One-on-One with Post & Schell Attorneys Steven Fox & Edward Shay, Part I

June 24, 2011
Steven Fox        Edward ShayIt’s no surprise that the recently passed Economic Recovery Package contains billions for hospitals and physicians to
Steven Fox Edward ShayIt’s no surprise that the recently passed Economic Recovery Package contains billions for hospitals and physicians to invest in healthcare IT. But only by digging into the legislation — specifically the HITECH Act, part of the massive American Recovery and Reinvestment Act of 2009 — can those responsible for getting that money understand what will be required of them, and when. Healthcare Informatics Editor-in-Chief Anthony Guerra recently talked with Steven Fox and Edward Shay, attorneys and partners at Post & Schell, to better understand the substance of the act.

AG: Of course, our readers are incredibly interested in the stimulus package and the implications of what it means to their business. If I asked you to start by boiling it down to a brief description for our CIO readers, what could you tell me?

SF: There is so much in there. I guess the biggest thing is the money. Money for things that probably hospitals are doing already, and if they're not, it’s going to encourage them to develop or implement EHR systems. I guess that’s certainly one of the biggest — because for hospitals, especially, we’re talking about a lot of money. It’s a minimum of $2 million, and then it goes up from there based on a pretty complicated formula that involves Medicare and Medicaid discharges. So the higher the percentage of Medicare discharges is, the more money that they're going to get.

I talked to one client recently, it’s a seven-hospital system, and the CIO estimated — just sort of a back-of-the-envelope kind of computation — that it’s going to be about $41 million over the four or five years for his hospital.

ES: One way to think about it Anthony is you’ve got $17 billion devoted to the incentive payments that Steve just described to you, and you’ve got an additional $2 billion that are allocated to virtually everything else in the act, which includes all of the sort of infrastructure development and studies and work, through the states with the grant programs and things like that. So there is no mystery about what the main objective here is, it’s clearly, as Steve says, to really stimulate the adoption of electronic health records.

SF: I think that’s a good way to put it, Ed. The vast majority is for hospitals and the other part is for physicians. A lot of hospitals are interested in helping (practices). I was meeting with a hospital CIO the other day (and the CEO), and they said that even though they're not getting that money directly, the money for the physicians in private practice (a maximum of $44,000 per physician), hospitals are interested in helping them. He said that he doesn’t want to see physicians leave that money on the table, because if you don’t take advantage of it, what you're doing is just leaving it there, which is sort of silly.

AG: You said it’s a minimum of $2 million, is that for any sized hospital? Does the number of beds ever come into it, or is it just based on, as you said, the Medicare/Medicaid billing?

ES: What drives it is discharges. Discharges, of course, are directly proportional to the bed size of an institution or a system. So you're right, Anthony, beds are a factor indirectly.

SF: Indirectly, yes.

AG: So the bigger you are, the more money you will get as a hospital.

ES: I think that’s a fair characterization, yes.

AG: Let’s go through this little scenario. I’m a CIO at a 500-bed hospital and I’m sitting there and I haven't done anything yet because I’m so busy with everything else, what do I need to do? Are there time restrictions, do I have a certain deadline at which to file particular paperwork, do I need lawyers — how do I get this money and how do I not risk missing out, because if I do, my CEO may have something to say about it.

SF: There are timelines. The first year that you can take advantage of this is 2011, but for hospitals, that’s referring to the fiscal year, so that starts next year (Oct. 1 of next year).

Some of this we’re not going to know until the regulations come out. Ed put together a really good timeline yesterday (see attachment at bottom of interview) that was really very helpful, which showed all the different dates for the regulations. But in this respect, the regulations are going to come out by Dec. 31, which will help us understand better how that’s going to work as far as the incentives. So they have to be meaningful users, which is the language that the regulations use for hospitals. And meaningful EHR users by 2011, or they can also start in 2012. If they start in either of those two years, they really basically get the same amount of money. That money is the $2 million.

I have the formula — I’m looking at it right now. $2 million is the base amount, and then it’s that amount multiplied by this Medicare share, which is based on inpatient bed days …basically divided by inpatient bed days under Parts A and C of Medicare divided by the total inpatient bed days. And also, part of the formula involves charity care charges. It’s a complex fractional formula, a lot of peoples’ eyes glaze over when they see the reference to the numerator and the denominator. And then there is a transition factor depending on when you start using (or becoming a meaningful user).

