Financial incentive programs for electronic health records

  • While Medicare and Medicaid EHR programs offer incentives for eligible providers who adopt EHRs, only the Medicare program imposes a penalty on providers who delay the adoption of EHRs.
  • Register for the program(s) and begin the process soon to maximize incentive dollars.

Physicians report having a great interest in obtaining federal funds for adopting electronic health record (EHR) technology, but two of the biggest barriers to their adopting EHRs are a lack of information about how to receive federal incentive funds and concerns about the initial cost of adopting EHRs, according to a recent study.1


Daniel Gottlieb, JD

In the past year, much of the focus has been on how healthcare reform under the Patient Protection and Affordable Care Act (PPACA) will affect physicians and other providers, but the Medicare and Medicaid incentive programs for adopting EHR technology were established a year before passage of the PPACA under the Health Information Technology for Economic and Clinical Health (HITECH) Act.

The HITECH Act, which was part of the federal stimulus legislation enacted in February 2009, authorized approximately $27 billion in incentives to providers, hospitals, and critical access hospitals (CAHs) to adopt EHRs. At the time, President Obama told Congress that EHRs could save the healthcare system $80 billion annually.


Eligible physicians and other providers can receive up to $44,000 by participating in the Medicare EHR Incentive Program and up to $63,750 by participating in the Medicaid EHR Incentive Program. Hospitals can receive base payments of up to $2 million plus additional amounts, depending on several factors.2

The aforementioned study focused entirely on Florida physicians who participate in Medicaid. As noted in the study, Florida is an important state for assessing physician attitudes toward EHR incentives because Florida has more licensed physicians than any other state, as well as large numbers of both Medicare and Medicaid beneficiaries.


While increasing the efficiency and improving—or at least not hurting—quality is the stated goal of EHR technology as well as many other health reform initiatives, whether those goals can be achieved using EHR technology remains an open question, particularly when healthcare professionals may be reluctant to adopt the technology. Accordingly, the Florida study sought to identify possible obstacles to adopting EHRs, despite the financial incentives being offered.

Of the physicians in the Florida study who said they are not planning to seek the financial incentives available to them, 42% said that one significant barrier to their adopting EHRs was that the physicians needed “more information about the incentive program.” Sixty-nine percent of the physicians said that they were deterred by the “costs involved” in implementing EHRs, and 42% said that they were deterred by not knowing which EHR system to purchase.

Many early adopters of EHR technology have used healthcare attorneys and other consultants familiar with details of the EHR incentive programs to simplify the process of determining eligibility and to provide assistance with navigating other requirements. Providers who prefer a more hands-on approach can find applicable information about eligibility and details about timelines and requirements that must be met on government Web sites.

Certain physicians, such as those who furnish 90% or more of their covered professional services in an inpatient or hospital emergency department, are not eligible for either the Medicare or Medicaid program.


For the Medicaid EHR Incentive Program, it is essential to note that not all states are ready to participate. Therefore, although registration for the Medicare Incentive Program was open nationally as of January 1, 2011, registration is not uniform.

Information on when registration is available in each state participating in the Medicaid EHR Program is posted on the Centers for Medicare and Medicaid Services (CMS) Web site under Medicaid State Information, including a list of launch dates, Web sites, and email addresses by state.Approximately 30 states currently have registration open for their Medicaid incentive programs.


For Florida providers, registration for the Medicaid incentive program was scheduled to open in September, and eligibility requirements and other details are available on the Agency for Healthcare Administration (AHCA) Web site.4 CMS also maintains a list of state Web sites and email addresses for each state.5


For the Medicare incentive program, many details can be found on the Web site of the Office of the National Coordinator for Health Information Technology (ONC),6 as well as the CMS Web site,7 which contains summarized information, as well as details of regulation and guidance issued to date, including the final rule previously published in the Federal Register.8

CMS has a publication listing frequently asked questions, and many providers have found it a helpful distillation of the rules for the incentive programs. For an overview of the applicable timelines for implementing and receiving incentive payments, CMS has a user-friendly “milestone” chart that provides a broad overview of significant dates in both EHR incentive programs.9 In addition, CMS has published a list of CMS regional offices and other external contacts.

The ONC and the National Institutes of Health have posted a video online with summary information about the EHR programs.11 The ONC Web site has a Certified HIT Products List (CHPL),12 and a list of organizations that have been selected as ONC-authorized testing and certification bodies.13

Although both the Medicare and Medicaid EHR programs offer incentives for eligible providers who adopt EHRs, only the Medicare program penalizes providers who delay in adopting EHRs. Under the Medicare incentive program, professionals must adopt EHRs (and meet the applicable requirements) by 2012 to receive the maximum incentive payments.

