EHR pay boosts revenue but it's beginning to ebb

Incentive payments for electronic health records continued to rev up earnings reports last quarter, but the train may be slowing.

Analysts who cover for-profit health systems pointed out that in many cases, EHR incentive payments came in higher than expected, but the impact was not as great as the previous year. In addition, the guidance from publicly traded providers anticipates even smaller payments for 2013.

And while the payments have been a boon to companies that sell EHR software, a challenge in Congress to curtail or eliminate incentive payments could be a roadblock for these players.

As the first earnings reports came in, HCA, Nashville, the largest hospital chain in the country, reported $80 million in incentive payments for EHRs in the fourth quarter of 2012, on net income of $314 million. In comparison, it recorded $120 million in HCIT payments during the same period the previous year.

At Vanguard Health Systems, also Nashville, EHR incentive payments last quarter totaled $14.5 million compared with $21.3 million in the fourth quarter of 2011. Its net income was $12.2 million for the quarter.

And while Health Management Associates, Naples, Fla., is projecting an increase in incentive payments when it reports its fourth-quarter earnings, it also noted that it does not expect the trend to continue. For 2013, it expects to recognize between $75 million to $85 million in EHR incentive payments, compared with the $90 million to $95 million it is anticipating for 2012.

Richard Close, an analyst at Avondale Partners, wrote in a note to clients that payments to hospitals topped $1 billion in December, the highest since the HITECH Act's inception.

That's also good news for companies like Computer Programs and Systems, Mobile, Ala., which serves the small-to-midsize hospital market, Close noted, as the incentive payments are more in line with the costs that a smaller hospital would face in implementing an EHR system.

Larger companies like Cerner Corp., Kansas City, Mo., are also well-positioned to serve the large hospital market, he wrote, adding however that pushback on the Hill to eliminate the payments in an attempt to reduce the deficit adds some uncertainty to the business.