BILL ANALYSIS                                                                                                                                                                                                    






                                 SENATE HEALTH
                               COMMITTEE ANALYSIS
                        Senator Elaine K. Alquist, Chair


          BILL NO:       SB 270                                       
          S
          AUTHOR:        Alquist                                      
          B
          AMENDED:       April 23, 2009                              
          HEARING DATE:  April 29, 2009                               
          2
          CONSULTANT:                                                 
          7
          Park/sh                                                     
          0
                                        
                                         
                                    SUBJECT
                                         
                         Health information technology 

                                     SUMMARY  

          Establishes the Health Information Technology Advisory  
          panel to advise the Governor and Legislature on health  
          information technology implementation, and provides for the  
          appointment and duties of the panel, as specified.

                             CHANGES TO EXISTING LAW  

          Existing federal law:
          Existing law, under the federal American Recovery and  
          Reinvestment Act of 2009, allows certain medical providers  
          to receive payments for meaningful use of health  
          information technology, as specified, and provides other  
          funding related to health information technology.

          This bill:

          This bill would create a health information technology  
          advisory panel to advise the Governor and the Legislature  
          on health information technology implementation in  
          California. The bill would require the panel to be composed  
          of the following voting members:

                                                         Continued---



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                 Two representatives of consumers, one of whom shall  
               have expertise in privacy and security of health  
               information.

                 One representative from a hospital.

                 One representative from a primary care clinic.

                 One representative from a health plan or health  
               insurer.

                 Two representatives from a medical group, one of  
               whom shall represent a group of specialists.

                 Two representatives from health care professions  
               who are not physicians.

                 One representative who is a solo or small group  
               physician.

                 One representative who is a physician who is part  
               of an independent physician association.

                 One representative who has expertise in  
               telemedicine or telehealth.

                 Two representatives from institutions of higher  
               education that offer medical or clinical education or  
               health informatics, one of whom represents a public  
               institution.

                 One representative from the California Council on  
               Science and Technology.

                 One representative from a nonprofit entity who has  
               demonstrated expertise in health information  
               technology.

                 One representative with expertise in the use of  
               health information technology to manage chronic  
               disease.







          STAFF ANALYSIS OF SENATE BILL  SB 270 (Alquist)Page 3


          

          The bill would require voting members to have demonstrated  
          expertise in the provision, use, or deployment of health  
          information technologies to providers, provider groups,  
          provider facilities, consumers, patients, or communities.  
          The bill would require panel members to be appointed by the  
          Governor, the Senate Committee on Rules, and the Speaker of  
          the Assembly, but does not yet specify the number or type  
          of appointments to be made by each of the three appointing  
          entities. The bill would require initial terms of voting  
          members to be staggered, with eight members being appointed  
          for a two-year term and nine members being appointed for a  
          four-year term, and provide that, upon the expiration of  
          the initial term, all voting members shall be appointed for  
          a four-year term. 



          The bill would require participation from the following as  
          ex officio, nonvoting members:



                 The Secretary of Business, Transportation and  
               Housing, or his or her designee.

                 The Secretary of Health and Human Services, or his  
               or her designee.

                 The Chair of the Senate Committee on Health, or his  
               or her designee.

                 The Chair of the Assembly Committee on Health, or  
               his or her designee.



          The bill would require the panel to do all of the  
          following:



                 Make recommendations to maximize the state's  
               eligibility and award of federal stimulus funds,  
               authorized by the American Recovery and Reinvestment  
               Act of 2009 (ARRA) (Public Law 111-5), related to the  
               use of health information technology.




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                 Advise the Governor and the Legislature on a  
               mechanism for designating a nonstate entity, and  
               whether such a nonstate entity is desirable, for  
               executing tasks related to accessing federal stimulus  
               funds made available through ARRA.

                 Make recommendations to ensure that safety net  
               providers have access to federal stimulus funds for  
               which they are eligible.

                 Make recommendations for sources necessary to match  
               federal dollars in the award of funds made available  
               through ARRA.

                 Make recommendations for working with higher  
               education entities to incorporate medical informatics  
               and health care information enterprise integration  
               into the higher education curriculum, and information  
               technology into clinical education.

