per week, on average, of patient care services will be considered to be
provided by MA EPs. We considered methods such as defining a dollar or
service threshold, or the number of hours of direct patient care
services actually provided. After due consideration we propose to
require qualifying MA organizations to attest to the fact that MA EPs
for whom they are requesting EHR incentive payments have provided, on
average, 20 hours of patient care services during the EHR reporting
period.
    As discussed in section II.B. of this proposed rule relating to
Medicare FFS EPs, a qualifying MA EP is also defined as a physician
under section 1861(r) of the Act. Section 1853(l)(1) of the Act, as
added by section 4101(c) of the HITECH Act, provides that the
provisions of sections 1848(o) and 1848(a)(7) of the Act, as amended
and added by sections 4101(a) and (b) of the HITECH Act, respectively,
which establish the incentive payments for EPs under Medicare FFS,
apply to a qualifying MA organization's qualifying MA EPs ``in a
similar manner'' as they apply to EPs under Medicare FFS. As discussed
above in section II.A.6. of this proposed rule, section
1848(o)(1)(C)(i) of the Act, as added by section 4101(a) of the HITECH
Act, states that hospital-based EPs are not eligible for incentive
payments. Therefore, we propose that, similar to the Medicare FFS
incentive program, MA incentive payments would also not be available
for hospital-based EPs. We note that the hospital where a hospital-
based EP provides his or her Medicare covered services would be
potentially entitled to an incentive payment either through the
Medicare FFS incentive program, or through the MA-affiliated hospital
EHR incentive program. Therefore, for such a 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.
    As discussed previously, an MA EP must either be employed by the
qualifying MA organization, or be employed by, or be a partner of, an
entity that through contract with the qualifying MA organization
furnishes at least 80 percent of the entity's Medicare patient care
services to enrollees of the qualifying MA organization. With respect
to the later criteria, we do not propose to define the term ``entity,''
but instead recognize that there exist a range of entities with which
MA organizations contract for patient care services, including a
physician group, an Independent Practice Association (IPA), an
Exclusive Provider Organization (EPO), a Physician Hospital
Organization (PHO), or Preferred Provider Organization (PPO).
    Moreover, we recognize that an EP may contract with more than one
such entity, and that these entities often contract with a number of MA
organizations and other health care insurers. An EP also may directly
contract with more than one MA organization. In general it is only when
an EP is employed by a single qualifying MA organization, or is
employed by or in partnership with an entity that contracts with a
single qualifying MA organization that an EP can satisfy the criteria
to be an MA EP.
    Finally, the qualifying MA organization must attest to the fact
that each MA EP is a meaningful user of certified EHR technology in
accordance with proposed Sec.  495.4. If all of these conditions are
met, such an individual is identified as an MA EP. We propose to define
the term ``MA eligible professional (EP)'' at Sec.  495.200 as an EP
who satisfies these conditions.
    Section 4101(d) of the HITECH Act directs the Secretary to study
and report on ``nearly exclusive'' physicians that primarily treat MA
enrollees and that would not otherwise qualify for incentive payments
under current law. This proposed rule does not address such
individuals, as it is limited to codifying in regulation existing
statutory language as discussed herein.

[[Page 1922]]

c. Qualifying MA-Affiliated Eligible Hospital
    We propose 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 proposed 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 are Medicare individuals
enrolled under MA plans offered by such organization. As discussed in
section II.A.1. of this proposed rule, section 1886(n)(6) of the Act,
defines an ``eligible hospital'' as a subsection (d) hospital (as
defined under section 1886(d)(1)(B) of the Act). In Sec.  495.200, we
also propose to define ``under common corporate governance'', as a
qualifying MA organization and a qualifying MA-affiliated eligible
hospital that have a common parent corporation, that one is a
subsidiary of the other, or that the organization and the hospital have
a common board of directors.
    Section 1853(m)(3)(B)(i) of the Act, as added by section 4101(c) of
the HITECH Act, provides that if for a payment year at least one-third
(33 percent) of a MA eligible hospital's discharges (or 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 propose to define ``inpatient-bed-days'' in the
same manner as that term is defined for purposes of implementing
section 4201(a) of the HITECH Act in the preamble of this proposed
rule. The term will be used in the same way in computing incentive
payments due qualifying MA organization under the qualifying MA-
affiliated eligible hospital incentive payment program.
    We note that, as discussed in section II.B.2.b. of this proposed
rule, under section 1886(n)(2)(D)(i)(II) of the Act, the portion of the
Medicare FFS hospital incentive payment comprising the discharge
related amount, or Medicare share, is based in part on the estimated
number of inpatient-bed-days attributable to individuals enrolled in MA
plans under Part C. This means that hospitals that treat individuals
enrolled in MA plans will receive a Medicare FFS hospital incentive
payment partially based on the number of 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
proposed rule for the computation of incentive payments to qualifying
MA organizations.)
    Therefore, we propose to make EHR incentive payments to qualifying
MA-affiliated eligible hospitals under the FFS EHR incentive program.
Finally, to the extent that such data necessary to estimate the
inpatient-bed-days-related incentive payment amount are not already
available to us through the normal submission of hospital cost reports,
we propose to require that qualifying MA organizations seeking
reimbursement for qualifying MA-affiliated eligible hospitals submit
similar data.
2. Identification of Qualifying MA Organizations, MA EPs, and MA-
Affiliated Eligible Hospitals
    In Sec.  495.202 we propose to require MA organizations that intend
to ask for reimbursement under the MA EHR incentive payment program to
so indicate as part of submissions of their initial bid under section
1854(a)(1)(A) of the Act, and to attest, in some cases, that they meet
the requirements of a qualifying MA organization. For MA organizations
offering an MA HMO plan type, we will deem such organizations to meet
the definition of HMO in 42 U.S.C. 300-gg(b)(3), (that is, section
2791(b)(3) of the PHS Act). As noted previously, for MA organizations
offering plan types other than HMOs, we propose to require an
attestation by the organization that the MA organization is recognized
under State law as an HMO, or that it is a similar organization
regulated under State law for solvency in the same manner and to the
same extent as an HMO before we would make a determination that the MA
organization is a qualifying MA organization for purposes of incentive
payments. We propose to require this beginning with bids due in June
2010 (for plan year 2011) for MA organizations seeking reimbursement
for MA EPs and MA-affiliated eligible hospitals.
    We also propose requiring qualifying MA organizations, as part of
their initial bids starting with plan year 2011, to make a preliminary
identification of potentially qualifying MA EPs and potentially
qualifying MA-affiliated eligible hospitals for which the organizations
will seek EHR incentive payments.
    In developing the preliminary and final lists of potentially
qualifying MA EPs, qualifying MA organizations must exclude hospital-
based MA EPs. We propose that qualifying MA organizations identify
hospital-based MA EPs using the same criteria outlined in section
II.A.6 of this proposed rule for identifying hospital-based EPs in the
Medicare FFS EHR incentive program.
    Along with both the preliminary and final lists of potentially
qualifying MA EPs and hospitals, qualifying MA organizations must
submit an attestation that these professionals and hospitals meet the
criteria to be considered eligible. For example, for hospitals, the
qualifying MA organization must attest that they are under common
corporate governance with the qualifying MA organization. For example,
for EPs, the qualifying MA organization must attest that the list does
not include any hospital-based EPs.
    We propose requiring qualifying MA organizations to provide final
identification of potentially qualifying MA EPs by the end of the MA EP
payment year (December 31), and final identification of potentially
qualifying MA-affiliated eligible hospitals by the end of the MA-
affiliated hospital payment year (the FFY ending on September 30), for
which MA EHR incentive payments will be sought. We also propose
requiring qualifying MA organizations to report the name, practice
address, and other identifying information, like NPI, for all
physicians that meet the requirements of a qualifying MA EP for which
the qualifying MA organization will be requesting payment under the MA
EHR incentive payment program.
    Once a qualifying MA organization identifies potential EPs, we are
required to ensure that such EPs did not receive the maximum EHR
incentive payment for the relevant payment year under the Medicare FFS
program under section 1848(o)(1)(A) of the Act, as added by section
4101(a) of the HITECH Act, before releasing an incentive payment to a
qualifying MA organization related to such EP. (See section
1853(l)(3)(B)(i) of the Act, as added by section 4101(c) of the HITECH
Act). Therefore, in order to allow us time to determine whether an MA
EP received the maximum EHR incentive payment under the Medicare

[[Page 1923]]

FFS program, we propose not to make incentive payments to qualifying MA
organizations for the MA EPs for a payment year until after the final
computation of EP incentive payments for that year under the Medicare
FFS program. Additionally, we propose to require qualifying MA
organization to ensure that all MA EPs are enumerated through the NPI
system, in order to detect and prevent duplicate payment for EPs under
both the FFS and MA EHR incentive payment programs.
    We also propose to require all qualifying MA organizations to 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
propose to require this reporting by all qualifying MA organizations in
years beginning with 2014 in anticipation of the statutory requirement
in sections 1853(l)(4) and 1853(m)(4) of the Act, to negatively adjust
our capitation payments to qualifying MA organizations for MA EPs and
MA-affiliated eligible hospitals that are not meaningful users of
certified EHR technology for years beginning with 2015.
3. Computation of Incentives to Qualifying MA Organizations for MA EPs
and Hospitals
    In Sec.  495.204, we propose a methodology under which payments to
qualifying MA organizations for qualifying MA EPs will be computed.
Section 1853(l)(3)(A) of the Act provides that in applying section
1848(o), instead of the additional payment amount specified under
section 1848(o)(1)(A) of the Act, the Secretary may substitute an
amount determined by the Secretary, to the extent feasible and
practical, to be similar to the estimated amount in the aggregate that
would be payable under, or would be based on, the Medicare physician
fee schedule under Part B instead of Part C. Section II.B.1. of this
proposed rule discusses these provisions.
    Section 1853(m)(3)(A) of the Act provides that in providing an
incentive payment to qualifying MA organizations for MA-affiliated
hospitals, we substitute for the amount specified under section
1886(n)(2) of the Act--the incentive payment amount under Medicare FFS
for qualifying eligible hospitals--an amount determined by the
Secretary to be similar to the estimated amount in the aggregate that
would be payable if payment for services furnished by such hospitals
was payable under Part A instead of Part C. (For more detailed
information see section II.B.2. of this proposed rule.)
    Section 1848(o) of the Act permits us to make the incentive
payments for a year in installments, although we are proposing to make
a single lump sum payment under the Medicare FFS EHR incentive program.
We read the term ``aggregate'' to mean the aggregate installment
payments made by us under the FFS EHR incentive program to a qualifying
EP over the course of the relevant payment year.
    The duplicate payment provisions in section 1853(l)(3)(B)(i)(II) of
the Act direct us to make payment for EPs ``only under'' the MA EHR
incentive program ``and not under'' the Medicare FFS EHR incentive
program to the extent any EP has earned ``less than [the] maximum
incentive payment for the same period'' under the Medicare FFS EHR
incentive program. We note that section 1853(l)(1) of the Act, provides
that section 1848(o) of the Act applies in a ``similar,'' but not the
same, manner to qualifying MA organizations as it applies to EPs under
Part B. The Medicare FFS incentive payment program under section
1848(o) does not include payment for professional services provided to
MA enrollees, but only for services paid under Part B. In a similar
manner we propose to limit payment to an MA organization to only
payment for their EPs' services to MA enrollees of plans offered by the
MA organization. We do not believe it would be appropriate to provide
an incentive payment to an MA organization for services provided to
individuals covered under Part B. Therefore, we propose, that in
calculating qualifying MA EP incentive payments, we will only consider
covered professional services provided to enrollees of MA plans offered
by qualifying MA organizations and will not include in the calculation
any services reimbursed by Medicare FFS.
    Under the Medicare FFS EHR incentive program, an EP's incentive
payment may not exceed the annual limits specified under section
1848(o)(1)(B)(i) of the Act. We propose that similar payment limits
apply to qualifying MA organizations for their qualifying MA EPs.
Specifically, the incentive payment to a qualifying MA organization for
each of its qualifying MA EPs may not exceed certain limits.
Specifically, section 1848(o)(1)(B) of the Act provides that the
incentive payment for an EP for a given year shall not exceed the
following amounts:
     For the EP's first payment year, $15,000 (or, if the first
payment year is 2011 or 2012, $18,000).
     For the EP's second payment year, $12,000.
     For the EP's third payment year, $8,000.
     For the EP's fourth payment year, $4,000.
     For the EP's fifth payment year, $2,000.
     For any succeeding year, $0.
    Note that, similar to the Medicare FFS EHR incentive program, there
will be no incentive payments made with respect to a year after 2016.
We propose similar restrictions related to qualifying MA organizations.
So, the maximum cumulative incentive payment over 5 years to a
qualifying MA organization for each of its qualifying MA EPs that
meaningfully use certified EHRs beginning on or before 2012 would be
$44,000 per qualifying MA EP. For qualifying MA organizations first
reporting the meaningful use of certified EHRs by qualifying MA EPs
after 2014, there is no incentive payment amount available. Subject to
an exception discussed below, for MA organizations first reporting the
meaningful use of certified EHRs by qualifying MA EPs in 2013 or 2014,
the maximum potential incentive payment per qualifying EP is,
respectively, $39,000 over 4 years, and $24,000 over 3 years.
    As we discuss in more detail in the section II.C.4. of this
proposed rule, we propose to make MA EP incentive payments to
qualifying MA organizations on the same payment cycle for all employed/
partnering qualifying EPs of the organization. In other words, all MA
EPs of a specific qualifying MA organization will be in the same
payment year with respect to the amount of the incentive payment per
qualifying EP that we will make. So, for instance, if a qualifying MA
organization is in its second payment year in 2013 and it hires a new
EP for which the qualifying MA organization had not previously received
an EHR incentive payment, we will nevertheless make a second year
incentive payment (up to $12,000 in 2013) with respect to such an MA
EP--assuming all other conditions are met. Thus, the limits on MA EP
incentive payments discussed above are applied to the qualifying MA
organization's entire MA EP population in any specific payment year
relative to that MA organization, regardless of the length of
employment/partnership of/between that specific MA EP and that specific
qualifying MA organization.
    Under section 1848(o)(1)(B)(iv) of the Act, the annual incentive
payment limit for EPs who predominantly furnish Part

[[Page 1924]]

B services in a geographic health professional shortage area (HPSA) is
increased by 10 percent. While we do not anticipate that MA EPs would
generally practice in a HPSA area, to the extent that an MA EP
practices in an area where he or she would be entitled to the 10
percent increase, that amount would apply to MA EPs as well. We
explored various ways of computing the EP-level incentive payments due
qualifying MA organizations whose qualifying MA EPs meaningfully use
certified EHR technology.
    One option that we considered was using MA plan bidding and MA
payment data to estimate average annual MA revenue for qualifying MA
EPs with respect to a qualifying MA organization. So, for instance, a
qualifying MA organization that estimated MA Part B service-related
physician costs of $3 million/year in its bid for a year, and that
employed 100 qualifying MA eligible physicians, would be assumed to
have an average physician Part B charge per physician per year factor
of $30,000 ($3,000,000/100). However, we did not pursue this option
because the approach results in an average revenue amount across all
potentially qualifying MA EPs with respect to a qualifying MA
organization and, therefore, would include revenue amounts that exceed
the annual per-professional ceiling on incentive payments under FFS for
all EPs. We believe such a result is contrary to the legal requirement
that qualifying MA organizations are to incentive payments only for
qualifying MA EPs that actually provide at least 20 hours per week of
patient care services. Under this method there would also be no way to
know if the EP provided 80 percent of his/her professional Medicare
services to enrollees of the organization.
    We also considered a reporting system for which qualifying MA
organizations would be required to report eligible-professional-
specific information along with MA patient encounters for nonhospital-
based office visits. Specifically, we examined requiring qualifying MA
organizations to report qualifying MA EP encounters with MA plan
enrollees based on the five levels of office visit codes recognized by
Medicare FFS.
    We would use such reports to estimate the amount of compensation
that a qualifying MA EP working primarily for a qualifying MA
organization would be eligible to receive under Medicare FFS. For
example, a qualifying MA EP with a primary care specialty might have an
average of 10 MA patient low/moderate intensity office visits with
members of a qualifying MA organization per day. Such an EP would
potentially qualify for the maximum Medicare FFS EP incentive payment
in the first year based on a calculation of $63 * 10 * 52 = $32,760--
which is more than the Medicare FFS EHR incentive program threshold of
$24,000 necessary to qualify for the maximum incentive payment of
$18,000 if the fist payment year were 2011 or 2012.
    We estimated the national average FFS allowed amounts for the 5
levels of office visit codes (CPT codes 99211-99215) in 2009 to be:
$20, $39, $63, $95, $129, respectively. We contemplated allowing, but
not requiring, qualifying MA organizations to report consultation codes
for specialist physicians (CPT codes 99241-99245) estimated to have
national average FFS allowed amounts of $50, $94, $129, $190, and $234,
respectively.
    However, we now believe that such a process would be
administratively burdensome and difficult to operationalize. Therefore,
we are proposing an alternative approach, but seek input from
interested parties as to which of these approaches, or perhaps others,
would best address the statutory requirement to compensate qualifying
MA organizations for qualifying MA EPs the amount that would be payable
if payment for services furnished by such professionals were made under
Part B instead of Part C.
    We propose an approach in which the revenue received by the
qualifying MA EP for services provided to enrollees of the qualifying
MA organization would serve as a proxy for the amount that would have
been paid if the services were payable under Part B. Under this
approach, the qualifying MA organization would report to us the
aggregate annual amount of revenue received by each qualifying MA EP
for MA plan enrollees of the MA organization. We would calculate the
incentive payment amount due the qualifying MA organization for each
qualifying MA EP as an amount equal to 75 percent of the reported
annual MA revenue of the qualifying MA EP, up to the maximum amounts
specified under section 1848(o)(1)(B) of the Act.
    For qualifying MA EPs who are compensated on a salaried basis, we
propose requiring the qualifying MA organization to develop a
methodology for estimating the portion of the qualifying MA EP's salary
attributable to providing services that would otherwise be covered as
professional services under Part B of Medicare to MA plan enrollees of
the MA organization. The methodology, which would require review and
approval by us, could be based on the relative share of patient care
hours spent with MA enrollees of the organization or another reasonable
method. So, for instance, if a qualifying MA EP spends 30 percent of
his or her time providing covered Part B physician office services to
MA plan enrollees, then the qualifying MA organization would report 30
percent of the qualifying MA EP's salary as annual revenue, which would
be used to compute the amount of the MA incentive payment due to the
qualifying MA organization for the qualifying MA EP. Thus, if the
qualifying MA EP had a base salary of $150,000, 30 percent would be
$45,000--which is well over the threshold of $24,000 needed by the MA
organization to qualify for a maximum incentive payment of up to
$18,000 (70 percent of $24,000) for such a qualifying MA EP in any
year. We also propose to require that salaries be prorated to ensure
that the amount reported reflects the salary paid for the applicable
year.
    Salaried physicians' compensation typically does not include an
allowance for administrative practice costs. Given that Part B allowed
amounts do include practice expense costs, we propose allowing
qualifying MA organizations to identify, where appropriate, an
additional amount related to overhead that would be added to the
qualifying MA EP's estimated Part B compensation. To the extent
Medicare FFS compensation to physicians includes an amount for office
space rental, office staffing, and equipment, we believe that
qualifying MA organizations should also be permitted to include an
amount for overhead related to such costs not directly experienced by
salaried qualifying MA EPs. In Sec.  495.204(b)(4)(ii), we propose
requiring qualifying MA organizations to develop a methodology for
estimating the additional amount related to overhead attributable to
providing services that would otherwise be covered under Part B of
Medicare. The methodology would require review and approval by us.
    For qualifying MA EPs who are not salaried (that is, who are paid
on a capitated or fee-for-service basis), we propose in Sec.
495.204(b)(5) to require qualifying MA organizations to obtain
attestations from such EPs and to submit to CMS information from the
attestations as to the amount of compensation received by the EPs for
MA plan enrollees of the MA organization. We are proposing such
attestations because many EPs are not paid directly by MA
organizations, but rather by intermediary contracting entities, such as
physician groups, and as a result the qualifying MA

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organization may not otherwise know how much compensation is received
by each qualifying MA EP. In reporting compensation, we are proposing
that the EPs include only those amounts for professional services that
would otherwise be payable under Part B and for which payment would be
made under, or would be based on, the Medicare physician fee schedule.
    As mentioned previously, in applying the instruction in section
1853(m)(3)(A) of the Act to substitute for the amount specified under
section 1886(n)(2) of the Act an amount similar to the estimated amount
in the aggregate that would be payable if payment for the hospitals'
services were made under Part A instead of Part C, we read the term
``aggregate'' to mean the aggregate installment payments made by us if
EHR incentive payments were made under Part A instead of Part C.
    Incentive payments to eligible hospitals under the Medicare FFS EHR
incentive program are comprised of three components: (1) An initial
amount composed of a base incentive payment of $2,000,000 and a second
incentive payment amount of $200 per discharge for discharges 1,150-
23,000 during a 12-month period selected by the Secretary; (2) the
Medicare share; and (3) a transition factor. As discussed in the
preamble related to proposed 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 proposed rule discusses our proposed
methodology for calculating the incentive payment for qualifying
eligible hospitals under the Medicare FFS EHR program. As set forth in
proposed Sec.  495.204(c)(2), we propose to use the FFS EHR hospital
incentive program for purposes of calculating and making the incentive
payment for qualifying MA-affiliated hospitals. To the extent data are
not available to reimburse MA-affiliated hospitals through the FFS
hospital incentive program, we propose to require submission of such
data to us and adopt the same definition of ``inpatient-bed-days'' and
other terms proposed under the Medicare FFS EHR hospital incentive
program specified in Sec.  495.104 of this proposed rule. In such a
case we propose 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
propose 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 propose requiring qualifying MA
organizations seeking reimbursement for their qualifying MA-affiliated
eligible hospitals to submit similar data.
    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 under section
1857(e) of the Act to add new ``appropriate'' contract terms
(incorporated for Part D by section 1860D-12(b)(3)(D) of the Act), we
propose requiring that qualifying MA organizations receive incentive
payments for qualifying MA-affiliated eligible hospitals through their
affiliated hospitals under the Medicare FFS EHR incentive program if
they are eligible for such payments, rather than through the MA EHR
incentive program. We believe this is the most efficient way in which
to administer the MA EHR hospital incentive program in light of the
expected low volume of MA-affiliated eligible hospitals (approximately
50 hospitals), and in light of preliminary data which indicates that
MA-affiliated eligible hospitals already submit Medicare cost reporting
data to us from which we can compute hospital incentive payments due.
To the extent sufficient data do not exist to make such payments under
the Medicare FFS EHR incentive program, qualifying MA organizations
will be required to submit additional data to us.
    Finally, to the extent payments are made to qualifying MA
organizations for qualifying MA EPs or qualifying MA-affiliated
eligible hospitals, we propose to conduct selected compliance reviews
to ensure that EPs and eligible hospitals for which such organizations
received incentive payments were actually meaningful users of certified
EHR technology, in accordance with our existing authority in section
1857(d) of the Act and 42 CFR 422.504 of the regulations related to
protections against fraud. The reviews would include validation of
meaningful user attestations, the status of the organization as a
qualifying MA organization, and verification of both meaningful use and
data used to calculate incentive payments. We propose requiring MA
organizations to maintain evidence of compliance with all aspects of
the MA EHR incentive payment program for 10 years after the date
payment is made with respect to a given payment year. Payments that
result from incorrect or fraudulent attestations, cost data, or any
other submission required to establish eligibility or to qualify for a
payment, will be recouped by CMS from the MA organization.
4. Timeframe for Payment
    For payments to qualifying MA EPs, in Sec.  495.206 we propose the
time frame

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for payment to be after the Medicare FFS program computes incentive
payments due under the Medicare FFS EHR incentive program--so the first
possible incentive payments would be made sometime in early 2012. We
propose that payments for qualifying MA-affiliated eligible hospitals
under common corporate governance occur in the same manner and in the
same time frame as payments made under the Medicare FFS EHR incentive
program to ``subsection (d)'' hospitals as discussed in section
II.B.2.d. of this proposed rule.
    We propose to define ``payment year'' with respect to qualifying MA
EPs in 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
propose to pay a qualifying MA organization on the same schedule for
all of its qualifying MA EPs. In other words, the first year during
which the qualifying MA organization receives an incentive payment for
its qualifying EPs will be considered the first payment year for all of
its qualifying EPs. Accordingly, for purposes of determining the
applicable incentive payment limits, the second, third, fourth, and
fifth years during which the qualifying MA organization receives an
incentive payment for its qualifying EPs will be considered the second,
third, fourth, and fifth payments years for each of its qualifying EPs,
regardless of whether the MA organization claimed an incentive payment
for a particular EP for a prior payment year. Such a consistent payment
cycle relative to qualifying MA organizations and qualifying MA EPs
obviates the need to track payment years and payment adjustment years
based on prior payments or adjustments with respect to any individual
qualifying MA EP. Rather, for purposes of payment years and payment
adjustment years, any EP employed by or partnering with any specific MA
organization will be on the same cycle with respect to that
organization.
    Similar to the Medicare FFS EHR incentive program, payment to
qualifying MA organizations for qualifying MA EPs and payment for
qualifying MA-affiliated eligible hospitals is available only for a
finite number of years. As previously discussed in the section on the
calculation of MA incentive payments, above, a qualifying MA
organization can receive an incentive payment of up to $18,000 for each
of its qualifying MA EPs for its first payment year if its first
payment year is 2011 or 2012, or up to $15,000, if its first payment
year is 2013, or up to $12,000, if its first payment year is 2014. Note
that, similar to the Medicare FFS EHR incentive program, there would be
no incentive payments made with respect to a year after 2016.
    We propose to define ``payment year'' with respect to qualifying
MA-affiliated eligible hospitals in 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 propose to use
the hospital inpatient-bed-days data from the hospital fiscal year that
ends during the FFY prior to the fiscal year that serves as the payment
year. For qualifying MA-affiliated eligible hospitals, we propose to
compute hospital EHR incentive payments due in the same manner as they
are being computed in the Medicare FFS hospital incentive payment
program. For qualifying MA-affiliated eligible hospitals for which the
first payment year is 2011 through 2013, up to 3 additional years of
incentive payments are available. For qualifying 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) more year(s) of
hospital incentive payments will be available.
    Unlike the fixed schedule for application of limitation on
incentive payments for MA EPs discussed previously in this section of
the proposed rule in which all employed/partnering MA EPs will be paid
on the same schedule (first payment year, second payment year, etc.)
with respect to any specific qualifying MA organization, we propose to
make payments to MA organizations for 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.
5. Avoiding Duplicate Payment
    We propose 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 the Act
states that to the extent an MA EP is entitled to the maximum incentive
payment under section 1848(o)(1)(A) of the Act, the Medicare FFS EHR
incentive payment program--such incentive payment will only be made
under the Medicare FFS EHR incentive program. Therefore, before
payments can be made to qualifying MA organizations for MA EPs, we must
first determine if a maximum incentive payment under the Medicare FFS
program has been previously earned by potential MA EPs. Under the
Medicare FFS incentive payment program, incentive payment calculations
will not be completed for the first payment year, 2011, until the early
part of 2012. Therefore, we would not be able to make payments to
qualifying MA organizations for MA EPs until claims submissions counted
for Medicare FFS incentive payments for CY 2011 have been closed, and
payment calculations for participating EP under the Medicare FFS EHR
incentive program have been completed in the early part of CY 2012. We
will follow the same practice--first computing Medicare FFS incentive
payments for EPs and then computing and paying MA incentive payments,
where appropriate--in all subsequent payment years.
    Subclause (II) of section 1853(l)(3)(B)(i) of the Act further
states that to the extent an MA EP is entitled to less than the maximum
incentive payment under the Medicare FFS EHR incentive program, that
payment is to be made solely under the MA provision. In other words, we
will need to withhold Medicare FFS incentive payments from EPs of less
than the maximum to the extent such professionals are also identified
as MA EPs under section 1853(l)(2) of the Act. Again, we would need to
await the computation of payments due EPs under the Medicare FFS EHR
incentive program before we can determine whether the EP is entitled to
less than the maximum payment amount under the Medicare FFS EHR
program, in which case any incentive payment for the EP will only be
made to the qualifying MA organization under the MA EHR program, and
not to the EP under the Medicare FFS EHR program.
    Section 1853(m)(3)(B) of the Act, states that incentive payments
for qualifying MA-affiliated eligible hospitals are to be made under
either the Medicare FFS hospital incentive payment program, or under
the MA hospital incentive payment program. If more than 33 percent of
discharges or bed-days of all Medicare patients for a year are covered
under Part A, then payment for that year is to only be made under
section 1886(n) of the Act--the Medicare FFS EHR incentive program--and
no payment is to be made under the MA hospital incentive payment

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program. Otherwise, to the extent less than 33 percent of bed days of
all Medicare patients for an incentive payment year are covered under
Part A, then payment for that incentive payment year may be made under
the MA EHR incentive payment program.
    Unlike the process we propose to follow related to qualifying EPs
(where we will wait for the Medicare FFS incentive payment program to
compute eligible physician incentive payments due under that program
before determining the amount due under the MA EHR incentive program),
we would not need to rely on Medicare FFS EHR incentive payment program
calculations before determining eligibility for MA-affiliated hospital
incentive payments. We would reimburse all hospitals, including MA-
affiliated eligible hospitals, under the Medicare FFS hospital
incentive program. We believe that by doing so, we will prevent
duplicate payments being made for the same hospitals by Medicare FFS
and the MA incentive payment programs. To the extent that qualifying MA
organizations are to receive incentive payments through the MA program
rather than through their hospitals under the Medicare FFS EHR
incentive program due to a lack of sufficient data to make payments
under the FFS program, we would identify and reimburse only appropriate
qualifying MA organizations for qualifying 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.
    In order to avoid duplicate payments and in accordance with section
1853(m)(3)(B)(ii)(II) of the Act, we will not make MA EHR hospital
incentive payments to qualifying MA organizations for MA-affiliated
eligible hospitals other than through the Medicare FFS EHR hospital
incentive payment program without first ensuring that no such payments
under the Medicare FFS EHR hospital incentive payments were made.
    We invite industry and public comment on our proposed process to
eliminate duplicate payments to EPs and MA-affiliated eligible
hospitals under the Medicare FFS and MA incentive payment programs.
6. Meaningful User Attestation
    We propose meaningful user attestation requirements in Sec.
495.210. For each MA EP and MA-affiliated hospital for which a
qualified MA organization seeks an incentive payment, the organization
must attest, in a form and manner specified by us, that its MA EPs and
MA-affiliated eligible hospitals are meaningful EHR users, as required
by sections 1853(l)(6) and 1853(m)(1) of the Act. We further propose to
adopt the definitions of meaningful user proposed under the Medicare
FFS program related to EPs and hospitals in proposed Sec.  495.4. We
propose to require qualifying MA organizations to attest each payment
year whether each of its MA EPs and MA-affiliated eligible hospitals
for which it is seeking an incentive payment was a meaningful EHR user
for the EHR reporting period for a payment year. A qualifying MA
organization must make this attestation for each payment year for which
it is seeking an incentive payment for MA EPs and 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.
    Note 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
HITECH program, we propose to allow qualifying MA organizations to
continue reporting under the existing MA quality reporting program. For
those HITECH clinical quality measures that do not overlap and that are
appropriate for the MA program, we are considering requiring that
qualifying MA organizations that receive an incentive payment report
those measures to CMS. This would ensure that clinical quality measure
reporting under HITECH is consistent between the FFS program and MA. An
alternative approach would be to require that qualifying MA
organizations that receive an incentive payment report all of the
HITECH clinical quality measures under section II.A.2 of this proposed
rule that are appropriate for the MA program directly to CMS, while
also reporting those HEDIS, HOS, and CAHPS measures under the existing
MA quality program. This may result in duplicative reporting under the
HITECH program and current MA quality reporting, but may provide us
with more direct access to quality data under the HITECH program. We
invite public comment on these approaches, including alternative
methods to consistently treat MA-affiliated providers and FFS providers
under the HITECH Medicare incentive program.
    Therefore, we propose requiring qualifying MA organizations to
submit attestations to us related to meaningful use by MA-affiliated
hospitals within 30 days of the close of the FFY--which is the payment
year for MA-affiliated hospitals--by October 30. We also propose
requiring qualifying MA organization to submit attestations to us
related to meaningful use by MA EPs within 30 days of the close of the
MA EP payment year--which is a CY--by January 30.
7. Posting Information on the CMS Web Site
    Sections 1853(l)(7) and 1853(m)(5) of the Act, require us to post
information on an Internet Web site related to the receipt of incentive
payments under the MA EHR incentive program. Information would include
the names, business addresses, and business phone numbers of each
qualifying MA organization receiving an incentive payment under this
section for qualifying MA EPs and hospitals. A list of the names of
each qualifying MA EP and qualifying MA-affiliated eligible hospital
for which an incentive payment has been made would also be posted.
Since this requirement is applicable to other Medicare EPs and eligible
hospitals, we have included this requirement in proposed Sec.  495.108.

[[Page 1928]]

8. Limitation on Review
    Section 1853(l)(8) of the Act states that there shall be no
administrative or judicial review under section 1869 of the Act,
section 1878 of the Act, or otherwise of the methodology and standards
for determining payment amounts and payment adjustments under the MA
EHR EP incentive program. This includes provisions related to
duplication of payment avoidance and rules developed related to the
fixed schedule for application of limitation on incentive payments for
all qualifying MA EPs related to a specific qualifying MA organization.
This also includes the methodology and standards developed for
determining qualifying MA EPs and the methodology and standards for
determining a meaningful EHR user, including the means of demonstrating
meaningful use and the selection of measures. We propose to codify
these requirements in 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 propose to codify these requirements in Sec.
495.212(c).
9. Conforming Changes
    Sections 4101(e) and 4201(d)(2) and (3) of the HITECH Act provide
conforming amendments to Part C of the Social Security Act. Therefore,
we are proposing the following conforming changes to the regulations
text:
     Revising 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 proposed 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.
10. Payment Adjustment and Future Rulemaking
    In future rulemaking we will develop standards related to payment
adjustments to qualifying MA organizations related to MA EPs and MA-
affiliated eligible hospitals that are not meaningful users of
certified EHR technology. We solicit comment on how we can most
effectively and efficiently apply payment adjustments to qualifying MA
organizations whose MA eligible EPs and hospitals have not successfully
meaningfully used certified EHR technology.
    The statutory requirement related to imposition of payment
adjustments with respect to MA EPs is set forth in section 1853(l) of
the Act. Specifically, section 1853(l)(4) of the Act requires that
instead of applying the payment adjustment in section 1848(a)(7) of the
Act, we apply the payment adjustment to the Medicare physician
expenditure proportion. This is our estimate of the proportion of the
expenditures under Parts A and B paid to the qualifying MA organization
in the form of capitation payments under section 1853 of the Act that
are not attributable to the EHR incentive payment program, that are
attributable to expenditures for physician services. In the case of a
qualifying MA organization that attests that not all MA EPs of the
organization are meaningful EHR users with respect to years beginning
with 2015, we are directed to apply the payment adjustment on the
proportion of the capitation payment with respect to all such EPs of
the organization that are not meaningful users for such year. The
adjustment amount is 1 percent for 2015, 2 percent in 2016, and 3
percent in 2017 and subsequent years.
    The statutory requirement related to imposition of payment
adjustments with respect to MA-affiliated eligible hospitals is
provided in section 1853(m) of the Act. Specifically, section
1853(m)(4) of the Act requires us to apply the adjustment to the
hospital expenditure proportion, which is our estimate of the
proportion of the expenditures under Parts A and B paid to the
qualifying MA organization in the form of capitation payments under
section 1853 of the Act that are not attributable to the EHR incentive
payment program, that are attributable to expenditures for inpatient
hospital services. In the case of a qualifying MA organization that
attests that not all 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 welcome comments on these incentive payment adjustments and on
how we can most effectively and efficiently apply payment adjustments
to qualifying MA organizations whose EPs and MA-affiliated hospitals
have not successfully meaningfully used certified EHR technology. Any
comments received will be considered in developing future rulemaking.

D. Medicaid Incentives

1. Overview of Health Information Technology in Medicaid
    Under the HITECH Act, State Medicaid programs, at their option, may
receive Federal financial participation (FFP) for expenditures for
incentive payments to certain Medicaid providers to adopt, implement,
upgrade, and meaningfully use certified EHR technology. Additionally,
FFP is available to States for administrative expenses related to
administration of those incentive payments as long as the

[[Page 1929]]

State meets certain conditions. Section 1903(a)(3)(F)(i) of the Act, as
amended by section 4201 of the HITECH Act, establishes 100 percent FFP
to States for providing incentive payments to eligible Medicaid
providers (described in section 1903(t)(2) of the Act) to adopt,
implement, upgrade, and meaningfully use certified EHR technology. The
incentive payments are not direct reimbursement for the purchase and
acquisition of such technology, but rather are intended to serve as
incentives for EPs and eligible hospitals to adopt and meaningfully use
certified EHR technology.
    Section 1903(a)(3)(F)(ii) of the Act, as amended by section 4201 of
the HITECH Act, also establishes 90 percent FFP to States for
administrative expenses related to carrying out the substantive
requirements associated with the incentive payments. As discussed later
in this proposed rule, we interpret these administrative expenses as
including approvable expenses related to oversight activities and
promotion of health information exchange.
    It is important to note that we do not believe that the Medicaid
incentive and administrative payments authorized under section 4201 of
the HITECH Act should be viewed in isolation. Rather, we encourage
States, providers, and other stakeholders to view these new programs in
concert with the numerous other initiatives recently undertaken and
currently being promoted by both CMS and the Department to encourage
advancements in health care technology and health information exchange.
These initiatives include the following:
     The establishment of the Office of the National
Coordinator (first through executive order in 2004 and then as
legislatively mandated in the HITECH Act);
     The Medicaid Transformation Grant program authorized by
section 6081 of the Deficit Reduction Act of 2005 (Pub. L. 109-171).
This program provided $150 million in grants in FY 2007 through FY 2008
to States to support innovative methods for transforming Medicaid
programs. Twenty-two States focused on HIT, with initiatives ranging
from the use of statewide EHRs for beneficiaries, to mechanized
clinical decision support, to e-prescribing, to electronic health
information exchange. For more information on the program, we refer
readers to: http://www.cms.hhs.gov/MedicaidTransGrants.
     The Medicaid Information Technology Architecture (MITA)
initiative and framework. MITA is a plan to promote improvements in the
Medicaid enterprise and the systems that support it through
collaboration between CMS and the States. The MITA framework consists
of models, guidelines, and principles for States to use as they plan
and implement business and technology enterprise solutions. Integral to
the MITA is the State's Medicaid Management Information System (MMIS).
The MMIS contains a great deal of claims data and other Medicaid
programmatic information that we believe should be used by States in
analyzing their current HIT environments. Once States establish a
baseline assessment, they can then plan the steps necessary to
transition towards achieving some of the objectives of the HITECH Act,
such as improving both quality of care and health care outcomes. In
addition, the MITA framework is CMS's initiative that will allow States
to modernize and transform their MMIS to improve the administration of
the Medicaid program, while supporting the States' need for
flexibility, adaptability, and rapid response to changes in the unique
aspects of their individual Medicaid programs. The ultimate goal of
MITA is to develop seamless and integrated systems that communicate
effectively and that are interoperable, both within and across States
as well as with other health care entities and payers, such as public
health departments and non-Medicaid payers. For more information on
MITA, we refer readers to: http://www.cms.hhs.gov/MedicaidInfoTechArch/.
    We believe that the HITECH Act incentives create a unique
opportunity for States and Medicaid providers to build upon prior and
current efforts in HIT in order to help achieve interoperable health
information exchange in health care. We believe that States should
build upon the lessons learned from these initiatives in order to
ensure that the incentive and administrative payments are leveraged in
a way that maximizes the role of HIT in enhancing quality and access,
reducing costs, and improving health care outcomes.
    We also plan to ensure public involvement as the HIT environment
evolves, both as a result of the HITECH Act incentives, as well as a
result of other Departmental HIT initiatives. We have already convened
several State calls on the HITECH Act, including discussing the
definition of meaningful use of certified EHR technology, and the
impact the definition would have on specific provider groups. More
information on the content of these calls can be found in section
II.A.2.a of this proposed rule. We convened additional calls with State
staffs on the Medicaid EHR incentives leading up to our development of
this proposed rule. Issues addressed include policies such as State
oversight of adopting, implementing, and upgrading certified EHR
technology; alternative fiscal agents under consideration; and
validating data to establish program eligibility.
    We also released a State Medicaid Director's letter on September 1,
2009. This letter outlines steps State Medicaid agencies can take to
assess the current status of their HIT efforts; develop a roadmap for
achieving their HIT objectives in support of the Medicaid EHR incentive
program; set Medicaid-specific performance goals and incentives for
provider adoption of HIT; and partner with a broad range of
stakeholders. Furthermore, we conducted a follow-up technical
assistance call with State Medicaid Directors and their staffs to
provide an overview and answer questions.
    Finally, as required by section 1903(t)(10) of the Act, we will be
reporting to Congress on the status, progress, and oversight of the
overall EHR incentive program. These reports will discuss steps taken
to avoid duplicate Medicare and Medicaid incentive payments to EPs, the
extent to which Medicaid EPs and hospitals have adopted certified EHR
technology as a result of the incentive payments, and any improvements
in health outcomes, clinical quality, or efficiency resulting from the
adoption of such technology.
 2. General Medicaid Provisions
    In the proposed Sec.  495.342 and Sec.  495.344 we provide the
general rule that States, at their option, may receive: (1) 90 percent
FFP for State expenditures related to the administration of an EHR
incentive program for certain Medicaid providers that are adopting,
implementing, or upgrading and meaningfully using certified EHR
technology; and (2) 100 percent FFP for State expenditures for those
incentive payments.
 3. Identification of Qualifying Medicaid EPs and Eligible
Hospitals
a. Overview
    As specified in section 1903(t)(2) of the Act, only certain
Medicaid providers will be eligible for incentive payments. This
section of the preamble discusses some of these eligibility
requirements, including requirements relating to patient volume,
whether a provider is hospital-based, and whether an EP is practicing
predominantly in a federally-qualified health center (FQHC) or a rural
health clinic (RHC). Proposed

[[Page 1930]]

