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Daily Rules, Proposed Rules, and Notices of the Federal Government

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 412, 413, and 495

[CMS-0044-F]

RIN 0938-AQ84

Medicare and Medicaid Programs; Electronic Health Record Incentive Program--Stage 2

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule.
SUMMARY: This final rule specifies the Stage 2 criteria that eligible professionals (EPs), eligible hospitals, and critical access hospitals (CAHs) must meet in order to qualify for Medicare and/or Medicaid electronic health record (EHR) incentive payments. In addition, it specifies payment adjustments under Medicare for covered professional services and hospital services provided by EPs, eligible hospitals, and CAHs failing to demonstrate meaningful use of certified EHR technology (CEHRT) and other program participation requirements. This final rule revises certain Stage 1 criteria, as finalized in the July 28, 2010 final rule, as well as criteria that apply regardless of Stage.
DATES: Effective dates:This final rule is effective on November 5, 2012, with the exception of the definition of "meaningful EHR user" in SS 495.4 and the provisions in SS 495.6(f), SS 495.6(g), SS 495.8, SS 495.102(c), and part 495 subpart D, which are effective September 4, 2012.

Applicability dates:Sections 495.302, 495.304, and 495.306 are applicable beginning payment year 2013.

FOR FURTHER INFORMATION CONTACT: Elizabeth Holland, (410) 786-1309, or Robert Anthony, (410) 786-6183, EHR Incentive Program issues or Administrative appeals process issues.David Koppel, (410) 786-3255, for Medicaid Incentive Program issues.Frank Szeflinski, (303) 844-7119, for Medicare Advantage issues.Travis Broome, (214) 767-4450, Medicare payment adjustment issues.Douglas Brown, (410) 786-0028, or Maria Michaels, (410) 786-2809 for Clinical quality measures issues.
SUPPLEMENTARY INFORMATION: Acronyms ARRAAmerican Recovery and Reinvestment Act of 2009 AACAverage Allowable Cost (of CEHRT) ACOAccountable Care Organization AIUAdopt, Implement, Upgrade (CEHRT) CAHCritical Access Hospital CAHPSConsumer Assessment of Healthcare Providers and Systems CCNCMS Certification Number CDSClinical Decision Support CEHRTCertified Electronic Health Record Technology CFRCode of Federal Regulations CHIPChildren's Health Insurance Program CHIPRAChildren's Health Insurance Program Reauthorization Act of 2009 CMSCenters for Medicare & Medicaid Services CPOEComputerized Provider Order Entry CQMClinical Quality Measure CYCalendar Year EHRElectronic Health Record EPEligible Professional EPOExclusive Provider Organization FACAFederal Advisory Committee Act FFPFederal Financial Participation FFYFederal Fiscal Year FFSFee-For-Service FQHCFederally Qualified Health Center FTEFull-Time Equivalent FYFiscal Year HEDISHealthcare Effectiveness Data and Information Set HHSDepartment of Health and Human Services HIEHealth Information Exchange HITHealth Information Technology HITPCHealth Information Technology Policy Committee HIPAAHealth Insurance Portability and Accountability Act of 1996 HITECHHealth Information Technology for Economic and Clinical Health Act HMOHealth Maintenance Organization HOSHealth Outcomes Survey HPSAHealth Professional Shortage Area HRSAHealth Resource and Services Administration IAPDImplementation Advance Planning Document ICRInformation Collection Requirement IHSIndian Health Service IPAIndependent Practice Association ITInformation Technology LOINCLogical Observation Identifiers and Codes System MAMedicare Advantage MACMedicare Administrative Contractor MAOMedicare Advantage Organization MCOManaged Care Organization MITAMedicaid Information Technology Architecture MMISMedicaid Management Information Systems MSAMedical Savings Account NAACNet Average Allowable Cost (of CEHRT) NCQANational Committee for Quality Assurance NCVHSNational Committee on Vital and Health Statistics NPINational Provider Identifier NPRMNotice of Proposed Rulemaking ONCOffice of the National Coordinator for Health Information Technology PAHPPrepaid Ambulatory Health Plan PAPDPlanning Advance Planning Document PCPPrimary Care Provider PECOSProvider Enrollment, Chain, and Ownership System PFFSPrivate Fee-For-Service PHOPhysician Hospital Organization PHRPersonal Health Record PHSPublic Health Service PHSAPublic Health Service Act PIHPPrepaid Inpatient Health Plan POSPlace of Service PPOPreferred Provider Organization PQRSPhysician Quality Reporting System PSOProvider Sponsored Organization RHCRural Health Clinic RPPORegional Preferred Provider Organization SAMHSASubstance Abuse and Mental Health Services Administration SMHPState Medicaid Health Information Technology Plan TINTax Identification Number Table of Contents I. Executive Summary and Overview A. Executive Summary 1. Purpose of Regulatory Action a. Need for the Regulatory Action b. Legal Authority for the Regulatory Action 2. Summary of Major Provisions a. Stage 2 Meaningful Use Objectives and Measures b. Reporting on Clinical Quality Measures (CQMs) c. Payment Adjustments and Exceptions d. Modifications to Medicaid EHR Incentive Program e. Stage 2 Timeline Delay 3. Summary of Costs and Benefits B. Overview of the HITECH Programs Created by the American Recovery and Reinvestment Act of 2009 II. Provisions of the Proposed Regulations and Analysis of and Responses to Public Comments A. Definitions Across the Medicare FFS, Medicare Advantage, and Medicaid Programs 1. Uniform Definitions 2. Meaningful EHR User 3. Definition of Meaningful Use a. Considerations in Defining Meaningful Use b. Changes to Stage 1 Criteria for Meaningful Use c. State Flexibility for Stage 2 of Meaningful Use d. Stage 2 Criteria for Meaningful Use (Core Set and Menu Set) (1) Discussion of Whether Certain EPs, Eligible Hospitals or CAHs can meet all Stage 2 Meaningful Use Objectives Given Established Scopes of Practice (2) EPs Practicing in Multiple Practices/Locations (3) Discussion of the Reporting Requirements of the Measures Associated with the Stage 2 Meaningful Use Objectives B. Reporting on Clinical Quality Measures Using Certified EHRs Technology by Eligible Professionals, Eligible Hospitals, and Critical Access Hospitals 1. Time Periods for Reporting Clinical Quality Measures 2. Certification Requirements for Clinical Quality Measures 3. Criteria for Selecting Clinical Quality Measures 4. Clinical Quality Measures for Eligible