Medicare and Medicaid Electronic Health Record (EHR) Incentive Payment Programs

Last Update: 28 February 2014

Note: The Medicaid and Medicare Electronic Health Record EHR Incentive Payment Program is one of several incentive programs that are currently available to eligible participants.  Other incentive programs include the Medicare Electronic Prescribing (ERx) Program and the PQRS program, which have different incentives and payment adjustments/penalties as well as separate deadlines.

The American Recovery and Reinvestment Act (ARRA) of 2009, signed into law in February 2009, included new funding for Health Information Technology (HIT).  A significant portion ($17 billion) of the funding for HIT will support incentives for physicians who have adopted Electronic Health Records (EHRs).   Eligible professionals who treat outpatient Medicare patients and demonstrate that they are using a "certified" EHR in a "meaningful" way can earn incentive payments totaling up to $44,000 (per physician) over 5 years.  Starting January 1, 2015, Medicare reimbursement rates will be reduced 1% for physicians who do not meet this requirement.   Physicians who treat Medicaid patients and demonstrate that they are using an EHR will be eligible for incentive payments totaling up to $63,750 (per physician) over 6 years.  Funding is also available to encourage hospitals to adopt EHRs, but this is not discussed here.
To obtain the full incentive, physicians must have begun participation in the Medicare incentive program in 2011 or 2012.  The amount of the incentive is reduced when participation starts after 2012, and the last year to begin participation and earn an incentive is 2014.  Participating physicians are only required to demonstrate meaningful use of an EHR for 90 consecutive days in the first year of participation in the Medicare incentive, as opposed to the entire calendar year in subsequent years.  Therefore, to receive the full incentive, physicians must have attested to meaningful use of EHRs by October 1, 2012.  The Medicaid incentive program started in 2010 and runs through 2021.  Physicians do not need to demonstrate meaningful use in the first year of the Medicaid program, but rather demonstrate efforts to adopt, implement, or upgrade to a certified EHR. The attestation deadline for Medicare eligible professionals for the 2013 year is March 31, 2014 at 11:59 pm ET.

For 2014 only, all providers regardless of their stage of meaningful use are only required to demonstrate meaningful use for a 3-month EHR reporting period. For Medicare physicians, this 3-month reporting period is fixed to the quarter of the calendar year in order to align with existing CMS quality measurement programs, such as the Physician Quality Reporting System. The 3-month reporting period is not fixed for Medicaid physicians where providers do not have the same alignment needs. CMS is permitting this one-time 3-month reporting period in 2014 only so that all providers who must upgrade to 2014 Certified EHR Technology will have adequate time to implement their new Certified EHR systems.

Use of a certified EHR system is a requirement for the incentive.  The Office of the National Coordinator for Health Information Technology (ONC) in the US Department of Health and Human Services has authorized six entities to test and certify EHRs.  Certification assures health care providers that the EHR technology they adopt includes the capabilities they will need to participate in the Medicare and Medicaid EHR incentive programs.  While certification status is only applicable to the incentive programs, it is likely to set the industry standard for EHR software functionality and interoperability. One of the certifying entities, CCHIT, has developed a list of CCHIT Certified products. Behavioral Health EHRs are listed separately as an Additional Certification to an Ambulatory EHR or as a standalone Behavioral Health EHR used in other outpatient settings. This certification is not directly tied to the incentive programs, and other products on the complete list of certified EHR products may also be suitable for individual psychiatric practices.   

    More Information about Certification
    US Department of Health and Human Services

    List of Certified HIT Products
    US Department of Health and Human Services

Meaningful Use
Physicians must attest to "meaningful use" of certified EHR technology to be eligible for the financial incentive.  For 2013, physicians must attest to meeting 20 objectives in order to demonstrate meaningful use.  There are 15 core objectives that all participants must demonstrate, as well as a list of 10 "menu" objectives from which physicians choose 5 that apply to their practice.  The objectives include requirements intended to: improve quality; engage patients and family; improve care coordination; and maintain privacy and security.  One of the required elements is to use EHRs to collect and report on 6 clinical quality performance measures.  See the Analysis section below for a discussion of how some of these objectives pertain to psychiatry.