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 propose to use the same definition of
``hospital-based'' as used in the Medicare EHR incentive program, as
sections 1848(o)(1)(C) and 1903(t)(3)(D) of the Act use almost
identical definitions of the term. We refer readers to section II.A. of
this preamble for a proposed definition of ``hospital-based,'' and for
a thorough discussion of our proposed methodology.
    The only exception to this rule is that Medicaid EPs practicing
predominantly in an FQHC or RHC are not subject to the hospital-based
exclusion.
    Medicaid EPs must also meet the other criteria for Medicaid
incentive payment eligibility, such as the patient volume thresholds or
practicing predominantly in an FQHC or RHC, as described in this
subpart. Since the statute at 1903(t)(2)(iii) of the Act does not
define ``practices predominantly,'' we propose that an eligible
professional practices predominantly at an FQHC or an RHC when the
clinical location for over 50 percent of his or her total patient
encounters over a period of 6 months occurs at an FQHC or RHC.
    Acute care and children's hospitals are listed in section
1903(t)(2) of the Act as the only two types of institutional providers
potentially eligible for Medicaid incentive payments. These terms are
specific to the Medicaid EHR incentive program and are not currently
defined in the Medicaid regulations. Consequently, we propose to define
these terms in 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 proposed Sec.  495.306.
Children's hospitals do not have patient volume requirements for
Medicaid incentive program participation.
(1) Acute Care Hospitals
    ``Acute care'' is defined as the necessary treatment of a disease
or injury for only a short period of time in which a patient is treated
for a brief but severe episode of illness.\1\ Many hospitals can be
considered acute care facilities if they provide both inpatient and
outpatient services with the goal of discharging the patient as soon as
the patient is deemed stable, with appropriate discharge instructions.
We are proposing that for purposes of Medicaid incentive payments, an
``acute care hospital'' is defined as: A health care facility where the
average length of patient stay is 25 days or fewer. For purposes of
participation in the Medicaid EHR incentive program, this proposed
definition ensures that hospitals are designated as acute care
hospitals based on the level and nature of care they provide. This
definition also includes some specialty hospitals where the average
length of stay is 25 days or fewer. This definition of acute care
hospitals will exclude specialty providers and long-term care
facilities where the average patients' length of stay exceeds 25 days.
To further refine the definition, we reviewed the Medicare-issued CCN.
CCNs are issued to categories of providers who meet Federal
requirements (known as conditions of participation) to participate in
the Medicare program. State Medicaid agencies look to Medicare's
conditions of participation when deciding whether to issue provider
agreements to many categories of providers. In the case of inpatient
hospital services Sec.  440.10(a)(3)(iii) requires that for inpatient
hospital services provided to Medicaid beneficiaries to be eligible for
FFP, those services must be provided in an institution that meets the
requirements for participation in Medicare as a hospital, and such
hospitals receive CCNs.
---------------------------------------------------------------------------

    \1\ State of Connecticut, Office of Health Care Access, ``The
Health of Connecticut's Hospitals,'' report released January 16,
2001, page 17.
---------------------------------------------------------------------------

    Hospital CCNs are structured such that the first two digits
represent the State in which the hospital is located, and the next four
digits identify the type of facility and are assigned sequentially from
the appropriate block of numbers. Short-stay general hospitals receive
CCNs whose number range is 0001 through 0879. The 11 cancer hospitals
in the United States also are issued CCNs within that number range. To
allow some flexibility for hospital participation in the Medicaid EHR
incentive program, we are proposing to define acute care hospitals for
purposes of this Medicaid EHR incentive program as those with an
average patient length of stay of 25 days or fewer and with a CCN that
has the last four digits in the series 0001 through 0879 (that is,
short-term general hospitals and the 11 cancer hospitals in the United
States).
    We also recognize a category of long-term care hospitals, which we
are planning to exclude from the definition. Long term acute care
hospitals are defined for Medicare purposes in regulations at 42 CFR
412.23(e). Specifically 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).
    We considered allowing both short-term and long-term acute care
hospitals to meet the definition of acute care hospital for purposes of
the Medicaid incentive payments. However, we are not proposing a
definition that encompasses both types of acute care hospitals because
CMS' interpretation was that long-term acute care hospitals did not
satisfy the intent of the statute, which we believe intends to include
general acute care hospitals. In addition, CMS knew of at least one
State that does not recognize long-term acute care hospitals as a
Medicaid provider type. We therefore drew the line at 25 days, the cut-
off between short-term general and specialty hospitals and long-term
acute care hospitals. We used this cut-off in conjunction with the list
of CMS CCNs (which also distinguish between short-term and long-term
hospitals (see CMS State Operations Manual Section 2779A1, as revised
on April 20, 2007 and effective on October 1, 2007) in order to be as
inclusive as possible within statute. Since Congress specifically
singled out children's hospitals in addition to acute care hospitals,
we believe that if Congress intended to include long-term care
hospitals, it would have similarly given them separate mention. In
addition, Congress specifically did not include nursing facilities,
another category of long-term care provider (and an important source of
Medicaid care) as a provider type eligible for incentive payments. CMS
read this as further evidence that the statute did not intend inclusion
of long-term care facilities.
(2) Children's Hospitals
    The statute also does not include a definition for ``children's
hospitals.'' To assist with the development of a definition of
``children's hospitals'' for purposes of the Medicaid EHR incentive
program, we convened teleconferences with States to gather input on
topics

[[Page 1931]]

that should be defined in this proposed rule. Participants noted that
one critical issue is whether a children's wing of a general hospital
could be considered a children's hospital for purposes of qualifying
for a Medicaid incentive payment.
    As with the acute care hospital definition, we again looked to
Medicare-issued CCNs and recognized that numbers whose last four digits
are in the 3300 to 3399 series are assigned to children's hospitals.
Currently in the United States there are 78 certified children's
hospitals, including both freestanding and hospital-within-hospital
facilities.
    For purposes of the Medicaid EHR incentive program, we propose one
definition to include only separately certified children's hospitals,
with CCNs in the 3300-3399 series in the definition of eligible
``children's hospital.'' By proposing to define ``children's hospital''
in this way, CMS would (1) prevent general acute care hospitals, which
cannot themselves qualify for the incentive because they do not meet
the 10 percent Medicaid patient volume, from using the fact that they
have a pediatric wing as justification for requesting a Medicaid
incentive payment; (2) exclude many of the facilities that are
perceived by the public as children's hospitals, but do not meet the
Medicare standards as either freestanding or hospital-within-hospital
children's hospitals; and (3) exclude some pediatric specialty
hospitals which have CCNs as psychiatric or rehabilitation hospitals.
    An alternative proposed definition of a ``children's hospital''
would include those hospitals with Medicare provider numbers in the
following series:
     0001 through 0879--Short-term (General and Specialty)
Hospitals.
     3025 through 3099--Rehabilitation Hospitals (Excluded from
Prospective Payment Systems).
     3300 through 3399--Children's Hospitals (Excluded from
Prospective Payment Systems).
     4000 through 4499--Psychiatric Hospitals (Excluded from
Prospective Payment Systems).
    This definition, for the purposes of the Medicaid HIT Incentive
payments, would apply only to those freestanding hospitals within the
above mentioned series that exclusively furnish services to individuals
under age 21.
    This broader definition would (1) still prevent acute care
hospitals that cannot independently qualify for the incentive because
they do not meet the 10 percent Medicaid patient volume from using the
fact that they have a pediatric wing as justification for requesting an
HIT incentive payment; (2) allow for participation in the incentive
program by the greatest number of children's hospitals, including
rehabilitative and psychiatric specialty hospitals; and (3) align with
Federal efforts aimed at improving healthcare quality for all children,
including those with physical and mental diseases/disabilities.
    We are soliciting comment on the proposed definitions of
``children's hospital'' as it applies to the Medicaid EHR incentive
program recognizing that there may be additional alternative
definitions that could have a positive impact on the health care
received by children.
c. Medicaid Professionals Program Eligibility
    For Medicaid EPs, the general rule (subject to the two exceptions
listed below) is that the EP must have at least 30 percent patient
volume attributable to those who are receiving Medicaid. Section
1903(t)(2)(A)(i) of the Act provides authority to the Secretary to
establish the methodology by which such patient volume will be
estimated. We propose that to establish such patient volume, the EP
must have a minimum of 30 percent of all patient encounters
attributable to Medicaid over any continuous 90-day period within the
most recent calendar year prior to reporting. There are two exceptions
to the general 30 percent rule discussed previously. The first
exception is that a pediatrician may have at least 20 percent patient
volume attributable to those who are receiving health care services
under the Medicaid program, as estimated in accordance with a
methodology established by the Secretary (section 1903(t)(2)(A)(ii) of
the Act). Again, the method we propose to use is that the pediatrician
must have a minimum 20 percent of all patient encounters attributable
to Medicaid over any continuous 90-day period within the most recent
calendar year prior to reporting.
    The second exception is that Medicaid EPs practicing predominantly
in an FQHC or RHC must have a minimum of 30 percent patient volume
attributable to ``needy individuals.'' Again, the method we propose to
use is that 30 percent of all patient encounters be attributable to
needy individuals over any continuous 90-day period within the most
recent calendar year prior to reporting.
    Section 1903(t)(3)(F) of the Act defines needy individuals as
individuals meeting any of the following three criteria: (1) They are
receiving medical assistance from Medicaid or the Children's Health
Insurance Program (CHIP); (2) they are furnished uncompensated care by
the provider; or (3) they are furnished services at either no cost or
reduced cost based on a sliding scale determined by the individual's
ability to pay. An explanation of how we propose to apply each of these
criteria is described in detail in this section of the proposed rule.
    We propose this flexible patient volume methodology in order to
capture the highest number of true Medicaid practitioners potentially
eligible for the EHR incentive program. We believe Congress set the
high patient volume thresholds in order to offer these incentives to
the practitioners whose practices are open and accessible to Medicaid
beneficiaries. We noted that many Medicaid eligible individuals, such
as children, may seek care at specified times of the year, such as the
beginning of the school-year for required immunizations. Since there
are five different types of providers, varying from specialty to
primary care, we thought the flexibility would capture any seasonal
encounter adjustments in the year, while still honoring Congress'
intent to reward higher-volume Medicaid practitioners.
d. Calculating Patient Volume Requirements
    As required by section 1903(t)(2) of the Act and discussed in the
previous section, all EPs and the vast majority of hospitals will need
to meet certain patient volume thresholds in order to be eligible for
incentive payments. (The only exception to this rule is for children's
hospitals, which have no patient volume threshold requirement).
    In addition, where patient volume is a criterion, most providers
will be evaluated according to their ``Medicaid'' patient volume, while
some professionals (those practicing predominantly in an FQHC or RHC)
will be evaluated according to their ``needy individual'' patient
volume.
    We propose to define ``patient volume'' in Sec.  495.302 to be a
minimum participation threshold for each individual Medicaid provider
(with the exception of children's hospitals).
    For the Medicaid patient volume, this threshold (represented below)
is calculated using as the numerator the individual hospital's or EP's
total number of Medicaid patient encounters in any representative
continuous 90-day period in the preceding calendar year and the
denominator is all patient encounters for the same individual
professional or hospital over the same 90-day period. We are not
prescribing standards for what is a ``representative''

[[Page 1932]]

period, but we intend to apply a plain meaning test. In other words, if
a reasonable person would not consider the selected period to be
representative (for example, because the selected period included a
short-term temporary Medicaid outreach program), then it would not
support a threshold calculation.
    [Total (Medicaid) patient encounters in any 90-day period in the
preceding calendar year/Total patient encounters in that same 90-day
period] * 100
    For the needy individual patient volume, the threshold (represented
below) is calculated in the same manner, but with the numerator equal
to the EP's total number of needy individual patient encounters in any
representative 90-day period in the preceding calendar year.
    [Total (Needy Individuals) patient encounters in any continuous 90-
day period in the preceding calendar year/Total patient encounters in
that same 90-day period] * 100
    Medicaid EPs and eligible hospitals would be required to annually
re-attest to patient volume thresholds to continue to qualify for
Medicaid incentive payments. Table 26 demonstrates the above-referenced
patient volume thresholds per provider type.

Table 26--Qualifying Patient Volume Threshold for Medicaid EHR Incentive
                                 Program
------------------------------------------------------------------------
                                  Minimum 90-day
                                 Medicaid patient
            Entity               volume threshold
                                    (percent)
------------------------------------------------------------------------
Physicians....................                 30  Or the Medicaid EP
                                                    practices
                                                    predominantly in an
                                                    FQHC or RHC--30%
                                                    ``needy individual''
                                                    patient volume
                                                    threshold.
Pediatricians.................                 20
Dentists......................                 30
Certified nurse midwives......                 30
Physician Assistants when                      30
 practicing at an FQHC/RHC led
 by a physician assistant.
Nurse Practitioner............                 30
Acute care hospital...........                 10  .....................
Children's hospital...........  .................  .....................
------------------------------------------------------------------------

    If a State has an alternative approach to the established timeframe
for measuring patient volume, it may propose it to us for review
through the State Medicaid HIT Plan (SMHP) (discussed later) and we
would make a determination of whether it is an acceptable alternative.
To be considered for approval, the alternative approach would require a
verifiable data source and justification. In defining the way in which
patient volume is established, we provide for a consistent methodology
per the statute, but also allow for the possibility that States may
propose acceptable alternatives that synchronize with existing data
sources, which could decrease State data burdens. This alternative
approach must provide an auditable record (that is, a record of how the
professional demonstrated patient volume) for CMS to monitor the
States' oversight of the Medicaid EHR incentive program implementation.
    In determining the ``needy individual'' patient volume threshold
that applies to EPs practicing predominantly in FQHCs or RHCs, section
1902(t)(2) of the Act authorizes the Secretary to make a downward
adjustment to the uncompensated care figure to eliminate bad debt data.
We interpret bad debt to be consistent with the Medicare definition, as
specified at Sec.  413.89(b)(1). Under Medicare, bad debts are amounts
considered to be uncollectible from accounts and notes receivable that
were created or acquired in providing services. ``Accounts receivable''
and ``notes receivable'' are designations for claims arising from the
furnishing of services, and are collectible in money in the relatively
near future. Providers should be required to use cost reports (for
FQHCs and clinics this would be the Medicare 222-92 cost report, or the
most recent version of the 222), or other auditable records to identify
bad debts. All information under attestation is subject to audit. Our
proposed regulations on calculating the needy individual patient volume
can be found at 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 Medicaid managed care organizations
(MCOs), prepaid inpatient health plans (PIHPs), or prepaid ambulatory
health plans (PAHPs), under 42 CFR Part 438 be included in the
calculation. Therefore, in determining patient volume, providers and
States should be aware that individuals enrolled in such plans will be
included in the patient volume calculation. Acute care hospitals have
to meet the 10 percent Medicaid volume threshold.
    We also note that although Sec.  438.60 of our regulations would
generally prohibit a State from making a direct payment to a provider
for services that are included under a contract with an MCO, PIHP, or
PAHP, providers contracted with these managed care plans will
nevertheless be eligible for Medicaid EHR incentive payments because
those payments are not for services that are included in such a
contract. The fact that Congress directed that individuals enrolled in
managed care be included in the patient volume calculation demonstrates
an intent to allow qualified providers to receive incentive payments,
whether they provided their services through capitated care
arrangements or fee-for-service. Over 70 percent of Medicaid
beneficiaries receive care in a managed care delivery system, and we do
not believe that the intent of Congress in creating the incentives
program was to remove the providers treating these individuals from the
incentives program.
e. Entities Promoting the Adoption of Certified EHR Technology
    We are proposing to define ``promoting the adoption of certified
EHR technology'' in 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

[[Page 1933]]

EHR technology (and support services including maintenance and
training) that is for, or is necessary for, the operation of the
technology. While the Act authorizes States to designate these
entities, the Secretary nevertheless retains authority to define what
it means to be ``promoting the adoption of certified EHR technology,''
as specified in section 1903(t)(6)(A)(ii) of the Act. Section 1102 of
the Act authorizes the Secretary to ``make and publish such rules and
regulations, not inconsistent with this Act, as may be necessary to the
efficient administration of the functions with which he or she is
charged under this Act.'' Since one of our functions is to approve
Title XIX plans under sections 1902(b) and 1116 of the Act, and States
would need to submit plans as to how they would spend section 4201 of
the HITECH Act funds, we have the authority to determine whether a
State's plan for allowing EPs to assign their Medicaid incentive
payments to these entities is in compliance with our interpretation of
the Act.
    We propose to define ``promoting'' certified EHR adoption to mean
the enabling and oversight of the business, operational and legal
issues involved in the adoption and implementation of EHR and/or
exchange and use of electronic health information between participating
providers, in a secure manner, including maintaining the physical and
organizational relationship integral to the adoption of certified EHR
technology by EPs. For example, health information exchanges have the
potential to transform the healthcare system by facilitating timely,
accurate, and portable health information on each patient at the point
of service. Health Information Exchanges (HIEs), are one type of entity
that we believe would meet the definition of an entity that is
promoting the adoption of certified EHR technology. HIEs provide the
capability to move clinical information electronically between
disparate health care information systems while maintaining the meaning
of the information being exchanged. HIEs also provide the
infrastructure for secondary use of clinical data for purposes such as
public health, clinical, biomedical, and consumer health informatics
research as well as institution and provider quality assessment and
improvement, where permissible under HIPAA and other requirements
included in the HITECH Act. In addition, use of health information
exchange models can reduce the need for costly point-to-point
interfaces between different EHR tools, as used in laboratories and
pharmacies, thus providing a more scalable model of interoperable
health information exchange. HIEs promote adoption of certified EHR
technology by providing the infrastructure for providers' EHRs to reach
outside of their clinical practice sites and connect with other points
of care. Providers report that having a more complete picture of their
patients' healthcare data from other providers and care settings is one
of the primary appeals to using EHRs. Without health information
exchange, electronic health records are simply digitized filing
cabinets and will not achieve their quality of care or cost containment
potential. Furthermore, given the proposed definition of meaningful
use, HIEs can significantly help Medicaid providers adopt and use EHR
in such a way that the goals of the incentive program are met. The
inclusion in HITECH of HIE grants to be awarded to States or State-
designated Entities by ONC are an additional indication of the
symbiotic relationship between health information exchanges and optimal
use of EHRs.
    Under 1903(t)(6)(A)(ii) of the Act and as proposed in Sec.
495.354, States must establish verification procedures that enable
Medicaid EPs to voluntarily assign payments to entities promoting EHR
technology. States must guarantee that the assignment is voluntary and
that the entity does not retain more than 5 percent of those assigned
Medicaid incentive payments for costs unrelated to certified EHR
technology. We propose requiring States to publish and make available
to all Medicaid EPs the procedures they developed for assigning
incentive payments to the third party entities before payments can be
assigned. Such publication must also include information about the
State's verification mechanism. The State's method must assure
compliance with the requirement that no more than 5 percent of the
Medicaid EP's annual incentive payment is retained by the entity for
costs not related to certified EHR technology.
    Although section 1903(t)(6)(A)(ii) of the Act allows assignment of
payment to entities promoting the adoption of EHR technology, we wish
to clarify that such assignment would not remove the responsibility of
the Medicaid EP to individually demonstrate meaningful use of the EHR
technology (as discussed in greater detail below). Therefore, entities
promoting the adoption would not receive the assigned payments unless
the Medicaid EP meets all eligibility criteria. Our proposed definition
for promoting the adoption of certified EHR technology is in Sec.
495.302.
4. Computation of Amount Payable to Qualifying Medicaid EPs and
Eligible Hospitals
    The statute, at sections 1903(t)(1), (t)(4), and (t)(5) of the Act,
creates different payment formulas for Medicaid EPs versus hospitals.
The payment methodology for Medicaid hospitals shares many aspects of
the methodology used for Medicare hospitals.
a. Payment Methodology for EPs
(1) General Overview
    Pursuant to section 1903(t)(1)(A) of the Act, payment for EPs
equals 85 percent of ``net average allowable costs.'' While the
Secretary is directed to determine ``average allowable costs'' based
upon studies of the average costs of both purchasing and using EHR
technology, the net average allowable costs that set payment are capped
by statute. As discussed in more detail further on, generally stated,
these caps equal $25,000 in the first year, and $10,000 for each of 5
subsequent years (there is an exception for pediatricians with under 30
percent Medicaid patient volume, whose caps are two-thirds of these
amounts). Thus, the maximum incentive payment an EP could receive from
Medicaid equals 85 percent of $75,000, or $63,750, over a period of 6
years. EPs must begin receiving incentive payments no later than CY
2016.
(2) Average Allowable Costs
    Section 1903(t)(4)(C) of the Act gives the Secretary the authority
to determine average allowable costs. Specifically, the Secretary is
directed to study the average costs associated with the purchase,
initial implementation, and upgrade of certified EHR technology,
including support services, and integral related training. The
Secretary also is directed to study the average costs of operating,
maintaining, and using certified EHR technology. The statute permits
the Secretary to use studies submitted by the States.
    We conducted a literature review of recent studies on EHR
technology to determine the average allowable cost of implementing and
using such technology. We reviewed the results from four recent,
comprehensive studies. Specifically, HHS' Office of the Assistant
Secretary for Planning and Evaluation commissioned a study by Moshman
Associates, Inc., Booz Allen Hamilton, in September 2006--Assessing the
Economics of EMR Adoption and Successful Implementation in Physical
Small Practice Settings. In this study, EHRs

[[Page 1934]]

consisted of a core group of functions that, in various permutations,
are often associated with an electronic medical record and frequently
include the capacity to: Capture and display clinical notes, display
laboratory results, display diagnostic imaging results or reports,
order drugs or diagnostic tests, and generate reports.\2\
---------------------------------------------------------------------------

    \2\ Moshman Associates, Inc., Booz Allen Hamilton, in September
2006--Assessing the Economics of EMR Adoption and Successful
Implementation in Physical Small Practice Settings, p. 40.
---------------------------------------------------------------------------

    The study found that EHR adoption is influenced by a variety of
factors, including hardware costs, software costs, the costs of
implementation and training, and costs associated with productivity
that occur in the early stages of implementation. While there are
challenges in making cost comparisons across different studies and
across different functionalities (that is, EMRs versus EHRs), the costs
per physician ranged between $33,000 and $50,000.\3\
---------------------------------------------------------------------------

    \3\ Moshman Associates Inc., Booz, Allen, Hamilton, p. 50.
---------------------------------------------------------------------------

    In reviewing Market Watch, The Value of Electronic Health Records
in Community Health Centers: Policy Implications by Robert H. Miller
and Christopher E. West, the cost and benefits of electronic health
records is reported in six community health centers (CHCs) that serve
disadvantaged patients.\4\ Robert Miller and Christopher West report
that initial EHR costs per full-time-equivalent (FTE) billing provider
averaged almost $54,000, with much variation across CHCs and within
each cost category, including hardware, software, installation,
training, etc. and ongoing costs per FTE provider, per year, averaged
$20,610.\5\
---------------------------------------------------------------------------

    \4\ Market Watch, The Value of Electronic Health Records in
Community Health Centers: Policy Implications by Robert H. Miller
and Christopher E. West, p. 206.
    \5\ Market Watch, The Value of Electronic Health Records in
Community Health Centers: Policy Implications by Robert H. Miller
and Christopher E. West, p. 208.
---------------------------------------------------------------------------

    A Congressional Budget Office (CBO) Paper: Evidence on the Costs
and Benefits of Health Information Technology from May 2008 indicates
that estimating the total cost of implementing HIT systems in office-
based medical practices is complicated by differences in the types and
available features of the systems now being sold, as well as
differences in characteristics of the practices that adopt them. The
CBO paper goes further to say that few detailed studies available
report that total costs for office-based EHRs are about $25,000--
$45,000 per physician \6\ and estimates for annual costs for operating
and maintaining the system, which include software licensing fees,
technical support, and updating and replacing used equipment range
between $3,000 to $9,000 per physician per year.\7\
---------------------------------------------------------------------------

    \6\ A CBO Paper, Evidence on the Costs and Benefits of Health
Information Technology, May 2008, p. 17.
    \7\ A CBO Paper, Evidence on the Costs and Benefits of Health
Information Technology, May 2008, p. 18.
---------------------------------------------------------------------------

    An article written by the Agency for Healthcare Research and
Quality (AHRQ), Research Activities, September 2005, Health Information
Technology, adoption rates of electronic health records are low among
physician groups--indicates that the average purchase and
implementation cost of an EHR was $32,606 per FTE physician. The
article indicates that maintenance costs were an additional $1,500 per
physician, per month and smaller practices had the highest
implementation costs per physician at $37,204.\8\
---------------------------------------------------------------------------

    \8\ Agency for Healthcare Research and Quality, Research
Activities, September 2005, Health Information Technology, Adoption
rates of electronic health records are low among physician groups.
---------------------------------------------------------------------------

    In conducting a review of the data, we determined that the studies
demonstrate a cross-sectional view of small and large practices and
community health centers. There was adequate data to support a
depiction of costs across multiple provider types.
    To summarize, we determined that the average costs of EHRs vary
greatly because of the size and type of provider practices, the
differences in available features of systems, and the additional costs
associated with licensing, support, training, and maintenance. However,
based on the information reviewed, we determined that the average costs
for initial EHR systems currently can range from $25,000 to $54,000 in
the implementation year, per professional. Since the average costs of
EHR technology in the first year can be as much as $54,000 and no less
than $25,000, and since we believe the costs of such technology will be
increasing, we are proposing to set the average allowable cost at
$54,000. We believe that to establish this average allowable cost at
the high end of the range is reasonable since the data we reviewed is
based on certification standards that may not be appropriate moving
forward. Specifically, since the ONC will be establishing new
certification standards for EHR technology in the coming months, we
believe the average cost of certified EHR technology incorporating the
new standards will be higher than the current costs of EHR technology.
It is our assumption that making improvements to incorporate the new
certification standards into current EHR technology will be costly.
Thus, we believe that establishing the average allowable cost at
$54,000 is reasonable.
    Additionally, our analysis determined that the range for subsequent
incentive payment year costs for most providers will fall into a large
range, based on a number of factors. On one end of the range, costs
related to maintenance could be as low as $3,000 to $9,000 per
provider, where other studies state that maintenance will be as high as
$18,000 to $20,610 per provider. Given the expectations in the ONC
interim final rule for system performance, interoperability, and the
health measures data discussed in this proposed rule that CMS and the
States will need to collect from professionals, we believe that the
costs for maintaining certified EHR technology will also be on the
higher end of the range at $20,610.
(3) Net Average Allowable Costs
    As required by section 1903(t)(3)(E) of the Act, in order to
determine ``net'' average allowable costs, average allowable costs for
each provider must be adjusted in order to subtract any payment that is
made to Medicaid EPs and is directly attributable to payment for
certified EHR technology or support services of such technology. The
only exception to this requirement is that payments from State or local
governments do not reduce the average allowable costs. The resulting
figure is the ``net'' average allowable cost; that is, average
allowable cost minus payments from other sources (other than State or
local governments). The statute indicates that EPs may receive 85
percent of a maximum net average allowable cost in the first year of
$25,000 and a maximum net average allowable cost of $10,000 in
subsequent years. This would mean that, as required by the statute, the
net average allowable costs are capped at these amounts.
    Since we have proposed that the average allowable cost is $54,000
in the first year, EPs could receive as much as $29,000 in funding from
sources (other than from State or local governments) as contributions
to the certified EHR technology and the incentive payment would still
be based on 85 percent of the maximum net average allowable cost of
$25,000 (or $21,250). This is appropriate since $54,000 (the average
allowable cost) minus $29,000 (contributing sources of funding from
other than State or local governments) equals $25,000.

[[Page 1935]]

Since $25,000 is equal to the level of the maximum net average
allowable cost or capped amount discussed above, providers could
receive 85 percent of $25,000 or $21,250 in year one as a Medicaid
incentive payment.
    The same logic would hold true for subsequent years. Specifically,
if in the following years an eligible professional received as much as
$10,610 in contributing funds from sources other than State or local
governments, the maximum incentive payment of $8,500 would be
unaffected in such subsequent years. This result is due to the fact
that the average allowable costs of $20,610 for maintaining EHR
technology minus the $10,610 received would still equal $10,000, the
maximum net average allowable costs permitted under the statute.
    In reviewing whether a reduction in the net average allowable cost
was warranted based on other contributions to EHR technology, we
considered the situation of EPs who may have been provided with the
actual certified EHR technology, as well as training, support services,
and other services that would promote the implementation and meaningful
use of such technology. In some cases, we do not believe the
contribution would reduce average allowable costs at all. For example,
if an FQHC or RHC has provided technology to its staff EPs to use, we
do not believe that such technology provision would be considered a
``payment'' from another source that would reduce average allowable
costs. Moreover, we believe the situations in which an EP has been
provided with the actual technology, support service, or training from
another source are extremely limited in light of the statutory
prohibitions on ``kickbacks'' at Section 1128B(b) of the Act.
(4) Payments for Medicaid Eligible Professionals
    One important difference we propose between the payments to
Medicaid EPs and hospitals is that States would disburse the payments
to EPs in alignment with the calendar year, whereas hospitals will
receive payments in alignment with the fiscal year, as described in
section II.D.4.b. of this proposed rule. There are two primary reasons
for this. The first is to align Medicaid incentive payment
disbursements with that of the Medicare program, in order to support
consistency between the two programs, as well as among the States. We
will undertake national outreach activities to encourage provider EHR
adoption and to align the annual payment periods. Since meaningful use
of the certified EHR technology is the driver of the incentives, we
believe that a cooperative approach between CMS, ONC, and the States
would be realized with more providers participating in the program.
    As previously discussed in this proposed rule, based on the 85
percent threshold applied to the net average allowable costs, we
propose that most Medicaid EPs may receive up to a maximum incentive
payment of $21,250 in the first payment year.
    In subsequent years of payment, Medicaid EPs' incentive payments
will be limited to 85 percent of the $10,000 cap on net average
allowable cost, or up to a maximum of $8,500 annually for most Medicaid
EPs.
    Since pediatricians are qualified to participate in the Medicaid
EHR incentive program as physicians, and therefore classified as
Medicaid EPs, they may qualify to receive the full incentive (that is,
the 85 percent threshold applied to the net average allowable cost) if
the pediatrician is not hospital-based and can demonstrate that they
meet the minimum 30 percent Medicaid patient volume requirements
discussed in this subpart.
    Pediatricians who are not 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 up to a maximum of
$5,667 in the 5 subsequent incentive payment years, or no more than
$42,500 over the maximum 6 year period.
    Table 27 demonstrates the various maximum incentive payment amounts
for Medicaid professionals.

                      Table 27--Maximum Incentive Payment Amount for Medicaid Professionals
----------------------------------------------------------------------------------------------------------------
                                                                       85 percent  allowed   Maximum  cumulative
       Cap on net average allowable costs, per the HITECH Act             for eligible         incentive over
                                                                          professionals      6[dash]year period
----------------------------------------------------------------------------------------------------------------
$25,000 in Year 1 for most professionals............................               $21,250  ....................
$10,000 in Years 2-6 for most professionals.........................                 8,500               $63,750
$16,667 in Year 1 for pediatricians with a minimum 20 percent                       14,167  ....................
 patient volume, but less than 30 percent patient volume, Medicaid
 patients...........................................................
$6,667 in Years 2-6 for pediatricians with a minimum 20 percent                      5,667                42,500
 patient volume, but less than 30 percent patient volume, Medicaid
 patients...........................................................
----------------------------------------------------------------------------------------------------------------

 (5) Basis for Medicaid EHR Incentive Program First Payment Year and
Subsequent Payment Years
(i) Medicaid EP Who Begins Adopting, Implementing or Upgrading
Certified EHR Technology in the First Year
    A Medicaid EP who begins by adopting, implementing, or upgrading
certified EHR technology in the first year will be eligible for the
incentive payments not in excess of the maximum amount. Under section
1903(t)(4) of the Act he or she is eligible to receive up to the
maximum first year Medicaid incentive payments discussed in the
previous sections, plus additional incentive payments for up to 5 years
for demonstrating meaningful use of certified EHR technology. In other
words, these providers may participate in the Medicaid EHR incentive
program for up to 6 years.
    Table 28 demonstrates the payment scenarios available to a Medicaid
EP who begins in their first year by adopting, implementing, or
upgrading certified EHR technology. As can be seen from the table, the
EP can begin receiving payments as late as 2016, and still receive up
to the maximum payments under the program.

[[Page 1936]]

                                    Table 28--Payment Scenarios for Medicaid EPs Who Begin Adoption in the First Year
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                        Medicaid EPs who begin adoption in
                      Calendar year                      -----------------------------------------------------------------------------------------------
                                                               2011            2012            2013            2014            2015            2016
--------------------------------------------------------------------------------------------------------------------------------------------------------
2011....................................................         $21,250  ..............  ..............  ..............  ..............  ..............
2012....................................................           8,500         $21,250  ..............  ..............  ..............  ..............
2013....................................................           8,500           8,500         $21,250  ..............  ..............  ..............
2014....................................................           8,500           8,500           8,500         $21,250  ..............  ..............
2015....................................................           8,500           8,500           8,500           8,500         $21,250  ..............
2016....................................................           8,500           8,500           8,500           8,500           8,500         $21,250
2017....................................................  ..............           8,500           8,500           8,500           8,500           8,500
2018....................................................  ..............  ..............           8,500           8,500           8,500           8,500
2019....................................................  ..............  ..............  ..............           8,500           8,500           8,500
2020....................................................  ..............  ..............  ..............  ..............           8,500           8,500
2021....................................................  ..............  ..............  ..............  ..............  ..............           8,500
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................          63,750          63,750          63,750          63,750          63,750          63,750
--------------------------------------------------------------------------------------------------------------------------------------------------------

     (ii) Medicaid EP Who Has Already Adopted, Implemented or Upgraded
Certified EHR Technology and Meaningfully Uses EHR Technology
    For a Medicaid EP who has already adopted, implemented, or upgraded
certified EHR technology and can meaningfully use this technology in
the first incentive payment year, we propose that the Medicaid EP be
permitted to receive the same maximum payments, for the same period of
time, as the Medicaid EP who merely adopted, implemented or upgraded
certified EHR technology in the first year. Section 1903(t)(6)(C)(ii)
of the Act states that for a Medicaid EP or hospital who has completed
``adopting, implementing, or upgrading'' certified EHR technology
``prior to the first year of payment. * * * clause (i)(I) shall not
apply and clause (i)(II) [discussing the demonstration of meaningful
use] shall apply to each year of payment to the Medicaid provider under
this subsection, including the first year of payment.'' We believe this
provision supports an interpretation that a Medicaid EP who has already
adopted certified EHR technology, would still receive a ``first year''
of payment under section 1903(t)(4) of the Act, and like all other
first years of payment, this payment could not exceed $21,250. Then,
under section 1903(t)(4)(A)(ii) and (iii) of the Act, such Medicaid EPs
could receive an additional 5 years of payment for subsequent years of
payment, with payments not exceeding $8,500 in each of these 5
subsequent years. This approach allows early adopters of certified EHR
to begin meaningfully using technology, without being at a competitive
disadvantage, and without losing incentive payments for the previous
costs associated with adopting, implementing, or upgrading certified
EHR technology.
    Thus, the maximum incentive payments for Medicaid EPs demonstrating
that they are meaningful users in the first payment year, would be
identical to the maximum payments available to those demonstrating
adoption, implementation, or upgrading certified EHR technology in the
first year, as depicted in Table 29.

                        Table 29--Maximum Incentive Payments for Medicaid EPs Who Are Meaningful Users in the First Payment Year
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Medicaid EPs who begin meaningful use of certified EHR technology in
                      Calendar year                      -----------------------------------------------------------------------------------------------
                                                               2011            2012            2013            2014            2015            2016
--------------------------------------------------------------------------------------------------------------------------------------------------------
2011....................................................         $21,250  ..............  ..............  ..............  ..............  ..............
2012....................................................           8,500         $21,250  ..............  ..............  ..............  ..............
2013....................................................           8,500           8,500         $21,250  ..............  ..............  ..............
2014....................................................           8,500           8,500           8,500         $21,250  ..............  ..............
2015....................................................           8,500           8,500           8,500           8,500         $21,250  ..............
2016....................................................           8,500           8,500           8,500           8,500           8,500         $21,250
2017....................................................  ..............           8,500           8,500           8,500           8,500           8,500
2018....................................................  ..............  ..............           8,500           8,500           8,500           8,500
2019....................................................  ..............  ..............  ..............           8,500           8,500           8,500
2020....................................................  ..............  ..............  ..............  ..............           8,500           8,500
2021....................................................  ..............  ..............  ..............  ..............  ..............           8,500
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................          63,750          63,750          63,750          63,750          63,750          63,750
--------------------------------------------------------------------------------------------------------------------------------------------------------

    An alternative approach we request comment on would be to limit the
incentive payment for Medicaid EPs who have already adopted,
implemented, or upgraded certified EHR technology to 5 years of
payment, at a maximum payment of $8,500 per year. This approach would
interpret section 1903(t)(4)(A) of the Act, which states that the
$25,000 cap on net average allowable costs is intended to cover the
costs of implementing or adopting certified EHR technology, as limiting
the $21,250 payment only to those actually adopting the technology in
their first year of payment. While early adopters would still be
eligible to receive incentive payments, the payment totals would be
lower, because such adopters would not need an incentive payment in
order to actually implement, adopt, or upgrade certified EHR
technology. This alternative approach is depicted in Table 30.

[[Page 1937]]

                 Table 30--Alternative Incentive Payment Scenario for Medicaid EPs Who Have Adopted EHR Technology Before the First Year
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                     Medicaid EPs who begin meaningful use in
                      Calendar year                      -----------------------------------------------------------------------------------------------
                                                               2011            2012            2013            2014            2015            2016
--------------------------------------------------------------------------------------------------------------------------------------------------------
2011....................................................          $8,500  ..............  ..............  ..............  ..............  ..............
2012....................................................           8,500          $8,500  ..............  ..............  ..............  ..............
2013....................................................           8,500           8,500          $8,500  ..............  ..............  ..............
2014....................................................           8,500           8,500           8,500          $8,500  ..............  ..............
2015....................................................           8,500           8,500           8,500           8,500          $8,500  ..............
2016....................................................  ..............           8,500           8,500           8,500           8,500          $8,500
2017....................................................  ..............  ..............           8,500           8,500           8,500           8,500
2018....................................................  ..............  ..............  ..............           8,500           8,500           8,500
2019....................................................  ..............  ..............  ..............  ..............           8,500           8,500
2020....................................................  ..............  ..............  ..............  ..............  ..............           8,500
2021....................................................  ..............  ..............  ..............  ..............  ..............  ..............
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................          42,500          42,500          42,500          42,500          42,500          42,500
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Medicaid EPs are not required to participate on a consecutive
annual basis. The tables in this section demonstrate how a Medicaid EP
would maximize the aggregate incentive under different scenarios,
considering that a Medicaid EP may initiate participation in 2011
through 2016. Additionally, these tables do not include the alternative
Medicaid maximum incentive payment for pediatricians discussed in the
previous section, which is two-thirds of the total amount listed in
Tables 27 through 30. Finally, these tables do not represent EPs whose
incentive payments may be reduced because net average allowable costs
may actually be lower than $25,000 in the first year, or $10,000 in
subsequent years, due to payments from other, non-State/local sources.
b. Payment Methodology for Eligible Hospitals
    Statutory parameters placed on Medicaid incentive payments to
hospitals are largely based on the methodology applied to Medicare
incentive payments. The specifications described in this section are
limits to which States must adhere when developing aggregate EHR
hospital incentive amounts for Medicaid-eligible hospitals. States will
calculate hospitals' aggregate EHR hospital incentive amounts on the
FFY to align with hospitals participating in the Medicare EHR incentive
program.
    States may pay children's hospitals and acute care hospitals up to
100 percent of an aggregate EHR hospital incentive amount provided over
a minimum of a 3-year period and a maximum of a 6-year period. The
maximum incentive amounts for these providers are statutorily defined
by a formula at section 1903(t)(5)(B) of the Act. The statute requires
that Medicaid refer, with some adjustments, to the calculation for the
Medicare hospital incentive payment described at sections
1886(n)(2)(A), 1886(n)(2)(C), and 1886(n)(2)(D) of the Act, to
determine the aggregate EHR amount allowable for individual hospitals.
The aggregate EHR hospital incentive amount is calculated using an
overall EHR amount multiplied by the Medicaid share. The aggregate EHR
hospital incentive amount is the total amount the hospital could
receive in Medicaid payments over 4 years of the program.
    States are responsible for using auditable data sources to
calculate Medicaid EPs' aggregate EHR hospital incentive amounts, as
well as determining Medicaid incentive payments to those providers.
Auditable data sources include--
     Providers' Medicare cost reports;
     State-specific Medicaid cost reports;
     Payment and utilization information from the State's MMIS
(or other automated claims processing systems or information retrieval
systems); and
     Hospital financial statements and hospital accounting
records.
    All State Medicaid EHR incentive program calculations, payments,
and limits under this section are subject to our review.
    For purposes of the Medicaid EHR incentive program, the overall EHR
amount is equal to the sum over 4 years of (I)(a) the base amount
(defined by statute as $2,000,000); plus (b) the discharge related
amount defined as $200 for the 1,150th through the 23,000th discharge
for the first payment year (for subsequent payments years, States must
assume discharges increase by the provider's average annual rate of
growth for the most recent 3 years for which data are available per
year): multiplied by (II) the transition factor for each year equals 1
in year 1, \3/4\ in year 2, \1/2\ in year 3, and \1/4\ in year 4.
    The statute specifies that the payment year is determined based on
a Federal fiscal year. Section 1886(n)(2)(C) of the Act provides the
Secretary with authority to determine the discharge related amount on
the basis of discharge data from a relevant hospital cost reporting
period, for use in determining the incentive payment during a Federal
fiscal year. Federal fiscal years begin on October 1 of each calendar
year, and end on September 30 of the subsequent calendar year. Hospital
cost reporting periods can begin with any month of a calendar year, and
end on the last day of the 12th subsequent month in the next calendar
year. For purposes of administrative simplicity and timeliness, we
propose that States, for each eligible hospital during each incentive
payment year, use data on the hospital discharges from the hospital
fiscal year that ends during the Federal fiscal year prior to the
fiscal year that serves as the payment year.

    Example: FY 2011 begins on October 1, 2010 and ends on September
30, 2011. For an eligible hospital with a cost reporting period
running from July 1, 2010 through June 30, 2011, we would employ the
relevant data from the hospital's cost reporting period ending June
30, 2010 in order to determine the incentive payment for the
hospital during Federal fiscal year 2011. This timeline would allow
States to have the relevant data available for determining the
aggregate EHR hospital incentive amount in a timely manner for the
first and subsequent payment years.
    The discharge-related amount is $200 per discharge for
discharges 1,150 through 23,000. To determine the discharge-related
amount for the 3 subsequent payment years that are included in
determining the overall EHR amount, States should assume discharges
for an individual hospital have increased by the average annual
growth rate for an individual hospital over the most

[[Page 1938]]

recent 3 years of available data from an auditable data source. Note
that if a hospital's average annual rate of growth is negative over
the 3 year period, it should be applied as such.
    We have provided a sample calculation for review that assumes
the following:
     An individual provider had 20,000 discharges in the
first FY (2011).
     The most recent annual growth data available are as
follows:
    ++ FY 2005 (.028 annual growth rate)
    ++ FY 2006 (.013 annual growth rate)
    ++ FY 2007 (.027 annual growth rate)
    The average annual growth rate over 3 years = (.028 x .013 x
.027)/3 = .0227.

