This issue of States in Action discusses the responsibilities, opportunities, and challenges for state Medicaid agencies in implementing programs to encourage providers to adopt electronic health records (EHRs). It focuses on the Medicaid Electronic Health Record Incentive Program, established by the Health Information Technology for Economic and Clinical Health (HITECH) Act in the American Recovery and Reinvestment Act of 2009 and jointly administered by the Centers for Medicare and Medicaid Services (CMS) and state Medicaid agencies. Rather than formal Snapshots of particular states' efforts, the issue includes lessons from states' early experiences in implementing the Medicaid EHR Incentive Program.
The EHR Incentive Program is just one of many health information technology (HIT) initiatives supported and encouraged by the federal government. With state Medicaid agencies facing competing demands as well as limited resources, states can benefit from aligning their efforts to promote health information technology, and collaborating with other agencies, states, and stakeholders to share or reduce costs, limit duplication, and avoid confusion for providers.
Health System Transformation Through HIT
Three major acts passed since 2009—the Children's Health Insurance Program Reauthorization Act, the HITECH Act, and the Affordable Care Act—expand or sustain coverage, encourage care delivery innovation and payment reform, and promote the use of health information technology to improve health care safety, quality, and efficiency of (Figure 1).
In particular, the HITECH Act aligns efforts to improve health care quality with adoption of HIT. The EHR Incentive Program is not merely about making paper processes electronic; it requires eligible providers to demonstrate the "meaningful use" of certified technology. To demonstrate meaningful use, eligible providers must use EHRs:
- in a meaningful manner, such as for electronic prescribing;
- for the electronic exchange of health information to improve quality of care (e.g., for care coordination); and
- to report clinical quality and other measures as specified by the Secretary of Health and Human Services.
Evidence of the benefits of HIT is continuing to grow. A recent evaluation of HIT projects funded through the Agency for Healthcare Research and Quality found that "grantees experienced improved efficiencies in health care delivery, improved quality of care, and increased access to care as a result of their health IT projects."1 Ninety-two percent of recent (2007–10) articles on HIT reached positive overall conclusions about its impact, and found that "the benefits of technology are beginning to emerge in smaller practices and organizations, as well as in large organizations that were early adopters."2
Figure 2 illustrates the increasing trend in adoption of basic or fully functional electronic health records or electronic medical records by office-based physicians.3 Between 2009 and 2010, the percentage of such physicians reporting they had a basic or fully functional system increased by 14.2 percent and 46.4 percent, respectively.4 Further, 81 percent of hospitals and 41 percent of office-based physicians report they intend to apply for EHR incentives, most of them during the first stage of the program (2011–12).5
HITECH and the Federal Plan
The HITECH Act aims to improve the quality of health care while reducing its long-term costs. The Act created two types of programs to achieve this purpose: 1) Medicare and Medicaid EHR Incentive Programs that support a multi-year, staged approach to promote the adoption and meaningful use of EHRs and 2) infrastructure grant projects such as Regional Extension Centers and Beacon Communities, administered through the Office of the National Coordinator for Health Information Technology (ONC) (Appendix A).6
In addition, the HITECH Act instructed the ONC to develop a Strategic Plan with measureable outcomes to provide a nationwide HIT roadmap. The Federal HIT Strategic Plan: 2011–15, which was released on March 25, 2011, for an extended public comment period through May 6, 2011, represents the federal government's maturing vision for interoperable HIT and clarifies the importance of HIT to the newly chartered Center for Medicare and Medicaid Innovation and accountable care organizations.
The federal HIT plan's measureable outcomes depend in part on the success of the Medicaid EHR Incentive Program. The measure of success for its first goal—to achieve adoption and information exchange through meaningful use of HIT—is based on the percentage of eligible professionals, hospitals, and physicians receiving Medicare or Medicaid EHR incentive payments.
EHR Incentive Programs
Title VI of the HITECH Act provides a projected $27 billion for the Medicare and Medicaid EHR Incentive Programs. For the Medicaid program in particular, CMS appropriated $40 million per year for FY 2009 through FY 2015 and $20 million in FY 2016 for incentive payments to eligible Medicaid providers and hospitals that demonstrate they make meaningful use of EHRs, as well as for program planning and administration by state Medicaid agencies.7 The inclusion of Medicaid in the HITECH Act program demonstrates its pivotal role as the nation's largest health care purchaser in terms of enrollment.