Professionals a. Statutory and Other Considerations b. Clinical Quality Measures for Eligible Professionals for CY 2013 c. Clinical Quality Measures for Eligible Professionals Beginning With CY 2014 5. Reporting Methods for Clinical Quality Measures for Eligible Professionals a. Reporting Methods for Medicaid EPs b. Reporting Methods for Medicare EPs in CY 2013 c. Reporting Methods for Medicare EPs Beginning With CY 2014 d. Group Reporting Option for Medicare and Medicaid Eligible Professionals Beginning With CY 2014 6. Clinical Quality Measures for Eligible Hospitals and Critical Access Hospitals a. Statutory and Other Considerations b. Clinical Quality Measures for Eligible Hospitals and CAHs for FY 2013 7. Reporting Methods for Eligible Hospitals and Critical Access Hospitals a. Reporting Methods in FY 2013 b. Reporting Methods Beginning With FY 2014 c. Electronic Reporting of Clinical Quality Measures for Medicaid Eligible Hospitals C. Demonstration of Meaningful Use and Other Issues 1. Demonstration of Meaningful Use a. Common Methods of Demonstration in Medicare and Medicaid b. Methods for Demonstration of the Stage 2 Criteria of Meaningful Use c. Group Reporting Option of Meaningful Use Core and Menu Objectives and Associated Measures for Medicare and Medicaid EPs Beginning With CY 2014 2. Data Collection for Online Posting, Program Coordination, and Accurate Payments 3. Hospital-Based Eligible Professionals 4. Interaction With Other Programs D. Medicare Fee-for-Service 1. General Background and Statutory Basis 2. Payment Adjustment Effective in CY 2015 and Subsequent Years for EPs Who Are Not Meaningful Users of CEHRT for an Applicable Reporting Period a. Applicable Payment Adjustments in CY 2015 and Subsequent Calendar Years for EPs Who Are Not Meaningful Users of CEHRT b. EHR Reporting Period for Determining Whether an EP Is Subject to the Payment Adjustment for CY 2015 and Subsequent Calendar Years c. Exception to the Application of the Payment Adjustment to EPs in CY 2015 and Subsequent Calendar Years d. HPSA Bonus Technical Change e. Payment Adjustment Not Applicable to Hospital-Based EPs 3. Incentive Market Basket Adjustment Effective in FY 2015 and Subsequent Years for Eligible Hospitals That Are Not Meaningful EHR Users for an Applicable Reporting Period a. Applicable Market Basket Adjustment for Eligible Hospitals Who Are Not Meaningful EHR Users for FY 2015 and Subsequent FYs b. EHR Reporting Period for Determining Whether a Hospital is Subject to the Market Basket Adjustment for FY 2015 and Subsequent FYs c. Exception to the Application of the Market Adjustment to Hospitals in FY 2015 and Subsequent FYs d. Application of Market Basket Adjustment in FY 2015 and Subsequent FYs to a State Operating Under a Payment Waiver Provided by Section 1814(B)(3) of the Act 4. Reduction of Reasonable Cost Reimbursement in FY 2015 and Subsequent Years for CAHs That Are Not Meaningful EHR Users a. Applicable Reduction of Reasonable Cost Payment Reduction in FY 2015 and Subsequent Years for CAHs That Are Not Meaningful EHR Users b. EHR Reporting Period for Determining Whether a CAH Is Subject to the Applicable Reduction of Reasonable Cost Payment in FY 2015 and Subsequent Years c. Exception to the Application of Reasonable Cost Payment Reductions to CAHs in FY 2015 and Subsequent FYs 5. Administrative Review Process of Certain Electronic Health Record Incentive Program Determinations E. Medicare Advantage Organization Incentive Payments 1. Definition (§ 495.200) 2. Identification of Qualifying MA Organizations, MA-EPs and MA-Affiliated Eligible Hospitals (§ 495.202) 3. Incentive Payments to Qualifying MA Organizations for Qualifying MA EPs and Qualifying MA-Affiliated Eligible Hospitals (§ 495.204) a. Amount Payable to a Qualifying MA Organization for Its Qualifying MA EPs b. Increase in Incentive Payment for MA EPs Who Predominantly Furnish Services in a Geographic Health Professional Shortage Area (HPSA) 4. Avoiding Duplicate Payments 5. Payment Adjustments Effective in 2015 and Subsequent MA Payment Adjustment Years (§ 495.211). 6. Reconsideration Process for MA Organizations F. Revisions and Clarifications to the Medicaid EHR Incentive Program 1. Net Average Allowable Costs 2. Eligibility Requirements for Children's Hospitals 3. Medicaid Professionals Program Eligibility a. Calculating Patient Volume Requirements b. Practices Predominately 4. Medicaid Hospital Incentive Payment Calculation a. Discharge Related Amount b. Acute Care Inpatient Bed Days and Discharges for the Medicaid Share and Discharge- Related Amount c. Hospitals Switching States 5. Hospital Demonstrations of Meaningful Use—Auditing and Appeals 6. State Flexibility for Stage 2 of Meaningful Use 7. State Medicaid Health Information Technology Plan (SMHP) and Implementation Advance Planning Document (IAPD) a. Frequency of Health Information Technology (HIT) Implementation Advanced Planning Document (IAPD) Updates b. Requirements of States Transitioning From HIT Planning Advanced Planning Documents (P-APDs) to HIT IAPDs III. Waiver of Delay in Effective Date IV. Collection of Information Requirements A. ICR Regarding Demonstration of Meaningful Use Criteria (§ 495.6 and § 495.8) B. ICRs Regarding Qualifying MA Organizations (§ 495.210) C. ICRs Regarding State Medicaid Agency and Medicaid EP and Hospital Activities (§ 495.332 Through § 495.344) V. Regulatory Impact Analysis A. Statement of Need B. Overall Impact C. Anticipated Effects 1. Overall Effects a. Regulatory Flexibility Analysis and Small Entities (1) Number of Small Entities (2) Conclusion b. Small Rural Hospitals c. Unfunded Mandates Reform Act d. Federalism 2. Effects on Eligible Professionals, Eligible Hospitals, and CAHs a. Background and Assumptions b. Industry Costs and Adoption Rates c. Costs of EHR Adoption for EPs d. Costs of EHR Adoption for Eligible Hospitals 3. Medicare Incentive Program Costs a. Medicare Eligible Professionals (EPs) b. Medicare Eligible Hospitals and CAHs c. Critical Access Hospitals (CAHs) 4. Medicaid Incentive Program Costs a. Medicaid EPs b. Medicaid Hospitals 5. Benefits For All EPs and All Eligible Hospitals 6. Benefits to Society 7. General Considerations 8. Summary 9. Explanation of Benefits and Savings Calculations D. Accounting Statement E. Conclusion Regulations Text I. Executive Summary and Overview A. Executive Summary 1. Purpose of Regulatory Action a. Rationale for the Regulatory Action

