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Making Sense of the Medicare and Medicaid Incentives Packages: Financing the Upfront Costs

Apr 15

Written by: Grants Office, LLC
Friday, April 15, 2011  RssIcon

By Chris LaPage
April 2011

So you have checked a few items off your list: (1) You determined you are an eligible health care provider, (2) You have calculated an estimate incentive payment and realize what's at stake in terms of reimbursement, (3) You have begun the registration process with CMS (Medicare) or the agency in your state administering the Medicaid program, and (4) You have reviewed and completely understand the various objectives and measures that your EHR system must meet in order to prove meaningful use and capitalize on the incentives.

Unfortunately, one large obstacle still stands in between you and the incentive payment. You cannot afford the upfront costs of purchasing and implementing an EHR. Furthermore, the incentive payments represent only a portion of what it will cost to get EHR rolled out through your entire practice, hospital, or clinic. Many EHR vendors are working out creative financing schemes that skew payments towards post-implementation when incentive funds would potentially become available. However, many providers in underserved urban and rural areas still wonder how they will be able to afford all of these upfront investments.

Fortunately, there are several funding options available to health care providers. While grant funding is typically geared towards nonprofit and public health care providers, for-profit physician practices can also take advantage of these funding streams by collaborating with appropriate entities. In addition, many states are finally getting their EHR loan programs up and running (which stems from Recovery Act funding), which provides low interest loans for EHR adoption to small- and medium-sized physician practices.

One potential source of EHR/HIE funding flows out of the Agency For Health Care Quality and Research's (AHRQ) Health Information Technology Portfolio. AHRQ puts out several grant programs that fund real world demonstration projects and looks for well rounded projects that include expenses for software, hardware, training, personnel, and the research/dissemination components of the grant program. The AHRQ grants are open to most nonprofit organizations, but success with this funding stream boils down to the ability of the applicant to attach a principal investigator (project lead) that has a background in research methodology. AHRQ must be sure that the research and dissemination piece will be brought to fruition; this requires you to look at the facilitators and barriers to EHR adoption and catalogue the lessons learned, obstacles encountered and best practices discovered. In addition, you must look at the ultimate effect of that implementation on quality of care indicators. Finally, AHRQ requires the creation of a dissemination plan, ranging from a journal article to regional and national conference presentations. The one issue with AHRQ's HIT portfolio is that you cannot do inpatient exclusive projects; you can do ambulatory-based projects or focus on transitions in care settings (between inpatient and outpatient). If you are willing to take on these elements, you can realize up to $2.5 million in funding over a five year project period.

The Health Resources and Services Administration (HRSA) also administers several programs that allow for the acquisition of EHRs. HRSA puts out solicitations specifically for Federally Qualified Health Centers to attain EHR systems and other types of health IT. HRSA also puts out a series of Rural Health Network Development grants that assist rural providers with planning and implementation activities in the formation of formal rural health care networks. Elements of health IT, such as health nformation exchange, are allowed expenses under the terms of these particular grant opportunities. In fact, HRSA is releasing a program in 2011 specifically for rural health networks to acquire EHR. The program offers applicants $900,000 over three years. They anticipate making 40 awards. HRSA also sponsors nursing education grants, including some that allow the acquisition of health IT for the purposes of training and continuing education.

Finally, you will want to explore alternative options beyond state and federal grant funding. Many organizations have secured earmarks for their health IT projects and that continues to be a viable funding stream. While earmarks are a hard sell in 2011, the process will likely be reformed and we will see some type of reincarnation in future fiscal cycles. Elected legislators are not going to cede their ability to target federal and state budget funds to high priority projects in their district. In addition, you can approach local, regional and national foundations that have a history with funding IT projects. Since foundations mainly look at impact, you will need to make the connection between the implementation and improved quality of care. In other words, you must drive home the benefit to the patient in order to secure foundation funding. Most foundations only require a 2-3 page letter of inquiry to make a decision on whether they would like to invite the applicant to make a full proposal and fund the project.

While some providers are under the wrong impression that they will not qualify for the incentives if they utilize federal grant funding to secure their EHR, the truth is grant funding has no implications for a provider's eligibility as it relates the incentive program. When it comes to implementing health IT, the incentives should be viewed as just one piece of the financing package.

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