On March 7, 2012, the Centers for Medicare and Medicaid Services (“CMS”) published in the Federal Register a proposed rule setting forth the Stage 2 “meaningful use” criteria that providers must meet in order to qualify for the Medicare and Medicaid electronic health record (“EHR”) incentive programs (the “Stage 2 proposed rule”).[1] On the same day, the Office of the National Coordinator for Health Information Technology (“ONC”) published in the Federal Register a complementary proposed rule setting forth the capabilities, standards and implementation specifications that certified EHR technology must include to achieve Stage 2 of meaningful use (the “standards and certification proposed rule”). CMS and ONC will consider comments on their respective proposed rules that are received by May 7, 2012.

The Stage 2 Proposed Rule

Background and Overview

As established by the American Recovery and Reinvestment Act of 2009 (“ARRA”),[2] the EHR incentive programs provide incentive payments to eligible professionals (“EPs”) and eligible hospitals that can demonstrate the “meaningful use” of certified EHR technology. These programs also impose penalties on those Medicare providers who cannot meet the meaningful use criteria by 2015.

CMS defines “meaningful use” in three different stages of increasing complexity. Each stage expands upon the requirements relating to the exchange of clinical information and the use of health information technology (“HIT”) to improve quality outcomes. Providers are required to meet the criteria for the applicable stage based on their first year of attesting to meaningful use (their first “payment year”). For example: providers whose first payment year is 2011 or 2012 would be required to meet Stage 2 beginning in 2014; providers whose first payment year is 2013 would be required to meet Stage 2 beginning in 2015; and so on. As proposed by CMS, Stage 2 would introduce new objectives for meaningful use and impose more stringent measures than the existing Stage 1 criteria. Further, Stage 2 would significantly raise the bar for the interoperability of EHR systems, requiring providers to successfully exchange clinical information on an ongoing basis, in contrast to Stage 1, which requires simply that providers test their ability to exchange such data.

Proposed Delay of Stage 2

Following the final rule to establish Stage 1 of meaningful use,[3] CMS received feedback from industry stakeholders who asserted that the anticipated timeline for the incentive programs would not allow providers and vendors adequate time to meet the more complex Stage 2 criteria. As a result, in the Stage 2 proposed rule, CMS proposes a minor delay to the implementation of Stage 2 for providers whose first payment year is 2011 or 2012. These providers would not be required to meet Stage 2 criteria until 2014.

Criteria for Stage 2 of Meaningful Use

CMS initially proposed that Stage 1 criteria be composed of core objectives that would need to be met by every provider; however, in the final Stage 1 rule, CMS eliminated this “all or nothing” approach in favor of a more flexible framework of “core” and “menu set” objectives, allowing providers more leeway in tailoring their adoption of EHR technology. Stage 2 of meaningful use would retain this two-tiered structure. EPs would be required to meet (or qualify for an exclusion for) 17 core objectives and three out of five menu objectives, while hospitals would be required to meet (or qualify for an exclusion for) 16 core objectives and two out of four menu objectives. Note that, once the provider is in Stage 2, the Stage 2 criteria replace the Stage 1 criteria (in other words, the provider in Stage 2 does not have two sets of criteria, but only the Stage 2 criteria). The more significant Stage 2 objectives and their associated measures include the following:

  • The Stage 1 core objective “exchange of key clinical information” would be replaced by “transitions of care” in Stage 2, with providers meeting criteria for the exchange of information during these “transitions of care” (which are defined as the movement of a patient from one setting of care, such as a hospital or long-term care setting, to another).
  • Multiple Stage 1 objectives would be combined into a more unified objective for Stage 2. For example, the proposed rule consolidates three objectives relating to the maintenance of problem lists, medication lists and medication allergy lists into one Stage 2 objective requiring providers to provide a summary of care record for each transition of care, with each list as a required field in the summary of care record. Further, as an example of Stage 2’s increased requirements for information exchange, the corresponding measure would require that 10 percent of summary of care records be transmitted electronically.
  • In Stage 1, providers are required to provide patients with an electronic copy of their health information upon request. For Stage 2, CMS proposes to eliminate this objective in favor of an “electronic online/access” core objective, requiring hospitals and EPs to enable patients to view online and download their health information and hospital admission information.
  • In response to the high number of data security breaches reported to the Department of Health and Human Services (“HHS”) involving lost or stolen media devices, CMS proposes to require providers to conduct or review a security risk analysis in accordance with the HIPAA Security Rule that specifically addresses encryption methods and to implement security updates to correct any identified deficiencies. This measure is intended to improve the security of electronic protected health information (“PHI”) and to mitigate the effects of breaches involving lost or stolen devices.
  • The Stage 2 proposed rule would impose more stringent requirements for several existing Stage 1 measures. For example, in Stage 2, providers would be required to use computerized provider order entry (“CPOE”) for more than 60 percent of the medication, radiology and laboratory orders created by the EP or eligible hospital. Providers also would be required to record patients’ vital signs and smoking status in 80 percent of all patient encounters.
  • Meaningful use objectives specify certain types of information that a certified EHR technology must be able to record and exchange as “structured data.” In Stage 2, providers would be required to incorporate a higher percentage of demographic and clinical information as structured data.

