Medicare Meaningful Use Incentives: A Confusing Minefield for Critical Access

Joe Wivoda, Chief Information Officer

Critical access hospitals (CAH) need to be aware of what is eligible for Medicare Meaningful Use incentives, and it can be confusing. Sure, we need to purchase a certified electronic health records (EHR), but the incentives for Medicare specify that CAHs can get a portion of the "reasonable costs" of acquiring certified technology. There are several catches (just read the FAQ 10163 and you will see what I mean). Here are some very important considerations when signing a contract for an EHR, whether from a vendor or a larger hospital system offering a great deal on their system.

A Right To Use Agreement is the most common contract for an EHR, at least historically. This type of agreement is similar to what you get when you purchase office software, such as from Microsoft. Surprisingly, you do not technically "own" the software in this case (or any that I will talk about). You merely have a right to use the software. These agreements generally also state that you lose that right to use the software if you quit paying the annual support and maintenance fees. One of the secrets in the software industry (not just health care) is that vendors make money on the maintenance agreement, not necessarily the licensing agreement. This is why vendors will usually negotiate aggressively on the licensing fee, but not on the maintenance. Even though you don't own the software, the right to use licensing agreement fees (not the maintenance fees - those are non-capital) are usually a capital expense and thus eligible for CAH Meaningful Use incentives from Medicare.

If you choose to lease the software over a period of time, then things get a little more tricky. Thankfully, the Centers for Medicare and Medicaid Services (CMS) recently clarified what is a qualified expense in FAQ 10722. Leasing can make sense if the hospital can not afford the licensing fees up front. Many vendors offer leasing packages as an option when that final contract is delivered. However, an Operating Lease is not depreciable, and therefore not eligible for Meaningful Use incentives. Capital Leases are eligible expenses, and it is important that you understand the difference. One of the four following conditions must be met for the purchase to be a capital lease:

• The lease transfers title of the facilities or equipment to the lessee during the lease term,
• The lease contains a bargain purchase option,
• The lease term is 75 percent or more of the useful life of the facilities or equipment. This provision is not applicable if the lease begins in the last 25 percent of the useful life of the facilities or equipment, or
• The present value of the minimum lease payments (that is, payments to be made during the lease term, including bargain purchase option, guaranteed residual value, or penalties for failure to renew) equal 90 percent or more of the fair market value of the leased property. This provision is not applicable if the lease begins in the last 25 percent of the useful life of the facilities or equipment. The present value is computed using the lessee's incremental borrowing rate, unless the interest rate implicit in the lease is known and is less than the lessee's incremental borrowing rate, in which case, the interest rate implicit in the lease is used.

I am not an accountant. Or a CPA. Or a CFO. Or a Medicare Administrative Contractor (MAC). I suggest you talk to one of them to be certain!

"Cloud Computing" is a trend in Information Technology (I hate the term "cloud computing" by the way - it sounds too magical). Software as a Service (SaaS) is another term for this type of software delivery. Basically, the equipment is housed somewhere besides your facility, in a secured data center. This type of "software delivery" is becoming more common now that high-speed Internet is more readily available. Is this type of agreement eligible for incentive dollars? Think about it: You don't own the hardware, or the software, and you usually pay a monthly fee to use it. That is a clear operating expense, not depreciable, and not eligible for Meaningful Use incentives under the Medicare rules for CAHs. These agreements often make sense: They are a reasonable expense, the implementation costs are usually low or nonexistent (since there is little customization allowed), the hospital does not need to worry about backups or having a Unix geek (like me) on staff, etc. These reasons may offset the value of the incentives, actually! Also, some vendors are structuring the agreements so that you CAN receive some incentives. If you are considering entering into this kind of agreement, ask questions about whether you can still receive Medicare incentives. Also ask about security, reliability, support, and a million other things that should be in another post...

Finally, all of these contract concerns apply when you are entering into an agreement with a larger hospital system. The key is whether or not the expenses are depreciable, and as a CIO, that is a term that I struggle to understand. Feel free to look at 42 CFR 413, or the Federal Accounting Standards Board (FASB) rules. For me, it's easier to understand the Theory of Special Relativity, but thanks to the CMS Frequently Asked Questions site I think I am starting to get it...

Minnesota Action Coalition: Support for the new health care delivery models

Sally Buck, Associate Director

Last fall I was asked to join the Minnesota Action Coalition and while the title wasn’t specific to the type of action, I gathered that it would be focused on nursing as the recommendation came from one of The Center’s Board Officers the Dean of Nursing at The College of St. Scholastica. As I reviewed the materials, I discovered that the Action Coalition was developed to effect long-term changes to meet the Institute of Medicine (IOM) 2010 Recommendations on the Future of Nursing. The goal of the report is to “transform the nursing field to prepare nurses to lead change and advance health for all Americans.” The Action Coalition in Minnesota is just one of forty-eight nationwide and supported by the Robert Wood Johnson Foundation (RWJF) in cooperation with the American Association of Retired Persons (AARP) and the AARP Foundation. This partnership of a leading health foundation and AARP was surprising to me at first; however, I quickly realized, it was highly strategic union. The AARP brought strong technical assistance in advocacy and policy development to the state coalitions and RWJF is supporting the technical assistance instead of providing grant funds to the Action Coalitions.

