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Stimulus Bill Promises a New Era In Digital Health Care

Pharmacy & Therapeutics Journal, May 2009

The advent of electronic prescribing was supposed to be a large part of the cure for improving patient outcomes and reducing prescription errors, but only a fraction of scripts are being sent electronically. Independent and hospital pharmacies continue to lag behind the technology wave because of the expense involved.

Stephen Barlas

My personal physician, let’s call him Dr. Smith, is a young,
enthusiastic guy whose eyes light up when he talks about his
two-year-old son who just taught himself to gargle. The kid
thinks he is a young Robin Williams. The toddler comedian
likes to throw back his head at the dinner table, juggle some
orange juice in his mouth, and see if his parents break into
Believe it or not, Dr. Smith is just as animated
when he’s asked about electronic health records
(EHRs) and electronic prescribing; however, his
tone quickly changes from pleasure to pain. His
office has experimented with all sorts of off-theshelf
EHR software but to no avail. His mediumsized
practice in well-off Arlington, Virginia, has
had to hire an information technology (IT) guru
with a background in medical records to develop
a customized EHR system. My doctor laughs
derisively when I ask him about the $17.2 billion
in Medicare and Medicaid health IT (HIT) incentive
money for physicians and hospitals in the stimulus package
Congress passed in February 2009. He doesn’t think it will
convince many physicians to jump into the HIT arena, especially
with standards and certification in such a mess.
The doctor’s frustration is palpable when he pulls a prescription
pad from his pocket. His practice does have legacy
e-prescribing software. He can send electronic prescriptions
through the Surescripts network—the only e-prescribing highway
available—to all local pharmacies; no problem here. But
if a patient comes in and wants a 90-day supply of a medication
from a mail-order pharmacy, that’s a no-go. His software does
not allow him to get onto the Surescripts highway to reach
Medco Health Solutions, CVS Caremark, and other big prescription
benefit managers (PBMs) and mail-order pharmacies.
EHRs and e-prescribing have been held up as saviors of our
medical system—literally and figuratively—since a National
Academy of Sciences report in 1999 detailed the average number
of deaths from hospital errors in the U.S. Most of these
deaths were the result of botched prescriptions with faulty
handwriting or other similar deficiencies. Through the early
part of the 21st century, EHRs gained momentum in the public’s
mind, if not the physicians’ office, as a way to save timeand resources and as a gateway to better health outcomes
more broadly, not just as a way to reduce prescription errors.
President Obama provided the most recent rationale for EHRs
when he linked them to job creation, mostly from sales of
e-health software and hardware.
The President’s support of EHRs catapulted previously landlocked
congressional legislation onto the deck of the fast-moving
stimulus bill. Known as the American Recovery
and Reinvestment Act (ARRA), the stimulus
bill aims to create a new digital health nirvana in
which federal dollars would be pumped into physician
practices and hospitals (but not pharmacies)
so that they can purchase off-the-shelf software
systems that will become magically robust and, at
long last, interoperable.
The ARRA has three general components:
• $19.2 billion in funding ($17.2 billion plus another
$2 billion going to the National Coordinator
for Health Information Technology)
• establishment of voluntary standards
• privacy provisions
Some top health care executives have heralded the arrival
of the new stimulus-funded era. David B. Snow, Jr., MHCA,
Chief Executive Officer (CEO) of Medco Health Solutions,
Inc.—the mail-order company to which my physician cannot
connect electronically—delivered a speech on March 18 at the
American Enterprise Institute, a mainline think tank, entitled
“Health IT: Empowering Precision Medicine.” The Pharmaceutical
Care Management Association (PCMA) issued a study
in March that predicted that HIT funding in the ARRA would
increase the number of prescribers using e-prescribing to
more than 75% over the next five years.
But a cow has more chance of jumping over the moon than
the PCMA’s guesstimate has of being correct. A June 2008
report from the eHealth Initiative and the Center for Improving
Medication Management estimated that only 6% of ambulatory
health care providers are using e-prescribing, including
those using EHRs and stand-alone e-prescribing solutions.
The PCMA’s estimate is close to astounding. Adoption by hospitals
and retail pharmacies isn’t much more impressive.
Karl F. Gumpper, RPh, BCNSP, BCPS, Director of the Section
of Pharmacy Informatics & Technology of the American
Society of Health-System Pharmacists (ASHP), says that an
association survey at the end of 2007 found that 20% of hospitals
had some e-prescribing capability.
