Fact sheet

2018 Medicare Electronic Health Record (EHR) Incentive Program
Payment Adjustment Fact Sheet for Hospitals

2018 Medicare Electronic Health Record (EHR) Incentive Program Payment Adjustment Fact Sheet for Hospitals

 Overview of the Program 

As part of the American Recovery and Reinvestment Act of 2009 (ARRA), Congress established payment adjustments under Medicare for eligible hospitals that are not meaningful users of Certified Electronic Health Record (EHR) Technology. Eligible hospitals that do not successfully demonstrate meaningful use for an EHR reporting period associated with a payment adjustment year will receive reduced Medicare payments for that year. The payment adjustments began on October 1, 2014 for eligible hospitals. Eligible hospitals that only participate in the Medicaid EHR Incentive Program and do not bill Medicare are not subject to these payment adjustments. Eligible hospitals that participate in both the Medicare and Medicaid EHR Incentive Programs will be subject to the payment adjustments unless they have successfully demonstrated meaningful use under one of these programs. Over 4,800 eligible hospitals may participate in the EHR Incentive Programs. 

Eligible Hospitals 

An eligible hospital demonstrates meaningful use by successfully attesting through either the CMS Medicare EHR Incentive Programs Attestation System (https://ehrincentives.cms.gov/hitech) or through its state’s Medicaid EHR Incentive Program attestation system. 

Eligible Hospital Payments 

An eligible hospitals payments are calculated using the formula discussed on the CMS webpage at:


FY 2018 EHR Eligible Hospital payment adjustment 

Eligible hospitals that are not meaningful EHR users will be subject to a payment adjustment beginning on October 1, 2017. This payment adjustment is applied as a reduction to the applicable percentage increase to the Inpatient Prospective Payment System (IPPS) payment rate, thus reducing the update to the IPPS standardized amount for these hospitals. We note that over 96% of eligible hospitals are meaningful users. Eligible hospitals receive the payment adjustment amount that is tied to a specific fiscal year (e.g., an eligible hospital that did not successfully demonstrate meaningful use for an applicable EHR reporting period in 2016 will receive a reduction to the IPPS applicable percentage increase in FY 2018). The table below illustrates the application of the reduced update to the IPPS standardized amount.

Percentage decrease to IPPS Amount

Hospital Adjustment

2015 (2013 Reporting Period) 2016 (2014 Reporting Period) 2017+ (2015 Reporting Period)

% Decrease

25% 50% 75%

CMS Exception Process

Eligible hospitals may apply for hardship exceptions to avoid the payment adjustment. Hardship exceptions are granted on a case-by-case basis and only if CMS determines that requiring an eligible hospital to be a meaningful EHR user would result in a significant hardship. Information on how to apply for a hardship exception is posted on the CMS EHR Incentive Programs website (https://www.cms.gov/EHRIncentivePrograms). Applications must be submitted no later than July 1st of the year before the applicable payment adjustment year.

Eligible hospitals can apply for hardship exceptions in the following categories:

  • Infrastructure — Eligible hospitals must demonstrate that they are in an area without sufficient internet access or face insurmountable barriers to obtaining infrastructure (e.g., lack of broadband).
  • New eligible hospitals — Eligible hospitals with new CMS Certification Numbers (CCNs) that do not have the time to become meaningful EHR users can apply for an exception for one full cost reporting period.
  • Unforeseen Circumstances — Examples may include a natural disaster or other unforeseeable barriers.
  • EHR Vendor Issues — an eligible hospital’s EHR vendor was unable to obtain certification, or the hospital was unable to implement meaningful use due to EHR certification delays.

Payment Adjustment/Meaningful Use  

Hospitals must demonstrate meaningful use every year according to the timelines detailed above in order to avoid Medicare payment adjustments. For example, an eligible hospital that demonstrates meaningful use for the first time in 2013 will avoid the payment adjustment in FY 2015, but will need to demonstrate meaningful use again in 2015 in order to avoid the payment adjustment in FY 2017.

For more information on the Medicare and Medicaid EHR Incentives program go to: https://www.cms.gov/EHRIncentivePrograms