MEDICARE AND MEDICAID ELECTRONIC HEALTH RECORDS INCENTIVES DEFERRED GAIN—MEDICARE ELECTRONIC HEALTH RECORDS INCENTIVES

EHR incentive reimbursements are payments received under the Health Information Technology for Economic and Clinical Health Act (the “HITECH Act”) which was enacted into law on February 17, 2009 as part of the American Recovery and Reinvestment Act of 2009 (“ARRA”). The HITECH Act includes provisions designed to increase the use of EHR by both physicians and hospitals. Beginning with federal fiscal year 2011 (federal fiscal year is October 1 through September 30) and extending through federal fiscal year 2016, eligible hospitals and critical access hospitals (“CAH”) participating in the Medicare and Medicaid programs are eligible for reimbursement incentives based on successfully demonstrating meaningful use of their certified EHR technology. Conversely, those hospitals that do not successfully demonstrate meaningful use of EHR technology are subject to payment penalties or downward adjustments to their Medicare payments beginning in federal fiscal year 2015.

SunLink’s four operating hospitals and Dexter (see Note 4.—Discontinued Operations) successfully attested for the Medicare EHR program for the fiscal year ended June 30, 2013. Incentive payments for all four operating hospital and Dexter totaling $5,257 were received by the hospitals during the quarter ended December 31, 2012. As Medicare EHR incentive payments cannot be recognized until the cost report information utilized to determine the final amount of reimbursement is known, SunLink recorded $1,136 as deferred gain as of June 30, 2013 for Dexter. It is anticipated this deferred gain will be recognized in the quarter ended December 31, 2013, when information for the cost report period January 1, 2013 through December 31, 2013 is known (based on buyer’s fiscal year). Based on revised estimates using June 30, 2013 information, a payable of $255 was recorded as of June 30, 2013 for SunLink’s four operating hospitals. This amount will be collected upon final settlement of cost reports for fiscal year 2013. SunLink’s four operating hospitals and Dexter, Memorial and Chilton (see Note 4.—Discontinued Operations) successfully attested for the Medicare EHR program for the fiscal year ended June 30, 2012. Incentive payments for all four operating hospital and Dexter, Memorial and Chilton totaling $8,521 were received by SunLink during the quarter ended June 30, 2011. As Medicare EHR incentive payments cannot be recognized until the cost report information utilized to determine the final amount of reimbursement is known, SunLink recorded the $8,521 as deferred gain as of June 30, 2011. This deferred gain was recognized in the quarter ended June 30, 2012, when information for the cost report period July 1, 2011 through June 30, 2012 was known. Based on revised estimates using June 30, 2012 information, a receivable of $103 was recorded as of June 30, 2012. Final settlement of cost reports for fiscal year 2012 resulted in a decrease of $140 in Medicare EHR incentive payments recognized in continuing operations. This adjustment was recorded in fiscal year 2013.

SunLink’s hospital in Mississippi successfully attested for the Medicaid EHR program in the quarter ended June 30, 2012. SunLink’s Missouri hospital, its two Georgia hospitals, Dexter and Chilton successfully attested for the Medicaid EHR program for the federal attestation year ended September 30, 2012 and recognized EHR incentive payments in the fiscal year ended June 30, 2013. Medicaid EHR incentive reimbursement payments were received for SunLink’s four operating hospitals and Dexter during the fiscal year ended June 30, 2013 totaling $1,320. SunLink’s hospital in Mississippi successfully attested for the Medicaid EHR program in the quarter ended June 30, 2011. SunLink’s Missouri hospitals, its two Georgia hospitals, Dexter and Chilton successfully attested for the Medicaid EHR program for the federal attestation year ended September 30, 2011 and recognized EHR incentive payments in the fiscal year ended June 30, 2012. Medicaid EHR incentive reimbursement payments were received for SunLink’s four operating hospitals, Dexter, Memorial and Chilton during the fiscal year ended June 30, 2012 totaling $2,080.

EHR incentive payments recognized in continuing operations for the years ending June 30, 2013 and 2012 are as follows:


	2013		2012		2011
Medicare	$	3,726	$	6,022	$	0
Medicaid		1,221		1,272		277

	$	4,947	$	7,294	$	277

EHR incentive payments recognized in discontinued operations for the year ended June 30, 2013 for Medicaid was $248. Medicare EHR incentive payments recognized in discontinued operations was a negative $89 due to final settlement of the 2012 cost reports. EHR incentive payments recognized in discontinued operations for the year ended June 30, 2012 for Medicare and Medicaid were $2,602 and $809, respectively. No EHR incentive payments were recognized in discontinued operations for the year ended June 30, 2011.