Year 1

2011 discharge related amount equals:
    (20,000 - 1149) x $200 = $3,770,200

Year 2

2012 discharge related amount equals:
    20,000 x 1.0227 = 20,454
    (20,454 - 1149) x $200 = $3,861,000

Year 3

2013 discharge related amount equals:
    20,454 x 1.0227 = 20,918
    (20,918 - 1149) x $200 = $3,953,800

Year 4

2014 discharge related amount equals:
    20,918 x 1.0227 = 21,393
    (21,393 - 1149) x $200 = $4,048,800
    The overall hospital EHR amount requires that a transition
factor be applied to each year. This transition factor equals 1 for
year 1, \3/4\ for year 2, \1/2\ for year 3, and \1/4\ for year 4, as
provided for in sections 1886(n)(2)(A) and 1886(n)(2)(E) of the Act,
and as incorporated through section 1902(t)(5)(B) of the Act. We
note that although, for purposes of the Medicare incentives, section
1886(n)(2)(E)(ii) of the Act requires a transition factor of 0, if
the first payment year is after 2013, we do not believe this rule
would apply in the context of the Medicaid incentive payments.
Nothing in section 1903(t) of the Act specifically cross references
this 0 transition factor, and, notably, section 1903(t) of the Act
allows Medicaid incentive payments to begin as late as 2016.

    The ``Medicaid Share,'' against which the overall EHR amount is
multiplied, is essentially the percentage of a hospital's inpatient,
non-charity care days that are attributable to Medicaid inpatients.
More specifically, the Medicaid share is a fraction expressed as--
     Estimated Medicaid inpatient-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 interpret these managed care individuals to be individuals
enrolled in a managed care organization (MCO), prepaid inpatient health
plan (PIHP), or prepaid ambulatory health plan (PAHP) under 42 CFR part
438.
    Some Medicaid managed care entities (that is, MCOs, PIHPs, and
PAHPs with risk contracts) provide substitute services (or, ``in-lieu-
of services'') in more cost effective or efficient settings than the
State plan services in the managed care contract. For example, in a
hospital inpatient setting, these services could be in a different
unit, such as a subacute wing or skilled nursing wing, so long as
States and contracting entities are in compliance with the actuarial
soundness rules at 42 CFR 438.6(c), provision of substitute services is
allowed. Although we understand that these substitute service days may
be used to achieve efficiency and cost effectiveness, we do not believe
such substitute service days should count as ``inpatient-bed-days'' in
the hospital EHR incentive payment calculation. The statute requires us
to calculate the Medicaid share ``in the same manner'' as the Medicare
share under section 1886(n)(2)(D) of the Act and such substitute
service days would not be considered ``in the same manner.'' Thus, we
propose that for purposes of the Medicaid formula, we would count only
those days that would count as inpatient-bed-days for Medicare purposes
under section 1886(n)(2)(D) of the Act.
    In addition, because the formula for calculating the Medicaid share
requires a determination of charity care charges, States should use the
revised Medicare 2552-10, Worksheet S-10 or another auditable data
source to determine the charity care portion of the formula. In the
absence of sufficient charity care data to complete the calculation,
section 1886(n)(2)(D) of the Act, requires the use of uncompensated
care data to derive an appropriate estimate of charity care, including
a downward adjustment for bad debts. We interpreted bad debt to be
consistent with the Medicare definition of bad debt as promulgated at
42 CFR 413.89(b)(1).
    Finally, per section 1886(n)(2)(D) of the Act, to the extent there
is simply not sufficient data that would allow the State to estimate
the inpatient bed-days attributable to Medicaid managed care patients,
the statute directs that such figure is deemed to equal 0. Likewise, if
there is simply not sufficient data for the State to estimate the
percentage of inpatient bed days that are not charity care (that is,
[estimated total charges--charity care charges]/estimated total
charges), the statute directs that such figure is deemed to equal 1.
    The aggregate EHR incentive calculation for Medicaid eligible
hospitals is represented mathematically as follows:

(Overall EHR Amount) * (Medicaid Share) or
{Sum over 4 year of [(Base Amount + Discharge Related Amount Applicable
for Each Year) * Transition Factor Applicable for Each Year]{time}  *

{(Medicaid inpatient-bed-days + Medicaid managed care inpatient-bed-
days)/[(total inpatient-bed days) * (estimated total charges-charity
care charges)/(estimated total charges)]{time}

    To achieve the aggregate EHR hospital incentive amount at
1903(t)(5)(a), the calculation must be aggregated over 4 years. For
further clarification, we have provided a sample calculation of the
aggregate EHR hospital amount.
    Assume the following as constant over 4 years except where noted:
     20,000 discharges (Note: This calculation assumes the same
averaging data calculated in the average annual growth example above.)
     34,000 inpatient Medicaid bed-days (including fee-for-
service and managed care days)
     100,000 total inpatient bed-days
     $1,000,000,000 in total charges
     $200,000,000 in charity care
     Overall EHR amount = Sum (Year 1, Year 2, Year 3, Year 4)
= $14,655,050

Year 1: {$2,000,000 + ((20,000 - 1,149) x 200){time}  x 1 x 1 =
$5,770,200
Year 2: {$2,000,000 + ((20,454 - 1,149) x 200){time}  x 1 x .75 =
$4,395,750
Year 3: {$2,000,000 + ((20,918 - 1,149) x 200){time}  x 1 x .50 =
$2,976,900
Year 4: {$2,000,000 + ((21,393 - 1,149) x 200){time}  x 1 x .25 =
$1,512,200
Medicaid Share: 34,000/(100,000 x (($1,000,000,000--$200,000,000)/
1,000,000,000) = 0.425
Overall EHR Amount x Medicaid Share = Medicaid aggregate EHR incentive
amount $14,655,050 x 0.425 = $6,228,396
    Unlike Medicaid EPs, who must waive rights to duplicative Medicare
incentive payments, hospitals may receive incentive payments from both
Medicare and Medicaid, contingent on successful demonstration of
meaningful use and other requirements under both programs.

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    The last year that a hospital may begin receiving Medicaid
incentive payments is FY 2016. States must make payments over a minimum
of 3 years and a maximum of 6 years. Additionally, in any given payment
year, no annual Medicaid incentive payment to a hospital may exceed 50
percent of the hospital's aggregate incentive payment. Likewise, over a
2-year period, no Medicaid payment to a hospital may exceed 90 percent
of the aggregate incentive.
    Table 31 demonstrates several scenarios for Medicaid hospitals.
However, there are other scenarios not included here. For example, this
table assumes that a hospital would participate on a consecutive annual
basis until the incentive is exhausted. The purpose of Table 31 is to
illustrate the general timeline for Medicaid hospital incentives.
[GRAPHIC] [TIFF OMITTED] TP13JA10.016

c. Alternative and Optional Early State Implementation to Make
Incentive Payments for Adopting, Implementing, or Upgrading Certified
EHR Technology
    Unlike Medicare, Medicaid has no statutory implementation date for
making EHR incentive payments. We believe that some States may be
prepared to implement their program and make EHR incentive payments to
Medicaid providers in 2010 for adopting, implementing, or upgrading
certified EHR technology. We propose to allow States to initiate
implementation of these payments to Medicaid EPs and hospitals after
promulgation of the final rule if they successfully demonstrate to CMS
that they are ready to make timely and accurate payments through the
SMHP. States should include an additional attestation for providers
assuring that they are not accepting payment in any other State.
    In order for us to approve a State for early implementation, we are
proposing that a State would have an electronic system for provider
registration capable of collecting the relevant information identified
in section II.A.5.c of this proposed rule, where we describe the data
collection requirements. This includes the following:
     Name, National Provider Identifier (NPI), business address
and business phone of each EP or eligible hospital;
     Taxpayer Identification Number to which the EP or eligible
hospital wants the incentive payment made;
     For eligible hospitals, their CMS Certification Number
(CCN);
     The remittance date and amount of any incentive payments
made to an EP or eligible hospital.
    Participating States would be responsible for transmitting this
data to CMS so that CMS can ensure that no duplicate payments will be
made to providers. We would use the single provider election repository
described in section II.A.5.c. of this proposed rule to assure no
duplicative payments were made between States.
    We are not proposing that States would be able to make early
payments to meaningful users. This opportunity is intended to offer
Medicaid providers an early opportunity for capital so that they are
more likely to have the certified EHR

[[Page 1940]]

technology required to demonstrate meaningful use in successive
periods. Since hospitals may qualify under both programs, we hope that
they will use the capital and qualify as a meaningful user under the
Medicare program in the first year. We are requesting comments on this
proposed approach.
d. Process for Making and Receiving Medicaid Incentive Payments
    The process for making payments involves coordination between
Medicare and State Medicaid agencies to avoid duplication of payments,
prevent fraud and abuse, and create program efficiencies to encourage
adoption. While we have responsibility regarding payments to Medicare
EPs and hospitals, State Medicaid agencies (or their contractors) are
fully responsible for administering and disbursing the incentive
payments to Medicaid providers.
    We will require that EPs make a selection between receiving
incentive payments through either the Medicare or Medicaid EHR
incentive programs. Medicaid EPs who practice in multiple states will
be required to choose only one state from which to receive Medicaid
incentive payments. The issues related to these decisions are discussed
here, as well as in section II.A of this proposed rule.
    In this section, we describe the steps Medicaid EPs will take to
receive an incentive payment. Due to the inter-dependencies of multiple
issues, we refer the reader to other sections of this proposed rule.
Specifically, section II.A of this proposed rule solicits comments for
a proposed reporting period in the first payment year of any continuous
90-day period that starts and ends within the calendar year. In
addition, such 90-day period would apply in both the first and second
payments years (that is, 2010 and 2011) for States approved for early
implementation in 2010. Section II.A. also solicits comments on full
annual reporting periods for all payment years other than the first
payment year (except in the case of States approved for 2010
implementation, for which the full annual reporting period would begin
in the third year). We also discuss the proposed single provider
election repository and other issues impacting both programs.
    It is important to note that there is a very clear intent in the
statute that there is coordination between the EHR incentive programs
to reduce or eliminate duplicate payments between Medicare and
Medicaid. Additionally, Medicare requirements under section
1848(o)(1)(B) of the Act require that payments begin no earlier than
2011. While the Medicaid provisions have no statutory start date,
before States may begin implementing the Medicaid EHR incentives, CMS,
and ONC need to provide guidance to States in the form of rulemaking
and other policy guidance. To that end, Medicaid will not begin to
provide 100 percent FFP for incentive payments any earlier than FY 2011
for hospitals and CY 2011 for EPs, (except in the case of incentive
payments for adopting, implementing, or upgrading, which could begin in
2010. See discussion in section II.D.4.b.(5).(c). of this proposed
rule. This also gives CMS, ONC, and States an opportunity to coordinate
between Medicare and Medicaid, which we hope will simplify
administrative complexity in the EHR incentive program and facilitate
provider adoption.
    We believe that by aligning the EHR incentive programs where
possible, Medicaid EHR incentive program administration could be more
efficient for the States, and provider communication about the program
could be less ambiguous. This will be of particular benefit to the
providers who serve both Medicare and Medicaid program beneficiaries,
and will be eligible for participation in both incentive programs.
Also, we believe that the incidence of fraud and abuse could be
curtailed, and the potential for duplication of payments could be
decreased.
    Under this proposed rule we are proposing that Medicaid EPs, as
discussed in section II.D.5 and II.A.5.c of this proposed rule, will
enroll in the program through the single provider election repository.
Once an EP selects the Medicaid EHR incentive program, we propose that
States must have a system for reporting and tracking necessary
information to qualify an EP for an incentive payment. In addition, as
detailed in Sec.  495.316 States will be required to submit data to CMS
including data for the number, type and practice location(s) of
providers who qualified for an incentive payment on the basis of having
adopted, implemented, or upgraded certified EHR technology or who
qualified for an incentive payment on the basis of having meaningfully
used such technology as well as aggregate de-identified data on
meaningful use. States' systems and processes will be submitted by the
States to CMS for prior approval, concurrent with the requirements
described in section II.D.8 of this proposed rule for review and
approval of the SMHP.
    The specific timeframes for EPs and eligible hospitals to report
and submit the required information in order to demonstrate they have
adopted, implemented, or upgraded certified EHR technology, as well as
meaningful use of such EHR technology are proposed for comment at
section II.A.1.e of this preamble. As discussed in that section of this
proposed rule, for the first payment year (as well as the second
payment year for those hospitals that are able to begin receiving
payments for FY 2010), the reporting periods for eligible hospitals
will be on a continuous 90-day basis, in the sense that as long as the
start and end dates occur within the payment year and as long as the
period spans the proposed 90-day consecutive period, the period can
begin at any time during the payment year. States will then be expected
to process payments, also on a rolling basis. In the subsequent payment
years, the reporting period will be a full annual period (that is, a
full payment period).
e. Avoiding Duplicate Payment
    At section 1903(t)(7) of the Act, the statute requires that the
Medicare and Medicaid programs coordinate payments to avoid
duplication. This section further specifies that CMS and the States
should coordinate payments through a data matching process, utilizing
NPIs to the extent practicable. Additionally, section 1903(t)(2) of the
Act states that Medicaid EPs must waive rights to Medicare incentive
payments under sections 1848(o) and 1853(l) of the Act. As previously
noted, hospitals may qualify for incentives under both programs. We
also propose requirements under the review and approval of SMHPs in
proposed part 495 subpart D for States to verify that providers meet
these requirements.
    As discussed in section II.A of this proposed rule, we considered
what information will be necessary to eliminate duplicative incentive
payments to providers between the Medicare and Medicaid programs. In
order to ensure against duplicate incentive payments, we believe three
conditions are required: (1) Knowing which EHR incentive program a
provider has selected, (2) uniquely identifying each provider
participating in each incentive program; and (3) ensuring that each
State has access to the information on which EPs or hospitals intend to
receive incentive payments from another State, or from the Medicare
program.
    To achieve all three of these conditions, as discussed in section
II.A.5.c of this proposed rule, we propose to collect this data in a
single provider election repository. Next, in administering each State
Medicaid EHR incentive program, we propose that

[[Page 1941]]

States would cross-check for potential duplicative payments through the
data available to them through the single provider election repository,
which is based on the NPIs. We believe that this coordinates with our
proposed requirements that a State must have an approved SMHP which
will include a mechanism for cross-checking this information prior to
payment.
f. Flexibility To Alternate Between Medicare and Medicaid EHR Incentive
Programs One Time
    We refer readers to section II.A.5.b of this proposed rule, where
we discuss our proposal to allow Medicare and Medicaid EPs to make one
EHR incentive program election change prior to 2015, and not to permit
any switching after the year 2014. Under such a proposal, even if an EP
initially received incentive payments under the Medicare program, such
an EP could still switch to the Medicaid program one time prior to
2015. Similarly, an EP who initially selected the Medicaid EHR
incentive program could switch to the Medicare program one time prior
to 2015.
g. One State Selection
    We propose that for EPs and hospitals with multi-state Medicaid
practice locations, that the provider may annually pick only one State
from which to receive incentive payments. In other words, a provider
would not be able to receive incentive payments from more than one
State in the same year. For example, a provider may be licensed to
practice in Illinois as well as in Iowa, particularly in the area known
as the Quad Cities because of the multiple cities in proximity to the
Illinois and Iowa borders. There are numerous situations like this
throughout the country for States sharing borders. Medicaid EPs and
hospitals may change the State that they select annually when they re-
attest to the program requirements.
    Since qualifying for the Medicaid incentive payments is not a
claims accrual process, as it is in Medicare, allowing providers to
include multiple practice sites across State boundaries would create
enormous administrative complexity for both CMS and State Medicaid
agencies. For example, States would have to collect and verify Medicaid
patient volume across more than one State, then divide and administer
payments based on a methodology suitable between the State Medicaid
agencies and the providers. Given that the providers qualifying for the
Medicaid incentive program will receive the same incentive payment
dollar amount regardless of whether payments are made by one, or more
than one, State, we believe it would not be worth the resulting
administrative complexity to allow payments from multiple States.
    We considered the possible impact of this proposed approach with
respect to patient volume calculations on Medicaid EPs and hospitals in
border State areas. While we addressed the administrative complexity of
this issue here, we recommend that States consider these border State
providers when developing their policies and attestation methodology.
We afforded additional flexibility in the patient volume at proposed
Sec.  495.306 to account for unique circumstances and data collection.
5. Single Provider Election Repository and State Data Collection
    We refer readers to section II.A.5.c of this proposed rule for a
discussion of the single provider election repository. As discussed in
that section, the repository will collect a minimum amount of
information on all EPs and hospitals to prevent duplicative payments
and coordinate technical assistance.
6. Collection of Information Related to the Eligible Professional's
National Provider Identifier and the Tax Identification Number
    Similar to the policy proposed where Medicaid EPs and hospitals
must select one State, for those EPs in multiple group practices or
multiple types of practice locations, we propose to require such
professionals to select one TIN for Medicaid EHR payment disbursement.
In other words, such EPs could not require a State to divide payments
among different practices or practice locations based upon group TINs.
Requiring EPs to use only one TIN would reduce administrative
complexity, as it would ensure that States are not put in the position
of dividing payments in any way an EP requests (such as by patient
encounters or amount contributed to EHR technology). We also believe
that requiring reimbursement to be made to one TIN would reduce
opportunities for fraud or abuse, as States will be able to cross-check
EP and TIN combinations more easily to verify EP attestations.
    Although the State would not divide payments among the various TINs
of an individual EP, Medicaid EPs could decide to divide payment
themselves, and distribute funds among their respective group practices
or practice locations after the initial disbursement from the State to
their designated TIN.
7. Activities Required To Receive Incentive Payments
     a. General Overview.
    As previously discussed, for Medicaid providers (including both EPs
and eligible hospitals) to qualify to receive a first year Medicaid
incentive payment, section 1903(t)(6)(C)(i) of the Act indicates that
the provider must demonstrate that they are ``engaged in efforts to
adopt, implement, or upgrade certified EHR technology.'' For providers
who meet this standard in their first year of participation in the
Medicaid incentive program, in subsequent years of participation, they
must then demonstrate ``meaningful use of certified EHR technology
through a means that is approved by the State and acceptable to the
Secretary,'' and that may be based upon the methods employed under the
Medicare incentive payments to physicians and hospitals, per sections
1848(o) or 1886(n) of the Act.
     b. Definitions Related to Certified EHR Technology and
Adopting, Implementing or Upgrading Such Technology.
(1) Certified EHR Technology
    As noted previously, in order to receive a Medicaid incentive
payment the EHR technology must be ``certified.'' Section 1903(t)(3) of
the Act defines ``certified EHR technology'' as a qualified electronic
health record (as defined in section 3000(13) of the PHS Act) that is
certified pursuant to section 3001(c)(5) of the PHS Act as meeting
standards adopted under section 3004 of the PHS Act that are applicable
to the type of record involved (as determined by the Secretary), such
as an ambulatory electronic health record for office-based physicians
or an inpatient hospital electronic health record for hospitals). In
section I.A of this proposed rule, for both Medicare and Medicaid, we
discussed incorporating ONC's definition of certified EHR technology.
(2) Adopting, Implementing or Upgrading
    Unlike the Medicare incentive programs, the Medicaid program allows
eligible providers to receive an incentive payment even before they
have begun to meaningfully use certified EHR technology. These
providers may receive a first year of payment if they are engaged in
efforts to ``adopt, implement, or upgrade'' to certified EHR
technology. In proposed 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

[[Page 1942]]

technology capable of meeting meaningful use requirements; or expanded
the available functionality and commenced utilization of certified EHR
technology capable of meeting meaningful use requirements at the
practice site, including staffing, maintenance, and training.
    For the purposes of demonstrating that providers adopted,
implemented, or upgraded certified EHR technology, Medicaid EPs and
hospitals would have to attest to having adopted, (that is, acquired
and installed) or commenced utilization of (that is, implemented)
certified EHR technology; or expanded (that is, upgraded) the available
functionality of certified EHR technology and commenced utilization at
their practice site. States would be responsible for ensuring that
processes are in place to verify that providers have actually adopted,
implemented or upgraded certified EHR technology, patient volume, as
well as other requirements in this section, including verifying that
attestations are consistent with methodologies to combat fraud and
abuse (see proposed Sec.  495.366 through 370, Financial Oversight,
Program Integrity, and Provider Appeals). The State's SMHP must detail
these processes.
    The CMS Medicaid Transformation Grants have demonstrated the many
challenges that exist to adopting EHR technology. EHR system
availability is not the same as EHR system utilization. It is for that
reason that we propose to include staff training and efforts to
redesign provider workflow under the definition of implementing
certified EHR technology. Success is not simply defined by the
acquisition and installation of new or upgraded certified EHR
technology, but more importantly by providers demonstrating progress
towards the integration of EHRs into their routine health care
practices to improve patient safety, care, and outcomes.
    In establishing criteria for the ``adoption'' portion of the
``adopt, implement, or upgrade'' requirement, we propose that there be
evidence that a provider demonstrate actual installation prior to the
incentive, rather than ``efforts'' to install. This evidence will serve
to differentiate between activities that may not result in installation
(for example, researching EHRs or interviewing EHR vendors) and actual
purchase/acquisition or installation. It is the States' responsibility
to verify this evidence of EHR adoption. As these Medicaid incentive
payments are intended to stimulate meaningful use of EHR technology,
they need to result in tangible adoption, implementation, or upgrading
of certified EHR technology.
    In establishing criteria for the ``implementation'' portion of
``adopt, implement or upgrade'' requirement, we are proposing that
``implementation'' mean that the provider has installed certified EHR
technology and has started using the certified EHR technology in his or
her clinical practice. Implementation activities would include staff
training in the certified EHR technology, the data entry of their
patients' demographic and administrative data into the EHR, or
establishing data exchange agreements and relationships between the
provider's certified EHR technology and other providers, such as
laboratories, pharmacies, or HIEs.
    In establishing the criteria for the ``upgrade'' portion of
``adopt, implement or upgrade'' requirement, we propose ``upgrade'' to
mean the expansion of the functionality of the certified EHR
technology, such as the addition of clinical decision support, e-
prescribing functionality, CPOE or other enhancements that facilitate
the meaningful use of certified EHR technology. States must describe
the process that would be in place in the SMHP for ensuring that
providers have actually adopted, upgraded or implemented certified EHR
technology. We encourage States to consider the submission of a vendor
contract from providers to ensure the existence of EHR technology.
    In listening sessions with State Medicaid Agencies' staff and
Governors' offices staffs, States suggested verifying providers'
adoption, implementation, or upgrading of certified EHR technology
through system enhancements that track and audit providers' written or
electronic attestations, through surveys, or through new claims codes
that would serve as attestations. Additional suggestions from State
staff included using EHR vendor audit logs for Medicaid EPs rendering
service through the FQHCs and tracking EHR reporting of the Health
Resources and Services Administration (HRSA)-mandated quality
indicators. More information on feedback received as a result of these
listening sessions can be found in section II.A. of this proposed rule.
These suggestions may be relevant to the discussion below concerning
the States process for developing a SMHP, verifying attestations and
ensuring that providers are eligible to participate in the incentive
payments program.
c. Other General Terminology
    ``EHR reporting period'' and ``payment period'' relate to the
requirements for Medicaid EPs participating in the Medicaid EHR
incentive program. As discussed previously, the reporting period is
significant for EPs and eligible hospitals because it will define the
period during which the provider must establish efforts to adopt,
implement, or upgrade certified EHR technology, or demonstrate
meaningful use of, such technology. The reporting period also is
significant for States, because States will refer to such reporting
periods in assuring us that providers are eligible to participate in
the Medicaid EHR incentive program. (Requirements relating to the
components that must be included in the SMHP are specified in proposed
Sec.  495.354). States will need to refer to the providers' reports of
the activities that establish their efforts to adopt, implement, or
upgrade certified EHR technology. Similarly, once meaningful use of EHR
technology is required to include the reporting of clinical quality
measures, States will need to ensure such measures are reported in
accordance with the appropriate period. States could not appropriately
make incentive payments in the absence of such reporting.
    As discussed in section II.A of this proposed rule and elsewhere in
this section, we propose that the EHR reporting period would occur on a
rolling basis during the first payment year (and also in 2010 for
States approved for early implementation). For subsequent payment
years, the EHR reporting period will be on an annual basis (that is,
for the entire payment year).
    States would be required to validate to us that the Medicaid EPs
and hospitals meet all of the eligibility criteria to qualify for
Medicaid incentive payments, including the applicable patient volume
thresholds, hospital-based requirements, and all of the requirements
described in this section. 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. Permissible means for
ensuring patient volume and all of the requirements described in this
section include survey, attestation, or the creation of special codes
on claims, subject to our prior approval.
    Additionally, we may require a more robust method for ensuring
compliance with the requirements listed in this section beyond
attestation as this program matures. Therefore, we are soliciting
comments, including the

[[Page 1943]]

impact that an alternative method may have on providers and States if
an alternative method that is not attestation is required.
    Section 1903(t)(6)(C)(ii) of the Act also indicates that in the
case of an early adopter, that is, a Medicaid EP or eligible hospital
that has already adopted certified EHR technology, such provider would
receive payment in the first year and all subsequent years of the
incentive program by demonstrating meaningful use. In other words, such
a provider would not need to demonstrate that it has adopted,
implemented, or upgraded certified EHR technology in year one of the
program, if they can already demonstrate meaningful use of such
technology. In the case of Medicaid EPs, we discuss our proposal
approach to paying early adopters in section II.D.4.5.
    It is expected that the bar for demonstrating meaningful use of
certified EHR technology will rise in years to come, as discussed in
section II.A. States have offered their suggestions to us as to how
they would verify providers' meaningful use of certified EHR
technology, including participation in the exchange of clinical and
administrative data; National Committee for Quality Assurance (NCQA)
certification as an advanced medical home (which includes an EHR
requirement); e-prescribing, and conducting security and privacy
audits. Many of these elements are discussed in the definition of
``meaningful use'' noted in section II.A.2. of this proposed rule. For
purposes of participation in the Medicaid EHR incentive program, the
specific definition of ``meaningful use'' in section II.A.2. of this
proposed rule is what providers must demonstrate to the States, and
what States must track and validate. States wishing to ask providers to
demonstrate additional objectives to the definition of ``meaningful
use'' as noted in this proposed rule would need to request our prior
approval of such a revised definition in their SMHP, as described in
section II.D.8 of this proposed rule.
    We do not wish to see the bar for demonstration of meaningful use
set so high, especially in the early years of this program that, it
becomes a deterrent for broad provider participation. Examples of how
States may consider adding to the Federal definition of meaningful use
include requiring providers to participate in a health information
exchange, and requiring that providers link to immunization, lead
screening, or newborn screening registries. These mechanisms must be
readily available to providers, and not represent a financial burden
for participation. For example, States are discouraged from proposing
additional meaningful use measures that would require providers to
assume additional financial costs in order to qualify to participate in
the Medicaid EHR incentive program.
    States should carefully consider how to build upon their existing
EHR activities and infrastructure without deterring eligible Medicaid
providers from participating by compelling them to use a particular
system. We encourage States that were awarded Federal HIT/EHR grants,
such as the Medicaid Transformation Grants, to work to connect the
tools and infrastructure developed under their Federal grant funds with
providers' efforts to adopt, implement, and upgrade certified EHR
technology and to become meaningful users of certified EHR technology.
We would be evaluating States' HIT Planning Advanced Planning Documents
(PAPDs) and SMHP with this objective in mind, as described section
II.D.8 of this proposed rule.
    The requirements to which States would hold eligible Medicaid
providers accountable would vary based upon the number of years an
eligible Medicaid provider participates in the program. In other words,
regardless of the calendar year, a provider's first year as a
participant in the Medicaid EHR incentive program is when that provider
must demonstrate either adoption, implementation, upgrading or
meaningful use of certified EHR technology. States' systems must be
able to track providers' year of entry into the Medicaid EHR incentive
program to determine the correct eligibility criteria and generate the
appropriate Medicaid incentive payments.
    In Table 32, we depict the requirements for eligible Medicaid
professionals and hospitals that either adopt, implement, or upgrade
certified EHR technology or that move directly to meaningful use of
such technology. Additionally, we refer readers to Table 1 since the
table references the stages of meaningful use. Readers may find this
information helpful when considering the information in Table 32.

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    As previously noted, States would be required to verify providers'
meaningful use of certified EHR technology. We also expect to test the
reporting of additional clinical quality measures that may be used in
future definitions of meaningful use. States may wish to participate in
this testing and seek out eligible Medicaid providers to report on
specific clinical quality measures, extractable from EHRs. States would
be able to use this reporting to pilot-test requirements that could be
included in future definitions of meaningful use.
    Once States are giving providers the Medicaid HIT incentive
payments for being meaningful users of EHRs, and starting in 2012 are
collecting those providers' clinical quality measures data, States will
be required to share any such reported data with CMS in an aggregated,
de-identified manner, on an annual basis. The timetable and format for
sharing the clinical quality measurement data would be provided to
States in future policy guidance issued by CMS. States' failure to
submit these required reports to us could result in discontinued
funding or disallowances. See the discussion below regarding the SMHP
and the State reporting requirements. We would use the States' reports,
including data on meaningful use and clinical quality measures, in
order for the Secretary to fulfill her responsibilities to Congress
under section 1903(t)(10) of the Act. This provision requires that the
Secretary report to Congress on the improvement of health outcomes,
clinical quality, or efficiency as a result of implementing this
program. For hospitals eligible for both Medicare and Medicaid EHR
incentive programs, where hospitals are reporting meaningful use
measures to CMS, we will make quality data on Medicaid eligible
hospitals available to States.
d. Quality Measures
    We refer readers to section II.A.3 of this proposed rule for a
discussion of the clinical quality measure reporting required for
demonstrating meaningful use of certified EHR technology. As discussed
in that section we have proposed in II.A.3 of this proposed rule,
additional clinical quality measures that could be used by Medicaid
providers to meet the quality reporting aspect of meaningful use. These
additional indicators address key Medicaid services, such as
pediatrics, obstetrical/gynecologic, mental health and substance abuse
services. Medicaid providers could report on these clinical quality
indicators in lieu of the quality indicators that are listed in Table
3. We recognize that quality measures associated with the Stage 1
definition of meaningful use contain certain gaps for Medicaid
providers, including in the areas of oral health, long-term care,
newborn screening, and other areas of pediatric care. As discussed
previously, we intend to update our definition of meaningful use
biannually, and we expect that our updated, Stage 2 definition would
include additional Medicaid clinical quality measures to be reported
from EHRs. We intend to work with the quality measurement community to
develop these Stage 2

[[Page 1945]]

quality measures (see section II.B.1.d. of this proposed rule).
8. Overview of Conditions for States To Receive Federal Financial
Participation (FFP) for Incentive Payments and Implementation Funding
    Section 1903(a)(3)(F) of the Act provides that States are eligible
for 100 percent FFP for direct payment expenditures to certain Medicaid
EPs and eligible hospitals to encourage the adoption and use of
certified EHR technology. States are also eligible for 90 percent FFP
for reasonable administrative expenses, contingent on State compliance
with the following requirements: (1) Using the funds to administer
Medicaid incentive payments for certified EHR technology, including
tracking of meaningful use by Medicaid EPs and eligible hospitals; (2)
conducting oversight of the Medicaid EHR incentive program, including
routine tracking of meaningful use attestations and reporting
mechanisms; and (3) pursuing initiatives to encourage the adoption of
certified EHR technology for the promotion of health care quality and
the exchange of health care information.
    This section of the proposed rule discusses the requirements for
States to request FFP from CMS for the Medicaid EHR incentive program.
Additionally, this section is closely connected to the requirements
outlined in Financial Oversight, Program Integrity and Providers
Appeals for purposes of oversight and accountability.
    In proposed Sec.  495.302, we define terms used in the Medicaid
subpart of the regulations governing State requests for FFP. Although
some of these terms have been defined in other portions of our
regulations, for ease of reference, and in order to define the terms in
this specific context, we have separately included definitions in part
495. Other terms such as ``HIT PAPD,'' ``IAPD,'' ``SMHP'' are new terms
which would be used in approving State plans for FFP.
     Acceptance Documents: The term ``acceptance document''
refers to written evidence of satisfactory completion of an approved
phase or work or contract related to information technology projects
for which approved Federal funding is utilized. The term is commonly
used in information technology projects and is defined in this proposed
rule to ensure that we are able to receive information from the State
necessary to evaluate and monitor the progress of HIT projects
requested or approved under this proposed rule.
     Acquisition: The term ``acquisition'' is defined in this
proposed rule to indicate a State's intent to acquire health
information technology equipment or services for the purpose of
implementation and administration of the provisions under this proposed
rule from commercial sources or from State or local government
resources. We define and utilize this term in the context of HIT
planning and implementation activities that will enable States to
implement existing Federal requirements for competitive procurement of
equipment or services.
     Service Oriented Architecture: The term ``service oriented
architecture'' is defined in this proposed rule as a means of
organizing and developing information technology capabilities as
collaborating services that interact with each other based on open
standards. We are defining this term in the context of HIT projects
authorized under the HITECH Act to ensure that different systems and
programming languages provide the basis for interoperability among and
between applications that may reside on different platforms through a
communication protocol to achieve health information exchange required
under ARRA.
     State Self-Assessment: The term ``State self assessment''
uses a standard methodology and tools to document the way a State
conducts business now and plans to conduct business in the future.
     Medicaid information technology architecture (MITA) is
both an initiative and a framework. It is a national framework to
support improved systems development and health care management for the
Medicaid enterprise. It is an initiative to establish national
guidelines for technologies and processes that enable improved program
administration for the Medicaid enterprise. The MITA initiative
includes an architecture framework, models, processes, and planning
guidelines for enabling State Medicaid enterprises to meet common
objectives with the framework while supporting unique local needs.
     Medicaid management information system (MMIS) means a
mechanized claims processing and information retrieval system--referred
to as Medicaid Management Information Systems (MMIS)--that meets
specified requirements and that the Department has found (among other
things) is compatible with the claims processing and information
retrieval systems used in the administration of the Medicare program.
The objectives of the MMIS are to include claims processing and
retrieval of utilization and management information necessary for
program administration and audit and must coordinate with other
mechanized systems and subsystems that perform other functions, such as
eligibility determination.
    We are defining the ``Medicaid Management Information System'' as
it relates to the mechanized claims processing systems at 42 CFR 433,
Subpart C, since this term has not previously been codified in
regulations and we are requiring that in implementing this program
under the authority of section 1903(t)(6)(D) of the Act, certified EHR
technology must be compatible with the MMIS. Additionally, we expect
States would align their Medicaid EHR initiatives with those envisioned
under MITA, in order to fully support the meaningful use of EHR
envisioned under this new program. As part of their SMHP, States will
be required to map different IT solutions to their existing Medicaid
enterprise business requirements using the MITA business areas and
processes list when preparing a baseline State self-assessment. Using
the MITA State self-assessment provides a baseline that will facilitate
collaboration between the States and CMS, between the State and
industry and among the States themselves. The MITA ``State self-
assessment'' process uses a standard methodology and tools to document
the way a State conducts business now, and plans to conduct business in
the future. The purpose of the SMHP is to identify the ``As Is'' state
and ``To Be'' (target) state of a State's Medicaid business enterprise
and to align business areas and processes in the user community. Once
this alignment is complete, States may then add other Medicaid business
processes by extending the MITA model during implementation to
ultimately facilitate the EHR program. The State self-assessment would
help to identify duplicative and overlapping business areas and
processes and to identify gaps by adopting new business areas and
processes needed to complete the EHR enterprise. Using an incremental
approach and setting achievable goals for the near and mid term, would
help the State assess its progress and identify targets of opportunity
critical to achieving the long-term ``To Be'' vision for HIT by 2014.
    Further, the Medicaid enterprise is comprised of internal and
external communities of common business areas that share an interest in
seeing that the mission and goals of the Medicaid program and improved
health outcomes are achieved. These communities include the EPs and
hospitals that would be receiving incentive payments. MITA's principles
and tools fosters nationally integrated business and IT transformation.
It does this by demonstrating that planned

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enhancements support State and Medicaid strategic goals and how intra-
state systems other than the MMIS have been considered in developing
the solutions. By documenting the analysis of alternative solutions,
particularly a review of solutions in other States or a description of
data sharing components and the reasons to include them or exclude them
at this time can then be considered in its solution.
    As such, the MITA process establishes the guidelines necessary for
EHRs implemented as a result of the Medicaid EHR incentive program to
be interoperable with State Medicaid systems, and we believe that as
States and providers implement EHRs, it is essential to plan technology
upgrades that would facilitate health information exchange with
Medicaid providers receiving incentive funding.
     State Medicaid Health Information Technology Plan (SMHP)
means a document that describes the State's current and future HIT
activities in support of the Medicaid EHR incentive program.
     Health Information Technology Planning Advance Planning
Document (HIT PAPD) (and any necessary update documents) means a plan
of action that requests FFP and approval to accomplish the planning
necessary for a State agency to determine the need for and plan the
acquisition of HIT equipment or services or both and to acquire
information necessary to prepare a HIT implementation advanced planning
document or request for proposal to implement the State Medicaid HIT
Plan.
     Health Information Technology Implementation Advance
Planning Document (HIT IAPD) (and any necessary update documents) means
a plan of action that requests FFP and approval to acquire and
implement the proposed State Medicaid HIT Plan services or equipment or
both.
    To qualify to receive FFP for administering the incentive program,
States must develop a SMHP, an HIT PAPD, and an HIT IAPD. These
documents would lay out the process States will use to implement and
oversee the EHR incentive program, and would help States to construct
an HIT roadmap to develop the systems necessary to support providers in
their adoption and meaningful use of certified EHR technology. The
development of a SMHP (see also 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 and reduce overall
health care costs. The uses of EHR technology can be integrated with
existing State resources to achieve these goals.
    We provided guidance in a State Medicaid Director's letter on
September 1, 2009, on this process and the State efforts necessary to
receive the 90 percent FFP. As previously noted, as States begin the
process of developing their SMHPs, they also can begin to receive the
90 percent FFP funding immediately to be used to support their initial
EHR planning activities. For example, initial planning regarding the
design and development of the anticipated SMHP may be eligible for the
90 percent FFP as an expense related to the administration of the
Medicaid incentive payments under section 1903(a)(3)(F) of the Act and,
more broadly, for promoting health information exchange. Our review
process would ensure that States are complying with requirements in the
Act, and that they demonstrate to the ``satisfaction of the Secretary''
that they are using the funds in the manner anticipated by the law; for
example, because of our oversight responsibilities simply proposing
activities does not ensure the 90 percent FFP. We would review and
prior approve all elements of the State's SMHP, and APD documents.
    States would be required to submit these advance planning documents
in order for us to approve receipt of the 90 percent Federal match.
Specifically, prior approval would be required for the HIT PAPD (see
also Sec.  495.336). The deliverable resulting from the HIT PAPD would
be the SMHP. The SMHP would be reviewed and approved before it is
included in an Implementation APD (IAPD) (see also Sec.  495.338). The
IAPD also must be prior approved. Until approval is granted States
cannot draw down funds. The APD process allows States to update their
APD when they anticipate changes in scope, cost, schedule, etc. This
allows States to add additional tasks to the contract which they may
have not thought of at the time the HIT PAPD was written, as they
worked through the original tasks on the original submission. Something
as complex as this will most likely result in an ``as needed'' and
``annual'' update to the original scope of work.
    For purposes of the Medicaid EHR incentive program, we envision two
high-level phases in the process of planning and implementing the
incentive program, as well as the promoting the adoption of EHR. Phase
I would include initial planning, including an assessment of the State
EHR environmental landscape, and development of the SMHP. The vehicle
for informing us of Phase I activities will be the HIT PAPD. Phase II
will involve further development and full implementation of the SMHP.
Consequently, we would be requiring the HIT IAPD as the vehicle for
reporting of Phase II activities. We are also proposing to require a
prior approval process, and anticipate that States would work closely
with us in developing the HIT PAPD prior to initiating EHR planning
activities and prior to submission of the initial HIT PAPD. State
collaboration with us prior to initiating submission of these documents
would assist States in understanding all of the requirements and would
help us understand the State's strategy and plans which would lead to a
more effective implementation. In addition, such coordination would
facilitate improved understanding of existing State EHR planning and
implementation efforts in progress that should be combined with this
effort (that is, health information exchange, EHR demonstration, and
Medicaid Transformation Grants).
    Also, States would be required to obtain prior written approval of
funding, planning documents, proposed budgets, project schedules, and
certain implementation activities that a State may wish to pursue in
support of the Medicaid EHR incentive program to encourage the adoption
and use of certified EHR technology in line with the 90 percent FFP
available to States. To minimize the burden on States, these prior
approval conditions, and the prior approval process, would mirror that
presently used in support of acquiring automated data processing
equipment and services in conjunction with development and operation of
State MMIS, or the State's automated mechanized claims processing and
information retrieval system approved by CMS.
    In considering the States' strategies for adoption of EHR and
health information exchange, current efforts such as the State MMIS or
automated mechanized claims processing and information retrieval
system, contain a great deal of claims data and other Medicaid
programmatic information. The State MMIS can be of significant value in
analyzing the State's current position and moving the State forward to
using certified EHR technology to promote health information exchange,
enhance quality, and improve health care outcomes. Additionally, the
MITA framework provides a conceptual model for building capacity in
Medicaid EHR and health information exchange.
    We are also proposing that State Medicaid programs must comply with
current procurement standards. Specifically, we are including language

[[Page 1947]]

in this proposed rule in accordance with the procurement requirements
in 45 CFR Part 95 Subpart F to incorporate much of the procurement
standards previously contained in 42 CFR Part 74. Inclusion of these
procurement requirements maintains the long-standing procurement
standards and policies for State information technology contracts, as
well as incorporate procurement standards under the authority of
section 1902(a)(4) of the Act, specifically for the definition of sole
source justification, requiring all procurement transactions to be
conducted in a manner to provide, to the maximum extent practical, open
and free competition and promote the administration of the Medicaid
program in a cost effective manner. This proposed rule also addresses
grantee responsibilities, codes of conduct, competition, procurement
procedures, and access to records that are specific to the HIT
requirements envisioned under the ARRA. Also, under the authority of
section 1902(a)(4) of the Act, we are proposing contracting
requirements, reporting requirements, systems of records access,
software and ownership rights, and rules for charging equipment and
cost allocation plans. All of these efforts would work to provide
clarity for States when considering planning and implementation
activities, and would also ensure that we are providing necessary
direction for States in completing their HIT PAPD, HIT IAPD, and SMHP.
We are proposing under the authority of 1902(a)(4) of the Act to
establish requirements for termination of FFP in the case of States
failing to provide access to information relating to any of the
requirements of this subpart. Additionally, under section 1903(t)(10)
of the Act, we are required to monitor and report on the progress of
implementation of the EHR provisions. These proposed provisions would
contribute to the overall effort in monitoring implementation efforts
and provide relevant information to Congress and the public at large.
    Consistent with our oversight responsibilities, we are also
proposing to provide a framework for attestations. Specifically, in
section II.D.7 of this proposed rule, we discuss that we would require
that providers attest to their efforts to adopt, implement or upgrade
certified EHR technology, and attest to their meaningful use of such
technology. In this section, we discuss our proposal that State
Medicaid agencies would attest, as outlined in section 1903(t)(6)(A)(i)
of the Act, that States would make Medicaid incentive payments to a
Medicaid EP or eligible hospital directly (or to an employer or
facility to which such Medicaid EP or eligible hospital has assigned
their Medicaid incentive payments) without any deduction or rebate, and
that States would attest that payments to an entity promoting the
adoption of certified EHR technology, as designated by the State, would
only be made if participation in such a payment arrangement is
voluntary for the Medicaid EP involved, and if such entity does not
retain more than 5 percent of such assigned Medicaid incentive payments
for costs not related to such technology. States would be required to
attest that the entire incentive payment has been forwarded to the
eligible Medicaid provider, and that no eligible Medicaid provider is
required to return any portion of the incentive payment to the State
Medicaid agency. We expect States to consider utilizing all existing
fiscal relationships as intermediaries for disbursing the incentives.
Since many States never pay the provider directly, but rather pay a
managed care plan, which then pays the provider, the State may have no
existing relationship and decide to contract with the managed care plan
to pass this incentive to the EP. States must establish a process to
ensure that any existing fiscal relationships with providers to
disburse the Medicaid incentive payments through Medicaid managed care
plans does not result in payments that exceed 105 percent of the
capitation rate, in order to comply with the Medicaid managed care
incentive payment rules at Sec.  438.6(c)(5)(iii) and a methodology for
verifying such information.
    Additionally, we are proposing that termination of funding approved
under this proposed Part 495 subpart D or disallowance of FFP may
result if the State fails to meet the requirements and undertakings of
the approved PAPD, SMHP, and IAPD, or fails to provide access to the
required information.
    Since section 4201 of the HITECH Act amends section 1903(a)(3) of
the Act to provide for 90 percent FFP for costs associated with certain
administrative activities performed by a State, we also are proposing
to allow for claiming of such reasonable costs incurred on or after
February 18, 2009, prior to publication of the final rule.
Specifically, if a State can show that it has begun the initial
planning stages of moving the State in the direction of meaningful use
of certified EHR technology through such activities as training
efforts, staff support, or contracting with a vendor, we may allow for
retroactive FFP back to the date in which these efforts began, but not
before February 18, 2009.
    9. Financial Oversight, Program Integrity and Provider Appeals
    Pursuant to section 1903(t)(9) of the Act, which requires States to
conduct adequate oversight of the incentive program, and in order to
ensure that ARRA funds are expended wisely and in a manner that impedes
waste, fraud or abuse of Federal taxpayer money, at Sec.  495.366, we
propose requirements for States' financial oversight and monitoring of
expenditures. Additionally, we are proposing 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). At the end of the quarter, the State
would be responsible for submitting expenditures to us via the MBES
Form CMS-64. The Form CMS-64 is the accounting statement that the State
Agency, in accordance with 42 CFR 430.30(c), submits each quarter under
Title XIX of the Act. The form is used to reconcile the Medicaid
funding advanced to the State for the quarter made on the basis of the
CMS-37, with actual expenditures for the quarter. It accounts for any
overpayments, underpayments, refunds received by the State Medicaid
agency, and income earned on grant funds. States must assure that
requests for reimbursement of FFP comply with all sections of this new
part and that the amounts reported on the Form CMS-64 and its
attachments represent actual expenditures for which all supporting
documentation, in readily reviewable form, has been compiled and which
is available at the time the claim for reimbursement of provider
payment incentives and administration funding is filed.
    We would assure that State expenditures claimed for Federal
matching under the Medicaid program are programmatically reasonable,
allowable, and allocable in accordance with existing Federal laws,
regulations, and policy guidance. CMS' Regional Office financial and
auditing specialists will be responsible for monitoring State funding
issues including the funding related to these Medicaid EHR payment
incentives. Funding specialists would also review the flow of funds to
determine that State funds are from

[[Page 1948]]

allowable sources and to insure that Medicaid payment incentives would
be paid without reduction or rebate. Additionally, funding specialists
would ensure that no other sources of funding are used to make Medicaid
EHR payment incentives to providers other than State and local
government funds. States would be responsible for establishing
policies, computer systems, edits to process Medicaid EHR incentive
payments; and for conducting analyses of providers' patterns of
practice (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, including a MMIS--
the automated mechanized claims processing and information retrieval
system, to process Medicaid EHR incentive payments. MMIS systems can
also help to manage information for program administration and audit
purposes.
    States must assure that any requests for reimbursement of the 90
percent Federal match for administration of the program are being
requested only because the State has used the funds for purposes
related to administering payments to qualified Medicaid providers for
certified EHR technology, including for tracking of meaningful use of
such technology, is conducting adequate oversight of the program
including routine tracking of meaningful use attestations and reporting
mechanisms; and is pursuing initiatives to encourage the adoption of
certified EHR technology to promote health care quality and the
exchange of health care information because of such technology. Any
initiatives for health information exchange must be consistent with
Federal laws and regulations governing the exchange.
    We would monitor State Agency compliance through systems
performance reviews, on-site reviews, and audits of the APD process.
    As a result of the authority extended to the Secretary under
section 1902(a)(4) of the Act requiring the effective and efficient
administration of the State plan, as well as section 1903(t)(9) of the
Act, requiring that a State demonstrate to the satisfaction of the
Secretary that it is conducting adequate oversight of the program, we
are also proposing to establish Sec.  495.370, Provider Appeals. This
proposed section would specify that Medicaid providers who believe that
they have been denied an incentive payment or have received an
incorrect payment amount under this part because of incorrect
determinations of eligibility, including, but not limited to, measuring
patient volume; demonstrating meaningful use of, or the efforts to
adopt, implement, or upgrade to, certified EHR technology; whether the
professional is hospital-based; whether the professional is practicing
predominantly in an FQHC or RHC; whether the hospital qualifies as an
acute care or children's hospital; or whether the provider is already
participating in the Medicare incentive program and therefore
ineligible duplicate Medicaid incentive program payments can appeal the
decision using current Federal processes established at 42 CFR
447.253(e).

III. Information Collection Requirements

    Under the Paperwork Reduction Act of 1995, CMS is required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 requires that CMS solicit comment on the following issues:
     The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection
burden.
     The quality, utility, and clarity of the information to be
collected.
     Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
    The following is a discussion of the requirements we believe are
subject to PRA and collection of information requirements as a result
of this proposed rule. The projected numbers of EPs and eligible
hospitals, MA organizations, MA EPs and MA-affiliated hospitals are
based on the numbers used in the Impact Analysis Assumptions as well as
in Table 45 in the Regulatory Impact Analysis section.

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

    In Sec.  495.8(a)(1), we propose that to demonstrate meaningful use
for CY 2011, an EP must attest, through a secure mechanism in a
specified manner, to the following: (1) During the EHR reporting
period, the EP used certified EHR technology and specify the technology
used; and (2) during the EHR reporting period, the EP satisfied each of
the applicable objectives and associated measures under Sec.  495.6
(including quality measures). The EP must specify the EHR reporting
period and provide the result of each applicable measure for all
patients seen during the EHR reporting period for which a selected
measure is applicable. We estimate that the certified EHR technology
adopted by the EP will capture many of the Meaningful Use objectives
and associated measures and generate automated numerator and
denominator information, where required, or automated summary reports.
Therefore, for these objectives and associated measures (Set A), we
estimate that it would take no more than 0.5 hours for an EP to attest
to them collectively as the EHR would be able to gather all of the
information necessary for the provider. For objectives and associated
measures requiring a numerator and denominator we limit to actions
taken in the presence of certified EHR technology. We do not anticipate
that an EP or eligible hospital will maintain two record keeping
systems when certified EHR technology is present. Therefore, we assume
that all patient records that would be in the denominator would be kept
using certified EHR technology. Because generating this automated
information requires the purchase of a certified EHR with the requisite
technical functionality, reporting these measures will incur
significant capital costs.
    However, there are still some Meaningful Use objectives and
associated measures (Set B) where reporting may require EPs to manually
gather the information necessary to report numerators and denominators
or to take any other additional steps before attesting that the
objective has been met, we have estimated that it would take 1 hour for
the EP to gather that information and report the result. For example,
the measure ``At least 80 percent of all patients who request an
electronic copy of their health information are provided it within 48
hours'' requires EPs to not only provide that information (a third-
party disclosure) but also attest to the provision of that information
for 80

[[Page 1949]]

percent of all patients who request that information. Another example
is the CPOE measure. The numerator for the CPOE measure could be
generated by the certified EHR technology adopted by the EP, as all
orders entered through CPOE could be tracked. However, the denominator
for this measure could require EPs to manually track the number of
orders entered through paper-based processes. Alternatively, EPs may
choose to purchase EHRs equipped with additional functionality to
enable the tracking of all orders, whether entered using CPOE or
otherwise, in which case reporting burden may be less than an hour but
the capital costs will be higher. We invite comments on what the
incremental costs of such additional functionality may be and what the
reporting burden using EHRs equipped with this functionality might be.
    Table 33 below lists those objectives and associated measures which
we estimate will require 0.5 hours to fulfill (``Set A'') and those
objectives and associated measures which we estimate will take 1 hour
each (``Set B''). We welcome comments on our burden estimates for each
particular measure, as well as what the incremental capital costs
attributable to each measure might be. Estimates of total capital costs
at the bottom of Table 33 are derived from the estimates used in the
``Industry Costs'' section in Section V.G.4.
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    First, we will discuss the burden associated with EP attestation to
EHR technology and Meaningful Use Set A objectives/measures, and
ambulatory quality measures. We estimate that it will take no more than
0.5 hour for an EP to attest that during the EHR reporting period, he
or she used certified EHR technology and specify the technology, and
satisfied each of the applicable Meaningful Use Set A objectives/
measures. We also estimate that it will take an EP an additional 0.5
hour to select and attest to the ambulatory quality measures for CY
2011.The total burden hours for an EP to attest to the above is one
hour. We estimate that there are about 442,600 non-hospital-based
Medicare and Medicaid EPs (323,500 Medicare EPs, 80,900 dual Medicare/
Medicaid EPs and 38,200 Medicaid-eligible-only EPs) who may attest to
the above (after registration) in CY 2011 to receive an EHR incentive
payment. We estimate the burden for the 28,000 MA EPs in the MAO burden
estimate section. The total estimated annual attestation burden hours
for EHR technology, Meaningful Use Set A objectives/measures, and
ambulatory quality measures are 442,600 for all EPs (442,600 EPs x 1
hour). The cost burden for an EP to attest to the above information is
$79.33 (1 hour x $79.33 (mean hourly rate for physicians based on the
May 2008 Bureau of Labor Statistics)). The total estimated annual cost
burden for all EPs to attest to EHR technology, Meaningful Use Set A
objectives/measures, and ambulatory quality measures is $35,111,458
(442,600 EPs x $79.33). We invite public comments on the estimated
percentages and the numbers of (registered) EPs that will attest to the
above in CY 2011 because such information would help us determine more
accurately the burden on the EPs.
    Next, we discuss the burden for EPs to gather information and
attest to Meaningful Use Set B objectives/measures. We estimate that it
takes about 8 hours for each EP to comply with this requirement. As
stated, we estimate that there are about 442,600 non-hospital-based EPs
in CY 2011. The total estimated annual attestation burden hours for all
EPs for the Meaningful Use Set B objectives and measures included in
Table 33 is 3,540,800 (442,600 EPs x 8 hours). The cost burden for an
EP to attest to the above information is $634.64 (8 hours x $79.33/hour
(the mean hourly rate for physicians based on the May 2008 Bureau of
Labor Statistics is $79.33) and $280,891,664 for EPs as a whole
(3,540,800 hours x $79.33/hour). We invite public comments on the
estimated percentages and the numbers of (registered) EPs that will
attest to Set B objectives and measures in CY 2011 because such
information would help us determine more accurately the burden on the
EPs.
    To estimate capital costs, we assume a certified EHR will cost
roughly $54,000 as explained in section V.G.4 of this proposed rule. If
442,600 EPs adopt these EHRs, total capital costs prior to incentives
would be roughly $23.9 billion. We also estimate that in 2011, $200
million of Medicare incentive payments (the midpoint of the low and
high estimates in Tables 36 and 37) and $900 million of Medicaid
incentive payments (the midpoint of the low and high estimates in
Tables 45 and 46) would be provided to EPs to help offset those costs.
Therefore, we estimate that total net capital costs for EPs in 2011
would be $22.8 billion ($23.9 billion - $200 million - $900 million).
These capital costs would decrease over the course of the EHR incentive
programs as additional incentives are provided. Therefore, in 2012, the
total net capital costs for EPs would be $20.6 billion (22.8 billion -
$1.6 billion of Medicare incentives - $650 million of Medicaid
incentives). Over the course of 2011 and 2012, the average net capital
costs would be $21.7 billion.
    We expect that there will be a steady growth in EPs. We estimate
that in 2012, there are about 447,400 non-hospital-based Medicare, and
Medicaid EPs (326,900 Medicare EPs, 81,700 dual Medicare/Medicaid EPs
and 38,800 Medicaid-eligible-only EPs) who are qualified to receive EHR
incentive payment. In Sec.  495.8(a)(2), we propose that to demonstrate
meaningful use for CY 2012 and subsequent years, a (registered) EP is
required to attest, through a secure mechanism in a specified manner,
to the following: (1) During the EHR reporting period, the EP used
certified EHR technology and specify the technology used; and (2)
during the EHR reporting period, the EP satisfied each of the
applicable objectives and associated measures under Sec.  495.6 except
Sec.  495.8(d)(3) ``Report ambulatory quality measures to CMS or the
States (in the case of Medicaid EPs).''
    For burden estimate purposes, we believe the burden associated with
gathering the information necessary to provide the attestations for the
measures in Table 33, as well as the burden associated with providing
the actual attestation, will remain unchanged from CY2011. As detailed
in Table 33, some measures (Set A) will require a total of

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0.5 hours to report while others (Set B) will require 1 hour.
    First, we will discuss the burden for an EP to attest that during
the reporting period, he or she used certified EHR technology, specify
the EHR technology, and he or she satisfied each of the applicable Set
A objectives measures in CY 2012. We estimate it will take no more than
0.5 hour for an EP to attest to the above requirements. For burden
estimate purposes, we estimate that all 447,400 non-hospital-based
Medicare, and Medicaid EPs (326,900 Medicare EPs, 81,700 dual Medicare/
Medicaid EPs and 38,800 Medicaid-eligible-only EPs) may attest (after
registration) in 2012 to receive an EHR incentive payment. We estimate
the burden for the 28,000 MA EPs in the MAO burden estimate section. We
estimate it will take an EP 0.5 hour to attest. The total estimated
annual attestation burden hours for all EPs are 223,700 (447,400 EPs x
0.5 hour). The cost burden for an EP to attest to the above information
is $39.67 (0.5 hour x $79.33 (mean hourly rate for physicians based on
the May 2008 Bureau of Labor Statistics)). The total estimated annual
cost burden for all EPs to attest is $17,746,121 (223,700 hours x
$79.33). We invite public comments on the estimated percentages and the
numbers of registered EPs that will attest to EHR technology used and
Meaningful Use Set A objectives/measures in CY 2012 because such
information would help us determine more accurately the burden on the
EPs.
    Next, we will discuss the estimated burden for EP attestation for
Meaningful Use Set B objectives/measures. We estimate it will take an
EP 8 hours to gather information and attest to the Meaningful Use Set B
objectives/measures. We estimated annual attestation burden hours in CY
2012 for all EPs for the Set B objectives and measures included in
Table 33 is 3,579,200 (447,400 EPs x 8 hours). Therefore, the cost
burden for an EP to attest to the above information is $634.64 per EP
(8 hours x $79.33/hour (mean hourly rate for physicians based on the
May 2008 Bureau of Labor Statistics) and $283,937,936 for EPs as a
whole (3,579,200 hours x $79.33/hour (mean hourly rate for physicians
based on the May 2008 Bureau of Labor Statistics).
    For ``Report ambulatory quality measures to CMS or the States'' as
stated in Sec.  495.8(a)(2), we propose that in CY 2012, EPs must
report, clinical quality information in the form and manner specified
by CMS, electronically to CMS. We estimate that the reporting/
submission of these data to CMS should not take more than 0.5 hour. The
total annual burden hours for all EPs to report and submit the
ambulatory quality measures are 223,700 (447,400 EPs x 0.5 hour). We
believe that an EP may assign a medical secretary to submit the
specific ambulatory clinical quality measures to CMS or the States.
Therefore, the cost burden for an EP to submit these clinical quality
measures is $7.41 (0.5 hour x $14.81 (mean hourly rate for medical
secretaries based on the May 2008 Bureau of Labor Statistics)). The
total annual cost burden for all EPs to report the clinical quality
measures is $3,312,997 (223,700 hours x $14.81 (mean hourly rate for
medical secretaries based on the May 2008 Bureau of Labor Statistics)).
    Similar to the requirements for EPs, we propose in Sec.
495.10(b)(1) that to demonstrate meaningful use for FY 2011, an
eligible hospital or CAH must attest, through a secure mechanism in a
specified manner, to the following: (1) During the EHR reporting
period, the eligible hospital or CAH used certified EHR technology and
specify the technology used; and (2) during the EHR reporting period
specified by the eligible hospital or CAH, the eligible hospital or CAH
satisfied each of the applicable objectives and associated measures
under Sec.  495.6 (including quality measures). The eligible hospital
or CAH must specify the EHR reporting period and provide the result of
each applicable measure for all patients admitted to the eligible
hospital during the EHR reporting period for which a selected measure
is applicable.
    We estimate that the certified EHR technology adopted by the
eligible hospital or CAH will capture many of the objectives and
associated measures. We estimate that it would take no more than 0.5
hour for an eligible hospital or CAH to attest that during the EHR
reporting period, they used EHR technology, specify the technology
used, and satisfied each of the applicable Meaningful Use objectives
and associated measures listed in Table 33-Set A. Because generating
this automated information requires the purchase of a certified EHR
with the requisite technical functionality, reporting these measures
will incur significant capital costs.
    Where reporting may require eligible hospitals or CAHs to manually
gather the information necessary to report numerators and denominators
or to take any other additional steps before attesting that the
objective has been met, we have estimated that it would take 1 hour for
an eligible hospital or CAH to gather that information and report the
result. These measures are listed in Table 33-Set B. Alternatively,
eligible hospitals or CAHs may choose to purchase EHRs equipped with
additional functionality to enable more efficient reporting, in which
case reporting burden may be less than an hour but the capital costs
will be higher. We invite comments on what the incremental costs of
such additional functionality may be and what the reporting burden
using EHRs equipped with this functionality might be.
    First, we will discuss the burden for eligible hospitals and CAHs
to attest to the technology used and the Meaningful Use Set A
objectives/measures and hospital quality measures in FY 2011. We
estimate that in FY 2011, there are about 5,011 Medicare and Medicaid
eligible hospitals and CAHs that may be qualified to receive EHR
incentive payment. We estimate that it will take no more than 1 hour
for an eligible hospital or CAH to attest (0.5 hour to attest to the
EHR technology used and Meaningful Use Set A objectives/measures, and
0.5 hour to attest to the hospital quality measures--a total of 1
hour.) We estimate that there are about 5,011 Medicare and Medicaid
hospitals (including 3,620 acute care hospitals, 1,302 critical access
hospitals, 78 Medicaid children's hospitals, and 11 Medicaid cancer
hospitals). For burden estimate purposes, we estimate that 5,011
Medicare and Medicaid hospitals may attest (after registration) in FY
2011 to receive an EHR incentive payment. The total estimated annual
attestation burden hours for all hospitals are 5,011 (5,011 hospitals
and CAHs x 1 hour). We believe that an eligible hospital or CAH may
assign an attorney to attest on their behalf. The cost burden for an
eligible hospital or CAH to attest to the above information is $59.98
(1 hour x $59.98 (mean hourly rate for attorneys based on the May 2008
Bureau of Labor Statistics)). The total estimated annual cost burden
for all eligible hospitals and CAHs to attest is $300,560 (5,011 x
$59.98). We invite public comments on the estimated percentages and the
numbers of (registered) eligible hospitals and CAHs that will attest in
FY 2011 because such information would help us determine more
accurately the burden on the hospitals and CAHs. We also invite
comments on the type of personnel or staff that would most likely
attest on behalf of eligible hospitals and CAHs.
    Next, we will discuss the burden for eligible hospitals and CAHs to
gather information and attest to Meaningful Use Set B objectives/
measures for FY 2011. We estimate that it may take an eligible hospital
and CAH 7 hours to comply with this requirement. As stated, we estimate
there are about 5,011

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eligible hospitals and CAHs that may attest to Meaningful Use Set B
objectives/measures. Therefore, the total estimated annual attestation
burden hours for all eligible hospitals and CAHs for the Set B
objectives and measures included in Table 33 is 35,077 (5,011 hospitals
and CAHs x 7 hours). We estimate that the hospital or CAH may use an
attorney to attest on their behalf. Therefore, the cost burden for an
eligible hospital or CAH to attest to Meaningful Use Set B objectives/
measures is $419.86 (7 hours x $59.98/hour (mean hourly rate for
attorneys based on the May 2008 Bureau of Labor Statistics) and
$2,103,918 for eligible hospitals and CAHs as a whole (35,077 hours x
$59.98/hour (mean hourly rate for attorneys based on the May 2008
Bureau of Labor Statistics)), not including capital costs.
    To estimate capital costs, consistent with the sources cited in
V.G.4, we assume that achieving meaningful use will require roughly a
$5 million capital investment for the average hospital. If 5,011
hospitals adopt these EHRs, total capital costs prior to incentives
would be roughly $25.1 billion. We also estimate that in 2011, $2.1
billion of Medicare incentive payments (the mid-point of the low and
high estimates in Tables 39 and 40) and $900 million of Medicaid
incentive payments (the mid-point of the low and high estimates in
Tables 45 and 46) would be provided to eligible hospitals and CAHs to
help offset those costs. Therefore, we estimate that total net capital
costs for hospitals in 2011 would be $22.1 billion ($25.1 billion-$2.1
billion-$900 million). These capital costs would decrease over the
course of the EHR incentive programs as additional incentives are
provided. Therefore, in 2012, the total net capital costs for hospitals
would be $19 billion (22.1 billion-$2.2 billion of Medicare incentives-
$900 million of Medicaid incentives). Over the course of 2011 and 2012,
the average net capital costs would be $20.6 billion.
    Similar to the requirements for EPs, we propose in Sec.
495.8(b)(2) that to demonstrate meaningful use in FY 2012 and
subsequent years, an eligible hospital or CAH must attest, through a
secure mechanism in a specified manner, to the following: (1) During
the EHR reporting period, the eligible hospital or qualifying CAH used
certified EHR technology and specify the technology used; and (2)
during the EHR reporting period specified by the eligible hospital or
CAH, the eligible hospital or CAH satisfied each of the applicable
objectives and associated measures under Sec.  495.6. except Sec.
495.6(e)(2). The eligible hospital or CAH must specify the EHR
reporting period and provide the result of each applicable measure for
all patients admitted to the eligible hospital during the EHR reporting
period for which a selected measure is applicable. We estimate that the
certified EHR technology adopted by the eligible hospital or CAH will
capture many of the objectives and associated measures. Therefore, we
estimate that it would take no more than 0.5 hour for an eligible
hospital or CAH to attest to the EHR technology used and objectives and
associated measures listed in Table 33-Set A. Because generating this
automated information requires the purchase of a certified EHR with the
requisite technical functionality, reporting these measures will incur
significant capital costs. We do not anticipate there is a significant
growth in the number of hospitals or CAHs. We estimate that in FY 2012,
the total burden attestation burden hours for hospitals and CAHs are
2,506 (5,011 hospitals and CAHs x 0.5 hour). We estimate that an
eligible hospital or CAH may assign an attorney to attest on their
behalf. The attestation burden for an eligible hospital or CAH is
$29.99 (0.5 hour x $59.98 (mean hourly rate for attorneys based on the
May 2008 Bureau of Labor Statistics). The total cost burden for all
hospitals and CAHs to attest to EHR technology used, and Meaningful Use
Set A objectives/measures is $150,310 (2,506 hours x $59.98). We also
invite comments on the type of personnel or staff that would mostly
likely attest on the behalf of eligible hospitals and CAHs.
    Where reporting may require eligible hospitals or CAHs to manually
gather the information necessary to report numerators and denominators
or to take any other additional steps before attesting that the
objective has been met, we have estimated that it would take 1 hour for
the eligible hospitals or CAHs to gather that information and report
the result for each of these measures or a total of 7 hours to comply
with this requirement in FY 2012. These measures are listed in Table
33-Set B. Alternatively, eligible hospitals or CAHs may choose to
purchase EHRs equipped with additional functionality to enable more
efficient reporting, in which case reporting burden may be less than an
hour but the capital costs will be higher. We invite comments on what
the incremental costs of such additional functionality may be and what
the reporting burden using EHRs equipped with this functionality might
be.
    For burden estimate purposes, we estimate that there are 5,011
Medicare and Medicaid hospitals and CAHs that may attest to the above
requirements in FY 2012. Therefore, the total estimated annual
attestation burden hours for all eligible hospitals and CAHs for the
Set B objectives and measures included in Table 33 are 35,077 (5,011
hospitals and CAHs x 7 hours). We estimate that the hospital or CAH may
use an attorney to attest on behalf of its organization. Therefore, the
cost burden for an eligible hospital or CAH to attest to the above
information is $419.86 (7 hours x $59.98/hour (mean hourly rate for
attorneys based on the May 2008 Bureau of Labor Statistics)) and
$2,103,918 for eligible hospitals and CAHs as a whole (35,077 hours x
$59.98/hour (mean hourly rate for attorneys based on the May 2008
Bureau of Labor Statistics)), not including capital costs.
    We estimate the capital cost for 2012 is $20.6 billion which is the
same as 2011, which was discussed earlier.
    Under Sec.  495.8, for ``Report hospital quality measures to CMS or
the States'', we propose that in FY 2012, eligible hospitals must
report clinical quality measures through electronic submission from
certified EHR technology. The reporting of these data to CMS or States
should not take more than 0.5 hour. The total annual reporting burden
hours for eligible hospitals and CAHs is 2,506 (5,011 hospitals and
CAHs x 0.5 hour). We believe that an eligible hospital or CAH may
assign a medical secretary to report/submit the hospital quality
measures to CMS or the States. The reporting cost burden for an
eligible hospital or CAH is $7.41 (0.5 hour x $14.81 (mean hourly rate
for medical secretaries based on the May 2008 Bureau of Labor
Statistics)). The total annual reporting cost burden for all eligible
hospitals and CAHs is $37,113 (2,506 hours x $14.81 (mean hourly rate
for medical secretaries based on the May 2008 Bureau of Labor
Statistics)).

B. ICRs Regarding Participation Requirements for EPs, Eligible
Hospitals, and CAHs (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.

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    Under Sec.  495.10 (a)(b)(c), we propose that in order for an EP,
eligible hospital, or CAH to participate in the Medicare or Medicaid
EHR incentive program, they must submit, in a manner specified by CMS,
the following initial registration information in the first payment
year: (1) Name of the EP, eligible hospital or CAH; (2) the National
Provider Identifier (NPI); (3) business address and business phone; (4)
Taxpayer Identification Number (TIN) to which the EP wants the
incentive payment made; and (5) for an eligible hospital and CAH, their
CMS Certification Number (CCN) and its TIN. We estimate that the
initial burden associated with the above requirements would be the time
required to submit the required registration information.
    We estimate that in FY 2011, there are 5,011 Medicare and Medicaid
eligible hospitals, and CAHs that may be qualified to receive EHR
incentive payment. Since we cannot predict how many eligible hospitals,
and CAHs will participate in the EHR incentive payment program, we
estimate that all 5,011 hospitals may register for the incentive
program for burden estimate purposes. We estimate that it would take no
more than 0.5 hour for an eligible hospital or CAH to register. We
estimate the total annual burden hours for registration will be 2,506
(5,011 hospitals x 0.5 hour). Once the decision to participate in the
incentive program is made, we believe eligible hospitals or CAHs may
assign a medical secretary to submit the registration information. The
cost burden for an eligible hospital or CAH to register is $7.41 (0.5
hour 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 hour x $14.81) (mean hourly rate for
medical secretaries based on the May 2008 Bureau of Labor Statistics)).
We invite public comments on the estimated percentages or the number of
eligible hospitals and CAHs that will register for the EHR incentive
payment program in 2011 and subsequent years. Such information would
help us determine more accurately the burden on the eligible hospitals
and CAHs.
    We estimate that all 442,600 non-hospital-based Medicare, and
Medicaid EPs may register in 2011 to receive an EHR incentive payment.
We estimate that it would take no more than 0.5 hour to complete the
registration. The total estimated annual registration burden hours for
all EPs are 221,300 (442,600 EPs x 0.5 hour) in the first payment year.
We cannot predict if an EP will register himself or herself or assign a
medical secretary to do it on his or her behalf. Therefore, we are
doing one high end burden estimate for an EP and one low end burden
estimate for a medical secretary. The cost burden for an EP who chooses
to register in the EHR incentive payment program himself or herself is
$39.67 (0.5 hour x $79.33 (mean hourly rate for physicians based on the
May 2008 Bureau of Labor Statistics)). The total estimated annual cost
burden for all EPs who register for the EHR incentive payment program
themselves is $17,555,729 (221,300 hours x $79.33 (mean hourly rate for
physicians based on the May 2008 Bureau of Labor Statistics)).
Similarly, the cost burden for an EP who chooses to use medical
secretary to register on their behalf is $7.41 (0.5 hour x $14.81 (mean
hourly rate for medical secretaries based on the May 2008 Bureau of
Labor Statistics)). The total estimated annual cost burden for all EPs
who choose to use medical secretaries to register on their behalf is
$3,277,453 (221,300 hours x $14.81 (mean hourly rate for medical
secretaries based on the May 2008 Bureau of Labor Statistics)). We
invite comments on whether we should use the higher cost burden
estimate ($17,555,729) or the lower cost burden estimate ($3,277,453).
We only use the average of the two estimates in the tally in Table 34.
We invite public comments on the estimated percentages or the numbers
of EPs that will register in 2011 and subsequent years and this
information would help us determine more accurately the burden on EPs
affected by this proposed rule.
    In Sec.  495.10(d), we propose that if there are subsequent changes
in the initial registration information, the EP is responsible for
providing us with updated changes in the manner specified by us. Based
on our experience with provider enrollment, we estimate that about 11
percent of the Medicare and Medicaid EPs may need to update their
registration information during a one-year period. We estimate that EPs
in this 11 percent (447,400 EPs (estimated number of EPs in CY 2012) x
11 percent = 49,214 EPs) may only have one occasion that requires
updating of information in a given year. For each occasion, we estimate
that it would take no more than 0.5 hour to notify us of the changes.
With that, we estimate that the annual total burden hours for 49,214
EPs to update changes are 24,607 (49,214 EPs x 0.5 hour). However, we
cannot predict if the EP will update the registration information
himself or herself or assign a medical secretary to do it. Therefore,
we are doing two burden estimates for an EP and his/her medical
secretary. The cost burden for an EP who chooses to update the
registration information himself or herself is $39.67 (0.5 hour x
$79.33 (mean hourly rate for physicians based on the May 2008 Bureau of
Labor Statistics)). The total estimated annual cost burden for all
49,214 EPs to update registration information themselves is $1,952,073
(49,214 EPs x 0.5 hour x $79.33 (mean hourly rate for physicians based
on the May 2008 Bureau of Labor Statistics)). Similarly, the cost
burden for the EP who chooses to use a medical secretary to update
registration information on their behalf is $7.41 (0.5 hour x $14.81
(mean hourly rate for medical secretaries based on the May 2008 Bureau
of Labor Statistics)). The total estimated annual cost burden for
48,686 EPs who choose to use medical secretaries to update registration
information on their behalf is $364,429 (49,214 EPs x 0.5 hour x $14.81
(mean hourly rate for medical secretaries based on the May 2008 Bureau
of Labor Statistics)). We only use the average of the two estimates in
the tally in Table 34. We invite comments on whether we should use the
higher cost burden estimate ($1,952,073) or the lower cost burden
estimate ($364,429). We also invite public comments on the estimated
percentages and the numbers of EPs that will need to submit subsequent
registration changes to us over the course of the EHR incentive payment
program and such information would help us determine more accurately
the burden on the EPs.
    Similarly, for hospitals and CAHs, we propose that if there are
subsequent changes in the initial registration information, the
eligible hospital or CAH is responsible for providing us with updated
information in the manner specified by us. Based on our experience with
provider enrollment, we estimate that about 8 percent of the Medicare
and Medicaid eligible hospitals and CAH (5,011 hospitals and CAHs x 8
percent = 401 hospitals) may need to update their registration
information during a one-year period. We estimate that eligible
hospitals in this 8 percent pool may only have 1 occasion that requires
updating of registration information in a given year. For each
occasion, we estimate that it would take no more than 0.5 hour to
notify us of the changes. With that, we estimate that the total annual
burden hours for eligible hospitals and CAHs to update CMS of
registration changes are 201 (401 hospitals and CAHs x 0.5 hour). We
believe that eligible hospitals or CAHs may assign a medical secretary

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to update the registration information. We estimate the total annual
cost burden for eligible hospitals and CAHs to update CMS of
registration changes is $2,969 (401 hospitals and CAHs x 0.5 hour x
$14.81) (mean hourly rate for medical secretaries based on the May 2008
Bureau of Labor Statistics)). We invite public comments on the
estimated percentages and the numbers of eligible hospitals and CAHs
that will submit subsequent registration changes to us over the course
of the EHR incentive payment program and this information would help us
determine more accurately the burden on the eligible hospitals and
CAHs.
    In Sec.  495.10(e)(1), we propose that for participation in the EHR
incentive payment programs, prior to the first payment year, an EP must
notify us in a specified manner as to whether he or she elects to
participate in the Medicare or Medicaid EHR incentive program. We
estimate that in 2011, there are about 80,900 dual Medicare/Medicaid
EPs who may make the initial Medicare and Medicaid program selection.
The standard full amount of Medicaid incentive payments that an EP
could receive is larger than the standard full amount for the Medicare
EP incentive payments. Therefore, for burden estimate purposes, we
believe that all of the 80,900 dual Medicare/Medicaid EPs may make the
Medicaid program selection for burden estimate purposes. We estimate
that it would take no more than 0.5 hour to submit the initial Medicare
or Medicaid selection notification to us. We cannot predict if the EP
will submit the notification to CMS himself or herself or assign a
secretary to do it. Therefore, we are doing one high end estimate and
one low end burden estimate for an EP and a medical secretary
respectively. The total estimated burden hours for all the dual
Medicare/Medicaid EPs to notify CMS of program selection are 40,450
(80,900 EPs x 0.5 hour) in the first payment year. The cost burden for
these EPs who notify CMS of Medicare or Medicaid program selection
himself or herself is $39.67 (0.5 hour x $79.33 (mean hourly rate for
physicians based on the May 2008 Bureau of Labor Statistics)). The
total estimated annual cost burden for all dual Medicare/Medicaid EPs
to notify CMS of program selection themselves is $3,208,899 (40,450
hours x $79.33). Similarly, the cost burden for an EP who chooses to
use medical secretaries to notify CMS of program selection is $7.41
(0.5 hour x $14.81 (mean hourly rate for medical secretaries based on
the May 2008 Bureau of Labor Statistics)). The total estimated annual
cost burden for all dual Medicare/Medicaid EPs who use medical
secretaries to notify CMS of program selection is $599,065 (40,450
hours x $14.81 (mean hourly rate for medical secretaries based on the
May 2008 Bureau of Labor Statistics)). We only use the average of the
two estimates in the tally in Table 34. We invite comments on whether
we should use the higher cost burden estimate ($3,208,899) or the lower
cost burden estimate ($599,065). We also invite public comments on the
estimated percentages and the number of dual Medicare/Medicaid EPs that
will submit initial Medicare or Medicaid program selection in 2011,
2012, 2013, or 2014 and this information would help us determine more
accurately the burden on the EPs affected by the proposed rule.
    Under Sec.  495.10(e)(2), we propose that EPs may switch from
Medicare to Medicaid EHR incentive program or vice versa one time, and
only for payment year 2014 or before. Since we have no knowledge of how
many EPs will make the subsequent changes in program selection, we
assume that all 81,700 (estimated number of dual Medicare/Medicaid EPs
for CY 2012) dual Medicare/Medicaid EPs may make subsequent program
selection changes for burden estimate purposes. We estimate that it
would take no more than 0.5 hour to submit the Medicare/Medicaid
selection change to us. We cannot predict if the EP will submit the
change to CMS himself or herself or assign a secretary to do it.
Therefore, we are doing one high end burden estimate for an EP and one
low end estimate for a medical secretary. The total estimated burden
hours for all dual Medicare/Medicaid EPs to notify CMS of program
changes are 40,850 (81,700 EPs x 0.5 hour) in a given year. The cost
burden for the EP who choose to notify CMS of Medicare/Medicaid program
change himself or herself is $39.67 (0.5 hour x $79.33 (mean hourly
rate for physicians based on the May 2008 Bureau of Labor Statistics)).
The total estimated annual cost burden for all dual Medicare/Medicaid
EPs to notify CMS of program changes themselves is $3,240,630 (40,850
hours x $79.33 (mean hourly rate for physicians based on the May 2008
Bureau of Labor Statistics)). Similarly, the cost burden for an EP who
chooses to use a medical secretary to notify CMS of program changes is
$7.41 (0.5 hour x $14.81 (mean hourly rate for medical secretaries
based on the May 2008 Bureau of Labor Statistics)). The total estimated
annual cost burden for all dual Medicare/Medicaid EPs who use medical
secretaries to notify CMS of program changes is $604,989 (40,850 hours
x $14.81 (mean hourly rate for medical secretaries based on the May
2008 Bureau of Labor Statistics)). We invite comments on whether we
should use the higher cost burden estimate ($3,240,630) or the lower
cost burden estimate ($604,989). We only use the average of the two
estimates in the tally in Table 34. We also invite public comments on
the estimated percentages and the numbers of dual Medicare/Medicaid EPs
that will submit initial Medicare or Medicaid program changes in 2012,
2013, or 2014 and this information would help us determine more
accurately the burden on the EPs affected by the proposed rule.

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

    Proposed Sec.  495.202(a)(1) states that beginning with bids due in
June 2010 (for plan year 2011), MA organizations seeking reimbursement
for qualifying MA EPs and qualifying MA-affiliated eligible hospitals
under the MA EHR incentive program are required to identify themselves
to CMS in a form an manner specified by CMS, as part of submissions of
initial bids under section 1854(a)(1)(A) of the Act. The burden
associated with this requirement is providing a list of MA EPs and
qualifying MA-affiliated eligible hospitals who may potentially seek
for EHR incentive payments. However, for EPs, we believe there is no
extra burden incur from this requirements as MA organizations can
identify the same lists of names of EPs as they used to satisfy the
collection requirements for Sec.  495.204(b)(2) and (5). In other
words, when identifying amounts of compensation per Sec.  495.204(b)(2)
and (5), qualifying MA organizations will be simultaneously identifying
EPs under this requirement. For hospitals, we estimate that it may take
no more than 0.25 hour for a MA organization to identify their MA-
affiliated hospitals to CMS. There are 29 MA-affiliated eligible
hospitals and 12 MA organizations or an average of 2.42 eligible
hospitals for each MA organization. The total burden hours for all MA
organizations to identify their affiliated hospitals to CMS are 3
hours. We believe a MA organization may use a billing clerk to identify
the eligible hospital to us. The cost burden for a MA organization is
$3.86 (0.25 hour x $15.44 (mean hourly rate for billing clerks based on
the May 2008 Bureau of Labor Statistics)). The total cost burden for
all MA organizations to identify their eligible

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hospitals to us is $46.32 ($3.86 x 12 MA organizations).
    We proposed in Sec.  495.202(a)(3) that qualifying MA organizations
offering MA plan types other than HMOs are required to attest to the
fact that they meet the definition of HMO in 42 U.S.C. 300gg-91(b)(3)-
section 2791(b)(3) of the PHS Act. There is minimal burden associated
with this requirement as qualifying MA organizations sponsoring MA
coordinated care plans, like PPOs, PSOs, and RPPOs, are not expected to
employ physicians that meet the definition of MA EP in section
1853(1)(2) of the Act and therefore, we do not expect any to need to
attest. Similarly, we do not expect any MA organizations that offer
other plan types other than coordinated care plans to request need to
attest to their status for similar reasons.
    In Sec.  495.202(a)(4), we propose requiring that, beginning with
bids due in June 2014 (for plan year 2015), all MA organizations with
potentially qualifying MA EPs or potentially qualifying MA-affiliated
eligible hospitals under the MA EHR incentive program to identify
themselves to CMS in a form and manner specified by CMS, as part of
submissions of initial bids under section 1854(a)(1)(A) of the Act. We
cannot estimate the collection burden for this requirement as the
timeframe goes beyond the scope of the effective date of the proposed
information collection period (three years from the effective date of
the final rule).
    In Sec.  495.202(b)(1), we propose that a qualifying MA
organization, as part of its initial bid starting with plan year 2011,
must make preliminary identification of potentially qualifying MA EPs
and potentially qualifying MA-affiliated eligible hospitals for which
the organization is seeking incentive payments. The burden for this
requirement is already addressed in Sec.  495.202 (a)(1) and Sec.
495.204(b)(2)(5). In Sec.  495.202(b)(2), we propose that MA-affiliated
organizations must provide and attest to the following information on
their MA-affiliated EPs and eligible hospitals: (A) Name of the EP or
eligible hospital; (B) address of the EP or eligible hospital; and (C)
NPI. We believe that it is customary and business practices of an MA
organization to keep the information in (A), (B), and (C) on file. The
burden for this requirement is the time it takes to attest to CMS that
the MA EPs or MA-affiliated eligible hospitals meet the eligibility
criteria. We estimate it should not take more than 0.5 hour for a MA
organization to comply with this attestation requirement. The total
burden hours for all MA organizations to attest are 6 hours. We believe
that MA organizations may use an attorney to attest on their behalf.
The cost burden for a MA organization to attest is $29.99 (0.5 hour x
$59.98 (mean hourly rate for attorneys based on the May 2008 Bureau of
Labor Statistics)). The total cost burden for all MA organizations to
attest is $359.88 ($29.99 x 12 MA organizations). We invite comments on
the type of personnel who will mostly likely attest on behalf of MA
organizations.
    Proposed Sec.  495.202(b)(4) states that all qualifying MA
organizations, as part of their initial bids in June 2014 for plan year
2015, must identify potentially qualifying MA EPs and potentially
qualifying MA-affiliated eligible hospitals. An attestation that each
professional or hospital either meets or does not meet the eligibility
criteria must be included as part of the identification submission. We
cannot estimate the collection burden for this requirement as the
timeframe goes beyond the scope of the effective date of the proposed
information collection period (3 years from the effective date of the
final rule).