Under this program, state Medicaid agencies are eligible to receive 100 percent reimbursement for incentive payments to eligible providers. States disburse incentive payments to professionals and hospitals "as they adopt, implement, upgrade, or demonstrate meaningful use of certified EHR technology in their first year of participation and demonstrate meaningful use for up to five remaining participation years." Eligible professionals (including physicians, dentists, and community health centers) can receive up to $63,750 over the six years. Hospital payments are based on various factors, beginning with a $2 million base payment.8
States also receive up to 90 percent reimbursement for operating the program, including:
- planning activities associated with designing and implementing the program and systems change;
- administering incentive payments, including tracking of meaningful use by Medicaid providers;
- oversight, including routine tracking of meaningful use evidence (attestation) and reporting mechanisms; and
- initiatives to encourage the adoption of certified EHR technology to promote health care quality and the exchange of health care information.9
For more on the meaningful use policy priorities and goals, see Appendix B. For more information on its core objectives, see Appendix C. Eleven states launched EHR Incentive Programs on January 3, 2011, and another four states have launched programs since. Oklahoma disbursed the first incentive payment to an eligible physician practice, and Kentucky disbursed the first incentive payment to an eligible hospital. State Medicaid agencies are at varying stages in the program implementation, just as providers are at differing stages of EHR adoption and meaningful use. As of mid-April, more than 5,970 eligible professionals and 998 eligible hospitals were in the process of registering to participate. Seven states—Alabama, Iowa, Kentucky, Louisiana, North Carolina, Oklahoma, and Texas—have disbursed more than $83 million in incentive payments to eligible providers (Figure 3).
Launching and Adminstering the EHR Incentive Program
Medicaid agencies must complete several steps to launch EHR Incentive Programs. They must submit and secure CMS approval for three key documents and complete testing of electronic exchanges between CMS and the state.10
All states and territories have now completed their Planning Advance Planning Documents and are using their approved federal funds to define the activities their Medicaid agencies will undertake over the next five years to implement the EHR Incentive Program.11 Federal regulations define these activities.12
Through the planning process, state Medicaid agencies have the opportunity to work with key constituents to construct a roadmap that defines their current HIT landscape, describes how they will build consensus on their future HIT landscape, outlines the capabilities necessary to administer the EHR Incentive Program, and explains their audit strategy to ensure its integrity.
In most states, this planning process coincides with planning efforts for the State Health Information Exchange (HIE) Cooperative Agreement Program. States therefore have a unique opportunity to coordinate their efforts to develop the capacity for health information exchange with their efforts to encourage use of EHRs—an opportunity to create a unified roadmap to achieve HIT interoperability to improve health outcomes, care quality, and cost efficiency. In fact, the ONC established required and encouraged coordination activities between the two programs (Figure 4).
Figure 4. ONC Required and Encouraged Coordination Activities Between State Health Information Exchanges and Medicaid EHR Incentive Programs
Required Activities |
Encouraged Activities |
1. The state's governance structure shall include Medicaid agency representation. 2. State Level HIE shall coordinate provider outreach and communications with Medicaid. 3. State Level HIE and state Medicaid agency shall identify common business or health care outcome priorities. 4. State Level HIE, in collaboration with Medicaid, shall leverage, participate in, and support all Beacon Communities, Regional Extension Centers (RECs), and ONC workforce projects. 5. State Level HIE shall align efforts with Medicaid to meet Medicaid requirements for meaningful use. |
1. The state HIE is encouraged to obtain a letter of support from the Medicaid Director. 2. Conduct joint needs assessments and environmental scans. 3. Collaborate with the Medicaid program and the ONC RECs to provide technical assistance to providers beyond the REC scope. 4. Share Help Desk or Call Center contracts and services between the State-HIE, REC, and MEHRIP. 5. Conduct statewide joint assessment and alignment of privacy policies across programs. 6. Leverage current Medicaid IT infrastructure in developing HIE technical architecture. 7. Decide whether to integrate systems for shared objectives, i.e. share Medicaid claims and encounters with the HIE and information from non-Medicaid providers with Medicaid. 8. Work together to determine which specific shared services and technical services will be offered or used by Medicaid. 9. Determine which operational responsibilities Medicaid will manage. 10. Use Medicaid HIT incentives to encourage provider participation in the HIE. 11. Collaborate on creation of payment incentives, such as Medicaid Pay for Performance, or encouraging participation of providers beyond Medicaid eligible providers. |
| Note: Beacon Communities are 17 innovative community collaboratives integrating certified electronic health record technologies and performance measurement into their local health care systems to improve the quality and cost effectiveness of care. Source: ONC, 2011 |
CMS has proposed regulation to guide states' efforts in modernizing their technology infrastructure to ensure that an enhanced 90 percent federal match is provided only for changes that "provide more efficient, economical, and effective administration of the [Medicaid] plan." Figure 5 shows the range of activities for which states may receive the 90 percent federal matching funds to encourage the adoption and meaningful use of EHRs.
