Cashing in on EHR incentive pay

Despite rush, long-term success still questionable

The two main federal incentive programs for health information technology closed out their first year with a gush of money, but one key to the programs’ long-term success will be whether their early appeal to tech-savvy providers is ever felt by the less-advanced majority of hospitals and office-based clinicians still on the sidelines.

By year’s end, the CMS had paid out more than $2.5 billion to slightly more than 31,000 providers that qualified for payments under the Medicare and Medicaid electronic healthrecord incentive programs created by the American Recovery and Reinvestment Act of 2009, according to the CMS’ December progress report, its latest.

Between the CMS’ October and December reports, total payments to hospitals more than doubled, topping $1.9 billion. At year’s end, 1,658 hospitals had been paid under the Medicare and Medicaid programs.

During the same period, combined payments to physicians and other “eligible professionals” jumped 99% to nearly $570.4 million. Eligible professionals are defined as physicians, nurse practitioners, dentists, certified nurse midwives and physician assistants. Through December, 29,344 clinicians had been paid. About 75% of them thus far have been physicians.

Final numbers for the two IT programs for their first year of operation are expected to increase a bit more, but won’t be available until later this year, said Dr. Farzad Mostashari, head of the Office of the National Coordinator for Health Information Technology. “All the leading indicators have been positive,” he said. “I think it’s certainly gratifying to see the trends toward higher and higher numbers, which we expect to continue.”

Payments started flowing in May under the federally administered Medicare EHR incentive program and in January under a few staterun Medicaid programs. At year’s end, however, eight states still didn’t have their Medicaid EHR programs operational.

Some critics have said much of the early money has gone to providers who already had EHR systems in place, but Mostashari bristled at the notion that might mean the two programs could fizzle out. “Look,” he said, “the payments for Medicaid run through 2021 and for Medicare run through five years. We’ve seen like eight months of payments. The baby is still a baby. I think it’s way too early for anybody concluding that this program has topped out.”

According to Joanne Sunquist, the chief information officer for 469-bed Hennepin County Medical Center in Minneapolis, meeting the meaningful-use requirements under Medicare was no major strain. The hospital attested to meeting 90 days of meaningful use in August, well ahead of the Oct. 1 deadline, and was paid $1.8 million by Medicare in October, she said.

Sunquist characterized the process as a “three or four” on a scale of 10, noting that the hospital completed implementation of its Epic system in 2007. “It was still work, but frankly, we didn’t find it too difficult.” Minnesota is one of eight states that still doesn’t have its Medicaid EHR program running. Sunquist said they will apply for Medicaid payments, too, when the time comes, but both federal payments “won’t even touch” what Hennepin has spent on health IT.

“When we decided to implement Epic seven years ago, we put together a seven-year return on investment, which we’ve actually met without the incentive money,” Sunquist said, which she described as “a bonus for us.”

The money made more of a difference for Orville (Calif.) Hospital, although earning it was more of a challenge, said Dense Lefevre, CIO, and Dr. Narinder Singh, the chief medical information officer. The 113-bed hospital in California’s Central Valley received first-year EHR incentive payments of $1.97 million from Medicare and another $1.2 million from MediCal, the state’s Medicaid program. The payments covered not only about half the cost of Oroville’s EHR installation, but also an IT infrastructure upgrade, Lefevre said.

Orville Hospital began installing an opensource version of the Veterans Administration’s Vista EHR a couple of years ago, rolling it out first to its 22 affiliated community clinics, Singh said. Then it completed enough of the installation at the hospital to meet the CMS’ meaningful-use requirements.

Thus far, 226 vendors of EHR systems or modular components of systems had at least one eligible professional customer apply and receive payments, according to a separate data set released by the CMS and ONC this month. In addition, 52 different vendors supplied complete or modular EHR systems to paid hospitals.

Among eligible professionals, Epic Systems led vendors in this market niche, according to the CMS data, with 29% of clinicians using its EHRS. Among hospitals, HCA Information Technology & Services was the most-cited vendor, with 18% of that market.

This boom time for vendors—and federal health IT policymakers—won’t last, said John Chilmark, managing partner of Cambridge, Mass.-based health IT market watcher Chilmark Research. After 2012, “this bloom comes off the rose,” he said. “I think it will come down to a 4% to 6% growth rate.” Also, for the hundreds of EHR vendors out there, reaching that plateau in sales growth will mark the beginning of the end for them as independent businesses, Chilmark said. “Once we see this market plateau, we’ll see additional consolidation occur.”