The Future of Nursing Campaign for Action, which supports the Action Coalitions, is designed to transform the nation’s health care system so that all Americans have access to high quality, patient centered care where they live, work, learn and play across the lifespan. The Action Coalitions have committed to develop and implement specific strategies to address the IOM recommendations. These are not short term efforts such as increasing nursing class size through scholarships. The strategies need to address: scope of practice; higher levels of education and academic progression; leadership in the redesign of the healthcare system; and, workforce planning and policy making through data and information. Any of these areas alone would entail a challenge to states let alone tackling all four through curriculum changes, program development, licensing issues, technology and communication. Therefore the Coalition representatives are diverse and include nursing education (community college, private college and university based programs), the hospital association, board of nursing, aging services association, and rural health.

This initiative is timely with the movement towards new health care delivery models within health care reform such as health care homes and accountable care organizations. AARP and RWJF were wise to focus on nursing to impact change in health care. Nurses encompass the greatest number of health care professions certainly in acute, public and long term care settings and as such they are the face of health care to Americans. In rural communities, with workforce shortages and the small staff size, it is imperative that nurses are able to practice to the extent of their education, have access to nursing education, and be prepared for leadership. Health professionals in small rural health care facilities are largely focused on primary care and practice without a fleet of medical residents and specialized advanced practice nurses and physicians, yet they are caring for the oldest and therefore the sickest patients as well as those with barriers to access such as culture, income, transportation, or language. In addition, many hospitals are staffed with nurses who are prepared at the associate degree level. As urban hospitals add access to baccalaureate education, rural hospitals needs the same access.

From my perspective, our Minnesota Action Coalition, although committed to the strategies including enhanced curriculum to increase the proportion of baccalaureate prepared registered nurses, has stumbled over governance structure and decision making. This stems from a lack of communication and leadership issues. Gaining consensus among nursing leaders is no small feat between an academic health center, state universities, private colleges and community colleges.  In order to establish a unified message, we need to build trust, support ongoing and open communication and focus on the goals. This is imperative in order to establish a unified message and collaborate to impact nursing practice, leadership and education. 

After my initial hesitation to participate in the MN Action Coalition, I’m now excited about the opportunity and appreciative of the expertise and support provided by AARP and RWJF to advance the Future of Nursing: Campaign for Action.

Strength In Numbers

Tracy Morton, Program Manager II

Strength In Numbers, the theme of this year’s National Conference of State Flex Programs, was clearly illustrated this past week in moving and motivational messages. The conference, held in Bethesda, Maryland, brought together the 45 state grantees of the Medicare Rural Hospital Flexibility (Flex) Programs to share their stories and hear from national experts on transforming quality improvement, building financial and operational improvement and supporting health system development for the 1,329 critical access hospitals (CAHs) throughout the country. The impact of the National Flex Program goes beyond the 1,329 communities where the CAHs reside to the other rural communities captured in the CAH’s market share, to the millions of Americans that call rural home and to even their suburban and urban families and friends who count on, and expect, quality health care for their loved ones. The 45 State Flex Programs individually and nationally impact this expectation. Talk about Strength In Numbers.

High quality health care in our country is becoming an expectation, evidenced by national initiatives such as Partnerships for Patients and the Medicare Beneficiary Quality Improvement Project (MBQIP). The federal government is also trying to control the cost of health care provision, as well as the cost of the health care system, with the coupling of quality and access to care through accountable care organizations (ACOs). While the hospitals need to be thinking about process and reporting changes for quality improvement, care transitions and patient accountability, they also need to think about moving from a volume-based to a value-based payment system. As Eric Shell from Stroudwater Associates pointed out, “rural hospitals need to think about the Triple Aim being played out in the market place, even when the market place doesn’t realize this is occurring”. Well, if this isn’t daunting, then I’m not sure what is.

The “message” at the conference wasn’t negative; it was inspirational. It was Strength In Numbers. It was about coming together; not trying to do the work alone. It was about sharing resources, best practices and stories; about being a catalyst for change and a change agent; thinking strategically about the State Flex Programs and the National Flex Program. The conference was about setting priorities and maximizing the impact of each of the 45 State Flex Programs on the 1,329 CAHs and their rural communities and partners. Because at the end of the day, and at the end of the conference, it came down to doing the right thing; about providing quality, affordable and accessible health care to the rural residents of America.