D. ICRs Regarding Incentive Payments to Qualifying MA Organizations for
MA-EPs and Hospitals (Sec.  495.204)

    Under Sec.  495.204(b)(2), we propose that a qualifying MAO would
need to report to CMS within 30 days of the close of the calendar year,
the aggregate annual amount of revenue attributable to providing
services that would otherwise be covered as professional services under
Part B received by each qualifying MA EP for enrollees in MA plans of
the MA organization in the payment year. Since the tracking of salaries
or compensation for MA EPs constitutes usual and customary business
practices, the only burden associated with this requirement is the time
required to submit the aggregated annual amount of revenue received by
each qualifying MA EP for enrollees in MA plans of the MA organization.
We estimate that there are 12 MA organizations and 28,000 MA EPs, or an
average of 2,333 (28,000 EPs/12 MA organizations) MA EPs affiliated
with each qualifying MA organization. We believe that it will take a MA
organization 40 hours annually to report the required aggregate revenue
data for all its salaried MA EPs, given that all the data are readily
available. The total estimated annual burden hours for all MA
organizations to comply with this requirement is 480 (12 MA
organizations x 40 hours). We believe MA organizations may involve a
billing clerk to report the required data to CMS. We estimate the cost
burden for a MA organization to report is $617.6 (40 hours x $15.44
(mean hourly rate for billing clerk based on the May 2008 Bureau of
Labor Statistics)). We estimate the total annual cost burden for all MA
organizations to comply with this requirement is $7,411 (12 MA
organizations x $617.6).
    Under Sec.  495.204(b)(4), we propose that for qualifying MA EPs
who are compensated on a salaried basis, CMS requires the qualifying MA
organization to develop a methodology for estimating the portion of
each qualifying MA EP's salary attributable to providing services that
would otherwise be covered under Part B to MA plan enrollees of the MA
organization. The methodology: (i) Must be approved by CMS; and (ii)
may include an additional amount related to overhead, where
appropriate, estimated to account for the MA-enrollee related Part B
practice costs of the salaried qualifying MA EP. We estimate that it
may take a MA organization one and a half hour to develop the
methodology. We estimate that there are about two MA organizations that
may have the need to develop the methodology. The total burden hours
for the MA organizations to develop the methodology are 3 hours (1.5
hours x 2 MA organizations). A MA organization may use an accountant to
develop the methodology. The cost burden for a MA organization is
$47.48 (1.5 hours x $31.65 (mean hourly rate for accountants based on
the May 2008 Bureau of Labor Statistics)). The total cost burden for
the MA organizations to develop the methodology is $94.95 ($47.48 x 2
MA organizations).
    In Sec.  495.204(b)(5), we propose that for qualifying MA EPs who
are not salaried, qualifying MA organizations would need to obtain, and
submit to CMS, attestations from such qualifying MA EPs as to the
amount of compensation received by such EPs for MA plan enrollees of
the MA organization. We estimate that about 10 percent of the MA EPs
(28,000 EPs x 10 percent = 2,800 EPs) are not salaried and that is an
average of 233 (2,800 EPs/12 MA organizations = 233 EPs) non-salaried
EPs in each MA organization. We estimate that it may take up to 0.25
hour to electronically obtain and compile each attestation into a
document for transmission to CMS. The total burden hours for a MA
organization are 58.3 (0.25 hour x 233 EPs). The total estimated burden
hours for all MA organizations are 699 (58.3 x 12 MA organizations). We
believe an MA organization may involve a billing clerk to compile and
submit the

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compensation information from such attestations. We estimate the cost
burden for a MA organizations to comply with this requirement is
approximately $899.38 (0.25 hour x 233 EPs x $15.44 (mean hourly rate
for billing clerk based on the May 2008 Bureau of Labor Statistics)).
We estimate the total annual cost burden for all MA organizations to
comply with this requirement is $10,792.56 (58.3 hours x 12
organizations x $15.44).

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

    Under Sec.  495.210(b), we propose requiring qualifying MA
organizations to attest within 30 days after the close of a calendar
year whether each qualifying MA EP is a meaningful EHR user. We
anticipate that the adopted EHR technology will capture the data for
determination whether each qualifying MA EP is a meaningful EHR user.
The burden associated with this requirement is the time necessary to
attest to the required information. We estimate that there are 12 MA
organizations and 28,000 MA EPs, or an average of 2,333 MA EPs
affiliated with each qualifying MA organization. We believe that it
will take a MA organization about 40 hours annually to attest whether
each qualifying MA EP is a meaningful user, given that all the data are
captured in the certified EHR technology. The total estimated annual
burden hours for all MA organizations to comply with this requirement
is 480 (12 MA organizations x 40 hours). We believe MA organizations
may involve an attorney to attest on their behalf. We estimate the cost
burden for a MA organization to attest is $2,399 (40 hours x $59.98
(mean hourly rate for attorneys based on the May 2008 Bureau of Labor
Statistics)). We estimate the total annual cost burden for all MA
organizations to comply with attestation for MA EPs is $28,790 (12 MA
organizations x $2,399). We invite comments on the type of personnel,
who will mostly attest on behalf of MA organizations.
    Section 495.204(c)(2) states that to the extent data are available,
qualifying MA organizations must receive hospital incentive payments
through their affiliated hospitals under the Medicare FFS EHR hospital
incentive program, rather than through the MA EHR hospital incentive
program. Under Sec.  495.210(c), we proposed that qualifying MA
organizations be required to attest within 30 days after the close of a
calendar year whether each qualifying MA-affiliated eligible hospital
is a meaningful EHR user. As stated in the preamble, the EHR incentive
payments for Medicare FFS and MA-affiliated hospitals are treated the
same as all Medicare-certified MA affiliated hospitals and they will
attest like other Medicare FFS hospitals. This means that Sec.
495.210(c) only applies to a MA-affiliated hospital that is not
Medicare certified and such type of hospitals do not exist currently.
We do not expect there to be any MA-affiliated hospitals that will not
be covered under the Medicare FFS EHR hospital incentive program
because section 1852(a)(1)(A) of the Act requires MA organizations to
provide Part A inpatient services solely through providers that meet
applicable requirements of the Medicare program. We have already
addressed the attestation burden on hospitals, including MA-affiliated
hospitals under Sec.  495.10(b)(2)(i)(ii).

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

    Proposed Sec.  495.306(a) states that to establish patient volume,
a Medicaid provider must annually meet one of the requirements
contained in Sec.  495.306(a)(1). Proposed Sec.  495.306(a)(1)(i)
states that except as specified in paragraph (a)(1)(ii) of this
section, a Medicaid professional must attest that a minimum of 30
percent of their patient encounters over any continuous 90-day period
in the most recent calendar year was covered by Medicaid. Proposed
Sec.  495.306(a)(1)(ii)(A) states that a pediatrician must attest that
a minimum of 20 percent of his or her patient encounters over any
continuous 90-day period in the most recent calendar year was covered
by Medicaid. Proposed Sec.  495.306(a)(1)(ii)(B) states that a Medicaid
professional practicing predominantly in a FQHC or RHC must attest that
a minimum of 30 percent of his or her patient encounters over any
continuous 90-day period in the most recent calendar year was with
needy individuals as defined in Sec.  495.302. Proposed Sec.
495.306(a)(2) states that an acute care hospital must attest that a
minimum of 10 percent of all patient encounters over any continuous 90-
day period in the most recent calendar year was covered by Medicaid.
    The burden associated with the requirements in this section is the
time and effort necessary to submit the information to CMS. In each
instance, we estimate that it will take no longer than 0.5 hour to
submit the necessary information to CMS. For proposed Sec.
495.306(a)(1)(i) through (ii), we estimate that 119,000 entities will
submit the required information. Similarly, we estimate the total
annual burden to be 59,500 hours in both Sec.  495.306(a)(1)(i) and
Sec.  495.306(a)(1)(ii). The total labor cost associated with the
requirement in Sec.  495.306(a)(1)(i) is $4,720,135. The total labor
cost associated with the requirement in Sec.  495.306(a)(1)(ii) is
$4,720,135. We reached these costs estimates since it will be important
for physicians (rather than staff assistants) to establish patient
volume at $79.33 (mean hourly rate for physicians based on the May 2008
Bureau of Labor Statistics)).
    The burden associated with the requirements in proposed Sec.
495.306(a)(1)(ii)(B) and Sec.  495.306(a)(2) is the time and effort
necessary to submit the information to CMS. In each instance, we
estimate that it will take no longer than 0.5 hour to submit the
necessary information to CMS. For proposed Sec.  495.306(a)(1)(ii)(B)
and Sec.  495.306(a)(2), we estimate that 3,361 entities will submit
the required information. Similarly, we estimate the total annual
burden to be 1,815.50 hours in both Sec.  495.306(a)(1)(ii)(B) and
Sec.  495.306(a)(2). The total labor cost associated with the
requirement in Sec.  495.306(a)(1)(ii)(B) is $144,024. This cost burden
is based on the physician establishing patient volume at $79.33 (mean
hourly rate for physicians based on the May 2008 Bureau of Labor
Statistics)). The total labor cost associated with the requirement in
Sec.  495.306(a)(2) is $25,617. This cost burden is based on a
secretary reporting patient volume on behalf of the acute care hospital
at $14.11 (mean hourly rate for secretaries based on the May 2008
Bureau of Labor Statistics)).

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

    Proposed Sec.  495.312(b) states that in order to receive a payment
under this part, a provider must report the required data under this
subpart within the EHR reporting period described in Sec.  495.6. The
data required is the information necessary to document that the
provider is a meaningful user or an adopter, implementer, or upgrader
of certified EHR technology and the data reported to the single
provider election repository. The burden associated with this
requirement is the time and effort necessary to report the required
data to States during the EHR reporting period. This burden is
accounted for in our burden discussions for sections A and B of the
information collection section, Sec.  495.10 and Sec.  495.12,
respectively.

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

    Proposed Sec.  495.314(a)(1) states that in the first payment year,
to receive an

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incentive payment, the Medicaid EP or eligible hospital must meet one
of the following criteria. The Medicaid EP or eligible hospital must
demonstrate that during the EHR reporting period for a payment year, it
has adopted, implemented, or upgraded certified EHR technology, as
defined in 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.
495.6.
    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 already accounted for this
burden in the earlier discussion of the burden associated with Sec.
495.10.
    Proposed Sec.  495.314(a)(2) states that a provider may notify the
State of its nonbinding intention to participate in the incentives
program prior to having fulfilled all of the eligibility criteria. This
requirement constitutes a 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 estimate that this burden will be
the same burden associated with Sec.  495.12 as stated above, 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.
    Proposed Sec.  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.
495.6. The burden associated with this requirement is the time and
effort necessary for a Medicaid EP or eligible hospital to demonstrate
that it is a meaningful user of certified EHR technology. We discussed
the burden associated with this requirement in our discussion of the
burden associated with Sec.  495.10.

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

    Proposed Sec.  495.316(a) would require States to be responsible
for tracking and verifying the activities necessary for a Medicaid EP
or eligible hospital to receive an incentive payment for each payment
year, as described in 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.
    We estimate that there will be approximately 50 States, the
District of Columbia, and 5 Territories per year requesting
reimbursement for the administration of and paying of Medicaid
incentive payments to providers for the meaningful use of electronic
health record systems. For States to collect and submit the information
required, we estimate it will take 5 hours per State. The estimated
annual burden for States associated with the aforementioned submission
requirements is 280 hours (56 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).

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

    Proposed Sec.  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)

    Proposed Sec.  495.324(a) would require a State to obtain prior
written approval from the Department as specified in paragraph (b) of
this section, when the State plans to initiate planning and
implementation activities in support of Medicaid provider incentive
payments encouraging the adoption and use of certified EHR technology
with proposed Federal financial participation (FFP). Specifically,
proposed 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).
    Proposed Sec.  495.324(c) would require a State to obtain prior
written approval from the Department of its justification for a sole
source acquisition, when it plans to acquire non-competitively from a
nongovernmental source HIT equipment or services, with proposed FFP
under this subpart if the total State and Federal acquisition cost is
more than $100,000. Burden must be calculated for State Medicaid
Agencies to submit the planning and implementation documents and the
SMHP to CMS including, among other things, an alternative approach to
the established timeframe for measuring patient volume, the process for
verifying eligibility, annual reports specifying provider adoption,
implementation, and/or upgrading of certified EHR technology activities
and payments, proposed additional quality measures, and the data
supporting the adoption, implementation, or upgrading and meaningful
use of certified EHR technology. This burden is the same as that listed
above in the burden discussion for Sec.  495.316.

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

    Proposed Sec.  495.330(a) states that the Department terminates FFP
at any time if the Medicaid agency fails to provide State and Federal
representatives with full access to records relating to HIT planning
and implementation efforts, and the systems used to interoperate with
electronic HIT, including on-site inspection. Proposed Sec.  495.330(b)
states that the Department may request such access at any time to
determine whether the conditions in this subpart are being met. The
burden associated with the requirements in this section is the time and
effort necessary to make the information available to the Department
upon request so it can monitor compliance. The Department estimates
that it will make 1 request per State/Territory per year for
information and that it will take each State 5 hours to compile and
furnish the information. We estimate that there will be approximately
50 States, the District of Columbia, and 5 Territories per year
submitting this information. For States to collect and submit the
information required, we estimate it will take 5 hours per State. The
estimated annual burden for States associated with the aforementioned
submission requirements is 280 hours (56 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 it is possible that a secretary may compile State
information and provide the information to the Department. In that case
the annual cost

[[Page 1968]]

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)).

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 adopting, implementing,
or upgrading and meaningful use of certified EHR technology. This
burden is the same as that listed above in the burden discussion for
Sec.  495.316.

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

    Proposed Sec.  495.346 states that the State agency must allow the
Department access to all records and systems operated by the State in
support of this program, including cost records associated with
approved administrative funding and incentive payments to Medicaid
providers. State records related to contractors employed for the
purpose of assisting with implementation or oversight activities or
providing assistance, at such intervals as are deemed necessary by the
Department to determine whether the conditions for approval are being
met and to determine the efficiency, economy, and effectiveness of the
program.
    This section imposes both recordkeeping and reporting requirements.
The burden associated with this requirement is the time and effort
necessary for a State to both maintain records and to make them
available to the Department upon request. The Department believes that
the burden associated with maintaining the records is exempt under 5
CFR 1320.3(b)(2) as this burden is part of a usual and customary
business practice; the time, effort, and financial resources necessary
to comply with a collection of information that would be incurred by
persons in the normal course of their activities (for example, in
compiling and maintaining business records) will be excluded from the
``burden'' if the agency demonstrates that the reporting,
recordkeeping, or disclosure activities needed to comply are usual and
customary.
    However, there is burden associated with making the information
available to the Department upon request. This burden is described in
the burden discussion for Sec.  495.330.

O. ICRs Regarding Procurement Standards (Sec.  495.348)

    Proposed Sec.  495.348(c) states that a grantee must maintain
written standards of conduct governing the performance of its employees
engaged in the award and administration of contracts. The burden
associated with this requirement is the time and effort necessary for a
grantee to develop and maintain written standards of conduct. We
estimate that it will take each of the 56 grantees 0.5 hour to develop
and maintain standards of conduct. The total estimated annual burden is
28 hours (56 grantees 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)).
    Proposed Sec.  495.348(e) would require 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. We estimate that it will take each of the 56 grantees 0.5
hour to develop and maintain written procurement procedures. The total
estimated annual burden is 28 hours (56 grantees 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)).
    Proposed Sec.  495.348(f) imposes a recordkeeping requirements.
This section states that a system for contract administration must be
maintained to ensure contractor performance with the terms, conditions
and specifications of the contract and to ensure adequate and timely
follow up on all purchases. The burden associated with this requirement
is the time and effort necessary to develop and maintain a system for
contract administration. We estimate that it will take each of the 56
grantees 5 hours to develop and maintain a system for contract
administration. The total estimated annual burden is 280 hours (56
grantees 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)

    Proposed Sec.  495.350 would require States to provide assurances
to the Department that amounts received with respect to sums expended
that are attributable to payments to a Medicaid provider for the
adoption of EHR are paid directly to such provider, or to an employer
or facility to which such provider has assigned payments, without any
deduction or rebate. The burden associated with this requirement is the
time and effort necessary for a State to verify that the sums expended
are attributable to payments to a Medicaid provider for the adoption of
EHR are paid directly to such provider, or to an employer or facility
to which such provider has assigned payments, without any deduction or
rebate. Additionally, there is burden associated with submitting an
attestation to the Department to that effect. The estimated burden
associated with these requirements is 0.5 hour to verify the
information and 0.5 hour to submit the attestation to the Department,
for a total of 1 hour. We estimate that there will be approximately 50
States, the District of Columbia and 5 Territories per year verifying
this information and submitting attestations to the Department. The
estimated annual burden for States associated with the aforementioned
submission requirements is 56 hours (56 States-Territories x 1 hours
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 it is possible that a secretary may
compile State information and provide the information to the
Department. In that case the annual cost burden for the secretary to
provide this information is $790 (56 hours 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)

    Proposed Sec.  495.352 would require each State to submit to the
Department on a quarterly basis a progress report documenting specific
implementation and oversight activities performed during the quarter,
including progress in implementing the State's approved Medicaid HIT
plan. The burden associated with this requirement is the

[[Page 1969]]

time and effort necessary for a State to draft and submit quarterly
progress reports to the Department. We estimate that there will be
approximately 50 States, the District of Columbia, and 5 Territories
per year drafting and submitting the quarterly progress reports. For
States to collect and submit the information required, we estimate it
will take 5 hours per State. The estimated annual burden for States
associated with the aforementioned submission requirements is 280 hours
(56 States-Territories 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 it is possible that a secretary may compile State
information and provide the information to the Department. In that case
the annual cost burden for the secretary to provide this information is
$3,951 (280 hours 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)

    Proposed Sec.  495.362 states that for administrative activities
performed by a State, without obtaining prior approval, which are in
support of planning for incentive payments to providers, a State may
request consideration of FFP by recorded request in a HIT
implementation planning advance planning document or implementation
advance planning document update. While this requirement is subject to
the PRA, we believe the burden is already covered in the discussion of
proposed Sec.  495.332 through Sec.  495.344.

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

    Proposed Sec.  495.366(a)(2) would require a State to have a
process in place to report actual expenditures for the Medicaid EHR
payment incentive program using the Medicaid Budget Expenditure System.
Since States already have to report Medicaid expenditures to the
Medicaid Budget and Expenditure System, there is no need for States to
develop and implement a reporting process. However, States will need to
estimate and report the expenditures related to the provider incentive
payments and the cost of the administration of the incentive payments.
We estimate that it will take each of the 50 States, the District of
Columbia and 5 Territories, 5 hours to compile and report this
information. The estimated annual burden for States associated with the
aforementioned requirements is 280 hours (56 States-Territories 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 it is possible that a secretary may compile State
information and provide the information to the Department. In that case
the annual cost burden for the secretary to provide this information is
$3,951 (280 hours x $14.11 (mean hourly rate for secretaries based on
the May 2008 Bureau of Labor Statistics)).
    Proposed Sec.  495.366(a)(2) would require a State to have an
automated payment and information retrieval mechanized system (Medicaid
Management Information System), to make EHR payment incentives, to
ensure Medicaid provider eligibility, to ensure the accuracy of payment
incentives, and to identify potential improper payments. Since States
already have an automated payment and information retrieval system,
there is no need to estimate this burden.
    Proposed Sec.  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.
    Proposed Sec.  495.366(c) discusses information collection
requirements pertaining to meaningful use and efforts to adopt,
implement, or upgrade to certified electronic health record technology
to make payment. Specifically, proposed 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.  495.10.
    Proposed Sec.  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. Proposed Sec.  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. Proposed Sec.
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.
    Proposed Sec.  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)

    Proposed Sec.  495.370(a) would require states to 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 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.
    These numbers are subject to a substantial amount of uncertainty
and actual experience may be significantly different. The range of
possible experience is greater than under most other rules for the
following reason; specifically, this rule provides the option for
States to participate in the Medicaid certified electronic health
record technology incentive payment program. To the extent that States
participate more or less than assumed here (that is, the number of
States, EPs and hospitals) the burden associated may be greater than or
less than estimated.
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If you comment on these information collection and recordkeeping
requirements, please do either of the following:

    Submit your comments electronically as specified in the ADDRESSES
section of this proposed rule; or submit your comments to the Office of
Information and Regulatory Affairs, Office of Management and Budget,
Attention: CMS Desk Officer, [CMS-0033-P--Meaningful Use] Fax: (202)
395-5806; or E-mail: OIRA_submission@omb.eop.gov.

IV. Response to Comments

    Because of the large number of public comments we normally receive
on Federal Register documents, we are not able to acknowledge or
respond to them individually. We will consider all comments we receive
by the date and time specified in the DATES section of this preamble,
and, when we proceed with a subsequent document, we will respond to the
comments in the preamble to that document.

V. Regulatory Impact Analysis

A. Overall Impact

    We have examined the proposed impacts of this rule as required by
Executive Order 12866, the Regulatory Flexibility Act (RFA), section
1102(b) of the Social Security Act regarding rural hospital impacts,
the Unfunded Mandates Reform Act, Executive Order 13132 on Federalism,
and the Congressional Review Act.
    Executive Order 12866 directs agencies to assess all costs and
benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). A regulatory impact
analysis (RIA) must be prepared for rules with economically significant
effects ($100 million or more in any 1 year). This proposed rule is
anticipated to have an annual effect on the economy of $100 million or
more, making it an economically significant rule under the Executive
Order and a major rule under the Congressional Review Act. Accordingly,
we have prepared a RIA that to the best of our ability presents the
costs and benefits of the proposed rule. We request comments on the
analysis provided in this proposed rule.
    This proposed rule is one of three coordinated rulemakings
undertaken to implement the goals and objectives of the HITECH Act
related to the adoption and meaningful use of certified EHR technology.
The other two are HHS's interim final rule establishing certification
criteria, standards, and implementation specifications for
certification of EHR systems, and the proposed rule on EHR
certification programs. Each rule will assess the direct economic
effects of the provisions it creates. This proposed rule on Medicare
and Medicaid EHR Incentive Programs addresses the impacts related to
the actions taken by EPs or eligible hospitals to become meaningful
users of certified EHR technology, including purchasing or developing
in-house certified EHR technology or EHR technology modules.
    A number of factors will affect the adoption of EHR systems and
demonstration of meaningful use. Many of these are addressed in this
analysis. Readers should understand that these forecasts are subject to
substantial uncertainty. Demonstration of meaningful use will depend in
part on the final provisions of these three rulemakings, which will
depend in turn on comments we now solicit but have not yet received.
These three rules deal primarily with standards and requirements for
FYs 2011 and 2012, but overall rates of meaningful use of certified EHR
technology will depend in part on future rulemakings issued by the HHS.
    The HITECH Act provides incentives for the meaningful use of
certified EHR technology. Additionally, the Medicaid program also
provides incentives for the adoption, implementation, and upgrade of
certified EHR technology. Payment adjustments are incorporated into the
Medicare program for providers unable to demonstrate meaningful use.
The absolute and relative strength of these is unclear. For example, a
provider with relatively small Medicare billings will be less
disadvantaged by payment adjustments than one with relatively large
Medicare billings. Another uncertainty arises because there are likely
to be ``bandwagon'' effects as the number of providers using EHRs
rises, thereby inducing more participation in the incentives program,
as well as greater adoption by entities (for example, clinical
laboratories) that are not eligible for incentives or subject to
penalties, but do business with EHR adopters. It is impossible to
predict exactly if and when such effects may take hold.
    One legislative uncertainty arises because under current law,
physicians are scheduled for massive payment reductions under the
sustainable growth rate (SGR) formula for determining Medicare
payments. Under the current law, physician payments will be reduced by
at least 21 percent beginning in CY 2010. Such reductions would almost
certainly cause major changes in physician behavior, enrollee care, and
other Medicare provider payments, but the specific nature of these
changes is exceptionally uncertain. Under a current law scenario, the
EHR incentives or payment adjustments would exert only a minor
influence on physician behavior relative to these very large payment
reductions. However, the Congress has legislatively avoided physician
payment reductions in each of the past 7 years. Behavioral changes
resulting from these scheduled physician payment reductions are not
included in our estimate and likewise we do not assume any additional
behavioral changes from EHR incentive payments for physicians.
    All of these factors taken together make it impossible to predict
with precision the timing or rates of adoption and ultimately
meaningful use. Therefore, we present a range of estimates, which
capture how different scenarios will impact overall costs. Our ``high''
scenario of meaningful use demonstration assumes that roughly a decade
from now, nearly 100 percent of hospitals and 70 percent of EPs will be
``meaningful users'' in the Medicare EHR incentive program. This
estimate is based on the substantial economic incentives created by the
combined direct and indirect factors affecting providers. We appreciate
that in the real world nothing is ever 100 percent, and can even
identify factors that would certainly lead providers to forego
implementing an EHR. For example, a physician nearing retirement with a
low Medicare caseload might well decide to accept the relatively low
adverse consequences of declining to demonstrate meaningful use of
certified EHR technology. Alternatively, EPs and eligible hospitals and
CAHs may choose not to adopt EHRs if the total costs of purchasing
certified EHRs and the total costs of complying with this rule are
higher than the value of the total EHR incentive payments (and
adjustments, if applicable). However, we have no reliable basis for
estimating the rate of such ``holdouts.'' To emphasize the
uncertainties involved, we have also created a ``low'' estimate for the
demonstration of meaningful use each year. This might best be viewed as
a more pessimistic view of the rate at which adoption approaches 100
percent.
    Both the high and low estimates are based on current law. That is,
we assume that the incentive payments and potential reimbursement
reductions set forth in the HITECH Act will remain unchanged. We also
assume that the scheduled physician payment

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reductions will occur. We appreciate that this assumption reflects the
standard practice used in forecasts of government spending (including
effects on the private sector) by the Boards of Trustees for the
Hospital Insurance and Supplementary Medical Insurance Trust Funds, the
Social Security trustees, the Office of the Actuary in HHS, and the
Congressional Budget Office. However, we note that if this assumption
is rendered invalid by future Congressional action, the combination of
positive and negative incentives in the HITECH Act are such that we
believe adoption rates would differ from those estimated in this RIA.
    There are many estimates of current EHR adoption and usage rates.
There are at least two EHR functions-- e-prescribing and billing--for
which adoption and usage rates for both physicians and hospitals may
exceed 50 percent. However, high estimates are misleading because they
focus on particular elements, not on comprehensive systems that provide
a full range of functions, similar in scope to those established in the
companion interim final rule that adopts standards, implementation
specifications, and certification criteria for the technical
requirements and capabilities that EHR systems will need to meet in
order to be certified. Based on several 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 for drugs was fully
implemented in only 17 percent of hospitals.
    Most physicians and hospitals have not yet invested in the
hardware, software, testing and training to implement EHRs for a number
of reasons--lack of standards, lack of interoperability, limited
physician acceptance, fear of maintenance costs, and lack of capital.
Perhaps most importantly, adoption of EHR technology necessitates major
changes in business processes and practices throughout a provider's
office or facility. Business process reengineering on such a scale is
not undertaken lightly. However, the availability of the HITECH Act
incentives, grants for technical support, more consistent use of
standards and specified certification criteria, and other factors
addressed in this RIA are sure to increase the adoption of EHR
technology very substantially over the next 10 years--perhaps
approaching complete adoption for physicians, hospitals, and many other
types of providers.
    Section II. of this proposed rule describes the categories of EPs,
eligible hospitals, and CAHs under Medicare and Medicaid, and outlines
the eligibility criteria, so those details are not repeated here.
    Overall, we expect spending under the EHR incentive program for
transfer payments to Medicare and Medicaid providers to be between $14
and $27 billion over 10 years (these estimates include net payment
adjustments for providers who do not achieve meaningful use in 2015 and
beyond in the amount of -$2.3 billion to -$5.1 billion). We have also
estimated ``per entity'' costs for EPs and eligible hospitals, which
aggregate to total spending. We estimate also that adopting entities
will achieve dollar savings at least equal to their total costs, and
that there will be additional benefits to society whose magnitude is
uncertain, but will certainly be many billions of dollars over time.
    While implementation costs will be significant for each
participating entity, we anticipate that the short-term costs to
demonstrate meaningful use of certified EHR technology will be
outweighed by the long-term benefits, including practice efficiencies
and improvements in medical outcomes. Although both cost and benefit
estimates are highly uncertain, we have prepared a RIA that to the best
of our ability presents the costs and benefits of the proposed
rulemaking.

B. Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (RFA) requires agencies to prepare
an Initial Regulatory Flexibility Analysis to describe and analyze the
impact of proposed rule on small entities unless the Secretary can
certify that the regulation will not have a significant impact on a
substantial number of small entities. In the healthcare sector, Small
Business Administration size standards define a small entity as one
with between $7 million and $34 million in annual revenues. For the
purposes of the RFA, essentially all non-profit organizations are
considered small entities, regardless of size. Individuals and States
are not included in the definition of a small entity. Since the vast
majority of Medicare providers (well over 90 percent) are small
entities within the RFA's definitions, it is the normal practice of HHS
simply to assume that all affected providers are ``small'' under the
RFA. In this case, most healthcare EPs, eligible hospitals, and CAHs
are either non-profit or meet the SBA's size standard for small
business. We also believe that the effects of the incentives program on
many and probably most of these affected entities will be economically
significant. Accordingly, this RIA section, in conjunction with the
remainder of the preamble, constitutes the required Initial Regulatory
Flexibility Analysis. We welcome comments on the analysis.
    We believe that the adoption of EHRs will have an impact on
virtually every EP and eligible hospital, as well as CAHs and some
physicians and hospitals affiliated with MA plans. While the program is
voluntary, in the first 5 years it carries substantial positive
incentives that will make it attractive to virtually all eligible
entities. Furthermore, entities that do not demonstrate meaningful use
of EHR technology will be subject to significant Medicare payment
reductions after the fifth year. The anticipation of these Medicare
payment adjustments will also motivate EPs, eligible hospitals, and
CAHs to adopt and meaningfully use certified EHR technology.
    For some EPs and eligible hospitals, the EHR technology that they
have in place before the HITECH requirements, will be able to be
upgraded to meet the criteria for certified EHR technology as defined
for this program. These costs may be minimal, involving no more than a
software upgrade. ``Home-grown'' EHR systems that might exist will also
require an upgrade to meet the HITECH certification requirements.
    We believe that most EPs using EHR systems will require significant
changes to achieve certification and/or the EPs will have to make
process changes to achieve meaningful use. Further, given what we know
about the current low levels of EHR adoption, we believe that the
majority of EPs will need to purchase certified EHR technology and
implement this new technology and have their staff trained on its use.
The

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costs for implementation and complying with the criteria of meaningful
use could lead to higher operational expenses. However, we believe that
the combination of payment incentives and long-term overall gains in
efficiency will compensate for the initial expenditures. Additionally
EPs and eligible hospitals will have to demonstrate meaningful use of
their certified EHR technology as defined in the preamble. Since the
definition for stage 1 meaningful use has not yet been finalized and
may be altered due to public comment, it is difficult to determine how
hard it will be for providers to achieve meaningful use.
1. Number of Small Entities
    In total, we estimate that there are approximately 624,000
healthcare organizations (EPs or eligible hospitals) that will be
affected by the incentive program. These include hospitals and
physician practices as well as doctors of medicine or osteopathy,
dental surgery or dental medicine, podiatric medicine, optometry or a
chiropractor. Additionally, eligible non-physicians (such as certified
nurse-midwives, etc.) will be eligible to receive the Medicaid
incentive payments.
    Of the 624,000 healthcare organizations we estimate will be
affected by the incentive program, we estimate that 94.71 percent will
be EPs, 0.8 percent will be hospitals, and 4.47 percent will be MAO
physicians or hospitals. We further estimate that EPs will spend
approximately $54,000 to purchase a certified EHR and $10,000 annually
for ongoing maintenance, while we estimate the hospitals will spend
approximately $5 million to purchase a certified EHR and $1 million
annually for ongoing maintenance. See the Assumptions section (section
V.G.3 of this proposed rule) for details on our estimates for the
number of entities that are eligible for the incentive, within each
eligibility type category (EPs and eligible hospitals).
2. Alternatives Considered
    This proposed rule implements new provisions of the Act for
providing incentives for EPs, eligible hospitals, and CAHs that adopt
and meaningfully use certified EHR technology. HHS has no discretion to
change the incentive payments or payment reductions specified in the
statute for providers that adopt or fail to adopt EHR and achieve
meaningful use of EHR technology. The only substantial alternatives
within the discretion of the Department revolve around how best to meet
the requirements of the HITECH Act regarding requirements for
meaningful use for FY 2011 and beyond. Requirements that are too
stringent could have the adverse effect of preventing many EPs,
eligible hospitals, and CAHs from achieving meaningful use and thus
preventing them from receiving an incentive payment. Our meaningful EHR
use requirements for 2011 are designed to encourage more widespread
adoption of certified EHR technology and allow more EPs, eligible
hospitals, and CAHs to qualify for incentives while they are also
adjusting their practice patterns and training staff to operate the EHR
technology in preparation for more stringent meaningful use
requirements over time. We recognize that there may be incremental
costs that result from requiring additional functionality over the base
level defined in the ARRA. For example, ARRA does not require certified
EHRs to include functionalities associated with administrative
simplification, but we have proposed them in this rule. We have not
been able to find research that allows us to quantify these incremental
costs and request comments on possible estimates or further sources of
information that will help us develop estimates.
    We note that with regard to reporting of quality measures for
purposes of demonstrating meaningful use, we considered requiring EPs,
eligible hospitals, and CAHs to report quality measures electronically
in the initial year of the program; however, ultimately we determined
that many providers would not be able to comply with a requirement to
report all quality measures at the beginning of the program. The
alternative approach, consistent with the requirements of this proposed
rule, is to require reporting of quality measures in phases. In 2011,
there will be a requirement to report quality measures through
attestation with a numerator and denominator. Electronic quality
measure reporting will begin in CY 2012. Additional quality measure
reporting will be added in later years.
    Under Medicaid, we considered numerous alternatives regarding how
to demonstrate eligibility for the incentive payments as well as
adoption and meaningful use of the certified EHR technology. These
alternatives, including the period for demonstrating adequate patient
volume, and the requirements and methods for demonstrating meaningful
use are discussed in section II.D. of this proposed rule.
3. Conclusion
    As discussed later in this analysis, we believe that there are many
positive effects of adopting EHR on health care providers, quite apart
from the incentive payments to be provided under this rule. While
economically significant, we do not believe that the net effect on
individual providers will be negative over time except in very rare
cases. (The statute provides for hardship exemption in such cases.)
Accordingly, we believe that the object of the RFA to minimize burden
on small entities are met by this rule as proposed. We invite public
comments on the analysis and request any additional data that would
help us determine more accurately the impact on the EPs and eligible
hospitals affected by the proposed rule.

C. Small Rural Hospitals

    Section 1102(b) of the Act requires us to prepare a RIA if a rule
would have a significant impact on the operations of a substantial
number of small rural hospitals. This analysis must conform to the
provisions of section 603 of the RFA. For purposes of section 1102(b)
of the Act, we define a small rural hospital as a hospital that is
located outside of a metropolitan statistical area and has fewer than
100 beds. This proposed rule would affect the operations of a
substantial number of small rural hospitals because they are required
to adopt certified EHR technology by 2015, or face adjusted payments.
As stated above, we have determined that this proposed rule would
create a significant impact on a substantial number of small entities,
and have prepared a Regulatory Flexibility Analysis as required by the
RFA and, for small rural hospitals, section 1102(b) of the Act.
Furthermore, any impacts that would arise from the implementation of
certified EHR technology in a rural eligible hospital would be
positive, with respect to the streamlining of care and the ease of
sharing information with other EPs to avoid delays, duplication, or
errors.

D. Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates would require spending in any 1 year
$100 million in 1995 dollars, updated annually for inflation. In 2009,
that threshold is approximately $130 million. UMRA does not address the
total cost of a rule. Rather, it focuses on certain categories of cost,
mainly those ``Federal mandate'' costs resulting from--(1) imposing
enforceable duties on State, local, or tribal governments, or on the
private sector, or (2) increasing the stringency of conditions in, or
decreasing the funding

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of, State, local, or tribal governments under entitlement programs.
    This rule imposes no substantial mandates on States. The State role
in the incentive program is essentially to administer the Medicaid
incentive program. While this entails certain procedural
responsibilities, these do not involve substantial State expense. In
general, each State Medicaid Agency that participates in the incentive
program will be required to invest in systems and technology to
comply--States will have to identify and educate providers, evaluate
their attestations and pay the incentive. However, the Federal
government will fund 90 percent of the cost, providing controls on the
total State outlay.
    The investments needed to meet the meaningful use standards and
obtain incentive funding are voluntary, and hence not ``mandates''
within the meaning of the statute. However, the potential reductions in
Medicare reimbursement after FY 2015 are effectively mandates. We note
that we have no discretion as to those potential payment reductions.
Private sector EPs that voluntarily choose not to participate in the
program may anticipate potential costs in the aggregate that may exceed
$130 million; however, because EPs may choose for various reasons not
to participate in the program, we do not have firm data for the
percentage of participation within the private sector.
    This RIA, taken together with the remainder of the preamble,
constitutes the analysis required by UMRA. We welcome comments on any
aspects of this proposed rule that mandate costs that could be reduced
or ameliorated.

E. Federalism

    Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct requirement costs on State
and local governments, preempts State law, or otherwise has Federalism
implications. This proposed rule would not have a substantial direct
effect on State or local governments, preempt State law, or otherwise
have a Federalism implication. Importantly, State Medicaid agencies are
receiving 100 percent match from the Federal government for incentives
paid and a 90 percent match to administer the program. As previously
stated, we believe that those administrative costs are minimal. We note
that this proposed rule does add a new business requirement for States,
because of the systems that will need to be implemented to track and
report on provider attestations, applications, and payments. States
will also expend funds on the systems that must be built to conduct the
tracking and reporting activities. However, the Federal share of the 90
percent match will protect the States from burdensome financial
outlays.

F. Anticipated Effects

    The objective of the remainder of this RIA is to summarize the
costs and benefits of the HITECH incentive program for the Medicare
FFS, Medicaid, and Medicare Advantage (MA) programs. We also provide
assumptions and a narrative addressing the potential costs to the
industry for implementation of this technology.

