BILL ANALYSIS SENATE HEALTH COMMITTEE ANALYSIS Senator Elaine K. Alquist, Chair BILL NO: AB 278 A AUTHOR: Monning B AMENDED: June 21, 2010 HEARING DATE: June 30, 2010 2 CONSULTANT: 7 Chan-Sawin 8 SUBJECT Health information exchange: demonstration projects SUMMARY Authorizes the California Office of Health Information Integrity (CalOHII) to establish and administer demonstration projects to evaluate potential solutions to facilitate health information exchange (HIE), as specified. Authorizes California-based health care entities, as defined, to submit an application with CalOHII to be approved as demonstration project participants, as defined. Authorizes CalOHII to approve up to four demonstration projects annually. Requires any costs associated with the support, assistance, and evaluation of approved demonstration projects to be funded exclusively by federal funds or other non-General Fund sources. Repeals the provisions of the bill on the date the Director of CalOHII executes a declaration stating that the grant period for the State Cooperative Grant Agreement for HIE has ended. CHANGES TO EXISTING LAW Existing federal law: Establishes the Health Information Technology for Economic and Clinical Health Act (HITECH Act), within the federal American Recovery and Reinvestment Act of 2009 (ARRA), to, among other things, provide funding related to health Continued--- STAFF ANALYSIS OF ASSEMBLY BILL 278 (Monning) Page 2 information technology (HIT) and HIE, including funding to states to establish HIE and to local communities to conduct health information exchange demonstration projects. Existing state law: Establishes CalOHII within the California Health and Human Services Agency (Agency) to ensure enforcement of state law mandating confidentiality of medical information, and to impose administrative fines for the unauthorized use of medical information. Authorizes the Agency, or one of the departments under its jurisdiction, to apply for federal funds made available through ARRA for health information technology and exchange. Requires Agency or a state-designated entity to facilitate and expand the use of electronic health information according to nationally recognized standards and specifications, and execute tasks related to accessing ARRA funds while protecting the privacy and confidentiality of medical records to the greatest extent possible. This bill: Authorizes the Agency, through CalOHII, to establish and administer demonstration projects, as defined, to evaluate potential solutions to facilitate HIE that promote quality of care, respect the privacy and security of personal health information, and enhance the trust of the stakeholders. Defines "demonstration project" as a project approved and administered by CalOHII in accordance to this division and the State Cooperative Grant Agreement for health information exchange, or any other similar grant or grants. Defines "State Cooperative Agreement" as the grant agreement between the federal government and the state, in which the federal government awarded the state with grant money pursuant to the HITECH Act in February 2010. Authorizes California-based health care entities, as defined, to submit an application to CalOHII to be approved as a demonstration project participant, as defined. STAFF ANALYSIS OF ASSEMBLY BILL 278 (Monning) Page 3 Defines "California-based health care entity" as a health care entity based primarily in California. Defines "demonstration project participant" as a California-based health care entity that is approved by CalOHII to participate in a demonstration project. Requires CalOHII, upon receiving a demonstration project application, to: 1) assist applicants in soliciting federal funds for the demonstration project; and, 2) work with applicants to define the scope of the demonstration project. Authorizes the Director of CalOHII to approve demonstration projects to test for, but not limited to, the following areas: 1) patient consent and informing policies and practices; 2) new technologies and applications that enable the transmission of protected health information, as specified; and, 3) implementation issues encountered by small solo health care providers as a result of higher privacy and security requirements. Requires that the selection of demonstration projects be based on, but not limited to, the following criteria: 1) areas critical to building consumer trust and confidence in the HIE system; 2) projects that help support the exchange of information critical to meeting the federal meaningful use provisions, as defined; and, 3) areas recommended by the California HIE consumer and industry stakeholder advisory process. Defines "meaningful use" to mean the term as defined in the HITECH Act, and in regulations promulgated under the HITECH Act. Requires CalOHII to engage with stakeholders to evaluate issues identified by the demonstration projects, comment upon proposed regulations, and discuss HIE solutions. Authorizes CalOHII to administer up to four demonstration projects a year. Requires CalOHII to work collaboratively with approved demonstration project participants to identify a set of common data elements that will be used to collect, analyze, and measure performance. STAFF ANALYSIS OF ASSEMBLY BILL 278 (Monning) Page 4 Authorizes the Director of CalOHII to adopt regulations to ensure all approved HIE service participants, as defined, and demonstration project participants follow rules, and work within parameters, that are consistent for the exchange of information. Defines "health information exchange service participants" as a California-based health care entity that has voluntarily agreed to use the HIE services developed in accordance with this bill. Exempts adoption of, and changes to, such regulations from provisions in existing law related to procedures for public participation, the review of proposed regulations by the Office of Administrative Law (OAL), and filing and publication requirements that specify an effective date that is 30 days after the date of filing with the Secretary of State. Requires the Director of CalOHII to file any regulation adopted pursuant to this bill with OAL, for filing with the Secretary