[Federal Register Volume 75, Number 8 (Wednesday, January 13, 2010)]
[Proposed Rules]
[Pages 1844-2011]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-31217]



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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

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

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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.

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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://

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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.aspx?&PrefixAlpha=5&PrefixNumeric=906 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.aspx?&PrefixAlpha=5&PrefixNumeric=906 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.aspx?&PrefixAlpha=5&PrefixNumeric=906 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

[[Page 1916]]

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

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qualifying MA organization furnishes at least 80 percent of the 
entity's Medicare patient care services to enrollees of the qualifying 
MA organization.
    Further, the EP must furnish at least 80 percent of his or her 
professional services covered under Title XVIII (Medicare) to enrollees 
of the qualifying MA organization and must furnish, on average, at 
least 20 hours per week of patient care services.
    As discussed in section II.A.1. of this proposed rule, an EP is 
defined as a physician (under section 1861(r) of the Act).
    We interpret ``employed by'' to mean that the EP is considered an 
employee of a qualifying MA organization or qualifying entity under the 
usual common law rules applicable in determining the employer-employee 
relationship under section 3121(d)(2) of the Internal Revenue Code of 
1986.
    We interpret ``to be a partner of'' to mean that the qualifying MA 
EP has an ownership stake in the entity. Under this proposed 
interpretation, a professional that contracts with an entity, but has 
no ownership stake in the entity, would not be considered a qualifying 
MA EP.
    We interpret ``furnishing at least 80 percent'' of the entity's 
``patient care services'' to mean at least 80 percent of the qualifying 
MA EP's total Medicare revenue in a year (that is, total revenue from 
Medicare FFS as well as from all MA organizations) must be from a 
single qualifying MA organization.
    We propose to interpret the requirement that a qualifying MA EP 
furnish at least 80 percent of their professional services covered 
under Title XVIII means that at least 80 percent of the professional's 
total Medicare revenue in a year (that is, total revenue from Medicare 
FFS as well as from all MA organizations) must be from a single 
qualifying MA organization. We believe that in establishing the rule 
that qualifying MA EPs need to furnish at least 80 percent of the EP's 
Title XVIII covered services ``to enrollees of the organization,'' the 
statute limits payment related to any specific qualifying MA EP to a 
single qualifying MA organization. Thus, if a qualifying MA EP provided 
an average of 20 hours per week of patient care services to two 
distinct qualifying MA organizations, we would pay the qualifying MA 
organization for the MA EP only if such a qualifying EP provided at 
least 80 percent of his or her professional services covered under 
Title XVIII to enrollees of that organization.
    For purposes of determining whether a qualifying MA EP furnishes, 
on average, at least 20 hours per week of patient care services, we 
interpret the requirement to include both Medicare and non-Medicare 
patient care services. Moreover, we propose that the relevant time 
period for determining whether an MA EP furnishes at least 20 hours per 
week of patient care services should be the EHR reporting period. (We 
discuss the proposed definition of EHR reporting period in section 
II.A. 1. e. of this proposed rule.) Therefore, over the EHR reporting 
period, the qualifying EP must provide on average 20 hours per week of 
patient care services. Finally, we interpret ``patient care services'' 
to mean services that would be considered ``covered professional 
services'' under sections 1848(o)(5)(A) and (k)(3) of the Act. That is, 
health care services for which payment would be made under, or for 
which payment would be based on, the fee schedule established under 
Medicare Part B if they were furnished by an eligible professional.
    We considered various methods of determining when at least 20 hours 
per week, on average, of patient care services will be considered to be 
provided by MA EPs. We considered methods such as defining a dollar or 
service threshold, or the number of hours of direct patient care 
services actually provided. After due consideration we propose to 
require qualifying MA organizations to attest to the fact that MA EPs 
for whom they are requesting EHR incentive payments have provided, on 
average, 20 hours of patient care services during the EHR reporting 
period.
    As discussed in section II.B. of this proposed rule relating to 
Medicare FFS EPs, a qualifying MA EP is also defined as a physician 
under section 1861(r) of the Act. Section 1853(l)(1) of the Act, as 
added by section 4101(c) of the HITECH Act, provides that the 
provisions of sections 1848(o) and 1848(a)(7) of the Act, as amended 
and added by sections 4101(a) and (b) of the HITECH Act, respectively, 
which establish the incentive payments for EPs under Medicare FFS, 
apply to a qualifying MA organization's qualifying MA EPs ``in a 
similar manner'' as they apply to EPs under Medicare FFS. As discussed 
above in section II.A.6. of this proposed rule, section 
1848(o)(1)(C)(i) of the Act, as added by section 4101(a) of the HITECH 
Act, states that hospital-based EPs are not eligible for incentive 
payments. Therefore, we propose that, similar to the Medicare FFS 
incentive program, MA incentive payments would also not be available 
for hospital-based EPs. We note that the hospital where a hospital-
based EP provides his or her Medicare covered services would be 
potentially entitled to an incentive payment either through the 
Medicare FFS incentive program, or through the MA-affiliated hospital 
EHR incentive program. Therefore, for such a 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

[[Page 1925]]

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.

[[Page 1939]]

    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.

[[Page 1944]]

[GRAPHIC] [TIFF OMITTED] TP13JA10.017

    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

[[Page 1964]]

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

[[Page 1967]]

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: [email protected].

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

[[Page 2011]]

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


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