Health Information. Technology Policy. Legislative and Regulatory Progress in 2003, and Prospects for the Future. Sheera Rosenfeld and Dan Mendelson

Transcription

1 Health Information Technology Policy Legislative and Regulatory Progress in 2003, and Prospects for the Future Sheera Rosenfeld and Dan Mendelson January 2004 Sponsored by IBM Center for Healthcare Management

2 Foreward On behalf of the IBM Center for Healthcare Management, we are pleased to present this report, Health Information Technology Policy: Legislative and Regulatory Progress in 2003, and Prospects for the Future by Sheera Rosenfeld and Dan Mendelson. The purpose of this report is to analyze the legislative accomplishments of 2003, explain the new programs that major government agencies have initiated, and discuss the prospects for further support of health information technology initiatives in To complete this study, the researchers reviewed legislation and the legislative history from 2003, surveyed the health policy literature, and interviewed a range of key government and private sector stakeholders was truly a watershed year for health information technology, in which both legislation and regulation supportive of progress were put into place. Perhaps more important, is a growing momentum, fueled by concern over patient safety, that is likely to result in more meaningful legislative and regulatory initiatives over the next few years. I hope that you find this analysis helpful in understanding the key issues that legislators and regulators are considering in the upcoming year and how these actions might affect your IT strategy. Neil E. de Crescenzo Partner-in-Charge IBM Center for Healthcare Management neilde@us.ibm.com 2

3 Table of Contents 5 Executive Summary 7 Introduction 8 Section 1: Health Information Technology Background 11 Section 2: Legislative Successes of Section 3: Major Granting Initiatives to Support Health Information Technology 25 Section 4: Health Information Technology in Conclusion 41 Bibliography 44 About the Authors 47 About the Center for Healthcare Management 47 About IBM Business Consulting Services IBM Center for Healthcare Management 3

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5 Executive Summary The year 2003 was truly a watershed year for health information technology (HIT), in which both legislation and regulation supportive of progress were put into place. Perhaps more important, is a growing momentum, fueled by concern over patient safety, that is likely to result in more meaningful legislative and regulatory initiatives over the next few years. As the Congress adjourned in 2003, they left a strong record in health care, including a Medicare bill that expanded coverage for prescription drugs and added over $400 billion to the entitlement program over the coming decade. Less noticed, but no less important, was a solid performance in the area of HIT. The purpose of this report is to analyze the legislative accomplishments of 2003, explain the new programs that major government agencies have initiated, and discuss the prospects for further support of HIT initiatives in To complete this study, the researchers reviewed legislation and the legislative history from 2003, surveyed the health policy literature, and interviewed a range of key government and private sector stakeholders. Our findings are summarized below. Some of the accomplishments in 2003 include: 1) The Medicare Modernization Act of 2003 was signed into law and included unprecedented HIT legislative provisions. This bill also represents the only HIT legislation to be enacted into law in ) Developed as part of the Consolidated Health Informatics Initiative (CHI), the Department of Health and Human Services (DHHS), Department of Defense (DoD), and the Veteran s Administration (VA) announced the adoption of uniform standards for the electronic exchange of clinical information across the federal government. 3) DHHS purchased a permanent license to the standard terminology SNOMED Clinical Terms that will be available free to health care providers and systems nationwide to broadly promote and support dissemination of common clinical data standards. 4) The federal government sponsored its first-ever national conference on developing and advancing a National Health Information Infrastructure (NHII). 5) DHHS commissioned the Institute of Medicine (IOM) and Health Level 7 (HL7) to design a standard electronic health record (EHR) functional model that will be broadly diffused across the US health care system at no cost to providers or delivery systems. 6) The IOM and the US General Accounting Office (GAO) released major reports focusing on the value of HIT. 7) DoD continued its roll out of the Computer Health Care System II (CHCS II), an electronic medical record (EMR) system that will help providers in the early detection of disease outbreaks among troops and manage care more effectively. 8) 2004 appropriations are still pending in Congress; however major increases in funding to support specific patient safety, HIT, and telemedicine related activities are expected for a number of agencies including the Agency for Healthcare Research and Quality (AHRQ), the Health Resources and Services Administration (HRSA), and DoD s Telemedicine and Advanced Technology Research Center (TATRC). The Administration, through agencies such as the AHRQ, HRSA, and the National Institutes of Health (NIH), continues to sponsor robust granting initiatives to impact health information technology adoption and diffusion and promote improvements in quality care. These major granting programs are intended to support communities, providers, and delivery systems to plan, implement, and invest in HIT and evaluate their benefit and impact on the health care delivered in this country. These agencies continue to lack the coordination and collaboration necessary to ensure that granting programs will be administered to complement one another rather than duplicate efforts and results; however, these are important programs that will continue to further the HIT agenda. Passage of the HIT provisions included in the new Medicare law mark advancement and are a truly notable step in the right direction; however, inherent in this year s progress are real limitations. The HIT provisions are still insufficient to bring about real change across the US health care system in the next few years. The financial resources, political will, and leadership for major change (along the lines of what is currently being enacted in the United Kingdom) have not coalesced. Primary barriers to implementation include: IBM Center for Healthcare Management 5

