Like every other hospital CIO in the United States, Jennifer Laughlin has been in high gear ever since President Barack Obama signed the American Recovery & Reinvestment Act into law in February.

The vice president and CIO of the 95-bed UW Health Partners-Watertown Regional Medical Center in rural Wisconsin hasn't even had time to compute exactly how much the Medicare incentives for meaningful EHR use will mean to her organization. She and her colleagues have been involved in a series of Webinars with the hospital's law firm going over the provisions of ARRA, including changes in privacy and security issues.

“There is so much funding available, but we have to figure out what we qualify for, and where to apply for grants,” Laughlin says.

Watertown is far ahead of most smaller, rural hospitals in EHR adoption. In fact, it has already reached Stage 6 in the HIMSS Analytics adoption model. But Laughlin says she will still try to figure out where her hospital might attain grant funding to help with several projects, including a patient portal.

The vast majority of the approximately $20 billion in funding will flow through Medicare and Medicaid incentive payments for using EHRs, but there will be some grant money available, especially for small and rural providers. For instance, the Department of Agriculture's Distance Learning and Telemedicine program usually gets about $25 million per year; the stimulus bill provides it with $225 million.

Organizations must research how to find funding both at the state and federal level, Laughlin says. “We know the money is not going to just drop from the sky.”

As CIOs struggle to ascertain where to apply for grants and how the Medicare and Medicaid incentives might apply to them, analysts say there are several misconceptions floating around about the new funding mechanisms.

“Most CIOs have no ideas of what the rules are, in part because the legislation is not all that clear, and also because the document is 500 pages long,” says Erica Drazen, managing partner of emerging practices at CSC Global Healthcare Sector in Boston. “The biggest confusion centers on the incentives,” she says. “Some people think they will only get them for new implementations. But actually, organizations that have already made progress with a certified product will have a huge advantage.”

Although people are trying to figure out the definition of the term “meaningful use,” there are some clues in the act, Drazen noted. It specifically talks about e-prescribing, CPOE, quality reporting, and clinical decision support. “Those are probably on the agenda of most hospital CIOs, and they can now safely proceed on those things,” she says.

Some CIOs may feel they are receiving mixed signals about the urgency of EHR adoption. Research firm Health Industry Insights (Framingham, Mass.) estimates a 100-bed hospital might expect to get a total of $3 million in incentive payments, but only if it qualifies to receive payment by the beginning of fiscal 2011. Qualifying later would result in truncated payments. Nevertheless, Lynne Dunbrack, program director for Health Industry Insights, says she advises CIOs that they still need to do their due diligence in evaluating and selecting a vendor.

“Smaller hospitals and physician groups may be thinking they have to get in a vendor's queue, and it's understandable because there is this window to get the incentive money,” Dunbrack says. “But they have to be careful not to work themselves up into a frenzy and make a mistake. The application still has to fit into how they operate.”

The formula for Medicare incentives should help CIOs put some solid numbers in their return-on-investment cases, says Harry Greenspun, M.D., executive vice president of Perot Systems Healthcare Services (Plano, Texas) and chief medical officer of the Perot Systems healthcare group.

“In the past, the ROI has been kind of fuzzy and dealt with quality or customer satisfaction improvements, but now a CIO can say in 2011, we're going to get this much for using it,” Greenspun explains, “and in 2015, we're going to start getting dinged if we don't use it, so they can see the cost of inaction.”

Greenspun says he also believes vendors may begin to finance their products differently, with offerings that are less capital-intensive, so organizations can get started. “There may be more ASP (application service provider) and hosted solution models,” he notes.

Paul Peabody, vice president and CIO of Beaumont Hospitals in Royal Oaks, Mich., says he is confident his three-hospital organization will be in good shape to qualify for Medicare bonuses. That's because it has spent close to $100 million over five years on a system-wide Epic (Verona, Wis.) implementation. Its hospital in Royal Oak is a 1,061-bed teaching hospital, and one of the busiest in the country. Peabody says it's difficult to determine exactly how much money in Medicare incentives Beaumont will receive, but he estimates it could be $10 million over the next four to five years. “That will help a lot,” he says.

Money will also help with Beaumont's ongoing effort to reach out to community physicians. Taking advantage of the Stark exemption that allows hospitals to subsidize EHRs for physician offices, Beaumont expects to have 300 local physician offices using the Epic system by the end of 2009.

Peabody does have questions about the language that states the EHRs must be interoperable. “What does that mean when we don't have standards yet?” he asked. What CIOs need and don't have yet, he explained, are patient identifiers, a standard format for the envelope that contains the data, such as HL7, version 3, and standard clinical nomenclature. Standards groups would really have to move quickly to have those criteria ready in just a couple of years, he says, and “I have never seen them move that fast on anything.”