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Medicare/Medicaid EHR Incentive and Penalty Programs

The American Recovery and Reinvestment Act (ARRA) of 2009 authorizes the Centers for Medicare & Medicaid Services (CMS) to provide financial incentives to eligible professionals and hospitals that demonstrate "meaningful use" of certified electronic health record (EHR) technology.

In general, you will be considered a meaningful EHR user during an EHR reporting period in a payment year if you use certified EHR technology to capture, exchange and report specific information/quality measures.

CMS announces new changes coming to meaningful use
Following our persistent advocacy, the AMA welcomes recent news from CMS that they are planning on revising Meaningful Use regulations to streamline the program's reporting procedures for physicians. Additional details are forthcoming and a rule finalizing these changes is expected at the end of the Summer 2015. The AMA looks forward to continuing our advocacy to reduce unnecessary administrative burdens and make health information technology work better for patients and physicians. Learn more about the changes CMS has proposed.

Tips on meeting Stage 2

To help physicians meet Meaningful Use requirements, the AMA has compiled a series of tip sheets on some of the more complext Stage 2 Core Measures. Eligible professionals are required to meet all 17 core objectives. Access a full list of these objectives in the first tip sheet, which is now available.

Use of certified EHR technology

Part of qualifying for EHR incentives involves the use of technology that is certified by the U.S. Department of Health and Human Services (HHS). HHS included both complete EHR systems and EHR modules in its definition of certified technology, meaning you can: (1) purchase a comprehensive certified package from a single vendor or (2) purchase certified components from different vendors. If you are already using an EHR or a module(s) and are unclear whether it is or will be certified for use under the Medicare / Medicaid EHR Incentive Program (often referred to as the "Meaningful Use Program"), ask your vendor what their plans are. Also, if your vendor indicates they are certified, verify this by visiting the website for the Office of the National Coordinator for Health IT, the federal agency within HHS that is charged with certifying EHRs.

Visit the Office of the National Coordinator for Health Information Technology (ONC) website for more on certification specifics. Also see the final rule on standards, specifications, and certification criteria for EHR technology, issued October 4, 2012, by HHS/ONC for Stage 2 of the EHR Meaningful Use Incentive Program. More information about the various “Stages” of the program can be found below.

Demonstrating meaningful use

The Centers for Medicare & Medicaid Services (CMS) EHR Incentive Programs known as "Meaningful Use" are staged in three steps with increasing requirements for participation. Physicians begin participating by meeting the Stage 1 requirements for a 90-day period in their first year of Meaningful Use and a full year in their second year (though for 2014 it was 90 days for everyone). To receive the full incentive amount – $43,720 – physicians participating in the Medicare Meaningful Use Program must have attested to having met all the requirements in 2011 or 2012. Physicians who start the Meaningful Use Program in 2013 or later can receive reduced incentives up to $38,220. After meeting the Stage 1 requirements, physicians will then have to meet Stage 2 requirements for two full years or face a financial penalty. However, because all physicians must upgrade or adopt newly certified EHRs in 2014, all physicians regardless of their stage of Meaningful Use are only required to demonstrate Meaningful Use for a three-month (or 90-day) EHR reporting period in 2014. For more information please visit the CMS Stage 2 website.

To learn more please visit the CMS FAQ Web page.

Conduct a security risk analysis now

If you are a physician participating in meaningful use, conducting or reviewing a security risk analysis is required to meet both stages 1 and 2. A security risk analysis needs to be conducted or reviewed during each program year. These steps may be completed outside of or during the EHR reporting period time frame, but must take place no earlier than the start of the EHR reporting year and no later than the date the provider submits their attestation for that EHR reporting period.