                 Make recommendations for standards and  
               certification to federal policy makers and the Office  
               of the National Coordinator for Health Information  
               Technology in the federal Department of Health and  
               Human Services.

                 Make recommendations on qualifications for centers  
               in the state that may provide technical assistance and  
               best practices related to health information  
               technology.

                 Make recommendations to ensure that providers have  
               access to information on federal incentive payments  
               available under ARRA, including understanding of  
               "meaningful use" as defined in federal law.

                 Meet at least monthly in the first year, and,  
               thereafter, as deemed necessary by the chair.



          The bill would require the panel to elect, from among its  
          members, a chair who shall regularly report to the Governor  
          and the Legislature on behalf of the panel, and would  
          require the panel to make a recommendation in 2014 whether  




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          continued need for the advisory panel exists beyond 2016.



          The bill would provide that all members of the advisory  
          panel shall serve without compensation, but would provide  
          for reimbursement to members all necessary travel expenses  
          associated with the activities of the panel. The bill would  
          provide that consumer representatives on the panel may  
          receive per diem compensation if they are otherwise  
          economically unable to attend and participate in panel  
          activities.



                                  FISCAL IMPACT  

          Unknown.

                            BACKGROUND AND DISCUSSION  

          Author's statement
          The author states that the American Recovery and  
          Reinvestment Act of 2009, signed on February 17, created  
          the opportunity for California to receive billions of  
          dollars in funding for health information technology, with  
          some estimates ranging between $3 and $4 billion for  
          California. The author states that while much of this  
          funding, in the form of incentive payments to physicians  
          for "meaningful use" of health information technology,  
          won't be available for at least another year, some funding  
          will be available in the form of grants and other start-up  
          costs related to planning, implementation, and the  
          development of health information exchanges (HIE) and  
          regional extension centers that provide technical  
          assistance. 

          The author believes that the state needs to think  
          strategically about how to maximize federal funds and put  
          that funding to the best use possible.  The author notes  
          that the Administration recently announced the creation of  
          an Advisory Board to look into these issues of stimulus  
          implementation, including health information exchange, and  
          how that is to be executed, and how the state should go  
          about undertaking such efforts or designating a nonprofit  
          entity to undertake these efforts.  




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          The author states that this measure reflects the  
          Administration's effort to look into issues of stimulus  
          implementation that need to be undertaken, but also  
          anticipates an ongoing need for an advisory board, as  
          stimulus funding will be available for five years,  
          definitions of meaningful use may change, and funding of  
          health information technology may have other ramifications  
          in the delivery of health care. 

          The author also notes that, given the timing of additional  
          federal guidance in relation to when funds may become  
          available, the language of SB 270 may contain other needed  
          implementation language to maximize California's  
          competitiveness for grants related to planning,  
          implementation, development of health information exchanges  
          and regional extension centers, as well as to authorize the  
          state to provide incentive payments through Medi-Cal as  
          soon as they are available.

          American Recovery and Reinvestment Act of 2009
          On February 17, 2009, President Barack Obama signed the  
          American Recovery and Reinvestment Act of 2009 (ARRA),  
          which invests more than $787 billion in an economic  
          recovery package that includes more than $36 billion for  
          health information technology over the next several years.  
          The majority of these funds are incentive payments that  
          will go to Medicaid and Medicare providers who are able to  
          demonstrate "meaningful use" of health information  
          technology.  

          Medicaid providers are eligible for incentive payments of  
          approximately $64,000 over a 5 to 6 year period, while  
          Medicare providers are eligible for up to $44,000 in  
          incentive payments. Providers who serve both Medicare and  
          Medicaid must choose one source of reimbursement only.  
          Hospitals are eligible to receive a base funding of $2  
          million, with additional funds provided according to a  
          statutorily prescribed formula related to discharge data.  
          ARRA also creates a penalty system under Medicare, which  
          begins in 2015.

