BILL ANALYSIS                                                                                                                                                                                                    

                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair

                                           278 (Monning)
          Hearing Date:  8/12/2010        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  
          (federal HITECH funds)

          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 

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          AB 278 (Monning)

          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 
          the bill be amended to specify that CalOHII would report those  
          results to the relevant fiscal and policy committees of the  

          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  

          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.

          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 

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          AB 278 (Monning)

          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.

          The proposed author's amendments would make minor semantic  


          changes and specify that the reports to the Legislature would be  
          made to the relevant policy and fiscal committees and the Joint  
          Legislative Budget Committee. They would have no fiscal effect  
          on the bill.