EHR Medicare Payments for Hospitals

Bambi Rose, RHIT, is the President and CEO of BLR Solutions, LLC and former Testing and Certification Program Director for the CCHIT

Initial and Final payment under the EHR Incentive Payment Schedule for Medicare Hospitals

I frequently field questions from eligible hospitals on how the Medicare payment schedule for hospitals  is calculated and paid.  This information is readily available on the CMS website. Below is an abstract of pertinent information provided by CMS.

From the CMS EHR Tip Sheet for Medicare Hospitals:

For EHR Incentive payment calculation regardless of the payment year, the Medicare incentive payment is the product of three factors:

1. An Initial Amount
2. The Medicare Share
3. A Transition Factor applicable to the payment year

This payment methodology is utilized to calculate Medicare hospital-based EHR incentive payments for eligible hospitals participating under both the Medicare fee for service and MA incentive programs.”

The Initial Amount is the sum of a base amount and a discharge-related amount. The base amount is $2,000,000, and the discharge-related amount provides an additional $200 for each acute care hospital discharge during a payment year, beginning with a hospital’s 1,150th discharge of the year and ending with a hospital’s 23,000th discharge of the year. No additional payment is made for discharges prior to the 1,150th discharge or for those discharges after the 23,000th discharge.

Data on acute care hospital discharges from the hospital’s most recently filed 12-month cost report at the time of the calculation will be used as the basis for making preliminary incentive payments. Final payments will be determined at the time of settling the first 12-month cost report for the hospital FY that begins after the beginning of the payment year and settled on the basis of the hospital discharge data from that cost reporting period. For example, for an eligible hospital with a cost reporting period running from July 1, 2010 through June 30, 2011, CMS would employ the relevant data from the hospital’s most recently filed 12-month cost report at the time of the calculation (most likely the June 30, 2010 cost report) to determine the preliminary incentive payment for the hospital during FY 2011. However, the final incentive payment would probably be based on hospital discharge data from the cost report beginning July 1, 2011 (fiscal year ending June 30, 2012) and determined at the time of settlement for that cost reporting period. If that cost report is not filed for a 12-month period, the next full 12-month cost report would be employed.

The second step in determining the hospital payment for a meaningful user of certified EHR technology is to calculate the Medicare Share. The time period used to determine the Medicare Share fraction is based on data from the latest filed 12-month cost report at the time the calculation is made, and that is later updated when the first 12-month cost report for the hospital fiscal year that begins after the beginning of the payment year is settled.

The numerator of the Medicare Share is the sum of:

The estimated number of acute care inpatient-bed-days attributable to individuals for whom payment may be made under Part A; and

The estimated number of acute care inpatient-bed-days attrcare Advantage organization under Part C.

The denominator of the Medicare Share is the product of:

The estimated total number of acute care inpatient-bed-days for 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, divided by the estimated total amount of the hospitals charges during such period. (Note: The removal of charges attributable to charity care in the formula, in effect, increases the Medicare Share resulting in higher incentive payments for hospitals that provide a greater proportion of charity care.)

The third factor in the formula to determine the incentive payment to an eligible hospital for a payment year is the Transition Factor. This element phases down the incentive payments over time.

Hospitals that demonstrate that they are meaningful users of certified EHR technology in FYs 2011, 2012, or 2013 could receive up to four years of financial incentive payments. Hospitals that begin receiving incentive payments later than FY 2013 will receive no more than three years of incentive payments. Specifically, if a hospital were to begin to demonstrate meaningful use of certified EHR technology in FY 2014, it would receive incentive payments for FY 2014, FY 2015, and FY 2016. Similarly, if a hospital were to begin meaningful use of certified EHR technology in FY 2015, it would receive incentive payments for FYs 2015 and 2016. (Note: Refer to Table 2: Fiscal Year That Eligible Hospital First Receives the Incentive Payment for the Transition Factor applicable to each year.)

The hospital’s final payments would be based on hospital discharge data and Medicare Share data from the first 12-month cost report that begins after the beginning of the payment year and determined at the time of settlement for that cost reporting period.

The CMS EHR Tipsheet also walks through these calculations using three examples for additional guidance and clarification.

Bambi Rose, RHIT, is the President and CEO of BLR Solutions, LLC.  She has extensive experience working with vendors and providers helping them to prepare for technology certification testing under the ARRA Meaningful Use incentive program and other proprietary certification programs. Contact her directly at:  bambirose1@gmail.com