“Whether they are using that capability to its full extent, for
example, by connecting to outside retail pharmacies or doctors’
offices, we don’t know,” he adds.
In-patient hospital pharmacies are almost totally in the dark,
according to Michael Van Ornum, RPh, RN, BCPS, a consulting
clinical pharmacist at Greater Rochester Independent Practice
Association and author of a book on e-prescribing. Inpatient
pharmacies connect to physicians making rounds via
computerized provider order entry (CPOE) systems.
“They don’t connect to the outside world via Surescripts, so
medication history is a weak spot, for example,” he explains.
Almost all chain pharmacies have pharmacy dispensing systems
with e-prescribing capability, but this is not true in
smaller, independent pharmacies. The eHealth Initiative report
said approximately 73% of independent pharmacies are not connected
even though most of them are using certified software.
Mr. Van Ornum describes the dilemma of an owner of an
independent pharmacy who had to choose whether or not to
buy a pharmacy dispensing system that cost $10,000 extra for
an e-prescribing component.
“He said he wasn’t going to pay an extra $10,000 just for the
privilege of paying Surescripts an extra 25 to 35 cents per
transaction,” Mr. Van Ornum relates.
Surescripts provides a valuable service to pharmacies and
physicians (who do not pay a per-transaction cost) by ensuring
that some (but often not all) information about a patient’s
medication history, insurance benefits, and formulary flexibility
is available to the physician or the pharmacy when the
patient is standing in front of them. Although connectivity to
Surescripts saves providers a considerable amount of time, Mr.
Van Ornum says that the pharmacy costs can add up to the
equivalent of a full-time technician. Such an expense offsets the
time savings gained by the pharmacy.
That is where e-prescribing adoption stands today. At the end
of 2007, according to the eHealth report, only 2% of the 1.47 billion
prescriptions each year that were eligible to be sent electronically
were sent that way. Progress has been made, no
question, but the task of completing the job is enormous. This
is where the stimulus bill comes in, although there are many
Kevin Hutchinson, President and CEO of Prematics, Inc.,
and founding CEO of Surescripts, says that the incentive funds
for physicians and hospitals are a positive step. However, the
one-year injection of money won’t be enough to encourage
many physicians in small and medium-sized practices—like my
physician—to fully embrace e-prescribing, much less fullblown
EHR systems. He explains:
Two things have to happen first. Health care reform has to change
the way reimbursement is done so [that] doctors see that the way
they deliver care is aligned with the way they get paid for care. Second,
physicians have to be sure that investments they make in 2009
will be reimbursed with stimulus money, which first becomes available
in 2011. Because these kinds of payment promises have been
broken in the past, there is a little bit of skepticism on the part of
Even if the money is there in 2011 and beyond, a study
released in March by Avalere Health, a consulting firm in“Whether they are using that capability to its full extent, for example, by connecting to outside retail pharmacies or doctors’
offices, we don’t know,” he adds.

Washington, DC, suggested that absent a leap of faith that new
HIT systems would increase their efficiency, up to 50% of
physicians in solo practice or in small groups perceived themselves
as better off financially by refusing to adopt e-prescribing
and EHRs and forgoing HIT funding in the stimulus bill;
they would instead pay a penalty for noncompliance.
The stimulus package would pay physicians incentives for
five years; the total amount would depend on which year they
first complied with certain standards. If that first year were
2011 or 2012, the doctors would get $44,000 over five years.
Total payments would be $3,000 less if they implemented
e-prescribing in 2013, 2014, or 2015. The Avalere researchers
found that solo practitioners and physicians in small group
practices would need to spend approximately $124,000 over the
five-year period of 2011 to 2015 to adopt EHRs.
Subtracting the potential $44,000 in federal incentive payments,
the resulting financial cost would be $70,000, or an
average of $14,000 a year. This represents about 8% of this
physician’s annual Medicare receipts, contrasted with the legislation’s
provisions to impose an $8,500 penalty on nonadopters
of e-prescribing. The penalties would be the result of
reduced Medicare fees for non-adopters in 2015 and beyond.
Unlike physicians and hospitals, pharmacies receive no
direct funding from the stimulus bill, even though, unlike
physicians, they will incur substantial recurring costs from
Surescript’s connection charges.
Brian Morris, RPh, and Director of Product Management
and Public Affairs at McKesson Pharmacy Systems, says,
“Pharmacies do not see the same opportunities and incentives
as physicians.”
