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Summing It Up

Keeping you ahead of the curve with timely news & updates.


Lloyd Arakelian

Recent Posts

Electronic Health Record (EHR) Stage 2 Changes- A Must-Read for All Hospital Administrators

New Rule Includes Core Objectives for Hospitals

Authors: Lloyd Arakelian & Carol Cassell


CMS has, at long last, released its final rule regarding Stage 2 of the Electronic Health Record (EHR) Incentive Program. These final regs address several key areas you should be aware of.

Core objectives

The final rule requires all hospitals to satisfy some 16 “core objectives” and three of six “menu objectives.” The new regs also replace and add other objectives. In Stage 1, for example, hospitals were required to fulfill 14 core objectives and five of 10 menu objectives. Some Stage 1 objectives were either eliminated or combined, but most of them have been finalized. Many require meaningful use by higher thresholds of the patient population, however.

Core objectives of “capability to exchange key clinical information” and “provide patients with an electronic copy of their health information” have now been replaced. The respective replacements are “transitions of care” (which requires the provision of a summary of care record for each referral or transition) and “electronic/online access” to patients’ health information within 36 hours of being discharged.

The final rule also adds a new core objective that requires that facilities “automatically track medications from order to administration using assistive technologies in conjunction with an electronic medication administration record (eMAR).”

And the rule adds these five new menu objectives:

  1. Record electronic notes in patient records.
  2. Offer access to imaging results available through Certified EHR Technology (CEHRT).
  3. Record patient family health history as structured data.
  4. Generate and transmit permissible discharge prescriptions electronically.
  5. Provide structured electronic lab results to ambulatory providers.

The sixth menu objective — which is to record whether a patient 65 years old or older has an advance directive — is a holdover from Stage 1.

Hospitals and CQMs

While the final rule removes clinical quality measure (CQM) reporting as a core objective, facilities must still report on CQMs to demonstrate meaningful use. And specifically, all facilities must report on 16 out of 29 CQMs, beginning in 2014.

Moreover, hospitals must select CQMs from at least three of six key health care policy domains as identified in the Department of Health and Human Services’ National Quality Strategy. The domains include:

  1. Patient and family engagement,
  2. Patient safety,
  3. Care coordination,
  4. Population and public health,
  5. Efficient use of health care resources, and
  6. Clinical processes/effectiveness.

Beginning in 2014, Medicare providers that are beyond the first year of demonstrating meaningful use must electronically report CQM data to CMS. Hospitals will provide reporting through the EHR Reporting Pilot infrastructure for hospitals or electronic submission of aggregate data through a CMS Portal.

Payment adjustments 

Medicare payment adjustments are supposed to take effect in fiscal year 2015 (Oct. 1, 2014). Medicare hospitals that demonstrate meaningful use this year will avoid a 25% payment reduction that applies to the percentage increase to the inpatient prospective payment system (IPPS) reimbursement amount in 2015. A Medicare hospital that first demonstrates meaningful use in 2014 will avoid that penalty by registering and attesting to meaningful use by July 1, 2014. If the increase in the IPPS amount in 2015 is 2%, for example, a hospital failing to meet meaningful use would only receive a 1.5% increase (1 – 25% reduction = 75%; 75% × 2% IPPS increase = 1.5% increase for nonconforming hospital).

The final rule also lists three categories of hardship exceptions that facilities may apply for to avoid any payment adjustments: infrastructure, new eligible hospitals and unforeseen circumstances. In the first category, hospitals must demonstrate that they’re in an area without sufficient Internet access or face insurmountable barriers to obtaining infrastructure (for example, the lack of broadband).

The second category allows hospitals with new CMS Certification Numbers that would not have had time to become meaningful users to apply for a limited exception for one full-year cost reporting period. And the third category regards unforeseen circumstances, such as natural disasters.

Getting a jump on the deadline

The Stage 2 rule offers providers more time to meet the Stage 2 criteria than was originally laid out in the Stage 1 regs. Now, the earliest that hospitals must meet Stage 2 criteria is in fiscal year 2014. But savvy hospitals will likely take steps to get a jump on the deadline to avoid 2015 Medicare payment adjustments.

If you have any questions about the Stage 2 rule or any other issue pertaining to the rule change, give us a call at 716.847.2651, or you may contact us here.

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What Your Hospital Needs to Know About Medicare’s IPPS Payment Policies

New Rule Brings New Provisions to Existing Policies

Authors: Lloyd Arakelian and Carol Hamel

CMS has issued its final rule, which updates FY 2013 Medicare payment rates and policies under the Inpatient Prospective Payment System, also known as the IPPS. Although much attention has focused on the 2.8% increase to payment rates for general acute care hospitals, the 1,100-page rule also implements the key elements of two new programs under the Inpatient Quality Reporting (IQR) Program and the Affordable Care Act, among other things. Your hospital could lose part of its operating payments if you fail to meet these programs’ standards.

