Incentive Payment

What Does Incentive Payment Mean?

Incentive payments are paid to hospitals, private practices and other health care facilities that are able to prove that they are ready and willing to adopt electronic health record (EHR) systems.


This initiative is part of the American Recovery and Reinvestment Act (ARRA) of 2009, in which funds were allocated for the development of nationwide electronic health care records. Health care providers are expected to have implemented EHRs by 2015 or face financial penalties.

Techopedia Explains Incentive Payment

According to the Center for Medicare and Medicaid Services (CMS), ARRA will provide 90 percent in matching funds for states to plan activities that center around EHR development, including IT EHR university-based training (UBT) and education.

In order to receive incentive payments, acute-care hospitals need 10 percent of their patients to be Medicare/Medicaid patients, while non-hospital providers need 30 percent of their patients to come from Medicare/Medicaid patient populations.

Incentive payments are received through audits conducted to ensure proper payments are being made and that eligible providers (EP) and health care treating facilities and practices are following meaningful use (MU) guidelines set forth by the Health Information Technology for Economic and Clinical Health Act (HITECH), which is monitored by the Department of Health and Human Services (HHS).

Incentive payments were slated to begin in 2010 but they actually started in 2011.They will be provided for up to five years and those who have already implemented EHR systems are still eligible for incentive payments if they upgrade their systems.


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Margaret Rouse
Technology Expert

Margaret is an award-winning technical writer and teacher known for her ability to explain complex technical subjects to a non-technical business audience. Over the past twenty years, her IT definitions have been published by Que in an encyclopedia of technology terms and cited in articles by the New York Times, Time Magazine, USA Today, ZDNet, PC Magazine, and Discovery Magazine. She joined Techopedia in 2011. Margaret's idea of a fun day is helping IT and business professionals learn to speak each other’s highly specialized languages.