CMS considers the EHR Incentive Program plans to be dynamic documents that will be regularly updated by states and resubmitted to the agency, along with the HIT Implementation Advance Planning Document. The implementation document outlines the allocation or acquisition of human resources, services, and equipment that form the basis for the state's benchmarks and transition strategies to move from the current environment to the desired future environment for HIT. States must receive approval from CMS for both documents before becoming eligible to receive enhanced matching funds.
Figure 5. State Initiatives to Encourage Adoption of EHRs That Are Eligible for 90% Federal Matching Funds
System Costs |
Communication and Outreach Business |
Processes |
Human Capital |
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| Source: State Medicaid Director Letter (SMD #10-016) issued on August 6, 2010, on "Federal Funding for Medicaid HIT Activities." |
As of early May 2011, 43 states have submitted both planning and implementation documents, and CMS has approved documents submitted by 20 of these states. While CMS is moving rapidly to review and approve plans, they are also providing technical assistance, training, and resources to help Medicaid agencies launch the EHR Incentive Program.
States are accountable for managing the programs, verifying provider eligibility, handling the provider attestation process, and disbursing incentive payments. In an eligible provider's first year of participation, they are permitted to attest that they have "adopted, implemented, or upgraded" their certified EHR technology. Starting in 2012, states will have to develop their HIT infrastructure to electronically accept the provider's attestation of meaningful use and receive clinical quality reports. Early adopter states report that they have looked for opportunities to align new responsibilities to administer the EHR Incentive Program defined in their State Medicaid Health IT Plan with current activities to ensure effective leveraging of business processes, infrastructure, and technology applications. In addition, state Medicaid agencies must:
- ensure there is no duplication of payment between the Medicare and Medicaid EHR Incentive Programs;
- recoup monies if overpayments or erroneous payments are found to have been paid;
- establish a provider appeals process for eligibility, payments, and determinations of meaningful use as part of the State Medicaid HIT Plan; and
- report estimated and actual expenditures for the program using the Medicaid Budget and Expenditure System.
Recommendations Based on States' Early Experiences
Given the requirements of health care reform and constraints on fiscal and human resources, states are well advised to align their plans for HIT development among the EHR Incentive Program, HIE development, and other efforts and to collaborate with other agencies, states, and stakeholders to share or reduce costs, reuse technical services, and streamline efforts to offer providers clear direction.
Medicaid agencies could, for example, collaborate with administrators of health information exchanges on activities such as fielding provider surveys, reaching out to and educating providers, creating immunization or other disease registries, and providing call center support.
To fulfill their outreach and technical assistance responsibilities, state Medicaid agencies could coordinate with regional extension centers (RECs), which are already providing outreach and technical assistance to small practices wishing to adopt EHRs and meet meaningful use criteria. Using federal funds, a few state Medicaid programs have hired RECs to expand their outreach and technical assistance to other providers (e.g., midwives and dentists) who are eligible for the Medicaid EHR Incentive Program.
Some RECs and states are working through provider associations' established communication channels (e.g., newsletters, e-alerts, webinars, and meetings) to inform providers about the incentive program and the availability of technical assistance. In addition, a few states are offering loans to providers who cannot afford to begin the process of acquiring EHRs.
For the incentive program to succeed, states must acknowledge that EHRs are not "plug and play": meaningful use of the technology requires education and support at the practice level. Further, to benefit from EHRs, practices need to change clinician and staff behaviors and rethink workflow. Doing so takes time and requires technical assistance and monitoring.
States that have been early adopters of the incentive program have learned that, instead of creating new systems to fulfill its technical requirements, they can often augment their existing systems. For example, some are using the same provider portal they use to enroll providers in Medicaid to fulfill the program's requirement for a call center while adding new functions, such as for attesting meaningful use.
Finally, as states support and encourage development of accountable care organizations, health homes, and other innovative payment and delivery models, they should include information technology as a critical part of the process, not as an afterthought or competing priority. That is, states should integrate their policy and technology initiatives by establishing goals for both and then adopting a framework and designing systems to accomplish them. There is potential for states to learn from the 17 Beacon Communities, which are integrating EHRs, HIEs, and other technologies into their local health care systems to improve quality and efficiency. The program is sharing lessons through the Health Care Transformation Has Begun site.
