CMS selects communities for Medicare EHR bonus pilot project

Washington -- Selected primary care physicians in a dozen communities will receive potentially tens of thousands in additional Medicare dollars for using certified electronic health records systems under a demonstration project starting next year.

Over the five years of the project, each doctor chosen for the demo could receive up to $58,000, with a limit of $290,000 per practice. The initiative will operate in Alabama; Delaware; Georgia; Louisiana; Maine; the Maryland/Washington, D.C., area; Oklahoma; and Virginia. The other communities are multicounty areas centered on South Dakota; Jacksonville, Fla.; Madison, Wis.; and Pittsburgh.

The Centers for Medicare & Medicaid Services will work with partners in Louisiana, Maryland, Pittsburgh and South Dakota starting this fall to recruit 200 small- to mid-sized primary care physician practices to participate in each community when the demonstration begins in June 2009. Projects in the remaining eight communities will launch one year after the initial four.

Physicians do not necessarily need to be first-time EHR adopters to qualify for the bonuses. Federal officials expect that many of the participants already will have a certified system.

Participation will not necessarily ensure extra Medicare payments. CMS randomly will choose only half of the 200 practices recruited in each community to get EHR incentive payments. The other half will serve as a control group and will get no bonuses, even if they use certified systems.

Practices that are put into the control group will know from the outset and will need only to fill out an annual survey of their EHR status. They will receive a small fee for filling out the paperwork. CMS wants to see how that group progresses in IT adoption without receiving any incentives. No one in the control group will be required to use an EHR. Incentive payments will not be available to non-primary care doctors or to practices with more than 20 physicians.

The size of the payments will be based in part on how sophisticated a practice's system is and whether the practice reports certain clinical quality measures defined by CMS for preventive care and the treatment of diabetes, congestive heart failure and coronary artery disease. In years three through five of the demonstration, Medicare will pay bonuses in large part based on how practices perform on these quality measures.

The administration is focusing on smaller physician practices because they have not embraced EHRs as quickly as federal officials would like. President Bush has proposed that most Americans have an electronic record by 2014.

"The gap between those who practice in small- to medium-sized offices and those who practice in larger offices or organizations is continuing to widen," said Karen M. Bell, MD, director of the office of health IT adoption for the Dept. of Health & Human Services. "This underscores our need to concentrate on those clinicians who, as it turns out, constitute the majority of practitioners in the U.S."

The American Medical Association said the federal incentives would be important to primary care practices in the 12 communities -- if the payment structure works.

"This a step toward wider use of new technologies that can help improve health care quality, and we look forward to the program findings, as we would like to see effective EHR programs expanded to cover other areas of physician practice," said AMA Board of Trustees Chair Joseph M. Heyman, MD.

Slow going

Efforts to encourage physicians to adopt electronic health records have not yet had a widespread impact. A survey of nearly 2,800 doctors by researchers at Massachusetts General Hospital and published June 18 in the New England Journal of Medicine found that only 4% of physicians reported having an extensive, fully functional EHR system, and only 13% said they had a basic system. Many of the physicians who did not use electronic systems cited cost concerns as a major barrier to adoption.

The researchers said Medicare health IT bonuses could play an important role in creating a new landscape for paperless medical records.

"Our data suggest that such incentives could be important facilitators of adoption," the authors write. "However, the cost of achieving widespread adoption of electronic health records in the United States could be high, probably in the tens or hundreds of billions of dollars, and whether any future federal administration will find the necessary resources is uncertain."

The promise of up to $58,000 in additional Medicare payments could attract some small physician practices that are on the fence about EHRs because of the cost, said Timothy G. Ferris, MD, MPH, medical director of the Massachusetts General Physicians Organization and one of the study's authors. But direct and indirect implementation costs of taking on a new system can be significant over time, and the additional Medicare money likely will only be enough for most practices to break even, he said.

"Every little bit helps, but I don't think the effect will be very dramatic in terms of new adopters," he said.

One physician who understands well the indirect costs that can come with going paperless is Richard J. Baron, MD, a Philadelphia internist. The five-physician practice he founded decided in 2004 to adopt a fully featured EHR system, and he described the process as the most difficult thing that his small business has done. Although the system eventually transformed patient care, unexpected startup and maintenance costs combined with decreased productivity during the transition took its toll at first.

"The experience in our office was that it cost us over $40,000 per doctor and that we saw a 2.5% absolute decrease in revenue in the year in which we implemented," he said. "In a business where your costs are fixed costs and your income as a physician is what's left at the end of the year, you can double a revenue decrease in terms of its impact on salary."

Dr. Ferris said the more promising element of the demonstration would be in testing a new way for Medicare to pay for patient care beyond just funding medical services. Whether the model succeeds should depend on what effect it might have in improving clinical outcomes, efficiency of care and patient satisfaction, he said.