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Prescription: Washington

‘Stage 2’ Incentive Rule for Electronic Records Highlights Importance of Hospital Pharmacy Data

Republicans Say Requirements for Incentives Are Set Too Low
Stephen Barlas

The new “Stage 2” requirements for electronic health records (EHRs) issued by the Centers for Medicare and Medicaid Services (CMS) will force hospitals to integrate additional pharmacy data into their software systems. In fact, the one objective being added to Stage 2 involves medication tracking within the hospital. Hospitals will have to meet Stage 2 rules in 2014 if they want federal incentive payments—that is, if the incentive program, which began paying out in 2011, is still standing. (“Stage 1” criteria address the basic functions of EHRs, such as capturing data electronically and providing patients with electronic copies of health information.1)

Top Republican House committee chairs want Kathleen Sebelius, Secretary of the Department of Health and Human Services (DHHS), to suspend the EHR payments, which were authorized under the 2009 stimulus bill and funded at $30 billion over a period of years. Leaders of the Ways and Means and the Energy and Commerce committees, who oversee Medicare and Medicaid budgets, argue that the Stage 2 requirements, published by the DHHS at the end of August, are a step back that simply loosens the Stage 1 requirements and does nothing to promote the interoperability of EHRs.

In terms of the softening of requirements from Stage 1 to Stage 2, the letter that House leaders sent to Ms. Sebelius on October 4, 2012, cited the electronic prescribing and medication reconciliation thresholds. In Stage 1, these thresholds were 75% and 80%, respectively; in Stage 2, they are dropped to 50%. Outlining their concerns, the House members wrote:2

More than four and a half years and two final Meaningful Use rules later, it is safe to say that we are no closer to interoperability in spite of the nearly $10 billion spent. With the bar for Meaningful Use set so low and with a focus instead on trying to pad participation rates, these challenges are predictable. Incentive payments, particularly those funded by the Medicare trust funds and taxpayers, should be given to providers who are truly ‘meaningful users’ of EHR.

Richard A. Correll, MBA, President and Chief Executive Officer of College of Healthcare Information Management Executives (CHIME), mentions that there are some positives and some negatives in the final rule of August 30, 2012. Initially, hospitals that met Stage 1 criteria in 2011 would have had to meet Stage 2 standards in 2013 to continue receiving incentive payments. The DHHS delayed the Stage 2 requirement until 2014 and said that hospitals have to meet the criteria for only 3 months, not for a full year, a concession that was applauded by hospitals.

Mr. Correll, however, is dissatisfied with other aspects of the final rule.

“The final rule still puts providers at risk of not demonstrating meaningful use based on measures that are outside their control, such as requiring 5% of patients to view, download, or transmit their health information during a 3-month period,” he said.3

Some hospitals have received incentive payments based on meeting Stage 1 meaningful-use objectives in 2011, the first year during which any hospital was eligible for payments. Hospitals that were eligible in 2011 can receive four annual payments until 2015, with those payments decreasing in size according to a formula set by the DHHS. All hospitals must meet a Stage 1 meaningful-use standard by 2015 or risk losing Medicare and Medicaid payments. A hospital first meets Stage 1 criteria in 2015, then moves through Stage 2 and Stage 3 over a period of years; however, the hospital would receive smaller incentive payments than a hospital that entered the incentive program in 2011 or 2012, and so on.

A DHHS spokesperson was unable to say how many hospitals had received incentive payments through 2012.

Stage 1 established a core and menu structure for objectives that health care providers had to achieve in order to demonstrate meaningful use. Core objectives are those that all providers must meet. There are also several predetermined menu objectives. Under Stage 1 criteria, eligible hospitals and critical access hospitals had to meet 14 core objectives and five menu objectives that they selected from a total list of 10. For Stage 2, the number is increased to 16 core objectives and decreased to three menu objectives from a list of six.

Procedures related to medications play a prominent role in many of the core and menu objectives. In fact, the importance of medication administration requirements in Stage 2 is increased considerably. This is because the DHHS is adding one new core objective and one new menu objective that involve pharmacy:4

  • The core objective reads as follows: automatically track medications from order to administration using assistive technologies in conjunction with an electronic medication administration record (eMAR).
  • The new menu objective reads as follows: generate and transmit permissible discharge prescriptions electronically (eRx).

The final Stage 2 objectives also tighten restrictions on some of the Stage 1 core objectives that pertain to medications. For example, in Stage 1, more than 30% of unique patients with at least one drug in their medication list have to be admitted to the eligible hospitals, or the critical access hospital’s inpatient or emergency department must order at least one medication using computerized prescriber order entry (CPOE). In Stage 2, more than 60% of medication orders, 30% of laboratory orders, and 30% of radiology orders, created by authorized providers of the eligible hospital’s or critical access hospital’s inpatient or emergency department during the EHR reporting period, must be recorded by CPOE.

Despite Republican complaints, the DHHS is unlikely to cancel the EHR incentive program. But second-guessing from Capitol Hill will continue, making it imperative that hospitals keep moving forward, maybe at a faster pace, with patient data integration—especially medication information—given the upgrades in that area in Stage 2.


  1. HHS announces next steps to promote use of electronic health records and health information exchange. August 232012;Available at: Accessed November 2, 2012
  2. House leaders express concern that nearly $10 billion in health IT spending may have been wasted. Committee on Ways and Means. October 42012;Available at: Accessed November 2, 2012
  3. Guerra A. CHIME: MU2 still puts providers ‘at risk.’ Health System August 242012;Available at: Accessed November 2, 2012
  4. Stage 2 Overview tipsheet. August 2012. Available at: Accessed November 2, 2012