Can hospitals benefit from HITECH Act stimulus funds for their non-hospital based, employed physicians?

IMPORTANT NOTICE:  This article was originally written in June 2009, before HHS released the Proposed Rule on “meaningful use” on December 30, 2009 and before President Obama signed the Continuing Extension Act of 2010. Under the Proposed Rule, the determining factor of whether a physician is “hospital-based” under the Medicare incentive program was to be his or her “site of service” on the claim, specifically, “21” for hospital inpatient, “22” for hospital outpatient, and “23” for emergency department.  If 90% or more of a physician’s claims had these places of service codes, then CMS would have deemed such physician to be “hospital-based” and ineligible for the incentive. However, on April 15, 2010, President Obama signed the Extension Act, which amended the HITECH Act language by replacing the words “outpatient setting” with the words “emergency room setting.”  Accordingly, CMS will not be able to deem a physician practicing in a hospital outpatient setting, such as an urgent care clinic, ineligible for the incentive soley on this basis.  If an employed or contracted physician practicing in an outpatient setting is eligible (EP), the hospital should take steps to ensure the incentive awarded to such EP due to the meaningful use of a certified EHR in that hospital’s outpatient setting is appropriately assigned to the employing or contracting hospital.

Article Summary: This article explores the potential for hospitals to obtain the HITECH Act incentives made available to “eligible professionals.” Hospital-based physicians who meet the “hospital-based” definition are not eligible for the eligible professional incentives. The definition of “hospital-based” contains several terms, including “hospital setting,” that are not clearly defined and, importantly, the HITECH Act leaves some discretion in the Secretary of Health & Human Services (HHS) to further define it. If the objective is to prevent hospitals from being paid twice for the same electronic medical record (EMR), then the exclusion of “hospital-based” physicians makes sense. However, if hospital-owned physician clinics or practices must implement specially designed health information technology (HIT) that will enable such physicians to make a “meaningful use” of the EMR, then the hospital owner might be advised to consider this in formulating its business and financial strategy for a totally integrated HIT system-wide.

As we await next week’s buzz that is sure to fly after the HIT Policy Committee meeting on June 16th, I am going to post a question that one of my partners asked me in regard to the HITECH Act incentives: Can a hospital whose parent company owns a physician practice through one of its subsidiaries or through ownership in a PLLC seek to have the employed physicians qualify for the HITECH Act incentives that are available to “eligible professionals”? The HITECH Act is clear that “hospital based” physicians cannot qualify for the incentives available to “eligible professionals.” And, the Act references pathologists, anesthesiologists and emergency physicians as examples of physicians who will most likely be excluded.

However, the HITECH Act attaches criteria to the meaning of “hospital based” and it’s these criteria that may leave an opening for hospital employed (not hospital based) physicians to become eligible for the HITECH Act’s “eligible professional” incentives. And, why not? Moreover, why would the Act go to the trouble of establishing criteria for exclusion as opposed to inclusion if it were not envisioned that hospital employed physicians may and should qualify for the eligible professional incentives?  Importantly, the HITECH Act specifically acknowledges that incentive payments for eligible professionals can be paid to the eligible professional or “an employer or facility in the cases described in clause (A) of section 1842(b)(6) [of the Social Security Act].” [See Note 1 below.]

So, let’s take a closer look at the HITECH Act language relevant to considering whether a physician employed by a hospital might meet the criteria for exclusion from the EHR incentives for “eligible professionals.”  [See Note 2 below.] When the language is broken down, clause by clause, the HITECH Act appears to exclude an employed physician who

  • furnishes “substantially all”
  • of “covered professional services”
  • in a “hospital setting”
  • that is either “inpatient or outpatient” and
  • through the use of the facilities and equipment of the hospital
  • including qualified EHR of the hospital.

The HITECH Act also states:

“The determination of whether an eligible professional is a hospital-based eligible professional shall be made on the basis of the site of service (as defined by the Secretary) and without regard to any employment or billing arrangement between the eligible professional and any other provider.”

Okay. Then “hospital-based” does not focus on the employment or billing arrangement, but rather on the site of service. So, the fact that the hospital may employ the physician and may handle the physician’s billing does not make, without more, a physician “hospital-based.” If the physician practice is not located in a facility that is part of the site “licensed” as a hospital, then can we safely say that the “site of service” is not the “hospital setting” and not “hospital based”? Importantly, the HITECH Act leaves the definition of “site of service” up to HHS.

Turning back to the above-listed exclusion criteria . . . just how many of a physician’s services will constitute “substantially all”? Is this more than 75%? 85% 99%? (I’m also getting this question in regard to medical staff members who spend a lot of time at the hospital rounding patients or in surgery. Can such a medical staff member who is not an employee and is not one of the three previously mentioned specialties inadvertently become “hospital-based”?)

What are “covered professional services”?

What is the “hospital setting”? How does this term differ, if at all, from “hospital-based”. (A pet peeve of mine is a word or term in a statute that is defined by itself, i.e., uses the same or substantially similar term in its definition.)

