Upfront carrots coupled with far-off sticks are part of the modus operandi of the federal government on several of its health information technology booster initiatives, and the CMS' Electronic Prescribing Incentive Program is no exception.

The big difference is that with the CMS' 3-year-old e-prescribing program, the sticks are no longer a distant threat. They're almost here.

Barring some last-minute reprieve, come Jan. 1, the CMS will cut Medicare reimbursement payments by 1% for what could be thousands of physicians, group practices and other prescribing providers that have not met the CMS program's arcane and shifting requirements. The eRx program was created under the Medicare Improvements for Patients and Providers Act of 2008 and launched in 2009.

To say the eRx program has been a fiasco would be an exaggeration, but it has come under broad and persistent criticism for its complexity, rule changes and lack of harmony with other federal information technology initiatives.

“I have to say it's not one of their better-run incentive programs,” says Robert Tennant, senior policy adviser to the Medical Group Management Association.

In February, the Government Accountability Office produced a 75-page report criticizing the CMS for unduly burdening physicians and other prescribers by requiring duplicative reporting mechanisms between federal e-prescribing programs. It specifically dinged the CMS for not establishing common certification methods for the technologies those programs required.

Tennant estimates that as many as 80,000 physicians and other prescribers have filed requests with the CMS for exemptions from the looming penalties, but, with only weeks to go before those penalties kick in, Tennant says he's heard of no physicians who have received a response from the CMS on whether their applications were accepted or denied. If the CMS grants waivers after Jan. 1, “Medicare will be forced to reprocess the claims,” he says. “I think the penalty will catch a lot of docs.”

The CMS eRx program authorized e-prescribers bonuses of 2% of Medicare payments for 2009 and 2010; 1% for this year and 2012; and 0.5% for 2013, when the carrots stop.

In 2009, the program paid out $148 million to 47,500 qualified prescribers, according to the GAO. The average payment to e-prescribers under eRx in 2009 was about $3,120 and the median payment was about $1,700.

The sticks—penalties with the eRx program—as noted come out at 1% next year for noncompliance in 2011. They escalate to 1.5% in 2013 and peak at 2% in 2014, ending that year.

Meanwhile, the CMS' Medicare electronic health record incentive program, which also has an e-prescribing component and which was created under the American Recovery and Reinvestment Act of 2009, began paying providers this year. Penalties for noncompliance under the EHR program also cut Medicare reimbursements, but they don't start until 2015. So, penalties for the two programs don't overlap, except that the statute for the EHR program provides a 2% penalty in 2014 its goals aren't met.

The GAO report noted plenty of other problems. About 40,000 of the 87,500 participants in the eRx program in 2009—roughly 46%—failed to qualify and get paid. Another 85% of the nearly 510,000 potentially eligible Medicare providers didn't participate.

The GAO also said the two programs have duplicative reporting requirements that “places additional burden” on physicians seeking to comply with both.

For more than a year, the American Medical Association, the American Academy of Family Physicians and the MGMA have sent the CMS multiple letters of complaint and demands for eRx program revisions.

As far back as December 2010, the AMA weighed in with HHS Secretary Kathleen Sebelius. The AMA was particularly sore about having penalties kick in during 2012 for prescribers who failed to meet e-prescribing goals during the first half of 2011, when many doctors were preoccupied with implementing new IT systems to meet the meaningful-use requirements in the first year of the CMS' EHR incentive program.

“This unreasonable policy leaves many physicians with little choice but to purchase and use a stand-alone e-prescribing program during the initial months of 2011 just to avoid penalties,” AMA Board Secretary Dr. Steven Stack said in a statement accompanying the Sebelius letter.

The AAFP boasts that more than half of its members are electronic prescribers, but with the penalty deadline just ahead, “I think a lot of our members are going to be affected by this,” says Dr. Stephen Waldren, director of the AAFP's Center for Health Information Technology. It would be helpful, Waldren says, if the CMS clarifies how and when the penalties will be imposed if a physician's exemption is denied, but so far, it hasn't.

One of the AAFP's main criticisms of the program—in line with the GAO—is the perceived lack of harmonization with the CMS' Stage 1 EHR incentive payment requirements for e-prescribing, which are more stringent than those of its eRx incentive plan, Waldren says.

This year, in responding to criticisms by the GAO and other organizations, the CMS granted an exemption from 2012 penalties to providers who claim to have registered for CMS' EHR incentive payment program and have implemented a certified EHR. When the CMS changed its rule this year to count physician participation in the EHR program as an exemption that would ward off penalties in the eRx program, that was progress, Waldren says.

But the CMS still did not allow providers to use EHR incentive program participation as a substitute for the reporting requirements needed to receive payments under the eRx program. For that, providers must submit 25 coded Medicare claims indicating e-prescribing use.

“They worked to try to harmonize this with meaningful use,” Waldren says, but, “It's still not there. Meaningful use only deals with forgoing the penalty. It has nothing to do with the incentive for e-prescribing. If you want to receive the incentive, you still have to submit the 25 instances of e-prescription.”

For the MGMA's Tennant, the most urgent issue is the status of the thousands of applications for hardship exemptions. One exemption, for example, can be granted to a physician in a rural community that doesn't have a pharmacy capable of receiving an electronic prescription.

“If the 80,000 prescribers aren't notified before Jan. 1 that their exemption applications have been accepted or denied, penalties kick in 2012,” Tennant says. Thus far, there's been “no sign that CMS will work their way through these in time to meet the Jan. 1 date.”

Applications for exemptions from 2012 penalties could be submitted only via a CMS website, and initially, they had to be in by Nov. 1 this year. But the site wasn't launched until September, had glitches and would not allow some prescribers to complete their exemption applications, several sources say.

Tennant recalls that the CMS required providers seeking one CMS-allowed exemption—their participation in the CMS' EHR incentive program—to post the certification number of their EHR software. That 15-digit number is assigned to software vendors by the Office of the National Coordinator for Health Information Technology at HHS. But the CMS website, he says, was initially programmed for only 13 digits, for a time making it physically impossible for providers to complete their submissions. Responding to the technical problems, the CMS said it would extend the exemption application deadline to Nov. 8, he says.

Another inconsistency between the eRx and the EHR incentive programs is who has to apply for incentives. For the eRx program, only the prescribing provider can submit a program registration, but for the EHR program, practice managers can register on behalf of their group's physicians, Tennant says.

The eRx rules also keep changing. This year, for example, the CMS has issued a proposed rule for the program, a final rule and then amended the program again with a rule covering the physician fee schedule.

“You could imagine a practice trying to decipher this,” Tennant says. “It's not been easy for them.”

Troubled as it's been, the CMS' e-prescribing incentive program has had its share of success.

The jump in 2009 in the number of e-prescribers and electronic prescriptions, “clearly tracks” the Medicare Improvements for Patients and Providers Act's incentives, according to a spokesman for Surescripts, a provider of e-prescription network services. Ken Whittemore, Surescripts' senior vice president of professional and regulatory affairs, says their analysts are reviewing the causes of another spike in the number of e-prescribers in 2011, but “that also points to the effect of the incentive program.”

Tennant says for all its criticism, the MGMA is a “strong supporter” of physician adoption of eRx technology.

“We've seen the number of clinicians embracing this technology climb dramatically over the last few years,” he says, “and at least some of the credit for this increase is due to the CMS incentive program.”