Ensure Your Practice Contracts Entitle You to EHR Incentives

March 13, 2013

Review your medical practice’s contracts to ensure you are prepared to handle distributing EHR incentive payments before they arrive in the mail.

The use of EHRs is rapidly expanding. Aside from the convenience that an EHR can offer, another motivating factor behind EHR adoption is that Medicare and Medicaid have adopted incentive programs for physicians who operate EHR systems. Physicians can earn up to $44,000 through the Medicare incentive program, and up to $63,750 in the Medicaid counterpart (physicians can elect to participate only in one of these two programs). The payment amounts depend upon when the physician began “meaningful use” of an EHR system. What constitutes “meaningful use” and its various stages is set out by CMS regulations.

While these financial incentives reward EHR use, they also create a host of contractual issues related to how income should be treated within a group practice. Most physician groups simply inform their physician employees that the incentive programs mandate meaningful use payments be made to the practice, and not to any individual physician. When provided with this information, physicians typically do not question the group’s right to the payments. After all, since most group practices incur the financial cost associated with establishing and maintaining the EHR system, it does seem fair and logical for the group to retain the incentive payments, doesn’t it?

A problem can arise, however, if a physician challenges a practice’s right to retain incentive payments. This is because the incentive programs actually require individual physicians to enroll in the programs, and further require that the income earned be paid to the enrolled physician unless he or she designates that the income be paid to the practice. This is true even if the practice is responsible for the costs associated with establishing and maintaining the EHR system. In fact, commentary to the incentive program regulations clearly states that payments are intended to incentivize and reward those physicians using EHRs in a meaningful way and not solely to reimburse a practice for the cost of achieving such meaningful use.

What all this means is that unless the physicians in your group practice have given permission for the practice to enroll them in an EHR incentive program, and to keep all income earned from EHR use, the physician is in a position to challenge the group’s right to retain the incentive payments.  Since the incentive programs generally view these issues as a matter of agreement between the parties, it’s imperative that every medical practice take the necessary legal steps to ensure the practice can retain the incentive payments that are earned.

For those practices that apply a compensation formula that charges physicians with a portion of practice overhead related to establishing and maintaining the EHR system, equity may dictate that the physician also be allowed to retain some portion of the associated incentive payments. While regulations do not demand this result, commentary from CMS suggests that a physician should be able to retain some amount related to the physician’s associated EHR out-of-pocket costs. This is something that will need to be kept in mind in drafting the necessary contract provisions.

In order to make sure your practice is handling these issues properly, this is what I recommend. First, review all existing employment/contractor agreements to determine if the practice’s right to retain income would include retention of incentive payments. Many agreements only allow the practice to retain income from “professional services,” which likely will not include incentive payments.

Existing agreements should be amended to allow the practice to: (a) enroll physicians in an incentive program and (b) to receive payment assignment (subject to adjustment based on actual physician compensation formulas). Any new physician agreements should be prepared to contain this language at the outset.

Use of an EHR is becoming a necessity to operate the most productive medical practices. Incentive payments can certainly help motive physicians and practices to incorporate an EHR into the practice model, as well as to offset the cost of introducing an EHR to the practice model. With new technology and concepts comes a need to review your practice’s contracts.  Make sure you are prepared to handle incentive payments before they arrive in the mail.