CMS provides guidance to states on stimulus grants for health IT

The Centers for Medicare and Medicaid Services will reimburse states that issue incentive payments to health care providers to encourage adoption of electronic medical records, according to guidance released on Sept. 1.

A letter from CMS Director Cindy Mann to state Medicaid directors details a program under the 2009 American Recovery and Reinvestment Act that offers financial incentives for eligible Medicare and Medicaid providers to adopt interoperable electronic health records. Approximately $20 billion will be distributed to providers by 2014, mostly in the form of grants.

The payments will help defray the costs of deploying electronic health record systems and can be used to pay for hardware, software, support services and training. But the grants will not necessarily cover the entire cost of installing such systems.

"The incentive payments are not direct reimbursement for such activities. Rather they are intended to serve as an incentive for eligible providers to adopt and meaningfully use certified EHR technology," Mann said in her letter.

The funds can be used only for electronic health records technology that is certified and interoperable with state or federal administrative management systems.

"Therefore, states risk making unallowable incentive payments prior to receiving guidance on how to make these systems compatible," Mann wrote.

States are immediately eligible to request 90 percent reimbursement for administrative costs associated with planning and issuing the payments. But that money comes with significant conditions attached. For administrative reimbursement, states must obtain prior approval from CMS for any planning activities or expenditures. They also must provide documentation demonstrating adequate oversight of their incentive programs.

Under the Recovery Act payments would be limited, based on average costs of setting up electronic health record systems, which have yet to be determined. Mann said the secretary of Health and Human Services will establish guidance on those limits.

CMS plans to issue a proposed rule by the end of the year that will contain more detailed information, and will work with states to determine when they are ready to begin issuing payments.