          In addition to incentive payments that flow through these  
          programs, ARRA provides for $2 billion in discretionary  
          funding for the newly codified Office of the National  
          Coordinator for Health Information Technology (ONCHIT) to  




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          carry out provisions of the bill related to HIT promotion,  
          such as planning and implementation grants, workforce  
          training grants, grants for the creation of regional  
          extension centers, and grants to create state loan programs  
          for EHR. The National Coordinator will award, on a  
          competitive basis, grants to states or tribal entities for  
          creating loan programs for "health care providers" (as  
          defined below). Most, if not all, of these grants require  
          in-kind matches to draw down federal dollars.

          Apart from these funding sources, ARRA also provides  
          roughly $1.5 billion through the Health Resources and  
          Services Administration to community health centers to be  
          used solely for construction, renovation, and equipment,  
          part of which may be used to acquire HIT systems; and $400  
          million through the Health and Human Services Agency (HHS)   
          to accelerate the development and dissemination of research  
          assessing the comparative effectiveness of health care  
          treatments and strategies, which may involve clinical  
          registries, clinical data networks, and other forms of  
          electronic health data that can be used to generate or  
          obtain outcomes data. Finally, ARRA provides for new  
          technology research and development grants and broadband  
          opportunity grants, which may create further opportunities  
          to expand the use of health information technologies.

          In addition to financial support and incentives related to  
          HIT, the Act also institutes several changes in the role of  
          the federal government, including the codification of  
          ONCHIT within HHS, which will review and endorse HIT  
          standards and coordinate the HIT policy and programs of HHS  
          and other relevant agencies. ARRA requires ONCHIT to adopt  
          initial standards by December 31, 2009, (through the  
          rulemaking process) and the National Coordinator is also  
          charged with developing health record technology, unless it  
          is determined that the marketplace is substantially and  
          adequately meeting the needs of providers. 

          ARRA calls for a HIT Policy Committee to make  
          recommendations to the National Coordinator regarding the  
          implementation of a nationwide HIT infrastructure, and a  
          HIT Standards Committee to make recommendations on  
          standards, implementation specifications, and certification  
          criteria for the electronic exchange and use of health  
          information.





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          Finally, ARRA expands federal patient privacy and  
          information security requirements beyond the current  
          requirements of the Health Insurance Portability and  
          Accountability Act (HIPAA). Expansions include applying  
          HIPAA security provisions and penalties directly to the  
          business associates of covered entities; requiring  
          notification of patients if the security of their personal  
          health information has been breached; requiring an  
          accounting of disclosures of personal health information  
          made through HIT systems; prohibiting the sale of a  
          patient's personal health information without the patient's  
          permission and prohibiting covered entities from being paid  
          to use patients' medical information for marketing  
          purposes; and providing for enforcement by State Attorneys  
          General. 

          Recent actions in response to ARRA
          On April 20, 2009, the Health and Human Services Agency, in  
          partnership with the State Chief Information Officer, and  
          the Business Transportation and Housing Agency, announced  
          it would initiate a collaborative, time-limited effort to  
          strengthen California's ability to maximize federal  
          stimulus funding for health information exchange and health  
          information technology. The product of the collaborative  
          effort will be a final project report that will help  
          determine whether, for the purposes of ARRA, it is  
          appropriate for the state to play the lead role in  
          providing technical services related to HIE or whether this  
          role is best suited to a state designated entity (SDE),  
          and, if necessary develop procurement documents/processes  
          to select a state designated entity. In addition to the  
          proposed governance structure of a state or SDE supported  
          HIE, the final report will address the current landscape,  
          summary of known federal requirements, EHR advancement  
          principles, architectural principles, data exchange  
          requirements, clinical requirements, and a high level  
          implementation plan, and will include recommendations to  
          the state regarding the use of EHRs and HIE by state  
          institutions, including state Mental Hospitals, Veterans  
          Homes, and Developmental Centers. The final report will be  
          submitted to the Advisory Board, which will hold a public  
          meeting to discuss the final report. Initial anticipation  
          for project completion is four months. 

          Additionally, the Governor appointed a deputy secretary of  
          HIT in April 2009, a position that had been established in  




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          January 2007, but had remained unfilled.