1 M. Au, S. Felt-Lisk, G. Anglin et al., Using Health IT: Eight Quality Improvement Stories (Rockville, MD: Agency for Healthcare Research and Quality, September 2010) .
2 M. Beeuwkes Buntin, M. F. Burke, M. C. Hoaglin et al., The Benefits of Health Information Technology: A Review of the Recent Literature Shows Predominantly Positive Results, Health Affairs, 2011 30(3):464–71.
3 Although the terms electronic health record (EHR) and electronic medical record (EMR) are sometimes used interchangeably, only certified EHR systems capable of supporting interoperability are eligible for the EHR Incentive Program. EMRs often refer to information systems that are not interoperable—that is, that exchange information only within a single hospital or outpatient setting—and are not certified or eligible for such incentives.
4C. J. Hsiao, E. Hing, T. Socey et al., Electronic Medical Record/Electronic Health Record Systems of Office-Based Physicians: United States, 2009 and Preliminary 2010 State Estimates (Hyattsville, MD, National Center for Health Statistics, December 2010).
5 D. Blumenthal, The Age of Meaningful Use: A Message from Dr. David Blumenthal, the National Coordinator for Health Information Technology, February 23, 2011, .
6The focus of this States in Action is the Medicaid EHR Incentive Program; for more information about the Medicare EHR Incentive Program, see https://www.cms.gov/ehrincentiveprograms/ and https://www.cms.gov/apps/media/press/factsheet.asp?Counter=3792&intNumPerPage=10&checkDate=&checkKey=&srchType=1&numDays=3500&srchOpt=0&srchData=&keywordType=All&chkNewsType=6&intPage=&showAll=&pYear=&year=&desc=&cboOrder=date.
7 Department of Health and Human Services American Recovery and Reinvestment Act, Centers for Medicare and Medicaid Services: Medicare and Medicaid Incentives and Administrative Funding, Funding Table note. Accessed at: http://www.hhs.gov/recovery/reports/plans/pdf20100610/CMS_HIT%20Implementation%20Plan%20508%20compliant.pdf.
8Meaningful use objectives and measures are based on national Health Outcome Policy Priorities and Care Goals, and will be staged over three periods in the next five years (as highlighted earlier in Figure 3). Stage 1 (2011 and 2012) sets the baseline for electronic data capture and information sharing; meaningful use criteria and measures for Stage 1 are based on the National Health Outcome Policy Priorities (Appendix B). Stage 2 (expected to be implemented in 2013) and Stage 3 (expected to be implemented in 2015) will continue to expand on the Stage 1 baseline and be defined through future rule making.
9 §495.320-.322, Section 4201 (a)(3)(F)(i-ii).
10 States must complete and obtain CMS approval for: 1) Planning Advance Planning Document; 2) State Medicaid HIT Plan; and 3) HIT Implementation Advance Planning Document. States also must test exchanges between the Medicare and Medicaid EHR Incentive Program Registration and Attestation System and the state’s technical system for attestation and verification, and complete a number of state launch activities. See 42 CFR Parts 412, 413, 422 et al. Medicare and Medicaid Programs; Electronic Health Record Incentive Program; Final Rule 44507.
11 See SMHP, OMB Approval Number: 0938-1088, https://www.cms.gov/MLNProducts/downloads/STATE_MEDICAID_HIT_PLAN_SMHP.pdf
12 Section 4201, Subtitle B – Medicaid Incentives, Division B: Title IV—Medicare and Medicaid Health Information Technology, HITECH of the ARRA Act; 42 CFR Parts 412, 413, 422 et al. Medicare and Medicaid Programs; Electronic Health Record Incentive Program; Final Rule; and State Medicaid Director Letters State Medicaid Director Letter SMDL# 11-002, ARRA# 8, April 8, 2011, Technical changes impacting the Medicaid EHR Incentive Program from the 2010 Medicare and Medicaid Extenders Act; SMD# 10-016, August 17, 2010, Federal Funding for Medicaid HIT Activities; SMD # 09-006, ARRA HIT # 1, September 1, 2009, Initial Guidance on Section 4201.
13 See A.-K. Fryer, M. M. Doty, and A.-M. J. Audet, Sharing Resources: Opportunities for Smaller Primary Care Practices to Increase Their Capacity for Patient Care (New York: The Commonwealth Fund, March 2011) and P. Torda, E. S. Han, and S. Hudson Scholle, Easing the Adoption and Use of Electronic Health Records in Small Practices, Health Affairs, April 2010 29(4):668–75.
