BILL ANALYSIS Ó
SB 945
Page 1
Date of Hearing: July 5, 2011
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
SB 945 (Committee on Health) - As Amended: May 31, 2011
SENATE VOTE : 39-0
SUBJECT : Medi-Cal: electronic records.
SUMMARY : Requires the Department of Health Care Services (DHCS)
to establish and administer the Medi-Cal Electronic Health
Records Incentive Program (Program) to provide federally funded
incentive payments to Medi-Cal providers to implement and use
electronic health records (EHR) systems. Contains an urgency
clause to ensure that the provisions of this bill go into
immediately effect upon enactment. Specifically, this bill :
1)Requires DHCS to establish and administer the Program in
accordance with the State Medicaid Health Information
Technology (HIT) Plan as developed by DHCS and approved by the
federal Centers for Medicare and Medicaid Services (CMS).
2)Requires the HIT Plan to include:
a) The identification and establishment of planning
processes, policies, and procedures necessary for the
Program to become operational;
b) The criteria for enrollment, eligibility, and data
collection;
c) Timeframes for professional and facility technology
modifications;
d) The process for provider outreach and DHCS coordination
with established regional extension centers (RECs);
e) The audit and appeals process; and,
f) Participation in the National Level Registry.
3)Requires DHCS to accept applications from and make incentive
payments to eligible professionals and facilities, upon
receipt of all necessary federal approvals and in accordance
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with the HIT plan.
4)Requires the professional and facility applicants to meet the
standards for the federal EHR Technology Program, including
requirements for the meaningful use of EHR.
5)Authorizes DHCS to contract with public or private entities
and to utilize existing health care service provider
enrollment and payment mechanisms in implementing the Program.
6)Allows contracts entered into by DHCS to implement the Program
to be exempt from established competitive bidding requirements
in state law and, instead, provides for an alternative
competitive bidding process, as specified.
7)Allows DHCS to implement the Program through provider
bulletins or similar instruction without regulatory action.
8)Establishes reporting requirements to the appropriate fiscal
and policy committees of the Legislature and to the
Legislative Analyst's Office, as specified.
9)Specifies that the Program be implemented only to the extent
federal financial participation is available. Further
specifies legislative intent that the Program be funded solely
through federal funds and private contributions identified by
DHCS and that General Fund moneys shall not be used.
10)Sunsets the Program on June 30, 2021.
11)Makes various legislative findings and declarations.
EXISTING LAW :
1)Establishes, as part of the federal American Reinvestment and
Recovery Act (ARRA), the Health Information Technology for
Economic and Clinical Health (HITECH) Act, to provide grants
to states to promote the electronic movement and use of health
information among organizations using nationally recognized
interoperability standards and incentive payments to providers
for HIT and health information exchange (HIE) adoption.
2)Authorizes the Governor to designate a nonprofit state
designated entity (SDE), and the California Health and Human
Services Agency (CHHSA) to apply, for federal funds available
for HIE and HIT, and establishes a related state fund for that
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purpose.
3)Requires CHHSA or the SDE to facilitate and expand the use and
disclosure of electronic health information according to
nationally recognized standards and specifications, and
execute tasks related to accessing ARRA funds while protecting
the privacy and confidentiality of medical records to the
greatest extent possible.
4)Establishes the Medi-Cal Program, administered by DHCS, which
provides comprehensive health benefits to low-income children,
their parents or caretaker relatives, pregnant women, elderly,
blind or disabled persons, nursing home residents, and
refugees who meet specified eligibility criteria.
FISCAL EFFECT : According to the Senate Appropriations
Committee:
Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Program payments to up to $1,400,000 fiscal year (FY)
2011-12Federal
Medi-Cal providers through FY 2020-21
State administrative costs $2,200 ongoing
through FY 2020-21 Federal/*
Private
*90% federal funds, 10% state match
COMMENTS :
1)PURPOSE OF THIS BILL . According to the authors, ARRA included
significant funding to implement wide-scale use and sharing of
EHRs and patient health information. This bill directs DHCS
to establish and administer the Medi-Cal EHR Incentive Program
to distribute these federal funds. The authors state that
this bill is needed to ensure DHCS may distribute federal
incentive payments to Medi-Cal providers in an expedited
manner, which will help many California health care providers
change their practices and utilize electronic tools. The
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authors argue that this may result in significant improvements
in health care quality and efficiency that should benefit all
Californians. According to DHCS, sponsor of this bill, the
largest single obstacle to adoption of EHRs by providers is
the high upfront and ongoing costs. DHCS states that the
incentive payments made available by this bill offer an
unparalleled opportunity to build the HIT infrastructure of
both outpatient providers as well as acute-care inpatient
hospitals. According to the sponsor, this bill is urgently
needed in order to meet federal deadlines. In addition, the
sponsor points out that the inability to secure contractors in
a timely fashion has led to missed opportunities, such as
participation in a collaborative outreach effort that would
have leveraged resources and funding from other participating
entities.
2)BACKGROUND . HITECH/ARRA included more than $36 billion to
encourage the adoption and use of HIT and HIE and to support
the needs of providers and states. SB 337 (Alquist), Chapter
180, Statutes of 2009, adopted the provisions related to HIE
including authorizing the Governor to designate a non-profit
entity or, alternatively, authorizing CHHSA to apply for
federal funds available for HIE and HIT. This allowed
California to take advantage of $38 million in federal funding
to coordinate the development of an electronic health
information technology infrastructure statewide. As part of
this effort, Cal eConnect was established as the governing
body.
Another component in transforming the use of EHRs was to
provide technical assistance to change the workflow within
providers' offices. The Office of the National Coordinator
(ONC) implemented the REC Program to assist providers in the
many steps necessary to adopt EHRs and to use them effectively
to meet meaningful use. Three RECs were established in
California with HITECH/ARRA funding.
3)MEANINGFUL USE . For the purposes of the Medicare and Medicaid
Incentive Programs, eligible professionals, eligible
hospitals, and critical access hospitals (CAHs) must use
ONC-certified EHR technology, which gives assurance to
purchasers and other users that an EHR system offers the
necessary technological capability, functionality, and
security to meet the meaningful use criteria. Certification
also helps providers and patients be confident that the
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electronic HIT products and systems they use are secure, can
maintain data confidentially, and can work with other systems
to share information. Existing federal regulations require
the date, time, patient identification, and user
identification to be recorded when electronic health
information is created, modified, accessed, or deleted; and an
indication of which actions(s) occurred and by whom. The
federal regulations also include verification that electronic
health information has not been altered in transit. For
disclosures of treatment, payment, and health care operations,
the date, time, patient identification, user identification,
and description of the disclosure must also be recorded.
4)INCENTIVE PAYMENTS . HITECH/ARRA included financial incentives
for Medicaid and Medicare practitioners and hospitals to
assist in purchasing, installing, and using EHR in their
practices. The Medicaid and Medicare EHR incentive programs
are similar but each has its own set of rules and incentive
payment schedules. The Medicare EHR incentive payments
Program is administered directly by CMS. Eligible
practitioners include physicians, dentists, nurse
practitioners, midwifes, and certain clinic based physician
assistants. These providers may only participate in one of
the programs, but may switch once during the course of their
participation. Acute care hospitals that meet specified
criteria based on the volume of Medicaid and Medicare,
children's hospitals and CAHs are eligible for incentive
payments from both programs. Authorization of the Program to
develop and administer incentive payments to Medi-Cal
providers who adopt and meaningfully use certified electronic
health records (meaningful use) was not included in SB 337.
HITECH/ARRA requires the state Medicaid Agency to administer
the Medicaid EHR incentive payments Program and the Act
provides 90% federal financial participation (FFP) for
administrative activities. Although the provider incentive
payments are paid by the State, they are 100% reimbursable by
CMS. The State must ensure that the Program meets all
statutory and regulatory requirements and is implemented in a
manner that minimizes the potential for fraud, waste and
abuse.
In California, it is estimated that practitioners will be
eligible for up to $4 million over six years and hospitals
will be eligible for $2-$6 million over 4 years. By 2015,
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Medicare providers who are not meaningful users will have
their Medicare reimbursement rate decreased by 1% per year, up
to a potential maximum penalty of 5%. Recipients of Medicaid
incentives will have one year to meet the meaningful use
criteria after receiving the first incentive payment. There
are no federal penalties for failure to adopt electronic
medical records (EMRs) for Medicaid providers.
a) Incentive Program Planning . Utilizing approximately $2
million in federal advanced planning funds and a grant from
the California HealthCare Foundation (CHCF), DHCS has
performed a number of preparatory activities. The Office
of Health Information Technology (OHIT) has been
established to develop goals and metrics for the Program,
establish policies and procedures, and to implement systems
to disburse, track, and report incentive payments. These
efforts include the creation and appointment of an Advisory
Board and a Draft State Medi-Cal HIT Plan. DHCS also
contracted with The Lewin Group and McKinsey & Company to
perform an initial Provider Landscape Assessment of
outpatient providers, hospitals EHR vendors and expected
return on investment for providers adopting EHR. Based on
the recently released assessment, 12% of California
providers meet the threshold necessary to be eligible for
Medi-Cal incentive payments. It is estimated that the
Program may issue payments to more than 10,000 medical
providers and 435 hospitals. DHCS anticipates that if all
eligible Medi-Cal providers in California take advantage of
this opportunity, $1.4 billion will be distributed to
Medi-Cal providers over the next ten years. However these
assumptions are, in part, based on data that are over five
years old and DHCS has committed to providing CMS with
updated data to be used as a benchmark by the end of the
year.
b) Enrollment and Participation . CMS established a
National Level Registry, beginning April 2011 for providers
and hospitals to begin the enrollment process. DHCS has
established an online State Level Registry (SLR) portal;
however the launch has been delayed as a result of the
complexity and unique requirements for California. DHCS is
working with Affiliated Computer Services, Inc. (ACS), the
state Medicaid Management Information System provider to
develop a California specific system instead of using an
off-the shelf product used in other states as originally
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planned. When the portal is operational, the system will
have the functionality necessary to validate, verify, and
audit providers.
c) Education and Outreach . DHCS has planned a multi-phase
campaign for outreach and education.
i) Phase I employed direct face-to-face communication
from OHIT and ACS to RECs, professional and hospital
organizations and associations via webinars, and in
person meetings and presentations.
ii) Phase II, the Build-Up Campaign, is to continue to
increase interest and direct providers to the Provider
Outreach Page www.medi-cal.ehr.ca.gov where they can
learn more about the Program. The objective is for
providers to use the workbook on the site to prepare
their information so that upon the launch of the SLR,
those providers will be able to immediately register
successfully.
iii) Phase III, the Launch Campaign, is to announce the
launch of the Program and to drive providers to register
on the SLR on the Provider Outreach Page.
iv) Phase IV, the Maintenance Campaign, will be to
continue to drive awareness of the Program, and begin to
specifically focus on the late adopters.
v) Phase V, the Beneficiary Campaign, will be to build
awareness and highlight the benefits of EHRs to
beneficiaries.
5)SUPPORT . DHCS, sponsor of this bill, writes in support that
this bill is needed to enable them to rapidly develop and
administer an EHR incentive Program for Medi-Cal providers and
access 100% FFP. According to the sponsor, it is anticipated
that if all eligible Medi-Cal providers in California take
advantage of this opportunity $1.4 billion in federal funds
will be distributed to Medi-Cal providers over the next ten
years. In support, DHCS also points out the state is eligible
for 90%/10% funding for administering the Program as a result
of funding from CHCF. In support, DHCS states that these EHR
incentive payments have the potential to help many
Californians health care providers change their practices to
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now utilize electronic tools. The sponsors conclude that this
should result in significant improvement in health care
quality and efficiency that should benefit all Californians.
The California Children's Hospital Association (CCHA), also in
support, states that the Program is of particular importance
to children's hospitals as they are not eligible for the
Medicare incentives. According to CCHA, the funds available
under this Program represent the only federal funds available
to children's hospitals to assist with EHR implementation.
CCHA also states that many of the children's hospitals have
already spent significant resources acquiring EHR systems.
CCHA concludes in support that the Program is critically
important to helping support children's hospitals complete
transition to electronic health records.
The California Primary Care Association (CPCA) also in support
writes that their member clinics and health centers are fully
supportive of the DHCS endeavor. According to CPCA, these
community clinics and health centers are already working with
their providers to partner on securing the incentive payments
and once the Program is launched, CPCA anticipates hundreds of
clinics will help their providers register and receive
payments. CPCA also writes in support that use of EHR will
enable clinics to better coordinate their patients care,
reduce duplicative tests, and lay the foundation for these
clinics and health centers to transform their practice into
patient centered health home.
6)RELATED LEGISLATION .
a) AB 174 (Monning) requires the EHR systems developed
based on demonstration projects established and
administered by the California Office of Health Information
Integrity (CalOHII) to be implemented with the full
participation of health consumers and organizations
concerned with protecting the privacy and security of
patient information in the development of policies.
Requires CalOHII to ensure that there are opportunities for
public comment and input on the development of those
policies. AB 174 is a two year bill pending in Senate
Health Committee.
b) SB 850 (Leno) requires an EHR system or EMR system to
automatically record any change or deletion of any
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electronically stored medical information. Establishes
requirements for the record of any change or deletion, as
specified, including that the record be made part of the
patient's medical information. SB 850 is pending in
Assembly Appropriations Committee.
7)PREVIOUS LEGISLATION .
a) SB 337, among other things, authorized CHHSA to apply
for federal HIT and HIE grant funds.
b) SB 320 (Alquist) of 2007 would have required the
California Office of HIPAA Implementation, in consultation
with other state agencies, to develop a plan for
implementation of the California Health Care Information
Infrastructure Program no later than March 1, 2009, which
would seek to provide the opportunity for every resident of
the state to have an EHR. SB 320 was vetoed by the
Governor.
c) 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 would have identified incentives to promote
the use of EHRs and personal health records. SB 1338 was
held in the Assembly Appropriations Committee.
d) 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 HIT systems to participating health
care institutions, providers, and provider organizations,
as specified. SB 1672 was held in the Senate
Appropriations Committee.
e) AB 1672 (Nation and 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.
REGISTERED SUPPORT / OPPOSITION :
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Support
State of California Department of Health Care Services (sponsor)
California Children's Hospital Association
California Primary Care Association
Eastern Plumas Health Care
Glenn Medical Center
Healdsburg District Hospital
L.A. Care Health Plan
Mayers Memorial Hospital
Seneca Healthcare District
Sutter Amador Hospital
Opposition
None on file.
Analysis Prepared by : Marjorie Swartz / HEALTH / (916)
319-2097