Federal EMR subsidies might be taxable, but consider the alternative


There's always a catch.

Any bonus money earned for "meaningful use" of EMRs will be considered taxable income by the Internal Revenue Service, according to the American Academy of Family Physicians' AAPF News Now.

"The way I look at it, this is just enhanced reimbursement from the federal [Medicare or Medicaid] program," Atlanta-based CPA Mark Estroff told the academy's publication. "They're just going to give you a little more money because you're utilizing the proper technology in your practice, and it is taxable just like any other practice gross receipts that you're going to receive."

OK, if you put it that way, it seems obvious, since regular Medicare and Medicaid payments are taxable income, but how many hospitals or physician practices factored this into their calculations of EMR return on investment? Not many, I'm guessing. The same thing apparently happened for practices receiving EMR subsidies from hospitals or health systems under the Stark and Medicare anti-kickback exemption that's been in place for several years. They figured the local hospital would cover as much as 85 percent of their EMR software and training costs, but never counted on receiving a Form 1099 for the value of the subsidy at year's end.

Well, at least there may be a silver lining or two, according to Estroff. Expenses for EMR software and hardware acquisition may be tax-deductible over a one-to-five-year period. Plus, he says, some states offer their own tax incentives for upgrading technology or training staff on new IT.

And a slightly higher tax bill may be preferable to the forthcoming Medicare penalties for not being a meaningful user of an EMR by 2015. "Right now, physicians are getting the carrot before the stick," Estroff says. "They're going to get the stick in a few years, so they might as well eat the carrot while they can."

Even if you only get to keep three-quarters of the carrot. - Neil