“Inpatient services” may be well understood by most, but are “outpatient services” meant to include services that are off-site or at a clinic that is not part of the hospital facility license?

Do the “facilities and equipment” include those that are owned by a physician subsidiary or PLLC rather than the hospital or its parent company? And, finally, what is meant by the “qualified EHR of the hospital“? Does “of the hospital” mean an EHR that is designed for hospital rather than physician use or is “of the hospital” intended only to indicate ownership interest, i.e., EHRs that are assets in the name of the hospital or its parent company?

Applying these criteria for exclusion too broadly could result in exclusion of all hospital employed physicians. Further, the HITECH Act clearly states that employment status is not the focus in determining eligibility for the eligible professional incentives. Rather, the focus is the employed physician’s “site of service.”

Hospital-employed physicians should be able to apply for incentive funds as long as they do not meet the exclusion criteria, and their employer may receive the payment if the conditions of Section 1842(b)(6)(A) of the Social Security Act are satisfied. [See Note 1 below.] It only seems fair considering that non-hospital based physician specialists often have unique EHR needs. A hospital-based EHR may not adequately address those needs. Although a hospitalist may find a hospital-based EHR suitable in many respects, a specialist, such as a pediatrician or a gastroenterologist, might require a separate yet interoperable software program designed for his or her practice in order to be most effective. Such specialized software might even be necessary to meet the definition of “meaningful use” in terms of producing meaningful quality and clinical data.

Vendors already are addressing the needs of specialists through specially designed electronic health records, such as those for ophthalmologists. In fact CCHIT’s most recent certification schedule recognizes different ambulatory care needs such as for child care, behavioral health, dermatology, eye care, and oncology. And, even though a single vendor may be able to meet both the hospital and physician practice electronic health record needs, the unique needs of each will warrant additional expense to ensure that the EHR can meet the “meaningful use” requirements.

Hopefully, HHS will include proposed definitions for the “eligible professional” exclusion by the December 31, 2009 deadline, if not well in advance of this date. It’s just one of many loose ends left for HHS to tie up in the HITECH Act. Stay tuned to this blog for more loose ends that I’ve identified as needing clarification, and soon!

Note 1. The following is the text of Clause (A) of Section 1342(b)(6) of the Social Security Act, addressing payments for physicians that are made directly to their employer or other entity:

‘(6) No payment under this part for a service provided to any individual shall (except as provided in section 1870) be made to anyone other than such individual or (pursuant to an assignment described in subparagraph (B)(ii) of paragraph (3)) the physician or other person who provided the service, except that (A) payment may be made (i) to the employer of such physician or other person if such physician or other person is required as a condition of his employment to turn over his fee for such service to his employer, or (ii) where the service was provided under a contractual arrangement between such physician or other person and an entity, to the entity if, under the contractual arrangement, the entity submits the bill for the service and the contractual arrangement meets such program integrity and other safeguards as the Secretary may determine to be appropriate, . . . .‘  (Emphasis added.)

Note 2. The following is the text of the HITECH Act that excludes certain eligible professionals from the eligible professional incentive when such professional are hospital-based:

`(i) IN GENERAL- No incentive payment may be made under this paragraph in the case of a hospital-based eligible professional.
`(ii) HOSPITAL-BASED ELIGIBLE PROFESSIONAL- For purposes of clause (i), the term `hospital-based eligible professional’ means, with respect to covered professional services furnished by an eligible professional during the EHR reporting period for a payment year, an eligible professional, such as a pathologist, anesthesiologist, or emergency physician, who furnishes substantially all of such services in a hospital setting (whether inpatient or outpatient) and through the use of the facilities and equipment, including qualified electronic health records, of the hospital. The determination of whether an eligible professional is a hospital-based eligible professional shall be made on the basis of the site of service (as defined by the Secretary) and without regard to any employment or billing arrangement between the eligible professional and any other provider.

Editor’s Cautionary Note: Although this blog may be helpful in informing clients and others who have an interest in health information technology, privacy and security, it is not intended to be legal advice. The subject matter of this blog is complex and how it applies to any particular individual or organization may vary significantly depending on specific facts and situations. Readers of the blog should not rely on information in this blog as a substitute for competent legal advice that is specific to the circumstances of the reader. The information on this blog also should not be relied upon to form an attorney-client relationship.


One thought on “Can hospitals benefit from HITECH Act stimulus funds for their non-hospital based, employed physicians?

  1. Each doctor, individually, must qualify for the incentive payment pursuant to the meaningful use rules applicable to “eligible professionals” under the applicable incentive plan (e.g. Medicare, Medicaid, grant, loan). The US government will make the payment directly to the qualifying eligible professional, not to anyone else. Whether the doctor turns his or her incentive payment over to the hospital once he/she receives it depends on the doctor’s relationship and/or contract with the hospital and an analysis of other applicable laws, such as Stark and Anti-Kickback Statute. Each situation has to be evaluated on a case-by-case basis.


Leave a reply. Please note that although this blog may be helpful in informing clients and others who have an interest in information privacy and security, it is not intended to be legal advice. The information on this blog also should not be relied upon to form an attorney-client relationship.

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