In this final rule the Secretary of the Department of Health and Human Services (the Secretary) will specify Stage 2 criteria beginning in 2014 that eligible professionals (EPs), eligible hospitals, and critical access hospitals (CAHs) must meet in order to qualify for an incentive payment, as well as introduce changes to the program timeline and detail Medicare payment adjustments. Recommendations on Stage 2 criteria from the Health ITPolicy Committee (HITPC), a Federal Advisory Committee that coordinates industry and provider input regarding the Medicare and Medicaid Electronic Health Record (EHR) Incentive Programs were substantially adopted, with consideration of current program data for the Medicare and Medicaid EHR Incentive Programs. Our current program data is derived from two sources. First, data elements from the registration and attestation process of those providers who have already registered and attested to Stage 1 of meaningful use. This includes demographic information about the provider, the Certified EHR Technology (CEHRT) used by the provider and their performance on the meaningful use objectives and measures. Second, we have information from thousands of questions providers submitted about the EHR Incentive Programs. These questions provide insights into the difficulties faced by providers and also into the areas of the EHR Incentive Programs that warrant additional clarification.

b. Legal Authority for the Regulatory Action

The American Recovery and Reinvestment Act of 2009 (ARRA) (Pub. L. 111-5) amended Titles XVIII and XIX of the Social Security Act (the Act) to authorize incentive payments to EPs, eligible hospitals, and CAHs, and Medicare Advantage (MA) organizations to promote the adoption and meaningful use of CEHRT.

Sections 1848(o), 1853(l) and (m), 1886(n), and 1814(l) of the Act provide the statutory basis for the Medicare incentive payments made to meaningful EHR users. These statutory provisions govern EPs, Medicare Advantage (MA) organizations (for certain qualifying EPs and hospitals that meaningfully use CEHRT), subsection (d) hospitals and critical access hospitals (CAHs) respectively. Sections 1848(a)(7), 1853(l) and (m), 1886(b)(3)(B), and 1814(l) of the Act also establish downward payment adjustments, beginning with calendar or fiscal year 2015, for EPs, MA organizations, subsection (d) hospitals and CAHs that are not meaningful users of CEHRT for certain associated reporting periods.

Sections 1903(a)(3)(F) and 1903(t) of the Act provide the statutory basis for Medicaid incentive payments. (There are no payment adjustments under Medicaid). For a more detailed explanation of the statutory basis for the EHR incentive payments, see the Stage 1 final rule (75 FR 44316 through 44317).

2. Summary of Major Provisions a. Stage 2 Meaningful Use Objectives and Measures

In the Stage 1 final rule we outlined Stage 1 meaningful use criteria, we finalized a separate set of core objectives and menu objectives for EPs, eligible hospitals and CAHs. EPs and hospitals must meet the measure or qualify for an exclusion to all 15 core objectives and 5 out of the 10 menu objectives in order to qualify for an EHR incentive payment. In this final rule, we maintain the same core-menu structure for the program for Stage 2. We are finalizing that EPs must meet the measure or qualify for an exclusion to 17 core objectives and 3 of 6 menu objectives. We are finalizing that eligible hospitals and CAHs must meet the measure or qualify for an exclusion to 16 core objectives and 3 of 6 menu objectives. Nearly all of the Stage 1 core and menu objectives are retained for Stage 2. The “exchange of key clinical information” core objective from Stage 1 was re-evaluated in favor of a more robust “transitions of care” core objective in Stage 2, and the “Provide patients with an electronic copy of their health information” objective was removed because it was replaced by a “view online, download, and transmit” core objective. There are also multiple Stage 1 objectives that were combined into more unified Stage 2 objectives, with a subsequent rise in the measure threshold that providers must achieve for each objective that has been retained from Stage 1.

b. Reporting on Clinical Quality Measures (CQMs)