    List of Meaningful Use Measures (zip file)
    Center for Medicare and Medicaid Services (CMS)

The definition of meaningful use with which physicians must comply, currently referred to as Stage 1, will be expanded in subsequent years as technological capabilities advance.  Starting in 2014, providers participating in the EHR Incentive Programs who have met State 1 for two or three years will need to meet meaningful use State 2 criteria. Stage 2 requirements will include new objectives to improve patient care through better clinical decision support, care coordination and patient engagement. More information on the news rules will be posted to this page as APA completes its analysis.

Financial Incentive and Penalty
Incentives for physicians who demonstrate meaningful use of certified EHR systems in the Medicare program will be awarded annually from 2011-2016. To be eligible for any incentive, the first year of adoption can be no later than 2014. The incentive is calculated based on a percentage of charges billed to Medicare.  Physicians who bill a small amount to Medicare will be eligible for smaller incentives.  To receive the full Medicare incentive in the first year, a physician must bill at least $24,000 in Medicare services.  Physicians can only participate in one incentive program (Medicare or Medicaid) per year and can only switch once.   The incentive for the entire year will be calculated after the end of the year and dispensed in a single payment once successful participation has been verified. There is an additional 10% bonus for physicians who work in a Geographic Health Professional Shortage Area (HPSA).

Incentive payments made through the Medicare Electronic Health Records (EHR) Incentive Program were subject to the mandatory reductions in federal spending known as sequestration, required by the Budget Control Act of 2011. The American Taxpayer Relief Act of 2012 postponed sequestration for 2 months. As required by law, President Obama issued a sequestration order on March 1, 2013. Under these mandatory reductions, Medicare EHR incentive payments made to eligible professionals and eligible hospitals will be reduced by 2%. This 2% reduction will be applied to any Medicare EHR incentive payment for a reporting period that ends on or after April 1, 2013, if the final day of the reporting period occurs before April 1, 2013, those incentive payments will not be subject to the reduction. Please note that this reduction does not apply to Medicaid EHR incentive payments, which are exempt from the mandatory reductions.

Incentives will be calculated based on 75% of the physician’s allowed Medicare charges for the year, with the following caps:

First Year  $18,000 (2011-2012)/ $15,000 (2013)/ $12,000 (2014) 
Second Year  $12,000 (2011-2013) $8,000 (2014)
Third Year  $ 8,000 (2011-2013)/ $4,000 (2014) 
Fourth Year  $ 4,000 
Fifth Year  $ 2,000


Starting in 2015, a reduction of 1% will be imposed on Medicare reimbursement for physicians who do not demonstrate meaningful use of an EHR. Physicians who first demonstrate meaningful use in 2013 must demonstrate meaningful use for a 90-day reporting period in 2013 to avoid payment adjustments in 2015. Clinicians who first demonstrate meaningful use in 2014 must demonstrate meaningful use for 90 days during the first nine months of 2014 and attest to meaningful use no later than October 1, 2014 to avoid the 2015 payment adjustment/penalty. Physicians must continue to demonstrate meaningful use every year to avoid payment adjustments/penalties in subsequent years.This penalty is to be increased annually to a maximum possible penalty of 5% in 2019 and thereafter.

The Medicaid incentive program offers up to $63,750 for physicians over 6 years.  To be eligible for the Medicaid incentive, at least 30% of the physician’s patient population must be Medicaid patients.  The Medicaid program is voluntary and there will be no penalty for clinicians who do not participate.  Demonstration of meaningful use is not required in the first year of participation: only adoption, implementation, or update of certified EHR software.  The incentive does not vary regardless of starting year, but participation must begin by 2016.  The last incentive year will be 2021. CMS has produced a guide to the Medicaid incentive program for clinicians.

Participation in the EHR Incentive program does not preclude participation in the Physician Quality Reporting System (PQRS), which in 2012 allows for an additional 0.5% incentive for physicians who successfully report performance on clinical performance measures. Physicians cannot simultaneously earn incentives in the Medicare EHR incentive program and the Medicare electronic prescribing incentive program. See this CMS Tip Sheet for more information.

Because there are different payment adjustments (penalties) tied to the multiple eHealth programs, CMS developed a Payment Adjustment Tool to show what payment adjustments to expect based on clinicians’ past, current, and expected future participation.

Mechanics of Participation
Participating physicians must report compliance with the 20  objectives of meaningful use through attestation. To qualify for an incentive payment, 20 of 25 objectives must be met: 15 required core objectives and 5 objectives chosen from a list of 10 menu set objectives. Depending on the objective, reporting may be a "yes/no" or may involve a numerator, denominator, or exclusion. Some objectives have minimum thresholds that must be met in order to qualify for the incentive (e.g. greater than 40% of prescriptions must be transmitted electronically).  Steps for participation include:

  • Registering on the EHR Incentive website, which includes entering the physicians' name, identification, and designating the Tax Identification Number (TIN) of the entity that should receive the incentive funds.
  • Enrollment in Medicare Fee-For-Service, Medicare Advantage, or Medicaid.
  • All participants in the incentive program must have a National Provider Identifier (NPI).
  • All participants in the Medicare program must be enrolled in the Provider Enrollment, Chain and Ownership System (PECOS)

Eligibility for the full incentive will require adoption of an EHR by 2012, and penalties in the form of reduced Medicare payments for physicians not using an EHR will begin in 2015.  Psychiatrists not currently using an EHR should consider exploring their options. While an EHR has great potential to improve healthcare quality and efficiency, the selection and usage of EHR technology can be time-consuming, complex, costly and disruptive.  A strategic, well-considered commitment to the potential benefit of EHRs to an individual's practice, rather than the financial incentive, should be the primary motivator guiding the decision to adopt an EHR. The incentive serves as a "rebate" that follows this decision and the resulting actions taken.  While the impact of the current incentive (and penalty) is greatest for physicians treating a significant number of Medicare or Medicaid patients, it is possible that private payers, state medical boards, or other entities will develop similar incentive programs or requirements over the coming years, and EHRs may become a standard platform of communication in healthcare.

Record and Chart Changes in Vital Signs
Many have noted that the requirements for the programs are framed around the use of EHRs in primary care.  The requirement for recording and charting vital signs is one example of this pattern.  The requirement is that greater than 50% of patient records of patients seen in the reporting period must have height, weight, and blood pressure recorded.  The measure includes exclusion language for "no relevance to the scope of practice," which better captures the situation of dentists and chiropractors, where vitals are never taken, than in specialty care, where vitals may be important but not universally so.  There is no official guidance on how specialists should address objectives that may not apply to their practice, but several items, including the requirement to record and chart vital signs, contain exclusionary options.  Statements made by HHS officials suggest that claiming exemptions is a viable option for specialist physicians.  Entering vitals data collected by outside clinicians is also acceptable.  More detail about claiming exemptions to meaningful use objectives can be found here. However under the new Stage 1 changes, an EP can claim an exclusion if the EP sees no patients 3 years or older (the EP would not have to record blood pressure), if all three vital signs are not relevant to their scope of practice (the EP would not record any vital signs), if height and weight are not relevant to their scope of practice (the EP would still record blood pressure), or if blood pressure is relevant to their scope of practice (the EP would still record height and weight).

This new measure and these new exclusions are optional in 2013 but will be required in 2014 and beyond.

Clinical Quality Measures
There is not a minimum level of performance required to qualify for the EHR incentives, only that the required measures are reported.  A low performance rate will not impact eligibility for incentive payment.  It will be important to check with your EHR vendor to determine which clinical quality measures are supported and in what form.  The links in the tables below give an overview of the measures.  For more information, see the CMS webpage on Clinical Quality Measures, or access this zip file.   

Core Measures
Physicians must report on the 3 core measures.  If one or more of the core measures are not applicable (designated by a 0 denominator), then alternate core measures must be used to bring the total to 3.  If the alternate core measures do apply, which is likely in most psychiatric practices, they should also be reported with a 0 denominator.  See this CMS FAQ for more information and see the table below for comments on the individual measures and their applicability to psychiatry.