For example, a physician who is reporting for a 90-day EHR reporting period in 2014 may complete the security risk analysis outside of this 90-day period as long as it is completed between Jan. 1 of the EHR reporting year and no later than the date the physician submits their attestation for that EHR reporting period. The latest date you can attest to Meaningful Use for those who have participated in the program in prior years has traditionally been the last day of February in the year after the reporting period (i.e. February 28, 2015 for the 2104 reporting year), however CMS is considering changing this. If you are new to the program for 2015 October 1, 2015 is the last date to attest to avoid penalties for 2016. To meet this Meaningful Use core measure, and stay in compliance with HIPAA requirements, make sure you conduct a security risk analysis before you attest for 2015 Meaningful Use.

Tools to conduct a risk analysis

Risk analysis is an activity tailored to the practice. Its size, complexity and capabilities, in addition to risk and cost, are all taken under consideration when determining the method used to meet this requirement. The rules for a risk analysis are not prescriptive--a number of different tactics can achieve compliance.

The AMA has a number of free resources to help physicians build their own compliance processes. These resources are available for AMA PRA Category 1 Credit™. Log in to AMA Online Learning Center to access this free CME activity.

Additionally the U.S. Department of Health and Human Services has created materials, toolkits and videos that can help small- to medium-sized practices become compliant. Visit the AMA's Web page on risk analysis to access these resources.

Stage 1

Following substantial input from the AMA and other stakeholders, CMS published the final requirements physicians and hospitals will need to meet to receive these incentives. The final rule for Stage 1 was published in the Federal Register. Learn more about what requirements must be met for Stage 1.

The AMA has developed a series of short fact sheets and frequently asked questions which provide a brief overview of the requirements for Stage 1, found below.

CMS Specification Sheets for Stage 1 for each requirement.

Stage 2

CMS Extends Stage 2 through 2016
The Centers for Medicare and Medicaid Services (CMS) extended Stage 2 of the Meaningful Use (MU) program -- which started January 1, 2014 -- through 2016. Originally CMS planned Stage 2 to end after 2015. The Stage 2 extension follows a recommendation by the AMA made to CMS to ensure physicians have adequate time to participate in Stage 2 before being thrust into Stage 3. This mimics CMS' actions with Stage 1 which was also extended a year at the AMA's urging.

The requirements for Stage 2 are final. The AMA has summarized CMS' final requirements for Stage 2, and prepared a table tracking the final requirements.

CMS has created a toolkit to help understand how to meet the Stage 2 requirements.

CMS Specification Sheets for Stage 2 for each requirement.

Modifications to Stages 1 and 2

CMS proposed a number of changes to Stages 1 and 2 of the Meaningful Use program. View a summary of these proposed changes. CMS is expected to publish a final set of changes the end of the Summer 2015.

Stage 3

On March 30, 2015 the Centers for Medicare and Medicaid Services (CMS) published a proposed rule on Stage 3 of the Meaningful Use Program. A summary of the rules and detailed set of proposed measures and objectives are available.

Support for becoming a meaningful user

There are numerous online resources available to physicians interested in becoming a "meaningful user" of an EHR, many of which are listed below under "Additional Resources." The Agency for Health Research and Quality (AHRQ) has developed a webpage on Meaningful Use with detailed and downloadable lists of each requirement. In addition, the federal government is funding entities known as "Regional extension centers" (RECs) which are aimed at helping primary care physicians select and adopt a certified EHR. Locate your REC using ONC’s interactive map or by visiting ONC’s REC Web page. Also, see this facts-at-a-glance document on the RECs.

EHR usability

Usability is the capacity for an individual to learn and easily use an object. Both utility (how well a system handles the work a user must do) and ease-of-use are factors in usability. For, electronic health records (EHRs) and other health information technology, usability is a key component in promoting adoption and continued use.

The AMA strongly believes that EHRs should facilitate a physician’s practice and improve patient care. EHRs should enhance care coordination, practice efficiencies, and processes that improve health outcomes. The usability of EHR products should also support decision-making and not circumvent the need for critical thinking.

To improve care EHRs and other health technology must work well for the people who use them. Unfortunately, the swift implementation of EHRs has compelled physicians to purchase tools not yet optimized for patients or doctors. As a result, EHRs can often impede, rather than enable, efficient clinical care. Information clinicians and others are unable to find what they need, cannot easily understand what they find, and are unable to use the technology effectively, efficiently, safely, and with satisfaction.

The AMA believes that the addition of user-centered design (UCD) in the development of EHR products can improve usability and increase physician satisfaction with EHRs. UCD is a design process that focuses on the needs, wants, and limitations of end users. Although there are many variations of the UCD process, analyzing and incorporating user requirements from the beginning of the development cycle is a fundamental attribute of UCD. In addition, there is a need to better understand the relationship between clinical workflows, EHR usability, and patient safety to ensure that EHRs enhance established clinical processes without negatively impacting patient outcomes.

The AMA continues to interface with key stakeholders in the EHR industry and advocate that ONC include robust UCD when certifying EHR technology. Below are links to the AMA's letters, testimony and documents regarding EHR usability:

joins SMART Platforms Advisory Committee, June 11, 2015

AMA calls for design overhaul of EHRs to improve usability. Read the Sept. 16, 2014 press release.

May 8, 2014 comment letter to CMS and ONC providing input on ways to improve the EHR Meaningful Use program

July 23, 2013 AMA testimony before ONC's Health IT Implementation and Certification/Adoption Workgroups

June 14, 2013 letter to HHS on Penalty Programs and ICD-10

AMA response to Senators Thune, Alexander, Roberts, Burr, Coburn and Enzi on the "Reboot White Paper"

May 3, 2013 AMA Chair Steven J. Stack, MD testifies before CMS on EHR Meaningful Use, May 3, 2013

January 14, 2013 comment letter to ONC on HIT Policy Committee's Proposed Stage 3 Meaningful Use criteria

Additional resources:
RAND/AMA report on physician professional satisfaction

AmericanEHR vendor and product review community site

Selecting an EHR

Online Forum
AmericanEHR Partners, in partnership with the AMA, is an online community of physicians and other health care providers who use information technology to deliver care to Americans. Through education, social media, and the collection of peer-contributed data, it organizes information to facilitate optimal decision making.

AmericanEHR Partners provides the ability for a physician to rate his or her EHR system or comment on other ratings from verified physicians who participate within the AmericanEHR community. Much like Internet message boards, AmericanEHR facilitates group discussion and allows users the opportunity to refine their search for product information by criteria that are most relevant to them, for instance, practice size and specialty. However, unlike Internet message boards, all ratings and discussion topics are originated by verified members who must register with AmericanEHR Partners and are compared against a physician master file, ensuring real users are discussing and rating real products.

The AMA encourages physicians to take advantage of AmericanEHR Partners. Registration is fast, easy, and provides a structured community for the discussion and discovery of EHRs and their vendors. Physicians can register today and see what others are saying about their EHR.

EHR Contracts
The Office of the National Coordinator for Health IT (ONC) through a contract with Westat, published a guide, EHR Contracts: Key Contract Terms for Users to Understand, aimed at helping break down the types of terms physicians can find in contracts with EHR vendors.

Safe Harbor Rules for Accepting Donated EHRs and technology

The U.S. Department of Health & Human Services (HHS) Office of the Inspector General (OIG) and the Centers for Medicare and Medicaid Services (CMS) have published companion rules which extend the ability for physicians to accept donations of almost free (must pay at least 15% of the cost of the technology) electronic health records (EHRs) from certain health care entities without violating STARK and Anti-kickback rules. The exception/safe harbor was scheduled to sunset on December 31, 2013. The AMA is pleased to announced that due to our advocacy, HHS has extended the time physicians can accept donated EHRs under this exception/safe harbor through 2021. They had proposed 2016 as an earlier date but recognized that this was too soon. While the AMA advocated for a permanent exception, the extension of the sunset through 2021 brings welcomed relief for physicians as they continue to adopt EHRs and struggle to with the high cost of implementation. The rules also made several other notable changes:

  • Excludes labs from the types of entities that may donate EHRs
  • Updates the definition of what type of software is considered interoperable for the purposes of donations
  • Clarifies the requirement prohibiting any action that limits or restricts the use, compatibility, or interoperability of donated items or services
  • Removes from the exception the requirement related to electronic prescribing capability

HHS accepted the argument made by several others that labs should be removed from those types of entities permitted to donate EHRs to physicians due to concerns that EHR donations are being used to secure inappropriate referrals. The AMA, however, advocated that a preferable approach would be one that focused more on the need for better education around the limits of the safe harbor and exception for EHR donations.

