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--- STAFF ANALYSIS OF SENATE BILL SB 270 (Alquist)Page 2 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. STAFF ANALYSIS OF SENATE BILL SB 270 (Alquist)Page 4 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 STAFF ANALYSIS OF SENATE BILL SB 270 (Alquist)Page 5 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. STAFF ANALYSIS OF SENATE BILL SB 270 (Alquist)Page 6 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 STAFF ANALYSIS OF SENATE BILL SB 270 (Alquist)Page 7 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. STAFF ANALYSIS OF SENATE BILL SB 270 (Alquist)Page 8 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 STAFF ANALYSIS OF SENATE BILL SB 270 (Alquist)Page 9 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 STAFF ANALYSIS OF SENATE BILL SB 270 (Alquist)Page 10 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. STAFF ANALYSIS OF SENATE BILL SB 270 (Alquist)Page 11 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 STAFF ANALYSIS OF SENATE BILL SB 270 (Alquist)Page 12 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 STAFF ANALYSIS OF SENATE BILL SB 270 (Alquist)Page 13 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 STAFF ANALYSIS OF SENATE BILL SB 270 (Alquist)Page 14 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 STAFF ANALYSIS OF SENATE BILL SB 270 (Alquist)Page 15 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 STAFF ANALYSIS OF SENATE BILL SB 270 (Alquist)Page 16 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 -- END --