UPDATED: HITECH Act will Benefit Hospitals

Each eligible hospital (a “subsection (d) hospital,” as defined under 42 U.S.C. §1395ww(d)(1)(B)) which does not include psychiatric hospitals, rehabilitation hospitals, children’s hospitals or long term care hospitals) that achieves "meaningful" EHR use may qualify to receive from Medicare an amount equal to the product of the following formula:

Initial Amount
($2 million plus additional amounts calculated in accordance with each hospital’s Medicare discharges)


Medicare Share
(roughly, a hospital’s share of Medicare discharges over total discharges)


Transition Factor:

Year 1 – 100%
Year 2 – 75%
Year 3 – 50%
Year 4 – 25%
Year 5 – 0%

“Meaningful users” are hospitals or physician practices able to demonstrate that one’s EHR technology is connected in a way that improves the quality of health care through reported results on clinical quality and other measures selected by the Secretary. Meaningful EHR use includes quality reporting and may be demonstrated by attestation, survey response, appropriate claims or quality reporting, or such other manner as the Secretary specifies.  Of course, the question remains as to how HHS will define “meaningful” use, and we will just have to wait until the end of this year to find out. The concern is that if HHS raises the bar too high, it will exclude hospitals who will be unable to achieve it within a reasonable time.


“Certified EHR technology” will be technology that is certified by an independent body recognized by the Secretary as meeting standards for such technology established by the Secretary by rulemaking before Dec. 31, 2009.

Hospitals can receive both Medicare and Medicaid incentives (calculations for the latter are linked to Medicaid discharges). The Medicaid portion can be accelerated (50% in one year or 90% in two years).  Also, Medicaid incentives are not restricted to subsection (d) hospitals. Thus, for example, although a children’s hospital does not qualify for Medicare incentive payments, its Medicaid incentives may produce a much higher amount of reimbursements.

Some calculations indicate that the maximum combined Medicare and Medicaid payments may total up to $11 million, while $6 million to $8 million payments should be more typical. Below is a sample breakdown* of reimbursement payments (from both Medicare and Medicaid) for hospitals under the Act:


Hospitals may also receive additional aid from the federal government if they participate in HHS’s health information technology extension program. At the heart of the program, the newly established HIT Research Center (“Center”) will provide technical assistance and disseminate best practices to support and accelerate efforts to implement and operate healthcare information technology in accordance with the standards, specifications and certification criteria to be established under the Act. As part of its duties, the Center will

  • provide a forum for the exchange of knowledge and experience;
  • accelerate the transfer of lessons learned;
  • analyze and disseminate evidence and experience;
  • provide technical assistance to regional and local information exchanges;
  • develop solutions for barriers to the electronic exchange of information; and
  • develop effective strategies for the use of HIT in medically underserved communities.

On a more local level, Regional Extension Centers (REC) will provide technical assistance and disseminate best practices learned from the Center to aid and accelerate implementation and use of HIT. Each REC must be affiliated with one or more nonprofit organizations. Support will be available for up to four years of funding aimed to cover up to 50% of each REC’s capital and operating expenses.

In making its funding decisions, HHS will consider the REC applicant's ability to provide assistance and utilize technology appropriate to the needs of particular categories of health care providers; the types of services the proposed REC will provide to health care providers; the geographical diversity and extent of the proposed REC’s service area; and the percentage of funding and amount of in-kind commitment from other sources the REC applicant can secure.

Public, nonprofit and critical access hospitals, community health centers, individual or small practices and entities that serve the uninsured and underinsured, as well as medically underserved persons, will be given priority in receiving assistance. In less than 90 days, HHS will produce a description of the extension program, including a detailed explanation of the program and the programs goals; procedures to be followed by the REC applicants; criteria for determining qualified REC applicants; and the maximum support levels expected to be available to REC’s under the program.

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Health IT Law Blog - March 20, 2009 1:21 PM
Healthcare Informatics Editor-in-Chief Anthony Guerra recently talked with our own Steve Fox and fellow Post & Schell partner Edward Shay about the substance of the HITECH Act and what this new legislation means for healthcare providers. The interv...
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