The Price of a Penalty: Unraveling CMS's Latest Moves

In late December, CMS announced an extension for its EHR incentive program. However, it wasn't the extension many of us expected. Rather than delaying the start of Stage 2, CMS delayed the start of Stage 3, moving the proposed start date from 2016 to 2017. While the move appears to benefit physicians who have been slow to adopt EHRs, a closer look reveals a more problematic view.

The Stage 3 delay essentially amounts to an extension on the back end of the EHR program. In other words, it has no tangible effect on the current transition between Stage 1 and Stage 2. Those who have completed two years of Meaningful Use under stage 1 essentially are faced with beginning Stage 2 in 2014. Once they have qualified for Stage 2, however, the wait for the next stage can be several years. With the payment being much lower to complete Stage 2, it stands to reason that many physicians may drop out of the program.

With these points in mind, it's fair to ask what CMS's motive was in announcing the delay. Was it merely to announce something, so as to appear willing to listen to criticism and take action? This is a cynical perspective, but perhaps not so far off the mark. While the incentive money will continue to trail off for “meaningful users” of EHRs, perhaps the real arc we should be following is how the penalty structure for not complying with the program continues to take shape.

A bill in Congress now might have a major impact on EHR incentives/penalties down the line: the SGR fix. If implemented, the SGR fix would essentially consolidate the penalties for Meaningful Use, PQRS (Physician Quality Reporting System), and the value-based modifier. While individual penalties for each of these might be relatively small against Medicare reimbursement, taken together they could form a more significant percentage. If the SGR fix goes into effect, physicians must comply with Meaningful Use, PQRS, and the value based modifier in order to avoid one sweeping penalty. Thus, we could see massive changes in the healthcare landscape; many older, private physicians will not likely wish to continue practicing.

PENALTIES IN PERSPECTIVE AND THE ROAD AHEAD

As we await further action on the issue of the SGR fix, physicians should be prepared for several changes in 2014, as this will be a crucial year for both longtime EHR users as well as new ones, in determining just how much the penalties are worth. With Stage 2 kicking off, it's important to bear in mind that no matter what stage you're in, 2014 is essentially a three-month year. Those three months, however, must be within an entire quarter—beginning to end. Also worth considering is that most penalties are based on two-year lags. Therefore, what happens in 2013 will affect 2015. The one exception to this is that if you attest for Meaningful Use before October 2014, you can avoid a 2015 penalty. Physicians face a one percent Medicare reimbursement hit in 2015 if they do not comply with the program.

To place things in perspective, consider that we have already been operating under a two percent hit from the sequester. The decision we face is whether another one percent in 2015 is going to make enough of a difference to cause us to shift course. But that's where the SGR fix comes into play. If a globalized penalty model is put into effect, physicians will be placed in a more compromising position of deciding how many small hits they are willing or able to take. The system may force us to comply with PQRS, value based modifier, and EHRs, as the penalties tallied together could reach nine or 10 percent otherwise.

It might be wishful thinking on the part of the government to expect Stage 2 of the incentive program to take off. However, if the penalty model is restructured, the major choice facing physicians won't be about whether to introduce EHRs for incentives, but whether they can continue practicing at all in light of steeper penalties for not complying.

Mark Kaufmann, MD is co-chair of the Dermatology workgroup for CCHIT. He is on the Medical Advisory Board of Modernizing Medicine.