Does E-Prescribing Lower Prices?

June 24, 2011
Southwest Medical Associates (SMA) in Las Vegas is the largest multi-specialty physician group in Nevada with 235-physicians and 650,000 annual
Southwest Medical Associates (SMA) in Las Vegas is the largest multi-specialty physician group in Nevada with 235-physicians and 650,000 annual outpatient visits. As a subsidiary of Sierra Health Services, Nevada's largest Managed Care Organization (MCO), SMA aims to deliver the highest quality patient care in the most cost-effective manner possible. In 2003, we implemented an electronic medical record (EMR) with e-prescribing capabilities designed to enhance care and save money by automating routine clinical tasks and enabling physicians to prescribe more low-cost generic medications. Three years later, the EMR has helped us save millions of dollars each year by increasing generic prescriptions and reducing the number of time-consuming phone calls to pharmacies.
Michael ColemanWe began looking for an e-prescribing application for our physicians in 2002. Executives at our parent company, Sierra, hoped e-prescribing would help reduce our group's $66 million annual pharmacy spend by offsetting the rising cost of pharmaceuticals. According to an October, 2005 study by Express Scripts, American consumers could have saved $20 billion in 2004 by using generic drugs. Sierra also hoped that e-prescribing would help our physicians reduce pharmacy call-backs and streamline the time-consuming prescription refill process.
Craig Morrow, M.D.

Also in 2002, SMA's physicians began searching for an EMR to resolve several problems. The cost of maintaining 650,000 paper records and building 5,000 new charts each month was eating into our increasingly thin bottom line. Our medical records department required 49 FTEs to shuffle all that paper, at a cost of $2.4 million per year, and the practice spent another $1.7 million a year producing 18 million lines of transcription. For patient safety reasons, we wanted an electronic record that would be available at any time from any of our practice locations, and remotely for physicians on-call or rounding in hospitals. We felt that arming our physicians with all pertinent information at the point of care would ensure the delivery of the highest quality care.

Physicians resist

In February 2003 we installed an early version of Chicago-based Allscripts' TouchWorks Rx+ e-prescribing solution—a stand-alone module of the TouchWorks EMR. By adopting just one module of the full EMR, we hoped to test the technology, assess its impact and move forward step by step. Unfortunately, we soon discovered that many or our physicians simply did not want to use the Web-based software, in part because the handheld, wireless iPaq computers on which it came loaded had limited battery life, and because our physicians were put off by the relatively small size of the iPaq screens, which they found difficult to read. As a result, our initial implementation of e-prescribing technology proved a disappointment.

By September 2003 the practice decided to implement the full TouchWorks EMR system. We proceeded despite the early disappointment because we felt Allscripts had a solid product, and we were certain the EMR represented the future of healthcare delivery. By the end of 2004, the practice was almost completely paperless and all of our physicians were documenting all patient encounters in the EMR. All of our prescribing physicians were now using e-prescribing on a consistent basis, using desktop thin-client PCs installed in every exam room rather than the troublesome iPaqs.

Prior to implementing the EMR, SMA physicians wrote all of their prescriptions by hand. Physicians were provided educational materials to encourage them to prescribe generic drugs whenever appropriate, but there was no systematic way to remind them about particular drug choices at the point of care. Today, the process is dramatically different. The physician enters the patient's name and a diagnosis into the EMR and then chooses from a pop-up menu of available medications. The system automatically notifies the physician of the formulary status to ensure that the chosen medication is covered by the patient's health plan. The system then checks the selection against the patient's medical record with a five-step automatic drug utilization review, screening for drug interactions, prior adverse reactions (allergies), duplicate therapies, proper drug dosage and drug-to-health state verification.

The physician then selects strength, dosage and number of refills, and the EMR's built-in clinical decision support double checks for inconsistency in dosage. Finally, the physician selects the pharmacy from a drop-down menu and sends the prescription via e-mail or fax. Because the system is integrated with the EMR, the patient's medical history is automatically updated after each visit, sparing clinical staff the effort of hand-keying the data into the system.

In addition to new technology, we launched a highly effective financial incentive program to encourage our physicians to adopt e-prescribing. For years, SMA had based physician bonuses on the entire group's performance against Sierra's pharmacy budget. The more generic medications our physicians prescribed, the larger the group's bonus pool grew. Individual physicians received a higher or lower percentage of the total pool based on their performance against quality and customer service measures. This approach had limited success, however, mostly because pharmaceutical companies hand out millions of free samples of their drugs to physicians, and physicians are always eager to give their patients free medications.

With the start of the EMR implementation, SMA mandated that only SMA prescribing physicians who were 100 percent TouchWorksRx+ compliant would be eligible to receive bonuses. The policy adjustment had swift and significant impact. Within one month, 90 percent of all prescriptions written at SMA were e-prescriptions. By the end of two months, every last SMA physician was using Rx+ to prescribe medications electronically. During the same time frame, the practice went from zero e-prescriptions to its current average level of 80,000 electronic scripts per month, making it one of the highest-volume eRx groups in the nation.

Real savings

After three years of using e-prescribing, SMA's generic fill rate (GFR) has achieved a 4.8-percentage-point lead over a control group of physicians in other SMA network groups that do not use electronic prescribing. Because every one point increase in GFR equals a cost savings to the organization of 1.5 percent, SMA's increased generic utilization saves $4.75 million each year, or 7.2 percent of its 2005 drug spend of $66 million. Our physicians are convinced that the system's clinical decision support and automatic drug utilization review prevents medical errors that would previously have slipped by unnoticed. While we cannot prove that errors have declined with e-prescribing because we did not establish a baseline of errors prior to the EMR's implementation, we can anecdotally report a sharp decrease in error issues.

Lessons learned

Our experience is further proof that, with the right eRx application, physicians can both improve the bottom line and enhance patient care. A key lesson for other MCOs and physician practices is that a group's total generic fill rate can be significantly improved by tying e-prescription adherence to financial incentives—even to the point of barring non-compliant clinicians from participation in incentive programs.

Craig Morrow, M.D. ([email protected]), is an internal medicine physician and medical director at Sierra Medical Associates in Las Vegas.
Michael Coleman, M.B.A. (
[email protected]), is chief operating officer.

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