Beginning in 2015, Medicare-eligible professionals, hospitals, and CAHs that do not successfully demonstrate “meaningful use”14 of EHR technology will have a payment adjustment in their Medicare reimbursement (although eligible professionals may be exempted in the case of “significant hardship.)15

As an alternative, the Medicaid EHR Incentive Program offers providers the opportunity to receive incentive payments for early adoption, but without a downward payment adjustment to reimbursements for providers who have not adopted EHRs.

As with any government program, navigating the specific rules and related criteria for achieving “meaningful use” can be off-putting to busy practitioners. It appears, however, that the push to encourage EHR use is here to stay. Eligible professionals who have not already adopted EHRs should begin the process quickly to take advantage of the financial incentives.


1. Menachemi N, Yeager VA, Bilello L, et al. Florida physicians seeing Medicaid patients show broad interest in federal incentives for adopting electronic health records. Health Aff;30:1461-70.

2. Centers for Medicare and Medicaid Services. EHR Incentive Program for Medicare hospitals. Published November 2010. Accessed October 2011.


3. Centers for Medicare and Medicaid Services. Medicaid state information. Revised October 2, 2011. Accessed October 2011.


4. Florida Agency for Health Care Administration. Hospital grace period. Accessed October 2011.

5. Centers for Medicare and Medicaid Services. EHR Incentive Program state contacts. Revised September 28, 2011. Accessed October 2011.

6. The Office of the National Coordinator for Health Information Technology. . Revised February 18, 2011. Accessed October 2011.

7. Centers for Medicare and Medicaid Services. Overview: EHR Incentive Programs. Revised September 30, 2011. Accessed October 2011.

8. Department of Health and Human Services, Centers for Medicare and Medicaid Services. Medicare and Medicaid programs; EHR Incentive Program; Health record incentive program, final rule. To be codified at 42 CFR §412, 413, 422, et. al. Fed Regist. 2010; 75(44, pt 2): 44314-44588.

9. Centers for Medicare and Medicaid Services. EHR Incentive Program Milestone Timelines. Accessed October 2011.

10. Centers for Medicare and Medicaid Services. List of CMS regional office contacts. Accessed October 2011.

11. National Institutes of Health. Medicine Dish: CMS EHR Incentive Program. Published August 18, 2010. Accessed October 2011.

12. Department of Health and Human Services. Certified health IT product list. Revised December 23, 2010. Accessed October 2011.

13. Department of Health and Human Services. ONC-authorized testing and certification bodies. Revised December 28, 2010. Accessed October 2011.

14. Centers for Medicare and Medicaid Services. Meaningful use overview. Revised September 20, 2011. Accessed October 2011.

15. Department of Health and Human Services, Centers for Medicare and Medicaid Services. Incentive Payments to EPs. To be codified at 42 CFR §495.102(d)(3). Fed Regist. 2010; 75(44). [Note: Eligible professionals may be granted an exception, on a case-by-case basis, from the downward adjustment if the Department of Health and Human Services (HHS) determines that the reduced Medicare reimbursement would pose a “significant hardship.” This exemption may be extended by HHS on an annual basis for up to 5 years.]

Important Steps

Five key things providers, hospitals, and critical access hospitals should do in adopting electronic health records (EHRs) and participating in the incentive programs:

Confirm your eligibility 
Each of the Medicaid and/or Medicare EHR incentive programs has rules pertaining to eligibility and qualifications once EHR technology is adopted, and these rules must be met to receive incentive payments.


Register for the program(s) and begin the process soon to maximize incentive dollars.


Consider obtaining legal advice 
Consider having a healthcare lawyer familiar with the applicable EHR incentive issues as well as software licensing matters review information technology (IT) vendors’ contracts before entering into them. Such agreements can contain pitfalls and unnecessary risks for providers.

Choose certified EHR technology wisely
Perform due diligence regarding an IT vendor’s performance in delivering EHR technology that will work for your particular needs. Simply because an IT application is listed on the Certified HIT Products List does not mean that it will fit your situation. Providers should ask IT vendors about both successes and challenges that may have occurred when the vendor has implemented EHR technology for similarly situated providers.

Understand “meaningful use” 
To qualify for incentive payments, it is not enough merely to adopt certified EHR technology. Providers must attest to “meaningful use” of the EHR technology, which, simply put, means that providers need to show they’re using EHR technology in ways that can be measured significantly in quality and in quantity. Accordingly, providers should assess their needs and confirm that once they adopt EHR technology, they can put it to meaningful use in the context of their particular clinical needs.