According to the federal government, over 370,000 providers have participated in the Medicare and Medicaid Electronic Health Record ("EHR") incentive program since its inception in 2011. However, providers nationwide continue to grapple with the challenges of complying with federal EHR requirements, and many such providers have voiced their displeasure to the federal government regarding the tight compliance timeframes. On Tuesday, May 20, 2014, the U.S. Department of Health and Human Services Centers for Medicare and Medicaid Services ("CMS"), as well as the Office of the National Coordinator for Health Information Technology, in part in reaction to comments and submissions to the agency from providers nationwide, published a proposed rule that provides additional time for providers to meet the operationally challenging standards surrounding electronic health records.

The proposed rule extends the deadline for providers to meet the so-called Stage 2 criteria for making meaningful use of electronic health records. Under Stage 2, providers not only transmit patient records electronically when making referrals, but they also must be capable of sending charts to a physician with a different EHR system. Another notable Stage 2 requirement puts the onus on providers to ensure that patients make use of EHRs by mandating that at least 5 percent of patients send a message to their doctors utilizing a portal within the EHR system and that 5 percent access their health information online.

Under the proposed rule, providers have greater flexibility in how they use certified electronic health record technology ("CEHRT") to meet the meaningful use standard. Specifically, the proposed rule allows providers to use the 2011 edition CEHRT or a combination of the 2011 and 2014 editions for reporting in 2014 under the Medicare and Medicaid EHR incentive programs.

Additionally, the proposed rule serves as CMS' formal announcement of previously announced plans in December to extend Stage 2 through 2016 and begin Stage 3 in 2017, after many providers and EHR providers said it would be nearly impossible to meet the Stage 2 goals by the original deadline. Please note, though, that even with the extension, beginning in 2015, providers will still be required to report to CMS utilizing the new technology.

As originally structured, CMS issued billions of dollars in payments to health care providers to incentivize adoption of EHRs. However, beginning in 2015, lack of EHR compliance means penalties for providers in the form of reduced reimbursements. For the first year, Medicare reimbursements will be reduced by 1 percent for providers that don't meet EHR standards. That penalty jumps to 2 percent the following year and 3 percent every year afterward.

While this extension of time to allow compliance of Stage 2 is welcome news, implementation and compliance are still a priority that must stay on all providers' radar screens. As Stage 2 reaches completion, CMS and providers will turn to Stage 3, which will focus on improving outcomes. Final rules regarding Stage 3 compliance are expected in the first half of 2015.