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Hospitals and EMRs: Stimulating a connection

Changes in Stark laws allow hospitals to offer EMR-implementation subsidies to physicians. Physicians can also tap into federal stimulus money for EMRs. How will the two funding options converge?

By — Posted Nov. 23, 2009

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Availability of government stimulus money, combined with hospitals being allowed to finance portions of physicians' electronic medical record systems, could make EMR adoption a veritable bargain. Or the stimulus money could make hospital systems less eager to help pay for your EMR, figuring that government funds will instead.

Either way, the possibility of combining two avenues of EMR funding has added a twist to the economic picture for physicians deciding what, when and whether to buy.

Doctors can get a maximum of $44,000 in funds from the federal economic stimulus package for adopting a certified EMR system that meets the government's "meaningful use" standards. How much physicians get in stimulus funds will be based on the percentage of their practice that is made up of Medicare or Medicaid patients. Hospitals can get their own share of stimulus funds, but the amount depends on how they're connected with physicians.

"There's a lot of activity going on," said Amy Leopard, health care attorney and partner at Walter & Haverfield in Cleveland. "Incentive payments have spurred that dialogue."

Some hospital systems are making their offers to physicians more generous; others are figuring out the role subsidies should play in light of the stimulus money.

"I have seen a variety of directions, and even within different hospitals, they are providing a menu of resources for physicians," Leopard said.

More help for doctors

North Shore-Long Island [N.Y.] Jewish Health System started talking about helping affiliated physicians pay for their EMR systems about nine months before the American Recovery and Reinvestment Act, or federal stimulus package, passed in February.

After the bill was enacted, North Shore continued its plan to offer subsidies of up to $40,000 per physician. That, combined with stimulus funds, could give affiliated practices up to $84,000 per doctor for EMRs.

"To support the highest quality of care that comes with electronic medical records, an offering to make it easier was warranted," said Michael Oppenheim, MD, medical information officer for North Shore.

The health system is offering two tiers of subsidies. Any affiliated physician can get up to 60% of the purchase price of an EMR. Physicians who agree to share data can get up to 85% of the purchase price -- the highest percentage allowed under Stark laws. Neither offer can exceed $40,000.

Dr. Oppenheim said North Shore already had started setting up a regional health information exchange that would help the hospital system qualify for the data-exchange incentive offered by the stimulus act.

Hospitals "have to show the ability to share data to improve quality of care. So if the hospital doesn't have anyone to share with, they will have a hard time demonstrating that," said Amy Fehn, a health care attorney for Wachler and Associates in Royal Oak, Mich.

But some hospitals, especially those in rural areas, may find their only chance to qualify for these incentives come from offering subsidies so physicians get EMRs, expert say.

Stimulus money is spread over five years and won't arrive until after an EMR system is purchased, Fehn said. So physicians still should talk to hospitals about help with upfront costs.

"What I've heard ... is that the small amount [of stimulus money] won't make a huge dent in the cost of an EMR, so I would expect that [physicians] will still be looking toward the hospitals for some assistance," Fehn said.

To qualify for stimulus money, physicians must adopt systems that are interoperable with other hospital systems, Fehn said. "That's the other catch."

Attorney Mary Jean Geroulo of the Dallas firm Stewart Stimmel agreed the stimulus money alone might not be enough for some physicians, and the Stark exceptions are important for the health care industry to meet the government's goal of digitizing all patient files.

"If hospitals have the ability to get affiliated physicians up to speed, we will have made huge strides," she said. And the Stark deadline -- scheduled to expire in 2013, before the stimulus incentives for EMR use turn into penalties for disuse -- could be extended if there's a demonstrated need.

"Hospitals will be taking advantage of this if they haven't already," Geroulo said.

For nephrologist Simon Prince, MD, North Shore medical staff president, the subsidy from the health system meant the difference between getting an inexpensive model or getting a pricier, higher quality system. If all they had was the stimulus incentive money, "A lot of people probably would have picked cheaper vendors," he said.

The hospital's offer was just one more factor pushing physicians toward adoption, Dr. Prince said.

"It's the stimulus money, it's the Stark exemptions, it's the North Shore Health System. All of these things are playing a role, and it's all allowing the enthusiasm to bubble up here. Everyone, I think, is getting on board."