of State and publication in the California Code of Regulations. Requires such filings to cite the appropriate section of this bill and any other applicable state or federal laws. Requires CalOHII, prior to adopting a regulation or changing an existing regulation pursuant to this bill, to adopt the standards requiring CalOHII to: 1) post the proposed regulation on its website at least 45 days prior to adoption; 2) accept public comments for at least 30 days after the proposed regulation has been posted online; and, 3) hold a hearing prior to adoption of the regulation if a member of the public requests a public hearing during the 30-day review period. Specifies that any regulation adopted shall become effective on the date it is filed with the Secretary of State unless the director prescribes a later date in the regulation, or in a written instrument filed with the regulation. Requires regulations adopted to expire upon repeal of the authorizing statute. STAFF ANALYSIS OF ASSEMBLY BILL 278 (Monning) Page 5 Requires CalOHII to receive reports from demonstration project participants on the outcome of the demonstration project no later than 60 days after the end of the project. Requires CalOHII to review the results of the demonstration projects and report to the Legislature no later than six months after the end of the project. Specifies that demonstration projects carried out utilizing federal grant funds may be subject to federal auditing requirements. Requires costs associated with the support, assistance and evaluation of approved demonstration projects to be funded exclusively by federal funds or other non-General Fund sources. Repeals the provisions of the bill on the date the Director of CalOHII executes a declaration stating that the grant period for the State Cooperative Grant Agreement for HIE has ended. Makes various legislative findings and declarations. FISCAL IMPACT This bill has not been analyzed by a fiscal committee. BACKGROUND AND DISCUSSION According to the author, current state privacy laws, while extensive, are problematic when it comes to electronic HIE. For example, current state law does not specifically address widespread HIE, which results in ambiguity of some state rules in an electronic environment. Additionally, the current health privacy framework is built upon an interaction of state and federal requirements, and it is not easily determined which requirements apply. Last of all, no agency or office at the state level is authorized to establish requirements, or interpret California medical privacy law, when it is applied to health information exchanged electronically. The author points out that the imminent implementation of STAFF ANALYSIS OF ASSEMBLY BILL 278 (Monning) Page 6 widespread HIE systems has raised many new issues among stakeholders with strong and often opposing viewpoints. While these issues generate strong and often opposing viewpoints, there is growing consensus on two points: 1) electronic HIE is such a new area that it raises new privacy issues on which there is very little empirical information that can alter the debate; and, 2) demonstration projects can provide valuable new insights into these complex issues and can help lead to resolution on issues. According to the author, providing explicit legislative authority for the demonstration projects will allow the Director of CalOHII to issue specific and standardized requirements to participants in approved demonstration projects. This authority will ensure a uniform application of the laws, thus providing health care entities that participate in the approved demonstrations guidance to minimize the risk of practices that may be inconsistent with state medical privacy law. Additionally, this authority will help CalOHII harmonize state and federal law wherever possible to support the demonstration. The author believes that these demonstration projects will supply the state with the tools to identify successful and problematic rules, gaps in state law, and inform state policymakers of potential viable solutions to enabling safe and secure exchange of personal health information. According to the author, the future policy recommendations informed by these demonstration projects will be critical to the successful implementation of HIE in California. Health information exchange Realizing the benefits of HIT requires a pervasive underlying infrastructure that supports the use of patient-focused electronic health information. This requires wide-scale systemic, state and nationwide infrastructure that incorporates protections for patient privacy and confidentiality. The building blocks for this infrastructure include electronic medical records (EMRs) used by providers to manage patient information, personal health records (PHRs) for individual access of their own records, and health information exchange (HIE) to facilitate the electronic exchange of EMRs and PHRs. STAFF ANALYSIS OF ASSEMBLY BILL 278 (Monning) Page 7 HIE is the capability to electronically move health information among disparate health care information systems while maintaining the meaning of the information being exchanged. In many instances, HIE is used to describe both the process of exchanging health information electronically, and the entity overseeing and governing the exchange. The goal of HIE is to facilitate access to, and retrieval of, clinical data to provide safer, more timely, efficient, effective, equitable, patient-centered care. HIE Readiness and Extent of HIE Adoption in California According to Agency's HIE strategic plan, health care services are delivered to Californians through 400 hospitals, over 60,000 active physicians, 100 federally qualified health centers and 263 rural health clinics. Nationally, it is estimated that only 7.6 percent of non-federal hospitals and 13 percent of ambulatory providers have implemented "basic" EMRs that include certain clinical documentation, but not clinical decision support. California providers rank above the national estimate with 20 percent of medical groups and 13 percent of physician groups estimated to be using EMRs. Similarly, among individual physicians, California physicians reported greater