If the nearly $25 billion paid out so far through the Medicare and Medicaid EHR Incentive Programs is making some American taxpayers uneasy, they need not worry. Providers who don’t successfully demonstrate meaningful use will soon start paying hefty penalties that over several years could ultimately save the federal government billions of dollars.

Financial penalties by means of lower Medicare reimbursement for failure to become meaningful users of electronic health records are “just kicking in” in 2015, Judy Murphy, chief nursing officer in the Office of the National Coordinator for Health IT told the general session on Tuesday at AHIMA’s annual conference in San Diego. Over time, the penalties could yield savings to the federal government of up to $6 billion.

The meaningful use penalties will be measured reductions from a hospital or practice’s Medicare Part B reimbursement rates, starting at a 1 percent cut in 2015, Murphy said.  The penalty rate eventually can reach 5 percent.

Likewise, the American Hospital Association has been warning that hospitals that do not meet meaningful use by October 1 could be subject to significant payment penalties under Medicare and lose promised incentives.

As of the end of July, the Centers for Medicare and Medicaid Services reported $24.87 billion in incentives had been paid through the Medicare and Medicaid EHR Incentive Programs—about $16 billion for Medicare and another $8 billion for Medicaid. According to CMS, 92% of hospitals have received an incentive payment and about 90% of eligible professionals who could potentially participate in the program have registered. In addition, about 75% of Medicaid and Medicare EPs have made a financial commitment and implemented an EHR and more than 400,000 providers have received an incentive payment for participation.

“People always say to me ‘Now, wait a minute, I thought this program was supposed to be $19 billion. How is it that now we’ve paid out over $24 billion?’” said Murphy. However, penalties levied against non-compliant providers will “offset what’s been paid out so that eventually the total payout will drop to between $19 billion and $20 billion.”

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