EPs, eligible hospitals, and CAHs are required to report on specified clinical quality measures in order to qualify for incentive payments under the Medicare and Medicaid EHR Incentive Programs. This final rule outlines a process by which EPs, eligible hospitals, and CAHs will submit CQM data electronically, reducing the associated burden of reporting on quality measures for providers. EPs will submit 9 CQMs from at least 3 of the National Quality Strategy domains out of a potential list of 64 CQMs across 6 domains. We are recommending a core set of 9 CQMs focusing on adult populations with a particular focus on controlling blood pressure. We are also recommending a core set of 9 CQMs for pediatric populations. EPs should report on these recommended CQMs if they are representative of their clinical practice and patient population. Eligible hospitals and CAHs will submit 16 CQMs from at least 3 of the National Quality Strategy domains out of a potential list of 29 CQMs across 6 domains. For the Medicare EHR Incentive Program, EPs, eligible hospitals, and CAHs in their first year of demonstrating meaningful use must submit their CQM data via attestation, and those beyond their first year must submit their CQM data electronically via a CMS-designated transmission method. For EPs, this includes an aggregate electronic submission or a patient-level electronic submission through the method specified by the Physician Quality Reporting System (PQRS) that would provide one submission for credit in both the PQRS and Medicare EHR Incentive Program. For eligible hospitals and CAHs, this includes an aggregate electronic submission or a patient-level data submission through the method similar to the Medicare EHR Incentive Program Electronic Reporting Pilot, which is proposed for extension in the CY 2013 Hospital Outpatient Prospective Payment System (OPPS) proposed rule (July 30, 2012, 77 FR 45188). For electronic submissions, patient-level data must be submitted using the Quality Reporting Data Architecture (QRDA) Category I format, and aggregate-level data must be submitted using the QRDA Category III format.

c. Payment Adjustments and Exceptions

Medicare payment adjustments are required by statute to take effect in 2015. We are finalizing a process by which payment adjustments will be determined by a prior reporting period. Therefore, we specify that EPs and eligible hospitals that are meaningful EHR users in 2013 will avoid payment adjustment in 2015. Also, if such providers first meet meaningful use in 2014, they will avoid the 2015 payment adjustment, if they are able to demonstrate meaningful use at least 3 months prior to the end of the calendar (for EPs) or fiscal year (for eligible hospitals) and meet the registration and attestation requirement by July 1, 2014 (for eligible hospitals) or October 1, 2014 (for EPs).

We also are finalizing exceptions to these payment adjustments. This final rule outlines four categories of exceptions based on (1) the lack of availability of internet access or barriers to obtaining IT infrastructure; (2) a time-limited exception for newly practicing EPs or new hospitals that will not otherwise be able to avoid payment adjustments; (3) unforeseen circumstances such as natural disasters that will be handled on a case-by-case basis; and (4) (EP only) exceptions due to a combination of clinical featureslimiting a provider's interaction with patients or, if the EP practices at multiple locations, lack of control over the availability of CEHRT at practice locations constituting 50 percent or more of their encounters.

d. Modifications to Medicaid EHR Incentive Program

We are expanding the definition of what constitutes a Medicaid patient encounter, which is a required eligibility threshold for the Medicaid EHR Incentive Programs. We include encounters for individuals enrolled in a Medicaid program, including Title XXI-funded Medicaid expansion encounters (but not separate Children's Health Insurance Programs (CHIPs)). We also specify flexibility in the lookback period for patient volume to be over the 12 months preceding attestation, not tied to the prior calendar year.

We are also making eligible approximately 12 additional children's hospitals that have not been able to participate to date, despite meeting all other eligibility criteria, because they do not have a CMS Certification Number since they do not bill Medicare.

These changes would take effect beginning with payment year 2013.

e. Stage 2 Timeline Delay

Lastly, we are finalizing a delay in the implementation of the onset of Stage 2 criteria. In the Stage 1 final rule, we established that any provider who first attested to Stage 1 criteria in 2011 would begin using Stage 2 criteria in 2013. This final rule delays the onset of those Stage 2 criteria until 2014, which we believe provides the needed time for vendors to develop CEHRT. We are also introducing a special 3-month EHR reporting period, rather than a full year of reporting, for providers attesting to either Stage 1 or Stage 2 in 2014 in order to allow time for providers to implement newly certified CEHRT. In future years, providers who are not in their initial year of demonstrating meaningful use must meet criteria for 12-month reporting periods. The 3-month reporting period allows providers flexibility in their first year of meeting Stage 2 without warranting any delay for Stage 3. This policy is consistent with CMS's commitment to ensure that Stage 3 occurs on schedule (implemented by 2016).

3. Summary of Costs and Benefits

This final rule is anticipated to have an annual effect on the economy of $100 million or more, making it an economically significant rule under the Executive Order and a major rule under the Congressional Review Act. Accordingly, we have prepared a Regulatory Impact Analysis that to the best of our ability presents the costs and benefits of the final rule. The total Federal cost of the Medicare and Medicaid EHR Incentive Programs between 2014 and 2019 is estimated to be $15.4 billion (these estimates include net payment adjustments for Medicare providers who do not achieve meaningful use in 2015 and subsequent years in the amount of $2.1 billion). In this final rule we have not quantified the overall benefits to the industry, nor to EPs, eligible hospitals, or CAHs participating in the Medicare and Medicaid EHR Incentive Programs. Information on the costs and benefits of adopting systems specifically meeting the requirements for the EHR Incentive Programs has not yet been collected and information on costs and benefits overall is limited. Nonetheless, we believe there are substantial benefits that can be obtained by eligible hospitals and EPs, including reductions in medical recordkeeping costs, reductions in repeat tests, decreases in length of stay, increased patient safety, and reduced medical errors. There is evidence to support the cost-saving benefits anticipated from wider adoption of EHRs.