Medicare Penalties Begin in 2015

The Health Information Technology for Economic and Clinical Health Act (“HITECH Act”) provides that, beginning in 2015, EPs and eligible hospitals that are not meaningful users of certified EHR technology will be subject to Medicare penalties.[4] CMS proposes to look at data from the year that is two years prior to the year in which the penalty could be imposed in order to evaluate whether a provider is subject to the penalty for that year. For example, an EP may avoid the payment adjustment for 2015 if he or she has received an incentive payment based on data from the 2013 EHR reporting period. However, an EP who did not achieve meaningful use in 2013 would be subject to the penalty.[5]

CMS proposes an exception to this two-year look back period for those providers who have never successfully attested to meaningful use prior to the end of 2013. Any Medicare provider whose first year of achieving meaningful use is 2014 would be able to avoid penalties if the provider is able to demonstrate meaningful use prior to the end of that calendar year (for EPs) or fiscal year (for hospitals) and meet the attestation and registration requirements by October 1, 2014 (for EPs) or July 1, 2014 (for hospitals).

CMS also proposes to introduce an additional Medicare penalty as authorized in the HITECH Act. Beginning in calendar year 2018, if the proportion of EPs that are meaningful users of certified EHR technology is less than 75 percent, the Medicare penalty for EPs will be increased by 1 percent, but will in no case exceed 5 percent in total. In making the 75 percent calculation, CMS would exclude from the denominator both the EPs granted an exception for the most recent calendar year and all hospital-based EPs.

Recognizing that in certain circumstances, compliance with the meaningful use requirements could impose a significant hardship on providers, the HITECH Act authorizes CMS to make exceptions to the Medicare penalty on a case-by-case basis. CMS proposes three types of “significant hardship” exceptions, all of which would be subject to annual renewal and available for no more than five years: (1) the lack of availability of internet access or barriers to obtaining IT infrastructure; (2) an exception for newly practicing EPs for a limited period of time after the EP has begun practicing, and for new hospitals for a limited period of time after the hospital has begun providing services; and (3) unforeseen circumstances such as a natural disaster, hospital closure or EHR vendor going out of business. Further, CMS is considering a potential fourth exception for EPs meeting certain criteria, including the lack of interaction with patients, lack of follow-up time with patients, and lack of control over the availability of certified EHR technology at their practice locations. CMS is soliciting comments on the appropriateness of such exemptions.

Modifications to the Medicaid EHR Incentive Program

The Stage 2 proposed rule includes some changes specific to the Medicaid EHR incentive program. Some of the significant changes focus on the definition of “Medicaid encounters,” eligibility requirements under the program, and timing and definitions associated with meaningful use.

Medicaid encounters serve as the vital eligibility threshold under the Medicaid EHR incentive programs. The Stage 2 proposed rule looks to expand the definition of a Medicaid encounter by including all encounters for individuals enrolled in a Medicaid program even if the encounter is actually paid by a third party payer or simply not covered under Medicaid. Calculations of Medicaid encounters are also modified under the Stage 2 proposed rule such that patient volume is no longer calculated based on the calendar year, but can include the most recent 12 months preceding attestation.

The Stage 2 proposed rule also makes some changes to eligibility for EPs and hospitals. Medicaid EPs will be required to link the Medicaid funding for certified EHR technology to a direct benefit for the Medicaid population by amending the program eligibility to require that at least one of the clinical locations used for calculation of an EP’s patient volume have certified technology during the applicable payment year. In addition, a narrow segment of children’s hospitals that have been excluded from the program to date based on their lack of a CMS Certification Number would be permitted to participate because they do not bill Medicare.

The Stage 2 proposed rule has provided increasing flexibility for states’ definition of meaningful use in Stage 2 and has made a slight shift in timing for providers who first attested to Stage 1 criteria in 2011 by moving their shift to Stage 2 from 2013 to 2014 in order to provide more time for EHR technology development.

Clinical Quality Measures – Reporting Modifications

Both the Stage 2 proposed rule and the standards and certification proposed rule (together, the “proposed rules”) include a focus on changes to clinical quality measures (“CQMs”) and reporting. The proposed rules acknowledge that this is a fluid area of development under the HITECH Act, requesting comments and suggestions to shape its efforts in this area. While CQMs are no longer a meaningful use core objective, CMS has incorporated CQM reporting into the definition of “meaningful user,” indicating that CQM is still a prerequisite for demonstrating meaningful use.