6 Financial Incentives and Funding: Incentives must be realigned throughout the health care system to promote and encourage adoption of HIT and electronic reporting of clinical data for quality, public health, and pharmaceutical purposes. Meaningful funding must be made available through grants, tax credits, or loans such as revolving loan funds to support the health care system s capital investments and adoption of HIT. Standards Development and Adoption The government must foster the broad scale adoption of standards through incentives. The industry must continue to incorporate core standards for electronic exchange of clinical information and further develop the critical standards that our country and health care system must use to communicate. Leadership Federal leadership is critical to move real adoption and the use of clinical standards. Private sector leadership is critical to support the development and adoption of data standards and to collaborate with public sector counterparts. Hope for the future stems from a growing recognition that fundamental change is necessary. Hope is also motivated by the public-private sector partnerships launched over the past decade, including Connecting for Health, the ehealth Initiative, NHII activities, and the Consolidated Health Informatics Initiative. As 2004 begins, policy makers and stakeholders will need to build on the accomplishments of They will also need to honestly address the barriers to HIT adoption particularly issues of funding that continue to hamper diffusion of important new technologies into the health care system. 6

7 Introduction Momentum is quietly building for adoption of health information technology (HIT). The year 2003 marked many milestones in the public and private sectors around care delivery and the use of HIT that are laying the groundwork for the future. Health care leaders, providers, payers, purchasers, and other key stakeholders gained major traction moving the HIT agenda, with a showing of federal leadership and public-private sector collaboration. And legislatively, 2003 was the first year since the turn of the century that movement around HIT actually led to a major legislative initiative. As the events below highlight, 2003 proved to be a year of momentum, evolution, new energy, and new leadership. 1) The Medicare Modernization Act of 2003 was signed into law and included unprecedented HIT legislative provisions including a voluntary electronic prescribing program and financial incentives for HIT adoption. This bill also represents the only HIT legislation to be enacted into law in ) In March of 2003, the Department of Health and Human Services (DHHS), Department of Defense (DoD), and the Veteran s Administration (VA) announced the adoption of uniform standards for the electronic exchange of clinical health information. These standards, developed as part of the Consolidated Health Informatics Initiative (CHI), the health care component of the President s egov Initiatives, will be adopted across the federal government. 3) DHHS purchased a permanent license to the standard terminology SNOMED Clinical Terms through a National Library of Medicine (NLM) contract with the College of American Pathologists (CAP). SNOMED Clinical Terms will be made available free of charge to health care providers and systems nationwide and its availability is expected to broadly promote and support dissemination of common clinical data standards. 4) The federal government sponsored its first-ever national conference on developing and advancing a National Health Information Infrastructure (NHII). Conference attendance of well over 1,000 included major stakeholders, public and private sector representatives, as well as professionals with expertise in medical informatics, standards development, patient safety, and financial incentives. 5) DHHS, taking a leading role to promote national acceptance and adoption of a standard for electronic health record (EHR) functionality, commissioned the Institute of Medicine (IOM) and Health Level 7 (HL7) to design a standard for EHR functionality that will be broadly diffused across the US health care system at no cost to providers or delivery systems. The final standard is due out in ) The IOM and the US General Accounting Office (GAO) released major reports focusing on the value of HIT. IOM s report, Patient Safety: Achieving a New Standard for Care, highlighted the need for an NHII in this country and provided recommendations for the development and adoption of nationwide clinical standards. The GAO report analyzed a group of public and private sector health care organizations and showcased the benefits from using HIT including improvements in quality, patient safety, workflow, and cost savings. 7) DoD continued its roll out of the Computer Health Care System II (CHCS II), an electronic medical record (EMR) that will help providers in the early detection of disease outbreaks among troops and manage care more effectively. In an effort to improve access to necessary and relevant health information and improve the quality of care, DoD will make CHCS II accessible to all authorized personnel in any branch of the military. 8) 2004 appropriations are still pending in Congress; however major increases in funding to support specific patient safety, HIT, and telemedicine related activities are expected for a number of agencies including the Agency for Healthcare Research and Quality (AHRQ), the Health Resources and Services Administration (HRSA), and DoD s Telemedicine and Advanced Technology Research Center (TATRC). These events are clear signs of change, and also of support from legislators and the administration for a positive HIT agenda. The prescription drug benefit has dominated the health policy debate in Washington for many years. With its enactment, the legislative agenda is open for the first time in a number of years, and HIT is key to many of the outstanding issues of costs and quality. This past year successfully showcased the need for clinical standards and interoperable HIT systems, and illuminated HIT s role in health care and the national quality movement. We also IBM Center for Healthcare Management 7