TABLE 1—Estimated EHR Incentive Payments and Benefits Impacts on the Medicare and Medicaid Programs of the HITECH EHR Incentive Program. (Fiscal year)—(in Billions) Fiscal year Medicare eligible Hospitals Professionals Medicaid eligible Hospitals Professionals Total 2014 $2.1 $1.9 $0.6 $0.5 $5.10 2015 1.8 1.9 0.4 0.8 4.90 2016 1.2 0.6 0.5 0.8 3.10 2017 0.2 0.1 0.5 0.7 1.50 2018 ^0.1 ^0.2 0.1 0.7 0.50 2019 0.0 ^0.2 0.0 0.5 0.30 B. Overview of the HITECH Programs Created by the American Recovery and Reinvestment Act of 2009

The American Recovery and Reinvestment Act of 2009 (ARRA) (Pub. L. 111-5) amended Titles XVIII and XIX of the Social Security Act (the Act) to authorize incentive payments to EPs, eligible hospitals, and CAHs, and Medicare Advantage (MA) Organizations to promote the adoption and meaningful use of CEHRT. In the July 28, 2010Federal Register(75 FR 44313 through 44588) we published a final rule entitled “Medicare and Medicaid Programs; Electronic Health Record Incentive Program,” that specified the Stage 1 criteria that EPs, eligible hospitals, and CAHs must meet in order to qualify for an incentive payment, calculation of the incentive payment amounts, and other program participation requirements (hereinafter referred to as the Stage 1 final rule). (For a full explanation of the amendments made by ARRA, see the Stage 1 final rule (75 FR 44316).) In that final rule, we also detailed that the Medicare and Medicaid EHR Incentive Programs will consist of 3 different stages of meaningful use requirements.

For Stage 1, CMS and the Office of the National Coordinator for Health Information Technology (ONC) worked closely to ensure that the definition of meaningful use of CEHRT and the standards and certification criteria for CEHRT were coordinated. Current ONC regulations may be found at 45 CFR part 170.

For Stage 2, CMS and ONC again worked together to align our regulations.

In the March 7, 2012Federal Register(77 FR 13698), we published a proposed rule that specified the potential Stage 2 criteria that EPs, eligible hospitals, and CAHs would have to meet in order to qualify for Medicare and/or Medicaid EHR incentive payments (hereinafter referred to as the Stage 2 proposed rule). In addition, the proposed rule —(1) proposed payment adjustments under Medicare for covered professional services and hospital services providedby EPs, eligible hospitals, and CAHs failing to demonstrate meaningful use of CEHRT and other program participation requirements; and (2) proposed the revision of certain Stage 1 criteria, as well as criteria that apply regardless of stage.

In the April 18, 2012Federal Register(77 FR 23193), we published a document that corrected typographical and technical errors in the March 7, 2012 Stage 2 proposed rule.

Simultaneously in the March 7, 2012Federal Register(77 FR 13832), ONC published its notice of proposed rulemaking titled Health Information Technology: Standards, Implementation Specifications, and Certification Criteria for Electronic Health Record Technology, 2014 Edition; Revisions to the Permanent Certification Program for Health Information Technology. The notice of proposed rulemaking proposed revisions to the initial set of standards, implementation specifications, and certification criteria in ONC's July 28, 2010 final rule as well as the adoption of new standards, implementation specifications, and certification criteria.

We urge those interested in this final rule to also review the ONC final rule on standards and implementation specifications for CEHRT. Readers may also visithttp://www.cms.hhs.gov/EHRincentiveprogramsandhttp://healthit.hhs.govfor more information on the efforts at the Department of Health and Human Services (HHS) to advance HIT initiatives.

II. Provisions of the Proposed Regulations and Analysis of and Responses to Public Comments

We received approximately 6,100 items of timely correspondence in response to our Stage 2 proposed rule published in the March 7, 2012Federal Register. We received some comments that were outside the scope of the proposed rule and therefore are not addressed in this final rule. Summaries of the timely public comments that are within the scope of the Stage 2 proposed rule and our responses to those comments are set forth in the various sections of this final rule under the appropriate headings. We have generally organized those sections by stating our proposals, summarizing and responding to the timely public comments received, and describing our final policy.

A. Definitions Across the Medicare FFS, Medicare Advantage, and Medicaid Programs 1. Uniform Definitions

As discussed in the proposed rule, in the Stage 1 final rule, we finalized many uniform definitions for the Medicare FFS, Medicare Advantage (MA), and Medicaid EHR incentive programs. These definitions are set forth in part 495 subpart A of the regulations, and we proposed to maintain most of these definitions, including, for example, “Certified EHR Technology (CEHRT),” “Qualified EHR,” “Payment Year,” and “First, Second, Third, Fourth, Fifth, and Sixth Payment Year.” We noted in the Stage 2 proposed rule that our definitions of “CEHRT” and “Qualified EHR” incorporate the definitions adopted by ONC, and to the extent that ONC's definitions are revised, our definitions would also incorporate those changes. For these definitions, we refer readers to ONC's standards and certification criteria final rule that is published elsewhere in this issue of theFederal Register.

We did not receive any comments on our proposal and will continue to use the existing definitions in part 495 subpart A, except where stated otherwise in this final rule.

We stated that we would revise the descriptions of the EHR reporting period to clarify that providers who are demonstrating meaningful use for the first time would have an EHR reporting period of 90 days regardless of payment year. We proposed to add definitions for the applicable EHR reporting period that would be used in determining the payment adjustments, as well as a definition of a payment adjustment year.

A summary of the comments pertaining to the EHR reporting period, the applicable EHR reporting period for determining the payment adjustments, and the definition of a payment adjustment year, as well as our responses to those comments, can be found in sections II.A.3.a and II.D.2 of this final rule.

2. Meaningful EHR User

We proposed to include clinical quality measure reporting as part of the definition of “meaningful EHR user” under § 495.4 instead of as a separate meaningful use objective under § 495.6.