          In February 2009, the California HealthCare Foundation, a  
          nonprofit foundation, published a document with the support  
          of Manatt Health Solutions and Robert Mittman, entitled "An  
          Unprecedented Opportunity: Using Federal Stimulus Funds to  
          Advance Health IT in California," which contained 24  
          recommendations on what California should do to benefit  
          from the federal stimulus, including facilitating incentive  
          payments to Medi-Cal providers, finding matching funds to  
          draw down federal dollars, getting a seat at the federal  
          table for important policy decisions on things like  
          standards and meaningful use, and providing technical  
          guidance and direction to interested parties across the  
          state. 
          
          The California HIT landscape
          In the adoption of health IT, California leads the national  
          average, but use is segmented largely according to provider  
          type.  According to the California Association of Physician  
          Groups, approximately 11.1 million patients are under the  
          care of large medical groups with EMRs, primarily under the  
          HMO model.  Competition and quality have been important  
          drivers of EMR/EHR adoption by larger groups and systems. 

          According to a May 2008 California HealthCare Foundation  
          (CHCF) report, 79 percent of Kaiser physicians and 57  
          percent of large group practices (defined as having at  
          least 10 physicians in the group) used EHRs in 2007. In  
          comparison, only 2 percent of independent practice  
          associations and 3 percent of community clinics have fully  
          installed EHRs. The CHCF report highlighted that, "nearly  
          all physicians who use EHRs said such use helps their  
          practice provide better care."

          Payers in California have participated in the funding of  
          HIT through the Integrated Healthcare Association's  
          pay-for-performance initiative, which last year included an  
          incentive for purchasing HIT, and this year will include an  
          incentive for using HIT. Additionally, hospitals and  
          independent physician associations (IPAs) have supported  
          HIT use among their providers.  
           
          In addition to private efforts, several non-profit grants  
          have funded HIT in the clinic setting. Between 1999 and  
          2006, the Community Clinics Initiative provided $41 million  




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          in grants to 82 percent of clinics in California to improve  
          the information technology capacity of community health  
          centers. According to a report published by the California  
          Endowment and Tides, most clinics have built a solid  
          technology infrastructure and automated core business  
          functions as a result of the funding.  
           
           Additionally, California has several regional health  
          information organizations (RHIOs) or health information  
          exchanges (HIEs) involved in supporting the development of  
          secure methods of health information exchange within a  
          particular geographic area among various health care  
          providers. 

          While not a conventional RHIO or HIE, Joint Venture Silicon  
          Valley Network, a 15-year-old public benefit corporation,  
          undertook an effort to overcome barriers in applying  
          information technology to health care by convening health  
          care providers, employers, and insurers on specified  
          projects, such as establishing a claims transmission  
          network, and developing a health data warehouse and  
          exchange. Joint Venture ceased its "Smart Health" project  
          after more than two years, concluding that, "while  
          individual stakeholders are making significant internal  
          progress toward this goal, Valley-wide solutions cannot  
          move forward within the current environment."
          
          State government efforts 
          In July 2005, Governor Schwarzenegger issued the first of  
          two Executive Orders directing his administration to  
          establish an "eHealth Action Forum" to develop a state  
          policy agenda for implementation of a comprehensive HIT  
          program by July 2007. The order also directed  
          administration officials to devise financing strategies to  
          allocate at least $200 million in investment funds and $40  
          million in grant monies, both derived from California  
          health plan mergers to benefit the diverse needs of rural  
          communities, medical groups, and safety net providers. The  
          order also directed state agencies to oversee  
          public/private financing alternatives to facilitate rapid  
          adoption and sustainability of health information  
          technology for hospitals, physician groups, physicians, and  
          other health care providers, and to develop a model for  
          connecting rural health clinics to medical centers using  
          telemedicine and other technology.





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          In January 2007, the Governor announced, as part of his  
          health insurance reform proposal, a number of initiatives  
          related to HIT, such as establishing a Deputy Secretary of  
          HIT, and a state HIT Financing Advisory Committee to  
          coordinate the state's HIT efforts and develop financing  
          mechanisms; implementing universal e-prescribing by 2010;  
          developing standardized personal health records (PHR)  
          within the public and private sectors; and implementing a  
          county-level pilot electronic medical record system for  
          mental health patients within the requirements of  
          Proposition 63, the Mental Health Services Act.

