## §495.310 Medicaid provider incentive payments.

(a) **General rule for a Medicaid EP**. The Medicaid EP's incentive payments are subject to the following limitations:

(1) First payment year. A first year payment may not exceed 85 percent of the maximum threshold of $25,000, which equals $21,250.

(2) **Subsequent annual payment years**. A subsequent annual payment may not exceed 85 percent of the maximum threshold of $10,000, which equals $8,500.

(i) Payments after the first year may continue for a maximum of 5 years.

(ii) Medicaid EPs may participate for a total of 6 years and may not begin receiving payments any later than CY 2016.

(3) **Maximum incentives**. In no case will the maximum incentive over a 6-year period exceed $63,750.

(4) **Limitation**. For a Medicaid EP who is a pediatrician described in paragraph (b) of this section is as follows:

(i) The maximum payment in the first year is further reduced to two-thirds, which equals $14,167.

(ii) The maximum payment in subsequent years is further reduced to two-thirds, which equals $5,667.

(iii) In no case will the maximum incentive payment to a pediatrician under this limitation exceed $42,500 over a 6-year period.

(b) **Optional exception for pediatricians**. A pediatrician described in this paragraph is an Medicaid EP who does not meet the 30 percent patient volume requirements described in §495.304 and §495.306, but who meets the 20 percent patient volume requirements described in such sections.

(c) **General rule for EPs**. An EP may only receive an incentive payment from either Medicare or Medicaid but not both.

(d) **Optional exception for EPs**. An EP may change his or her EHR incentive payment program election once, consistent with §495.10 of this part but such change in election must occur for payments by occurring before CY 2015.

(e) **General rule for Medicaid EPs and hospitals**. An Medicaid EP or hospital may receive an incentive payment from only one State in a payment year.

(f) **Incentive payments to hospitals**. Incentive payments to an eligible hospital under this subpart are subject to all of the following conditions:

(1) The payment is provided over a minimum of a 3-year period and maximum of a 6-year period.

(2) The total incentive payment received over all payment years of the program is not greater than the aggregate EHR incentive amount, as calculated under paragraph (g) of this section.

(3) No single incentive payment for a payment year may exceed 50 percent of the aggregate EHR hospital incentive amount calculated under paragraph (g) of this section for an individual hospital.

(4) No incentive payments over a 2-year period may exceed 90 percent of the aggregate EHR hospital incentive amount calculated under paragraph (g) of this section for an individual hospital.

(5) No hospital may begin receiving incentive payments for any year after 2016.

(6) A multi-site hospital with one CMS Certification Number is considered one hospital for purposes of calculating payment.

(g) **Calculation of the aggregate EHR hospital incentive amount**. The aggregate EHR hospital incentive amount is calculated as the product of the (overall EHR amount) times (the Medicaid Share).

(1) **Overall EHR amount**. The overall EHR amount for an eligible hospital is based upon a theoretical 4 years of payment the hospital would receive based, for each of such 4 years, upon the product of the following:

(i) **Initial amount**. The initial amount is equal to the sum of--

(A) The base amount which is set at $2,000,000 for each of the theoretical 4 years; plus

(B) The discharge related amount for a 12-month period selected by the State but with the Federal fiscal year before the hospital's fiscal year that serves as the payment year. The discharge related amount is the sum of the following, with discharges over the 12-month period and based upon the total discharges for the eligible hospital (regardless of any source of payment):

(1) For the first through 1,149th discharge, $0.

(2) For the 1,150th through the 23,000th discharge, $200.

(3) For any discharge greater than the 23,000th, $0.

(C) For purposes of calculating the discharge-related amount under paragraph (g)(1)(i)(B) of this section, for the last 3 of the theoretical 4 years of payment, discharges are assumed to increase by the provider's average annual rate of growth for the most recent 3 years for which data are available per year. Negative rates of growth must be applied as such.

(ii) **Medicare share**. The Medicare share, which equals 1.

(iii) **Transition factor**. The transition factor which equals as follows:

(A) For the first of the theoretical 4 years, 1.

(B) For the second of the theoretical 4 years, 3/4.

(C) For the third of the theoretical 4 years, 1/2.

(D) For the fourth of the theoretical 4 years, 1/4.

(2) Medicaid share. The Medicaid share specified under this paragraph for an eligible hospital is equal to a fraction--

(i) The numerator of which is the sum (for the 12 month period selected by the State and with respect to the eligible hospital) of--

(A) The estimated number of inpatient-bed-days which are attributable to Medicaid individuals; and

(B) The estimated number of inpatient-bed-days which are attributable to individuals who are enrolled in a managed care organization, a pre-paid inpatient health plan, or a pre-paid ambulatory health plan under part 438 of this chapter; and

(ii) The denominator of which is the product of--

(A) The estimated total number of inpatient-bed-days with respect to the eligible hospital during such period; and

(B) The estimated total amount of the eligible hospital's charges during such period, not including any charges that are attributable to charity care, divided by the estimated total amount of the hospital's charges during such period.

(iii) In computing inpatient-bed-days under the previous sentence, a State may not include estimated inpatient-bed-days attributable to individuals with respect to whom payment may be made under Medicare Part A, or inpatient-bed-days attributable to individuals who are enrolled with a Medicare Advantage organization under Medicare Part C.

(h) **Approximate proxy for charity care**. If the State determines that an eligible hospital's data are not available on charity care necessary to calculate the portion of the formula specified in paragraph (g)(2)(ii)(B) of this section, the State may use that provider's data on uncompensated care to determine an appropriate proxy for charity care, but must include a downward adjustment to eliminate bad debt from uncompensated care data. The State must use auditable data sources.

(i) **Deeming**. In the absence of the data necessary, with respect to an eligible hospital the amount described in paragraph (g)(2)(ii)(B) must be deemed to be 1. In the absence of data, with respect to an eligible hospital, necessary to compute the amount described in paragraph (g)(2)(i)(B) of this section, the amount under such clause must be deemed to be 0.

(j) **Dual eligibility for incentives payments**. A hospital may receive incentive payments from both Medicare and Medicaid if it meets all eligibility criteria.

(k) **Payments to State-designated entities**. Payments to entities promoting the adoption of certified EHR technology as designated by the State must meet the following requirements:

(1) A Medicaid EP may designate his or her incentive payment to an entity promoting the adoption of certified EHR technology, as defined in §495.302, and as designated by the State, only under the following conditions:

(i) The State has established a method to designate entities promoting the adoption of EHR technology that comports with the Federal definition in §495.302.

(ii) The State publishes and makes available to all EPs a voluntary mechanism for designating annual payments and includes information about the verification mechanism the State will use to ensure that the assignment is voluntary and that no more than 5 percent of the annual payment is retained by the entity for costs not related to certified EHR technology.

(2) [Reserved]

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