Comment:A few commenters suggested that this change would create confusion, but the majority supported this change to alleviate confusion caused by the current situation. Many comments discussed the specifics of clinical quality measures.

Response:We appreciate the support expressed for the proposal. We continue to believe that separating clinical quality measures from the meaningful use objectives and measures in § 495.6 will reduce confusion and finalize the change as proposed. We address comments on the specifics of clinical quality measures in section II.B of this final rule. While clinical quality measure reporting will no longer be listed as a separate objective and measure in § 495.6, as it is now incorporated in the definition of meaningful EHR user in § 495.4, it remains a condition for demonstrating meaningful use.

We proposed to revise the third paragraph of the definition of meaningful EHR user at § 495.4 to refer specifically to the payment adjustments and read as follows: “(3) To be considered a meaningful EHR user, at least 50 percent of an EP's patient encounters during an EHR reporting period for a payment year (or during an applicable EHR reporting period for a payment adjustment year) must occur at a practice/location or practices/locations equipped with CEHRT.” We did not receive any comments on this revision and we are finalizing it as proposed.

3. Definition of Meaningful Use a. Considerations in Defining Meaningful Use

In sections 1848(o)(2)(A) and 1886(n)(3)(A) of the Act, the Congress identified the broad goal of expanding the use of EHRs through the concept of meaningful use. Section 1903(t)(6)(C) of the Act also requires that Medicaid providers adopt, implement, upgrade or meaningfully use CEHRT if they are to receive incentives under Title XIX. CEHRT used in a meaningful way is one piece of the broader HIT infrastructure needed to reform the health care system and improve health care quality, efficiency, and patient safety. This vision of reforming the health care system and improving health care quality, efficiency, and patient safety should inform the definition of meaningful use.

As we explained in our Stage 1 meaningful use rule and again in our Stage 2 proposed rule, we seek to balance the sometimes competing considerations of health system advancement (for example, improving health care quality, encouraging widespread EHR adoption, promoting innovation) and minimizing burdens on health care providers given the short timeframe available under the HITECH Act.

Based on public and stakeholder input received during our Stage 1 rule, we laid out a phased approach to meaningful use. Such a phased approach encompasses reasonable criteria for meaningful use based on currently available technology capabilities and provider practice experience, and builds up to a more robust definition of meaningful use as technology and capabilities evolve. The HITECH Act acknowledges the need for this balance by granting the Secretary the discretion to require more stringent measures of meaningful use over time. Ultimately, consistent with other provisions of law, meaningful use of CEHRT should result in health care that is patient centered, evidence-based, prevention-oriented, efficient, and equitable.

Under this phased approach to meaningful use, we update the criteria of meaningful use through staggered rulemaking. We published the Stage 1 final rule (75 FR 44314) on July 28, 2010, and this rule finalizes the criteria and other requirements for Stage 2. We currently are planning at least one additional update, and anticipate finalizing the Stage 3 criteria through additional rulemaking in early 2014 with Stage 3 starting in 2016. The stages represent an initial graduated approach to arriving at the ultimate goal.

• The Stage 1 meaningful use criteria, consistent with other provisions of Medicare and Medicaid law, focused on electronically capturing health information in a structured format; using that information to track key clinical conditions and communicating that information for care coordination purposes (whether that information is structured or unstructured, but in structured format whenever feasible); implementing clinical decision support tools to facilitate disease and medication management; using EHRs to engage patients and families and reporting clinical quality measures and public health information. Stage 1 focused heavily on establishing the functionalities in CEHRT that will allow for continuous quality improvement and ease of information exchange. By having these functionalities in CEHRT at the onset of the program and requiring that the EP, eligible hospital or CAH become familiar with them through the varying levels of engagement required by Stage 1, we believe we created a strong foundation to build on in later years. Though some functionalities were optional in Stage 1, all of the functionalities are considered crucial to maximize the value to the health care system provided by CEHRT. We encouraged all EPs, eligible hospitals and CAHs to be proactive in implementing all of the functionalities of Stage 1 in order to prepare for later stages of meaningful use, particularly functionalities that improve patient care, the efficiency of the health care system and public and population health. The specific criteria for Stage 1 of meaningful use are discussed in the Stage 1 final rule, published on July 28, 2010 (75 FR 44314 through 44588). We are finalizing certain changes to the Stage 1 criteria in section II.A.3.b. of this final rule.

• Stage 2: We stated in the Stage 2 proposed rule that our Stage 2 goals, consistent with other provisions of Medicare and Medicaid law, would expand upon the Stage 1 criteria with a focus on ensuring that the meaningful use of EHRs supports the aims and priorities of the National Quality Strategy. Specifically, Stage 2 meaningful use criteria would encourage the use of health IT for continuous quality improvement at the point of care and the exchange of information in the most structured format possible. Our proposed Stage 2 meaningful use requirements included rigorous expectations for health information exchange including: more demanding requirements for e-prescribing; incorporating structured laboratory results; and the expectation that providers will electronically transmit patient care summaries with each other and with the patient to support transitions in care. Increasingly robust expectations for health information exchange in Stage 2 and Stage 3 would support the goal that information follows the patient. In addition, as we forecasted in the Stage 1 final rule, we proposed that nearly every objective that was optional for Stage 1 would be part of the core for Stage 2.

• Stage 3: We anticipate that Stage 3 meaningful use criteria will focus on: promoting improvements in quality, safety and efficiency leading to improved health outcomes; focusing on decision support for national high priority conditions; patient access to self-management tools; access to comprehensive patient data through robust, secure, patient-centered health information exchange; and improving population health. For Stage 3, we currently intend to propose higher standards for meeting meaningful use. For example, we intend to propose that every objective in the menu set for Stage 2 be included in Stage 3 as part of the core set. While the use of a menu set allows providers flexibility in setting priorities for EHR implementation and takes into account their unique circumstances, we maintain that all of the objectives are crucial to building a strong foundation for health IT and to meeting the objectives of the HITECH Act. In addition, as the capabilities of HIT infrastructure increase, we may raise the thresholds for these objectives in both Stage 2 and Stage 3.