Reconsidering the subsidy

Tufts Medical Center began offering subsidies more than a year ago. It saw them as a good business strategy, as "the community physicians' role is very important to our success at a larger level," said Bill Shickolovich, Tufts vice president and chief information officer.

Shickolovich sees Tufts' contributions in two parts -- to defray costs and to show good faith that the medical center was "committed to making this work, together."

Tufts is still committed to getting its affiliated physicians connected, he said. But "because the stimulus funding has not yet started, we at Tufts Medical Center have not yet decided how to balance any stimulus opportunities with our subsidies."

Possible scenarios some hospitals are considering include having affiliated physicians share subsidies with the sponsoring hospitals or even repay the entire subsidized amount. But those possibilities raise legal questions, which is why many hospitals haven't decided what to do yet.

After the stimulus bill was passed, Leopard said, several of her hospital clients said they were glad they hadn't yet offered subsidies. But the ones that did haven't discussed "backing up the truck and taking them away." Some are thinking of other approaches, outside of the Stark exemptions, that would provide assistance without footing the bill, she added.

"I think it's very dynamic, and a lot of different, creative approaches are being discussed," Leopard said. But whatever the source of funding, doctors still need to weigh the options before adopting any EMR system.

One possibility is an application service provider EMR, Leopard said. Hospital and physician practices can access an ASP-model EMR online, which means neither group has to invest in the expense of an on-site server. The systems are hosted remotely and accessible via the Internet for both the hospital and affiliated physicians.

Hospitals also could act as vendors and sell licenses to doctors who want to connect. Or hospitals can negotiate with vendors for discounts for affiliated practices.

But affordability shouldn't be the only consideration in choosing an EMR. It's crucial, experts say, that the system makes sense for the practice. Having to switch systems later could create major problems, Leopard warned.

Doctors should study any offer's conditions and not assume that a hospital system will meet the meaningful use criteria and qualify them for incentive money. "It's going to be a bad scene if [physicians] spend all this money and don't get the [incentive] funds. They need to proceed cautiously," Fehn said.

There are cautions for hospitals as well. Hospitals that previously offered the maximum subsidy allowed under the Stark exceptions might consider lowering that amount for physicians who haven't yet accepted their offers. But, attorneys warn, if this is perceived as favoritism to practices that make more referrals, it's an antitrust violation.

Attorneys advise physicians to ask sponsoring hospitals about previous offers. Physicians also should get any new offers in writing, with an expiration date.

Before accepting any hospital subsidy, Michigan health care attorney Fehn warns, physicians should "put some thought into it and not just jump on the first bandwagon that comes along."

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ADDITIONAL INFORMATION

Questioning the offer

Even if a hospital's subsidy offer seems like a good deal, there are things to consider before accepting it. Experts suggest asking:

  • Will the offer require physicians to exchange data with the sponsoring hospital?
  • Is the system interoperable with the systems used at neighboring hospitals?
  • Will data reporting be required?
  • Will the system help or hamper your ability to qualify for incentive funds?
  • Did the hospital offer a different amount to other physicians? If so, why?
  • Is the hospital working with a reputable vendor that will ensure the system is equipped to meet meaningful use requirements?
  • Do you have a legal representative, apart from the hospital's legal counsel, protecting your practice's interests?
  • Is the system the hospital is offering one you would have picked on your own?
  • Does the system meet your practice's needs?

Sources: Amy Leopard, health care attorney and partner, Walter & Haverfield, Cleveland; Amy Fehn, health care attorney, Wachler and Associates, Royal Oak, Mich.; Mary Jean Geroulo, health care attorney and partner, Stewart Stimmel LLP, Dallas

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What hospitals stand to gain

When the federal government invested $19 billion toward expanding use of electronic medical records, it wasn't just looking at physician practices. Hospitals also have a lot to gain from going electronic. But they might need the help of physicians to qualify for funds.

Under the American Recovery and Reinvestment Act, hospitals participating in the Medicare program can qualify for up to $2 million in base incentive pay per year for implementing EMR systems.

Plus, they can get additional incentive money under a complicated formula that includes $200 per discharge, multiplied by the hospital's Medicare Share and a transition factor that starts at 1.0 and declines to 0.25 over the course of the program.

But to qualify, hospitals must meet three basic requirements: They must use a certified or qualified EMR; they must use the EMR to do quality reporting; and they must exchange data with affiliated physicians.

To qualify for the highest eligible amount, hospitals must be meaningful users of EMRs by fiscal 2011.

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