The Impact of the Economic

Recovery Act of 2009 on Healthcare

Alex Gerwer; Principal Partner, AKN
asg_akn@yahoo.com
December 18, 2009
 Healthcare Market Dynamics
Have Changed
• Government has strengthened their position as
the largest purchaser of healthcare services and
with it is coming a greater sense of public
accountability.
• There is a strong belief in the government that
health information technology holds the quality
key to higher quality, better use of our money,
and more accountability
 Potential benefits of health IT
• Improve the quality of health care
• Reduce medical errors
• Decrease health care costs
• Eliminate unnecessary duplication of tests
• Increase administrative efficiencies
• Decrease paperwork
• Expand access to affordable care
• Assist with the evaluation of health care quality,
efficacy, and value
• Help early detection of infectious disease
outbreaks around the country
• Improve tracking of chronic disease management
 The Investment in Health IT: The
Recovery Act of 2009
• $19 billion over 10 years
– promote the adoption and use of health
information technology and electronic health
records.
• $17 billion of that
– financial incentives for physicians and hospitals
 HITECH Finances
• $2B for HIT infrastructure, especially HIE
• $17.2B Medicare/Medicaid incentives to doctors and
hospitals for “ meaningful” use of certified HIT (net
after government projected savings)
• $4.7B for the National Telecommunications and
Information Administration's Broadband Technology
Opportunities Program
• $2.5B for the U.S. Department of Agriculture's Distance
Learning, Telemedicine, and Broadband Program
• $1.1B for comparative effectiveness grants from AHRQ,
NIH and HHS- does automation improve care
 HITECH Finances
• $1.5B for the community health centers through
the Health Resources and Services Administration;
• $500M for the Social Security Administration;
• $85M for the Indian Health Service; and
• $50M for the Veterans Benefits Administration
• Assorted “pockets” of HIT funding in state and
community funding allotments.
• $29.6B IN TOTAL (not counting local funding)
(Note- there is actually another $20B for Medicare Incentives
before government calculations for savings. The real total for
Health IT is about $50 B.)
 Incentives For Physicians
• Beginning in 2011, physicians can receive extra
Medicare payments for the meaningful use of a
certified EHR
• Adopt EHR in 2011 or 2012: $18,000 payment in 1st
year, additional per year
– $44,000 total if starting in 2011
• Adopt EHR in 2013: at least $15,000, with gradually
decreasing incentives until 2016.
– $27,000 total if starting in 2013
• Purchasing, installing, and implementing an EHR in a
medical office has been estimated to cost $40,000.
 Physician Incentives $17.2 B
“Meaningful Use of certified EHR technology
including e-prescribing Demonstrates EHR is
connected to provide electronic exchange of health
information improve quality and promote care
coordination
Able to report on clinical quality measures as
specified by the Secretary”
 Physician Incentives – Time Table
• Projected Minimum Incentives for Medicare and
Medicaid providers