In the Stage 1 final rule (75 FR 44323), we published the following Table 2 with our expected timeline for the stages of meaningful use.

Table 2—Stage of Meaningful Use Criteria by Payment Year as Finalized in 2010 First payment year Payment year 2011 2012 2013 2014 2015 2011 Stage 1 Stage 1 Stage 2 Stage 2 TBD 2012 Stage 1 Stage 1 Stage 2 TBD 2013 Stage 1 Stage 1 TBD 2014 Stage 1 TBD

We proposed changes to this timeline as well as its extension beyond 2014. As we explained in the Stage 2 proposed rule, under the timeline used in Table 2, an EP, eligible hospital, or CAH that became a meaningful EHR user for the first time in 2011 would need to begin their EHR reporting period for Stage 2 on January 1, 2013 (EP) or October 1, 2012 (eligible hospital or CAH). The HITPC recommended we delay by 1 year the start of Stage 2 for providers who became meaningful EHR users in 2011. We stated in the proposed rule that Stage 2 of meaningful use would require changes to both technology and workflow that cannot reasonably be expected to be completed in the timebetween the publication of the final rule and the start of the EHR reporting periods as listed in Table 2. We noted the similar concerns we have heard from other stakeholders and agreed that, based on our proposed definition of meaningful use for Stage 2, providers could have difficulty implementing these changes in time. Therefore, we proposed a 1-year extension of Stage 1 of meaningful use for providers who successfully demonstrated meaningful use for 2011. Our proposed timeline through 2021, which we finalize in this rule with a notation of the special EHR reporting period in 2014, is displayed in Table 3. We refer readers to section II.D.2 of this final rule for a discussion of the applicable EHR reporting period that will be used to determine whether providers are subject to payment adjustments.

Table 3—Stage of Meaningful Use Criteria by First Payment Year First payment year Stage of meaningful use 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2011 1 1 1 *2 2 3 3 TBD TBD TBD TBD 2012 1 1 *2 2 3 3 TBD TBD TBD TBD 2013 1 *1 2 2 3 3 TBD TBD TBD 2014 *1 1 2 2 3 3 TBD TBD 2015 1 1 2 2 3 3 TBD 2016 1 1 2 2 3 3 2017 1 1 2 2 3 *3-month quarter EHR reporting period for Medicare and continuous 90-day EHR reporting period (or 3 months at state option) for Medicaid EPs. All providers in their first year in 2014 use any continuous 90-day EHR reporting period.

We explained in the proposed rule that the Medicare EHR incentive program and the Medicaid EHR incentive program have different rules regarding the number of payment years available, the last year for which incentives may be received, and the last payment year for initiating the program. The last year for which an EP and an eligible hospital or CAH can begin receiving Medicare incentive payments is 2014 and 2015 respectively. These providers would begin in Stage 1 of meaningful use. Medicaid EPs and eligible hospitals can receive a Medicaid EHR incentive payment for “adopting, implementing, and upgrading” (AIU) to CEHRT for their first payment year, which is not reflected in Table 3. For example, a Medicaid EP who earns an incentive payment for AIU in 2013 would have to meet Stage 1 of meaningful use in his or her next 2 payment years (2014 and 2015). The applicable payment years and the incentive payments available for each program are discussed in the Stage 1 final rule.

If we anticipate future criteria beyond Stage 3 of meaningful use, we expect to update Table 3 in the rulemaking for Stage 3, which remains on schedule for implementation in 2016.

Comment:We received numerous comments, which represented a significant majority of all comments received, on the timing of the stages of meaningful use. Commenters asserted that the timeline is too aggressive and will result in many providers being unable to meet Stage 2 of meaningful use, particularly those who first attested in 2011 and 2012. The most common justification for this claim was the lack of sufficient time between the publication of this final rule and the time when a provider who first attested to meaningful use in 2011 or 2012 would have to begin Stage 2 of meaningful use. Some commenters suggested that the time was insufficient regardless of resource constraints, while others suggested that currently vendors of CEHRT lack the necessary capacity to make the necessary upgrades to their CEHRT products and implement them for their customers in time. Commenters also pointed to competing priorities and demands on provider time and resources, such as the transition to ICD-10, the various programs and policies under the Affordable Care Act and other priorities that diminish the time and resources that can be devoted to reaching Stage 2 of meaningful use. Commenters offered several suggestions on how to increase the time available between publication of this final rule and the EHR reporting periods in 2014. The suggestions included using a shorter than full year EHR reporting period in 2014, delaying the start of Stage 2 until 2015 and using a shorter than full year EHR reporting period in 2015, and delaying the start of Stage 2 until 2015 with a full year EHR reporting period. Several commenters suggested a minimum of 18 months is needed, while others suggested longer periods.