Today, a pharmacy management system could cost a pharmacy
more than $10,000 depending on hardware, training,
and implementation requirements.
Some stimulus funding could flow indirectly to pharmacies,
however. The ARRA gives $2 billion to the Office of the
National Coordinator for Health Information Technology
(ONC) for a basket of loan and grant programs, including one
to establish regional implementation centers that provide guidance
to physicians and pharmacies. The latter provision is
why Mark Kinney, RPh, Vice President of Government Affairs
for the Independent Pharmacy Cooperative (whose members
are generally small pharmacies in more rural areas) thinks that
the legislation will be very valuable.
Dan Rode, MBA,Vice President of Policy and Government
Relations at the American Health Information Management
Association, describes those “regional exchanges” as HIT
versions of the U.S. Department of Agriculture’s extension
center offices. They would ostensibly be staffed with HIT
experts who would venture into physicians’ offices and pharmacies
and help with e-prescribing and implementing EHR
systems. This would be a free service.
“I don’t imagine the consultants industry is too happy about
this,” Dan Rode jokes.
But physicians and pharmacies need more than money to
convince them to make substantial e-prescribing investments.
They need the software to be mature and interoperable, which
is currently far from the case. The stimulus bill is supposed to
help here too.
On standards and certification, the stimulus bill says that the
Department of Health and Human Services (DHHS) Secretary
has to adopt an initial set of HIT standards and certification procedures
by December 31, 2009. However, the ARRA is silent
on how detailed or far-reaching those new DHHS standards
should be; it is also mute on whether the Obama DHHS will
endorse the standards already adopted by the Bush admin -
istration-endorsed Healthcare Information Technologies Standards
Panel (HITSP) and the certifications based on those
standards, as issued by the Certification Commission for
Healthcare InformationTechnology (CCHIT) at the end of this
year. In fact, the bill’s silence on that topic and its creation of
a new broad-based standards committee to advise DHHS was,
to some extent, a repudiation of the fractured, confusing standards
and certification-setting system endorsed by the wellmeaning
Bush administration, which had outsourced the work
to the HITSP and CCHIT. These two private-sector groups
are heavily influenced by software vendors.
Even if new DHHS Secretary Kathleen Sebelius, MPA, endorses
the CCHIT certification process at the end of 2009
(which is likely), that will not quiet the concerns of either
physicians or pharmacies. The CCHIT has been certifying
EHR systems but not stand-alone e-prescribing systems, which
would obviously be cheaper and would make it easier for physicians
and pharmacies to get on board. All EHR systems that
have been certified by the CCHIT have e-prescribing functionality,
but that functionality has considerable limits.
For the most part, the earlier e-prescribing systems based
their functions on the Medicare e-prescribing “foundation”
standards adopted in 2006. However, the first-generation systems
certified by CCHIT, which are now being used by physicians
and pharmacies, do not necessarily allow physicians to
connect to all pharmacies, as in the case of my personal physician.
Some EHR systems connect only to retail pharmacies,
others only to mail-order pharmacies. Even rival software
packages connecting physicians to mail-order pharmacies provide
different levels of data, depending on what Medco, CVS
Caremark, and others agree to release.
Generally, there is no ability to look up formularies in real
time. In part, those shortcomings were the result of the cost
of the certification process; some vendors simply could not pay
the CCHIT charge for complete certification. In addition, the
mail-order pharmacies really saw the light on e-prescribing
only a few years ago. They were late to the party, according to
Prematics CEO Hutchinson, who says that this has changed
markedly now. Nonetheless, there are all these legacy EHR
systems out there that cannot meet the new standards set by
the Medicare Improvements for Patients and Providers Act of
2008 (MIPPA).
This is the Medicare reform legislation that provides
Medicare payment incentives to physicians for e-prescribing.
That bill specified three new e-prescribing standards, in addition
to the three “foundation” standards: (1) formulary and
benefit transactions, (2) medication history transactions, and
(3) fill status notifications.
Although CHIT will have 50 full EHR systems certified to the
entire six-standard suite by the end of June, no stand-alone
e-prescribing systems have been certified by CCHIT. However,
John Morrissey, a CCHIT spokesperson, says that stand-alone
systems will be certified in the fall of 2009, again based on the
Medicare standards.
So what happens to a physician like mine with a legacy EHR
system after his software vendor has the latest version, which
is compliant with the three new Medicare standards, certified
by the CCHIT?
Theoretically, the legacy system can be upgraded at no cost,
based on the initial contract with the software vendor. But Mr.