          In January 2007, following the eHealth Action Forum, the  
          consulting firm Accenture released a report containing  
          findings and recommendations regarding HIT expansion in  
          California and a roadmap to achieving the goals outlined in  
          the Executive Order. Accenture sought information from  
          state agencies and the state chief information officer, and  
          more than 130 public and private health leaders, including  
          some from other states and the federal government in  
          preparing its California Health Information Technology  
          Study. 

          The study highlighted five key action areas for the state,  
          including: 

                 Establishing of statewide HIT leadership,  
               consisting of a designated leader and a strong  
               advisory group to provide public-private collaboration  
               on HIT issues.

                 Structuring incentives and identifying financing  
               methods, especially for clinical systems for poorly  
               automated care delivery in sites with low access to  
               capital, and the "last mile" of broadband  
               establishment. Primary investment structures discussed  
               in the HIT roadmap include grants and loans; contracts  
               and purchases; and financial incentives built into  
               ongoing fee schedules.

                 Investing in HIT that would allow providers and  
               entities of all types to link to a secure, "operating  
                                    core connecting infrastructure" (technology and  
               communications) to achieve 100 percent health data  
               exchange (HDE) in ten years, including efforts to  
               enable digitized data at the point of care and  




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               connection to the core infrastructure. 

                 Augmenting privacy and security protection.

                 Engaging consumers in these changes. 

          Accenture also recommended near-term steps including  
          appointment of a state HIT czar and an advisory board,  
          establishing a foundation for financing, especially  
          involving the grants and loans efforts; drafting a health  
          data exchange blueprint; appointing a patient panel;  
          organizing current privacy and security efforts, and laws  
          and regulations; and developing pilot efforts based on  
          priority patient populations.

          In March 2007, the Governor issued a second Executive Order  
          directing his administration to convene a workgroup to  
          solicit input and participation in the development of a  
          comprehensive strategy to increase quality, strengthen  
          health care transparency and increase accountability in  
          public and private health care delivery systems. The order  
          identified key actions for the state to pursue, including  
          providing state leadership to accomplish 100 percent  
          electronic health data exchange, leveraging state  
          purchasing power, developing a quality reporting mechanism  
          through the Office of the Patient Advocate, and  
          strengthening the ability of the Office of Statewide Health  
          Planning and Development to collect, integrate and  
          distribute data on health outcomes, costs, utilization and  
          pricing for use by purchasers, health plans, providers and  
          consumers.

          In December 2008, the state HIT Financing Advisory  
          Committee submitted a report, which was made publicly  
          available in early February 2009, containing five near-term  
          and long-term priority recommendations, among others. The  
          recommendations were to:

           Create a Public-Private Partnership to consolidate future  
            public and private health IT resources (dollars and  
            expertise) and coordinate grants and loans. (Near-Term)

           Finance EHRs through medium-term financing, rather than  
            the more typical short-term clinical information systems  
            loan, and determine ways to finance "operating" losses  
            that are a continuation of the original EHR investment  




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            and investigate ways to reduce transaction costs;  
            determine the feasibility of using the California Health  
            Facilities Financing Authority to issue bonds for this  
            financing. (Near-Term)

           Evaluate the feasibility of new organizations for  
            implementing and providing EHR services. Investigate the  
            possibility of creating support service organizations  
            that either act as application service providers and/or  
            provide support for EHR implementation and development of  
            templates. (Mid-Term)

           Determine the feasibility of establishing a state grant  
            program. (Long-Term)

           Encourage Medi-Cal to consider demonstration projects  
            that incorporate new reimbursement models that require  
            health IT (e.g., investigate Medi-Cal pay-for-performance  
            fee-for-service incentives for medical homes services).  
            (Long-Term)

          Prior legislation
          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  
          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  
          California Health and Human Services 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 EHRs and PHRs. 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  




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          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 EHRs, provided enhanced Medi-Cal  
          reimbursement for EHR adoption, and provided state funding  
          to promote
          HIT development. These provisions were amended out of the  
          bill. 

