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August 22, 2014

Daily Briefing primer: Understanding 'meaningful use' and its three stages

Daily Briefing

The EHR Incentive Programs (better known as "meaningful use") were created by the 2009 economic stimulus package in an effort to improve patient care and electronic health records (EHRs) adoption.

Under the Medicare and Medicaid programs, eligible professionals  (EPs) and hospitals (EHs) must attest to the meaningful use (MU) of a certified EHR in order to receive incentive payments and avoid penalties later in the program.  

The Medicare MU program is run by CMS, while the Medicaid program is run by each state's Medicaid agency. EPs eligible for both programs must select one, while hospitals may participate in both. CMS set three stages of meaningful use.

All providers must meet performance thresholds through online attestation, regardless of the stage they are in. First-time EHs and EPs who do not attest to MU by July  1, 2014, and Oct 1, 2015, respectively, will be subject to Medicare payment adjustments (note: there are no penalties in Medicaid).

  • EPs: Penalties start with a 1% cut to total Medicare charges in 2015 and may increase at 1% each year up to 5%, depending on total EP meaningful use participation.  
  • Hospitals: Penalties apply to the increase in the Inpatient Prospective Payment System (IPPS) payment rate (i.e., market basket update). In 2015, the penalty will equal 25% of the increase. For example, if the IPPS increase by 2% for 2015, a hospital not attesting to meaningful use will receive only a 1.5% increase.

The deadline to attest for all providers beyond Year 1 is different than those in year 1. It's Nov. 30 each year for hospitals, and Feb. 28 for EPs. If this attestation deadline is not met, these providers are also subject to Medicare payment adjustments.

New penalties and cuts: How Medicare payments will change next year

Stage 1

Providers were able to attest to Stage 1 of the program as early as 2011. All providers in Year 1, regardless of when they start the MU program, attest using any consecutive 90-days to monitor performance, and those in Year 2 for a full-year (except in FY/CY 2014 where all Year 2 providers could report for a 3-month quarter). To attest to Stage 1 of meaningful use, EPs and hospitals must:

  • Capture structured clinical data such as, problem, medication, medication allergy data, vital signs, and smoking status
  • Utilize clinical decision support Provide health information to patients; and
  • Report clinical quality measures (CQMs) and public health data.

The EHR incentive program requires providers that have attested to Stage 1 for two to three years to meet more advanced requirements in Stage 2, which began for hospitals on October 1, 2013, and EPs on January 1, 2014.  

Stage 2

To attest to Stage 2 of meaningful use, EPs and hospitals are required to use their EHRs to meet more complex requirements:

  • Electronically transmit patient care summaries across various settings;
  • Engage patients with personal health records (PHRs) or patient portals that they can use to view, download, or transmit their health information
  • Report CQMs and public health data

Stage 3

CMS has not yet proposed Stage 3 objectives and measures. Stage 3 will begin for providers who have completed at least two years of Stage 2 on October 1, 2016 for hospitals; and January 1, 2017 for EPs. It is anticipated that Stage 3 will focus on:

  • Improving quality, safety, and efficiency and health outcomes;
  • Using decision support for high-priority conditions;
  • Engaging patients in a higher capacity(including patient-generated health information)
  • Enhancing information exchange  and
  • Reporting CQM and population health data.

Sources: fact sheet, 3/14/14; fact sheet, 1/15/13; Advisory Board poster, 2/11/14; CMS fact sheet, accessed 8/18/14; CMS tip sheet, August 2012; CMS tip sheet [3], March 2014; CMS tip sheet [2], March 2014. 

How is your hospital affected?

Estimate hospital Medicare and Medicaid incentive payments or penalties for meaningful use with our penalties calculator.


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