I haven't seen any figures based on the bed size — there probably would be a way, based on the number of beds, to approximate it, but I haven't seen anybody who ran the formula trying to figure it out that way. The most important thing is that you’ve got to have an electronic health record in your institution by ideally, it would be starting by next October (2010). And so to do that, clearly hospitals can't sit around; they’ve got to get it moving. I think one of the ways that we as — not just talking about Ed and myself — but lawyers, in general, are going to be involved, is helping clients negotiate all the different contracts that they're going to have to have when they negotiate with the various EHR vendors. It’s more important than ever, for instance, to make sure that there are firm timelines in there, because you don’t want to be signing a contract that is pretty loose as far as the timelines to the vendor because, more than ever, if they're not implemented and up and running within the timeframe of the statute, they're going to lose out on the incentive payments.

AG: You mentioned the Dec. 31 deadline for more guidance to come out, is that correct?

ES/SF: Right, yes.

AG: Do you know of any hospitals that are currently trying to get these funds — are the funds available prior to that point in time?

ES: The funds would not be available prior to that point in time. The funds will be available when two things happen. First, when the secretary explains how the payments will be made. And I’m sure you know that Medicare provides funds to hospitals in different ways. I mean we don’t know whether this will be a supplemental payment, whether it will be an add-on to their existing payments. But the payment methodology needs to be explained.

The second thing is they're not going to start paying until you have established that you meet all of the factors that Steve was describing to be a meaningful user. And of course, if you're talking about discharge information for a particular fiscal year, then it will probably be more towards the end of the fiscal year.

The key here is that you have to be ready by the beginning of the fiscal year.

AG: Which fiscal year are we talking about?

ES: 2011. That starts Oct. 1, 2010. And for us, we think that’s a very tight window for many organizations; there is a lot you need to do to get ready. I mean there are a lot of contracting issues that you need to review, and that’s some of what Steve was alluding to. You don’t just drop one of these systems in, as your readers well know. It’s complicated. There are interfaces, there is data migration, there are a lot of challenges here. And I think the great risk is this is going to be a little bit like Y2K, when you're going to have every hospital in the country calling up their vendors, calling up their lawyers, calling up their consultants and saying, ‘We need you in here next week.’

SF: I was just going to add on to what Ed was saying that I think the worse thing is going to be when people see these dates 2011-2012, that it’s paid over this five year period, and think that they can wait and start looking seriously at this next year. If they do that, besides just the normal lag time, there is going to be so much demand on vendors and IT people that it’s going to be difficult to actually get these systems implemented in time to take advantage of it. That’s one of the concerns that Ed and I have, that people are going to wait and not really focus on this now. There is still obviously a lot that they can do today.

One of the things that hospitals have to be very careful about right now is the fact that one of the other requirements is it has to be a certified electronic health record. Right now, the only certifying body is CCHIT. They have been certifying a lot of EHR systems, but nobody knows if they're going to be re-upped or reappointed as the certifying body. I think there is a lot of assumption, a lot of people are assuming that they are, but there may be additional organizations that also want to take that role that may apply to the government to be a certifying body as well.

But the point I was making is I've spoken to a number of hospitals who were in the midst — prior to the Stimulus Bill — of discussions with vendors for systems that are not certified by CCHIT and the vendors are telling them, ‘Don’t worry about it; our system is just as good as one that’s certified.’ Some vendors don’t want to go through the ordeal of becoming certified. There is a cost involved, which is I think pretty nominal for anybody who is selling a system. But it’s very important that hospitals be very careful in any contracts that they enter into, between now and the end of the year when the regulations come out, that they make sure their vendors are agreeing to comply with the regulations, even though they don’t know exactly what they're going to be. So that’s a very tough sell.

Vendors hate to agree to something that they're not sure about. The line that they always use in negotiations is, ‘We don’t know what we don’t know.’ They say that, and they say, ‘We’re not going to agree to something that isn't even out there.’ But the truth is, they have to agree to that because otherwise you could be stuck with a system that’s not in compliance, and that you're not going to get any of the incentive payments for.

Click here for Part II