EHR incentive payments improve bottom line of for-profit hospitals

A debt-rating agency predicts they will use the extra money toward acquisitions.

By — Posted May 16, 2012

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Meaningful use incentive payments made in 2011 helped boost the bottom line for several for-profit hospital companies by nearly $400 million, according to Fitch Ratings.

Fitch’s report, “For Profit Hospitals Quarterly Diagnosis,” published in April, found that meaningful use incentive checks added a cumulative $396 million in earnings before interest, taxes, debt and amortization.

All six large for-profit hospital companies analyzed by Fitch had received an incentive payment ranging from $11 million, which went to Universal Health Services, to $306 million, which went to HCA.

According to the most recent report from the Centers for Medicare & Medicaid Services issued in April, 2,667 Medicare and Medicaid incentive payments had been made to both eligible hospitals and critical access hospitals through March. There were 566 hospitals that received money from both Medicare and Medicaid.

Incentive payments to hospitals are based on a complicated formula, with qualifying hospitals earning a base of $2 million. The report noted that the 2011 incentive payments, which Fitch considered modest, are expected to be larger in 2012 and 2013.

No known report has noted the net gains for physician practices qualifying for incentives. Since January 2011, 29,931 eligible health care professionals received $628 million in Medicare incentives through March 2012, according to the CMS report. Since May 2011, 44,014 eligible professionals, which include physicians, dentists, nurse practitioners and chiropractors, collected $792 million in incentives. The Medicaid program allowed eligible professionals to buy a system with their first incentive payment, and the Medicare program required eligible professionals to have a system in place to qualify.

Practices could earn up to $44,000 per physician over five years from Medicare or nearly $64,000 over six years from Medicaid if they show meaningful use of EHRs. Unlike hospitals, they cannot participate in both programs,

In a March 26 blog post, National Coordinator for Health Information Technology Farzad Mostashari, MD, said the Office of the National Coordinator has set a goal of having at least 100,000 eligible professionals paid incentives by either the Medicare or Medicaid meaningful use incentive program by the end of 2012.

Fitch said the hospital companies analyzed in the report are not expected to use their positive cash flow to reduce debt. They are expecting acquisitions of other hospitals to remain a top priority. Fitch could not provide specifics on expected acquisition activity, but did say that Community and HCA had the most acquisition activity in 2011.

A Feb. 28 report released by Irving Levin Associates said 86 hospital merger or acquisition deals took place in 2011, the highest number in the past decade. Moody’s Investors Service issued a report in March predicting those trends will continue.

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