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Incentive Reductions

Payment Adjustments

As part of the American Recovery and Reinvestment Act of 2009 (ARRA), Congress mandated payment adjustments for Medicare EPs and EHs that are not meaningful users of certified EHR technology under the Medicare EHR Incentive Programs. The following payment adjustments will be applied beginning in FY/CY 2015:

  • EPs: One percent of Part B Physician Fee Schedule, potentially rising to five percent
  • Subsection (d) hospitals: One-quarter of one percent of the annual update, rising to three-fourths of one percent
  • CAHs: One-third of one percent, rising to a full percent

EPs and EHs that can participate in either the Medicare or Medicaid EHR Incentive Programs will be subject to the payment adjustments. However, EPs and EHs that are only eligible to participate in the Medicaid EHR Incentive Program and that do not bill Medicare are not subject to these payment adjustments.


The Budget Control Act of 2011 outlines mandatory reductions in federal spending. These reductions, also known as sequestration, were postponed for two months by the American Taxpayer Relief Act of 2012 but, as required by law, President Obama issued a sequestration order on March 1, 2013.

Incentive payments made through the Medicare EHR Incentive Program are subject to this sequestration order. As a result, any Medicare EHR incentive payments made to EPs and EHs for a reporting period that ends on or after April 1, 2013, will be reduced by two percent. Note, however, that if the final day of the reporting period occurs before April 1, 2013, those incentive payments will not be subject to the reduction.

Because the Medicaid EHR Incentive Program is run by each state's Medicaid agency, Medicaid EHR incentive payments are exempt from the mandatory federal reductions.