Hutchinson claims that upgrades can present challenges as a
result of additional new features that can adjust the workflow
of users, “sometimes expectantly and sometimes not. It is important
that training follow significant upgrades, especially
one that will add true electronic prescribing capabilities.”
Yet even with the addition of three new standards in April
2009, the Medicare Part D suite, now being used by the CCHIT,
vendors and physicians are still skeptical. That is because the
suite omits three standards that Medicare pilot-tested in 2006
but found wanting. Probably the most significant one is the
standard for RxNorm drug nomenclature, developed and maintained
by the National Library of Medicine (NLM).
In the March–April 2009 issue of Health Affairs, Maria Friedman,
Anthony Schueth, and Douglas S. Bell wrote that the latest
Medicare e-prescribing standard “will be critical for driving
more advanced functionality and e-prescribing adoption by
payers and vendors that have not yet fully participated in e-prescribing.”
However, they add: “On the other hand, the fact that three
other standards were pilot-tested but not adoptedmay have created
a perception that e-prescribing is generally not mature.
“There are a lot of people on the RxNorm bandwagon,”
acknowledges Mr. Hutchinson.
Moreover, the new Medicare standard, based on the
National Council for Prescription Drug Programs (NCPDP)
SCRIPT 8.1 standard, does not accommodate e-prescribing in
long-term-care facilities, in which specialized long-term care
pharmacies are located off-site and drugs are delivered to the
facility. The NCPDP has made changes to standard 8.1 to accommodate
long-term care facilities; the new standard is 10.5.
The problem is that vendors are using NCPDP SCRIPT 8.1 as
a yardstick. If standard 10.5 turns out to be compatible with earlier
versions, long-term care facilities and their pharmacies may
be able to use vendor systems certified to prior version 8.1. A
number of different players will be involved in making that
“backwards-compatible” decision, meaning that it is going to
take a considerable amount of time.
Although the CCHIT’s certification of physician systems
may leave something to be desired, its certification of pharmacy
systems is nonexistent. Surescripts certifies pharmacy
e-prescribing software products that use its network; a physician-
dispensing system without that certification is useless
for e-prescribing. That certification is based on compliance with
NCPDP SCRIPT 8.1. Like physicians, pharmacies also face
challenges when a vendor certifies the newest version of a
pharmacy management system to standard 8.1; legacy systems
must then be upgraded.
At least CCHIT has had the federal government’s imprimatur.
The DHHS has never blessed Surescripts. McKesson’s
Brian Morris thinks that CCHIT could extend its reach to
pharmacy systems under the ARRA and that national standards
could prevent adoption impediments arising from in-terstate differences. Several states such as Ohio and New
York, for example, have their own pharmacy system certification
process with requirements that aren’t in harmony with
those of other states and industry standards.
The stimulus bill is silent about the Drug Enforcement
Agency’s (DEA’s) prohibition against e-prescribing of controlled
substances. Those drugs account for about 20% of all
prescriptions, according to the report from the eHealth Initiative.
The DEA has proposed a rule that would ease its restrictions
against e-prescribing.
Maria Friedman, one of the authors of the Health Affairs
article and a former Medicare official, says that the DEA and
DHHS are currently arguing over the proposed rule, which
many pharmacy and physician groups have criticized. Privacy
and security concerns factor into the DEA rule-making, as
they do into the stimulus provisions affecting the Health Insurance
Portability and Accountability Act (HIPAA).
The ARRA expands HIPAA protections for individuals.
These new privacy requirements in some cases would force
EHRs and e-prescribing systems to contain functionality
beyond what is required by the Medicare Part D standards. For
example, Section 14405 of the ARRA expands HIPAA to allow
patients with health insurance to pay for a test with cash and
to instruct physicians not to report the test results to the
patient’s employer or medical insurance company. Currently
under HIPAA, physicians have no choice and must report the
results. In the future, physicians and pharmacies would be able
to segregate patient information that does not get sent to the
“That complicates things, to be honest,” states Dan Rode,
who notes that this provision is one of many that will be up for
grabs during the DHHS rule-making process that will unfold
this year. He adds:
It is way too early to know whether this bill will positively [affect]
innovation. But we believe that there still is more needed than what
the stimulus bill provides to achieve interoperability. The bill is
where Congress left us on February 17. We will move forward.

COMMENTARY: The Stimulus Bill and Electronic Health Records
248 P&T® • May 2009 • Vol. 34 No. 5