Read the CMS rule and OIG rule to learn more.

2015 Hardships to Avoid 2016 Penalties

The deadline for certain Medicare physicians to file for a hardship in 2015 to avoid a financial penalty in 2016 is July 1, 2015. Hardship exceptions will be granted only under specific circumstances, and you generally must reapply each year. The following categories of hardships available for 2015.

  • Lack of Infrastructure: Eligible professionals must demonstrate that they are in an area without sufficient internet access or face insurmountable barriers to obtaining infrastructure (e.g., lack of broadband).In order to be approved for this hardship exception, physicians must demonstrate that they are in an area without sufficient internet access or face insurmountable barriers to obtaining infrastructure (e.g. lack of broadband).
  • Unforeseen and/or Uncontrollable Circumstances: In order to be approved for this hardship exception, during the past 1 or 2 calendar years (2014 or 2015) preceding the payment adjustment year (2016), the physician must have faced unforeseen and/or uncontrollable circumstances, as listed below that prevented them from becoming a meaningful user.
  • Lack of Control over the Availability of Certified EHR Technology: In order to be approved for this hardship exception, during the past 1 or 2 calendar years (2014 and 2015) preceding the payment adjustment year (2016), the EP:
    • Must have practiced in one or more locations;
    • Been unable to control the availability of Certified EHR Technology in that location(s); and,
    • More than 50 percent of their outpatient encounters must have occurred in that location(s).
  • Lack of Face-to-Face Patient Interaction: In order to be approved for this hardship exception, during the past 1 or 2 calendar years (2014 and 2015) preceding the payment adjustment year (2016), the EP’s practice must have involved a complete lack of face-to-face patient interaction and follow-up or that the cases of face-to-face interaction and follow-up were extremely rare and not part of the EP’s normal scope of business.

The following physicians do not need to submit a hardship application:

  • New physicians to the profession in their first year (both eligible professionals and eligible hospitals)
  • Physicians who are hospital-based: a physician is considered hospital-based if he or she provides more than 90% of their covered professional services in either an inpatient (Place of Service 21) or emergency department (Place of Service 23) of a hospital*
  • Physicians in which 90% of their claims include Place of Service 21, Place of Service 23 and certain observation services using Place of Service 22.
  • Physicians with certain Medicare enrollment (aka PECOS) specialties (05-Anesthesiology, 22-Pathology, 30-Diagnostic Radiology, 36-Nuclear Medicine, 94-Interventional Radiology) 6 months prior to the first day of the payment adjustments. Physicians should verify that their PECOS specialty is up to date.
Reimbursement for drugs

Penalties for Meaningful Use only apply to Medicare Physician Fee Schedule (MPFS) claims for Part B covered professional services. Part B drugs themselves are not services, and therefore are not paid under the MPFS. Only the services associated with the Part B drugs, such as injections, that may be necessary to administer the drugs are considered covered professional services that are paid under, or are based on, the MPFS.

For example, HCPCS code J2778 (Lucentis) would not be subjected to payment adjustments, but CPT code 67028 (intravitreal injection) would be subjected to payment adjustments. Therefore, claims for Part B drugs themselves are not affected by penalties for meaningful use.

Avoiding penalties in the Future
You must continue to demonstrate Meaningful Use every year to avoid penalties in subsequent years. If you are eligible to participate in both the Medicare and Medicaid EHR Incentive Programs, you MUST demonstrate Meaningful Use to avoid the penalties. You may demonstrate Meaningful Use under either Medicare or Medicaid.