The time periods associated with CQM reporting have not been modified under the Stage 2 proposed rule. There will be no change in the CQMs through 2013, but thereafter, the Stage 2 proposed rule doubles the required CQMs for EP reporting in Stage 2 – increasing the number to 12. Eligible hospitals also would be subject to a nearly proportionate increase, moving from 15 to 24 required reporting CQMs under the proposed rules. The proposed rules also align eligible hospital reporting with the National Strategy for Quality Improvement in Health Care (“National Quality Strategy”) released by HHS last year by requiring eligible hospitals to choose one CQM under the umbrella of each National Quality Strategy domain.

Although an increase in CQMs reported in Stage 2 appears to be relatively certain, much less certain is the categorization of “core” required CQM measures as opposed to “menu” measures that can be selected from a group of options. There are several proposals under consideration with respect to core and menu CQMs for EPs and CMS has requested industry input on which measures and categorizations should be included in the final Stage 2 rule. Similarly, certification criteria related to CQM reporting is in a nascent state of development. ONC has also requested guidance from industry participants regarding appropriate certification criteria in this area, particularly with respect to capturing CQM data and calculations of relevant numerators and denominators within an EHR system.

The proposed rules seek to streamline the method of CQM reporting going forward. Attestation remains a CQM reporting option through 2012. In the meantime, CMS is launching and seeking volunteer participation in an electronic reporting pilot that will extend through 2013, and Medicaid is allowing states to shift to state-based e-submission. CMS is drawing on existing platforms to further simplify the reporting processes for CQMs. In fact, quality data reported under the Medicare shared savings program for Accountable Care Organizations or CMS’s Physician Reporting Quality System can serve to satisfy the reporting requirements under HITECH – obviating any duplicate reporting.

Overview of Standards and Certification Proposed Rule

The HHS Secretary proposes through the standards and certification proposed rule to revise the initial set of standards, implementation specifications and certification criteria adopted in previous HITECH rules. These updated standards and criteria establish the technical capabilities and specifications required for certified EHR technology in order to support meaningful use beginning in the 2014 fiscal and calendar years (the “2014 Edition EHR certification criteria”). The standards and certification proposed rule also includes corresponding revisions to the permanent certification program for HIT.

As throughout the history of these programs, HHS has worked to tailor the 2014 Edition EHR certification criteria to the updated meaningful use requirements included in the Stage 2 proposed rule. It is vital that these programs dovetail to keep the technology industry aligned with the needs of EPs and hospitals under the HITECH landscape as it evolves. Many of the certification criteria from previous rulemaking has been designated “unchanged” under the standards and certification proposed rule, but other criteria are designated as “new” or “revised” in reference to the 2011 standards.  The unchanged criteria are subject to “gap certification,” allowing an EHR technology developer to use previous test results for certification.

One major change introduced under the standards and certification proposed rule is to streamline the requirements for certified EHR technology to minimize burden to EPs and hospitals by allowing each provider to secure only the EHR technology they need to demonstrate and support meaningful use. Beginning in 2014, certified EHR technology would be required to include a “Base EHR,” defined as EHR technology that includes fundamental capabilities every provider is required to secure to demonstrate meaningful use. Some of these fundamental capabilities highlighted in the proposed rule include clinical decision and physician order entry support, exchange of health information with external sources, and privacy and security. In addition, each provider would need to add to its Base EHR any additional EHR technology necessary to meet the meaningful use objectives and applicable core and menu set measures under the applicable stage of meaningful use and including the appropriate reporting of CQMs.

The standards and certification proposed rule also modifies ONC’s HIT Certification Program. The temporary certification program is expected to conclude on the effective date that the standards and certification proposed rule becomes final. The permanent certification program will then become effective as the “ONC HIT Certification Program.” The proposed rule has modified the certification process to include increased flexibility for technology vendors to quickly develop and adapt to changes in the marketplace and technology as development spurs forward.

For example, the “minimum standard” code set would now include newer versions of the sets, unless affirmatively prohibited by the HHS Secretary for certification, to allow ease of upgrade as improvements are developed. In addition, the concept of Base EHR has allowed for more flexibility and a reduction in the burden of EHR Module certification including the removal of the requirement that each EHR Module be certified for “privacy and security” based on the inclusion of that requirement for Base EHRs. Lastly, in a significant move towards greater transparency, test results submitted and used for certified EHR technology would be made available to the public.

[1] 77 Fed. Reg. 13698 (March 7, 2012).
[2] Pub. L. 111-5 (2009).
[3] 75 Fed. Reg. 44313 (July 28, 2010).
[4] Section 1848(a)(7) of HITECH.
[5] Those who are eligible for both the Medicare and Medicaid incentive programs, but who have chosen to attest under the Medicaid program using the “adopt, implement or upgrade” option for year one, are not considered meaningful users and also would be subject to the Medicare penalty in 2015 unless they have successfully attested in 2013.