BILL ANALYSIS Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair 278 (Monning) Hearing Date: 8/2/2010 Amended: 7/15/2010 Consultant: Katie Johnson Policy Vote: Health 6-2 _________________________________________________________________ ____ BILL SUMMARY: AB 278 would permit the California Office of Health Information Integrity to establish and administer up to four demonstration projects annually to evaluate potential solutions to facilitate health information exchange that promote quality of care, respect the privacy of personal health information, and enhance the trust of stakeholders. _________________________________________________________________ ____ Fiscal Impact (in thousands) Major Provisions 2010-11 2011-12 2012-13 Fund Demonstration project $360 $360 $360 Special* procurement, administration, and oversight * California Health Information Technology and Exchange Fund _________________________________________________________________ ____ STAFF COMMENTS: This bill meets the criteria for referral to the Suspense File. This bill would permit the California Office of Health Information Integrity (CalOHII) to establish up to four demonstration projects annually to identify barriers to implementing health information exchanges in California, test potential security and privacy policies for the secure exchange of health information, and to identify and address differences in state and federal laws regarding privacy of health information. California-based health care entities would be permitted to submit applications to CalOHII to be approved as demonstration project participants. CalOHII is not expected to directly fund the projects. Instead, this bill would require CalOHII to assist applicants in soliciting federal funds for the demonstration projects and to work with the applicants to define the scope of the projects, which could include exploring policies and practices related to patient consent, new technologies and applications, and implementation issues that could be encountered by small solo health care providers. This bill would permit CalOHII to adopt regulations through a public, modified rulemaking process and would specify that the regulations would expire on the date the Director of CalOHII executes a declaration that would state that the grant period for the State Cooperative Grant Agreement for health information exchange has ended. Any costs associated with the support, assistance, and evaluation of approved demonstration projects would be required to be funded exclusively by federal funds or other non-General Fund sources. CalOHII would be required to review the results of a demonstration project, the timelines of which are estimated to be between 6 months and 2 years depending on the terms of the project, and to report the results to the Legislature no later than six months after the end of a project. Staff recommends that Page 2 AB 278 (Monning) the bill be amended to specify that CalOHII would report those results to the relevant fiscal and policy committees of the Legislature. Background As part of the American Recovery and Reinvestment Act (ARRA), Congress enacted the Health Information Technology for Economic and Clinical Health Act (HITECH Act). This new Act authorizes the federal Health and Human Services Department (HHS) to enter into cooperative agreements with states in order to fund efforts to achieve widespread HIE. It includes direct subsidies to Medicare and Medicaid physicians who demonstrate meaningful use of HIE and grants to states. The Department of Health Care Services (DHCS) is currently in the process of drafting a "Planning-Advance Planning Document" to guide its implementation of "meaningful use" and incentive payments to Medi-Cal providers through the DHCS Medi-Cal Electronic Health Records Incentive Program. SB 337 (Alquist), Statutes of 2009, requires CHHS to develop a plan to ensure that HIT technologies are available and utilized statewide and establishes the California Health Information Technology and Exchange Fund into which federal grant funds are deposited. CHHS is tasked with identifying future funding, independent of the General Fund and in addition to federal funds. Since the California Health and Human Services Agency (CHHS) established it in October 2007, the California Privacy and Security Advisory Board (CalPSAB), a group comprised of health care providers, insurers, research institutions, and consumer advocates, has advised CHHS on the implementation of health information technology (HIT) and health information exchange (HIE). This bill would grant CalOHII authority to partner with interested parties to pilot some of CalPSAB's policy recommendations. Funding In February 2010, California was awarded $38.7 million to be used over four years to support the establishment of HIE capacity throughout the state's health care system through a State Cooperative Grant Agreement. In FY 2009-10, CalOHII was allocated $2.2 million of grant funds through an April 2010 Section 28 letter and the office has requested, and been approved for, the use of $17.2 million of these federal funds in FY 2010-2011 through the budget subcommittee process, although the Governor has yet to sign a final budget. $16.5 million of the $17.2 million would be used to contract with Cal eConnect (CeC), California's non-profit "governance entity" selected through a Request for Information process, to meet the requirements of the grant. CeC is generally responsible for establishing rules by which health information would be exchanged throughout California. This bill would serve as a testing ground for the policies to be implemented. Depending on the results of the pilots, there could be future cost pressure on various funds for California to adopt certain policies to effectively implement HIE. $724,000 would be used for 6 positions to support grant and other administrative activities over the life of the grant and would need to be allocated in each subsequent budget. These staff would also work in varying degrees on the demonstration projects. Thus, about 50 percent of the personnel costs could be associated with this bill.