On February 29, 2016, the Centers for Medicare and Medicaid Services (CMS) issued a State Medicaid Directors Letter (SMDL) that expands the scope of expenditures eligible for the 90 percent federal match for activities to promote the use of a health information exchange (HIE) and the adoption of certified electronic health record (EHR) technology by Medicaid providers.
Specifically, this updated guidance permits States to claim the enhanced match for expenditures that promote coordination of care between entities eligible for EHR incentive payments and other Medicaid providers who may not necessarily qualify for such payments. This SMDL supersedes earlier guidance that did not permit the enhanced match for these activities.
Expansion of Enhanced Match for Coordination Activities Among Non-Eligible Professionals
In previous guidance, CMS took the position that States could only receive an enhanced match for activities that promote interconnectivity and coordination of care between eligible providers. CMS now reverses course and provides that costs for activities that promote use of EHR by others (i.e., non-eligible providers) may be matched at 90 percent if the State expenditures on these activities help eligible providers meet meaningful use objectives. Funding for these activities is available as of the date of the letter (February 29, 2016) and will not be available retroactively.
CMS explains that the enhanced match may be available for following types of state costs:
On-boarding Medicaid providers to Health Information Exchanges
States may claim the enhanced match for activities to on-board Medicaid providers onto a HIE or any interoperable system that connects eligible providers to other Medicaid providers. CMS clarifies that the enhanced match is available for implementation only, not continued costs of keeping providers connected to the HIE. The enhanced match is also available for costs for supporting the initial on-boarding of pharmacies, clinical laboratories, and public health providers to HIEs or other interoperable systems. CMS reiterates that on-boarding must support eligible providers’ efforts to meet meaningful use objectives.
HIE Infrastructure
States may claim the enhanced match for costs related to the design, development, and implementation of infrastructure for several HIE components and interoperable systems that connect eligible providers to other Medicaid providers, when this infrastructure helps eligible providers demonstrate Meaningful Use. CMS reiterates, however, that there is no enhanced match for ongoing and maintenance costs after this technology is established and functional.
CMS provides the following, non-exhaustive, list of the types of state costs for the design, development, and implementation of HIE infrastructure for which the 90 percent match may be claimed.
-
Provider directories. The enhanced match is available for developing provider directories that allow for the exchange of data between eligible providers and other Medicaid providers to coordinate care or calculate clinical quality measures, as long as these costs help eligible providers achieve meaningful use standards.
-
Secure electronic messaging. States may claim the enhanced match for costs related to the design, development and implementation of secure messaging solutions that connect eligible providers to each other and other Medicaid providers, when the communication helps eligible providers meet the inter-connectivity standards of Meaningful Use.
-
Query exchange. States may claim the enhanced match for costs related to the design, development, and implementation of query-based HIEs.
-
Encounter alerting. States may claim the enhanced match for costs related to the design, development, and implementation of communications within an HIE system that communicates to eligible providers and other Medicaid providers about the admission, discharge, and transfer of Medicaid patients, when these communications help eligible providers meet the care coordination requirements of Meaningful Use.
-
Public health systems. States may claim the enhanced match for costs related to the design, development, and implementation of public health systems and connections to public health systems, including the reporting and exchange of public health data as required by Meaningful Use standards.
-
Health information service provider services (HISP). States may claim the enhanced match for costs related to the design, development, and implementation of HISP services. HISP services assist with the technical aspects of connecting eligible providers to each other and other Medicaid providers.
Cost controls, Reporting, and Allocation
CMS also uses this guidance to reiterate several principles applicable to the 90 percent match that it has set forth in prior guidance including the following:
-
States must describe in advance, in the advance planning document, which specific Meaningful Use measures they intend to support. States must confirm such measures are supported post-implementation.
-
States should refer to earlier guidance (SMD Letter #11-004) detailing how States are expected to leverage multiple public and private funding sources to develop HIEs. States should adhere to general cost allocation principles and fair share principles to claim FFP for the Medicaid portion of such activities. CMS recognizes that the Medicaid portion of such cost allocations may increase as a result of this guidance. CMS reports that it will provide technical assistance on the impact of this guidance for cost allocation and will work with States to review cost allocation models that “carefully consider the extent to which the HIE and other interoperable system” benefits eligible providers, other Medicaid providers, and other payers.
-
The 90 percent match cannot be used for ongoing operations and maintenance costs, only for activities that support the initial adoption of such technology.
Application of HIPAA to Meaningful Use
In response to questions from States about the application of HIPAA to activities to promote HIEs and interoperable systems, CMS links to guidance from the Office for Civil Rights (OCR), the agency at the U.S. Department of Health and Human Services (HHS) that enforces HIPAA. However, CMS notes that such guidance concerns which uses and disclosures are permitted under HIPAA, not whether they are eligible for the enhanced match.
© 2025 Covington & Burling LLP