The Centers for Medicare and Medicaid Services (CMS) announced Tuesday that the agency will provide financial incentives for as many as 1,200 small and medium-size primary care practices to adopt electronic health records (EHRs) over a five-year period. Federal officials say the new demonstration program could improve the quality of care for as many as 3.6 million patients — and perhaps more if government efforts to encourage similar initiatives by private payers are successful.

“This project will appropriately align incentives to reward doctors in small physician practices who use certified EHRs as tools to deliver higher quality care,” acting CMS administrator Kerry Weems said during a teleconference from Good Samaritan Hospital in Cincinnati. “This reward structure will bring the benefits of electronic health records to Americans at their most frequent point of contact with health care, their family doctor.”

CMS will honor the ambulatory certification stamp of the private Certification Commission for Healthcare Information Technology (CCHIT).

Health and Human Services (HHS) Secretary Mike Leavitt had been scheduled to make the announcement, but stayed back in Washington to lobby Congress about State Children's Health Insurance Program reauthorization legislation. In a statement released by HHS, Leavitt said, “We are looking for 1,200 physician practice pioneers who will help us move health care toward a system that delivers better quality at lower cost for more Americans.”

CMS is still working on particulars for bonus payments, though Weems said that a detailed benchmark and incentive plan will be ready when recruitment of participating practices begins in late winter or early spring. He made it clear that quality will be the primary consideration, however. “We’re not going to be in the business of paying for acquisition of software,” Weems said.

“We believe that encouraging higher quality care through the use of EHRs benefits every health care stakeholder,” Weems said. “That is why we are asking private insurers to help accelerate certified EHR adoption by offering incentives similar to those in this demonstration.”

While no private payers have officially adopted the program, Weems was joined in Cincinnati by Allan Korn, chief medical officer of the Blue Cross and Blue Shield Association. “This new Medicare incentive pilot to be implemented by the Centers for Medicare and Medicaid Services (CMS) is an important step in recognizing and rewarding providers for delivering quality, coordinated care supported by the adoption and use of an EHR,” Korn said.

Korn touted Blues plans’ support of the Patient-Centered Medical Home model and associated demonstration, involving internal medicine, family, pediatric, and OB/GYN practices in up to 27 states. “We would like to reorganize the primary care physician’s office as a central point for Americans to organize and coordinate their health care,” Korn said. “EHRs are a key to success of those efforts.”

Private payers are free to increase the pool of money available to medical providers, but CMS is constrained by federal rules that require demonstration programs to be budget-neutral. This announcement comes one day after the Medical Group Management Association (MGMA) released a survey showing that physician practices are concerned about the administrative requirements in existing CMS quality-reporting initiatives. (See story.)

Weems said he had not seen the MGMA report, but said, “Our objective would be to have a CCHIT reporting tool available by the third or fourth year of the program.” He said that the CMS program would have enough incentives in the early years to assure that practices would stick around that long.

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