If you are only eligible to participate in the Medicaid Meaningful Use Program, you are not subject to these penalties.

Helpful Resources
For more information on EP penalties, view the Payment Adjustments and Hardship Exceptions Tipsheet for EPs.

Key deadlines for 2015 reporting periods

July 1: First day of last 90-day reporting period for Medicare physicians starting Meaningful Use program for first time in 2015.

New to MU in 2015:
September 30: Last day of last 90-day reporting period for Medicare physicians starting Meaningful Use program for first time in 2015.

October 1: Last day for Medicare physicians starting Meaningful Use program for first time to attest in 2015 for a 90 day reporting period in order to avoid penalties in 2016.

Existing MU participants in 2015:
October 3: First day of last 90 day reporting period of 2015 for any Medicare physician to report for 2015 to get incentives.

December 31: Last day of last 90 day reporting period of 2015 for any Medicare doctor to report for 2015 to get incentives.

February 28, 2016: Last day for existing participant to attest to any 90-day reporting period in 2015 to get incentives.

AMA Advocacy on EHR Incentive Programs

The AMA continues to advocate strongly for making the EHR Meaningful Use Incentive Program more workable for physicians by asking CMS to establish more reasonable reporting requirements, measurement thresholds, and overall flexibility so that all physicians who want to participate are able to do so. Below are links to all of the AMA’s letters and testimony. As a result of significant AMA advocacy, CMS made several changes to the Stage 1 requirements reducing the number of overall requirements and including exceptions to certain measures.

September 17, 2015 sign-on letter to Secretary Burwell on pausing Stage 3

May 29, 2015 AMA comment letter to CMS on Meaningful Use Stage 3 Proposed Rule

May 29, 2015 AMA comment letter to ONC on Version 2015 Certification Proposed Rule

May 20, 2015 comment letter to CMS on Meaningful Use Modifications Proposed Rule.

May 8, 2015 AMA comment letter to House Energy and Commerce on revised draft "21st Century Cures Act"

April 3, 2015 AMA comment letter on ONC’s Interoperability Roadmap Draft Version 1.0

March 5, 2015 written statement written statement to the Senate Health, Energy, Labor & Pension Committee hearing on EHRs

January 21, 2015 sign-on letter to ONC on proposed modifications to the EHR certification process

October 21, 2014 AMA Letter on Medicare reporting programs to CMS, outlining how overlapping payment adjustments threaten physician practice viability

October 14, 2014 Meaningful Use Stage 3 letter to ONC and CMS

September 18, 2014 AMA Letter to Rep. Ellmers

September 15, 2014 sign-on letter to HHS on Meaningful Use

July 21, 2014 AMA comment letter to CMS on proposed modifications to certified EHR technology and Meaningful Use reporting periods.

July 7, 2014 comment letter to FDA on Food and Drug Administration Safety and Innovation Act (FDASIA) Health IT Report

June 5, 2014 AMA letter to CMS, ONC, and OIG on EHR Program Integrity Guidance

May 16, 2014 AMA letter to CMS on Meaningful Use and PQRS audits

May 8, 2014 comment letter to CMS and ONC providing input on Meaningful Use

April 28, 2014 letter to ONC on Version 2015 voluntary certification of EHRs

February 21, 2014 sign-on letter to the Secretary on Meaningful Use

December 18, 2013 AMA Wire article on Selecting an EHR

December 18, 2013 letter to OMB on EHR Safe Harbor rules

December 9, 2013 AMA Wire article on meaningful use Stage 2 extension

July 23, 2013 joint letter with AHA on Meaningful Use

July 23, 2013 AMA testimony before ONC's Health IT Implementation and Certification/Adoption Workgroups

June 14, 2013 letter to HHS on Penalty Programs and ICD-10

June 10, 2013 letter to CMS on EHR Safe Harbor under the Anti-Kickback Statute

AMA response to Senators Thune, Alexander, Roberts, Burr, Coburn and Enzi on the "Reboot White Paper"

