Bill Uses Carrot, Stick for Electronic-Health Records


Practice Areas

Charlotte Business Journal
November 2009

Until recently, health care providers were expected to take the full risk of investing in information technology for their practices. But that’s changed with the federal stimulus bill. It provides about $19 billion in Medicare and Medicaid incentives for doctors and hospitals to adopt electronic health-record systems.

The incentives start with bonuses for early adopters, but providers that fail to act fast enough will face Medicare penalties.

In addition, the federal Stark rules, which generally prohibit hospitals and health systems from providing free services to doctors, have been relaxed to some degree. Hospitals and health systems can now take a leading role in the adoption of communitywide electronic health-record systems. The government’s rationale is that such systems reduce costs of health care delivery, increase doctor and hospital efficiency and promote standardization of patient care.

Easing the financial burden

Electronic records are defined as a digital collection of a patient’s medical history, including such information as diagnosed medical conditions, prescribed medications, vital signs, immunizations, lab results and personal characteristics such as weight and age.

The government will issue rules later this year to determine how doctors and hospitals can qualify for incentives for using the systems.

It’s expected users will have to demonstrate to the government that:

The incentive program also authorizes 100 percent federal reimbursement for states to provide incentive payments to Medicaid providers that integrate electronic systems. The Medicaid providers will have to meet minimum patient-volume percentages and cannot also receive incentives under Medicare. Providers that fail to adopt electronic records before 2015 and also fail to obtain a hardship exemption will see a 1 percent cut to Medicare pay. The reduction increases up to 3 percent for 2017 and remains each year thereafter.

Relaxation of a legal barrier

By offering money through Medicare or Medicaid programs to providers, the incentives lessen the financial barrier to implementing electronic record systems. However, the federal Stark rules present a potential legal barrier to the systems. The rules prohibit a doctor from referring a patient to an entity (such as a hospital) with which he has a financial relationship if the referral is for certain services.

If a hospital provides a doctor with health-information technology, hardware, software or access to its proprietary systems, that could be considered remuneration and a violation of Stark rules. Interestingly, Stark offers an exception for the provision of information technology by a hospital to a doctor to permit access and participation in a communitywide health information system.

The Stark exception contemplates a system that provides access to electronic records and that facilitates the sharing of medical information, as long as certain conditions are met. The doctor must need the hardware and software to participate in the community system. A hospital can’t provide a doctor with redundant or superfluous technology. The community system must also be available to all providers, practitioners and residents of the community who wish to participate.

The future of electronic systems

In coming years, the financial incentives and the availability of the communitywide health-information-systems exception under Stark will reduce the financial and legal burdens of adopting electronic records. Although the government is still determining how to define the terms, the definitions are expected to also deal with patient-privacy protections and provide instructions on how much control patients will have over their medical data.

These developments will present opportunities for the IT sector to work with health care providers to help them achieve meaningful use of electronic-health records in their practices. Although the road map is still being charted, the systems will be a reality for the entire health care industry. Proponents believe electronic-health records will be as integral to medicine as stethoscopes and thermometers.

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