use of EMRs than the national average, with 37 percent of physicians reporting EMR use in comparison to 28 percent nationally. This uptake may, in part, be explained by the presence of large medical practices (10 or more physicians) in California, as 57 percent of physicians in large practices report using EMRs, compared to 25 percent of physicians in small/medium practices and 13 percent of solo practitioners. However, two-thirds of physicians work in small and solo practices. Virtually all Kaiser Permanente physicians now use EMRs. California's health care safety-net facilities and providers in underserved communities generally face significant fiscal and resource challenges, and these challenges impact their ability to implement EMRs. While less than a third of community clinics report they are actively pursuing EMRs, the majority of community clinics have some form of health IT in place, most commonly in the form of diabetes and immunization registries. California's current HIE efforts fall broadly into two categories: 1) large health systems, affiliated providers STAFF ANALYSIS OF ASSEMBLY BILL 278 (Monning) Page 8 and ancillary services implementing integrated EMRs, and, 2) community-driven efforts that aim to ensure ubiquitous availability of data within a region or across the state. Community HIE Efforts California's HIE activity is characterized by a wide range of local initiatives that have remained largely independent. There are over 20 self-characterized HIEs throughout the state with informal jurisdictions largely based on a regional or geographic boundary. The efforts are predominantly overseen by Boards of Directors comprised of local stakeholders, health care leaders, and representatives of organizations who are, or plan to be, participating in the HIE. Community HIE efforts have historically been driven and motivated by the perceived health care needs of their local communities. These efforts are often closely linked with the predominant provider organizations in the community who pay special attention to the community's unique health needs (e.g. diabetes, behavioral health, etc.). While community HIE efforts often share a common mission to improve health care in their communities through HIE and health IT, the efforts do not all share a common technical approach and are in various stages of technical development. Efforts in integrated health systems and in organized provider groups Several of California's integrated health systems currently exchange data between and among their affiliated physicians and hospitals. Many of these systems have multiple locations and facilities spread across Northern and Southern California, with some systems extending into neighboring states. While many of these systems offer a suite of HIT applications and modalities to their hospital-based clinicians, health systems vary in their provision of HIT outside of the hospital walls. Over the past decade, these health systems have made significant investments in their HIT infrastructure and staff. While technical approaches and vendors vary among health systems, all of the health systems follow national standards and many participate in technical workgroups at the state and national levels. Today health systems vary in their interactions with and participation in community HIE efforts, ranging from no involvement to participation in collaborative activities. Health systems largely operate STAFF ANALYSIS OF ASSEMBLY BILL 278 (Monning) Page 9 as closed networks and their information will largely remain proprietary and locked within those networks unless addressed through statewide collaboration. Of California's approximately 400 IPAs and medical groups, as many as 70 have begun to implement an EMR infrastructure and adoption program. With few exceptions, EMR adoption has been incremental with only a portion of an IPA or medical group's affiliated physicians fully operational on a system. The Health Information Technology for Economic and Clinical Health Act On February 17, 2009, President Barack Obama signed the federal economic stimulus bill, ARRA, which includes more than $36 billion for HIT and HIE over the next several years. The majority of these funds ($34 billion) are incentive payments that will go to Medicaid and Medicare providers who are able to demonstrate "meaningful use" of HIT. California is expected to receive more than $3 billion in provider incentive payments. In addition, ARRA provides $2 billion in discretionary funding for HIT promotion, including $564 million in planning and implementation grants of which California was awarded, beginning in fiscal year 2009-2010, to establish statewide HIE. Under this grant, the state is required to coordinate, plan and implement an HIT and HIE program that enables health care providers to be able to share electronic health records, when appropriate, in order to improve treatment and health care outcomes. In addition to this grant funding, the federal government expects to make incentive payments to health care providers who convert to electronic records and demonstrate they can use the electronic record in a meaningful manner. California expects to begin capturing between $2 and $3 billion dollars in provider incentive funds beginning in 2011. This infrastructure is a critical piece necessary for California's health care providers to be able to capture the full amount of incentive payments over the next four years. In addition to the State HIE Cooperative Grants, HITECH also provides for the following grants: STAFF ANALYSIS OF ASSEMBLY BILL 278 (Monning) Page 10 Beacon Community Cooperative Grants to local communities to build and strengthen their HIT infrastructure and exchange capabilities, including strong privacy and security measures for data exchange, so they can demonstrate the vision of the future where hospitals, clinicians and patients are meaningful users of health IT. The goal of these grants is to develop models for communities to achieve measurable improvements in health care quality, safety, efficiency, and population health. A total of $220 million in federal funding is available, with each community chosen expected to receive $10-20 