May 3, 2013 AMA Chair Steven J. Stack, MD testifies before CMS on EHR Meaningful Use, May 3, 2013

April 22, 2013 AMA response to CMS and ONC on HIE RFI

February 1, 2013 comment letter to ONC on HIT Policy Committee's Patient Safety Action and Surveillance Plan

January 14, 2013 comment letter to ONC on HIT Policy Committee's Proposed Stage 3 Meaningful Use criteria

May 7, 2012 sign-on letter to CMS on Proposed Stage 2 Meaningful Use Rule

May 7, 2012 comment letter to ONC on Proposed Stage 2 Certification Rule

March 1, 2012 health IT and patient safety letter to ONC.

June 29, 2011 Sign-on letter to HHS on Stage 1 and Stage 2 MU measures, accompanied by a matrix illustrating applicability to different specialties of Stage 1 and proposed Stage 2 Meaningful Use requirements, and a color-coded dashboard depicting overall ability of several specialties to meet EHR Incentive Program requirements.

April 21, 2011 statement to ONC HIT Policy Committee on usability of EHRs

February 25, 2011 sign-on letter on proposed requirements for Stage 2 meaningful use of EHRs

January 27, 2011 letter to CMS opposing application of Meaningful Use requirements to private pay patients and March 10, 2011 response from CMS

June 16, 2011 cross-industry letter to HHS on EHR Incentive Program

July 2010 press release on Stage 1

March 15, 2010 letter to CMS on Stage 1 proposed rule signed by several state and specialty medical societies

September 29, 2009 letter AMA signed onto concerning lack of sufficient quality measures for specialists

September 17, 2009 letter to HHS on meaningful use

August 2009 letter and attached matrix to CMS and ONC in reaction to the Health IT Policy Committee’s proposal on meaningful use

June 26, 2009 AMA letter and attachment to HHS on meaningful use


AMA Press Releases and Statements on MU



AMA Wire Meaningful Use news


Presently between 5% to 10% of "eligible professionals" (which includes physicians) are being targeted for a Meaningful Use audit. The AMA has received a number of complaints and concerns associated with physicians undergoing an audit for receipt of the Meaningful Use (MU) of Electronic Health Records (EHRs) Incentive program and we are communicating concerns as we learn of them to the Center for Medicare & Medicaid Services (CMS). We continue to advocate for a more fair and straightforward process. Should a physician come across any of these problems, they are urged to communicate this to the MU audit contractor (e.g., ask for more time to comply, indicate any documents they are unable to furnish). The contact information for the MU audit contractor can be found below:

Peter Figliozzi
Figliozzi & Company, CPAs P.C.
585 Stewart Avenue
Suite 416
Garden City, NY 11530
(516) 745-6400 ext. 302

The AMA has advocated since the inception of the MU program for greater flexibility in meeting the program's requirements. We have also advocated for certified EHRs to have better capabilities for helping physicians demonstrate to the CMS that in the event of an audit that they have met the requirements. We continue to engage CMS and the Office of the National Coordinator (ONC) on these concerns. It is our understanding that physicians who have undergone these audits have been most challenged in demonstrating they met the "yes/no" requirements that call for attestation as well as proving they successfully met the security risk analysis. CMS has shared the following two documents on the audit process which may be of interest:


CMS has an informal appeals process for those participating in the Medicare program and have been denied an EHR incentive payment, have been determined to be ineligible for the program, or have received an unfavorable audit decision.  Physicians looking to appeal an adverse decision in the Medicaid MU program should contact their state Medicaid Agency for information about filing an appeal. 

Under the CMS appeal process, physicians have to file a claim and submit necessary documentation according to the following deadlines:

  • Failed Audit Meaningful Use – 30 days from the date of the adverse audit determination letter
  • Failed Reporting Meaningful Use – March 31st
  • Eligibility – March 31st

CMS' decision on the appeal is considered final with no further opportunities to appeal. More information on the MU appeals process can be found on the CMS website.

Additional resources