Case study 3 | Management homework help

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Case #3: Electronic Health Records            

Louisiana made incorrect Medicaid electronic health record incentive payments totaling $4.4 million. Incorrect payments included both overpayments and underpayments, for a net overpayment of $1.8 million.

To improve the quality and value of American health care, the federal government promotes the use of certified electronic health record (EHR) technology by healthcare professionals (professionals) and hospitals (collectively, “providers”). As an incentive for using EHRs, the federal government is making payments to providers that attest to the “meaningful use” of EHRs. The Congressional Budget Office estimates that from 2011 through 2019, spending on the Medicare and Medicaid EHR incentive programs will total $30 billion; the Medicaid EHR incentive program will account for more than a third of that amount, or about $12.4 billion.

The Government Accountability Office has identified improper incentive payments as the primary risk to the EHR incentive programs. These programs may be at greater risk of improper payments than other programs because they are new and have complex requirements. Other U.S. Department of Health and Human Services, Office of Inspector General, reports describe the obstacles that the Centers for Medicare and Medicaid Services (CMS) and states face overseeing the Medicare and Medicaid EHR incentive programs. The obstacles leave the programs vulnerable to paying incentive payments to providers that do not fully meet requirements. The Louisiana Department of Health and Hospitals (State agency) was one of the first state agencies to pay incentive payments, making approximately $93 million in Medicaid EHR incentive program payments during calendar year (CY) 2011.            

The objective of this review was to determine whether the state agency made Medicaid EHR incentive program payments in accordance with federal and state requirements.


The Health Information Technology for Economic and Clinical Health (HITECH) Act, enacted as part of the American Recovery and Reinvestment Act of 2009, P.L. No. 111-5, established Medicare and Medicaid EHR incentive programs to promote the adoption of EHRs. Under the HITECH Act, state Medicaid programs have the option of receiving from the federal government 100 percent of their expenditures for incentive payments to certain providers. The state agency administers the Medicaid program and monitors and pays EHR incentive payments.

To receive an incentive payment, eligible providers attest that they meet program requirements by self-reporting data using the CMS National Level Repository (NLR). The NLR is a provider registration and verification system that contains information on providers participating in the Medicaid and Medicare EHR incentive programs. To be eligible for the Medicaid EHR incentive program, providers must meet Medicaid patient-volume requirements. In general, patient volume is calculated by dividing the provider’s total Medicaid patient encounters by the Louisiana Made Incorrect Medicaid Electronic Health Record Incentive Payments (A-06-12-00041) ii provider’s total patient encounters. For hospitals, patient encounters are defined as discharges, not days spent in the hospital (bed-days).

The amount of an incentive payment depends on the type of provider. Hospitals may receive annual incentive payments that are based on a formula that consists of two main components—the overall EHR amount and the Medicaid share. Professionals receive a fixed amount of $21,250 in the first year and $8,500 in subsequent years; the total may not exceed $63,750 over a 6-year period.


From January 1 through December 31, 2011, the state agency paid $93,394,502 for Medicaid EHR incentive payments. We (1) reconciled both professional and hospital incentive payments reported on the State’s Form CMS-64, Quarterly Medicaid Assistance Expenditures for the Medical Assistance Program (CMS-64 report), with the NLR and (2) selected for further review all of the 25 hospitals that received an incentive payment totaling $1 million or more. The state agency paid the 25 hospitals $53,180,619, which is 57 percent of the total paid during CY 2011 for first-year payments. In addition, the state agency made second-year payments to 15 of the 25 hospitals, totaling $14,512,894 as of June 30, 2013.


The state agency did not always pay EHR incentive payments in accordance with federal and state requirements. The state agency made incorrect EHR incentive payments to 20 hospitals totaling $4,431,518. Specifically, the state agency overpaid 13 hospitals a total of $3,090,946 and underpaid 6 hospitals a total of $1,340,572 for a net overpayment of $1,750,374. The state agency made an incorrect payment to an additional hospital; however, we confirmed that the payment had been recovered during our audit. Additionally, the state agency did not ensure that hospitals correctly calculated patient volume for 24 hospitals, made incorrect incentive payments to 13 professionals for a total overpayment of $3,250, and did not report 13 professional incentive payments to the NLR.

These errors occurred because (1) state agency instructions on the hospital incentive payment and patient-volume calculations were incorrect or lacked needed information, (2) the hospital calculation worksheet had an error in the formula used to calculate the discharge-related amounts, (3) state agency personnel did not use the correct cost report periods or review supporting documentation for the numbers provided in the cost reports that were used to calculate incentive payments, (4) state agency personnel made clerical errors, (5) the state agency did not have system edits in place to prevent overpayments to professionals, and (6) the state agency did not reconcile the CMS-64 report with the NLR.


1.As an EMR consultant for the State of Louisiana, what recommendations would you suggest be done based on the results of the study? Think about all the different types of health information technology out there that could of addressed the reasons why the error occurred.

2.Do you support the adoption of EMRs in healthcare? Think about the cost of investment for a hospital or doctor’s office versus the cost-savings realized from the adoption of an EHR system.  Does the savings justify the cost?  Find a real-life example of a healthcare organization that implemented an EHR.  Describe the healthcare organization, what type of health information technology was adopted, the challenges with the implementation, the values realized from the implementation,  the cost of the investment and the savings realized.  Did the healthcare company agree that the savings justified the cost?

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