Title  Core/ Alternate Comment


NQF 0013: Hypertension: Blood Pressure Measurement





This measure requires a recording of blood pressure in patients with hypertension who were seen by the clinician at least 2 times.  The following CPT codes, which exclude many codes commonly used by psychiatrists, are used to define the applicable encounters: 99201, 99202, 99203, 99204, 99205, 99212, 99213, 99214, 99215, 99241, 99242, 99243, 99244, 99245, 99324, 99325, 99326, 99327, 99328, 99334, 99335, 99336, 99337, 99341, 99342, 99343, 99344, 99345, 99347, 99348, 99349, 99350.  Only patients for whom hypertension is recorded as a diagnosis and who are seen at least twice using one of the above encounter codes would be included in the measure denominator.


NQF 0028 (a and b): Tobacco Use Assessment and Tobacco Cessation Intervention




This two-part measure requires reporting on assessment and cessation intervention for tobacco use for patients at least once within 2 years.  It incorporates the encounter codes commonly used in psychiatry and is likely in scope for most psychiatrists.


NQF 0421: Adult Weight Screening and Follow-Up





 This measure requires a recording of BMI and follow-up plan if the BMI is outside parameters.  Its encounter code list includes the following encounter codes used in psychiatric practice: 90801, 90802, 90804, 90805, 90806, 90807, 90808, 90809, but the measure specifications allow for patients to be excluded from the denominator if a physical exam was not performed.


NQF 0024: Weight Assessment and Counseling for Children and Adolescents


Alt Core


This measure only applies to physicians who treat patients between the ages of 2-17; does not include encounter codes typically used in psychiatry; and is designated for Primary Care and OB/GYN encounters.  It is likely to be inapplicable in most psychiatric practices.


NQF 0041: Preventive Care and Screening: Influenza Immunization for Patients > 50 Years Old


Alt Core


This measure does not include encounter codes typically used in psychiatry and is likely to be inapplicable in most psychiatric practices.


NQF 0038: Childhood Immunization Status


Alt Core


This measure does not include encounter codes typically used in psychiatry; is designated for Primary Care and OB/GYN encounters; and is likely to be inapplicable in most psychiatric practices. 

Additional Measure Set
Physicians must report on 3 of the 38 additional measures.  See the table below for the 3 measures that are most likely to apply to typical psychiatric practices, but others from the complete list may apply in certain circumstances.  If a clinician determines that there are not 3 of the 38 measures that apply to their practice, they should report on any measures that do apply and attest that no others apply.  

Title  Comment


NQF 0105: Anti-Depressant Medication Management


This measure captures the percentage of patients 18 years of age and older who were diagnosed with a new episode of major depression, treated with antidepressant medication, and who remained on an antidepressant medication treatment during the acute and continuation phases.  It incorporates the encounter codes commonly used in psychiatry and is likely in scope for most psychiatrists.


NQF 0027: Smoking and Tobacco Use Cessation, Medical assistance


This measure captures the percentage of patients 18 years of age and older who were current smokers or tobacco users, who were seen by a practitioner during the measurement year and who received advice to quit smoking or tobacco use or whose practitioner recommended or discussed smoking or tobacco use cessation medications, methods or strategies. Unlike the Tobacco screening measure in the core set above, NQF 0028, this measure does not incorporate the CPT codes most commonly used in psychiatric encounters, so it may have a low or 0 denominator population for psychiatrists who use these codes rarely or never.


NQF 0004:  Initiation and Engagement of Alcohol and Other Drug Dependence Treatment



This measure captures the percentage of adolescent and adult patients with a new episode of alcohol and other drug (AOD) dependence who initiate treatment through an inpatient AOD admission, outpatient visit, intensive outpatient encounter or partial hospitalization within 14 days of the diagnosis and who initiated treatment and who had two or more additional services with an AOD diagnosis within 30 days of the initiation visit.  This measure does incorporate the CPT encounter codes commonly used in psychiatry, and is likely applicable in most psychiatric practices

What EHR should I buy?
Physicians must use certified EHR software (either a complete system, or a collection of certified modules that together meet the functional requirements of the program), in order to be eligible for the EHR incentive.  To get an incentive payment, you must use an EHR that is certified specifically for the EHR Incentive Programs. EHRs certified or qualified for other Medicare incentive programs may not be certified for this program. Also, if you already own an EHR, it may not be certified to use in the EHR Incentive Programs. Given the rapidly evolving nature of the EHR market and the wide variation in practice settings and functional needs of individual APA members, APA does not recommend or endorse specific products.  Based on individual needs and preferences, products that are highly suitable for one practice may be inappropriate for another.  APA is working to expand capabilities for APA members to exchange their experiences with specific EHR products.