G. HITECH Impact Analysis

1. Need for Regulation
    This proposed rule would implement the provisions of the American
Recovery and Reinvestment Act of 2009 (ARRA) (Pub. L. 111-5) that
provide incentive payments to eligible professionals (EPs) and eligible
hospitals participating in Medicare and Medicaid programs that adopt
and meaningfully use certified electronic health record (EHR)
technology. The proposed rule would specify the--initial criteria an EP
and eligible hospital must meet in order to qualify for the incentive
payment; calculation of the incentive payment amounts; payment
adjustments under Medicare for covered professional services and
inpatient hospital services provided by EPs and eligible hospitals
failing to meaningfully use certified EHR technology; and other program
participation requirements.
2. Alternatives Considered
    As previously discussed in the alternatives section of the
regulatory flexibility analysis, HHS has no discretion to change the
incentive payments or payment reductions specified in the statute for
providers that adopt or fail to adopt EHR and achieve meaningful use of
EHR technology. However, the Department has discretion around how best
to meet the HITECH Act requirements for meaningful use for FY 2011 and
beyond.
    We recognize that there may be additional costs that result from
various discretionary policy choices such as requiring additional
functionality over the base level defined in the ARRA. For example,
ARRA does not require certified EHRs to include functionalities
associated with administrative simplification, but we have proposed
them in this rule. While ARRA also requires that certified EHRs have
the capability to support CPOE, we have used our discretion in
developing the ``CPOE use'' measure discussed in section III.
    We have not been able to find research that allows us to quantify
these incremental costs and request comments on possible estimates or
further sources of information that will help us develop estimates
(please refer to the analysis below as well as to the rightmost column
in Table 33). In addition, we welcome information on benefits of
specific provisions of this rule so that we can conduct, for the final
rule, a more robust assessment of alternatives comparing incremental
costs and benefits of each requirement.
3. Background and Assumptions
    The principal costs of this proposed rule are the additional
expenditures that will be undertaken by eligible entities in order to
obtain the Medicare and Medicaid incentive payments to adopt and
demonstrate meaningful use of certified EHR technology, and to avoid
the Medicare payment adjustments that will ensue if they fail to do so.
The estimates for the provisions affecting Medicare and Medicaid EPs,
eligible hospitals, and CAHs are somewhat uncertain for several
reasons: (1) The program is voluntary although payment adjustments will
be imposed on Medicare providers who are unable to demonstrate
meaningful use starting in 2015; (2) the criteria for the demonstration
of meaningful use of certified EHR technology have not been finalized
and will change over time; (3) HHS has not yet defined certified EHR
technology; (4) the impact of the financial incentives and payment
adjustments on the rate of adoption of certified EHR technology by EPs,
eligible hospitals, and CAHs, is difficult to predict; and (5) the
ultimate impact of certified EHR technology on expenditures for medical
treatments (for example, reducing errors, expedited treatment) cannot
be known with certainty at this time. The net costs and savings shown
for this program represent a range of possible scenarios, and actual
impacts could differ. We welcome public input on all aspects of the
costs and benefits of this proposed rule.
    As written in the preamble, this proposed rule describes the
incentive payments for EPs, eligible hospitals, and CAHs for adopting
and demonstrating meaningful use of certified EHR technology. This
impact analysis addresses the costs and benefits to the Medicare and
Medicaid programs, as

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well as general implementation costs for eligible hospitals and EPs.
    Detailed information about the incentive program, the specific
payment amounts and how those payments will be paid, is provided in
section II. of this proposed rule. Based on input from a number of
internal and external sources, including the Government Accountability
Office (GAO) and CBO, we calculated the numbers of EPs and eligible
hospitals under Medicare, Medicaid, and MA and used them throughout the
analysis.
     About 553,200 original Medicare FFS EPs in 2011 (some of
which will also be Medicaid EPs).
     About 27 percent of the total EPs are hospital-based
Medicare EPs, and are not eligible for the program. This leaves
approximately 404,400 nonhospital-based Medicare EPs in 2011.
     Twenty percent of the nonhospital-based Medicare EPs
(approximately 80,900 Medicare EPs in 2011) are also eligible for
Medicaid (meet the 30 percent Medicaid patient volume criteria) but can
only be paid under one program. Any EP in this situation will choose to
receive the Medicaid incentive payment, because it is larger.
     About 38,200 non-Medicare eligible EPs (such as dentists,
pediatricians, and eligible non-physicians such as certified nurse-
midwives, nurse practitioners and physicians assistants) will be
eligible to receive the Medicaid incentive payments.
     5,011 eligible hospitals, comprised of the following:
    ++ 3,620 acute care hospitals.
    ++ 1,302 CAHs (Medicare only).
    ++ 78 children's hospitals (Medicaid only).
    ++ 11 cancer hospitals (Medicaid only).
     All eligible hospitals, except for children's and cancer
hospitals, may qualify and apply for both Medicare and Medicaid
incentive payments.
     12 MA Organizations (about 28,000 EPs, and 29 hospitals)
would be eligible for incentive payments.
     Payments can begin as early as FY 2011.
4. Industry Costs and Adoption Rates
    To estimate the impact on healthcare providers we used information
from four studies cited previously. Based on these studies, we estimate
for EPs, the average adopt/implement/upgrade cost is $54,000 per
physician FTE, while annual maintenance costs average $10,000 per
physician FTE. For all eligible hospitals, the range is from $1 million
to $100 million. Though reports vary widely, we anticipate that the
average would be $5 million for installation. We estimate $1 million
for maintenance, upgrades, and training each year. Though we cite these
existing studies, we realize that these estimates vary widely, in part,
because different providers have adopted different types of EHRs, each
with their own set of functionalities. Because providers who would like
to qualify as ``meaningful users'' of EHRs will need to purchase
``certified EHRs,'' we further acknowledge that ``certified EHRs'' may
differ in many important respects from the types of EHRs used in these
studies and the functionalities they contained. For that reason, we
welcome industry input on the costs of implementing and maintaining
certified EHR technology. We would be particularly interested in
estimates of what a ``qualified EHR'' as defined in ARRA would cost
(that is, an EHR with the capability to collect and store patient
demographic data and support CPOE, clinical decision support, and
registry functions) for both EPs and hospitals. To the extent that
there may be additional costs that result from various discretionary
policy choices in this rulemaking, such as requiring additional
functionality over the base level defined in the ARRA, we would be
interested to know what those incremental additional costs may be.
    Industry costs are important, in part, because EHR adoption rates
will be a function of these industry costs and the extent to which the
costs of ``certified EHRs'' are higher than the total value of EHR
incentive payments available to EPs and eligible hospitals (as well as
adjustments, in the case of the Medicare EHR incentive program) and any
perceived benefits including societal benefits. Because of the
uncertainties surrounding industry cost estimates, we have made various
assumptions about adoption rates in the following analysis in order to
estimate the budgetary impact on the Medicare and Medicaid programs. We
welcome comments on our estimates, including costs estimates and
adoption rate estimates.
    For an eligible Medicaid EP, the first year incentive is based in
part on the adoption, implementation, and upgrade costs. Previously, we
noted that section 1903(t)(4)(C) of the Act gives the Secretary the
authority to determine average allowable costs for certified EHR
technology. The Secretary is to study average costs associated with the
purchase, initial implementation, and upgrade of certified EHR
technology, including support services and initial training.
    Sections 1903(t)(1)(A) and 1903(t)(4) of the Act specify that EPs
may not receive incentive payments in excess of 85 percent of the net
average allowable costs of certified EHR technology, with such net
average allowable costs capped at $25,000 in the first year (for the
purchase, implementation or upgrade of certified EHR technology) and
$10,000 in each of the subsequent years.
a. Costs of EHR Adoption for EPs
    Previously, we described four studies used to estimate costs of
implementation including the purchase and installation of hardware and
software, training, as well as productivity losses associated with
implementation and training. Each of these studies was conducted
several years ago, and did not control for type of EHR, functionality,
physician practice type or size. Furthermore, EHRs were not being built
against any particular consensus standard, nor was the concept of
``meaningful use'' a factor. Thus, the cost of implementing and
maintaining certified EHR technology which meets the requirements
established in this regulation might exceed the estimates from these
studies.
    One average estimate of the cost per physician for implementation
is around $35,000. Therefore, in a practice with five physicians, the
cost could be $175,000. A similar study of community health centers
estimated costs to average $54,000 per physician FTE. In this study,
the authors explained that implementation costs varied between entities
for hardware, software, installation, and training. After
implementation, there were ongoing operating costs estimated at $21,000
per year for a practice of four physicians. The CBO paper, Evidence on
the Costs and Benefits of Health Information Technology, May 2008, in
attempting to estimate the total cost of implementing health IT systems
in office-based medical practices, recognized the complicating factors
of EHR types, available features and differences in characteristics of
the practices that are adopting them. The CBO estimated a cost range of
$25,000 to $45,000 per physician. In the CBO study, operating costs
added $3,000 to $9,000 per physician per year. Finally, a 2005 paper
from AHRQ stated that the average purchase and implementation cost of
an EHR could be $32,606 per FTE physician. Maintenance costs were an
additional $1,500 per physician, per month, or $18,000 per year.
Smaller practices had the highest implementation costs per physician at
$37,204. Based on the studies cited, eligible providers will be
eligible to receive the maximum incentive permitted under the statute,
because the implementation and maintenance costs

[[Page 1977]]

we have estimated exceed the caps for net average allowable costs set
in the statute.
    In calculating the impact of the EHR incentive program for Medicaid
EPs, we assumed that approximately 20 percent of the EPs eligible for
the Medicare incentive payment program are also eligible for Medicaid
EHR incentive payments (about 80,000 in 2011). Since the Medicaid
incentive payments are higher than those for Medicare are and EPs can
only receive payments from on program, we assume the dually eligible
EPs will receive their payments through the Medicaid program. Medicaid
also offers incentive payments for pediatricians, dentists, certified
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
    In 2006, the AHA conducted a survey to evaluate annual hospital
costs: the range was enormous--ranging from $30,500 to $93.8 million,
with a median amount of $3.8 million. In another article from
HealthDayNews, EHR system costs were reported by experts to run as high
as $20 million to $100 million; HHS discussions with experts led to
cost ranges for adoption that varied by hospital size and level of EHR
system sophistication. Research to date has shown that adoption of
comprehensive EHR systems is limited. In the AHA study, nearly 3,050
U.S. hospitals were surveyed about the use of EHR systems. Only 1.5
percent of these organizations had comprehensive systems, which were
defined as hospital-wide clinical documentation of cases, test results,
prescription and test ordering, plus support for decision-making that
included treatment guidelines. Almost eight percent of hospitals had an
EHR system that includes physician and nursing notes, but these systems
did not have decision support. Some 10.9 percent have a basic system
that does not include physician and nursing notes, and can only be used
in one area of the hospital. Researchers found that 17 percent of the
hospitals had the capacity for e-prescribing, a key feature in any
modern day system. According to hospital CEOs, the main barrier to
adoption is the cost of the systems, and the lack of capital. Hospitals
have been concerned that they will not be able to recoup their
investment, and they are already operating on the smallest of margins.
Because uptake is low, it is difficult to get a solid average estimate
for implementation and maintenance costs that can be applied across the
industry.
    Although we have provided some estimates on implementation/upgrade
costs in this analysis, we recognize that there are additional industry
costs associated with adoption and implementation of EHR technology
that are not captured in our estimates that eligible entities will
incur. Because the impact of those activities, such as reduced staff
productivity related to learning how to use the EHR technology, the
need to add additional staff to work with HIT issues, administrative
costs related to reporting, and the like are unknown at this time and
difficult to quantify, we invite public comment and additional
information to assist in our analysis. We also note that there may be
EPs that voluntarily choose not to participate in the program, and that
those EPs may anticipate potential costs resulting from that decision.
Therefore, we have set a placeholder in our accounting statement at
this time and request public comment on industry costs on those that
may or may not choose to implement the program that could inform our
analysis for the final rule.
    We did not include cost estimates on Federal hospitals in this
analysis, since the Veterans Affairs hospitals have already implemented
comprehensive electronic health record systems. There may be costs if
those systems have to be significantly upgraded to meet the
certification criteria, but no estimates were gathered for this
analysis.
5. Medicare Incentive Program Costs
a. Medicare Eligible Professionals (EPs)
    To determine the estimated costs of the Medicare incentives for EPs
we first needed to determine the EPs with Medicare claims. Then, we
calculated that about 27 percent of those EPs are hospital-based based
on the definition proposed in Sec.  495.6, and therefore, do not
qualify for incentive payments. They are subtracted from the total
number of EPs who have claims with Medicare. These numbers were
tabulated from Medicare claims data. We have also estimated that about
20 percent of EPs that are not 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 are uncertain,
so we established high and low scenario to account for high and low
rates of demonstration of meaningful use.
    The percentage of Medicare EPs who will satisfy the criteria for
demonstrating meaningful use of certified EHR technology and will
qualify for incentive payments is a key, but highly uncertain factor.
Our Medicare EHR adoption assumptions for EPs are also affected by the
current situation with Medicare physician fee schedule payment rates.
As noted previously, under current law (that is, the SGR system
formulas), physician payments will be reduced by at least 21 percent
beginning in CY 2010. Such reductions would almost certainly cause
major changes in physician behavior, enrollee care, and other Medicare
provider payments, but the specific nature of these changes is
exceptionally uncertain. Under a current law scenario, the EHR
incentives or payment adjustments would exert only a minor influence on
physician behavior relative to these very large payment reductions.
Behavioral changes resulting from these scheduled payment reductions
are not included in our estimate and likewise do not assume any
additional behavioral changes from EHR incentive payments.
    Accordingly, the estimated number of nonhospital based Medicare EPs
who will demonstrate meaningful use of certified EHR technology over
the period CYs 2011 through 2019 is as shown in Table 35.

[[Page 1978]]

                         Table 35--Medicare EPs Demonstrating Meaningful Use of Certified EHR Technology, High and Low Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                             Calendar year
                                             -----------------------------------------------------------------------------------------------------------
                                                 2011        2012        2013        2014        2015        2016        2017        2018        2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
EPs who have claims with Medicare                  553.2       558.9       564.6       570.3       576.0       581.7       587.5       593.3       599.0
 (thousands)................................
Non-Hospital Based EPs (thousands)..........       404.4       408.6       412.7       416.9       421.1       425.3       429.5       433.7       437.9
EPs that are both Medicare and Medicaid EPs         80.9        81.7        82.5        83.4        84.2        85.1        85.9        86.7        87.6
 (thousands)................................
Low Scenario:
    Percent of EPs who are Meaningful Users.        10          13          15          18          21          24          28          32          36
    Meaningful Users (thousands)............        33.8        41.3        49.8        59.5        70.3        82.4        95.6       110.0       125.4
High Scenario:
    Percent of EPs who are Meaningful Users.        36          40          44          49          53          58          62          66          70
    Meaningful Users (thousands)............       115.8       131.0       146.8       163.1       179.7       196.4       212.9       229.0       244.6
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Under the HITECH Act, EPs can receive up to 5 years of Medicare
incentive payments for the meaningful use of certified EHR technology.
These payments are the lesser of 75 percent of the physician's allowed
charges for the year or a specified maximum amount, which declines from
a possible $18,000 incentive payment for the first payment year to a
$2,000 incentive payment for the fifth payment year. EPs in HPSAs
receive incentives that are 10 percent higher than the maximum amounts.
Hospital-based EPs are not eligible for the Medicare EP incentive
payments. EPs may choose to receive incentive payments from either
Medicare or Medicaid, but not from both.
    The standard full amount of Medicaid incentive payments that an EP
could receive is larger than the standard full amount for the Medicare
EP incentive payments: about $65,000 versus $44,000 for Medicare.
Details about the Medicaid payments are described in the section V.G.3
of this proposed rule. Medicare incentive payments can first be paid to
EPs in CY 2011; and 2012 is the last year that an EP can start to
receive incentives and obtain the full 5 years of payments. EPs who
first qualify in CY 2013 would be limited to an incentive of $15,000
for the first year, and may be eligible to receive 4 years of incentive
payments. EPs who first qualify in CY 2014 would be limited to an
incentive of $12,000 for the first year and may be may be eligible to
receive 3 years of incentive payments. For the Medicare program,
incentives are not payable after CY 2016, and EPs who first demonstrate
meaningful use in CY 2015 or later are not eligible for EHR incentive
payments.
    Medicare payment adjustments will apply in CY 2015 and later to EPs
who cannot demonstrate meaningful use of certified EHR technology,
regardless of whether they received an EHR incentive payment or not.
Specifically, the Medicare Physician Fee Schedule payments for an EP
who cannot demonstrate meaningful use of certified EHR technology would
be reduced by 1 percentage point in CY 2015, two percentage points in
CY 2016, and 3 percentage points in CY 2017, and between 3 and 5
percentage points in starting in CY 2018. The HITECH Act gives the
Secretary the authority, beginning in CY 2018, to increase these
reductions by 1 percentage point each year, but not more than 5
percentage points overall, if the Secretary finds the proportion of EPs
who are meaningful EHR users is less than 75 percent.
    Each year a transfer will be made between the general fund of the
Treasury and the Part B account of the Supplemental Medical Insurance
(SMI) trust fund to offset the incentives paid or payment adjustments
made during the year. In this way, the Part B beneficiary premium will
not be affected by the EP payment incentives.
    We estimate that there are 12 MA plans that might be eligible to
participate in the EHR incentive program. Those plans have about 28,000
EPs.
    Our estimates of the incentive payment costs and payment adjustment
savings reflect our assumptions about the proportion of EPs who will
demonstrate meaningful user of certified EHR technology. These
assumptions were developed based on a review of recent studies and
discussions with subject matter experts. We project that a growing
proportion of EPs will adopt certified EHR technology that meets the
standards even in the absence of the legislated incentives. This number
could be higher or lower depending on the final meaningful use
definition adopted, physicians' access to capital and implementation
expertise, the success of the other HITECH programs in reaching
physicians, and other factors.
    Specifically, our assumptions are based on literature estimating
current rates of physician EHR adoption and rates of diffusion of EHRs
and similar technologies. There are a number of studies that have
attempted to measure the rate of adoption of electronic medical records
(EMR) among physicians prior to the enactment of the HITECH Act (see,
for example, Funky and Taylor (2005) The State and Pattern of Health
Information Technology Adoption. RAND Monograph MG-409. Santa Monica:
The RAND Corporation; Ford, E.W., Menachemi, N., Peterson, L.T.,
Huerta, T.R. (2009) ``Resistance is Futile: But it is Slowing the Pace
of EHR Adoption Nonetheless'' Journal of the American Informatics
Association 16(3): 274-281). We took the estimated rate of

[[Page 1979]]

EHR adoption from the study with the most rigorous definition, assuming
that meaningful use would be a standard at least as strict as that one
(DesRoches, CM, Campbell, EG, Rao, SR et al. (2008) ``Electronic Health
Records in Ambulatory Care--A National Survey of Physicians'' New
England Journal of Medicine 359(1): 50-60). We then inflated that
number (4 percent) to a 2011 baseline using the numbers of physicians
reporting in that survey that they had EHR implementation underway. We
assumed that the same proportion of them would be implementing fully-
functional EHRs as in the baseline (30 percent of those with basic
systems.) We then trended this number forward using the trajectory
mapped out by Ford et al. using the data from the period prior to FY
2004 since the slower rate of adoption during the FY 2005 through 2007
period was thought to be caused by policy uncertainty which this
regulation should resolve.
    However, actual adoption trends could be significantly different
from these assumptions, given the elements of uncertainty we describe
throughout this analysis.
    The estimated net costs for the low scenario of the Medicare EP
portion of the HITECH Act are shown in Table 36. This provision is
estimated to decrease Part B expenditures by a net total of $0.6
billion during FYs 2011 through 2019.

  Table 36--Estimated Costs (+) and Savings (-) for Medicare EPs Demonstrating Meaningful Use of Certified EHR
                                            Technology, Low Scenario
                                                  [In billions]
----------------------------------------------------------------------------------------------------------------
                                                                      Payment
                   Fiscal year                       Incentive      adjustment        Benefit        Net total
                                                     payments        receipts        payments
----------------------------------------------------------------------------------------------------------------
2009............................................  ..............  ..............  ..............  ..............
2010............................................  ..............  ..............  ..............  ..............
2011............................................            $0.1  ..............  ..............            $0.1
2012............................................             0.9  ..............  ..............             0.9
2013............................................             0.8  ..............  ..............             0.8
2014............................................             0.7  ..............  ..............             0.7
2015............................................             0.5           -$0.4  ..............             0.1
2016............................................             0.3            -0.6  ..............            -0.3
2017............................................             0.1            -0.9  ..............            -0.8
2018............................................  ..............            -1.0  ..............            -1.0
2019............................................  ..............            -1.1  ..............            -1.1
                                                 ---------------------------------------------------------------
    Total, 2009-2014............................             2.4  ..............  ..............             2.4
    Total, 2009-2019............................             3.2            -3.9  ..............            -0.6
----------------------------------------------------------------------------------------------------------------

    The estimated net costs for the high scenario of the Medicare EP
portion of the HITECH Act are shown in Table 37. This provision is
estimated to increase Part B expenditures by a net total of $5.4
billion during FYs 2011 through 2019.

  Table 37--Estimated Costs (+) and Savings (-) for Medicare EPs Demonstrating Meaningful Use of Certified EHR
                                            Technology, High Scenario
                                                  [In billions]
----------------------------------------------------------------------------------------------------------------
                                                                      Payment
                   Fiscal year                       Incentive      adjustment        Benefit        Net total
                                                     payments        receipts        payments
----------------------------------------------------------------------------------------------------------------
2009............................................  ..............  ..............  ..............  ..............
2010............................................  ..............  ..............  ..............  ..............
2011............................................            $0.3  ..............  ..............            $0.3
2012............................................             2.2  ..............  ..............             2.2
2013............................................             1.8  ..............  ..............             1.8
2014............................................             1.5  ..............  ..............             1.5
2015............................................             1.0           -$0.2  ..............             0.8
2016............................................             0.6            -0.3  ..............             0.2
2017............................................             0.1            -0.5  ..............            -0.4
2018............................................  ..............            -0.5  ..............            -0.5
2019............................................  ..............            -0.5  ..............            -0.5
                                                 ---------------------------------------------------------------
    Total, 2009-2014............................             5.8  ..............  ..............             5.8
    Total, 2009-2019............................             7.5            -2.1  ..............             5.4
----------------------------------------------------------------------------------------------------------------

b. Medicare Eligible Hospitals
    In brief, the estimates of hospital adoption were developed by
calculating projected incentive payments (which are driven by
discharges), comparing them to projected costs of attaining meaningful
use, and then making assumption about how rapidly hospitals would adopt
given the fraction of their costs that were covered.
    Specifically, the first step in preparing estimates of Medicare
program costs for eligible hospitals was to determine the amount of
Medicare incentive payments that each hospital in the country could
potentially receive under the statutory formula, based on its admission
numbers (total patients and Medicare

[[Page 1980]]

patients). The total incentive payments potentially payable over a 4-
year period vary significantly by hospitals' inpatient caseloads,
ranging from a low of about $9,000 to a high of $10.4 million, with the
median being $3.6 million. The potential Medicare incentive payments
for each eligible hospital were compared with the hospital's expected
cost of purchasing and operating certified EHR technology. Costs of
adoption for each hospital were estimated using data from the 2007 AHA
annual survey and IT supplement. Estimated costs varied by size of
hospital and by the likely status of EHR adoption in that class of
hospitals. Hospitals were grouped first by size (CAHs, non-CAH
hospitals under 400 beds, and hospitals with 400 or more beds) because
EHR adoption costs do vary by size: namely, larger hospitals with more
diverse service offerings and powerful physician staffs generally
implement more customized systems than smaller hospitals that might
purchase off-the-shelf products. We then calculated the proportion of
hospitals within each class that were at one of three levels of EHR
adoption: (1) Hospitals which had already implemented relatively
advanced systems that included CPOE systems for medications; (2)
hospitals which had implemented more basic systems through which lab
results could be shared, but not CPOE for medications; and (3)
hospitals starting from a base level either neither CPOE or lab
reporting. The CPOE for medication standard was chosen because expert
input indicated that the CPOE standard in the proposed meaningful use
definition will be the hardest one for hospitals to meet. Table 38
provides these proportions.

                                                   Table 38--Hospital IT Capabilities by Hospital Size
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            Levels of adoption
                                                 -------------------------------------------------------------------------------------------------------
                                                        Any CPOE meds              Lab results                 Neither                    Total
                  Hospital size                  -------------------------------------------------------------------------------------------------------
                                                   Number of                 Number of                 Number of                 Number of
                                                   hospitals    Percentage   hospitals    Percentage   hospitals    Percentage   hospitals    Percentage
--------------------------------------------------------------------------------------------------------------------------------------------------------
CAHs............................................          146           18          372           47          274           35          792           23
Small/Medium....................................          683           30        1,268           55          359           16        2,310           67
Large (400+ beds)...............................          169           49          162           47           17            5          348           10
                                                 -------------------------------------------------------------------------------------------------------
    Total.......................................          998           29         1802           52          650           19        3,450          100
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We then calculated the costs of moving from these stages to
meaningful use for each class of hospital, assuming that even for
hospitals with CPOE systems they would incur additional costs of at
least 10 percent of their IT budgets. These costs were based on cross-
sectional data from the AHA survey and thus do not likely represent the
true costs of implementing systems. We request public input on the
costs of adoption and attaining the meaningful use standard and the
determinants of those costs.
    Under the HITECH Act, an eligible hospital can receive up to 4
years of Medicare incentive payments for the demonstration of
meaningful use of certified EHR technology. These payments reflect the
ratio of Medicare inpatient days to total inpatient days and are
adjusted by transition factors of 100, 75, 50, and 25 percent for the
first through fourth implementation years respectively. Medicare
incentive payments can first be paid to hospitals in FY 2011, and FY
2013 is the last year that a hospital can start to receive incentives
and obtain the full 4-year transition rates. Eligible hospitals that
first qualify in FY 2014 or FY 2015 will only receive the transition
portions that apply to eligible hospitals who implement their EHR in FY
2013 (for example, 75 percent in FY 2014 and 50 percent in FY 2015).
Eligible hospitals that first demonstrate meaningful use in FY 2016 or
later are not eligible for incentive payments. Payment adjustments will
be applied beginning in FY 2015 to eligible hospitals that cannot
demonstrate meaningful use of certified EHR technology. Special rules
apply to CAHs.
    We estimate that there are 12 MAOs that might be eligible to
participate in the incentive program. Those plans have 29 eligible
hospitals. The costs for the MA program have been included in the
overall Medicare estimates.
    Again due to uncertainties, we are providing ranges for our
estimates. Our high scenario estimated net costs for section 4102 of
the HITECH Act are shown in Table 39: Estimated costs (+) and savings
(-) for eligible hospitals adopting certified EHRs. This provision is
estimated to increase Medicare hospital expenditures by a net total of
$11.2 billion during FYs 2011 through 2019.

  Table 39--Estimated Costs (+) and Savings (-) for Medicare Eligible Hospitals Demonstrating Meaningful Use of
                                     Certified EHR Technology, High Scenario
                                                  [In billions]
----------------------------------------------------------------------------------------------------------------
                                                                      Payment
                   Fiscal year                       Incentive      adjustment        Benefit        Net total
                                                     payments        receipts        payments
----------------------------------------------------------------------------------------------------------------
2009............................................  ..............  ..............  ..............  ..............
2010............................................  ..............  ..............  ..............  ..............
2011............................................            $2.4  ..............        ([sup1])            $2.4
2012............................................             2.7  ..............        ([sup1])             2.7
2013............................................             2.4  ..............        ([sup1])             2.4
2014............................................             2.3  ..............        ([sup1])             2.3
2015............................................             1.3           -$0.1        ([sup1])             1.2
2016............................................             0.5            -0.1        ([sup1])             0.4
2017............................................  ..............  ..............        ([sup1])        ([sup1])

[[Page 1981]]

2018............................................  ..............  ..............        ([sup1])        ([sup1])
2019............................................  ..............  ..............        ([sup1])        ([sup1])
                                                 ---------------------------------------------------------------
    Total, 2009-2014............................             9.8  ..............            -0.1             9.7
    Total, 2009-2019............................            11.6           -$0.2            -0.2            11.2
----------------------------------------------------------------------------------------------------------------
\1\ Savings of less than $50 million.

    We are also providing the estimates for a low scenario in Table 40.

  Table 40--Estimated Costs (+) and Savings (-) for Medicare Eligible Hospitals Demonstrating Meaningful Use of
                                     Certified EHR Technology, Low Scenario
                                                  [In billions]
----------------------------------------------------------------------------------------------------------------
                                                                      Payment
                   Fiscal year                       Incentive      adjustment        Benefit        Net total
                                                     payments        receipts        payments
----------------------------------------------------------------------------------------------------------------
2009............................................  ..............  ..............  ..............  ..............
2010............................................  ..............  ..............  ..............  ..............
2011............................................            $1.7  ..............           (\1\)            $1.7
2012............................................             1.6  ..............           (\1\)             1.6
2013............................................             1.5  ..............           (\1\)             1.5
2014............................................             1.8  ..............           (\1\)             1.8
2015............................................             1.4           -$0.4           (\1\)             1.0
2016............................................             0.6            -0.3           (\1\)             0.3
2017............................................  ..............            -0.3           (\1\)            -0.3
2018............................................  ..............            -0.2           (\1\)            -0.2
2019............................................  ..............  ..............           (\1\)           (\1\)
                                                 ---------------------------------------------------------------
    Total, 2009-2014............................             6.6  ..............           -$0.1             6.5
    Total, 2009-2019............................             8.6            -1.1            -0.2             7.4
----------------------------------------------------------------------------------------------------------------
\1\ Savings of less than $50 million.

    Based on the comparison of Medicare incentive payments and
implementation/operating costs for each eligible hospital (described
above), we made the assumptions shown in Table 41, related to the
prevalence of certified EHR technology for FY 2011 through 2018. As
indicated, eligible hospitals that could cover the full cost of an EHR
system through Medicare incentive payments were assumed to implement
them relatively rapidly, and vice-versa. In other words, eligible
hospitals will have an incentive to purchase and implement an EHR
system if they perceive that a large portion of the costs will be
covered by the incentive payments. Table 41 shows the high scenario
estimates:

 Table 41--Assumed Proportion of Eligible Hospitals With Certified EHR Technology, by Percentage of System Cost
                              Covered by Medicare Incentive Payments, High Scenario
----------------------------------------------------------------------------------------------------------------
                                                        Incentive payments as percentage of EHR technology cost
                     Fiscal year                     -----------------------------------------------------------
                                                         100+%      75-100%     50-75%      25-50%       0-25%
----------------------------------------------------------------------------------------------------------------
2011................................................        0.8         0.5         0.3         0.2         0.1
2012................................................        0.95        0.65        0.5         0.35        0.2
2013................................................        1.0         0.8         0.7         0.6         0.4
2014................................................        1.0         0.95        0.85        0.75        0.6
2015................................................        1.0         1.0         0.95        0.9         0.8
2016................................................        1.0         1.0         1.0         0.95        0.9
2017................................................        1.0         1.0         1.0         1.0         0.95
2018................................................        1.0         1.0         1.0         1.0         1.0
----------------------------------------------------------------------------------------------------------------

    For instance, under the high scenario 50 percent of eligible
hospitals whose incentive payments would cover between 75 percent and
100 percent of the cost of a certified EHR system were assumed to have
a certified system in

[[Page 1982]]

FY 2011. In FY 2012, 65 percent of those hospitals were assumed to have
a certified EHR system. All such hospitals were assumed to have a
certified EHR system in FY 2015 and thereafter.
    High rates of EHR adoption are anticipated prior to FY 2015 due to
the large payment adjustments that will be imposed on eligible
hospitals that are unable to demonstrate meaningful use beginning in FY
2015. Specifically, the Medicare ``market basket'' payment updates
would be reduced (on a noncumulative basis) by one-fourth, one-half,
and three-fourths for FYs 2015, 2016, and 2017 and later, respectively,
for eligible hospitals that were not meaningful users of certified EHR
technology. However, we heard from industry experts that issues
surrounding the capacity of vendors and expert consultants to support
implementation, issues of access to capital, and competing priorities
in responding to payer demand will limit the number of hospitals that
can adopt advanced systems in the short term. Therefore, we cannot be
certain of the adoption rate for hospitals due to these factors and
others previously outlined in this preamble, and so we provide a range
which reflects what we believe are reasonably anticipated low to high
rates of adoption.
    Table 42 shows the low scenario estimates.

 Table 42--Assumed Proportion of Eligible Hospitals With Certified EHR Technology, by Percentage of System Cost
                              Covered by Medicare Incentive Payments, Low Scenario
----------------------------------------------------------------------------------------------------------------
                                                        Incentive payments as percentage of EHR technology cost
                     Fiscal year                     -----------------------------------------------------------
                                                         100+%      75-100%     50-75%      25-50%       0-25%
----------------------------------------------------------------------------------------------------------------
2011................................................        0.6         0.35        0.2         0.2         0.05
2012................................................        0.65        0.4         0.25        0.15        0.1
2013................................................        0.75        0.55        0.4         0.25        0.15
2014................................................        0.9         0.75        0.55        0.4         0.3
2015................................................        1.0         0.9         0.75        0.6         0.5
2016................................................        1.0         1.0         0.9         0.85        0.75
2017................................................        1.0         1.0         0.95        0.9         0.85
2018................................................        1.0         1.0         1.0         0.95        0.9
2019................................................        1.0         1.0         1.0         1.0         1.0
----------------------------------------------------------------------------------------------------------------

    For large, organized facilities such as hospitals, we believe that
the revenue losses caused by these payment adjustments would be a
substantial incentive to adopt certified EHR technology, even in
instances where the Medicare incentive payments would cover only a
portion of the costs of purchasing, installing, populating, and
operating the EHR system. Based on the assumptions about incentive
payments as percentages of EHR technology costs in Table 42, we
estimated that the great majority of eligible hospitals would qualify
for at least a portion of the Medicare incentive payments that they
could potentially receive, and only a modest number would incur
penalties. Nearly all eligible hospitals are projected to have
implemented certified EHR technology by FY 2019. Table 43 shows our
high scenario estimated range of percentages of the total potential
incentive payments associated with eligible hospitals that could
demonstrate meaningful use of EHR systems. Also shown are the estimated
percentages of potential incentives that would actually be paid each
year.

  Table 43--Estimated Percentage of Medicare Incentives Which Could Be
   Paid for Meaningful Use of Certified EHR Technology Associated With
    Eligible Hospitals and Estimated Percentage Payable in Year, High
                                Scenario
------------------------------------------------------------------------
                                              Percent
                                            associated        Percent
               Fiscal year                 with eligible    payable in
                                             hospitals         year
------------------------------------------------------------------------
2011....................................            43.4            43.4
2012....................................            58.5            58.5
2013....................................            73.9            73.9
2014....................................            84.8            84.8
2015....................................            93.6            50.2
2016....................................            97.3            35.1
2017....................................            99.1  ..............
2018....................................           100.0  ..............
------------------------------------------------------------------------

    For instance in FY 2012 under the high scenario, 58.5 percent of
the total amount of incentive payments which could be payable in that
year would be for eligible hospitals who have demonstrated meaningful
use of certified EHR technology and therefore will be paid. In FY 2015
under the high scenario, 93.6 percent of the total amount of incentive
payments which could be payable will be for hospitals who have
certified EHR systems, but some of those eligible hospitals would have
already received 4 years of incentive payments, and therefore 50.2
percent of all possible incentive payments actually paid in that year.
    Table 44 shows the low scenario estimates.

[[Page 1983]]

  Table 44--Estimated Percentage of Medicare Incentives Which Could Be
 Paid for the Meaningful Use of Certified EHR Technology Associated With
    Eligible Hospitals and Estimated Percentage Payable in Year, Low
                                Scenario
------------------------------------------------------------------------
                                              Percent
                                            associated        Percent
               Fiscal year                 with eligible    payable in
                                             hospitals         year
------------------------------------------------------------------------
2011....................................            30.5            30.5
2012....................................            35.5            35.5
2013....................................            46.2            46.2
2014....................................            61.7            61.7
2015....................................            77.8            47.3
2016....................................            90.9            42.3
2017....................................            94.5  ..............
2018....................................            97.3  ..............
------------------------------------------------------------------------

    The estimated payments to eligible hospitals were calculated based
on the hospitals' qualifying status and individual incentive amounts
under the statutory formula. Similarly, the estimated penalties for
nonqualifying hospitals were based on the market basket reductions and
Medicare revenues. The estimated savings in Medicare eligible hospital
benefit expenditures resulting from the use of hospital certified EHR
systems are discussed under ``general considerations'' at the end of
this section. We assumed no future growth in the total number of
hospitals in the U.S. because growth in acute care hospitals has been
minimal in recent years.
c. Critical Access Hospitals (CAHs)
    We estimate that there are 1,302 CAHs eligible to receive EHR
incentives payments, and that will participate in the incentive program
beginning in FY 2011. The statistics for their incentives are
incorporated into the overall Medicare and Medicaid program costs.
6. Medicaid Incentive Program Costs
    Under section 4201 of the HITECH Act, States can voluntarily
participate in the Medicaid incentive payment program and we have based
our Medicaid incentive program costs on all States participating.
Eligible hospitals and EPs can also qualify for a Medicaid incentive
payment for adopting, implementing, or upgrading and up to 5 years of
incentive payments for demonstrating meaningful use certified EHR
technology. Under Medicaid, EPs include physicians and pediatricians,
dentists, certified nurse-midwives, nurse practitioners, and certain
physician assistants. Initial incentive payments are available through
2016. The Medicaid hospital incentives are similar to those specified
in section 4102 of the HITECH Act for Medicare, except that they are
payable for up to 6 years based on the ratio of Medicaid inpatient days
to total days, and are not phased down by the Medicare eligible
hospital transition factors. Medicaid hospitals can begin incentive
payments through 2016. There are also additional hospitals, such as
children's and cancer hospitals that are only eligible for Medicaid
incentives.
    EPs may qualify for Medicaid incentive payments if at least 30
percent of their patient volume is from Medicaid. (Separate rules apply
for pediatricians.) As mentioned above, the Medicaid maximum incentive
payments are larger than the corresponding Medicare payments. Various
maximums are specified for eligible hospital and EP incentive payments.
There are no Medicaid penalties for nonadoption of EHR systems or for
failing to demonstrate meaningful use. The Federal costs for Medicaid
incentive payments to providers who can demonstrate meaningful use of
EHR technology were estimated similarly to the estimates for Medicare
eligible hospital and EP. Table 45 shows our high estimates for the net
Medicaid costs for eligible hospitals and EP.

               Table 45--Estimated Federal Costs (+) and Savings (-) Under Medicaid, High Scenario
                                                 [In $billions]
----------------------------------------------------------------------------------------------------------------
                                                        Incentive payments
                                                 --------------------------------     Benefit
                   Fiscal year                                       Eligible        payments        Net total
                                                     Hospitals     professionals
----------------------------------------------------------------------------------------------------------------
2009............................................  ..............  ..............  ..............  ..............
2010............................................  ..............  ..............  ..............  ..............
2011............................................             1.1             1.2           (\1\)             2.3
2012............................................             1.2             0.9           (\1\)             2.1
2013............................................             0.7             0.9           (\1\)             1.6
2014............................................             0.4             0.9           (\1\)             1.3
2015............................................             0.3             0.9           (\1\)             1.2
2016............................................             0.2             1.0           (\1\)             1.2
2017............................................             0.1             0.4           (\1\)             0.5
2018............................................             0.0             0.3           (\1\)             0.3
2019............................................             0.0             0.2           (\1\)             0.2
                                                 ---------------------------------------------------------------
    Total, 2009-2014............................             3.4             3.8             0.0             7.2
    Total, 2009-2019............................             4.1             6.6            -0.1            10.6
----------------------------------------------------------------------------------------------------------------
\1\ Savings of less than $50 million.

[[Page 1984]]

    Table 46 shows the low estimates for Medicaid costs and savings.

               Table 46--Estimated Federal Costs (+) and Savings (-) Under Medicaid, Low Scenario
                                                 [In $billions]
----------------------------------------------------------------------------------------------------------------
                                                        Incentive payments
                                                 --------------------------------     Benefit
                   Fiscal year                                       Eligible        payments        Net total
                                                     Hospitals     professionals
----------------------------------------------------------------------------------------------------------------
2009............................................  ..............  ..............  ..............  ..............
2010............................................  ..............  ..............  ..............  ..............
2011............................................             0.7             0.6           (\1\)             1.3
2012............................................             0.6             0.4           (\1\)             1.0
2013............................................             0.4             0.4           (\1\)             0.9
2014............................................             0.5             0.5           (\1\)             1.0
2015............................................             0.6             0.5           (\1\)             1.1
2016............................................             0.6             0.5           (\1\)             1.1
2017............................................             0.3             0.2           (\1\)             0.5
2018............................................             0.1             0.2           (\1\)             0.2
2019............................................             0.0             0.1           (\1\)             0.1
                                                 ---------------------------------------------------------------
    Total, 2009-2014............................             2.3             1.9             0.0             4.2
    Total, 2009-2019............................             3.8             3.5            -0.1             7.3
----------------------------------------------------------------------------------------------------------------
\1\ Savings of less than $50 million.

a. Medicaid EPs
    To determine the Medicaid EP incentive payments, we first
determined the number of qualifying EPs. As indicated above, we assumed
that 20 percent of the non-hospital-based Medicare EPs would meet the
requirements for Medicaid incentive payments (30 percent of patient
volume from Medicaid). All of these EPs were assumed to choose the
Medicaid incentive payments, as they are larger. In addition, the total
number of Medicaid EPs was adjusted to include EPs who qualify for the
Medicaid incentive payments but not for the Medicare incentive
payments, such as most pediatricians, dentists, certified nurse-
midwives, nurse practitioners and physicians assistants. As noted
previously there is much uncertainty about the rates of demonstration
of meaningful that will be achieved. Therefore, as we estimated for the
Medicare EPs, we are providing high and low scenario estimates for
Medicaid EPs.
    Our high scenario estimates are listed in the Table 47.
BILLING CODE 4120-01-P

[[Page 1985]]

[GRAPHIC] [TIFF OMITTED] TP13JA10.032

    Under the high scenario, we assumed an increase over baseline
participation of Medicaid EPs because of the incentive payments, with
the proportion of EPs ever receiving incentive payments increasing from
46.5 percent in CY 2011 to 93.7 percent by CY 2019. About 55,000 EPs
are projected to qualify for incentive payments in CY 2011, resulting
in a CY 2011 cost of about $1.2 billion. It should be noted that since
the Medicaid EHR incentive payment program provides that a Medicaid EP
can receive an incentive payment in their first year because he or she
is a meaningful user or because he or she is engaged in efforts to
adopt, implement, or upgrade certified EHR technology, these
participation rates include not only meaningful users but eligible
providers implementing certified EHR technology as well. Table 48 shows
our low scenario estimates.

[[Page 1986]]

[GRAPHIC] [TIFF OMITTED] TP13JA10.033

BILLING CODE 4120-01-C
b. Medicaid Hospitals
    Medicaid incentive payments to most acute-care hospitals were
estimated using the same adoption assumptions and methodology as
described previously for Medicare eligible hospitals and shown in Table
49. Because hospitals' Medicare and Medicaid patient loads differ, we
separately calculated the range of percentage of total potential
incentives that could be associated with qualifying hospitals, year by
year, and the corresponding actual percentages payable each year. Acute
care hospitals and children's hospitals can receive Medicaid incentive
payments for no less than 3 years but no more than 6 years and may
qualify to receive both the Medicare and Medicaid incentive payments.
    As stated previously, the estimated eligible hospital incentive
payments were calculated based on the hospitals' qualifying status and
individual incentive amounts payable under the statutory formula. The
estimated savings in Medicaid benefit expenditures resulting from the
use of certified EHR technology are discussed under ``general

[[Page 1987]]

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.

     Table 49--Estimated Percentage of Potential Medicaid Incentives
Associated With Eligible Hospitals and Estimated Percentage Payable Each
                           Year, High Scenario
------------------------------------------------------------------------
                                              Percent
                                            associated        Percent
               Fiscal year                 with eligible    payable in
                                             hospitals         year
------------------------------------------------------------------------
2011....................................            60.7            60.7
2012....................................            75.5            75.5
2013....................................            86.0            86.0
2014....................................            91.5            30.8
2015....................................            96.3            20.8
2016....................................            98.3            12.3
2017....................................            99.5             6.8
2018....................................           100.0             2.0
2019....................................           100.0             0.0
------------------------------------------------------------------------

    Table 50 shows our low scenario estimates.