Response:While our proposal would provide more than a year between the publication of this final rule and the first day any provider would start their EHR reporting period in 2014 for any stage of meaningful use, we agree that additional time to demonstrate meaningful use in 2014 would be helpful to providers, many of whom will need to upgrade to new technology as well as ensure they are able to meet all of the objectives and measures for Stage 2. In considering what would be an appropriate length of time between publication of this final rule and the start of the EHR reporting periods for providers in 2014 for either Stage 2 or Stage 1, we weighed two primary factors against the comments calling for a delay. The first is that by delaying Stage 2 until 2015, the movement towards improved outcomes that is the main goal of meaningful use would be put off by a full year. This full-year delay would have a ripple effect through the timeline of the stages as providers move along their own timelines across the stages of meaningful use. For this reason, we will not delay Stage 2 until 2015, but instead we are using a 3-month EHR reporting period in 2014 as the first year any provider would attest to Stage 2. The second consideration is the data integrity of meaningful use attestations and clinical quality measure submissions, especially as it relates to our efforts towards alignment with other programs such as PQRS, Medicare Shared Savings Program (SSP), and potentially others. The more robust data set provided by a full year reporting period offers more opportunity for alignment than the data set provided by a shorter reporting period, especially compared across years. By altering the reporting period from year to year the data is less comparable from year to year. However, we agree with commenters that the use of a shorter EHR reporting period in 2014 is necessary to allow sufficient time for vendors to upgrade their CEHRT and forproviders to implement it. In an effort to preserve some data validity with similar Medicare quality measurement programs, we are finalizing 3-month quarter EHR reporting periods in 2014 for certain providers that are beyond their first year of meaningful use, rather than any continuous 90-day period within the year as for first-time meaningful users. For more information on alignment with other programs, we refer readers to our discussion on clinical quality measures (see section II.B.1. of this final rule).

While commenters generally suggested a shorter EHR reporting period for the start of Stage 2 in any year rather than just Stage 2 in 2014, we believe that most of the reasons for a shorter period are due to the time constraints for vendor certification, upgrades and provider implementation between publication of this final rule and the beginning of Stage 2 in 2014. Any provider starting Stage 2 after 2014 will have more time and therefore most of the constraints are lifted. We acknowledge that not all constraints go away, but we believe that the balance is sufficiently shifted such that the concerns of data validity and program alignment outweigh the few remaining concerns with a full year EHR reporting period for the provider's first year of Stage 2 if it is after 2014. In addition, since ONC's 2014 Edition certification is for all EHR systems, regardless of the stage of meaningful use the provider using that system is in, there are far fewer implementation concerns after 2014. For example, if a provider begins Stage 2 in 2015, that provider would have been required to use CEHRT (that was certified to the 2014 Edition EHR certification criteria) for the previous year (2014) for Stage 1.

Finally, we considered that for the Medicaid EHR incentive program, EPs work exclusively with the states as they must choose between either the Medicare or Medicaid EHR incentive program. We do not know whether shifting from an EHR reporting period of any continuous 90 days to a 3-month quarter will provide any alignment benefits for Medicaid EPs, and it could introduce system complexity for Medicaid agencies. Therefore, we are maintaining flexibility for states to allow Medicaid EPs to select any continuous 90-day EHR reporting period during 2014 as defined by the state Medicaid program, or, if the state so chooses, any 3-month calendar quarter in 2014. As nearly all hospitals participate in both Medicare and Medicaid, we are using the 3-month quarter EHR reporting period for all hospitals to align both programs.

After consideration of the public comments received, we are modifying our proposal with regard to the EHR reporting periods for EPs, eligible hospitals and CAHs that attest to meaningful use for 2014 for their first year of Stage 2 or their second year of Stage 1. Our final policy is as follows: For 2014, Medicare EPs will attest using an EHR reporting period of January 1, 2014 through March 31, 2014; April 1, 2014 through June 30, 2014; July 1, 2014 through September 30, 2014; or October 1, 2014 through December 31, 2014. For 2014, Medicare and Medicaid eligible hospitals and CAHs will attest using an EHR reporting period of October 1, 2013 through December 31, 2013; January 1, 2014 through March 31, 2014; April 1, 2014 through June 30, 2014; or July 1, 2014 through September 30, 2014. Medicaid EPs will attest using an EHR reporting period of any continuous 90-day period between January 1, 2014 and December 1, 2014 as defined by the state Medicaid program, or, if the state so chooses, any 3-month calendar quarter in 2014.

b. Changes to Stage 1 Criteria for Meaningful Use

We proposed the following changes to the objectives and associated measures for Stage 1:

• Computerized Provider Order Entry (CPOE)—In 2013 (CY for EPs, FY for eligible hospitals/CAHs), we proposed that providers in Stage 1 could use the alternative denominator of the number of medication orders created by the EP or in the eligible hospital's or CAH's inpatient or emergency department (POS 21 or 23) during the EHR reporting period (for further explanation of this alternative denominator, see the discussion of the CPOE objective in the Stage 2 criteria section at II.A.3.d. of this final rule).

A provider seeking to meet Stage 1 in 2013 can use either the denominator defined in the Stage 1 final rule or the alternative denominator to calculate the percentage for the CPOE measure. We also proposed to require the alternative denominator for Stage 1 beginning in 2014.

Comment:Commenters both supported and opposed the new denominator for CPOE. Those supporting the proposed denominator did so for its simplicity and greater accuracy for measuring actual CPOE usage. Those opposing the proposed denominator did so either because they were concerned with the burden associated with counting paper or other orders that are never entered into the EHR or because of the potential higher performance required by the proposed denominator.

Response:We proposed the alternative denominator to alleviate the burden associated with measurement, not to create a higher performance threshold. As we stated in the proposed rule, feedback from many providers indicated that the alternative denominator was more easily measurable. In response to concerns from commenters, we are finalizing the alternative denominator for this measure and specify that providers at any year in Stage 1 may elect to use either the denominator defined in the Stage 1 final rule or the alternative denominator to calculate the percentage for the CPOE measure. In response to comments, we are not requiring that the alternative denominator be used beginning in 2014, which will give providers who may find it difficult to measure the flexibility to continue to use the denominator defined in the Stage 1 final rule.

• Vital Signs—For the objective of record and chart changes in vital signs, the proposed Stage 2 measure would allow an EP to split the exclusion and exclude blood pressure only or height/weight only (for more detail, see the discussion of this objective in the Stage 2 criteria section at II.A.3.d. of the final rule). We proposed an identical change to the Stage 1 exclusion as well, starting in CY 2013. We als