Congress adopted a carrot & stick approach to prodding medical professionals and hospitals to increase the electronic capture and distribution of health information. Between 2011 and 2014 there are financial incentives to adopt EHRs. After 2015 there are financial penalties for hospitals and physicians who have not reached the point of meaningful use of EHRs.

The Carrot

Congress authorized significant funding to support the widespread adoption of health IT through the ARRA economic stimulus bill. CMS estimates that the total payments distributed to Medicare and Medicaid providers will be between $14 and $27 billion over 10 years, though total spending will depend on the number of providers that qualify. The majority of these funds will be distributed as incentive payments distributed through the Medicare and Medicaid programs to eligible providers - including hospitals - that use EHR systems. The ARRA-stipulated incentive payments are intended to encourage hospitals and some physicians to become "meaningful users" of health IT. The formula for hospital incentive payments includes a base payment of $2 million with additional factors for total discharge volume, the level of charity care, the percentage of inpatient days paid for by Medicare or Medicaid, and an annual transition factor that scales back the payment over time.
Registration for Medicaid incentives begins in January, 2011. For more information see the AHA Registration and Attestation Advisory. To register, see the Medicare and Medicaid Registration User Guide for Eligible Hospitals.

The Stick

After 2015, hospitals that have not become meaningful users of EHRs will face penalties from both Medicare and Medicaid in the form of reduced payments. These penalties will come in the form of reduced Medicare and Medicaid payments.