8 observed widespread examples of health plans, employers, and delivery systems across the country experimenting with various types of financial incentives for providers and delivery systems to adopt technology to improve the quality of care. Much of this movement has and will continue to be motivated by concerns around the medical errors and episodes of poor quality care to which American consumers are exposed. The efforts of this past year, highlighted in detail below, also show that legislators have been unwilling thus far to use the most powerful tools they have to drive broad scale change. Specifically, there is nothing directing the industry to adopt new technologies through mandates. There have been no major changes made to payment systems in Medicare or Medicaid to promote HIT adoption across the health care system. And no major financial incentives exist system wide to make HIT a higher priority for clinicians or to shift their behavior to increase HIT adoption. As 2004 begins, the industry has the opportunity to build on past accomplishments, but also faces a number of significant impediments which have slowed progress over the past decade. In that spirit, this paper highlights major HIT related activities of 2003, both in terms of achievements and missed opportunities, and discusses the likely future of policy progress in this area. Paper Overview Section 1: HIT Background This section provides general background and current progress on the HIT agenda and highlights the major barriers impeding HIT adoption; discusses the federal government s role in providing leadership, funding, and financial incentives; and sets the stage for the discussion of HIT legislation by providing a brief overview of the legislative and regulatory process and its innate challenges. Section 2: Legislative Successes of 2003 This section presents an overview and summary of the HIT provisions in the Medicare Modernization Act of 2003; raises key regulatory questions and issues the Centers for Medicare and Medicaid Services (CMS) and other lead agencies will need to consider in implementing these provisions; and discusses high level observations regarding the implications these provisions will have for the health care industry. Section 3: Major Granting Initiatives to Support HIT This section highlights major funding initiatives primarily in DHHS that seek to provide financial support and resources to promote adoption and diffusion of HIT. Readers should use this section as a basic resource in considering existing granting agencies and initiatives for Section 4: Health Information Technology in 2004 This section summarizes major HIT related legislative misses or failed legislative attempts in 2003 and discusses topics for potential legislation in This section also highlights other public and private sector activity likely to occur in 2004 around the areas of patient safety, medical errors reduction, and health information technology adoption. Section 1: HIT Background Over the last ten years, there has been a steady and noticeable increase in the level of interest in HIT and its potential to change the system of health care delivery in this country. Evidence showcasing the value of HIT has also increased. The IOM s Crossing the Quality Chasm report in 2001 and more recent report Patient Safety: Achieving a New Standard for Care; research conducted at key institutions including Brigham and Women s, Partners Health Care, Intermountain Health Care, and Kaiser Permanente; and studies conducted by AHRQ support the case for HIT adoption in efforts to improve patient safety and quality, and reduce costs. As evidence mounts, policy makers, the broader health care industry, and the general public have become more attuned to the crisis in health care that exists today around medical errors, and the power that HIT holds to change the system. Research has also shown, though, that the health care sector in general, has lagged far behind other industries in the adoption of emerging information technologies. Physicians, health systems, and 8

9 federal agencies for example, are still unable to electronically exchange clinical information relevant to the patient s health. Although billing information is routinely submitted electronically and submission of clinical data is routinely mandatory, the paper record continues to be the exchange medium of choice with cost and quality consequences. Barriers that continue to inhibit the rapid and successful diffusion of HIT include 1) payment systems that fail to reward HIT investments and infrastructure improvements, 2) lack of standards adoption and interoperability among systems, 3) clinicians reluctance to adopt HIT because of the lack of integration into their workflows, 4) high investment costs, and 4) the failure of many technology companies to deliver technologies that adequately meet the needs of health care providers and facilities. These are serious barriers, reflective of the complexity of our healthcare system. Until they are addressed, it is unlikely that widespread adoption of HIT on the scale of what is taking place in the United Kingdom (UK) will occur in the US. Meanwhile, major advancement around the UK s activities to support HIT and an interconnected health information infrastructure continues to highlight the US lack of evolution and forward movement in this same area. Over the next ten years, England s National Health Service (NHS) will commit more than $17 billion to connect its health care system including all hospitals, doctor s offices, and clinics. Under the NHS plan, electronic medial records for every patient will be accessible by providers across the entire health care network by 2005, and electronic prescribing and online scheduling and referrals should be in place by In contrast, providers, delivery systems, payers, and purchasers in the US are slowly increasing their investments in HIT and exploring approaches to overcome the list of barriers to adoption. Federal policy makers and the Administration have also expressed concern and dissatisfaction with the quality and cost consequences of the current paper-based system and voiced a commitment to developing programs that both support and facilitate HIT investment and broad scale adoption; however unless dramatic change occurs, it will pale by comparison to the NHS. Federal Government Leadership The federal government is in a unique position to drive beneficial change and take a lead role in promoting the adoption of HIT to improve the quality of care delivered in this country. There are a range of tools ranging from strong to weak available to policy makers to achieve these goals. They include: Changes to the entitlement program(s): The federal government can fundamentally change the health care system by leveraging care provided through Medicare or Medicaid. The power of the government both as a payer and purchaser can substantially influence stakeholders acceptance and adoption of, and commitment to using HIT to improve care delivery. For example, the federal government can change the conditions of participation for Medicare providers to force HIT adoption; numerous other opportunities exist to bring about dramatic changes (e.g., differential payments or preferred provider status resulting in increased volume to physicians who utilize HIT or submit clinical and/or performance data electronically; optional submission of data in electronic open standards whenever clinical reports are required; changes to provider contracts to assert standardized information technology requirements.) Demonstration projects within the entitlement program: Experimental, pilot, and/or demonstration projects are often used by the Administration and policy makers as a way to test out, examine, or demonstrate the value or impact of a specific change in care delivery. Demonstrations, for example, may explore an alternative payment methodology (e.g., payment differential) or different mode of communication and care delivery (e.g., telemedicine) encouraging HIT adoption. Demonstration projects in the HIT arena can provide a laboratory in which providers, policy makers, and researchers alike can study and evaluate the impact of technology in the provision of care for beneficiaries and test alternative payment methodologies for providers. Appropriations: Funding, granting and revolving loan programs to pay and/or support health care providers, delivery systems, and broader regions and communities investing in and adopting HIT can be critical to providing necessary start-up assistance and capital. Private sector capabilities have typically run far ahead of those of the government. Therefore, also ensuring adequate funding for federal agencies to implement electronic submissions in open standards will be a key enabler to private sector use. IBM Center for Healthcare Management 9

10 General Oversight: Committee hearings, councils, commissions, and advisory boards are ways the Administration and federal policy makers can provide for and ensure oversight of programs, encourage implementation of specific activities, and support sharing of information including access to progress and expertise in the private sector. These types of oversight can support change in the health care industry and speed up the broad diffusion of information technology. As described above, there are many vehicles the federal government can use to drive change and promote adoption and diffusion of beneficial information technology in health care. To date, the federal government has relied on each tool to varying degrees and while the Medicare bill (discussed in Section 2) did not result in any fundamental changes to the entitlement program in the area of HIT, incremental efforts are evident. Health Agencies in the Federal Government A number of different government agencies are concerned about HIT. The most active federal agencies in health services are those that provide direct care, including the Veterans Health Administration (VHA), the DoD, and the Indian Health Service (IHS). Each of these systems has entertained clinical HIT projects and discussed the value and adoption of electronic clinical medical records. CMS, which has been less active, has a tremendous amount of leverage through its oversight of Medicare, Medicaid, and SCHIP programs. Both the IHS and CMS are agencies within DHHS, as are the major health research and development funding agencies listed in this paper, including AHRQ, Centers for Disease Control (CDC), Food and Drug Administration (FDA), HRSA, National Institutes of Health (NIH), and NLM. Despite their common reporting within DHHS, these agencies have operated quite independently in the past on HIT initiatives, and their programs have not been well coordinated. Some coordination has been initiated across departments, and DHHS Secretary Thompson has committed to ensuring better coordination in the future. How Legislation Affects The Real World Below is a brief review of the legislative and regulatory processes, which provides useful context for the next section s detailed summary of the legislative and regulatory activity in Almost half of the health care dollar in the United States comes from the government. One-of-three dollars originates with a single agency the Centers for Medicare and Medicaid Services. Both the aggregate dollars and the pervasive regulatory impact of the government are larger in health care than almost any other sector of our economy. Most bills that are introduced in Congress are never passed into law. They do, however, serve as a medium for debate and negotiation toward a future goal. Variations of the same bill are often introduced year after year until some agreeable part of it is subsumed into a larger piece of legislation and passed into law. For this reason, we discuss bills in this paper that have not passed and may never pass, but which provide an indication of the issues being debated and the potential directions for future law. Legislation that deals with competing interests is typically written at the high policy level, a point at which agreement can be accomplished. The laws that result when such bills get passed cannot easily be interpreted or enforced because they lack detail. This is the purpose of regulation. Translating laws into workable form falls to the various departments of the Administration which are typically commanded by the law to write enabling regulations. Regulations go through several stages in their development, including a required public comment period, which can take anywhere from a few months to several years. For example, the Administrative Simplification Law was written in and attached to several other bills before finally becoming law in 1996 as a Subtitle of the Health Insurance Portability and Accountability Act (HIPAA). Despite the command in the law that DHHS adopt standards within two years, the regulatory process took four years to produce the first final rules, which didn t become effective until 2003, a decade after the law was first drafted. Other rules implementing other standards are still being written and are not expected to become final until well after Of course, regulation can move more rapidly if there is a strong political will to move it along. 10

11 In the field of HIT, where technology changes monthly, it is difficult for members of Congress and regulators to shape the evolution of markets. It is possible however, for the legislative process to force progress. It is more difficult for it to track progress in a reasonable time, and often likely that laws oriented to tracking (as opposed to initiating change) will eventually end up slowing progress, as they become outdated and cannot be changed quickly. Finding the right level of detail is difficult in law and regulation and it forces us to look harder at ways to get cooperative consensus standards. For example, legislation that funds or rewards submission of clinical data in open standards could incentivize providers to submit data without locking them in to a particular technological platform. The sections below on regulatory issues are intended to make the reader aware of issues that must be resolved in the process of adding details in the regulation writing stage before the true impact of the law can be estimated and understood. Section 2: Legislative Successes of 2003 On December 8 th, 2003, President Bush signed into law historic Medicare legislation that put into motion the most significant changes to the Medicare program since its inception in One less noticed aspect of the bill included a number of important incremental changes that reflect increased interest in the adoption of HIT intended to improve the quality of health care delivered in this country. These provisions represent the first piece of electronic prescribing (e-prescribing) legislation enacted to date and thus signify a monumental step forward. As it turned out, the Medicare bill did what other bills in the past have failed to do -- allow for a primary vehicle in which to move the HIT agenda. Passage is important in another sense it allows public policy makers to move their attention onto issues such as quality and cost. As long as the prescription drug benefit was still preoccupying the public debate, there was little ability to get the attention of lawmakers on HIT. Passage of these HIT provisions should be deemed a success and considered as a truly notable sign of advancement of the HIT agenda. It is unlikely, however, that they will result in any immediate or fundamental changes to the US health care system. As discussed in the paper, neither Congress nor the Administration went as far as to implement a mandate to adopt information technology, to require any major changes in the context of Medicare, or to support any major new technology buying programs through appropriations. In its limitations, however, lies the direction and lessons for where we should move as an industry. This legislation also holds promise for the direction this country and its leadership can and should move around the adoption of HIT to improve patient safety, quality care, and the health care system in this country. Key HIT provisions in the Medicare Modernization Act of 2003 Electronic Prescribing Program - Standards development and adoption - Voluntary e-prescribing pilot program - Discretionary grants to providers - Financial incentives for e-prescribing adoption Medicare Management Performance Demonstration Project ( Pay for Performance Demo) Commission on Systemic Interoperability Council for Technology and Innovation Extension of Telemedicine Demonstration Project Chronic Care Improvement Program For the HIT provisions and sub-provisions discussed in this section, where necessary, the following are included: 1) an introduction to the provision and subject matter at hand; 2) summary of the specific HIT provision; 3) discussion of key questions and details that may need to be addressed through the regulatory process; and 4) observations and implications these provisions will have on the health care environment and/or industry. Electronic Prescribing- Section 101 The IOM s report To Err is Human was one of the first major studies to showcase both the severity and prevalence of medical errors in the US health care system. Many studies since this 1999 IOM report reiterated how broad reaching and pervasive the IBM Center for Healthcare Management 11

12 problem of medical errors is-- both in the inpatient and the ambulatory settings. Medication-related errors in particular were highlighted in the IOM s report as one of the most common types of medical errors and one of the greatest threats to patient safety. To address these concerns, computerized physician order entry (CPOE) and e-prescribing are held up as technologies that possess real potential to reduce drug related adverse events and greatly improve patient safety overall. Electronic Prescribing: Program Summary: The e-prescribing provision in the new Medicare law establishes an e-prescribing program to be used by physicians, pharmacies, and pharmacists who serve Medicare beneficiaries with Part D benefits. The program specifically provides for electronic transmission of information related to the following: the prescription, eligibility and benefits (including formulary and requirements for prior authorization), drug being dispensed, other drugs listed in medication history, drug-drug interactions, warnings or cautions, dosage adjustments, and lower cost drugs. The e-prescribing program under Medicare Part D is a voluntary program; however, the law requires that one year after release of the final standards (described below) any health care provider or pharmacy using e-prescribing and transmission under the Medicare program must do so in accordance with these final standards, as issued by the Secretary of DHHS. If a provider or pharmacy is not using electronic transmissions under the Medicare program, this provision does not require them to begin doing so. Electronic Prescribing: Standards Summary: The Secretary, with recommendations from the National Committee on Vital and Health Statistics (NCVHS) 1 must develop, adopt, recognize, or modify initial uniform e-prescribing standards no later than September 1, 2005, that will then be used in the voluntary pilot program (described below). NCVHS however, should develop its recommendations for these standards in consultation with key standards organizations, providers, hospitals, pharmacies, pharmacist, pharmacy benefit managers (PBMs), state pharmacy and state medicine boards, other federal agencies, and other experts on e-prescribing. In general, the e-prescribing standards should work to: 1) improve patient safety and quality of care for all patients; 2) improve efficiencies including costs savings in care delivery; 3) be compatible with other accepted HIT standards; 4) permit electronic exchange of drug labeling and drug listing information; 5) permit messaging if it relates to drug prescribing and quality assurance; 6) allow for designation of a particular dispending pharmacy; and 7) not impose undue administrative burden on health care professionals and pharmacies. The law also requires that after final e-prescribing standards are established, and at a time determined by the Secretary, the program will allow for electronic transmission of information related to the beneficiaries medical history and the covered prescription drug. Information transmitted under the e-prescribing program will only be disclosed however, if it meets HIPAA rules and requirements regarding the privacy of individually identifiable health information. Regulatory Issues: Standards Required for E-Prescribing 1) Will CMS look to external standards organizations including National Council of Prescription Drug Programs (NCPDP), Health Level 7 (HL7), and others to establish e-prescribing standards that: a) Are compatible with other accepted HIT standards; b) Carry an appropriate level of administrative responsibility as opposed to undue administrative burden; and c) Will improve efficiencies and cost savings in care delivery? 2) Will CMS follow a path similar to that of HIPAA implementation? Will the rules be issued in the required timeframes? What will be major lessons learned from HIPAA implementation and how will they be applied to the development and implementation of e-prescribing standards? 3) What type of information will CMS consider necessary and/or appropriate regarding beneficiaries medical history? Will CMS seek public comment in determining these standards in consideration of what providers will deem both acceptable and feasible? 4) Will funding be made available for implementing the provisions? 12

13 NCPDP is a non-profit, standards development organization that creates and promotes data interchange and processing standards for the pharmacy services sector of the health care industry. HL7 is a not-for-profit organization that sets health care technical standards specifically around clinical and administrative data. Electronic Prescribing: Pilot Program and Timeline Summary: The law directs the Secretary to launch a one-year voluntary pilot e-prescribing program beginning January 1, 2006, using the initial standards described earlier. The Secretary may decide areas where a pilot is not required given the presence of adequate industry experience. By April 1, 2007, the Secretary must evaluate the pilot project, report the results, and make recommendations on the program to Congress. The Secretary is required to create final uniform e-prescribing standards for release no later than April 1, These final standards will supercede any state laws and/or regulations that are contrary to the final standards, restrict the ability to carry out the e-prescribing program, or restrict electronic transmission of the required information for Medicare beneficiaries. The law also establishes a safe harbor from penalties under the Medicare anti-kickback statute and from the financial relationship requirements under Medicare for certain doctors, hospitals, and plans. Regulatory Issues: Implementation of E-Prescribing Pilot Program 1) How much money is there to run the specific pilot programs? 2) What is the focus and goal of the pilot program (e.g., test financial incentive approaches, assess program feasibility, evaluate provider acceptance)? How will the program fit with other statutory timelines in the bill? 3) Will recommendations about future programs be subject to a public comment period or will this be part of the evaluation? 4) How many pilot programs will CMS launch and what criteria will they use to determine appropriate geographic variation? 5) How will CMS interpret adequate industry experience and what criteria will be used to define areas that meet this description? Will CMS call upon e-prescribing experts to determine what constitutes adequate industry experience? 6) Will CMS work with AHRQ or external private sector entities to evaluate these pilot programs? Will CMS look to existing evaluations conducted in the private sector to determine appropriate and necessary criteria for evaluation? 7) How will CMS interpret the provisions regarding certain doctors, hospitals, and plans that are not subject to penalties under the Medicare anti-kickback statute or the financial relationship requirements under Medicare? What criteria will be developed and applied to determine those entities that are eligible and appropriate? Electronic Prescribing: Timeline Deadline for Secretary to develop/adopt standards for e-prescribing Launch 1 yr. voluntary e-prescribing pilot program; Plans can offer differential payments Evaluation results of pilot program due to Congress Deadline for Secretary to finalize and release standards All Medicare providers using e-prescribing must adopt finalized standards Jan 2004 Sept 1, 2005 Jan 1, 2006 Apr 1, 2007 Apr 1, 2008 Apr 2009 IBM Center for Healthcare Management 13

14 Electronic Prescribing: Grants Summary: The Secretary is authorized to make discretionary grants to providers to help assist with implementation of programs and defray costs. Costs can include the purchase, lease or installation of computer hardware or software, including handheld devices; upgrades and improvements to existing computer hardware, and/or software; and education or training for providers and staff on the use of technology for the e-prescribing program. The grant program includes a matching component that requires providers to contribute no less than 50 percent of the cost incurred in implementing the program. One grant will be awarded per provider or group and special consideration will be given to providers who serve a disproportionate number of Medicare patients or who serve a rural or underserved area. The provision authorizes the appropriation of $50 million for Fiscal Year (FY) 2007, and such sums as may be necessary for FY 2008 and FY However, unless Congress specifically appropriates these funds, beginning with the FY 2007 federal budget, they will not be available. Regulatory Issues: Discretionary Grant Awards 1) Which agency will have jurisdiction (e.g., AHRQ, HRSA, CMS)? How will the lead agency offer guidance and direction to providers seeking assistance with e-prescribing implementation and technology investments? 2) If CMS leads, should they provide resource assistance to providers through the Quality Improvement Organizations or other means (e.g. private sector organization)? 3) Will HRSA or CMS if serving as the lead agency collaborate and coordinate with AHRQ and utilize the HIT Resource Center to serve providers? (AHRQ is expected to announce their RFA for a HIT Resource Center in early 2004 with a grant award in fall of 2004.) 4) Will the lead agency maintain oversight to ensure that provider investments in technology and other allowable purchases are an appropriate use of federal matching dollars to create and support sustainable e-prescribing programs? 5) Will the lead agency detail in the program application process or elsewhere those technologies, functionalities, resources, or other types of training materials that providers should consider for purchase or will they refer providers to external entities? Electronic Prescribing: Financial Incentives Summary: Medicare Advantage plans may, beginning on or after January 1, 2006, provide separate or differential payment for providers participating in e- prescribing programs that meet the recognized standards. The additional payments can consider the cost for implementing the program and may be increased based on: 1) increase in formulary compliance, 2) decrease in costs, 3) reduction in adverse drug reactions, and 4) improvement in filing efficiencies. Regulatory Issues: Payment and Financial Incentives 1) Will CMS offer guidance and resource assistance to Medicare Advantage plans seeking information about financial incentive approaches to use with participating providers (both in terms of payment structurehow it will be paid out and dollar amount- how much will be paid out)? 2) What types of guidelines or limitations (if any) will CMS set around financial incentive payments to minimize variation across participating plans and providers? 3) Will CMS refer providers through the application process or other mechanism to examples of specific private sector programs in place that use different payment incentive approaches? Implications and Observations: E-Prescribing Provisions During the legislative process, much of the initial debate around e-prescribing provisions focused on the battle between mandatory and voluntary provisions. Stakeholders on both sides would agree that this was a dominant issue in the debate. In the end, the push was strong and the mandate went away-- although some consider the 2009 deadline just shy of a mandate at least in the standards arena. While the voluntary provisions will have some implications for the health care industry, the exact impact that this type of market- based solution will have on physician utilization and adoption of e-prescribing remains 14

15 to be seen. Below are further implications for the broader health care arena and observations about the e-prescribing provisions overall. Market-Based Solution Congress sent a clear message to the HIT industry no mandatory e-prescribing provisions and no requirements to adopt or use technology. At the same time, legislators did express an obvious and anticipated interest in supporting HIT through the promotion of real market-based incentives. It is clear that Congress, with virtually no additional money invested, would like the marketplace to test this approach to assess what can be accomplished in the context of budget neutrality (i.e., no additional expenditures) within the Medicare program. The underlying premise of this legislation is that Medicare Advantage plans will have an incentive to help physicians purchase e-prescribing technology because this technology will help to enforce formulary compliance and improve efficiencies, thus resulting in cost savings. If formulary compliance increases through use of the technology and twoway messaging with the physician, discounts from pharmaceutical manufacturers should increase, and these savings can help pay for the technology. Such success could become a real competitive differentiator for those plans that adopt the technology. Under the implementation timeline however, the likely broad scale adoption of e-prescribing is pushed out at least five to ten years. In general, the success of a market incentive (versus a mandate) in promoting adoption will depend on the plans economic decisions not necessarily their quality decisions regarding the technology. Adoption will depend on answers to questions such as the following: What will be the certainty of the promise of a return on investment, and will this drive physician behavior and technology adoption? How will PBMs and managed care plans respond? Will this ultimately reduce costs for PBMs, physicians, and ultimately consumers while still rewarding doctors? Willingness to Support Experimentation The federal government is often interested in sponsoring important demonstration (and pilot) projects typically through the primary DHHS agencies mentioned above, including CMS, AHRQ, and HRSA. Private granting organizations such as the Robert Wood Johnson Foundation and the California HealthCare Foundation also fund such programs. With these provisions and the pilot program, Congress and the Administration are invested in supporting and testing e-prescribing, allowing for some experimentation and trial, and looking to see the results. Future evaluations and evaluation dollars will be critical to understand the variation that emerges across e-prescribing programs both in terms of the success of different financial incentives and resource requirements. The health care community, providers, payers, and purchasers alike will be looking to the Secretary in April 2007 for the results and recommendations for moving forward. Limited Program Investment These provisions are a sign of interest and commitment by the Administration and Congress; however they are not a commitment of dollars. A limited amount of new money and resources will be available to these programs, both in terms of grant dollars and the number of demonstration programs that will be conducted. Congress may be proceeding very carefully and cautiously in its approach; the limited investment may also simply be a sign of HIT s importance at this point in time, when compared to other provisions in bill (e.g., drugs for seniors, subsidies to hospitals). In either case, with less money for technology and limited financial support for providers, it will be a longer road getting to program results, whether they are successes or failures. Provider Opportunities The grants and financial incentives included in the e-prescribing program are designed to provide incentives for health care providers to adopt technology. Changes in practice that result from technology adoption (e.g., reduced medication errors, increased efficiency) can positively impact patients and payers. Given this, providers may have a unique opportunity to develop competitive advantage through the use of this technology. IBM Center for Healthcare Management 15

16 As more employers and payers realize the value of HIT, providers and delivery systems offering this level of care will be desirable. Some employers are already giving their employees incentives, through reduced or waived deductibles, to encourage them to seek care with providers or delivery systems that adopt certain HIT or meet specific quality measures. Over the long term, we may likely see consumers driving changes in the market as patient volume is steered towards providers who have invested in HIT and made the commitment to providing safer, more efficient, and higher quality care. If this plays out well, these same providers are likely to be in a much better position to compete in the health care market place. Medicare Management Performance Demonstration- Section 649 In the past year, a number of programs and organizations such as Bridges to Excellence, Integrated Healthcare Association, Empire Blue Cross Blue Shield, Hannaford Bros., and Blue Shield of California have begun to roll out financial incentive programs that encourage providers and delivery systems to adopt HIT to improve patient safety and quality of care. Approaches being tested include bonus payments to physicians who meet certain quality measures using HIT; bonus payments to hospitals for adopting specific technology; and differences in consumer co-payment or deductibles intended to steer consumers to providers who have adopted HIT or achieved certain outcomes. While it is too early to know which approaches will work best because the provision of health care is a local proposition, it is unlikely that one single model will emerge. The broader goal of these efforts therefore, is to discover successful and effective models that are both adaptable and replicable. Summary: Under the Medicare Modernization Act, the Secretary will establish a three-year pay for performance demonstration project with physicians and Medicare beneficiaries in four sites across the United States with at least two in urban areas and one in a rural area. In the process, the Secretary will consult with private sector and non-profit groups that have previously or are currently undertaking similar activities to improve quality of care. The Medicare performance demonstration project is intended to support the adoption of HIT to promote continuity of care, stabilize medical conditions, prevent or minimize exacerbations of chronic conditions, and reduce adverse health outcomes. Physicians who treat a minimum number of Medicare beneficiaries (as specified by the Secretary) may participate in the demo if they: Meet certain practice standards including use of evidence based guidelines, Establish and maintain health care information for beneficiaries, and Agree to phase in over the three years: the use of HIT to manage clinical care and electronic reporting of clinical quality and outcomes measures data. The Secretary shall pay a per beneficiary amount to each participating physician who meets or exceeds the specific performance standards described above. QIOs will be responsible for enrolling physicians for the program and evaluating their performance under this section. QIOs will also provide technical assistance and education to physicians around HIT, practice guidelines, and clinical outcomes and measures. The program will be funded through Medicare Part B- the Federal Supplementary Medical Insurance Trust Fund; however the program must be budget neutral. One year following completion of the program, the Secretary must submit a report to Congress with recommendations for future activity. For the purposes of the demonstration project, HIT is defined as communication, clinical alerts and reminders, and other information technology that meets such functionality interoperability, and other standards as prescribed by the Secretary. Regulatory Issues: Implementation of Medicare Management Performance Demonstration 1) How will CMS define participant site? Will CMS determine how many patients must participate and how many providers can participate? 2) Will CMS determine or identify specific guidelines for adherence to the program or defer to QIOs for direction? 3) Will CMS mandate or suggest beneficiary health care information that is acceptable and necessary, defer to QIOs, or look to the private sector? 4) Will this information be addressed in the provider/site application, a proposed rule, or QIO guidance? 16