On July 13, 2010, the Centers for Medicare & Medicaid Services (CMS) issued its final rule implementing provisions of the American Recovery and Reinvestment Act of 2009 regarding incentive payments to eligible hospitals and professionals.

CMS received more than 2,000 comments on its January 13, 2010, proposed rule. While CMS did not make dramatic changes from the proposed rule, there were several important changes, including:

• Critical access hospitals (CAHs) will be eligible to receive Medicaid incentive payments. Like other acute care hospitals, CAHs will be eligible to receive both Medicare and Medicaid incentive payments. CMS instructs states to pay incentive payments using the acute care methodology.

• CMS also clarified the criteria acute care hospitals, including CAHs, must meet to receive Medicaid incentive payments. They must demonstrate that 10 percent of their encounters are Medicaid patients; an encounter is defined as either an inpatient discharge or an emergency room visit. Including outpatients should allow many more hospitals to meet the 10 percent requirement.

• CMS eased the burden and added flexibility for meeting the meaningful use criteria in Stage 1. In the proposed rule, CMS listed 25 objectives for eligible professionals (EP) and 24 for hospitals, all of which must be met to demonstrate meaningful use.

  In the final rule, CMS divided the objectives between a core set and menu set of objectives. There are now 15 core objectives for EPs and 14 for hospitals. To demonstrate meaningful use, an EP or hospital must meet all objectives in the core set. EPs and hospitals can elect to defer up to five objectives in the menu set, but must meet at least one of the population and public health measures.

• The final rule implemented the provision contained in the Continuing Extension Act of 2010 that allows certain provider-based physicians to be eligible for incentive payments. However, physicians who furnish 90 percent or more of their Medicare or Medicaid services in a hospital inpatient setting or emergency room will not be eligible for the incentive payments.

One controversial position that did not change in the final rule was allowing incentive payments for multicampus hospitals that use a single provider number; incentive payments will still be tied to the Medicare provider number. Strong opposition to this item continues, and U.S. Sen. Charles Schumer of New York has introduced legislation that would allow multicampus hospitals using a single provider number to receive incentive payments.

Although CMS issued the final rule, many issues remain unclear. Hospitals should carefully review these changes and contact their BKD National Health Care Group advisor for more information on these matters.