                                     COMMENTS
           
        1.Recent amendments. The bill was amended on April 23, 2009.  
          These amendments struck all of the bill's prior provisions  
          related to health information technology, and replaced  
          these provisions with the establishment of the advisory  
          panel, its composition, and its duties. Given the bill's  
          recent amendment date, stakeholders may not have had an  
          adequate opportunity to review the bill's new provisions.

        2.Author's amendments. The author would like to provide a few  
          clarifying amendments, and one addition to the panel's  
          nonvoting members.
          
            130250. (a) There is hereby created a health information  
            technology advisory panel to advise the Governor and the  
            Legislature on health information technology  
            implementation in California. The panel shall be composed  
            of the following voting members:
               (1) Two representatives of consumers, one of whom  
               shall have expertise in privacy and security of health  
               information.
               (2) One representative from a hospital.
               (3) One representative from a primary care clinic.
               (4) One representative from a health plan or health  
               insurer.
               (5) Two representatives from a medical group, one of  
               whom shall represent a group of specialists.
               (6) Two representatives from health care professions  
               who are not physicians.
               (7) One representative who is a solo or small group  
               physician (defined as a group of five physicians or  
               fewer), representing primary care.
               (8) One representative who is a solo or small group  
               physician (defined as a group of five physicians or  
               fewer) representing specialty care.  physician who is  




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               part of an independent physician association  .
               (9) One representative who has expertise in  
               telemedicine or telehealth.
               (10) Two representatives from institutions of higher  
               education that offer medical or clinical education or  
               health informatics, one of whom represents a public  
               institution.
               (11) One representative from the California Council on  
               Science and Technology.
               (12) One representative from a nonprofit entity who  
               has demonstrated expertise in health information  
               technology.
               (13) One representative with expertise in the use of  
               health information technology to manage chronic  
               disease.

             (b) Of the panel members as provided for in subdivision  
             (a) the Governor shall appoint __ members, the Senate  
             Committee on Rules shall appoint __ members, and the  
             Speaker of the Assembly shall appoint __ members.
             (c) The following shall also participate in the panel as  
             ex officio, nonvoting members:
               (1) The Secretary of Business, Transportation and  
               Housing, or his or her designee.
               (2) The Secretary of Health and Human Services, or his  
               or her designee.
               (3) The chair of the Senate Committee on Health, or  
               his or her designee.
               (4) The chair of the Assembly Committee on Health, or  
               his or her designee.
               (5) The State Chief Information Office, or his or her  
               designee.


             130252. (a) The panel shall do all of the following:

               (1) Make recommendations to maximize the state's  
               eligibility and award of federal stimulus funds,  
               authorized by the American Recovery and Reinvestment  
               Act of 2009 (ARRA) (Public Law 111-5), related to the  
               use of health information technology.

               (2) Advise the Governor and the Legislature on a  
               mechanism for designating a nonstate entity, and  
               whether such a nonstate entity is desirable, for  
               executing tasks related to accessing federal stimulus  




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               funds made available through ARRA.

               (3) Make recommendations to ensure that safety net  
               providers have access to federal stimulus funds for  
               which they are eligible.

               (4) Make recommendations for sources necessary to  
               match federal dollars in the award of funds made  
               available through ARRA.

               (5) Make recommendations for working with higher  
               education entities to incorporate medical informatics  
               and health care information enterprise integration  
               into the higher education curriculum, and information  
               technology into clinical education.

               (6) Make recommendations for standards and  
               certification to federal policy makers and the Office  
               of the National Coordinator for Health Information  
               Technology in the federal Department of Health and  
               Human Services.

               (7) Make recommendations on qualifications for centers  
               in the state that may provide technical assistance and  
               best practices related to health information  
               technology, and meaningful assistance on its  
               implementation.

               (8) Make recommendations to ensure that providers have  
               access to information on federal incentive payments  
               available under ARRA that will help them maximize  
               their eligibility under ARRA, including understanding  
               of "meaningful use" as defined in federal law.

               (9) Meet at least monthly in the first year, and,  
               thereafter, as deemed necessary by the chair.
               
                                    POSITIONS  

          Support:  None received
          Oppose:   None received


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