BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 270
                                                                  Page  1

          Date of Hearing:   June 29, 2010

                            ASSEMBLY COMMITTEE ON HEALTH
                              William W. Monning, Chair
                    SB 270 (Alquist) - As Amended:  June 28, 2010

           SENATE VOTE  :   33-0
           
          SUBJECT  :   Health care providers:  medical information.

           SUMMARY  :  Clarifies existing law related to delays in reporting  
          unauthorized access to, and use or disclosure of, a patient's  
          medical information to the Department of Public Health (DPH),  
          makes other specified clarifications, and extends sunset for  
          California Office of Health Insurance Portability and  
          Accountability Act of 2001 (HIPAA) Implementation (CalOHI).   
          Specifically,  this bill  :   

          1)Authorizes a clinic, health facility, home health agency, or  
            hospice to delay reporting unlawful or unauthorized access,  
            use, or disclosure of a patient's medical information to DPH  
            if a law enforcement agency or official provides the entity  
            with a written or oral statement that compliance with the  
            reporting requirement would likely impede the law enforcement  
            agency's  investigation  , rather than  activities  , that relates  
            to the unlawful or unauthorized access to, and use or  
            disclosure of, a patient's medical information.  

          2)Authorizes a law enforcement agency or official to request an  
            extension of the 60-day delay based upon a written declaration  
            that there exists a bona fide, ongoing, significant criminal  
            investigation of serious wrongdoing, that notification of  
            patients will undermine the law enforcement agency's  
             investigation  , rather than  activities  .

          3)Clarifies for purposes of this bill, that internal paper  
            records, electronic mail, or facsimile transmissions  
            inadvertently misdirected within the same facility or health  
            care, as specified, shall not constitute unauthorized access  
            to, or use or disclosure of a patient's medical information. 

          4)Clarifies, for enforcement purposes, that it shall be presumed  
            that the facility did not notify the affected patient if the  
            notification was not documented and authorizes this  
            presumption to be rebutted by a licensee only if it  








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            demonstrates, by a preponderance of evidence, that the  
            notification was made. 

          5)Extends the sunset date CalOHI from July 1, 2010 to January 1,  
            2013.  

           EXISTING FEDERAL LAW  

          1)Prohibits, under HIPAA, a health plan, health care  
            clearinghouse, or a health care provider (covered entity), who  
            transmits health information in electronic form, from using or  
            disclosing protected health information, for purposes other  
            than medical treatment or payment, or health care operations,  
            as defined, without written authorization of the patient, with  
            specified exceptions.

          2)Requires covered entities and their business associates, to  
            provide notice of medical privacy breaches involving the  
            unauthorized acquisition, access, use, or disclosure of  
            protected health information to each individual whose  
            information has been subject to a breach within 60 days of the  
            discovery of the breach.  

          3)Provides that if a law enforcement official determines that  
            notice of a medical privacy breach would impede a criminal  
            investigation or cause damage to national security, the notice  
            shall be delayed, in a specified manner.

           EXISTING STATE LAW  :

          1)Prohibits, under the Confidentiality of Medical Information  
            Act (CMIA), licensed or certified health care professionals,  
            clinics and health facilities, health plans, and contracting  
            entities, as defined, from disclosing or using a patient's  
            medical information for any purpose not necessary to provide  
            health care services to the patient and related administrative  
            functions, without first obtaining authorization from the  
            patient or the patient's representative, as specified, with  
            exceptions.

          2)Provides for administrative fines and civil penalties for  
            persons and specified entities who negligently disclose, or  
            who knowingly and willfully obtain, disclose, or use, medical  
            information in violation of the CMIA, and authorizes the  
            Attorney General, any district attorney, any county counsel  








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            acting pursuant to an agreement with the district attorney, or  
            a city attorney, to seek civil penalties for violations.  

          3)Requires every provider of health care services to establish  
            and implement administrative, technical, and physical  
            safeguards to protect the privacy of patients' medical  
            information, and requires every provider to reasonably  
            safeguard confidential medical information from any  
            unauthorized access or unlawful access, use, or disclosure.  

          4)Defines unauthorized access as the inappropriate review or  
            viewing of patient medical information without a direct need  
            for diagnosis, treatment, or other lawful use of the  
            information.

          5)Requires a clinic, health facility, home health agency, or  
            hospice to report any unlawful or unauthorized access to, or  
            use or disclosure of, a patient's medical information to DPH  
            and to the affected patient or patient's representative, no  
            later than five days after the unlawful or unauthorized  
            access, use, or disclosure has been detected by the entity.  