Understanding readmissions changes

Under the Hospital Readmissions Reduction Program, facilities that have excess 30-day readmissions for three certain conditions (pneumonia, heart attack and heart failure) will receive reduced payments beginning in FY 2013 (for discharges on or after Oct. 1, 2012). The final rule also details which hospitals will be subject to the program and the method used to calculate the hospital’s readmission adjustment factor. In addition, the rule outlines which portion of the IPPS payment will be used to calculate the readmission adjustment amount.

The rule limits the readmission adjustment factor to a 1% reduction for FY 2013. (But it increases to 2% and 3% in FY 2014 and 2015, respectively.) Moreover, it explains that CMS will apply that adjustment factor to the hospital’s base operating diagnosis-related group payment amount. The rule also establishes a process for hospitals to review their admission information and submit corrections before any of the readmission rates are made available to the public. In some situations, certain readmissions won’t count toward the excess readmission rate. For instance, certain planned readmissions (that is, coronary artery bypass graft following a heart attack) and hospital-to-hospital transfers are excluded from readmissions when calculating the rate.

HVPB provisions

The Hospital Value-Based Purchasing (HVBP) Program adjusts payments starting in FY 2013, and annually after that, based on how well hospitals perform or improve their performance on a selected set of quality measures. Hospitals can earn back up to 1% of their base operating amount, which CMS will remove from their 2013 payments in order to fund payments under the HVBP program.

The rule also finalizes details on how and when each facility will receive its Total Performance Score (TPS) as well as on other policies for the FY 2015 program. Plus, it outlines an appeals process in regard to the calculation of the performance assessment portion of a TPS.

Other key provisions

Hospitals that don’t successfully participate in the IQR program will receive a rate increase of just 0.8%, rather than the slightly larger 2.8% increase provided to hospitals that meet the requirements. Participation in the program is completely voluntary. But, as of now, hospital participation has increased substantially — to more than 99% of Medicare-participating hospitals reimbursed under the IPPS.

The rule also includes new measures that must be reported for perinatal care and readmissions, as well as a measure related to whether hospitals use surgery checklists. A new survey measure has also been added to the Hospital Consumer Assessment of Healthcare Providers and Systems measures to assess the level of quality care for patients as they transition from one care setting to another.

Comply or lose out

Finally, if your hospital doesn’t comply, it stands to lose up to 4% of its operating payments if it doesn’t satisfy the standards of the three programs described in this article. Be sure to put the necessary measures in place in order to maintain compliance.

For any questions on the new policies or any health care issue, contact us here or give us a call at 716.847.2651.

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Aligning Value-Based Reimbursement With Physician Compensation

Compensation May Become Dependent on Case Outcome

Authors: Lloyd Arakelian and Shawn Frier

Accountable care

The Patient Protection and Affordable Care Act (PPACA) offers hospitals multiple options for providing care and paying providers, such as forming accountable care organizations (ACOs). CMS will reward ACOs that can reduce costs while still meeting performance standards on quality of care. Provider and patient participation in an ACO is strictly voluntary.

But even if you don’t plan on forming a CMS-inspired ACO, you can still develop a compensation system that works toward improving outcomes and cutting costs. This will probably require new physician performance metrics that put less emphasis on volume and greater focus on quality factors, such as patient satisfaction, efficiency and readmission rates. (Keep in mind that any new compensation plan that involves nonemployee physicians will need to comply with the Stark Law and the antikickback statute requirements regarding commercial reasonableness and fair market value.)

Compensation models

Several value-based compensation models are gaining attention, including:

  • Bundled payments. CMS is running a pilot program for the bundled payment model in several hospitals. It makes a single discounted payment to hospitals and physicians for a defined group of services provided to a patient within a specified episode of care, such as heart bypass surgery. Instead of a surgical procedure generating multiple claims from multiple providers, the entire team is compensated with a bundled payment.
  • Pay-for-service / fee-for-service. In this model, physicians are paid a negotiated amount for each service, with additional incentives based on quality, costs and patient experience.
  • Shared savings. With this model, providers that work together to meet quality standards based on outcomes and care coordination share in the savings they achieve on the targeted costs.

The path to success

Physicians might want to fight change, especially if it involves their compensation. But, by following the steps below, you can smooth out the transition:

  1. Define your hospital’s strategic goals. Start by defining the strategic goals so you can align the incentives to accomplish those goals. If you want to score a certain rating on the Hospital Consumer Assessment of Healthcare Providers and Systems patient experience survey, for example, part of your physicians’ compensation should be based on their individual scores on the physician communication measure.
  2. Get physician buy-in. Physician buy-in is critical to the long-term success of organizational change. Make sure you engage your hospital’s physicians in the process by, for example, giving them representation on the accountable care team that will identify the optimal clinical practices and establish performance metrics.
  3. Offer feedback. Give your physicians feedback on their performance before they see the consequences of any underperformance in a smaller paycheck. Track their performance regularly and offer timely reports in one-on-one meetings. Solicit feedback on any performance hurdles they’re confronting, and provide physicians aggregated reports of clinical data that demonstrate how their efforts are improving quality.