• Year 1 - $18,000

• Year 2 - $12,000

• Year 3 - $8,000

• Year 4 - $4,000

• Year 5 - $2,000
 Physician Incentives - Breakdown
• Medicare incentives start at $44K for a 5 year
cycle.
• Medicaid incentives range up to $65K with a 30%
minimum payer base to qualify.
• Minimum for Medicare participation- must bill
125% of total incentive over five-year period of
incentive distribution.
• If you start reporting in 2012, you will lose $2000
for the length of the 5 year period
• If you start reporting in 2013, you will lose $7000
over the length of 5 year period.
 Physician Incentives- Details
• There are no penalties (for lack of adoption) for
Medicaid providers- you just forgo the incentives
• These incentives apply to all physicians servicing
Medicare and Medicaid patients as long as you are
meaningfully using a “certified” EMR so no bias
against doctors who are already automated.
• As soon as you are automated, you should begin
eprescribing and collecting your PQRI data as the
2% incentives will apply.
 A “Certified” EHR
• By the law, the government must produce a
final set of certified HIT standards by 12/31/09
• The current base of standards promulgated by
the Certification Commission on Health
Information Technology will probably be the
basis
•There will be necessity major additions to
address “meaningful use”
 Connection to a Health Exchange
(Interoperability)
• The ability to communicate between systems on
different IT platforms presumably from different
HIT providers
• There has not been a lot of evidence of this in
the health care sector and the certification
process is bound to be very heavily focused on
this requirement.
Electronic Prescribing (ePrescribing)
• The ability to prescribe medications
electronically by communication between a
medical provider’s computer and a pharmacy’s
computer
• There is currently a Medicare bonus for
physicians who attempt e-prescription on at
least 50% of eligible prescriptions to a
participating pharmacy
 Physician Incentives-Details
• If eligible professional predominantly furnishes
services in a Secretary-designated health
professional shortage area, amounts are
increased by 10% (25% if you are affiliated with
a critical access hospital).
• No incentives for initial adoption after 2014
• Doesn’t apply to hospital-based eligible
professionals (e.g. pathologist, anesthesiologist,
or emergency physician, who furnishes
substantially all services in a hospital setting
Healthcare Quality Gains It’s Rightful
Position
• While initial incentives are for reporting, in
short order pay be dependent upon quality
• This requires regular review and adjustments
to be sure physicians are working to goals
• The goal is for the American consumer and the
government to be able to measure what they
are buying- something few to hands around
 Health Quality Measure Reporting
• The sharing of key data on health outcomes
that help measure the quality of care be
delivered by a medical provider
• The key and probably least understood of all
the “meaningful use” criteria
• This is where the government will determine if
it is getting a “return on its investment” and if
our health care system is truly improving
through automation.
 Penalties For Physicians
• Financial penalties: In 2015, physicians who are
not using EHRs will lose 1% of their Medicare
fees, which will increase to 2% in 2016 and 3% in
2017.
• Medicaid: if patient mix is 30% or more Medicaid
patients – alternative subsidies through Medicaid
(must choose between Medicaid and Medicare
benefits)
• Incentive payments may be aggregated and paid
as a lump sum to staff-model or exclusive group-
model Medicare Advantage HMOs.
 Penalties start in January 1,
2015 for Medicare
Providers
Medicare Penalties
• 1% of your Medicare fee schedule - 2015
• 2% of your Medicare fee schedule - 2016
• 3% of your Medicare fee schedule – 2017
• For 2018 and beyond, if proportion of eligible
professionals who are meaningful users is less
than 75%, percentage shall increase by 1% from
percent in previous year but not be greater than
5%
 Other Legislative Provisions
• Secretary on a case-by-case basis, may exempt
an eligible professional from application of
payment adjustment (e.g. penalty) if
requirement would result in significant
hardship (e.g. rural area without sufficient
internet access)
• Exemption cannot exceed five years
 Other Legislative Provisions
• The Secretary shall select the quality measures
consistent with following:
– Preference to clinical quality measures that
have been endorsed under a contract with
the Secretary
– Prior to any measure being selected, it shall
be published in Federal Register for public
comment
 Public Disclosure
• CMS will post on its website the names,
addresses and phone numbers of eligible
addresses, professionals who are meaningful
EHR users and group practices receiving
incentive payments
 For Hospitals
• Hospitals demonstrating meaningful use of EHRs
in 2011
– one-time bonus of $2 million plus and an add on to
Medicare DRG payments, which would apply to every
admission (up to a designated max)
– then phase out over a 4 year period
• Hospitals may opt for a Medicaid incentive
program instead of Medicare payments.
• Hospitals will face penalties for not using EHRs by
2015 (cuts from Medicare payments).
Community Health Center Programs
• $1.5 billion to be distributed by HRSA
• Plan is to be ready by May 2009
• Only Federally Qualified Health Centers or groups of
these centers are eligible
• Primary Care Associations cannot apply for the money
but Health Center Controlled Networks (HCCN's) are
beneficial recipients
• Health Center Controlled Networks (HCCN's) or
the CHC version of an Health Information
Exchange will be prime recipients of this money
• Money will be released in several units over the
next few years
Community Health Center Programs-
continued
• FQHC providers- identified as physicians,
physician assistants, nurse midwives, nurse
practitioners and dentists- are eligible for the
Medicaid incentives outlined in previous slides as
long that they are treating a minimum 30%
Medicaid base.
• These incentives are significantly higher than
the Medicare awards
• All criteria for “meaningful use” apply here as
well
 Recovery Act:
Other Health IT Measures
• $2 billion for ONCHIT to put HIT support
systems in place
• $300 million to support the development of
health information exchange capabilities
• Grants to create regional technology centers
to help physicians and hospitals install EHRs
• Funds to train a workforce to assist with HIT
implementation
• Educational programs for medical students
• Grants and loans to states to assist with
adoption and interoperability
Protecting Health Care Information
• Extends privacy and security regulations of
HIPAA to businesses such as Google and
Microsoft, who have created their own
Personal Health Records
• Requires health care organizations to notify
patients when patient data have been
compromised
• Limits commercial use of information
 Remaining Issues
and Unanswered Questions
• The terms “certified EHR” and “meaningful use” have yet to
be defined, and these definitions will have significant
impact on physicians and hospitals
• The infrastructure for the development and
implementation of health IT will need to be in place well
before the 2011 start of the incentives program
• The Health IT incentives need to be accompanied by
payment reform so that improvements to quality via EHRs
get rewarded
• There need to be clear provisions for the delivery of
incentives to physicians who participate in physician
groups, medical groups, and independent practice
associations
 Hot Topics Over the Next 6 Months
• Community Health Center Grants
• Certification Process
• Definition of “Meaningful Use”
• Details around Privacy and Security of Health
Record
• Connection to personal health records
• Development of health information exchanges
 Overview of the Senate Bill
Key Elements of the bill:
• Cover the uninsured: Expands health insurance coverage to 31 million previously
uninsured Americans.
• Regulate the insurance industry: Prevent insurers from denying coverage based on
pre-existing conditions, dropping individuals who become ill and imposing caps on
health care spending.
• Help people afford insurance: Subsidize insurance premiums on a sliding-scale for
small businesses and the middle class.
• Support primary care: Investments in physician workforce expansion, including new
loan forgiveness programs, scholarships and National Health Service Corps funding -
for primary care.
• Payment reform: Payment reform that rewards value in health care delivery through
new pilot programs for the medical home and accountable care organizations.
• Investments in prevention and public health: Establishes fund of $7 billion dedicated
to prevention and public health related activities.
• Control Cost: Multiple cost control mechanisms with the potential to reduce national
health care spending by $683 billion over a decade.
 Selected References
1. “Stimulating the Adoption of Health Information
Technology” David Blumenthal, The New England
Journal of Medicine, April 9, 2009.
http://content.nejm.org/cgi/content/full/NEJMp0901
592

2. “Use of Electronic Health Records in U.S. Hospitals”,

Ashish K. Jha et al, The New England Journal of
Medicine, April 16, 2009.
http://content.nejm.org/cgi/content/full/NEJMsa090
0592

3. Office of the National Coordinator for Health

Information Technology: http://healthit.hhs.gov/