          6)Allows DPH to assess a penalty of $100 for each day the  
            unlawful or unauthorized access, use, or disclosure is not  
            reported, following the initial five-day period, not to exceed  
            $250,000 per reported event.  

          7)Requires a clinic, health facility, home health agency, or  
            hospice to delay reporting any unlawful or unauthorized  
            access, use, or disclosure of a patient's medical information  
            to DPH if a law enforcement agency or official provides the  
            entity with a written or oral statement that compliance with  
            the reporting requirement would be likely to impede the law  
            enforcement agency's activities that relate to the unlawful or  
            unauthorized access to, and use or disclosure of, a patient's  
            medical information, and specifies a date upon which the delay  
            shall end, not to exceed 60 days after a written request was  
            made, or 30 days after an oral request is made.

          8)Allows a law enforcement agency or official to request an  
            extension of the 60-day delay based upon a written declaration  
            that there exists a bona fide, ongoing, significant criminal  
            investigation of serious wrongdoing, that notification of  
            patients will undermine the law enforcement agency's  
            activities, and that specifies a date upon which the delay  








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            shall end, not to exceed 60 days after the end of the original  
            60-day period Health Information Technology (HIT) and Exchange  
            (HIE) Provisions authorizes the California Health and Human  
            Services Agency (CHHSA), or one of its departments, to apply  
            for federal HIT and HIE grants, pursuant to requirements set  
            forth  in the federal American Recovery and Reinvestment Act  
            of 2009 (ARRA).  

          9)Establishes until July 1, 2010, as part of CalOHI in CHHSA,  
            and directs CalOHI to assume statewide leadership,  
            coordination, policy formulation, direction, and oversight  
            responsibilities of HIPAA implementation.  

          10)Authorizes CHHSA, or one of its departments, to apply for  
            federal HIT and HIE grants, pursuant to requirements set forth  
            in ARRA.  Requires the Governor to designate a nonprofit  
            entity, as specified, to apply for federal funds and establish  
            HIE if no application is made by the state.

          11)Requires CHHSA or the state-designated entity (SDE) to  
            develop a plan to ensure that HIE capabilities are developed,  
            adopted, and utilized statewide while minimizing disparities  
            in access to HIT, as specified.

          12)Specifies that the governing board of the SDE must contain,  
            at a minimum, the Secretary of CHHSA, Chairs of the Senate and  
            Assembly Committees on Health, and two consumer  
            representatives, as specified.

          13)Requires CHHSA or the SDE 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, to the greatest extent  
            possible, protecting the privacy and confidentiality of  
            medical records. 

          14)Establishes CalOHI 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.

           FISCAL EFFECT :   According to the Senate Appropriations  








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          Committee Analysis, pursuant to Senate Rule 28.8, negligible  
          state costs.

           COMMENTS  :   

           1)PURPOSE OF THIS BILL  .  According to the author, this bill  
            clarifies that disclosure of medical privacy breaches can be  
            suspended for law enforcement investigations, rather than any  
            law enforcement activity, which significantly narrows the  
            limit on disclosure of medical privacy breaches.   
            Additionally, this bill extends the sunset of the state agency  
            responsible for overseeing the federal health information  
            technology infrastructure grants, including the federal health  
            information exchange grant, and serves as the primary resource  
            for state entities on health information privacy and the  
            implementation of HIPAA regulations.  The sunset date for  
            CalOHI is currently set for July 1, 2010, which is why the  
            author requests an urgency clause.  

           2)BACKGROUND  .  Congress passed ARRA on February 13, 2009 and  
            President Obama signed the bill on February 17, 2009.  Under  
            the medical privacy provisions of ARRA, entities that transmit  
            health information in an electronic form are required to  
            provide notice of a medical privacy breach to an individual  
            whose information has been subject to a breach, within 60 days  
            of the discovery of the breach.  The 60-day requirement is  
            delayed in the case that a law enforcement official determines  
            that notice of a medical privacy breach would impede a  
            criminal investigation or cause damage to national security.   
            However, ARRA provides that state medical privacy breach  
            notification laws that are more protective of medical privacy  
            (such as the notification requirements in California law) are  
            not preempted.  This bill will clarify the notification  
            requirements in CMIA.  

           3)FEDERAL FUNDING FOR HIE  .  A component of ARRA, the HITECH Act,  
            provides roughly $41 billion for national HIT and HIE  
            investments over the next four years to promote the sharing of  
            electronic health records (EHR) among organizations using  
            nationally recognized interoperability standards.  The state  
            grant program is intended to enable providers to qualify for  
            Medicare and Medicaid financial incentives ($34 billion)  
            authorized by ARRA, provided they meet specified meaningful  
            use requirements.  Additionally, ARRA provides $2 billion for  
            HIT promotion, including $564 million in planning and  








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            implementation grants for HIE.  These funds can be used, at  
            the discretion of the federal Secretary of the Department of  
            Health and Human Services to fund a number of initiatives,  
            including grants to states to develop HIEs, HIT workforce  
            training grants, and grants to states to develop loan funds,  
            to name a few.

          Out of the $2 billion, $564 million in federal grant funds are  
            available to states to develop state and local/regional HIEs,  
            which are intended to ultimately connect to a national health  
            information network.  These funds will allow California to  
            create an exchange mechanism that allows health information to  
            move across health care systems.  Recently, under the  
            leadership of CHHSA, the state has developed an HIT and HIE  
            strategic plan aimed towards maximizing the opportunities  
            provided under ARRA as part of a more comprehensive vision of  
            the state's HIT infrastructure.  In addition to coordinating  
            activities across various state departments and stakeholders,  
            who are planning and implementing various HIT elements in  
            ARRA, CHHSA is responsible for establishing HIE for  
            California.  In February 2010, CHHSA received a $33.8 million  
            ARRA HIE federal grant, which, which will be distributed by  
            CaleConnect, the state's new non-profit entity that will  
            implement the requirements of the federal HIE grant, which is  
            called CaleConnect.  Continued progress toward widespread HIE  
            will depend on successfully addressing a number of major  
            privacy and security concerns.  CalOHII, under the supervision  
            of CHHSA, is currently 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 HIE in California.  

           4)PRIVACY AND SECURITY STANDARDS  .  CalOHII has convened the  
            California Privacy and Security Advisory Board (CalPSAB) to  
            develop and recommend these new standards. Adoption of privacy  
            and security standards for HIE will ensure that a person's  
            critical health information can move safely and securely to  
            the point of care.  An individual could benefit from improved  
            treatment outcomes and the opportunity to better manage their  
            health. Electronic HIE could also lead to more transparent  
            care and contribute to a more effective and efficient health  
            care system.  Over the last year, CalPSAB has been working  
            towards developing privacy and security guidelines for sharing  
            of electronic health information that is based on nationally  








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            recognized standards and harmonizes both state and federal  
            laws.  

           5)URGENCY CLAUSE  .  The author intends to add an urgency clause  
            to this measure so its provisions take effect immediately upon  
            enactment as the sunset date for CalOHII is July 1, 2010. 
           
          6)RELATED LEGISLATION  .  AB 278 (Monning) authorizes CalOHI to  
            establish up to four demonstration projects a year to evaluate  
            solutions to facilitate health information exchange that  
            promote quality of care, respect security personal health  
            information, and enhance stakeholder trust.  AB 278 is set to  
            be heard in Senate Health Committee on June 30, 2010.
           
          7)PREVIOUS LEGISLATION  .  

             a)   SB 337 (Alquist) Chapter 180, Statutes of 2009, revises  
               the timelines for reporting of unauthorized access to, or  
               use or disclosure of, patients' medical information, and  
               provides limited exemptions to the reporting timelines in  
               cases where law enforcement agencies are investigating such  
               privacy breaches.  SB 337 also authorizes CHHSA to apply  
               for federal health information technology and health  
               information exchange grants, and requires the Governor to  
               designate a qualified non-profit entity to apply for  
               federal health information exchange grants on behalf of the  
               state if no application is made by the state.

             b)   AB 211 (Jones), Chapter 602, Statutes of 2008,  
               establishes CalOHI 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.

             c)   AB 1302 (Horton), Chapter 700, Statutes of 2007, extends  
               the sunset on HIPAA and CalOHI from January 1, 2008 to July  
               1, 2010.

             d)   SB 541 (Alquist), Chapter 605, Statutes of 2008,  
               requires licensed clinics, health facilities, hospices, and  
               home health agencies to prevent unlawful access to, use, or  
               disclosure of patients' medical information, establishes  








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               administrative penalties for violations, and requires the  
               patient and the DPH be notified of any unlawful access to,  
               use, or disclosure of a patient's medical information.
                    
             e)   SB 320 (Alquist) of 2007 would have required the CalOHI,  
               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.  SB 320 was  
               vetoed by Governor Schwarzenegger.

             f)   SB 1338 (Alquist) of 2006 would have required CHHSA, 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 personal health records.  SB 1338 was held in the  
               Assembly Appropriations Committee.


                    
           REGISTERED SUPPORT / OPPOSITION :

           Support 
           
          California Health and Human Services Agency (sponsor)
           
            Opposition 
           
          None on file. 


           Analysis Prepared by  :    Martin Radosevich / HEALTH / (916)  
          319-2097