     Table 50--Estimated Percentage of Potential Medicaid Incentives
Associated With Eligible Hospitals and Estimated Percentage Payable Each
                           Year, Low Scenario
------------------------------------------------------------------------
                                              Percent
                                            associated        Percent
               Fiscal year                 with eligible    payable in
                                             hospitals         year
------------------------------------------------------------------------
2011....................................            35.6            35.6
2012....................................            40.6            40.6
2013....................................            50.9            50.9
2014....................................            66.8            31.2
2015....................................            81.6            41.0
2016....................................            92.6            41.7
2017....................................            95.5            25.8
2018....................................            97.4            11.0
2019....................................           100.0             0.0
------------------------------------------------------------------------

7. Benefits for All EPs and All Eligible Hospitals
    In this proposed rule we have not quantified the overall benefits
to the industry, nor to eligible hospitals or EPs in the Medicare,
Medicaid, or MA programs. We believe that the first 5 years of the
incentive program will be dedicated to implementation activities, from
installation of the technology to training to operational and
behavioral changes. Information on the costs and benefits of adopting
systems specifically meeting the requirements in this rule does not yet
exist--and information on costs and benefits overall is limited
(Goldzweig et al. 2009 ``Costs and Benefits of Health Information
Technology: New Trends from the Literature'' Health Affairs.) We would
welcome industry input on the impact of this proposed rule on adoption,
the costs of adopting and meeting the meaningful use criteria, and on
resulting benefits to providers.
    Nonetheless, we believe there are benefits that can be obtained by
eligible hospitals and EPs, including: Reductions in medical
recordkeeping costs, reductions in repeat tests, decreases in length of
stay, and reduced errors. Furthermore, there is limited but growing
evidence to support the cost saving benefits anticipated from wider
adoption of EHRs. For example, at one hospital emergency room in
Delaware, the ability to download and create a file with a patient's
medical history saved the ER $545 per use, mostly on reduced waiting
times. A pilot study of ambulatory practices found a positive ROI
within 16 months and annual savings thereafter (Greiger et al. 2007, A
Pilot Study to Document the Return on Investment for Implementing an
Ambulatory Electronic Health Record at an Academic Medical Centers.)
Some vendors have estimated that EHRs could result in cost savings of
between $100 and $200 per patient per year. As adoption increases,
there will be more opportunities to capture and report on cost savings
and benefits. A number of relevant studies are required in the HITECH
Act for this specific purpose, and the results will be made public, as
they are available.
    Some vendors have estimated that EHRs could result in cost savings
of between $100 and $200 per patient per year. As adoption increases,
there will be more opportunities to capture and report on cost savings
and benefits. A number of relevant studies are required in the HITECH
Act for this specific purpose, and the results will be made public, as
they are available.
8. Benefits to Society
    According to the recent CBO study ``Evidence on the Costs and
Benefits of Health Information Technology'' (http://www.cbo.gov/ftpdocs/91xx/doc9168/05-20-HealthIT.pdf), when used effectively, EHRs
can enable providers to deliver health care more efficiently. For
example, they can reduce the duplication of diagnostic tests, prompt
providers to prescribe cost-effective generic medications, remind
patients about preventive care, reduce unnecessary office visits and
assist in managing complex care. Further, the report points out that
there is a potential to gain both internal and external savings from
widespread adoption of

[[Page 1988]]

health IT, noting that internal savings would likely be in the
reductions in the cost of providing care, and that external savings
could accrue to the health insurance plan or even the patient, such as
the ability to exchange information more efficiently. The benefits
resulting specifically from this proposed regulation are even harder to
quantify because they represent, in many cases, adding functionality to
existing systems and reaping the network externalities created by
larger numbers of providers participating in information exchange. We
would welcome additional data on the costs and benefits of specific
provisions of this rule and the incentive program as a whole so that we
can conduct, for the final rule, a more robust assessment of societal
benefits to determine whether the benefits of the regulation justify
its costs (as directed by Executive Order 12866).
9. General Considerations
    The estimates for the HITECH Act provisions were based on the
economic assumptions underlying the President's 2010 Budget. Under the
statute, Medicare incentive payments for certified EHR technology are
excluded from the determination of MA capitation benchmarks. As noted
previously, there is considerable uncertainty about the rate at which
eligible hospitals and EPs will adopt EHRs and other HIT. Nonetheless,
we believe that the Medicare incentive payments and the prospect of
significant payment penalties for nonparticipation will result in the
great majority of hospitals implementing certified EHR technology in
the early years of the Medicare EHR incentive program. We expect that a
steadily growing proportion of practices will implement certified EHR
technology over the next 10 years, even in the absence of the Medicare
incentives. Actual future Medicare and Medicaid costs for eligible
hospital and EP incentives will depend in part on the standards
developed and applied for assessing meaningful use of certified EHR
technology. We will administer the requirements in such a way as to
encourage adoption of certified EHR technology and facilitate
qualification for incentive payments, and will adopt progressively
demanding standards each year. Certified EHR technology has the
potential to help reduce medical costs through efficiency improvements,
such as prompter treatments, avoidance of duplicate or otherwise
unnecessary services, and reduced administrative costs (once systems
are in place), with most of these savings being realized by the
providers rather than by Medicare or Medicaid. To the extent that this
technology will have a net positive effect on efficiency, then more
rapid adoption of such EHR systems would achieve these efficiencies
sooner than would otherwise occur, without the EHR incentives.
    The CBO has estimated a modest level of such savings attributable
to EHRs, with much of the amount associated with reductions in adverse
drug-to-drug interactions. We believe that most of such savings will
result from the existing statutory requirements for e-prescribing and
that the acceleration of other efficiency savings will be relatively
modest in comparison to the incentive and payment adjustments. We
expect a negligible impact on benefit payments to hospitals and EPs
from Medicare and Medicaid as a result of the implementation of EHR
technology.''
    In the process of preparing the estimates for this rule, we
consulted with and/or relied on internal CMS sources, as well as the
following sources:
     Congressional Budget Office (staff and publications).
     American Medical Association (staff and unpublished data).
     American Hospital Association.
     Actuarial Research Corporation.
     RAND Health studies on:
    ++ ``The State and Pattern of Health Information Technology
Adoption'' (Fonkych & Taylor, 2005);
    ++ ``Extrapolating Evidence of Health Information Technology
Savings and Costs'' (Girosi, Meili, & Scoville, 2005); and
    ++ ``The Diffusion and Value of Healthcare Information Technology''
(Bower, 2005).
     Kaiser Permanente (staff and publications).
     Miscellaneous other sources (Health Affairs, American
Enterprise Institute, news articles and perspectives).
    As noted at the beginning of this analysis, it is difficult to
predict the actual impacts of the HITECH Act with much certainty at
this time. We believe the assumptions and methods described herein are
reasonable for estimating the financial impact of the provisions on the
Medicare and Medicaid programs, but acknowledge the wide range of
possible outcomes. We invite comments on all of our assumptions.
    All financial analysis is calculated over a 10-year planning
horizon, because though the incentive payments for Medicare EPs, CAHs
and eligible hospitals will only be paid for 5 years, the Medicaid
incentives will cease in CY 2021. Starting in CY 2015, payment
adjustments will be made to the Medicare physician fee schedule.
10. Summary
    The total cost to the Medicare and Medicaid programs is estimated
to be range from $14.1 (low scenario) to 27.3 (high scenario) billion
over a 10-year timeframe. We do not estimate total costs to the
provider industry, but rather provide a possible per EP and per
eligible hospital outlay for implementation and maintenance operations.

[[Page 1989]]

[GRAPHIC] [TIFF OMITTED] TP13JA10.034

    Table 53 shows the total costs from 2009 through 2019 for the high
scenario after which the payment adjustments will be invoked.
[GRAPHIC] [TIFF OMITTED] TP13JA10.035

11. Explanation of Benefits and Savings Calculations
    In our analysis, we assume that benefits to the program would
accrue in the form of savings to Medicare, through the Medicare EP
payment adjustments. Expected qualitative benefits, such as improved
quality of care, better health outcomes, reduced errors and the like,
unable to be quantified at this time. We invite public comment on the
subject of benefits to the Medicare and Medicaid programs.

H. Accounting Statement

    Whenever a rule is considered a significant rule under Executive
Order 12866, we are required to develop an Accounting Statement
indicating the classification of the expenditures associated with the
provisions of this proposed rule. Monetary annualized benefits and non-
budgetary costs are presented as discounted flows using 3 percent and 7
percent factors. Additional expenditures that will be undertaken by
eligible entities in order to obtain the Medicare and Medicaid
incentive payments to adopt and demonstrate meaningful use of certified
EHR technology, and to avoid the Medicare payment adjustments that will
ensue if they fail to do so are noted by a placeholder in the
accounting statement. We are not able to explicitly define the universe
of those additional costs, nor specify what the high or low

[[Page 1990]]

range might be. We invite public comments that may inform additional
analysis on the subject of industry costs to implement EHR technology
at the final rule stage.
[GRAPHIC] [TIFF OMITTED] TP13JA10.036

    In accordance with the provisions of Executive Order 12866, this
proposed rule was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 412

    Administrative practice and procedure, Health facilities, Medicare,
Puerto Rico, Reporting and recordkeeping requirements.

42 CFR Part 413

    Health facilities, Kidney diseases, Medicare, Reporting and
recordkeeping requirements.

42 CFR Part 422

    Administrative practice and procedure, Health facilities, Health
maintenance organizations (HMO), Medicare, Penalties, Privacy,
Reporting and recordkeeping requirements.

42 CFR Part 495

    Administrative practice and procedure, Electronic health records,
Health facilities, Health professions, Health maintenance organizations
(HMO), Medicaid, Medicare, Penalties, Privacy, Reporting and
recordkeeping requirements.

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

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL
SERVICES

    1. The authority citation for part 412 continues to read as
follows:

    Authority:  Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).

Subpart D--Basic Methodology for Determining Prospective Payment
Federal Rates for Inpatient Operating Costs

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

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-fourth 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.
* * * * *

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

    3. The authority citation for part 413 continues to read as
follows:

    Authority:  Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i),
and (n), 1861(v), 1871, 1881, 1883, and 1886 of the Social Security
Act (42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), (i), and
(n), 1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww); and sec. 124 of
Public Law 106-133 (113 Stat. 1501A-332).

Subpart E--Payments to Providers

    4. Section 413.70 is amended by--
    A. Revising paragraph (a)(1).

[[Page 1991]]

    B. Adding new paragraphs (a)(5) and (a)(6).
    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; and
    (C) For cost reporting periods beginning in FY 2017 and each
subsequent fiscal year, 100 percent.
    (ii) A CAH may, on a case-by-case basis, be exempt from the
application of the adjustments made under this paragraph, if CMS or its
Medicare contractors determine, on an annual basis, that requiring the
CAH to become a qualifying CAH under 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.
    (iv) There is no administrative or judicial review under section
1869 of the Act, section 1878 of the Act, or otherwise of the
following:
    (A) The methodology and standards for determining the amount of
payment under paragraph (a)(5) of this section.
    (B) The methodology and standards for determining the amount of
payment adjustments made under this paragraph (a)(6).
    (C) The methodology and standards for determining a CAH to be a
qualifying CAH under Sec.  495.106 of this chapter.
    (D) The methodology and standards for determining if the hardship
exemption applies to a CAH under paragraph (a)(6)(ii) of this section.
    (E) The specification of the cost reporting periods, payment years,
or fiscal years as applied under this paragraph.
    (F) The calculation of reasonable costs under Sec.  495.106(c) of
this chapter.
* * * * *

PART 422--MEDICARE ADVANTAGE PROGRAM

    5. The authority citation for part 422 continues to read as
follows:

    Authority:  Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).

Subpart G--Payments to Medicare Advantage Organizations

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

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

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

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.
* * * * *
    9. Section 422.322 is amended by--
    A. Adding paragraph (a)(3).
    B. Revising paragraph (b).

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 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

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

[[Page 1992]]

PART 495--STANDARDS FOR THE ELECTRONIC HEALTH RECORD TECHNOLOGY
INCENTIVE PROGRAM

Subpart A--General Provisions
Sec.
495.2 Basis and purpose.
495.4 Definitions.
495.6 Meaningful use objectives measures for EPs, eligible
hospitals, and CAHs.
495.8 Demonstration of meaningful use criteria
495.10 Participation requirements for EPs and eligible hospitals,
and qualifying CAHs.
Subpart B--Requirements Specific to the Medicare Program
495.100 Definitions.
495.102 Incentive payments to EPs.
495.104 Incentive payments to eligible hospitals.
495.106 Incentive payments to CAHs.
495.108 Posting of required information.
Subpart C--Requirements Specific to Medicare Advantage (MA)
Organizations
495.200 Definitions.
495.202 Identification of qualifying MA organizations, MA-EPs, and
MA-affiliated eligible hospitals.
495.204 Incentive payments to qualifying MA organizations for MA-EPs
and hospitals.
495.206 Timeframe for payment to qualifying MA organizations.
495.208 Avoiding duplicate payment.
495.210 Meaningful user attestation.
495.212 Limitation on review.
Subpart D--Requirements Specific to the Medicaid Program
495.300 Basis and purpose.
495.302 Definitions.
495.304 Medicaid provider scope and eligibility.
495.306 Establishing patient volume.
495.308 Net average allowable costs as the basis for determining the
incentive payment.
495.310 Medicaid provider incentive payments.
495.312 Process for payments.
495.314 Activities required to receive an incentive payment.
495.316 State monitoring and reporting regarding activities required
to receive an incentive payment.
495.318 State responsibilities for receiving FFP.
495.320 FFP for payments to Medicaid providers.
495.322 FFP for reasonable administrative expenses.
495.324 Prior approval conditions.
495.326 Disallowance of Federal financial participation (FFP).
495.328 Request for reconsideration of adverse determination.
495.330 Termination of Federal financial participation (FFP) for
failure to provide access to information.
495.332 State Medicaid (HIT) plan requirements.
495.334 State self-assessment requirements.
495.336 Health information technology planning advance planning
document requirements (HIT PAPD).
495.338 Health information technology implementation advance
planning document requirements (HIT IAPD).
495.340 As-needed HIT PAPD update and as-needed HIT IAPD update
requirements.
495.342 Annual HIT IAPD requirements.
495.344 Approval of the State Medicaid HIT plan, the HIT PAPD and
update, the HIT IAPD and update, and the annual HIT IAPD.
495.346 Access to systems and records.
495.348 Procurement standards.
495.350 State Medicaid agency attestations.
495.352 Reporting requirements.
495.354 Rules for charging equipment.
495.356 Nondiscrimination requirements.
495.358 Cost allocation plans.
495.360 Software and ownership rights.
495.362 Retroactive approval of FFP with an effective date of
February 18, 2009.
495.364 Review and assessment of administrative activities and
expenses of Medicaid provider health information technology adoption
and operation.
495.366 Financial oversight and monitoring of expenditures.
495.368 Combating fraud and abuse.
495.370 Appeals process for a Medicaid provider receiving electronic
health record incentive payments.

    Authority:  Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).

Subpart A--General Provisions

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 physicians and other professionals who adopt
and meaningfully use certified electronic health record technology.
    (b) Section 1853(1) of the Act to provide incentive payments to
Medicare Advantage organizations for their affiliated professionals who
meaningfully use certified EHR technology and meet certain other
requirements.
    (c) Section 1886(n) of the Act by establishing incentives payments
for the meaningful use of certified EHR technology by subsection (d)
hospitals, as defined under section 1886(d)(1)(B) of the Act,
participating in Medicare FFS program.
    (d) Section 1814(l) of the Act to provide an incentive payment to
critical access hospitals who meaningfully use certified EHR technology
based on the hospitals' reasonable costs.
    (e) Section 1853(m) of the Act to provide incentive payments to MA
organizations for certain affiliated hospitals that meaningfully use
certified EHR technology.
    (f) Sections 1903(a)(3)(F) and 1903(t) of the Act to provide 100
percent Federal financial participation (FFP) to States for incentive
payments to certain eligible providers participating in the Medicaid
program to purchase, implement, and operate (including support services
and training for staff) certified EHR technology and 90 percent FFP for
State administrative expenses related to such incentive payments.
    (g) Sections 1848(a)(7), 1853(l)(4), 1886(b)(3)(ix)(1), and
1853(m)(4) of the Act, providing for payment reductions for inpatient
services furnished on or after October 1, 2014 to Medicare
beneficiaries by hospitals that are not meaningful users of certified
electronic health record technology, and for covered professional
services furnished on or after January 1, 2015 to Medicare
beneficiaries by physicians and other professionals who are not
meaningful users of certified electronic health record technology.

Sec.  495.4  Definitions.

    In this part, unless otherwise indicated--
    Certified electronic health record technology means a qualified EHR
that meets the certification requirements specified in 45 CFR 170.102.
    Critical access hospital (CAH) means a facility that has been
certified as a critical access hospital under section 1820(e) of the
Act and for which Medicare payment is made under section 1814(l) of the
Act for inpatient services and under section 1834(g) of the Act for
outpatient services.
    EHR reporting period means either of the following:
    (1) For an EP--
    (i) For the first payment year, any continuous 90-day period within
a calendar year;
    (ii) For the second, third, fourth, fifth or sixth payment year,
the calendar year.
    (2) For an eligible hospital or a CAH--
    (i) For the first payment year, any continuous 90-day period within
a fiscal year; and
    (ii) For the second, third, fourth, fifth or sixth payment year,
the fiscal year.
    Eligible hospital means an eligible hospital as defined under 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.
    Fifth payment year means the fifth payment year that the EP,
eligible hospital or CAH receives an incentive payment under this part.

[[Page 1993]]

    First payment year means the first payment year that the EP,
eligible hospital or CAH receives an incentive payment under this part.
    Fourth payment year means the fourth payment year that the EP,
eligible hospital or CAH receives an incentive payment under this part.
    Hospital-based EP is an EP (as defined under this section) who
furnishes 90 percent or more of his or her covered professional
services in the CY preceding the payment year in a hospital setting. A
setting is considered a hospital setting if it is identified by the
codes used in the HIPAA standard transactions that identifies the site
of service as an inpatient hospital, outpatient hospital, or emergency
room.
    Meaningful EHR user means--
    (1) An EP, eligible hospital or CAH that, for an EHR reporting
period for a payment year, demonstrates in accordance with Sec.  495.8
meaningful use of certified EHR technology by meeting the applicable
objectives and associated measures under Sec.  495.6; and
    (2) A Medicaid EP or Medicaid eligible hospital, that meets
paragraph (1) of this definition and any additional criteria for
meaningful use imposed by the State and approved by CMS under Sec.
495.316 and Sec.  495.332.
    Payment year means--
    (1) For an EP other than a Medicaid EP, a calendar year beginning
with CY 2011; and
    (2) For a CAH or an eligible hospital other than a Medicaid
eligible hospital, a Federal fiscal year beginning with FY 2011.
    (3) For a Medicaid EP,
    (i) The timeframe specified in paragraph (1) of this definition; or
    (ii) In accordance with subpart D of this part and with CMS
approval, CY 2010.
    (4) For a Medicaid eligible hospital,
    (i) The timeframe specified in paragraph (2) of this definition; or
    (ii) In accordance with subpart D of the part and with CMS
approval, FY2010.
    Qualified EHR means an electronic record of health related
information on an individual that includes patient demographic and
clinical health information, such as medical history and problem lists;
and has the capacity to meet all of the following:
    (1) Provide clinical decision support.
    (2) Support physician order entry.
    (3) Capture and query information relevant to health care quality.
    (4) To exchange electronic health information with, and integrate
such information from other sources.
    Second payment year means the second payment year that the EP,
eligible hospital or CAH receives an incentive payment under this part.
    Sixth payment year means the sixth payment year that the EP,
eligible hospital or CAH receives an incentive payment under this part.
    Third payment year means the third payment year that the EP,
eligible hospital or CAH receives an incentive payment under this part.

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 paragraph
(a)(2) of this section, EPs must meet all objectives and associated
measures of the Stage 1 criteria specified in paragraphs (c) and (d) of
this section to receive an incentive payment.
    (2) Exceptions for Medicaid EPs--(i) Exception for Medicaid EPs
receiving payment in CY 2010. If CMS has approved a State's request to
begin providing incentive payments to EPs in CY 2010 for adopting,
implementing or upgrading certified EHR technology, the objectives and
associated measures of the Stage 1 criteria specified in paragraphs (c)
and (d) are applicable to an EP whose second payment year is CY 2011.
    (ii) Exception for Medicaid EPs who adopt, implement or upgrade in
their first payment year. For Medicaid EPs who adopt, implement, or
upgrade certified EHR technology in their first payment year, the
meaningful use objectives and associated measures of the Stage 1
criteria specified in paragraphs (c) and (d) apply beginning with the
second payment year, and do not apply to the first payment year.
    (b) Stage 1 criteria for eligible hospitals and CAHs--(1) General
rule regarding Stage 1 criteria for meaningful use for eligible
hospitals or CAHs. Except as specified in paragraph (b)(2) of this
section, eligible hospitals and CAHs must meet all objectives and
associated measures of the Stage 1 criteria specified in paragraphs (c)
and (e) of this section to receive an incentive payment.
    (2) Exception for Medicaid eligible hospitals. For Medicaid
eligible hospitals who adopt, implement, or upgrade certified EHR
technology in their first payment year, the meaningful use objectives
and associated measures of the Stage 1 criteria specified in paragraphs
(c) and (e) apply beginning with the second payment year.
    (c) Stage 1 criteria for EPs and eligible hospitals or CAHs. An EP,
eligible hospital or CAH must satisfy the following objectives and
associated measures:
    (1)(i) Objective. Implement drug-drug, drug-allergy, drug-formulary
checks.
    (ii) Measure. The EP, eligible hospital or CAH has enabled this
functionality.
    (2)(i) Objective. Maintain an up-to-date problem list of current
and active diagnoses based on ICD-9-CM or SNOMED CT [reg].
    (ii) Measure. At least 80 percent of all unique patients seen by
the EP or admitted to an eligible hospital or CAH have at least one
entry or an indication of none recorded as structured data.
    (3)(i) Objective. Maintain active medication list.
    (ii) Measure. At least 80 percent of all unique patients seen by
the EP or admitted by the eligible hospital or CAH have at least one
entry (or an indication of ``none'' if the patient is not currently
prescribed any medication) recorded as structured data.
    (4)(i) Objective. Maintain active medication allergy list.
    (ii) Measure. At least 80 percent of all unique patients seen by
the EP or admitted to the eligible hospital or CAH have at least one
entry (or an indication of ``none'' if the patient has no medication
allergies) recorded as structured data.
    (5)(i) Objective. Record the following demographics:
    (A) Preferred language.
    (B) Insurance type.
    (C) Gender.
    (D) Race.
    (E) Ethnicity.
    (F) Date of birth.
    (G) For eligible hospitals or CAHs, the date and cause of death in
the event of mortality.
    (ii) Measure. At least 80 percent of all unique patients seen by
the EP or admitted to the eligible hospital or CAH have the
demographics specified in paragraphs (c)(5)(i)(A) through (G) of this
section recorded as structured data.
    (6)(i) Objective. (A) Record and chart changes in the following
vital signs:
    (1) Height.
    (2) Weight.
    (3) Blood pressure.
    (B) Calculate and display the body mass index (BMI) for patients 2
years and older.
    (C) Plot and display growth charts for children 2 to 20 years
including body mass index.
    (ii) Measure. For at least 80 percent of all unique patients age 2
years or older seen by the EP or admitted to the eligible hospital,
record blood pressure and BMI and plot the growth chart for children
age 2 to 20 years old.
    (7)(i) Objective. Record smoking status for patients 13 years old
or older.

[[Page 1994]]

    (ii) Measure. At least 80 percent of all unique patients 13 years
old or older seen by the EP or admitted to the eligible hospital or CAH
have ``smoking status'' recorded.
    (8)(i) Objective. Incorporate clinical lab-test results into EHR as
structured data.
    (ii) Measure. At least 50 percent of all clinical lab tests results
ordered by the EP or authorized provider of the hospital during the EHR
reporting period whose results are either in a positive/negative or
numerical format are incorporated in certified EHR technology as
structured data.
    (9)(i) Objective. Generate lists of patients by specific conditions
to use for quality improvement, reduction of disparities, research and
outreach.
    (ii) Measure. Generate at least one report listing patients of the
EP, eligible hospital or CAH with a specific condition.
    (10)(i) Objective. Implement five clinical decision support rules
relevant to specialty or high clinical priority, including for
diagnostic test ordering, along with the ability to track compliance
with those rules.
    (ii) Measure. Implement five clinical decision support rules
relevant to the clinical quality metrics reported under this subpart.
    (11)(i) Objective. Check insurance eligibility electronically from
public and private payers.
    (ii) Measure. Insurance eligibility is checked electronically for
at least 80 percent of all unique patients seen by the EP or admitted
to the eligible hospital or CAH.
    (12)(i) Objective. Submit claims electronically to public and
private payers.
    (ii) Measure. At least 80 percent of all claims filed
electronically by the EP or the eligible hospital or CAH.
    (13)(i) Objective. Perform medication reconciliation at relevant
encounters and each transition of care.
    (ii) Measure. Perform medication reconciliation for at least 80
percent of relevant encounters and transitions of care.
    (14)(i) Objective. Provide summary care record for each transition
of care and referral.
    (ii) Measure. Provide summary of care record for at least 80
percent of transitions of care and referrals.
    (15)(i) Objective: Capability to submit electronic data to
immunization registries and actual submission where required and
accepted.
    (ii) Measure: Performed at least one test of certified EHR
technology's capability to submit electronic data to immunization
registries.
    (16)(i) Objective. Capability to provide electronic syndromic
surveillance data to public health agencies and actual transmission
according to applicable law and practice.
    (ii) Measure. Performed at least one test of certified EHR
technology's capacity to provide electronic syndromic surveillance data
to public health agencies (unless none of the public health agencies to
which the EP, eligible hospital or CAH submits such information have
the capacity to receive the information electronically).
    (17)(i) Objective. Protect electronic health information created or
maintained by certified EHR technology through the implementation of
appropriate technical capabilities.
    (ii) Measure. Conduct or review a security risk analysis in
accordance with the requirements under 45 CFR 164.308(a)(1) and
implement security updates as necessary.
    (d) Additional Stage 1 criteria for EPs. An EP must meet the
following objectives and associated measures:
    (1)(i) Objective. Use computerized provider order entry (CPOE).
    (ii) Measure. CPOE is used for at least 80 percent of all orders.
    (2)(i) Objective. Generate and transmit permissible prescriptions
electronically (eRx).
    (ii) Measure. At least 75 percent of all permissible prescriptions
written by the EP are transmitted electronically using certified EHR
technology.
    (3)(i) Objective. Report ambulatory quality measures to CMS or, in
the case of Medicaid EPs, the States.
    (ii) Measure. Successfully report to CMS (or, in the case of
Medicaid EPs, the States) clinical quality measures in the form and
manner specified by CMS.
    (4)(i) Objective. Send reminders to patients per patient preference
for preventive/follow-up care.
    (ii) Measure. Reminder sent to at least 50 percent of all unique
patients seen by the EP that are 50 years of age and over.
    (5)(i) Objective. Provide patients with an electronic copy of their
health information (including diagnostic test results, problem list,
medication lists, and allergies) upon request.
    (ii) Measure. At least 80 percent of all patient requests for an
electronic copy of their health information are provided it within 48
hours.
    (6)(i) Objective. Provide patients with timely electronic access to
their health information (including diagnostic test results, problem
list, medication lists, and allergies) within 96 hours of the
information being available to the EP.
    (ii) Measure. At least 10 percent of all unique patients seen by
the EP are provided timely electronic access to their health
information.
    (7)(i) Objective. Provide clinical summaries to patients for each
office visit.
    (ii) Measure. Clinical summaries provided to patients for at least
80 percent of all office visits.
    (8)(i) Objective. Capability to exchange key clinical information
among providers of care and patient authorized entities electronically.
    (ii) Measure. Perform at least one test of certified EHR
technology's capacity to electronically exchange key clinical
information.
    (e) Additional Stage 1 criteria for eligible hospitals or CAHs.
Eligible hospitals or CAHs must meet the following objectives and
associated measures:
    (1)(i) Objective. Use computerized provider order entry (CPOE) for
orders (any type) directly entered by authorizing provider (for
example, MD, DO, RN, PA, NP).
    (ii) Measure. CPOE is used for at least 10 percent of all orders.
    (2)(i) Objective. Report hospital quality measures to CMS or, in
the case of Medicaid eligible hospitals, the States.
    (ii) Measure. Successfully report to CMS (or, in the case of
Medicaid eligible hospitals, the States) clinical quality measures in
the form and manner specified by CMS.
    (3)(i) Objective. Provide patients with an electronic copy of their
health information (including diagnostic test results, problem list,
medication lists, allergies, discharge summary, and procedures), upon
request.
    (ii) Measure. At least 80 percent of all patient requests for an
electronic copy of their health information are provided it within 48
hours
    (4)(i) Objective. Provide patients with an electronic copy of their
discharge instructions and procedures at time of discharge, upon
request.
    (ii) Measure. At least 80 percent of all patients who are
discharged from an eligible hospital or CAH and who request an
electronic copy of their discharge instructions and procedures are
provided it.
    (5)(i) Objective. Capability to exchange key clinical information
(for example, discharge summary, procedures, problem list, medication
list, allergies, and diagnostic test results) among providers of care
and patient-authorized entities electronically.
    (ii) Measure. Performed at least one test of certified EHR
technology's capacity to electronically exchange key clinical
information.
    (6)(i) Objective. Capability to provide electronic submission of
reportable lab results (as required by State or local

[[Page 1995]]

law) to public health agencies and actual submission where it can be
received.
    (ii) Measure. Performed at least one test of certified EHR
technology capacity to provide electronic submission of reportable lab
results to public health agencies (unless none of the public health
agencies to which the eligible hospital submits such information have
the capacity to receive the information electronically).

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) Attest, through a secure mechanism, in a manner specified by
CMS (or for a Medicaid EP, in a manner specified by the State), that
during the EHR reporting period, the EP used certified EHR technology,
and specify the technology used.
    (ii) Attest, through a secure mechanism, in a manner specified by
CMS (or for a Medicaid EP, in a manner specified by the State), that
during the EHR reporting period, the EP satisfied each of the
applicable objectives and associated measures under Sec.  495.6 of this
part. The EP must specify the EHR reporting period and provide the
result of each applicable measure for all patients seen during the EHR
reporting period for which a selected measure is applicable.
    (iii) For Medicaid EPs, if, in accordance with Sec.  495.316 and
Sec.  495.332, CMS has approved a State's additional criteria for
meaningful use, demonstrate meeting such criteria using the method
approved by CMS.
    (iv) Exception for Medicaid EPs. If a Medicaid EP has adopted,
implemented or upgraded certified EHR technology described in Sec.
495.4 of this subpart, the provider must demonstrate meaningful use in
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) Attest, through a secure mechanism, in a manner specified by
CMS (or for a Medicaid EP, in a manner specified by the State) that
during the EHR reporting period, the EP used certified EHR technology
and specify the technology used.
    (ii) Attest, through a secure mechanism, in a manner specified by
CMS (or for a Medicaid EP, in a manner specified by the State), that
during the EHR reporting period, the EP satisfied each of the
applicable objectives and associated measures under Sec.  495.6, except
Sec.  495.6(d)(3) ``Report ambulatory quality measures to CMS or, in
the case of Medicaid EPs, the states.''
    (iii) For Sec.  495.6(d)(3), ``Report ambulatory quality measures
to CMS or, in the case of Medicaid EPs, the States'', report
electronically to CMS (or in the case of Medicaid EPs, the States)
clinical quality information in the form and manner specified by CMS.
    (iv) For Medicaid EPs, if, in accordance with Sec.  495.316 and
Sec.  495.332, CMS has approved a State's additional criteria for
meaningful use, demonstrate meeting such criteria using the method
approved by CMS.
    (b) Demonstration by eligible hospitals and CAHs. To successfully
demonstrate meaningful use an eligible hospital or CAH must the
following requirements:
    (1) For FY 2011--
    (i) Attest, through a secure mechanism, in a manner specified by
CMS (or for a Medicaid eligible hospital, in a manner specified by the
State), that during the EHR reporting period, the eligible hospital or
CAH used certified EHR and specify the technology used.
    (ii) Attest, through a secure mechanism, in a manner specified by
CMS (or for a Medicaid eligible hospital, in a manner specified by the
State), that during the EHR reporting period, the eligible hospital or
CAH satisfied each of the applicable objectives and associated measures
under Sec.  495.6. The eligible hospital or CAH must specify the EHR
reporting period and provide the result of each applicable measure for
all patients admitted to the eligible hospital during the EHR reporting
period for which a selected measure is applicable.
    (iii) Exception for Medicaid eligible hospitals. If a Medicaid
eligible hospital has adopted, implemented or upgraded certified EHR
technology for the first payment year, the eligible hospital must
demonstrate meaningful use in the second payment year, see Sec.  495.6
and Sec.  495.8.
    (iv) For hospitals participating in the Medicaid EHR incentive
program, if, in accordance with Sec.  495.316 and Sec.  495.332, CMS
has approved a State's additional criteria for meaningful use,
demonstrate meeting such criteria using the method approved by CMS.
    (2) For FY 2012 and subsequent years must--
    (i) Attest, through a secure mechanism, in a manner specified by
CMS (or for a Medicaid eligible hospital, in a manner specified by the
State), that during the EHR reporting period, the eligible hospital or
CAH used certified EHR and specify the technology used.
    (ii) Attest, through a secure mechanism, in a manner specified by
CMS (or for a Medicaid eligible hospital, in a manner specified by the
State), that during the EHR reporting period, the eligible hospital or
CAH satisfied each of the applicable objectives and associated measures
under Sec.  495.6 except Sec.  495.6(e)(2). The eligible hospital or
CAH must specify the EHR reporting period and provide the result of
each applicable measure, except for Sec.  495.6(e)(2) ``Report hospital
quality measures to CMS or, in the case of Medicaid eligible hospitals,
the States:''
    (iii) For Sec.  495.6(e)(2) ``Report hospital clinical quality
measures to CMS or, in the case of Medicaid eligible hospitals, the
States,'' report electronically to CMS (or in the case of Medicaid
eligible hospitals, the States), clinical quality measures in the form
and manner specified by CMS.
    (iv) For Medicaid hospitals if, in accordance with Sec.  495.316
and Sec.  495.332, CMS has approved a State's additional criteria for
meaningful use, demonstrate meeting such criteria using the method
approved by CMS.
    (c) Review of meaningful use. (1) CMS may review an EP, eligible
hospital or CAH's demonstration of meaningful use.
    (2) EPs, eligible hospitals, and CAHs must keep documentation
supporting their demonstration of meaningful use for 10 years.

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.
    (b) In addition to the information submitted under paragraph (a) of
this section, an eligible hospital or CAH, must, in the first payment
year, submit in a manner specified by CMS its CMS Certification Number
(CCN) and its Taxpayer Identification Number (TIN).
    (c) Subject to paragraph (f) of this section, in addition to the
information submitted under paragraph (a) of this section, an EP must
submit in a manner specified by CMS, the Taxpayer Identification Number
(TIN) to which the EP's incentive payment should be made.
    (d) In the event the information specified in paragraphs (a)
through (c) of this section as previously submitted to CMS is no longer
accurate, the EP or

[[Page 1996]]

eligible hospital must provide updated information to CMS or the State
on a timely basis in the manner specified by CMS or the State.
    (e) An EP that qualifies as both a Medicaid EP and Medicare EP--
    (1) Must notify CMS in the manner specified by CMS as to whether he
or she elects to participate in the Medicare or the Medicaid EHR
incentive program.
    (2) Is limited to switching between programs one time, and only for
payment years 2014 and before;
    (3) Must, for each payment year, meet all of the Medicare or
Medicaid applicable requirements, including applicable patient volume
requirements, for the program he or she chooses to participate in;
    (4) Is limited to receiving, in total, the maximum payments the EP
would receive under the Medicaid EHR program, as described in subpart D
of this part;
    (5) Is placed in the payment year the EP would have been in, had
the EP not switched programs. For example, an EP that begins receiving
Medicaid incentive payments in 2011, and then switches to the Medicare
program for 2012, is in his or her second payment year in 2012.
    (f) Limitations on incentive payment reassignments. Section
1842(b)(6)(A) of the Act allows for the reassignment of payments under
Medicare to an employer or entity with which the EP has a contractual
arrangement allowing the employer or entity to bill and receive payment
for the EP's covered professional services.
    (1) EPs are permitted to reassign their incentive payments to their
employer or to an entity with which they have a contractual
arrangement, consistent with all rules governing reassignments
including part 424, subpart F of this chapter.
    (2) Each EP may only reassign the entire amount of the incentive
payment to one employer or entity.

Subpart B--Requirements Specific to the Medicare Program

Sec.  495.100  Definitions.

    In this subpart unless otherwise indicated--
    Covered professional services means services furnished by an
eligible professional for which payment is made under, or is based on,
the Medicare physician fee schedule as provided in section 1848(k)(3)
of the Act.
    Eligible hospital means a hospital subject to the prospective
payment system specified in Sec.  412.1(a)(1) of this chapter,
excluding those hospitals specified in Sec.  412.23 of this chapter.
    Eligible professional (EP) means a physician as defined in section
1861(r) of the Act, which includes all of the following types of
professionals:
    (1) A doctor of medicine or osteopathy.
    (2) A doctor of dental surgery or medicine.
    (3) A doctor of podiatric medicine.
    (4) A doctor of optometry.
    (5) A chiropractor.
    Geographic health professional shortage area (HPSA) means an area
that is designated by the Secretary under section 332(a)(1)(A) of the
PHS Act as of December 31 of the year prior to the payment year as
having a shortage of health professionals.
    Qualifying CAH means a CAH that is a meaningful EHR user for the
EHR reporting period for a cost reporting period beginning during a
payment year.
    Qualifying eligible professional (EP) means an EP who is a
meaningful EHR user for the EHR reporting period for a payment year and
who is not a hospital-based EP.
    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 shall be paid to a qualifying eligible professional (or to an
employer or entity in the cases described in section 1842(b)(6)(A) of
the Act) for a payment year an amount equal 75 percent of the estimated
allowed charges under the physician fee schedule (established under
section 1848 of the Act) for the covered professional services
furnished by the EP during the payment year.
    (2) For purposes of this paragraph (a), the estimated allowed
charges for the qualifying EP's covered professional services during
the payment year are determined based on claims submitted no later than
2 months after the end of the payment year, and, in the case of a
qualifying EP who furnishes covered professional services in more than
one practice, are determined based on claims submitted for the EP's
covered professional services across all such practices.
    (b) Limitations on amounts of incentive payments.
    (1) Except as otherwise provided in paragraph (b)(2) and paragraph
(c) of this section, the amount of the incentive payment that a
qualifying EP can receive for each payment year is limited to the
following amounts:
    (i) For the first payment year, $15,000 (or, if the first payment
year for such qualifying eligible professional is 2011 or 2012,
$18,000).
    (ii) For the second payment year, $12,000.
    (iii) For the third payment year, $8,000.
    (iv) For the fourth payment year, $4,000.
    (v) For the fifth payment year, $2,000.
    (vi) For any succeeding payment year for such professional, $0.
    (2)(i) If the first payment year for a qualifying eligible
professional is 2014, then the amount for a payment year for a
qualifying EP is the same as the amount specified for such payment year
for a qualifying EP whose first payment year is 2013.
    (ii) If the first payment year for a qualifying EP is after 2014,
then the applicable amount specified in this paragraph for such
professional for such year and any subsequent year must be $0.
     (c) Increase in incentive payment limit for EPs who predominantly
furnish services in a geographic HPSA. In the case of a qualifying
eligible professional who in the year prior to the payment year
furnishes more than 50 percent of his or her covered professional
services in a geographic HPSA, the annual incentive payment limit
determined under paragraph (b) of this section is to be increased by 10
percent.
    (d) Payment adjustment effective in CY 2015 and subsequent years
for nonqualifying EPs.
    (1) Subject to paragraph (d)(3) of this section, beginning in 2015,
for covered professional services furnished by an EP who is not a
qualifying EP or a 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) and the Medicare physician fee schedule
amount for such services.
    (2) Applicable percent. Applicable percent is as follows:
    (i) For 2015, 99 percent if the eligible professional is not
subject to the payment adjustment for an eligible professional who is
not a successful electronic prescriber under section 1848(a)(5) of the
Act, or 98 percent if the eligible professional is subject to the
payment adjustment for an eligible professional who is not a successful
electronic prescriber under section 1848(a)(5) of the Act).
    (ii) For 2016, 98 percent.
    (iii) For 2017 and each subsequent year, 97 percent.
    (3) Significant hardship exception. The Secretary may, on a case-
by-case basis, exempt an EP who is not a qualifying EP from the
application of the payment adjustment under

[[Page 1997]]

paragraph (d)(1) of this section, if the Secretary determines that
compliance with the requirement for being a meaningful EHR user would
result in a significant hardship for the EP. The Secretary's
determination to grant an EP an exemption under this paragraph (d)(3)
may be renewed on an annual basis, provided that in no case may an EP
be granted an exemption under this paragraph (d)(3) for more than 5
years.

Sec.  495.104  Incentive payments to eligible hospitals.

    (a) General rule. A qualifying hospital (as defined in this
subpart) shall receive the special incentive payment as determined
under the formulas described in paragraph (c) of this section for the
period specified in paragraph (b) of this section.
    (b) Transition periods. Subject to the payment formula specified in
paragraph (e) of this section, qualifying hospitals may receive
incentive payments during transition periods which comprise the
following fiscal years:
    (1) Hospitals whose first payment year is FY 2011 may receive such
payments for FYs 2011 through 2014.
    (2) Hospitals whose first payment year is FY 2012 may receive such
payments for FYs 2012 through 2015.
    (3) Hospitals whose first payment year is FY 2013 may receive such
payments for FYs 2013 through 2016.
    (4) Hospitals whose first payment year is FY 2014 may receive such
payments for FY 2014 through 2016.
    (5) Hospitals whose first payment year is FY 2015 may receive such
payments for FY 2015 through 2017.
    (c) Payment methodology. (1) The incentive payment for each payment
year is calculated as the product of the following:
    (i) The initial amount determined under paragraph (c)(3) of this
section;
    (ii) The Medicare share fraction determined under paragraph (c)(4)
of this section; and
    (iii) The transition factor determined under paragraph (c)(5) of
this section.
    (2) Interim and final payments. CMS uses data on hospital
discharges (as that term is defined in Sec.  412.4(a) of this chapter),
Medicare Part A inpatient-bed-days, Medicare Part C inpatient-bed-days,
and total inpatient-bed-days, from the hospital cost report for the
hospital fiscal year that ends during the Federal fiscal year prior to
the fiscal year that serves as the payment year as the basis for making
preliminary incentive payments. Final payments are determined at the
time of settling the hospital cost report for the hospital fiscal year
that ends during the payment year, and settled on the basis of data
from that cost reporting period.
    (3) Initial amount. The initial amount is equal to one of the
following:
    (i) For each hospital with 1,149 discharges or fewer during the
fiscal year prior to the payment year, $2,000,000.
    (ii) For each hospital with at least 1,150 but no more 23,000
discharges during the payment year, $2,000,000 + [$200 x (n - 1,149)],
where n is the number of discharges for the hospital during the fiscal
year prior to the payment year.
    (iii) For each hospital with more than 23,000 discharges for the
fiscal year prior to the payment year, $6,370,400.
    (4) Medicare share fraction-- (i) General. (A) CMS determines the
Medicare share fraction by using the number of Medicare Part A,
Medicare Part C, and total inpatient-bed-days using data from the
Medicare cost report as specified by CMS.
    (B) CMS computes the denominator of the Medicare share fraction
using the charity care charges reported on the hospital's Medicare cost
report.
    (ii) The Medicare share fraction is the ratio of--
    (A) A numerator which is the sum of--
    (1) The number of inpatient-bed-days during the period which are
attributable to individuals with respect to whom payment may be made
under Part A; and
    (2) The number of inpatient-bed-days during the period which are
attributable to individuals who are enrolled with a Medicare Advantage
organization (as defined in Sec.  422.2 of this chapter).
    (iii) A denominator which is the product of--
    (A) The total number of inpatient-bed-days during the period; and
    (B) The total amount of the eligible hospital's charges during the
period, not including any charges that are attributable to charity care
divided by the estimated total amount of the hospitals charges during
the period.
    (5) Transition factor. For purposes of the payment formula, the
transition factor is as follows:
    (i) For hospitals whose first payment year is FY 2011--
    (A) 1 for FY 2011;
    (B) \3/4\ for FY 2012;
    (C) \1/2\ for FY 2013; and
    (D) \1/4\ for FY 2014.
    (ii) Hospitals whose first payment year is FY 2012--
    (A) 1 for FY 2012;
    (B) \3/4\ for FY 2013;
    (C) \1/2\ for FY 2014; and
    (D) \1/4\ for FY 2015;
    (iii) Hospitals whose first payment year is FY 2013--
    (A) 1 for FY 2013;
    (B) \3/4\ for FY 2014;
    (C) \1/2\ for FY 2015; and
    (D) \1/4\ for FY 2016.
    (iv) Hospitals whose first payment year is FY 2014--
    (A) \3/4\ for FY 2014;
    (B) \1/2\ for FY 2015; and
    (C) \1/4\ for FY 2016.
    (v) Hospitals whose first payment year is FY 2015--
    (A) \1/2\ for FY 2015; and
    (B) \1/4\ for FY 2016.

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.
    (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

[[Page 1998]]

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)(3) of this subpart and 20 percentage
points.
    (d) Incentive payments made to CAHs. (1) The amount of the
incentive payment made to a qualifying CAH under this section
represents the expensing and payment of the reasonable costs computed
in paragraph (c) of this section in a single payment year and, as
specified in 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
qualified CAH under this section;
    (3) Specification of EHR reporting periods, cost reporting periods,
payment years, and fiscal years used to compute the CAH incentive
payment as specified in this section; and
    (4) Identification of the reasonable costs used to compute the CAH
incentive payment under paragraph (c) of this section including any
reconciliation of the CAH incentive payment amount made under paragraph
(d) of this section.

