Despite the pending $36.3 billion that the U.S. government plans to spend over the next several years to drive physician adoption of electronic health record software, the market is at a standstill.Why?

It's really quite simple and logical. That $36.3 billion targeted for EHR adoption was part of the massive stimulus package signed by President Obama in early 2009. Within that package, was the $36.3 billion for the "meaningful use of certified EHRs." Funny thing, though, no one was quite sure what "meaningful use" meant or what a "certified EHR" was. Defining those terms was left to the Department of Health and Human Services' Office of the National Coordinator for Healthcare IT (ONC).

Physicians may receive as much as $48,000 in reimbursement under Medicare (hospitals may see up to $11 million) for meaningful use of certified EHRs. However, without a clear understanding of what was expected under meaningful use, let alone what a certified EHR really is, physicians and hospital CIOs have wisely waited for a clear signal from the administration and the ONC.

Aware that the market was at a standstill, ONC and its Meaningful Use Workgroup, worked feverishly to deliver recommendations. The first draft came out in mid-June and met much resistance. The workgroup was sent back to the drawing board, facing an extremely tight ten-day public comment period. On July 16th, it released a second draft, incorporating comments and concerns. This draft was adopted, and now, the Center for Medicare and Medicaid Services (CMS) will take these recommendations and turn them into rules and methods of verification.

In a nutshell, here are the five broad categories laid out by the workgroup that physicians and hospital CIOs will need to consider:

1. Improve quality, safety, efficiency and reduce health disparities. 2. Engage patients and families. 3. Improve care coordination. 4. Improve population and public health. 5. Insure adequate privacy and security protections for personal health information.

Within each category, the workgroup set specific objectives and measures in a matrix, ratcheting up requirements every two years. In 2011, which is adoption year one, the broad objective is to capture and share data. For 2013, adoption year two, meaningful use is to advance care processes with decision support. In 2015, adoption year three, meaningful use criteria focus on improving outcomes.

The use "adoption years" was one of the newest revisions. This approach lowers the burden for providers, letting them incrementally adopt an EHR and change process workflow overtime rather than having to jump in, say, in 2013 and be required to adopt all meaningful use criteria for the year.

At 10 pages, the meaningful use matrix sets some fairly high goals. Clearly, the federal government wants to ensure that it gets its money worth from the significant amount of tax dollars that will be pumped into the healthcare IT market. The real question, though, is have the goals been set too high?

As mentioned previously, the total amount of possible reimbursement for hospitals is roughly $11 million. Yes, that's a lot, especially for a small hospital, but the potential future penalties are an even bigger issue for most hospitals. (CMS payment penalties, begin at 1% in 2016 and potentially ratcheting up to 5% five years later.) Thus, we're likely to see virtually all hospitals attempt to meet the meaningful use criteria.

Small physician practices, where some 75% of all healthcare occurs, is another story. These practices are often family-run operations with modest IT skills. In such small practices, adoption of EHRs has been anemic (a recent New England Journal of Medicine article pegged adoption at some 4%). In these small practices, EHRs have yet to prove themselves as a benefit and are often seen as a serious detriment to delivering efficient care.

With EHRs already viewed as suspect by this sector, will adding on the burden of meeting meaningful use criteria and creating reports to verify compliance justify the upfront costs a physician will have to pay in expectation of future reimbursement from CMS? Not likely. Even the penalties with which CMS can threaten a small practice are likely to backfire, as many practices will simply stop seeing Medicare or Medicaid patients.

To drive EHR adoption among small practices, burdensome criteria tied to reimbursement won't succeed. New incentives are necessary, and, more important, healthcare IT adoption can't occur in a vacuum without broader payment reform. As long as physicians are paid by the visit, they'll optimize their practices for higher patient throughput. Technology that hinders throughput won't be adopted.

Maybe the trick to encouraging adoption of EHRs that will be meaningfully used by physicians in support of broader healthcare improvement goals rests within a policy framework that pays for healthy citizens. Or maybe EHR vendors need to simply create software that helps physicians be more profitable. John Moore is founder and managing partner of healthcare IT analyst firm, Chilmark Research. He's currently leading research on understanding the impact of consumer-driven health policies and consumer-centric technology on the healthcare market.