million. HIT Technology and Infrastructure Research Grants to researchers focused on solving current and expected future challenges that represent barriers to adoption and meaningful use of HIT, through the proliferation of new methods and advanced technologies. These projects focus on areas where "breakthrough" advances are needed. A total of $60 million is available. Privacy and security in the context of HIE Both federal and state law currently regulates medical and health privacy and security. The electronic health information capabilities raise new consumer privacy and provider liability concerns that existing laws were never originally created to address. Failure to effectively address these critical concerns could lead to poor consumer and vendor participation into newly created systems, costly legal conflicts, and a regression back to inefficient and costly paper based information systems. In order for the state to develop a privacy and security framework that can effectively support the transition to electronic health information exchange the state must identify and address necessary changes in state privacy and security laws. The California Office of Health Information Integrity CalOHII, also known as the California Office of HIPAA Implementation (CalOHI), oversees a number of vital state functions related to medical information privacy. Among its duties, CalOHI is responsible for overseeing the federal HIT infrastructure grants, including the federal HIE grant, and serves as the primary resource for state entities on health information privacy and the STAFF ANALYSIS OF ASSEMBLY BILL 278 (Monning) Page 11 implementation of federal HIPAA regulations. CalOHII is also responsible for working with a wide spectrum of health care stakeholders including representatives from the health care industry, consumers, and privacy and security advocates to develop new privacy and security standards to enable the adoption and application of health information exchange in California. In addition, CalOHII is working on a number of HIT issues on behalf of the state, including the expansion of broadband throughout California, the implementation of telehealth, and support to the Health Information Technology Financing study. Arguments in support The California Office of Health Information Integrity writes in support, stating that AB 278 would test policies and rules, and better inform the state and health care stakeholders while they attempt to define HIE infrastructure over the next several years. By allowing for various HIE demonstration projects, it would be possible to determine how best to protect privacy in accordance with state and federal laws, while enabling electronic health information exchange. Related bills SB 337 (Alquist), Chapter 180, Statutes of 2009, among other things, authorizes the Agency to apply for federal health information technology and health information exchange grants. Prior legislation AB 211 (Jones) Chapter 602, Statutes of 2008, establishes OHII to ensure the enforcement of state confidentiality of medical information, to impose administrative fines for the unauthorized use of medical information upon referral from DPH, and require providers of health care to establish and implement appropriate administrative, technical, and physical safeguards to protect the privacy of patient's medical information. SB 320 (Alquist) of 2007 would have required the California Office of HIPAA Implementation, in consultation with the others, to develop a plan for implementation of the California Health Care Information Infrastructure Program STAFF ANALYSIS OF ASSEMBLY BILL 278 (Monning) Page 12 no later than March 1, 2009, that would seek to provide the opportunity for every resident of the state to have an electronic health record. Vetoed by the Governor. SB 1338 (Alquist) of 2006 would have required the Agency, in conjunction with certain other state departments, to develop a strategic plan to foster the adoption of HIT. This plan would have included, among other provisions, HIT standards and identified incentives to promote the use of electronic health records (EMRs) and personal health records. Held in the Assembly Appropriations Committee. SB 1672 (Maldonado) of 2006 would have required the California Health Facilities Financing Authority to establish a low-interest loan program to provide financing for the purchase of health care information technology systems to participating health care institutions, providers, and provider organizations, as specified. Held in the Senate Appropriations Committee. AB 1672 (Nation, Richman) of 2005, in an early version, would have established deadlines for various health care entities to adopt EMRs, provided enhanced Medi-Cal reimbursement for EMR adoption, and provided state funding to promote HIT development. These provisions were amended out of the bill. PRIOR ACTIONS No longer applicable. COMMENTS 1. Health information exchange is a new, complex, and rapidly evolving area. The use of electronic systems to manage and share health information is a new phenomenon in the health care industry, even though the technology itself is not new. Due to the sensitive nature of personal health information and the portable nature of electronic records, new concerns regarding privacy and security have emerged that were not applicable with paper records. The ability to test new models and technologies may provide state policymakers the necessary information to make informed choices regarding the necessary changes to current state laws related to medical privacy. STAFF ANALYSIS OF ASSEMBLY BILL 278 (Monning) Page 13 2. Suggested technical amendments: (a) On page 3, line 33, before the period, insert: , including issues related to access to, and storage of, individual health information. (b) On page 4 , after "parameters" and before the comma, insert : as defined by the office (c) On page 5, delete line 32 and replace with: (1) Policies and practices related to patient consent, informing, and notification. (d) On page 5, line 38, after "Implementation issues" insert: , if any, POSITIONS Support: California Office of Health Information Integrity (CalOHII) Oppose: None received -- END --