Medicare and Medicaid payment incentives are available for hospitals, physicians, and certain other healthcare professionals that implement and use Electronic Health Record (EHR) systems.  To receive the payment incentives, eligible providers must engage in meaningful use of federally certified EHR systems.

The federal health information technology initiative, created under the Health Information Technology for Economic and Clinical Health Act in 2009 (HITCH), is an ambitious effort to help modernize the U.S. health system’s infrastructure.  While not a cure-all, active use of EHRs by physicians and hospitals is essential if we have any hope of improving quality of care, reducing medical errors, bending the cost curve, or providing genuinely patient-centered, evidenced-based care.

Medicare Incentives for Electronic Health Records:

Beginning in 2011, the law provides Medicare incentive payments to physicians and hospitals who are meaningful users (as defined in federal rules) of EHR technology.  Physicians are eligible for up to $44,000 in bonus payments.  Rural providers may receive an additional 10%.

Hospitals receive a base amount of $2 million plus an amount based on the number of patient discharges during the year.  The hospital payments are adjusted according to the share of Medicare patients and the amount of charity care provided.

Both the physician and hospital incentive payments are phased out over time.  In 2015, the incentives are replaced with financial penalties for those providers not using EHR technology.

Medicaid Incentives for Electronic Health Records:

The law provides State Medicaid programs with 100% federal match for EHR incentive payments to Medicaid providers for the acquisition and meaningful use of EHR technology.  Eligible Medicaid providers include acute care hospitals, children’s hospitals, physicians, and certain other healthcare professionals.

Medicaid incentive payments are capped at $63,750 and payable over a period of up to six years.

To qualify for Medicaid payments, physicians must pay the remaining 15% of EHR technology costs and waive their right to any Medicare EHR incentives. The Medicaid incentive payment for hospitals is computed using a modified version of the formula used for the Medicare hospital EHR payments, adjusted for the facility’s Medicaid patient share.  Eligible hospitals may qualify for both Medicare and Medicaid EHR incentives.

Medicaid EHR Incentive Program is a voluntary for States and administered individually by each State Medicaid agency.  It is likely every State Medicaid program will operate an EHR incentive program.

Frequently Asked Questions About EHR Incentive Payments:

To help providers understand and obtain the EHR incentives, the Centers for Medicare and Medicaid Services (CMS) has carefully answered nearly 200 frequently asked questions on the EHR Incentive Program,

  • Eligibility for Medicare EHR incentives for hospitals
  • Eligibility for Medicare EHR incentives for physicians
  • Eligibility for EHR incentives from State Medicaid Programs for hospitals and physicians
  • Registration and attestation processes
  • Incentive payments and penalties
  • Payment amounts and timing
  • Meaningful use requirements
  • Certified EHR technology

For the timeline for the Medicare and Medicaid EHR Incentive Program, with key milestones from 2010 through 2021, click here (PDF).

More Resources about Federal HIT Initiative: