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 hospital subsidiaries successfully attested for the Medicare EHR program for the fiscal year ended June 30, 2014. Medicare EHR incentive payments for all four operating hospital subsidiaries totaling $2,494 were received during the quarter ended December 31, 2013 and recognized at June 30, 2014. In addition, $1,136 was received by Dexter (see Note 3.—Discontinued Operations) for the fiscal year ended June 30, 2013. This Medicare EHR incentive payment was not recognized until June 30, 2014 as Medicare EHR incentive payments cannot be recognized until the cost report information utilized to determine the final amount of reimbursement is known. The amount recognized of $1,076 was less than the amount received due to an adjustment based on the December 31, 2013 cost report as filed by the buyer of Dexter. Based on revised estimates using June 30, 2014 information, a third party receivable of $369 was recorded as of June 30, 2014 for SunLink’s four operating hospitals. This amount will be collected upon final settlement of the cost reports for fiscal year 2014. Final settlement of cost reports for fiscal year 2013 resulted in an increase of $705 in Medicare EHR incentive payments recognized in continuing operations. This adjustment was recorded in fiscal year 2014.

SunLink’s four operating hospitals and Dexter 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. This deferred gain was recognized in the quarter ended June 30, 2014, when information for the cost report period January 1, 2013 through December 31, 2013 was known (based on buyer’s fiscal year). Based on revised estimates using June 30, 2014 information, a third party payable of $315 was recorded as of June 30, 2014 for SunLink’s four operating hospitals and Dexter. This amount will be paid upon final settlement of cost reports for fiscal year 2013.

SunLink’s four operating hospitals and Dexter, Memorial and Chilton (see Note 3.—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 four operating hospital subsidiaries successfully attested for the Medicaid EHR program and recognized Medicaid EHR incentive payments in the fiscal year ended June 30, 2014. Medicaid EHR incentive reimbursement payments were received for SunLink’s four operating hospitals during the fiscal year ended June 30, 2014 totaling $593. SunLink’s four operating hospital subsidiaries and Dexter successfully attested for the Medicaid EHR program and recognized Medicaid 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. EHR incentive payments for SunLink’s hospital in Mississippi were recognized in the fiscal year ended June 30, 2011 while payment was received in the fiscal year 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, 2011 and recognized Medicaid 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 and Chilton during the fiscal year ended June 30, 2012 totaling $2,357.

EHR incentive payments recognized in continuing operations for the years ending June 30, 2014, 2013 and 2012 are as follows:


	2014		2013		2012
Medicare	$	3,568	$	3,726	$	6,022
Medicaid		343		1,221		1,272

	$	3,911	$	4,947	$	7,294

EHR incentive payments recognized in discontinued operations for the years ending June 30, 2014, 2013 and 2012 are as follows:


	2014		2013			2012
Medicare	$	1,076	$	(89	)	$	2,602
Medicaid		0		248			809

	$	1,076	$	159		$	3,411

Medicare EHR incentive payments recognized in discontinued operations was a negative $89 for fiscal year 2013 due to final settlement of the 2012 cost reports.