How much will I be penalized if I don’t participate?
The penalty for not using an EHR is only tied to Medicare reimbursement. Medicare reimbursement is currently scheduled to be reduced by 1% for physicians not meaningful using EHRs in 2015.  Reductions may continue to rise after 2015, up to 5%.  The exact rules for the penalty and any exemptions have not yet been established by CMS.  There is no penalty in the Medicaid incentive program.

Are there Hardship Exemptions for Medicare Physicians?
Physicians may apply for hardship exemptions to avoid the payment adjustments described above. Hardship exemptions will be granted only under specific circumstances and only if CMS determines that providers have demonstrated that those circumstances pose a significant barrier to their achieving meaningful use. Hardship exemptions are subject to annual renewal and will not be given for more than five years. Information on how to apply for a hardship exemption will be posted on the CMS EHR Incentive Programs website in the future.
CMS Payment Adjustments/Penalties and Hardship Exemptions Tip Sheet.

When do I need to act?
Physicians can start participating in the incentive programs now.  To earn the full Medicare incentive, physicians must have started meaningful use of an EHR by October 2012.  Physicians who start meaningful use of an EHR in 2013 or 2014 will still be eligible for a reduced incentive.  According to proposed regulations to avoid Medicare payment reductions in 2015, physicians must start using EHRs by 2014.  The last year to begin participation in the Medicaid program is 2016.

Do outpatient behavioral health settings qualify for the incentive?
With the exception of the hospital-based incentive program, incentives are based on individual clinicians, not their practice setting.  The incentive is calculated based on Medicare or Medicaid services provided by eligible providers, which were legislatively defined as physicians, dentists, and other clinicians, but not psychologists or social workers.  Physicians who work in behavioral health outpatient settings may apply for the incentives and reassign the funds to their employer, but most other clinicians are likely ineligible. Legislation has been proposed to expand the definition of eligible providers to include behavioral health non-physician clinician EHR users.

I still have questions!
See the CMS incentive program FAQ page for an extensive FAQ on the EHR incentive programs. You may consider contacting CMS program-specific phone/email contacts, your EHR vendor, and/or email APA staff.

Additional HIT Initiatives

Office of the National Coordinator for HIT (ONC)
The Office of the National Coordinator for Health Information Technology (ONC) is within the Office of the Secretary for the U.S. Department of Health and Human Services (HHS) and is currently led by Farzad Mostashari, MD.  ONC is the principal Federal entity charged with coordination of nationwide efforts to implement and use the most advanced health information technology and the electronic exchange of health information.

HIT Regional Extension Centers (RECs)
Regional extension centers have been funded to provide technical assistance, guidance and information on best practices to support and accelerate health care providers' efforts to become meaningful users of EHRs. 62 centers serve clinicians in designated geographic areas. While the primary audience of these centers is primary care physicians, some may provide information and services that are helpful to specialists.

State Health Information Exchanges
Funding has been made available to advance health information exchange (HIE) across the health care system through State HIEs. Cooperative agreements have been awarded to states to evolve and advance the necessary governance, policies, technical services, business operations and financing mechanisms for health information sharing across the healthcare system.  ONC is also overseeing efforts to develop a Nationwide Health Information Network (NwHIN) that will enable the secure exchange of health information over the Internet nationally.


Official EHR Incentive Program Website
Center for Medicare and Medicaid Services (CMS)
    Medicare and Medicaid EHR Incentive Program Basics

Office of the National Coordinator for Health Information Technology (ONC) - HIT Home
US Department of Health and Human Services
Meaningful Use
    ONC Meaningful Use Page
    CMS Meaningful Use Page

Medicare/Medicaid EHR Incentive Programs 
American Medical Association

Meaningful Use OneSource
Health Information and Management Systems Society (HIMSS)

Health Policy Brief: Electronic Health Record Standards
Health Affairs

American Psychiatric Association

Payment Adjustment Tool