Take care

Although the change to value-based reimbursement seems inevitable, don’t rush into such a dramatic and alarming change. Make sure you take a step-by-step approach, introducing a few new components at a time.

For any questions on value-based reimbursement or any other healthcare concerns, contact us here or give us a call at 716.847.2651.


Third-party and governmental payers are moving rapidly to value-based reimbursement — in effect, leading to a shift from the traditional physician compensation model toward a new focus on quality outcomes. If you haven’t moved in that direction, start thinking about how you should change compensation plans to reflect an environment that emphasizes pay for performance and accountability.

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Is Your Hospital Ready to Demonstrate “Meaningful Use”?

Use of New Technology Programs Encouraged with Incentives

Authors: Lloyd Arakelian and Dorothy DiCarlo-Rhoads

glasses_and_paperwork.jpgThe American Recovery and Reinvestment Act of 2009 (often abbreviated as ARRA) created some new programs that are designed to encourage health care providers to use electronic health record (EHR) technology. The Medicare and Medicaid EHR Incentive Programs offer payments (beginning with a $2 million base payment) to certain hospitals that adopt and then demonstrate “meaningful use” of certified EHR technology.

Although most hospital administrators in a recent KPMG poll reported that they have made much progress in adopting EHR technology, less than 50% of them indicated they were ready to meet the meaningful-use requirements. The most frequently cited challenge was simply understanding the massive requirements.

Back to basics

Since 2011, community hospitals have been allowed to participate in the Medicare incentive program. The last year in which eligible hospitals can begin receiving the incentive payments is 2015. Such facilities must demonstrate meaningful use in every year that they participate in the program. Beginning in 2015, however, hospitals that have thus far not demonstrated meaningful use will see a payment “adjustment” in Medicare reimbursements.

Depending on the state, the Medicaid incentive program has been voluntarily offered since 2011. Hospitals may receive incentive payments as long as they demonstrate meaningful use — or adopt, implement or upgrade to certified EHR technology — the first year they participate in the program. After that, facilities must demonstrate meaningful use in order to receive payments. In addition, no payment adjustments will be made to Medicaid reimbursements. The last year a hospital may begin the program is 2016.

If your hospital is eligible for only the Medicare program or for both programs, the meaningful-use reporting period for the first year of participation will be 90 days. And the reporting period for subsequent years is the entire year. Hospitals that are eligible for only the Medicaid program don’t need to demonstrate meaningful use in the first year. However, the reporting period for year two will be 90 days, and the period for all remaining participation years will be the entire year.

Understanding the criteria

Meaningful use simply means that a hospital must show that it’s using certified EHR technology in ways that can be measured in both quantity and quality. The facility must show that it’s using the technology: 1) for electronic exchange of health information to improve quality of health care, 2) in a meaningful manner, such as for e-prescribing, and 3) to submit data on clinical quality and other measures.

The criteria for meaningful use cover three stages. Stage 1 sets the baseline for electronic data capture and information sharing. This stage runs through 2012. And stages 2 and 3 will likely be implemented in 2013 and 2015.

There are 24 meaningful-use objectives for hospitals. In order to qualify for a payment, your hospital must meet 19 objectives, including 14 required “core objectives” and five objectives from a list of 10 “menu set objectives” (for example, recording advance directives for patients 65 years old or older and implementing drug formulary checks).

You must also report on 15 clinical quality measures that are generated from EHRs, such as incidence of potentially preventable venous thromboembolism and emergency department throughput. In order to meet the objectives and measures, some 80% of your patients must have records in the certified technology.

Hospitals that register for the Medicare program must use the CMS Web-based Registration and Attestation System to certify that they’ve met the meaningful-use criteria. And, for the Medicaid program, hospitals must adhere to their states’ systems. A certified EHR system will generate a report with all the data that must be entered.

Fortunately, CMS has provided an online tool that you can use to test whether your hospital is ready and able to demonstrate meaningful use and receive incentive payments. You can find the Meaningful Use Attestation Calculator here.

Don’t drag your feet

Don’t drag your feet by waiting until the end of the reporting period just to see how your hospital is progressing. Make sure you monitor your achievements on the measures and objectives from the start, and check in with the calculator regularly.

For any questions on meaningful use or any other healthcare issues, contact us here or give us a call at 716.847.2651.

core objectives

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