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Appendix C: Background on the Market Landscape Pertaining To Exchange of Health Information

Purchasing, maintaining, updating and incorporating interoperable data systems and services into provider workflow requires significant investment on behalf of health care providers. Some experts believe that that these investments should be assumed as a cost of doing business for health care providers; many providers, however, continue to report a lack of adequate resources and strong financial incentives for participation in exchange.101 This appendix provides background information about existing incentives for and barriers to exchange of health information shaping current market dynamics.

Federal Funding Supporting Exchange of Health Information

Providers have been successful at securing substantial federal investments to support their adoption of data systems.102 As mentioned in Section 1, through the HITECH Act, the federal government has made significant investments to support providers in adopting new EHR technology and the development of HIOs to help facilitate exchange of health information. The law included provisions for incentives and penalties for EHR adoption among certain providers—physicians, chiropractors, dentists, optometrists, podiatrists, psychiatrists and most hospitals—and established standards and associated incentive payments for meaningful use of EHR technology. 103

Since 2011, the federal EHR incentive payment program has provided more than $30 billion to encourage hospitals, office-based physicians and other “eligible providers”—that is, eligible professionals or hospitals—to adopt and meaningfully use EHRs, with the goal of using those limited funds to achieve connectivity. The incentives excluded many other categories of providers, however. In 2016, CMS issued a State Medicaid Director Letter that permits states to request 90 percent enhanced matching funds from CMS to connect a broader variety of Medicaid providers for health information exchange and to encourage the adoption of certified EHR technology. 104

Subject to CMS prior approval, states can now claim 90 percent HITECH matching funds for expenditures related to connecting eligible providers to other Medicaid providers, including behavioral health providers, substance abuse treatment providers, long-term care providers (including providers operating in nursing facilities), home health providers, emergency medical service providers, public health providers, correctional health providers, community-based providers, pharmacists and providers of laboratory services. The program, however, will only cover costs for other Medicaid providers to connect to eligible providers if that connection will help eligible providers demonstrate meaningful use.

The federal health IT investments are designed as one-time payments to support infrastructure development; they do not support all IT costs that providers incur, such as those related to maintaining and updating systems and services.