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 addresses.
    (3) Business phone number.
    (b) CMS posts, on its Internet Web site, the following information
for qualifying MA organizations that receive an incentive payment under
subpart C of this part--
    (1) The information specified in paragraph (a) of this section for
each of the qualifying MA organization's MA plan information; and
    (2) The information specified in paragraph (a) of this section for
each of the qualifying MA organization's MA EPs and MA-affiliated
eligible hospitals.

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

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 subsection to a qualifying MA
organization.
    Inpatient-bed-days is defined in the same manner and is used in the
same manner as that term is defined and used for purposes of
implementing section 4201(a) of the American Recovery and Reinvestment
Act of 2009 with respect to the Medicare FFS hospital EHR incentive
program in 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.
    Payment year means -
    (1) For a qualifying MA EP, a calendar year beginning with CY 2011
and ending with CY 2016; and
    (2) For an eligible hospital, a Federal fiscal year beginning with
FY 2011 and ending with FY 2016.
    Qualifying MA-affiliated eligible hospital means an eligible
hospital under section 1886(n)(6) of the Act that is under common
corporate governance with a qualifying MA organization and that of the
Medicare beneficiaries it serves, more than two-thirds are Medicare
individuals enrolled under MA plans, and that is a meaningful user of
certified EHR technology as defined by 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 is only be made under section 1886(n) of the Act
and not under this section.
    Qualifying MA EP means all of the following:
    (1) A physician (as described in section 1861(r) of the Act),
including a doctor of medicine or osteopathy who is either of the
following:
    (i) Employed by a qualifying MA organization.
    (ii) Employed by, or is a partner of, an entity that through a
contract with a qualifying MA organization furnishes at least 80
percent of the entity's Medicare patient care services to enrollees of
such organization.
    (2) Furnishes at least 80 percent of his or her professional
services covered under Title XVIII to enrollees of the qualifying MA
organization.
    (3) Furnishes, on average, at least 20 hours per week of patient
care services to enrollees of the qualifying MA organization during the
EHR reporting period.
    (4) Is a meaningful user of certified EHR technology in accordance
with Sec.  495.4 of this part.

[[Page 1999]]

    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 2010 (for plan year 2011), MA organizations
seeking reimbursement for qualifying MA EPs and qualifying MA-
affiliated eligible hospitals under the MA EHR incentive program are
required to identify themselves to CMS in a form and manner specified
by CMS, as part of submissions of initial bids under section
1854(a)(1)(A) of the Act.
    (2) Qualifying MA organizations offering MA HMO plans, absent
evidence to the contrary, are deemed to meet the definition of HMO in
42 U.S.C. 300gg-91(b)(3)-section 2791(b)(3) of the PHS Act.
    (3) Qualifying MA organizations offering MA plan types other than
HMOs, must attest to the fact that they meet the definition of HMO in
42 U.S.C. 300gg-91(b)(3)-section 2791(b)(3) of the PHS Act.
    (4) Beginning with bids due in June 2014 (for plan year 2015), all
MA organizations with potentially qualifying MA EPs or potentially
qualifying MA-affiliated eligible hospitals under the MA EHR incentive
program must identify themselves to CMS in a form and manner specified
by CMS, as part of submissions of initial bids under section
1854(a)(1)(A) of the Act.
    (b) Identification of qualifying MA EPs and qualifying MA-
affiliated eligible hospitals.
    (1) A qualifying MA organization, as part of its initial bid
starting with plan year 2011, must make a preliminary identification of
potentially qualifying MA EPs and potentially qualifying MA-affiliated
eligible hospitals for which the organization is seeking incentive
payments.
    (2) A qualifying MA organization must provide CMS with the
following for each MA EP or eligible hospital:
    (i) The MA EP's or MA-affiliated eligible hospital's name.
    (ii) The address of the MA EP's practice or MA-affiliated eligible
hospital's location.
    (iii) NPI.
    (iv) An attestation by MA organization specifying that the MA EP or
MA-affiliated eligible hospital meets the eligibility criteria.
    (3) Final identification of potentially qualifying MA EP or MA-
affiliated eligible hospital must be made by the end of the payment
year as defined in Sec.  495.200 for which MA EHR incentive payments
are being sought.
    (4) Beginning plan year 2015 and for subsequent plan years, all
qualifying MA organizations, as part of their initial bids in June for
the following plan year must--
    (i) Identify potentially qualifying MA EPs and potentially
qualifying 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 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 30
days of the close of the calendar year, the aggregate annual amount of
revenue attributable to providing services that would otherwise be
covered as professional services under Part B received by each
qualifying MA EP for enrollees in MA plans of the MA organization in
the payment year.
    (3) CMS calculates the incentive amount for the MA organization for
each qualifying MA EP as an amount equal to 75 percent of the reported
annual revenue specified in paragraph (b)(2) of this section, up to the
maximum amounts specified under 1848 (o)(1)(B) of the Act.
    (4) For qualifying MA EPs who are compensated on a salaried basis,
CMS requires the qualifying MA organization to develop a methodology
for estimating the portion of each qualifying MA EP's salary
attributable to providing services that would otherwise be covered as
professional services under Part B to MA plan enrollees of the MA
organization in the payment year. The methodology--
    (i) Must be approved by CMS; and
    (ii) May include an additional amount related to overhead, where
appropriate, estimated to account for the MA-enrollee related Part B
practice costs of the salaried qualifying MA EP.
    (5) For qualifying MA EPs who are not salaried, qualifying MA
organizations must obtain attestations from such qualifying MA EPs as
to the amount of compensation received by such EPs for MA plan
enrollees of the MA organization. The organizations must submit to CMS
compensation information for each such MA EP based on such
attestations.
    (c) Amount payable to qualifying MA organization for qualifying MA-
affiliated eligible hospitals.
    (1) 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. 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.

[[Page 2000]]

    (2) To the extent data are available, qualifying MA organizations
must receive hospital incentive payments through their affiliated
hospitals under the Medicare FFS EHR hospital incentive program, rather
than through the MA EHR hospital incentive program.
    (d) Payment to qualifying MA organizations. CMS makes payment to
qualifying MA organizations for qualifying MA EPs only under the MA EHR
incentive program and not under the Medicare FFS EHR incentive program
to the extent an EP has earned less than the maximum incentive payment
for the same period under the Medicare FFS EHR incentive program.
    (e) Payment review under MA. To ensure the accuracy of the
incentive payments, CMS conducts selected compliance reviews of
qualifying MA organizations to ensure that EPs and eligible hospitals
for which such qualifying organizations received incentive payments
were meaningful users of certified EHR technology in accordance with
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 10 years from the
date such payments are made with respect to a given payment year.
    (4) Payments that result from incorrect or fraudulent attestations,
cost data, or any other submission required to establish eligibility or
to qualify for such payment, will be recouped by CMS from the MA
organization.

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 be 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
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.  495.210(b) is
provided to CMS.

Sec.  495.210  Meaningful user attestation.

    (a) Qualifying MA organizations are required to attest, in a form
and manner specified by CMS, that each qualifying MA EP and qualifying
MA-affiliated eligible hospitals is a meaningful EHR user.
    (b) Qualifying MA organizations are required to attest within 30
days after the close of a calendar year whether each qualifying MA EP
is a meaningful EHR user.
    (c) Qualifying MA organizations are required to attest within 30
days after close of the FY whether each qualifying MA-affiliated
eligible hospital is a meaningful user.

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

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
    Adopt, implement or upgrade means--
    (1) Install or commence utilization of certified EHR technology
capable of

[[Page 2001]]

meeting meaningful use requirements; or
    (2) Expand the available functionality of certified EHR technology
capable of meeting meaningful use requirements at the practice site,
including staffing, maintenance, and training.
    Children's hospital means a separately certified children's
hospital, either freestanding or hospital-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 EHR or by enabling the exchange and use
of electronic clinical and administrative data between participating
providers, in a secure manner, including maintaining the physical and
organizational relationship integral to the adoption of certified EHR
technology by EPs.
    Health information technology planning advance planning document
(HIT PAPD) means a plan of action that requests FFP and approval to
accomplish the planning necessary for a State agency to determine the
need for and plan the acquisition of HIT equipment or services or both
and to acquire information necessary to prepare a HIT implementation
advanced planning document or request for proposal to implement the
State Medicaid HIT plan.
    HIT implementation advance planning document (HIT IAPD) means a
plan of action that requests FFP and approval to acquire and implement
the proposed State Medicaid HIT plan services or equipment or both.
    Medicaid information technology architecture (MITA) is both an
initiative and a framework. It is a national framework to support
improved systems development and health care management for the
Medicaid enterprise. It is an initiative to establish national
guidelines for technologies and processes that enable improved program
administration for the Medicaid enterprise. The MITA initiative
includes an architecture framework, models, processes, and planning
guidelines for enabling State Medicaid enterprises to meet common
objectives with the framework while supporting unique local needs.
    Medicaid management information system (MMIS) means a mechanized
claims processing and information retrieval system--referred to as
Medicaid Management Information Systems (MMIS)--that meets specified
requirements and that the Department has found (among other things) is
compatible with the claims processing and information retrieval systems
used in the administration of the Medicare program. The objectives of
the MMIS are to include claims processing and retrieval of utilization
and management information necessary for program administration and
audit and must coordinate with other mechanized systems and subsystems
that perform other functions, such as eligibility determination.
    Needy individuals mean individuals that meet one of following:
    (1) Received medical assistance from Medicaid or the Children's
Health Insurance Program.
    (2) Were furnished uncompensated care by the provider.
    (3) Were furnished services at either no cost or reduced cost based
on a sliding scale determined by the individuals' ability to pay.
    Patient volume means the minimum participation threshold where the
numerator is the total number of Medicaid patients or needy individuals
treated in any 90-day period in the most recent calendar year preceding
the reporting and the denominator is all patient encounters in the same
90-day period. Represented as follows:
    [Total (Medicaid) treated in any 90-day period in the most recent
calendar year preceding the reporting/Total patients in same 90-day
period] * 100; or
    [Total (Needy Individuals) treated in any 90-day period in the most
recent calendar year preceding the reporting/Total patients in same 90-
day period] * 100.
    Practices predominantly means an EP for whom the clinical location
for over 50 percent of his or her total patient encounters over a
period of 6 months in the most recent calendar year occurs at a
federally qualified health center or rural health clinic.
    Service oriented architecture or service component based
architecture means organizing and developing information technology
capabilities as collaborating services that interact with each other
based on open standards.
    State Medicaid health information technology plan (SMHP) means a
document that describes the State's current and future HIT activities.
    State self-assessment means a process that a State uses to review
its strategic goals and objectives, measure its current business
processes and capabilities against the (MITA) business capabilities and
ultimately develops target capabilities to transform its Medicaid
enterprise to be consistent with the MITA principles.

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 a EHR
incentive payment is limited to the following:
    (1) A physician.
    (2) A dentist.
    (3) A certified nurse-midwife.
    (4) A nurse practitioner.
    (5) A physician assistant practicing in a Federally Qualified
Health Center or Rural Health Clinic, which is so led by a physician
assistant.
    (c) Additional requirements for the Medicaid EP. To qualify for an
EHR incentive payment, a Medicaid EP must not be hospital-based as
defined Sec.  495.4 of this subpart and meet one of the following
criteria for each year for which the EP seeks an EHR incentive payment:
    (1) Have a minimum 30 percent patient volume attributable to
individuals receiving Medicaid.
    (2) Have a minimum 20 percent patient volume attributable to
individuals receiving Medicaid, and be a pediatrician.
    (3) Practice predominantly in a FQHC or RHC and have a minimum 30
percent patient volume attributable to needy individuals, as defined at
Sec.  495.302.
    (d) Exception. The hospital-based exclusion in paragraph (c) does
not apply to the Medicaid-EP qualifying based on practicing
predominantly at a FQHC or RHC.
    (e) Additional requirement for the eligible hospital. To be
eligible for an EHR incentive payment for each year for which the
eligible hospital seeks an EHR incentive payment the eligible hospital
must meet the following criteria:
    (1) An acute care hospital must have at least a 10 percent Medicaid
patient volume for each year for which the hospital seeks an EHR
incentive payment.
    (2) A children's hospital is exempt from meeting a patient volume
threshold.

[[Page 2002]]

Sec.  495.306  Establishing patient volume.

    (a) A Medicaid provider must annually meet one of the following to
establish patient volume:
    (1)(i) General rule for a professional. Except as specified in
paragraph (a)(1)(ii) of this section, a Medicaid EP must attest that a
minimum of 30 percent of his or her patient encounters over any
continuous 90-day period in the most recent calendar year was covered
by Medicaid.
    (ii) Optional exception. (A) A pediatrician must attest that a
minimum of 20 percent of his or her patient encounters over any
continuous 90-day period in the most recent calendar year was covered
by Medicaid.
    (B) A Medicaid EP practicing predominantly in a Federally Qualified
Health Center or Rural Health Clinic must attest that a minimum of 30
percent of his or her patient encounters over any continuous 90-day
period in the most recent calendar year was with needy individuals as
defined in Sec.  495.302 of this subpart.
    (2) General rule for an acute care hospital. An acute care hospital
must attest that a minimum of 10 percent of all patient encounters over
any continuous 90-day period in the most recent calendar year was
covered by Medicaid.
    (b) If a State has an alternative approach to the established
timeframe for measuring patient volume, the State must submit the
approach to CMS for review and prior approval. CMS determines if it is
an acceptable alternative.
    (1) To be considered for approval, the alternative approach must be
justified and have a verifiable data source.
    (2) If CMS approves the State's alternative approach to the
established timeframe for measuring patient volume, such timeframe
would apply to Medicaid EPs and eligible hospitals, instead of the 90-
day timeframe described in paragraph (a) of this section.
    (c) To establish patient volume for an EP who practices
predominantly in a Federally Qualified Health Center or Rural Health
Clinic by use of uncompensated care data, an adjustment to the
uncompensated care data must be completed so that it is an appropriate
proxy for charity care, including a downward adjustment to eliminate
bad debt data from uncompensated care.
    (d) An individual enrolled in a managed care organization, pre-paid
inpatient health plan, or pre-paid ambulatory health plan under part
438 of this chapter must be included in the calculation to establish
patient volume.

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 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) General rule for a Medicaid EP. The Medicaid EP's incentive
payments are subject to the following limitations:
    (1) First payment year. A first year payment may not exceed 85
percent of the maximum threshold of $25,000, which equals $21,250.
    (2) Subsequent annual payment years. A subsequent annual payment
may not exceed 85 percent of the maximum threshold of $10,000, which
equals $8,500.
    (i) Payments after the first year may continue for a maximum of 5
years.
    (ii) Medicaid EPs may participate for a total of 6 years and may
not begin receiving payments any later than CY 2016.
    (3) Maximum incentives. In no case will the maximum incentive over
a 6-year period exceed $63,750.
    (4) Limitation. For a Medicaid EP who is a pediatrician described
in paragraph (b) of this section is as follows:
    (i) The maximum payment in the first year is further reduced to
two-thirds, which equals $14,167.
    (ii) The maximum payment in subsequent years is further reduced to
two-thirds, which equals $5,667.
    (iii) In no case will the maximum incentive payment to a
pediatrician under this limitation exceed $42,500 over a 6-year period.
    (b) Optional exception for pediatricians. A pediatrician described
in this paragraph is a Medicaid EP who does not meet the 30 percent
patient volume requirements described in Sec.  495.304 and Sec.
495.306, but who meets the 20 percent patient volume requirements
described in such sections.
    (c) General rule for EPs. An EP may only receive an incentive
payment from either Medicare or Medicaid but not both.
    (d) Optional exception for EPs. An EP may change his or her EHR
incentive payment program election once, consistent with Sec.  495.10
of this part but such change in election must occur for payments by
occurring before CY 2015.
    (e) General rule for Medicaid EPs and hospitals. An Medicaid EP or
hospital may receive an incentive payment from only one State in a
payment year.
    (f) Incentive payments to hospitals. Incentive payments to an
eligible hospital under this subpart are subject to all of the
following conditions:
    (1) The payment is provided over a minimum of a 3-year period and
maximum of a 6-year period.
    (2) The total incentive payment received over all payment years of
the program is not greater than the aggregate EHR incentive amount, as
calculated under paragraph (g) of this section.
    (3) No single incentive payment for a payment year may exceed 50
percent of the aggregate EHR hospital incentive amount calculated under
paragraph (g) of this section for an individual hospital.
    (4) No incentive payments over a 2-year period may exceed 90
percent of the aggregate EHR hospital incentive amount calculated under
paragraph (g) of this section for an individual hospital.
    (5) No hospital may begin receiving incentive payments for any year
after 2016.
    (6) A multi-site hospital with one CMS Certification Number is
considered one hospital for purposes of calculating payment.
    (g) Calculation of the aggregate EHR hospital incentive amount. The
aggregate EHR hospital incentive amount is calculated as the product of
the (overall EHR amount) times (the Medicaid Share).
    (1) Overall EHR amount. The overall EHR amount for an eligible
hospital is based upon a theoretical 4 years of payment the hospital
would receive based, for each of such 4 years, upon the product of the
following:
    (i) Initial amount. The initial amount is equal to the sum of--
    (A) The base amount which is set at $2,000,000 for each of the
theoretical 4 years; plus
    (B) The discharge related amount for a 12-month period selected by
the State but with the Federal fiscal year before the hospital's fiscal
year that serves as the payment year. The discharge related amount is
the sum of the following, with discharges over the 12-month period and
based upon the total discharges for the eligible hospital (regardless
of any source of payment):
    (1) For the first through 1,149th discharge, $0.

[[Page 2003]]

    (2) For the 1,150th through the 23,000th discharge, $200.
    (3) For any discharge greater than the 23,000th, $0.
    (C) For purposes of calculating the discharge-related amount under
paragraph (g)(1)(i)(B) of this section, for the last 3 of the
theoretical 4 years of payment, discharges are assumed to increase by
the provider's average annual rate of growth for the most recent 3
years for which data are available per year. Negative rates of growth
must be applied as such.
    (ii) Medicare share. The Medicare share, which equals 1.
    (iii) Transition factor. The transition factor which equals as
follows:
    (A) For the first of the theoretical 4 years, 1.
    (B) For the second of the theoretical 4 years, \3/4\.
    (C) For the third of the theoretical 4 years, \1/2\.
    (D) For the fourth of the theoretical 4 years, \1/4\.
    (2) Medicaid share. The Medicaid share specified under this
paragraph for an eligible hospital is equal to a fraction--
    (i) The numerator of which is the sum (for the 12 month period
selected by the State and with respect to the eligible hospital) of--
    (A) The estimated number of inpatient-bed-days which are
attributable to Medicaid individuals; and
    (B) The estimated number of inpatient-bed-days which are
attributable to individuals who are enrolled in a managed care
organization, a pre-paid inpatient health plan, or a pre-paid
ambulatory health plan under part 438 of this chapter; and
    (ii) The denominator of which is the product of--
    (A) The estimated total number of inpatient-bed-days with respect
to the eligible hospital during such period; and
    (B) The estimated total amount of the eligible hospital's charges
during such period, not including any charges that are attributable to
charity care, divided by the estimated total amount of the hospital's
charges during such period.
    (iii) In computing inpatient-bed-days under the previous sentence,
a State may not include estimated 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 hospital's data are not available on charity care
necessary to calculate the portion of the formula specified in
paragraph (g)(2)(ii)(B) of this section, the State may use that
provider's data on uncompensated care to determine an appropriate proxy
for charity care, but must include a downward adjustment to eliminate
bad debt from uncompensated care data. The State must use auditable
data sources.
    (i) Deeming. In the absence of the data necessary, with respect to
an eligible hospital the amount described in paragraph (g)(2)(ii)(B)
must be deemed to be 1. In the absence of data, with respect to an
eligible hospital, necessary to compute the amount described in
paragraph (g)(2)(i)(B) of this section, the amount under such clause
must be deemed to be 0.
    (j) Dual eligibility for incentives payments. A hospital may
receive incentive payments from both Medicare and Medicaid if it meets
all eligibility criteria.
    (k) Payments to State-designated entities. Payments to entities
promoting the adoption of certified EHR technology as designated by the
State must meet the following requirements:
    (1) A Medicaid EP may designate his or her incentive payment to an
entity promoting the adoption of certified EHR technology, as defined
in 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 designating annual payments and includes information
about the verification mechanism the State will use to ensure that the
assignment is voluntary and that no more than 5 percent of the annual
payment is retained by the entity for costs not related to certified
EHR technology.
    (2) [Reserved]

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.
    (d) State disbursement. The State disburses an incentive payment to
the provider based on the criteria described in subpart A and this
subpart.
    (e) Timeframes. Payments are disbursed consistent with the
following timeframes for each type of Medicaid eligible provider:
    (1) Medicaid EPs. States disburse payments consistent with the
calendar year on a rolling basis following the end of the EHR reporting
period for the payment year.
    (2) Medicaid eligible hospitals. States disburse payments
consistent with the Federal fiscal year on a rolling basis following
the end of the EHR reporting period for the payment year.

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 EHR reporting period for a payment
year, it has adopted, implemented, or upgraded certified EHR
technology, as defined in Sec.  495.302; or
    (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:

[[Page 2004]]

    (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.  495.350, the State is
required to submit to CMS annual reports on the following:
    (1) Provider adoption, implementation, or upgrade of certified EHR
technology activities and payments; and
    (2) Aggregated, de-identified meaningful use data.
    (d)(1) The annual report described in paragraph (c) of this section
must include, but is not limited to the following:
    (i) The number, type, and practice location(s) of providers who
qualified for an incentive payment on the basis of having adopted,
implemented, or upgraded certified EHR technology;
    (ii) Aggregated data tables representing the provider adoption,
implementation, and upgrade of certified EHR technology;
    (iii) The number, type, and practice location(s) of providers who
qualified for an incentive payment on the basis of meaningful use of
certified EHR technology;
    (iv) Aggregated data tables representing the provider's clinical
quality measures data; and
    (v) A description and quantitative data on how its incentive
payment program addressed individuals with unique needs such as
children.
    (2) The State may propose additional, not substitute, measures for
meaningful use of certified EHR technology, subject to CMS prior
approval.
    (e) State failure to submit the required reports to CMS may result
in discontinued or disallowed funding.

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 the Department, that
the State is--
    (a) Using the funds provided for the purposes of administering
incentive payments to providers under this program, including tracking
of meaningful use by Medicaid providers of EHR technology;
    (b) Conducting adequate oversight of the program, including routine
tracking of meaningful use attestations and reporting mechanisms; and
    (c) Pursuing initiatives to encourage the adoption of certified EHR
technology to promote health care quality and the exchange of health
care information, subject to applicable laws and regulations governing
such exchange.

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 use of certified EHR
technology with proposed Federal financial participation.
    (b) To receive 90 percent match, each State must receive prior
approval for all of the following:
    (1) The HIT planning advance planning document and the
implementation advance planning document.
    (2) A request for proposal and any contract that a State may
utilize to complete activities under this subpart, unless specifically
exempted by the Department, prior to release of the request for
proposal or prior to execution of a contract.
    (3) For contract amendments, unless specifically exempted by the
Department, before execution of the contract amendment, involving
contract cost increases exceeding $100,000 or contract time extensions
of more than 60 days.
    (c) Failure to submit any of the information specified in paragraph
(b) of this section to the satisfaction of the Department may result in
disapproval or suspension of project funding.
    (d) A State must obtain prior written approval from the Department
of its justification for a sole source acquisition, when it plans to
acquire non-competitively from a nongovernmental source HIT equipment
or services, with proposed FFP under this subpart if the total State
and Federal acquisition cost is more than $100,000.

Sec.  495.326  Disallowance of Federal financial participation (FFP).

    If the Department finds that any acquisition approved or modified
under the provisions of this subpart fails to comply with the criteria,
requirements, and other undertakings described in the approved HIT
planning advance planning document and HIT implementation advance
planning document to the detriment of the proper and efficient
operation of the Medicaid program, payment of FFP may be disallowed. In
the case of a suspension of approval of a HIT planning advance planning
document and HIT implementation advance planning document, see 45 CFR
205.37(c) and 307.40(a).

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 Federal financial participation (FFP) for
failure to provide access to information.

    (a) The Department terminates FFP at any time if the Medicaid
agency fails to provide State and Federal representatives with full
access to records relating to HIT planning and implementation efforts,
and the systems used to interoperate with electronic HIT, including on-
site inspection.
    (b) The Department may request such access at any time to determine
whether the conditions in this subpart are being met.

Sec.  495.332  State Medicaid (HIT) plan requirements.

    Each State Medicaid HIT plan must include all of the following
elements:
    (a) State systems. For State systems, interoperability, and the
current and future visions:
    (1) A baseline assessment of the current HIT landscape environment
in the State including the inventory of existing HIT in the State. The
assessment must include a comprehensive--

[[Page 2005]]

    (i) Description of the HIT ``as-is'' landscape;
    (ii) Description of the HIT ``to-be'' landscape; and
    (iii) HIT roadmap and strategic plan for the next 5 years.
    (2) A description of how the State Medicaid HIT plan will be
planned, designed, developed and implemented, including how it will be
implemented in accordance with the Medicaid Information Technology
Architecture (MITA) principles as described in the Medicaid Information
Technology Framework 2.0. The MITA initiative--
    (i) Establishes national guidelines for technologies and processes
that enable improved program administration for the Medicaid
enterprise;
    (ii) Includes business, information and technology architectures
that provide an overall framework for interoperability, as well as
processes and planning guidelines for enabling State Medicaid
enterprises to meet common objectives within the framework while
supporting unique local needs; and
    (iii) Is important to the design and development of State EHR
incentive payment systems.
    (3) A description of how intrastate systems, including the Medicaid
Management Information System (MMIS) and other automated mechanized
claims processing and information retrieval systems--
    (i) Have been considered in developing a HIT solution; and
    (ii) A plan that incorporates the design, development, and
implementation phases for interoperability of such State systems with a
description of how any planned systems enhancements support overall
State and Medicaid goals.
    (4) A description of data-sharing components of HIT solutions.
    (5) A description of how each State will promote secure data
exchange, where permissible under the Health Insurance Portability and
Accountability Act (HIPAA). HIPAA and other requirements included in
the Recovery Act.
    (6) A description of how each State will promote the use of data
and technical standards to enhance data consistency and data sharing
through common data-access mechanisms.
    (7) A description of how each State will support integration of
clinical and administrative data.
    (8) A description of the process in place for ensuring improvements
in health outcomes, clinical quality, or efficiency resulting from the
adoption of certified EHR technology by recipients of Medicaid
incentive payments and a methodology for verifying such information.
    (9) A description of the process in place for ensuring that any
certified EHR technology used as the basis for a payment incentive to
Medicaid providers is compatible with State or Federal administrative
management systems, including the MMIS or other automated claims
processing system or information retrieval system and a methodology for
verifying such information.
    (10) A description of how each State will adopt national data
standards for health and data exchange and open standards for technical
solutions as they become available.
    (11) A description of how the State intends to address the needs of
underserved and vulnerable populations such as children, individuals
with chronic conditions, Title IV-E foster care children, individuals
in long-term care settings and the aged, blind, and disabled. This
description must address the following:
    (i) Person centered goals and objectives and shared decision-
making.
    (ii) Coordination of care across multiple service providers,
funding sources, settings, and patient conditions.
    (iii) Universal design to ensure access by people with disabilities
and older Americans.
    (iv) Self-direction including budget development and expenditure
tracking.
    (v) Institutional discharge planning and diversion activities that
are tied to community based service availability.
    (b) Eligibility. For eligibility, a description of the process in
place for all of the following:
    (1) For ensuring that each EP and eligible hospital meets all
provider enrollment eligibility criteria upon enrollment and re-
enrollment to the Medicaid EHR payment incentive program.
    (2) For ensuring patient volume consistent with the criteria in
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 physician,
pediatrician, nurse practitioner, certified nurse midwife or dentist
and a methodology in place used to verify such information.
    (3) For ensuring that the EP is a provider who meets patient volume
consistent with the criteria in Sec.  495.304 and a methodology in
place used to verify such information.
    (4) For ensuring that each Medicaid EP is not hospital-based and a
methodology in place used to verify such information.
    (5) To ensure that a hospital eligible for incentive payments has
demonstrated an average length of stay of 25 days or less and that a
methodology for verifying such information is available.
    (c) Monitoring and validation. For monitoring and validation of
information, States must include the following:
    (1) A description of the process in place for ensuring that,
because of CMS' and the States' oversight responsibilities, all
provider information for attestations and any information added to the
CMS Single Provider Repository including all information related to
patient volume, NPI, Tax identification number (TIN), meaningful use,
efforts to adopt, implement, or upgrade are all true and accurate and
that any concealment or falsification of a material fact related to the
attestation may result in prosecution under Federal and State laws and
a methodology in place used to verify such information.
    (2) A description of the process in place for ensuring that the EP
or eligible hospital is eligible to receive an incentive payment
consistent with the criteria outlined in 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 reporting period,
and that they have adopted, implemented, or upgraded certified EHR
technology during the reporting period and a description of the
methodology in place used to verify such information.
    (4) A description of the process in place for capturing clinical
quality data from each EP or eligible hospital and a description of the
methodology in place used to verify such information.
    (5) A description of the process in place for monitoring the
compliance of providers coming onto the program with different
requirements depending upon the year and a methodology for verifying
such information.
    (6) A list of the specific actions planned to implement the HIT EHR
incentive program, including a description and organizational charts
for workgroups within State government including external partners.
    (7) A description of the process in place to ensure that no amounts
higher than 100 percent of FFP will be claimed for reimbursement of
expenditures for State payments to Medicaid eligible providers for the
certified EHR technology incentive payment program

[[Page 2006]]

and a methodology for verifying such information is available.
    (8) A description of the process in place to ensure that no amounts
higher than 90 percent of FFP will be claimed for administrative
expenses in administering the certified EHR technology incentive
payment program and a methodology for verifying such information is
available.
    (9) A description of the process and methodology for ensuring and
verifying such information that includes the following:
    (i) Amounts received under section 1903(a)(3)(F) of the Act with
respect to payments to a Medicaid EP or eligible hospital are paid
directly to such provider (or to an employer or facility to which such
provider has assigned payments) without any deduction or rebate.
    (ii) All assignments to an entity promoting the adoption of
certified EHR technology, as designated by the State, are voluntary for
the Medicaid EP involved.
    (iii) Entities promoting the adoption of certified EHR technology
do not retain more than 5 percent of such payments for costs not
related to certified EHR technology (and support services including
maintenance and training) that is for, or is necessary for the
operation of, such technology.
    (10) A description of the process in place for ensuring that each
Medicaid EP or eligible hospital that collects an EHR payment incentive
has collected a payment incentive from only one State even if the
provider is licensed to practice in multiple States and a methodology
for verifying such information.
    (11)(i) A description of the process in place for ensuring that
each EEP or eligible hospital that wishes to participate in the EHR
incentive payment program will receive a NPI; and
    (ii) A description of how the NPI will be used to coordinate with
the CMS so that the EP will choose only one program from which to
receive the incentive payment and the hospital payments are tracked
accordingly.
    (12) A description of the process in place for ensuring that each
EP or eligible hospital who wishes to participate in the EHR incentive
payment program will provide a TIN to the State for purposes of the
incentive payment.
    (d) Payments. Payments must provide descriptions of the following
processes that are in place:
    (1) The process in place for ensuring that there is no duplication
of Medicare and Medicaid incentive payments to EPs and a methodology
for verifying such information.
    (2) The process in place to ensure that any existing fiscal
relationships with providers to disburse the incentive payments through
Medicaid managed care plans does not result in payments that exceed 105
percent of the capitation rate, in order to comply with the Medicaid
managed care incentive payment rules at 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 that a
methodology for verifying such information is available.
    (4) The process in place to ensure that Medicaid EHR incentive
payments are made for no more than 6 years and that no EP or eligible
hospital begins receiving payments after 2016 and that a methodology
for verifying such information is available.
    (5) The process in place to ensure that Medicaid EHR incentive
payments are not paid at amounts higher than 85 percent of the net
average allowable cost of certified EHR technology and the yearly
maximum allowable payment thresholds and a methodology for verifying
such information is available.
    (6) The process in place to ensure that all hospital calculations
and hospital payment incentives are made consistent with the
requirements of this part and a methodology for verifying such
information is available.
    (7) The process in place to provide for the timely and accurate
payment of incentive payments to EPs and eligible hospitals, including
the time frame specified by the State to meet the timely payment
requirement.
    (8) The process in place and a methodology for verifying such
information to provide that any monies that have been paid
inappropriately as an improper payment or otherwise not in compliance
with this subpart will be recouped and FFP will be repaid.
    (e) For combating fraud and abuse and for provider appeals. (1) A
description of the process in place for a provider to appeal consistent
with the criteria described in 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(b).
    (2) (i) Additional requirements for qualifying a Medicaid provider
as a meaningful user of certified EHR technology consistent with Sec.
495.4 and Sec.  495.316(e) of this part.
    (ii) A State may propose additional meaningful use objectives
beyond the Federal standards at Sec.  495.6, if they do not require
additional functionality beyond that of certified electronic health
record technology. See also Sec.  495.316(e).
    (3) A plan for early implementation of incentive payments for a
provider who adopts, implements, or upgrades certified EHR technology
consistent with the Sec.  495.302 and Sec.  495.314.
    (i) An approvable plan must include mechanisms for making timely
and accurate payments.
    (ii) A State will require a provider to attest that they are not
receiving a payment in any other State.

Sec.  495.334  State self-assessment requirements.

    Each State must prepare a State self-assessment that meets the
following requirements:
    (a) List and prioritize the State's goals and objectives for HIT.
    (b) Define the State's current business model and map to the
Medicaid information technology architecture business process model.
    (c) Assess the State's current capabilities.
    (d) Determine the State's target capabilities.

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.

[[Page 2007]]

    (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.
    (i) A detailed payment listing file that--
    (1) Is in an electronic format that may be a field delimited ASCII
text file, a commonly used spreadsheet file, or a commonly used
database file; and
    (2) Shows each EP and eligible hospital for which the State will
provide for the payment of incentive payments, including the--
    (i) Name of the provider;
    (ii) National provider identifier of the provider;
    (iii) Type of provider as specified in Sec.  495.304;
    (iv) Planned annual payment amounts;
    (v) Total of planned payment amounts; and
    (vi) Calendar year of each planned annual payment amount.
    (j) A statement setting forth the security and interface
requirements to be employed for all State HIT systems, and related
systems, and the system failure and disaster recovery procedures
available.

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/IAPD and actual expenditures for the past
year.
    (f) A report of any approved or anticipated changes to the
allocation basis in the advance planning document's approved cost
methodology.
    (g) An updated detailed payment listing file in an electronic
format.

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.

    The Department does not approve any of these documents that do not
include all information required under this subpart.

Sec.  495.346  Access to systems and records.

    The State agency must allow the Department access to all records
and systems operated by the State in support of this program, including
cost records associated with approved administrative funding and
incentive payments to Medicaid providers. State records related to
contractors employed for the purpose of assisting with implementation
or oversight activities or providing assistance, at such intervals as
are deemed necessary by the Department to determine whether the
conditions for approval are being met and to determine the efficiency,
economy, and effectiveness of the program.

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

[[Page 2008]]

cost effective manner and in compliance with the provisions of
applicable Federal statutes and executive orders.
    (3) Apply when the cost of the procurement is treated as a direct
cost of an award.
    (b) Grantee responsibilities. The standards contained in this
section do not relieve the Grantee of the contractual responsibilities
arising under its contract(s).
    (1) The grantee is the responsible authority, without recourse to
the Departmental awarding agency, regarding the settlement and
satisfaction of all contractual and administrative issues arising out
of procurements entered into in support of an award or other agreement.
This includes disputes, claims, and protests of award, source
evaluation or other matters of a contractual nature.
    (2) Matters concerning violation of statute are to be referred to
such Federal, State or local authority as may have proper jurisdiction.
    (c) Codes of conduct. The grantee must maintain written standards
of conduct governing the performance of its employees engaged in the
award and administration of contracts.
    (1) No employee, officer, or agent must participate in the
selection, award, or administration of a contract supported by Federal
funds if a real or apparent conflict of interest would be involved.
    (2) Such a conflict would arise when the employee, officer, or
agent, or any member of his or her immediate family, his or her
partner, or an organization which employs or is about to employ any of
the parties indicated herein, has a financial or other interest in the
firm selected for an award.
    (3) The officers, employees, and agents of the grantee must neither
solicit nor accept gratuities, favors, or anything of monetary value
from contractors, or parties to subagreements.
    (4) Grantees may set standards for situations in which the
financial interest is not substantial or the gift is an unsolicited
item of nominal value.
    (5) The standards of conduct provide for disciplinary actions to be
applied for violations of such standards by officers, employers, or
agents of the grantees.
    (d) Competition. All procurement transactions must be conducted in
a manner to provide, to the maximum extent practical, open and free
competition.
    (1) The grantee must be alert to organizational conflicts of
interest as well as noncompetitive practices among contractors that may
restrict or eliminate competition or otherwise restrain trade.
    (2) In order to ensure objective contractor performance and
eliminate unfair competitive advantage, contractors that develop or
draft grant applications, or contract specifications, requirements,
statements of work, invitations for bids and requests for proposals
must be excluded from competing for such procurements.
    (3) Awards must be made to the bidder or offeror whose bid or offer
is responsive to the solicitation and is most advantageous to the
grantee, price, quality, and other factors considered.
    (4) Solicitations must clearly set forth all requirements that the
bidder or offeror must fulfill in order for the bid or offer to be
evaluated by the grantee.
    (5) Any and all bids or offers may be rejected when it is in the
grantee's interest to do so.
    (e) Procurement procedures. All grantees must establish written
procurement procedures. These procedures must provide, at a minimum,
the following:
    (1) Grantees avoid purchasing unnecessary items.
    (2) When appropriate, an analysis is made of lease and purchase
alternatives to determine which would be the most economical and
practical procurement for the grantee and the Federal government.
    (3) Solicitations for goods and services provide for all of the
following:
    (i) A clear and accurate description of the technical requirements
for the material, product or service to be procured. In competitive
procurements, such a description must not contain features which unduly
restrict competition.
    (ii) Requirements which the bidder or offer must fulfill and all
other factors to be used in evaluating bids or proposals.
    (iii) A description, whenever practicable, of technical
requirements in terms of functions to be performed or performance
required, including the range of acceptable characteristics or minimum
acceptable standards.
    (iv) The specific features of brand name or equal descriptions that
bidders are required to meet when such items are included in the
solicitation.
    (v) The acceptance, to the extent practicable and economically
feasible, of products and services dimensioned in the metric system of
measurement.
    (vi) Preference, to the extent practicable and economically
feasible, for products and services that conserve natural resources and
protect the environment and are energy efficient.
    (4) Positive efforts must be made by grantees to utilize small
businesses, minority-owned firms, and women's business enterprises,
whenever possible. Grantees of Departmental awards must take all of the
following steps to further this goal:
    (i) Ensure that small businesses, minority-owned firms, and women's
business enterprises are used to the fullest extent practicable.
    (ii) Make information on forthcoming opportunities available and
arrange time frames for purchases and contracts to encourage and
facilitate participation by small businesses, minority-owned firms, and
women's business enterprises.
    (iii) Consider in the contract process whether firms competing for
larger contracts intend to subcontract with small businesses, minority-
owned firms, and women's business enterprises.
    (iv) Encourage contracting with consortia of small businesses,
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 45 CFR part 76.
    (10) Some form of cost or price analysis must be made and
documented in the procurement files in connection with every
procurement action.
    (11) Price analysis may be accomplished in various ways, including
the comparison of price quotations submitted, market prices,

[[Page 2009]]

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 the Department that
amounts received with respect to sums expended that are attributable to
payments to a Medicaid provider for the adoption of EHR are paid
directly to such provider, or to an employer or facility to which such
provider has assigned payments, without any deduction or rebate.
    (b) State Medicaid agency attestations must be provided in
accordance with Sec.  433.74 of this chapter.

Sec.  495.352  Reporting requirements.

    Each State must submit to the Department on a quarterly basis a
progress report documenting specific implementation and oversight
activities performed during the quarter, including progress in
implementing the State's approved Medicaid HIT plan.

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 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. The Department reserves a royalty-free,
nonexclusive, and irrevocable license to reproduce, publish, or
otherwise use and to authorize others to use for Federal government
purposes, such software, modifications, and documentation.
    (c) Proprietary software. Proprietary operating/vendor software
packages such as software that is owned and licensed for use by third
parties, which are provided at established catalog or market prices and
sold or leased to the general public must not be subject to the
ownership provisions in paragraphs (a) and (b) of this section.
    (d) Limitation. Federal financial participation is not available
for proprietary applications software developed specifically for the
public assistance programs covered under this subpart.

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

[[Page 2010]]

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. Sec.  495.354 and 495.374, the State must annually collect and
verify information regarding the efforts to adopt, implement, or
upgrade certified EHR technology and the meaningful use of said
technology before making any payments to providers.
    (d) Claiming Federal reimbursement for State expenditures. Subject
to 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 Medicaid EHR incentive payments are made for no
more than 6 years or for any year starting after the year of 2015
unless the provider has been provided payment under paragraph (b)(1) of
this section for the previous year.
    (4) Subject to 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 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 42 CFR Sec.  455.15 and Sec.  455.21,
refer suspected cases of fraud and abuse to the Medicaid Fraud Control
Unit.
    (2) The State must take corrective action in the case of improper
EHR payment incentives to Medicaid providers.
    (b) Providers' statements regarding submission of documentation
containing falsification or concealment of a material fact on EHR
incentive payment documentation. On any forms on which a provider
submits information necessary to the determination of eligibility to
receive EHR incentive payments, the State must obtain the statement
that meet the following:
    (1) Is signed by the provider and contains the following statement:
``This is to certify that the foregoing information is true, accurate,
and complete. I understand that Medicaid EHR incentive payments
submitted under this provider number will be from

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Federal funds, and that any falsification, or concealment of a material
fact may be prosecuted under Federal and State laws.''
    (2) Appears directly above the claimant's signature, or if it is
printed on the reverse of the form, a reference to the statements must
appear immediately preceding the provider's signature.
    (3) Is resubmitted upon a change in provider representative.
    (4) Is updated as needed.
    (c) Overpayments. States must repay to CMS all Federal financial
participation received by providers identified as an overpayment
regardless or recoupment from such providers, within 60 days of
discovery of the overpayment, in accordance with sections 1903(a)(1),
(d)(2), and (d)(3) of the Act and part 433 Subpart F of the
regulations.
    (d) Complying with Federal laws and regulations. States must comply
with all Federal laws and regulations designed to prevent fraud, waste,
and abuse, including, but not limited to applicable provisions of
Federal criminal law, the False Claims Act (32 U.S.C. 3729 et seq.),
and the anti-kickback statute (section 1128B(b) of the Act).

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.

(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program, Program No. 93.778, Medical
Assistance Program.)

    Dated: November 13, 2009.
Charlene Frizzera,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: December 28, 2009.
Kathleen Sebelius,
Secretary.
[FR Doc. E9-31217 Filed 12-30-09; 4:15 pm]
BILLING CODE 4120-01-P
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