There are basically four factors involved in the incentive payment to hospitals. The base amount, additional incentive payments based upon the quantity of annual discharges, a Medicare share, and a transition factor.
The base amount specified in the legislation is $2,000,000.
The discharge related amount specified in the legislation is estimated based upon total discharges for the eligible hospital (regardless of any source of payment) for the period, for each discharge up to the 23,000th discharge
The Medicare share is based on inpatient bed days paid under Medicare Part A or through a Medicare Advantage organization.
The transition factor where total incentive payments are reduced over a period of four years.
There is additionally a “phase down” factor applied to hospitals who are not meaningful users after 2013. This phase down factor is based on the transition factor discussed above.
As with Physicians, hospitals must show meaningful use as early as possible (in year one) in order to maximize incentive payments.
Critical Access Hospitals (CAH) have a unique payment formula that is the same as the formula that is calculated for eligible hospitals, with the exception of how the Medicare Share is calculated. After the Medicare Share is derived, 20 percentage points must be added to that amount. In addition, the Medicare Share cannot be larger than 100% for CAH’s.
HIMSS has developed a very good calculator to calculate incentive payments for both non-critical access hospitals and critical access hospitals. Providers can click the following link access the calculators:
You can find the entire ARRA legislation at: