LEGISLATIVE PROPOSALS TO 

PROMOTE ELECTRONIC HEALTH 

RECORDS AND A SMARTER 

INFORMATION SYSTEM 

HEARING 

BEFORE THE 

SUBCOMMITTEE ON HEALTH 

OF THE 

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED NINTH CONGRESS 

SECOND SESSION 

MARCH 16, 2006 

Serial No. 109-114 

Printed for the use of the Committee on Energy and Commerce 

Available via the World Wide Web: http://www.access.gpo.gov/congress/house 

U.S. GOVERNMENT PRINTING OFFICE 

WASHINGTON : 2006 

For sale by the Superintendent of Documents, U.S. Government Printing Office 

Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC area (202) 512-1800 

Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001 

30-339PDF 
COMMITTEE ON ENERGY AND COMMERCE 

JOE BARTON, Texas, Chairman 

RALPH M. HALL, Texas 

MICHAEL BILIRAKIS, Florida 

 Vice Chairman 

FRED UPTON, Michigan 

CLIFF STEARNS, Florida 

PAUL E. GILLMOR, Ohio 

NATHAN DEAL, Georgia 

ED WHITFIELD, Kentucky 

CHARLIE NORWOOD, Georgia 

BARBARA CUBIN, Wyoming 

JOHN SHIMKUS, Illinois 

HEATHER WILSON, New Mexico 

JOHN B. SHADEGG, Arizona 

CHARLES W. “CHIP” PICKERING, Mississippi 

 Vice Chairman

VITO FOSSELLA, New York 

ROY BLUNT, Missouri

STEVE BUYER, Indiana 

GEORGE RADANOVICH, California 

CHARLES F. BASS, New Hampshire 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE FERGUSON, New Jersey 

MIKE ROGERS, Michigan 

C.L. “BUTCH” OTTER, Idaho 

SUE MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

JOHN D. DINGELL, Michigan 

 Ranking Member 

HENRY A. WAXMAN, California 

EDWARD J. MARKEY, Massachusetts 

RICK BOUCHER, Virginia 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

SHERROD BROWN, Ohio 

BART GORDON, Tennessee 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

ELIOT L. ENGEL, New York 

ALBERT R. WYNN, Maryland 

GENE GREEN, Texas 

TED STRICKLAND, Ohio 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MIKE DOYLE, Pennsylvania 

TOM ALLEN, Maine 

JIM DAVIS, Florida 

JAN SCHAKOWSKY, Illinois 

HILDA L. SOLIS, California 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

BUD ALBRIGHT, Staff Director 

DAVID CAVICKE, General Counsel

REID P. F. STUNTZ, Minority Staff Director and Chief Counsel

SUBCOMMITTEE ON HEALTH 

NATHAN DEAL, Georgia, Chairman 

RALPH M. HALL, Texas 

MICHAEL BILIRAKIS, Florida 

FRED UPTON, Michigan 

PAUL E. GILLMOR, Ohio 

CHARLIE NORWOOD, Georgia 

BARBARA CUBIN, Wyoming 

JOHN SHIMKUS, Illinois 

JOHN B. SHADEGG, Arizona 

CHARLES W. “CHIP” PICKERING, Mississippi 

STEVE BUYER, Indiana 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO, California 

MIKE FERGUSON, New Jersey 

MIKE ROGERS, Michigan 

SUE MYRICK, North Carolina 

MICHAEL C. BURGESS, Texas 

JOE BARTON, Texas 

 (EX OFFICIO)

SHERROD BROWN, Ohio 

 Ranking Member 

HENRY A. WAXMAN, California 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

BART GORDON, Tennessee 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

GENE GREEN, Texas 

TED STRICKLAND, Ohio 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

TOM ALLEN, Maine 

JIM DAVIS, Florida 

TAMMY BALDWIN, Wisconsin 

JOHN D. DINGELL, Michigan 

 (EX OFFICIO)

(II)
CONTENTS 

Page 

Testimony of: 

Nelson, Ivo, Healthcare Industry Leader, Global and Americas, IBM ............................ 17 

Braithwaite, William, Chief Clinical Officer, eHealth Initiative and Foundation for 

eHealth Initiative ........................................................................................................... 31 

Mertz, Alan, President, American Clinical Laboratory Association ................................. 40 

Vaughan, Bill, Senior Policy Analyst, Consumers Union ................................................. 45 

Newman, Mark, President and CEO, Evanston Northwestern Healthcare, on behalf of 

Healthcare Leadership Council ..................................................................................... 56 

Pyles, James C., Attorney Member, Powers, Pyles, Sutter and Verville, P.C. ................. 96 

Detmer, Dr. Don E., President and Chief Executive Officer, American Medical 

Informatics Association ................................................................................................ 127 

Additional material submitted for the record: 

Braithwaite, William, Chief Clinical Officer, eHealth Initiative and Foundation for 

eHealth Initiative, Response for the Record ................................................................. 154 

Mertz, Alan, President, American Clinical Laboratory Association, Response for the 

Record ........................................................................................................................... 155 

Newman, Mark, President and CEO, Evanston Northwestern Healthcare, on behalf of 

Healthcare Leadership Council, Response for the Record ........................................... 158 

Pyles, James C., Attorney Member, Powers, Pyles, Sutter and Verville, P.C., Response 

for the Record ................................................................................................................ 161 

Detmer, Dr. Don E., President and Chief Executive Officer, American Medical 

Informatics Association, Response for the Record ....................................................... 164 

Blue Cross and Blue Shield Association, prepared statement of ....................................... 166 

Peel, Deborah C., MD, Founder, Patient Privacy Rights Foundation, prepared 

statement of .................................................................................................................... 171 

Advanced Medical Technology Association, prepared statement of ................................. 177 

(III) 

(1) 

LEGISLATIVE PROPOSALS TO 

PROMOTE ELECTRONIC HEALTH 

RECORDS AND A SMARTER 

INFORMATION SYSTEM 

THURSDAY, MARCH 16, 2006 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON ENERGY AND COMMERCE, 

SUBCOMMITTEE ON HEALTH, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 10:10 a.m., in Room 

2123 of the Rayburn House Office Building, Hon. Nathan Deal 

(chairman) presiding. 

 Members present: Representatives Deal, Shadegg, Burgess, Barton 

(ex officio), Brown, Waxman, Green, Capps, Baldwin, and Gonzalez. 

 Staff present: Chuck Clapton, Chief Health Counsel; Melissa 

Bartlett, Counsel; Ryan Long, Counsel; Nandan Kenkeremath, Counsel; 

Bill O’Brien, Legislative Analyst; David Rosenfeld, Counsel; Brandon 

Clark, Policy Coordinator; Chad Grant, Legislative Clerk; John Ford, 

Minority Counsel; Chris Knauer, Minority Investigator; Purvee Kempf, 

Minority Counsel Amy Hall, Minority Professional Staff Member; 

Bridgett Taylor; Minority Professional Staff Member; Jessica McNiece, 

Minority Research Assistant; and Jonathan Brater, Minority Staff 

Assistant. 

MR. DEAL. I will call the hearing to order. We are pleased to have 

all of you with us today, and certainly another distinguished panel for 

this hearing. Let me tell you at the outset that this is one of those days 

where we have a lot of votes on the Floor. In fact, we are going to be 

interrupted almost at the point we begin today with a series of about 10 

votes on amendments that were debated yesterday, and we’ll be on the 

Floor for an immediate vote this morning. 

 We thought we would try to get started and call the committee 

hearing to order and maybe get in a few opening statements before we 

have to leave. We will try to accommodate your time constraints 

because you are our guests and we appreciate your presence with us 

today. We also have a great deal of interest in the subject matter of this 

hearing and in the testimony that is going to be presented. We will have 

several members of the full committee who are not members of our 

Health Subcommittee who will probably be joining us, and I invite them 
2

to join us on the dais. I would ask unanimous consent for them to be 

allowed to submit their written statements for the record, and without 

objection that is so ordered. 

 There may come a time in the questioning stage where, depending on 

how long we have been going in this hearing and the availability of time, 

that we will address the issue of their ability to ask questions at that point 

in the hearing process. We would certainly at this point ask unanimous 

consent for those members of the full committee to be allowed to submit 

written questions for the record in the event time does not allow their 

oral questions, and without objection that is so ordered. 

 I will now recognize myself for an opening statement. As I said, we 

are pleased to have such a distinguished panel of guests with us today, 

and I look forward to your testimony on a subject that I think is certainly 

at the very top of most people’s concerns when we talk about healthcare 

reform. The use of better information technology and healthcare holds 

the potential not only to save lives but also money. In the creation of an 

electronic system to track medical records hopefully we will reduce 

medical errors and help eliminate inefficiencies and waste in the current 

system. 

 These systems hold a potential to significantly improve healthcare by 

eliminating illegible handwritten prescriptions, providing immediate 

access to laboratory test results, and making a patient’s full medical 

history available to their treating physician no matter where that patient 

may seek treatment. As many of you are aware, several bills have 

already been introduced in Congress to deal with this general subject 

matter of new technologies. These proposals reflect a broad range of 

ideas about what can be done to create the proper incentives to encourage 

more healthcare providers to acquire and use healthcare information 

technology. 

 This hearing is hopefully going to be the first in a series of hearings 

to explain these proposals and explore what actions Congress needs to 

take in this area. However, we need to be cautious of dramatic 

legislative proposals which largely seek to regulate this budding 

technology area. Innovators, investors, healthcare providers, healthcare 

payment systems and patients will drive these changes. As a guiding 

principle, Congress should do nothing that would impede or limit 

reforms which are already transforming the market place. The President 

and the Health and Human Services Secretary Michael Leavitt, have both 

shown broad leadership in promoting this great discussion and 

demonstration and initial activities that hopefully will be helpful to our 

future. 

 We are also seeing many hospitals, physicians, pharmacies, and 

payers moving forward in the implementation of this technology. We 
3

neither want to interfere with this effort nor overstate the government’s 

role in innovations, applications, or basic investment decisions. 

Ultimately investments and the products, training, and activities to 

promote the use of structured information will happen piece by piece and 

not by a grand government design. We must also continue to provide 

patients with the assurance that their personal medical records will 

remain private and not be subject to inappropriate disclosures. 

 Such protections must also balance the need to be realistic and 

workable so that patients can reap the benefits of better healthcare 

through the use of IT. The adoption of new technologies holds the 

potential to improve accountability and empower patients with greater 

access to their own medical records. At the same time, safeguards must 

be provided to prevent hackers and other unauthorized persons from 

gaining access to confidential medical records. As we move forward, let 

us look at the many legislative proposals to promote electronic health 

records of health information technology in a cautious fashion. 

Hopefully, we in Congress can be helpful and not unintentionally slow 

down or misdirect the growth in the many new innovations and 

applications to come. 

 Again, I welcome our witnesses and thank you for your participation. 

And in the absence of Mr. Brown, I am going to recognize Mr. Waxman 

for an opening statement. 

 [The prepared statement of Hon. Nathan Deal follows:] 

PREPARED STATEMENT OF THE HON. NATHAN DEAL, CHAIRMAN, SUBCOMMITTEE ON 

HEALTH

3⁄4 The Committee will come to order, and the Chair recognizes himself for an 

opening statement. 

3⁄4 I am proud to say that we have a distinguished and expert panel of witnesses 

appearing before us today that will help us explore how to best increase the 

proper utilization of information systems in our healthcare delivery system. 

3⁄4 The use of better information technology in healthcare holds the potential to 

save lives as well as money. The creation of an electronic system to track 

medical records will sharply reduce the number of medical errors and help 

eliminate inefficiencies and waste in the system. 

3⁄4 These systems hold the potential to significantly improve healthcare by 

eliminating illegible handwritten prescriptions, providing immediate access to 

laboratory test results and making a patient’s full medical history available to 

their treating physician no matter where that patient seeks treatment. 

3⁄4 Several bills have been introduced with the intent of helping speed the adoption 

of these new technologies. 

3⁄4 These proposals reflect a broad range of ideas about what can be done to create 

the proper incentives to encourage more healthcare providers to acquire and use 

health information technology. 

3⁄4 This hearing is hopefully going to be the first in a series of hearings to examine 

these proposals and explore what actions Congress needs to take in this area. 
4

3⁄4 However, we need to be cautious of dramatic legislative proposals which 

largely seek to regulate this budding technology area. 

3⁄4 Innovators, investors, healthcare providers, healthcare payment systems, and 

patients will drive these changes. 

3⁄4 As a guiding principle, Congress should do nothing that would impede or limit 

reforms which are already transforming this marketplace. 

3⁄4 The President and the Health and Human Services Secretary Michael Leavitt 

have both shown broad leadership in promoting the many discussions, 

demonstrations, and initial activities that will be helpful for our future. 

3⁄4 We are also seeing many hospitals, physicians, pharmacies, and payers moving 

forward in the implementation of this technology. 

3⁄4 We neither want to interfere with this effort nor overstate the government’s role 

in innovations, applications, or basic investment decisions. 

3⁄4 Ultimately, investments in the products, training and activities to promote the 

use of structured information will happen piece by piece and not by a grand 

government design. 

3⁄4 We must also continue to provide patients with the assurance that their personal 

medical records will remain private and not be subject to inappropriate 

disclosures. 

3⁄4 Such protections must also balance the need to be realistic and workable so that 

patients can reap the benefits of better healthcare through the use of IT. 

3⁄4 The adoption of new technologies holds the potential to improve accountability 

and empower patients with greater access to their own medical records. 

3⁄4 At the same time safeguards must be provided to prevent hackers and other 

unauthorized persons from gaining access to confidential medical records. 

3⁄4 As we move forward, let’s look at the many legislative proposals to promote 

electronic health records of health information technology cautiously. 

3⁄4 Hopefully, we in Congress can be helpful and not unintentionally slow down or 

misdirect the growth in the many new innovations and applications to come. 

3⁄4 Again, I welcome our witnesses and thank them for their participation. 

3⁄4 I now recognize my friend from Ohio, Mr. Brown, for five minutes for his 

opening statement. 

 MR. WAXMAN. Thank you, Mr. Chairman. I appreciate you holding 

this hearing. It is an important issue. As we look forward to electronic 

health records and promoting smarter information systems, I want to 

raise the same caution that you just did. Computerized medical records 

pose a threat to one of the most basic privacy rights that an individual 

can have. Basic medical and genetic information should not be shared 

without meaningful informed consent, but even with consent protections 

against release of information, the right to be informed of any breach of 

privacy, the right to have access to one’s own information and strong 

protections against the discriminatory use of the information are all 

critical. 

 Further, the maintenance of State laws that protect privacy should be 

a bedrock principle. We cannot take such comfort in our Federal rules 

that we can afford to eliminate any additional protections. And, finally, I 

cannot help but comment on the irony that we would even contemplate 

limiting State protections when we have so clearly failed at the Federal 
5

level to adopt legislation that assures basic protections against 

discrimination on the basis of genetic information. This committee has 

jurisdiction in this area and it should exercise it. It is an important one to 

keep in mind. As we look at the positive side of it, we should also 

recognize that there is a potential negative side to this new computerized 

health world. Thank you, and I yield back the balance of my time. 

 MR. DEAL. Mr. Shadegg, you are recognized for an opening 

statement. 

 MR. SHADEGG. Thank you, Mr. Chairman, and I want to 

compliment you on the legislation you put in this area. I would echo the 

remarks you made in your opening statement. I will not make my own 

opening statement other than to say that while there are important gains 

that can be made in this area, my personal belief is we ought to also be 

looking at giving consumers more choice. Choice works in so many 

other places, and in the healthcare field we have given consumers 

virtually no choice. Their healthcare plan is selected by their employer 

in the vast majority of cases. It is handed to them from their doctor. 

They are told who their doctor is in any given area, and I believe we have 

taken them too much out of the equation. And it is critical while the 

gains we can make here are very important and need to be pursued, and I 

compliment the bill you have, we also need to be looking at advancing 

choice and healthcare to the greatest degree possible. With that, I yield 

back. 

 MR. DEAL. I thank the gentleman. Ms. Capps, you are recognized 

for an opening statement. 

 MS. CAPPS. Thank you, Mr. Chairman, and I want to thank you also. 

I am pleased that we are holding hearings on health information 

technology because I believe that facilitating better sharing of 

information between members of the healthcare community is a very 

important aspect of improving patient safety and quality of care. I am 

very excited to hear from our witnesses today, and I thank each of you 

for coming. I am excited by the prospect of eliminating unnecessary 

procedures and duplication of examinations or lab work that is often 

caused because of the inadequate filing and information transfer. 

 I am optimistic about how utilizing health information technology 

has the possibility of removing many of the administrative burdens that 

healthcare professionals, especially nurses, must devote their time to. 

Thinking of the people who are carrying the burden of delivery of care 

within our institutions and settings and the time that is so often taken 

away from the patient to fill out the duplicative records, and each time 

that is done it makes the possibility of error creep in. As we all know, 

the current nursing shortage crisis is only continuing to worsen. Less 

time spend filling out paperwork, as I said, or combing through extensive 
6

medical histories means that nurses and other patient care providers can 

spend more time with their patients. That is going to mean better 

healthcare for patients. 

 I am also interested in how health information technology has the 

potential to reduce costly, often fatal, medical errors such as adverse 

drug reactions, interactions. The prospects for expanding the use of 

current information technology extend far beyond how we treat current 

patients also. Finally, I am hopeful about how digitalizing records may 

help serve the medical research community as long as the privacy 

protections are maintained, and that is a big as long as. But I think the 

possibility exists for doing this, and I want us to explore the ways that 

technology can help us with the privacy protections, as well as accessing 

medical research which is imperative for future developments in 

healthcare. 

 As we work to reap the potential benefits of health IT, we will face 

challenges in developing a method that is cost effective and accessible to 

all providers. Furthermore, while evaluating the different paths toward 

increasing the usage and improving the interoperability of health IT, we 

must remain concerned, as I said, about protecting patient privacy. As 

always, expanding the use of information technology systems lends itself 

to greater access of information in both positive and negative ways. We 

must ensure safeguards are in place which protects information from 

being accessed by the wrong parties or being used to discriminate against 

individuals. So I look forward to hearing from our witnesses today on 

how we can create a system that is beneficial to everyone involved in the 

provision of healthcare, keeping our bottom line to improve treatment 

and protect patient privacy. I yield back the balance of my time. 

 MR. DEAL. I thank the gentlelady, and am pleased to recognize my 

friend, Mr. Brown, the Ranking Member of the Health Subcommittee. 

 MR. BROWN. Thank you, Mr. Chairman. I apologize for being late 

and, thank the witnesses, all of you, for joining us today. We have all 

heard according to the Institute of Medicine report to err is human. 

Studies have found that deaths from medical errors range from estimates 

of 44,000 a year to as high as 98,000. Among the reasons cited in the 

report for such extremely high numbers of errors are issues like illegible 

writing in medical records, and the lack of coordination and 

communication across providers. I am pleased the committee has called 

this hearing today because increased use of electronic medical records is 

a very promising means by which to address these errors, cut down on 

the number of unnecessary deaths in this country, as well as improve the 

quality of healthcare. 

 Electronic medical records provide the ability to coordinate care 

across different healthcare sites. This means your general practitioner 
7

can keep track of what treatments you are receiving from different 

specialists, helping to oversee your care, and make sure you get the 

services that you need. They can reduce healthcare administrative costs 

as duplicate folders of paper records are consolidated into one electronic 

record accessible from any computer in the office. Hospitals and doctor 

offices can establish support systems for their doctors to help them make 

the best decisions for their patients. Right at the bedside doctors can 

check for patient allergies and whether they have a family history of 

stroke, for example. 

 According to the IOM, health information technology is a key step to 

improving the quality of healthcare. Finally, the electronic medical 

records means that records can travel with patients backed up in case of 

emergencies. Katrina highlighted this point clearly in the wake of the 

hurricane. Thousands of displaced individuals with serious medical 

conditions found themselves with no access to their medical records. 

Paper records in doctor offices were unreachable or in many cases were 

destroyed. Patients had no record of what medications they had been 

taking, what dosage, what treatments they were receiving, whether these 

treatments had been effective or not. Breaks in care can be deadly for 

individuals with conditions like some forms of cancer or HIV/AIDS that 

require ongoing and regular treatment. 

 In a system of paper records stored on shelves in doctors’ offices, 

displaced residents find themselves having to try and re-create years of 

medical records. In circumstances like these, electronic medical records 

can actually protect patients’ health by allowing doctors to immediately 

identify healthcare needs and provide treatment in a timely manner. I do 

want to be clear, however, that while there are many benefits to increased 

implementation of health information technology we have to be very 

cautious about how we move forward. Over time these systems may 

result in savings for providers and for patients. Their development and 

implementation is a costly process, one that can be a heavy burden for 

family physicians and their practices. 

 We should never mandate the implementation of costly technology 

without adequate support, particularly for small physician practices that 

may not have the necessary capital. Finally, there must be adequate 

protections for patient privacy. We have all read the stories about stolen 

bank records in the last few months. Imagine the cases of stolen medical 

records. My own State of Ohio has enacted a series of laws expressly 

aimed at protecting a patient’s confidentiality, a patient’s ability to 

determine with whom and how medical information is shared in a right 

of action in cases of inappropriate disclosure. In particular, the State has 

enacted laws protecting information concerning birth defects, 

HIV/AIDS, and genetic tests. These are important protections. The last 
8

thing we want to do is see an individual avoiding necessary and 

important medical care for fear of lack of confidentiality. 

 We need to put resources in to developing standards and guidance to 

assist physicians and medical institutions through the process of 

developing electronic medical record systems. However, we have to be 

keenly aware of finding an appropriate balance between utilizing 

technology and protecting patients. I look forward to hearing from all of 

our witnesses about how to address these issues. Thank you, Mr. 

Chairman. 

 MR. DEAL. I thank the gentleman. I recognize Dr. Burgess from 

Texas, a member of our subcommittee, for an opening statement. 

 MR. BURGESS. Thank you, Mr. Chairman. I appreciate you calling 

this hearing today. I do have an opening statement I will submit for the 

record, but I would just like to make a few observations. A few years 

ago in a graduate level course that I took so that I would be better able to 

understand the business work as I practiced medicine, I learned a 

startling fact that the insurance industry spent between 7 and 12 percent 

of their budget on information technology. The average small office 

such as mine spent an average of 1 to 3 percent. Clearly, we could not 

keep up at that rate. 

 We had an opportunity in this country with the Y2K, most people do 

not remember that now, but it was a big deal in the health industry for a 

time, and I used that opportunity to upgrade the computer services in my 

office over the objection of my partners because it did not return any real 

value. And it is going to be a process of educating physicians, 

particularly physicians my age, who did not grow up in the computer 

world to recognize what that value is. But that brings me to another 

point, and it is not really related to this discussion this morning but it is 

important in that we are faced with the prospect of continually cutting 

Medicare reimbursement for physicians year over year under the SGR 

formula. 

 And, Mr. Chairman, we have to seriously deal with that because we 

are going to drive out the best and brightest physicians, and I am 

referring to physicians my age, the 40 to 50-year-old doctor who is going 

to be driven away from the Medicare system. If we are going to spend 

all of this money, all of this investment, in information technology, you 

want to keep your best and brightest involved in the field. So people 

have said we cannot tackle it this year. It is just too big a bite, but I 

submit that there is no better time than the present to do that. The 

Ranking Member brought up health privacy issues with HIV and birth 

defects. As we move into the genomic it is going to become even more 

critical, and we have to be able to assure people, the public, that their 
9

medical information will be private and not readily dispersible across 

half of the civilized world. 

 And then finally, Mr. Chairman, I just have this observation. In the 

21st Century it almost makes no sense that we still fight things the way 

we do here in Congress, and while I appreciate you having this hearing 

here this morning, to me it just underscores that there is no committee on 

health in the United States Congress. The jurisdiction is divvied up 

between several committees, and I think it is time for the Committee on 

Energy and Commerce to assert its rightful place and take all of that 

jurisdiction so we can deal with these problems without having to go 

through stove pipes. With that, I will yield back. 

 MR. DEAL. I thank the gentleman. Another member from Texas, 

Mr. Green, is recognized for an opening statement. 

 MR. GREEN. Thank you, Mr. Chairman, for holding a hearing on 

electronic health records and legislation introduced by our colleagues to 

facilitate further development of health information. I would like my full 

statement to be placed in the record, and I will just talk about two 

incidents recently. When we had Hurricane Katrina and Rita, Katrina in 

Louisiana and obviously Rita in southeast Texas and southwest 

Louisiana, there were a couple of events that could show how important 

electronic records were. As both hurricanes approached the area and 

everyone fled, including a lot of our healthcare providers who closed 

their facilities, at the time they had to figure out how they were going to 

store their records. The benefit of electronic records is incalculable for 

providers who had them in place. 

 In Beaumont, Texas, a 19-doctor practice knew that Rita was coming 

and backed up their computer data with a server in a Dallas hotel room. 

And a week after Rita hit the practice reopened and all their data, 

including their patients’ electronic records were there, and it reappeared 

as if nothing happened. The hurricanes also highlighted the need for 

interoperability within the EHRs. In my hometown of Houston where 

we received 150,000 residents from New Orleans, it was so chaotic to try 

to have people come in and get them rediagnosed if they did not have 

their medication. You did not know what dosage. But the VA stood out. 

If we received a veteran from Louisiana the VA medical professionals at 

Houston’s VA medical hospital were able to access the records for these 

evacuees who had typically received care at the VA hospital in 

Louisiana. 

 Mr. Chairman, that shows in the real world, particularly in an 

emergency situation disaster, how this can be done. And I think we need 

to do it. I know it is costly, but the further we move it along the better it 

will be, not only for I think the physicians who practice for the sanctity 
10

of their records along with our privacy concerns, but also for the delivery 

of medicine to our constituents. Thank you. 

 MR. DEAL. I thank the gentleman. Ms. Baldwin, you are recognized 

for an opening statement. 

 MS. BALDWIN. Thank you, Mr. Chairman. I am happy that we are 

taking this time to focus on healthcare IT. Like other Members who 

have spoken already this morning, I want to add my voice of support for 

implementation of healthcare IT. It is the healthcare topic that policy 

makers love to love these days. And it is easy to understand why 

healthcare IT is so popular. The potential for improving patient care, 

making better use of scarce resources, and collecting data for research is 

huge. Imagine the opportunities for medical collaboration that healthcare 

IT could provide for a rural doctor who needs to consult with a specialist 

who is hundreds, perhaps even thousands, of miles away or imagine the 

immensely powerful research data that could be de-identified and then 

analyzed to track the spread of Avian flu or widespread negative side 

effects of a popular drug. So I am encouraged that we are taking up this 

important topic and I hope that we will be able to have some constructive 

discussions on issues involving advancing healthcare IT. 

 But I also think we need to be very up front and clear about the 

issues involved and the potential pitfalls. From a provider standpoint 

there are many barriers to the adoption of healthcare IT. These barriers 

may be financial, technical, cultural, or legal, and these are all worthy of 

serious consideration discussing only the inter-operability or the 

interconnectivity issue could take us hours to fully understand it, perhaps 

years to reach agreement on. From the patient perspective, while 

patients tend to have enormous potential gains from increased access to 

and frankly ownership of their own health records, there are also 

potential pitfalls, specifically surrounding how to craft a healthcare IT 

system that insures patient privacy protections are not sacrificed in the 

name of increased efficiency. 

 Lastly, I think we need to be very cognizant of avoiding the situation 

where we have healthcare IT haves and have nots. Healthcare IT 

systems are expensive, and those who spend the money to put healthcare 

IT systems into place are not always the same people who benefit from 

these systems. So we need to keep moving forward keeping this in mind 

and looking for ways to bring responsible privacy protecting healthcare 

IT systems to all Americans. Thank you, Mr. Chairman, for holding this 

hearing. 

 [Additional statement submitted for the record follow:] 
11

PREPARED STATEMENT OF THE HON JOE BARTON, CHAIRMAN, COMMITTEE ON ENERGY AND 

COMMERCE

 Thank you, Chairman Deal, for holding this important hearing. Medical records 

haven’t changed much since doctors and paper found each other. I suppose the filing 

cabinet was regarded as a giant advance in technology. But masses of fragile paper 

stuffed into large pieces of furniture are an anachronism here at the dawn of the 

information age. 

 We’re here today to discuss the next great advance. Electronic health records will 

mean more than convenience for doctors’ assistants. They will mean faster, better, less 

expensive care, with fewer of the medical errors that harm patients instead of help them. 

I want to applaud President Bush and Secretary Leavitt for their leadership on this issue. 

I also want to recognize the many activities at HHS and in the private sector that will help 

speed the adoption of health information technology. Several Members have legislative 

proposals to help promote electronic health records and promote smarter information 

systems. We will review these ideas and see if there are areas where the Federal 

government can be helpful. 

This isn’t about the government deciding what’s best for you, and then forcing it 

down the private sector’s throat. The private sector will also play an important role in the 

development of smarter information systems. Any investment of time, resources, or 

money needs to provide a return on investment in health care quality and costs. When 

the utility is there, the investments will follow. It is very likely some elements of 

electronic health records will be in more standard use in the near future. I am optimistic, 

for example, about greater near-term adoption of e-prescribing and electronic reporting of 

laboratory results. Other elements may take longer. 

As we review our current regulatory programs, we need to make sure that 

regulations promote improved coordination of care. This may mean looking at things 

like government payment policies and Stark and Anti-kickback provisions. The 

government may be able to assist the private sector in encouraging the harmonization of 

interoperability standards. No one should, however, see this as an easy task. 

I look forward to hearing from today’s witnesses and to try to identify legislative 

provisions that are clearly helpful, mindful of the appropriately limited role of the Federal 

government in choosing among innovations in technology. 

PREPARED STATEMENT OF THE HON. JOHN D. DINGELL, A REPRESENTATIVE IN CONGRESS 

FROM THE STATE OF MICHIGAN

Mr. Chairman, thank you for holding this hearing on Health Information 

Technology. Electronic medical records, electronic prescribing, decision support 

services, and the ability for systems to exchange information make it easier for physicians 

to do their job and patients to have more coordinated care. But this technology creates 

new challenges for keeping an individual’s information private and protected from 

disclosure. And is it necessary to compromise other patient protections in order to 

encourage the use of health information technology? 

First, over the past week, one of the biggest security breaches occurred when pin 

numbers for many top banks in the world were compromised. Yet loss of money does 

not compare to the irreparable damage that can result from sensitive health information, 

such as mental illness records, HIV/AIDs status, or genetic medical histories, being 

compromised. 

In order to successfully implement electronic health records, patient concerns need 

to be addressed at every level. Patients are worried about the privacy and security of 

their health information, whether they have the right to decide to keep sensitive 

information out of the network, having access to their own records, and having control 
12

over how the information is used. Providers and health plans say they want to expand 

health information technology to get better quality care and to coordinate care for 

patients. But without including patients in the process of developing a national health 

information infrastructure and addressing their needs, we will not succeed in having a 

system that patients feel comfortable taking part in and using. 

Second, do patient protections need to be sacrificed? Representative Nancy Johnson 

and Subcommittee Chairman Deal have introduced a health information technology bill 

that creates an exemption from Federal fraud and abuse laws. This broad exemption 

would allow hospitals and health plans to give away free health information technology 

and services to physicians. Could this lead to biased decision-making by physicians 

about where to send patients who need hospital care? Do we really need to weaken the 

laws that protect vulnerable patients against abusive activities at a time when they need 

health care? 

Finally, I note that a serious commitment to health information technology means 

putting funding behind our proposals, making available grants, loan programs, or 

incentive payments through Medicare and Medicaid. Without funding, we are merely 

providing lip service to this very important effort. 

I look forward to the testimony the witnesses will present today. Thank you. 

PREPARED STATEMENT OF THE HON. TOM ALLEN, A REPRESENTATIVE IN CONGRESS FROM 

THE STATE OF MAINE

Mr. Chairman, thank you for calling this hearing today to examine the current state 

of health information technology. Advances in HIT has shown great promise in 

improving the quality of health care, lowering costs, and reducing medical errors. 

Maine has been at the forefront of adopting HIT. It is one of the first states to 

implement a statewide electronic health record-sharing system. 

In January 2006, the board of directors of the “Maine Health Information Network 

Technology System” formalized a not-for-profit organization to implement an 

“Interoperable Health Information Network,” which is slated to be in place by 2010. This 

electronic medical records system will bring critical medical data to physicians and other 

health care providers across the state and provide immediate and universal access to key 

medical information. 

Having a state-wide electronic medical records system in place will ensure better, 

safer and more cost-effective care. 

As we focus our attention on efforts to bolster the adoption of HIT nationwide and 

consider specific legislative proposals, I urge my colleagues to first “do no harm.” We 

need to ensure that current patient privacy standards are not eroded. Consumers need to 

know that the confidentiality and security of their medical records will be guaranteed. 

PREPARED STATEMENT OF THE HON. TIM MURPHY, A REPRESENTATIVE IN CONGRESS FROM 

THE STATE OF PENNSYLVANIA

Thank you Mr. Chairman. 

 As a psychologist, I have experienced a great deal of success in bringing people 

together. However, perhaps my greatest achievement was hosting a press conference 

when Senator Hillary Rodham Clinton (D-NY) and former Speaker Newt Gingrich (RGA) stood side by side to save tens of thousand of lives and hundred of billions of 

dollars. In May of last year, Senator Clinton and former Speaker Gingrich attended a 

kick-off ceremony to discuss my introduction of the first health information technology 

(Health IT) legislation of its kind aimed at dramatically transforming the way health care 

is delivered in this country. The 21st Century Health Information Act (H.R. 2234) 
13

promotes the move towards secure, confidential electronic health records and 

interoperable regional health information networks. 

 I was pleased to work with my colleagues including Energy and Commerce Health 

Subcommittee Chairman Deal (R-GA), Ways and Means Health Subcommittee Chair 

Nancy Johnson (R-CT) and U.S. Department of Health and Human Service Secretary 

Michael Leavitt on legislative proposals to ensure that our 18th century paper file system 

catches up with our 21st century medical care. Many of the provisions from my 

legislation including a Stark exemption to allow hospitals to buy this lifesaving 

technology for their doctors was incorporated into H.R. 4157, the Health Information 

Technology Promotion Act and I am proud to cosponsor this legislation before the 

Subcommittee today. 

 Health IT is not computers, wires, hardware, software, and PDAs, it is fewer 

errors, less infections and mistakes, lower cost, better quality and a higher standard of 

care. It’s as simple as that. 

Today, voluminous paper medical records are frequently scattered between multiple 

hospitals and doctors’ offices resulting in the likelihood that important records could be 

lost or not retrieved when doctors need to be making informed decisions. One study 

found that one in seven medical records was missing vital patient information. The 

paper-based, often incomplete, medical record-keeping system used by most health care 

providers leads to redundant tests, medical errors, and misdiagnoses. All told, the RAND 

Corporation reported these critical errors add $162 billion in health care costs per year. 

Electronic medical records (EMRs) and electronic prescribing can reduce costly medical 

and medication errors, while quickly and securely being able to provide a patient’s 

medical records and tests at a moments notice. 

It is my hope that this hearing will focus on continued concerns over protecting 

patient privacy, interoperable standards to avoid a ‘Tower of Babel’ where health systems 

can not speak to each other and leveraging technology to improve the efficiency, quality 

and safety of the health care system. Every day that we delay implementation is costing 

lives and money. 

 Thank you, Mr. Chairman for allowing me to participate in today’s hearing, I look 

forward to working with you to transform health care for the 21st Century. 

PREPARED STATEMENT OF THE HON. FRED UPTON, A REPRESENTATIVE IN CONGRESS FROM 

THE STATE OF MICHIGAN

Mr. Chairman, I am encouraged that we are taking this big step forward today to 

examine and evaluate what needs to be done legislatively to foster the rapid development 

and dissemination of health information technology, including electronic medical 

records, and to do this in a way that will not impede further technological advances. 

We’ve got some tough nuts to crack. Protecting patient privacy, modifying anti-kickback 

laws to allow the development of HIT networks, and modernizing our coding systems are 

just three areas that come to mind immediately. 

 As an original cosponsor of H.R. 4157, the Health Information Technology 

Promotion Act, that you and Mrs., Johnson introduced, I think the bill gives us a solid 

starting point for progress toward a 21st Century health care delivery system—a system of 

efficient, coordinated, cost-effective and high-quality care. While we are second to none 

in the world when it comes to medical innovation, we have a system that is fragmented, 

vulnerable, inefficient, and fraught with preventable medical errors. We’ve got some 

catching up to do, to say the least. 

 Perhaps nothing offers a more compelling example of the pressing need for the 

widespread use of electronic medical records and health information technology than the 

aftermath of Hurricane Katrina. Hundreds of thousands of residents were displaced from 

their homes, many fleeing with only the clothes on their backs, and living in shelters and 
14

temporary housing across the country. Neither the evacuees nor their new health care 

providers had access to their paper medical records, many of which were destroyed. At 

least 40 percent of evacuees were taking prescription medications before the storm, and 

many more needed medications after it. Because our nation’s pharmacies have been in 

the forefront of electronic medical records and health information technology, five days 

into the disaster, a website, KatrinaHealth.org, was in the works, and shortly, doctors and 

pharmacists across the country could go online and find out what medications many of 

the evacuees they were seeing were taking and how that might affect any new 

medications they were thinking of prescribing. 

 Meanwhile, back in the Gulf, hospital roofs were dotted with what sodden paper 

records may have survived, weighted down with stones, and drying out in the sun. 

 MR. DEAL. I thank the gentlelady. And, Mr. Gonzalez, a member of 

the full committee, we welcome him to the dais as well. Thank you for 

being here. It is my pleasure now to introduce our distinguished panel, 

and we are just about to be interrupted with these votes but I will try to 

get your introductions in before that time. First of all, Mr. Ivo Nelson, 

Healthcare Industry Leader with IBM; Dr. William Braithwaite, who is 

the Chief Clinical Officer of eHealth Initiative and Foundation for 

eHealth Initiative; Mr. Alan Mertz, the President of American Clinical 

Laboratory Association; Mr. Bill Vaughan, Senior Policy Analyst at 

Consumers Union; Mr. Mark Neaman, President and CEO, Evanston 

Northwestern Healthcare; Mr. James C. Pyles, Attorney and member of a 

firm here in Washington, D.C.; and Dr. Don Detmer, President and Chief 

Executive Officer of American Medical Informatics Association in 

Maryland. 

 Gentlemen, we are pleased to have you here, and how about that for 

timing. We will let the buzzer ring for its required period of time here, 

and we have five more buzzers to go and they will start in just a second. 

But, Mr. Nelson, we will at least try to get your opening statement in. 

Let us wait for these bells to ring again. Mr. Nelson, you may proceed. 

STATEMENTS OF IVO NELSON, HEALTHCARE INDUSTRY 

LEADER, GLOBAL AND AMERICAS, IBM; WILLIAM 

BRAITHWAITE, M.D., Ph.D., CHIEF CLINICAL OFFICER, 

eHEALTH INITIATIVE AND FOUNDATION FOR eHEALTH 

INITIATIVE; ALAN MERTZ, PRESIDENT, AMERICAN 

CLINICAL LABORATORY ASSOCIATION; BILL 

VAUGHAN, SENIOR POLICY ANALYST, CONSUMERS 

UNION; MARK NEAMAN, PRESIDENT AND CEO, 

EVANSTON NORTHWESTERN HEALTHCARE; JAMES C. 

PYLES, ATTORNEY MEMBER, POWERS, PYLES, SUTTER 

AND VERVILLE, P.C.; AND DON E. DETMER, PRESIDENT 

AND CHIEF EXECUTIVE OFFICER, AMERICAN MEDICAL 

INFORMATICS ASSOCIATION 
15

MR. NELSON. Thank you, Chairman Deal, and members of the 

subcommittee. My name is Ivo Nelson. I am actually here from Texas 

so I feel quite at home with the people that are here today. I do lead the 

IBM Healthcare Business Consulting Services Group. IBM appreciates 

this opportunity to testify in support of legislative proposals to promote 

electronic health records in a smarter health information system. Today, 

there is growing consensus that a more intelligent, innovative healthcare 

system is within reach through better use of information technology. The 

IBM Corporation is fully committed to helping a smarter health system 

emerge as a model of 21st Century American innovation. 

 One of IBM’s core values is creating innovation that matters to the 

company and to the world. Today, almost everyone agrees that 

dramatically improving healthcare is the innovation that matters. To that 

end, we are collaborating with other large employers, agencies, 

providers, and standards bodies to transform healthcare. Today, it is a 

fragmented paper-based problem. Soon it will become a highly 

connected system for fluid exchange of digital health information and 

innovative new services. As a company, we are striving to do for 

healthcare what the ATM system, which we helped to invent, did to 

launch the global infrastructure for electronic financial transactions or 

what the Internet browser did to catapult the Web from an academic 

network into the platform for innovation it is today. 

 With respect to pending legislation proposals, IBM supports 

provisions that serve three objectives: drive adoption of open standards 

by the Federal government in private industry; commit initial seed 

funding and make early policy choices; and create incentives in Medicaid 

and Medicare to reward quality of care. These three areas are keys, we 

believe, to a smarter system of health. This new model of care will 

unlock the value of health information and help healthcare become 

properly organized around its core constituents, patients. 

 Let me expand briefly on the three topics I have outlined. Standards 

interoperability are the front and center in a project called the 

Nationwide Health Information Network or NHIN. IBM is one of four 

companies developing prototype architectures through a contract 

awarded in 2005 by the Office of the National Coordinator of Health IT 

at the Department of Health and Human Services. The NHIN project can 

be thought of as a foundation for a medical Internet and digital 

infrastructure for healthcare. It was also structured with the ingenious 

requirement the four contractors must make their respective efforts 

interoperate with each other via open standards. 

 The success of the Internet itself is overwhelmingly due to open 

standards and protocol such as HTML, XML, IP, and many others. 

Some healthcare standards have had long use within care settings and 
16

new standards are emerging. What is needed today is to expand the use 

of these standards across multiple care settings and across all of 

government healthcare. Federal adoption of an open standard for these 

core elements of medical is critical. For example, Federal agencies 

mandate reporting of extensive amounts of clinical information, yet do 

not allow information to be submitted via standardized electronic 

formats. I have actually attached the FDA drug adverse event reporting 

requirement, MEDRA, for you to take a look at. 

 While this example is drawn from the FDA, each of the agencies has 

comparable examples of reporting that does not utilize health 

information technology built on standards. Turning to the government’s 

role as an early funder and policy maker, history demonstrates that a new 

innovation often proceeds slowly at first before a catalystic inflection 

point causes it to accelerate. The Internet remained an obscure academic 

network for decades before browsers drove its explosive growth. With 

nearly half of healthcare spending in the U.S. originating with the 

government, the public sector can have a decisive role in sparking a 

smarter health system for all Americans. Committing initial seed 

funding in making early policy choices will set the stage for growth of 

health information exchange. The funding for Dr. Brailer’s office, the 

national coordinator, and projects like NHIN and PHRS are good 

examples of catalyzing funding. Efforts to resolve privacy issues are 

another. 

 IBM hopes to play a complimentary leadership role as an innovation 

partner for the business of healthcare and as a large employer providing 

healthcare to more than half a million IBMers and their families. Finally, 

establishing electronic health records for millions of citizens will require 

a range of incentives to accelerate adoption especially among physicians 

and providers. The benefits of a smarter health system will enable a 

historic shift in medicine when designed to reward outcomes and 

improve quality of care rather than today’s fee for service model. Health 

IT is needed for this shift in reimbursement because it can ease the 

burden of measuring and reporting performance. 

 Creating powerful incentives is necessary if we are to transform 

healthcare, and this committee can start by implementing pay-forperformance model in Medicaid. To summarize the three points I leave 

you with are the Federal government can advance a smarter health 

system by widely deploying standards. You can accelerate the 

transformation of healthcare through bold seed funding and active 

leadership in policy areas such as privacy. Strong incentives are needed 

to drive adoption of electronic health records and rewarding the quality 

of care in medicine, and Medicaid is one of the most powerful tools 

available. 
17

 Mr. Chairman and members of the subcommittee, thank you for the 

opportunity to testify today, and I look forward to answering any 

questions you may have. I spend most of my time in the field with 

hospitals and payers so I have got a very pragmatic view, I think, of the 

industry we are all operating in. Thank you. 

 [The prepared statement of Ivo Nelson follows:] 

PREPARED STATEMENT OF IVO NELSON, HEALTHCARE INDUSTRY LEADER, GLOBAL AND 

AMERICAS, IBM 

Chairman Deal and members of the Health Subcommittee of Energy and Commerce. 

My name is Ivo Nelson and and I lead IBM’s Healthcare Business Consulting Services. 

IBM appreciates the opportunity to testify in support of legislative proposals to promote 

electronic health records (EHRs) in a smarter health information system. 

Today, there is growing consensus that a more intelligent, innovative healthcare 

system is within reach. Through better use of information technology, experts agree that 

healthcare quality can be improved and costs restrained, while protecting the privacy of 

patients and the security of their health data. 

The IBM Corporation is fully committed to helping a smarter health information 

system emerge as a model of 21st century American innovation. We are focusing our 

software, services and expertise and combination of business and technology experience 

to support the transformation of healthcare from its fragmented, paper-based current 

state into a coherent, interconnected system. The objective is to enable the fast and fluid 

exchange of digital health information, applications and services that will revolutionize 

all facets of healthcare. 

Healthcare is closely aligned with one of the three core values around which IBM 

organizes and manages our global enterprise: creating “innovation that matters, to the 

company and the world.” 

Today, almost everyone agrees that dramatically improving healthcare is the

innovation that matters. To that end, IBM is collaborating with other large employers, 

agencies, providers and standards bodies on a host of efforts to spur the transition to 

digital healthcare. As a company we are trying to do for healthcare what the ATM system 

(which IBM helped invent) did to launch a global infrastructure for electronic financial 

transactions, or what the Internet browser did to catapult the World Wide Web from an 

academic network into the platform for innovation that it functions as today. 

IBM supports legislative provisions that: 

• Drive adoption of open standards by the federal government and private 

industry; 

• Commit initial seed funding and make early policy choices that will set the 

stage for growth of health information exchange; and 

• Create incentives in Medicaid and Medicare to reward quality of care, 

including those that can be measured and rationalized through the use of health 

information technology (Health IT). 

These three areas — open standards, seed funding and policy commitment that 

catalyze change, and new incentives to reward the quality of healthcare — are the keys 

we believe, the keys that will open up a smarter information system for healthcare. Not 

only will this new model of care unlock the value of health information in a networked 

world, it will help healthcare evolve into a system properly organized around its core 

constituents—patients—and begin to make costs and quality more transparent to all. 
18

In 2004, the President launched an initiative to make electronic health records 

(EHRs) available to most Americans within the next 10 years. In 2005, the Senate passed 

legislative reforms to Medicare reimbursement and Health IT legislation that drives 

toward these goals. We encourage similar action by your committee and the House in 

2006. 

Today, I would like to talk about the steps that this committee could take to improve 

healthcare, first through better use of open technology standards. Where possible, I will 

use examples of our own conduct and efforts at IBM. 

I. Driving Standards Adoption

Achieving the vision of a nationwide health information exchange first requires 

interoperability: the ability for disparate health information systems to be able to talk to 

each other and share data in a safe and secure manner. Interoperability and standards are 

often mistakenly lumped together. Standards are much narrower and specify technical 

details. Interoperability, on the other hand, is a much broader concept that involves both 

atechnical and business context. 

The success of the Internet itself is overwhelmingly due to the implementation of 

open standards, protocols, languages and architectures such as HTML, XML, HTTP, 

PDF and many others. In fact, almost all digital dataflow today depends on an open 

standard for packets of digital information called IP, or Internet Protocol. 

Open standards have been profoundly embraced by most technology companies, as 

well as governments and the public sector around the world for many years, and for many 

reasons. Chief among them is that open standards work to ensure compatibility and 

interoperability that benefits all participants. Broadly speaking, standards have long 

proven their value in business and society in everything from measurements of weight 

and size to transformative technologies such as wireless networks. 

“Open” standards are those that are freely available to all, and are created by an 

open decision-making process. In our world of networked information, they speed 

innovation, integration and collaboration in countless dimensions, including supply chain 

management, consumer electronics and many forms of communications. 

Why is better use of standards so important? In short, better use will facilitate the 

easier exchange of health information, thereby helping lower costs (e.g. transaction 

costs), provide better information to physicians and caregivers at the point of care and 

improve patient safety and clinical quality. 

Until we have unambiguous, clinically-relevant coding of chief complaints, 

prescriptions, laboratory and imaging orders and results, we hobble our ability to learn 

from this vast corpus of information. Outcomes analysis, long-term effects, and the 

identification and encouragement of best practices and quality-of-care are all dependent 

on capturing this information at the source. Open standards are nothing less than the 

means to advance the industry towards richer, more evidence-based medicine and a 

smarter health system. 

In many cases, the standards have had long use within care settings and are simply 

being pressed into use for broader networks that extend across multiple care settings. 

Standards are used in all phases of patient care and cover everything from messaging and 

content, to measurement and communication. In some cases, these protocols have already 

achieved wide adoption, such as the Digital Imaging and Communications in Medicine 

(DICOM) format. More recently, the National Council for Prescription Drug Programs, 

Inc. (NCPDP) telecommunication standard was named the official format for pharmacy 

claims under the Health Insurance Portability and Accountability Act (HIPAA). 

IBM’s Standards Efforts in Healthcare 

IBM has worked with providers, hardware and software vendors to develop and 

adopt standardized ways of describing health data, transmitting it to other computers, and 
19

requesting processing related to that data from other computers. As specific needs for 

collaboration across networks become clear, new standards are developed and adopted. 

For example, one of the earlier standards, DICOM, was developed so that x-rays and 

other medical images could be shared. 

IBM is a member of many key healthcare standards bodies including HL7, and was 

a founding member of the Eclipse Organization a leading open source community. Most 

recently, IBM made its entire patent portfolio available, royalty-free, to standards bodies 

working on open, interoperable infrastructure for healthcare and education. 

Integrating the Healthcare Enterprise IBM’s work on building a nationwide 

infrastructure for clinical information exchange (the NHIN prototype) has lead it to join 

an initiative called Integrating the Healthcare Enterprise (IHE). Under the leadership of 

HIMSS and the Radiological Society of North America, IHE is an architectural 

framework for exchanging information across the enterprise that can incorporate 

established standards to allow different healthcare enterprises to use their own choice of 

hardware and software. In fact, our NHIN prototype is based on IHE’s work, as well as 

the open-standards based Interoperable Healthcare Information Infrastructure (IHII) 

architecture developed by IBM Research.

What is Still Missing: Federal Transition to Broad Standard’s Adoption 

Federal adoption of open standards for healthcare diagnoses, treatments and other 

core elements of medicine is critical to tip the use of these innovation drivers from 

desirable to necessary. When the government has adopted standards, such as the use of 

International Classification of Diseases and Related Health Problems (ICD-9) system for 

billing purposes, its market power provides a sufficient voice to finalize consensus within 

healthcare. The government was a principle driver for the adoption of ICD-9, 

CPT/HCPCS, and DRG reporting. 

Existing Government Efforts Set the Stage for Adoption of Healthcare Standards 

The federal government has lead numerous efforts to highlight key standards although 

adoption has lagged. 

Consolidated Health Informatics - In 2004, as part of the Consolidated Health 

Informatics initiative (CHI), the HHS, DoD, and DVA agreed to endorse 20 sets of 

standards that enable information to be shared across agencies and serve as a model for 

the private sector. 

Medical Language - The Department of Health & Human Services (HHS) signed an 

agreement in 2003 to license a standardized medical vocabulary developed by the 

College of American (SNOMED) 

Electronic Medical Records - At the request of HHS, the international standardssetting organization known as Health Level 7 has established a tentative standard that 

defines the set of functions needed in an electronic medical record. 

E-Prescribing Standards - The Medicare Prescription Drug Improvement and 

Modernization Act (MMA) requires the Centers for Medicare and Medicaid Services 

(CMS) to develop standards for electronic prescribing. 

Standards Harmonization Contract – HHS/ONCHIT –The Office of the National 

Coordinator for Health IT/HHS awarded a contract in October of 2005 to the American 

National Standards Institute (ANSI) to develop, prototype, and evaluate a 

harmonization process for health IT standards.
20

However, beyond the initiatives cited here, the broader federal government has been 

somewhat slow to adopt and drive electronic healthcare standards, and often requests that 

health information be exchanged using phone, mail, or manual means that don’t advance 

open electronic standards and data exchange. As a result, healthcare care costs are higher 

and quality is lower than they would be if the federal government was more proactive 

about implementing electronic standards. 

For example, federal agencies mandate reporting of extensive amounts of clinical 

information, yet don’t require information to be submitted via standardized electronic 

formats. I have attached FDA drug adverse event reporting requirement – MEDRA – and 

an illustration from the FDA website depicting their reporting process. 

http://www.fda.gov/medwatch/ While this example is drawn from the FDA, each of the 

agencies has comparable examples of reporting that does not utilize health information 

technology built on standards. 

Agencies need the resources, guidance and clear leadership to move away from 

these manual reporting systems in favor of standards-based electronic reporting. The 

Senate legislation includes provision to move the federal government towards standards 

adoption by establishing an additional requirement for standards in procurement, and 

requiring the option of standards based reporting to federal agencies. The provision 

would build on the standards identified several years ago by Secretary Thompson, while 

allowing further standards to be adopted as they are identified. It also allows the provider 

the choice of either continuing to report manually or in electronic standards. 

II. The Role of Initial Funding and Policy Leadership in Sparking Healthcare 

Transformation

A smarter health system is clearly desirable – however, history demonstrates that 

innovation often proceeds slowly at first, before accelerating after a catalytic inflection 

point. The Internet, for example remained an obscure academic network for several 

decades before the Mosaic Web browser drove its explosive growth in the 1990s. The 

DVD player became the most rapidly adopted new technology only after manufacturers 

resolved two competing technology standards. 

The government’s role as an early funder and policy driver is vital during the initial 

phase of a major innovation such as the one dawning around digitally networked 

healthcare. Initial funding is the seed that allows healthcare system participants to 

develop prototypes that translate concepts into implementations. The government also 

plays a key role as a consensus builder on policy issues, to the benefit of both citizens and 

businesses. As lessons are learned from prototypes and policy development, new business 

models emerge over time that can carry innovation forward. 

Meanwhile the nature of innovation itself is becoming more collaborative—between 

commercial enterprises as well as between the public and private sectors—government 

has a highly constructive role to play in sparking work that will unleash the ability of 

businesses to drive growth and productivity. A smarter healthcare system is just such 

entrepreneurial fire ready to be lit. 

Finally, with nearly half of all healthcare spending in the U.S. originating with the 

federal government, the public sector can have a decisively influential role in helping 

engender a smarter health system for all Americans. IBM hopes to play a similar 

leadership role, both as large employer seeking to innovate how it delivers healthcare to 

its workforce, and as a business and innovation partner for many parts of the healthcare 

ecosystem. 

Nationwide Health Information Network Architectural Prototypes. 

Funding included in President Bush’s Health Information Technology Plan is an 

important source of prototype funding. The President has requested $116 million for his 

health information initiative in FY 2007. While this represents a small portion of the 
21

$5.5 billion that will be spent on health related information technology, it provides key 

seed money for prototypes and early learning. 

The importance of standards and interoperability are front and center in a several 

projects pertaining to development of a Nationwide Health Information Network (NHIN). 

As you may know, IBM is one of four companies awarded a contract to develop NHIN 

architectural prototypes through a contract with the Department of Health and Human 

Services, Office of the National Coordinator for Health Information Technology. The 

four architecture prototype contractors are not building the Network, per se, but each 

vendor is building a prototype architecture. 

The goal of the Nationwide Health Information Network (NHIN) prototype is to 

demonstrate major concepts that build towards the ultimate goal of a smarter, more 

connected information infrastructure for healthcare, including the abilities: 

• To enable secure electronic exchange of healthcare information between and 

within healthcare marketplaces that allows for the gathering of necessary public 

health data while preserving patient privacy. 

• To demonstrate how various healthcare marketplaces can be part of this 

communications network in a manner that is cost-effective and not disruptive to 

their current models of doing business. 

These contracts complete the foundation for an interoperable, standards-based 

network for the secure exchange of health care information. HHS previously has awarded 

contracts to create processes to harmonize health information standards, develop criteria 

to certify and evaluate health IT products, and develop solutions to address variations in 

business policies and state laws that affect privacy and security practices that may pose 

challenges to the secure communication of health information. 

IBM is following several key principles in developing a prototype architecture for 

the developing nationwide network. These principles are the result of IBM’s experience 

in healthcare and other sectors. They also arise from IBM’s work with many broad-based 

organizations in this area such as the Healthcare Information & Management Systems 

Society (HIMSS), the eHealth Initiative, and other information technology vendors, and 

privacy and technical organizations with whom we collaborate with on a daily basis. 

The NHIN project promises to 

bring about a smarter health 

system by leveraging the expertise 

and market interests of the private 

sector. But it was also structured 

with an ingenious requirement: the 

four participating contractors, IBM 

included, must make their 

respective efforts interoperate 

across competing healthcare 

marketplaces via open standards. 

If the NHIN project can be thought 

of as the foundation of a “medical 

Internet” or digital infrastructure 

for healthcare, then the importance 

that the evolving nation-wide 

integrated system will be based on 

open standards is quite obvious. 

IBM is working on the NHIN with partners 

in three regional communities: 

Fishkill, NY

Taconic Health Information Network & 

Community (THINC) RHIO 

RHIO/Community Leader: Dr. John Blair 

2,300 physicians supporting 700,000 patients 

Shared data using Healthvision 

Research Triangle, NC

North Carolina Healthcare Information and 

Communications Alliance (NCHICA) 

RHIO/Community Leader: Holt Anderson 

Competitive, high-tech urban environment 

Rockingham County, NC

Also members of NCHICA 

Rural environment with NC and VA patients 

Small, competitive practices and hospitals 
22

In developing this prototype architecture for the evolving nationwide network, IBM 

is following several key principles that are the result of our experience in healthcare and 

other sectors. They also arise from IBM’s work with many organizations in this area 

such as the Healthcare Information & Management Systems Society (HIMSS), the 

eHealth Initiative, and other information technology vendors, as well as privacy and 

technical organizations with whom we collaborate on a daily basis. 

The NHIN project promises to bring about a smarter health system by leveraging the 

expertise and market interests of the private sector. But it was also structured with an 

ingenious requirement: the four participating contractors, IBM included, must make their 

respective efforts interoperate across competing healthcare marketplaces via open 

standards. If the NHIN project can be thought of as the foundation of a “Medical 

Internet” or digital infrastructure for healthcare, then the importance that the evolving 

nation-wide integrated system will be based on open standards is quite obvious. 

Through the NHIN, it is envisioned that healthcare consumers would be empowered 

to access their personal health records (PHRs) using the same network that allows them 

to share their medical records with healthcare providers that they see in other 

communities. IBM’s architectural prototype for the NHIN system would not be a single 

repository of everyone’s medical records, but rather an index that points to information 

stored at the originating provider site. IBM believes that independent healthcare 

consumers, providers, and communities (as well as regional health information 

organizations) will set the rules for who can see what information and for what 

information they need. 

Healthcare systems or RHIOs wish to retain control over their enterprise-wide data 

and will also set the business rules for how data will be exchanged. The NHIN will be a 

practical, community-centric approach to exchanging healthcare information in a secure, 

standardized way between healthcare communities in the United States. 

 At the conclusion of the NHIN prototype project, HHS will have four architectural 

prototypes to choose from or to incorporate into the adopted NHIN architecture and a 

dozen communities will have developed practical experience with information sharing. 

IBM’s prototype architecture, along with the other vendors, is part of a broader 

effort sponsored by the ONC including related efforts to advance the national health IT 

agenda. IBM continues to participate in and monitor the other ONC-sponsored efforts by 

The American Health Information Community, the Healthcare Information Technology 

Standards Panel (HITSP), Certification Commission for Health Information Technology 

(CCHIT), and Health Information Security and Privacy Collaboration (HISPC). 

The ONC awarded contracts and named inter-related groups may supersede some of 

the functions and activities related in other aspects of this testimony as they evolve during 

the coming months. Through a series of contracts, public meetings and coordination 

activities, these named groups are collectively addressing standards harmonization, 

compliance certification, processes to develop solutions that address variations in 

business policies and state laws that affect privacy and security practices. 

Personal Health Records

IBM can offer several examples to the Committee of our own funding and policy 

initiatives that may provide some guidance for similar efforts involving Medicaid. In 

2005 IBM announced that it would provide personal health records (PHRs) to its entire 

U. S. workforce. To protect employees’ privacy, the personal health record (PHR) system 

available to IBMers today is managed by an outside vendor and we have instituted 

contractual provisions and process controls in order to prevent inappropriate access to 

employee-specific data. 

To establish their personal health record (PHR), our U.S.-based employees begin by 

entering basic information: medicines, allergies, major conditions, and details on their 
23

doctors and insurance coverage. Later this year, employees’ personal health records 

(PHRs) will grow to automatically include medical and prescription drug claims history. 

Even this basic information has real utility today. It can be emailed or faxed to a 

provider—and even sent from a Web-enabled mobile device—or simply stored or printed 

out for easy access in an emergency or when traveling. The ultimate goal is to enable all 

types of electronic health information, including one’s lab results, prescription histories, 

medical images and more to flow into the record to form a comprehensive portrait of a 

patient. Equipping and empowering patients with personal health records (PHRs) is only 

the start. Enabling such data to flow electronically to doctors, hospitals and other 

providers authorized by the patient will allow healthcare to become a highly interoperable 

and innovative - something it is far from today. 

 Early this week, CMS also issued an RFP on personal health records (PHRs) for 

Medicare beneficiaries. Yesterday, IBM testified to the Federal Workforce Committee 

about legislation to extend interoperable Personal Health Records (PHRs) to all federal 

employees. This Committee has the same ability to leverage existing claims data in state 

Medicaid programs. IBM urges you to examine the role that our federal government can 

play in catalyzing interoperable personal health records (PHRs) by providing them to 

Medicaid beneficiaries. 

Just as the value of a network rises exponentially with the number of devices 

connected to it—the so-called network effect—the power of the personal health record 

(PHR) will rise dramatically the faster we can build a critical mass. What’s more, with a 

large enough base of personal health records (PHRs), the private and public sectors will 

create strong incentives for physicians, hospitals, and other health system participants to 

begin to adopt the infrastructure for healthcare that will improve quality and reduce costs. 

Interoperable personal health records (PHRs) will also drive two vital changes in the 

nature of healthcare itself. First, they will increasingly make the patient the center-point 

around which healthcare organizes itself. And second, interoperable personal health 

records (PHRs) and their related systems will support greater transparency across 

healthcare, and in many dimensions, including price and quality. 

At IBM, the personal health records (PHRs) that we are providing to all of our 

employees in the U.S. are a prime example of this patient-centered approach. When an 

IBMer first goes to the Web site for their personal health record, they are offered a 

financial incentive to complete an employee health risk appraisal, develop a personal 

preventive care action plan and identify quality hospitals in their area. The process 

surveys a range of issues including exercise level, family histories and cholesterol 

control, if applicable. Based on the results, an IBMer can subscribe to receive expert 

information, articles and advice on how to reducing their risks. It identifies eligibility for 

additional benefits and services such as disease management and refers employees to 

those resources. Decision support tools for drug comparison and interactions, hospital 

quality and Leapfrog results (from the Leapfrog Group’s performance measurement 

system) provide individual support for optimizing benefits quality and costs. 

For IBM, the risk assessment tools and the personal health records (PHRs) we 

provide our workforce are an investment that we recoup through improvements in 

employee health and the significant cost savings that result. For individual employees, the 

incentives we provide—to take the assessment, or track their self-paced exercise 

regimens —are essential to helping us capture these business benefits. 

Consumer Centric Healthcare 

To put IBM’s experience with personal health records (PHRs) in some context, I 

would first like to describe our broader efforts on improving employee health and 

reducing costs. That backdrop is, in fact, how we progressed to offer personal health 

records (PHRs) for our employees. 
24

IBM provides health and health benefits of over 500,000 IBMers, retirees and 

dependents. In total, the IBM Corporation spends over $1.7 billion on healthcare each 

year. As a result of our consumer-centric health programs for our employees, IBMers are 

healthier and have lower health expenses than others in our industry. We have 

demonstrated that information-rich, patient-centric wellness programs aren’t marginal 

benefits. They are very good business: 

• IBM’s employee injury and illness rates are consistently lower than industry 

levels. 

• We have documented significant decreases in the number of health risks among 

IBM employees as a result of participating in our wellness initiatives. 

• IBM’s disease management programs have demonstrated a 9%-24% reduction 

in emergency room visits and a 13-37% reduction in hospital admissions 

resulting in an overall 16% reduction in medical and pharmacy costs adjusted 

for medical trend over a 2 year period. 

With the health 

improvements, we have 

seen cost benefits -- IBM 

healthcare premiums are 

6% lower for family 

coverage and 15% lower 

for single coverage than 

industry norms. Our 

employees benefit from 

these lower-cost as well -- 

they pay 26 to 60% less 

than industry norms. And 

IBM healthcare premiums 

have been growing 

significantly more slowly 

than U.S. health insurance 

premiums. 

Critical Areas for Initial 

Policy Choices:

 Privacy in electronic healthcare is an area of policy development with deep 

importance, diverse viewpoints, and great need for government leadership, both in terms 

of driving standards and providing catalytic early funding. 

According to a 2005 survey, two-thirds of all Americans report high levels of 

concern about the privacy of their personal health information, with ethnic and racial 

minorities and the chronically ill showing the greatest concern: 

• Is of a racial/ethnic minority: 73% 

• Is not of a racial/ethic minority: 52% 

• Has been diagnosed with a disease: 67% 

• Has not been diagnosed with a disease: 63% 

One in four consumers reports being aware of incidents where the privacy of 

personal information was compromised. In addition, they believe, erroneously, that paper 

records are more secure than electronic ones (66% vs. 58%). (California HealthCare 

Foundation) 

US Average Annual Premiums for Covered Workers: 

Industry Average vs. IBM (2005)

4,024

10,880

3,404

10,209

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

Single

Coverage

Family

Coverage
25

These attitudes about privacy are reflected in the requirements consumers believe 

are important for electronic health information exchange. Nine of ten consumers want a 

system that confirms the identity of anyone accessing it. Eight of ten want to personally 

review who has accessed their information, and to be asked before their information is 

shared. (Markle) Clearly, privacy issues, and the public’s perceptions of those issues, 

must be addressed in order for the PHR to succeed. 

The HIPAA Privacy Rule has provided the bedrock for patient privacy in the U.S. 

and has established a baseline for privacy and security requirements for electronic health 

information. Many states have gone further then HIPAA to ensure patient privacy and 

have adopted policies that further protect patient data when stored and moved in an 

electronic format. These variations in policies present challenges for widespread 

electronic health information exchange. To assess these challenges, HHS awarded a 

contract devoted to privacy and security. The Health Information Security and Privacy 

Collaboration (HISPC), a new partnership consisting of a multi-disciplinary team of 

experts and the National Governor’s Association (NGA), will work with approximately 

40 states or territorial governments to assess and develop plans to address variations in 

organization-level business policies and state laws that affect privacy and security 

practices and pose challenges to interoperable health information exchange. Overseeing 

the HISPC will be RTI International, a private, nonprofit corporation who has been 

selected as the HHS contract recipient. 

While many see privacy as a potential barrier to health information exchange, most 

computer systems today include a variety of privacy protections. Most people are 

familiar with identity-based limitations – personal IDs and passwords that must be 

entered in order to access a system. With little effort, privacy controls can include roles 

as well as identity authentication so that a billing clerk or a doctor will have the 

appropriate level and access to a patient’s personal health information. Information 

technology can also provide tools to monitor who accesses data, create an audit trail for 

changes the data, and a watermarks to deter data theft and assert ownership of pirated 

copies. With paper records, there is no automated way to know, for example, if someone 

has accessed a record inappropriately, or even removed it or copied it. 

We have the technology today to protect patients’ but if privacy policies are unclear, 

or built on concepts such as “intent” that are difficult to translate into computer rules, 

technology will be of little help in formalizing privacy. Creating a smooth interface 

between privacy policy and technology will require a significant commitment of political 

will and resources. Here again, the government can play a pivotal role in stimulating and 

encouraging the development of privacy policies that will enable electronic healthcare to 

move forward faster. 

III. Creating Incentives in Medicare and Medicaid to Reward Quality 

Establishing a system of electronic health records (EHRs) for millions of citizens is 

a major societal shift, and will require a range of incentives to accelerate adoption among 

various constituencies. Physicians and other healthcare providers will bear the direct 

costs of implementing electronic health records (EHRs), as well as the indirect cost to 

transform their established workflow processes to take advantage of these new 

technologies. 

The current healthcare system has well-known flaws in how treatments are 

reimbursed. The current model rewards the volume of services and not the quality of 

outcomes. This paradigm results in low quality and rising costs. Those reimbursement 

flaws reduce the incentive for quality improvement tools such as interoperable electronic 

health records (EHRs). Reforms in reimbursement methodologies and additional sources 

of funding will have a dramatic impact on the adoption of the electronic health records 

(EHRs), and the multitude of systemic benefits they reap. 
26

The effectiveness of “carrots” for 

performance are why IBM supports 

incentives to providers to adopt electronic 

health records (EHRs) and other related 

health information technology applications 

(Computerized Patient Order Entry, eprescribing, etc.). 

In fact, IBM is already implementing a 

“pay-for-use” incentive plan to drive the use 

of electronic prescriptions. 

In New York’s Hudson Valley, where 

many of our employees live, we are funding 

a program that rewards doctors each time 

they use a new system for writing 

prescriptions electronically. Working with 

Dr. John Blair and Taconic Health 

Information Network and Community 

(THINC) regional health information 

organization, or RHIO, IBM has agreed to 

increase the reimbursement physicians 

receive if they submit prescriptions 

electronically. We believe that the 

additional reimbursement we are offering 

will pay for itself by reducing medication 

errors and increasing the use of generic 

drugs. 

We urge this Committee to examine 

approaches to rewarding value through the 

Medicaid program. This coming year, the 

federal government will provide over $300 

billion through the Medicaid program. It 

makes no sense to pay all those providers 

the same reimbursement rates, if the quality 

for some greatly exceeds — or severely lags 

behind — that of others. But today, 

Medicaid is at best neutral, and at worst 

negative, toward quality. Medicaid pays for 

the delivery of a service, not for the 

achievement of better health. 

A number of pay-for-performance 

demonstration projects in Medicare are 

underway (see box, right). IBM would 

encourage the expansion of these 

pioneering efforts and application to the 

Medicaid program. 

Barriers & Indicators for Success: 

Electronic health records (EHRs) and a 

digital infrastructure to support them will enable a historic shift in medicine: rewarding 

outcomes and improved quality of care rather than simply paying for procedures in 

today’s fee-for-service model. Health IT is invariably linked to this shift in 

reimbursement because it is needed to help document and measure performance. 

 

Medicare and Private Sector Payfor-performance Demonstration 

Projects

Hospital Quality Initiative (MMA 

section 501(b)) - focuses on an 

incentives for reporting an initial set 

of 10 quality measures. 

Premier Hospital Quality Incentive 

Demonstration - Under this 

demonstration, CMS is collecting data 

and provides an incentive related to 

performance on 34 quality measures. 

Physician Group Practice 

Demonstration (BIPA 2000) - The 

demonstration rewards 10 large 

physicians groups for improving the 

quality and efficiency of health care 

services delivered to Medicare feefor-service beneficiaries. 

Medicare Care Management 

Performance Demonstration (MMA 

Section 649 – A three-year pay-forperformance demonstration with 

focused on small and medium-sized 

physician practices to promote the 

adoption and use of health information 

technology to improve the quality of 

patient care for chronically 

Private Industry Efforts - Pay-forPerformance Programs and 

Purchasers 

There are more then 100 pay-forperformance programs across the U.S 

including Integrated Healthcare 

Association’s (IHA) pay-forperformance effort in California, The 

Leapfrog Group’s Hospital Quality 

and Safety Survey and their new 

Hospital Rewards Program that 

rewards hospitals out of a savings 

fund, and the Bridges To Excellence 

program, which is an ambulatory care 

incentive program active in several 

states. 
27

Health information technology is a key to successful pay-for-performance for two 

reasons. First, electronic reporting can reduce the significant burden that performance 

reporting places on providers. Current performance measures often involve manual chart 

review and manual processing by skilled professionals. Electronic reporting can reduce 

the performance reporting burden and ease participation by providers in pay-forperformance programs. 

Second, electronic reporting 

can align with the ongoing care 

process to actually improve the 

quality of care a patient receives, 

not just by documenting end results, 

but by alerting providers in realtime 

to any gaps or best practices that 

may have been overlooked. As a 

result, performance measurement 

carried out electronically can move 

from a description of quality to an 

operational tool that improves care. 

Those patients that do not receive 

appropriate care may be highlighted 

while they are interacting with providers rather than much later in reports that are 

submitted to reimbursers. 

Naturally, the pay-for-performance model will require the support of doctors and the 

medical community. Financial incentives under a pay-for-performance program must be: 

• Non-punitive (i.e. physicians who are unable to participate in the program 

should not be subject to negative updates); 

• Prioritized, so that physicians are rewarded for achieving improvements for the 

top 20 conditions identified in the Institute of Medicine’s (IOM) “Crossing the 

Quality Chasm” report; 

• Considerate of the critical role of primary care physicians in achieving such 

improvements; and 

• Sufficient to offset physicians’ investment in health information technology 

and other office redesign required to measure and report quality. 

We also advise that pay-for-performance programs be implemented along with 

reforms to change the way that physician services are valued and reimbursed, rather than 

grafted onto an underlying payment methodology that pays doctors for doing more, 

instead of doing better. 

Of course, one of the most important factors in making pay-for-performance a 

success is the size of the incentive or bonus relative to a physician’s or hospital’s total 

revenues. While no formal studies have yet clearly documented this issue, empirical data 

suggest that physicians will respond to incentives only if they represent 5% or more of 

their total revenues. 

In conclusion, creating powerful incentives in the federal health programs is 

necessary if we are to drive improvements in healthcare through the intelligent 

application of technology. Incentives for quality will undoubtedly lead toward better use 

of health information technology to improve healthcare. The information technology 

industry would like the opportunity to drive such a virtuous circle – incentives leading to 

better use of health IT which leads to improved quality and lower costs. This Committee 

can start by implementing the pay-for-performance model in Medicaid. 
28

Summary 

• The federal government can advance a smarter health system by deeply 

adopting and supporting open standards. 

• The federal government can accelerate the transformation of healthcare through 

judicious seed funding of prototypes and communities and active leadership in 

policy areas such as privacy and security. 

• Strong incentives are needed to drive adoption of electronic health records 

(EHRs), and one of the most powerful levers would be to reward the quality of 

care in Medicare and Medicaid via a “pay-for-performance” model. 

 MR. DEAL. Thank you, Mr. Nelson. And I again apologize but we 

are going to stand in recess pending these votes. There will be ten votes, 

so we will probably be somewhere an hour or thereabouts before we will 

be able to get back, but hopefully we will have a little better attendance 

perhaps after those first series of votes. Thank you, and we will stand in 

recess. 

 [Recess.] 

 MR. DEAL. We will call the hearing back to order. Thank you for 

being patient during the break. Dr. Braithwaite, we will hear from you at 

this time. 

MR. BRAITHWAITE. Thank you, Mr. Chairman. Chairman Deal and 

distinguished members of the subcommittee, I am honored to be here 

today. My name is Bill Braithwaite, and I am testifying today on behalf 

of the eHealth Initiative and its foundation otherwise known as eHI. I 

serve as the chief medical officer of both organizations, which are 

independent, national, non-profit organizations whose missions are the 

same: to improve the quality, safety, and efficiency of health and 

healthcare through information and information technology. In addition 

to our main work with communities, we work actively with Congress and 

the Administration to support these goals and applaud their strong 

commitment. eHI looks forward to working with you on potential 

legislation in this area. 

 I would like to talk a little bit about the big picture. The field of 

healthcare today is so vast and so complex that practicing medicine with 

an acceptable error rate is proving to be humanly impossible without the 

support of integrated information technology. The number of deaths 

caused by medical errors in our healthcare system every year has been 

estimated to be around 100,000 or higher if you include all the different 

aspects of healthcare. I think we would all agree that this is not 

acceptable. In most cases the healthcare system is at fault. We still 

practice medicine under the old paradigm where the doctor and the 

patient interact from memory to arrive at recommendations of healthcare 

decisions for the patient. 
29

 The only way to significantly improve the quality, safety, and 

efficiency of our healthcare system is to bring the information system 

into the exam room, as it were, and to change the paradigm of clinical 

practice so that it routinely involves the doctor, the patient, and the 

computer working together to provide the best healthcare advice 

possible. The way to implement this new approach is through direct 

interaction of clinicians and patients with a Clinical Decision Support 

System. Such a system must be integrated into the clinical environment 

in a way that supports, rather than disrupts, the efficient flow of the 

process of healthcare. But since most of the data on which clinical 

decisions are made actually originate outside the exam room, the Clinical 

Decision Support System by itself cannot function without a way to 

access the sources of the clinical data, the laboratories, pharmacies, 

radiology centers, et cetera. This is the impetus for eHI’s emphasis on 

interoperable health information exchange initiatives. 

 There are three critical prerequisites for successful implementation 

of health information exchange initiatives: incentives for 

implementation; assurances about privacy and security; and full 

interoperability between disparate clinical information systems. Even 

though all three are crucial, I will restrict this testimony to 

interoperability, and you will hear about the others from others on the 

panel. 

 There is still confusion in the healthcare industry about the meaning 

of the term interoperability. The definitions in my written testimony on 

page 5 come from an analysis of over 100 such definitions done by the 

international standards developing organization, HL7. Basically 

interoperability is the secure electronic communication of clinical data, 

like lab results from a computer in one institution in such a way that a 

computer in another institution can understand the precise meaning of 

what was said. In this case computer understanding means that the 

information could be processed by the receiving computer to reach 

conclusions about what advice to give to optimize patient care. 

 The terminology used to describe clinical concepts must be 

standardized, controlled, and coded in enough detail to differentiate 

between closely related conditions that might require different 

treatments. For example, the synonyms were originally used to identify 

the condition at the local hospital. At last count, for example, there were 

17 different terms used in different parts of this country that all referred 

to the same concept of high blood pressure. Larger categories of clinical 

concepts typically used for reimbursement transactions are not 

sufficiently detailed for this purpose. Interoperability also implies that 

there is a standard mechanism that all participants can use to exchange 

the information securely. Most of us use the World Wide Web every day 
30

and understand the power of having such a communications 

infrastructure available to all. Healthcare, of course, requires iron clad 

security as part of its infrastructure, including features not required in the 

standard Internet such as authentication, authorization, auditing, 

encryption, and digital signatures. 

 Successful implementation of electronic health information across 

institutions requires specificity, standards, and conformance testing of 

the results, features not currently found in most of the standards available 

today even after up to 20 years of development because of course the 

standards developing organizations have been focused on something 

else, the exchange of information within institutions between information 

systems. The sometimes heard proclamation that health information 

exchange should wait until the standards are done is made by those who 

are not fully aware of the tasks involved. Enormous progress has been 

made in the understanding, specification, and adoption of standards so 

far, but standards are not static. They must evolve to meet the 

continuous advances in the delivery of healthcare and can never be done. 

On the other hand, there are some low hanging fruit that we can address. 

Given that the timeline for full interoperability between clinical 

information systems, in my opinion, is likely to be measured in decades, 

what can we do in the meantime to reap some of the value of the Health 

Information Exchanges that we can implement today? 

 If we focus our resources on a few projects that can successfully 

reach interoperability in the short term, we can demonstrate immediate 

benefits for people who are working toward the same goal using 

consistent standards. If you ask clinicians what information is most 

important when they are seeing a patient without a medical record as 

they had to do after Katrina, they quickly list medication history, 

allergies, lab results, problem list, and interpretive reports. The patient, 

however, first wants to do without the need to fill out the same data 

multiple times on the medical clipboard at each provider that they go to. 

So let us start with those needs in mind and solve some of the immediate 

problems. 

 The industry has already made much progress on these particular 

needs because the demand is there, and the efforts under the contracts 

issued by HHS through the Office of the National Coordinator are 

focusing on the same situations in the context of prototypes for a 

nationwide health information infrastructure. Results from these funded 

efforts are expected by the end of this year. In addition, the important 

private-public sector partnerships such as the Markle Foundation’s 

Connecting for Health initiative, with additional support from the Robert 

Wood Johnson Foundation, have provided a great deal of guidance on 
31

the technical aspects and the key principles and policies for information 

sharing. 

 The standard for exchanging medication history and laboratory 

results is already being tested, although integration with lab test ordering 

is still being worked on. One approach for interpretive reports, which is 

one of the sort of early wins that people are looking for, is an electronic 

standard message that contains both a human readable representation of 

the data, and a structured and coded form suitable for processing by a 

computer. Thus, those source systems that are only capable of producing 

the human readable form, similar to a web page, can still participate in 

the electronic Health Information Exchange while those systems with 

more capability can include the data that is fully understood by a 

computer program in full interoperability. This will allow a migration 

over time from a simple and easy to produce form of data that is still 

compatible with the more sophisticated forms in both directions of 

communication. 

 MR. DEAL. Could I ask you to summarize for us, please? 

 MR. BRAITHWAITE. Yes. Vendors are reluctant to spend money 

implementing standards without customer willingness to pay for it. 

Providers are reluctant to pay for such features if they cannot see 

immediate payback. Therefore, purchasers have to be shown that the 

present and future value of standards-based systems and convinced to 

buy them whenever feasible. In conclusion, I believe we can provide 

appropriate incentives to implementation, adequate assurances to 

providers and patients about the privacy and security of their 

information, and support for full interoperability of our healthcare 

information systems. In doing so we will have set the stage for a high 

quality, safe, and efficient healthcare system for all Americans in their 

communities. eHI will be there to help you if you can do this through 

legislation. I would like to thank the committee for providing me the 

opportunity to share these insights on behalf of eHI and its foundation. 

 [The prepared statement of William Braithwaite follows:] 

PREPARED STATEMENT OF WILLIAM BRAITHWAITE, M.D., PH.D., CHIEF CLINICAL OFFICER,

EHEALTH IMITATIVE AND FOUNDATION FOR EHEALTH IMITATIVE

Summary 

Health Information Exchange (HIE) initiatives are the underpinnings for a system to 

improve how healthcare is practiced. Recognizing that healthcare is local, the eHealth 

Initiative and its Foundation are supporting multi-stakeholder HIE collaboration at the 

state, regional and community levels through the Connecting Communities program. 

Important knowledge related to every aspect of health information exchange is resulting 

from this work. [see http://toolkit.ehealthinitiative.org] The current paradigm of clinical 

practice limits our ability to avoid errors and control costs. Only with clinical decision 

support systems (CDSS) integrated into the routine of clinical practice can the system 

support better healthcare decision making. HIE is a necessary precursor to the operation 
32

of CDSS. Requirements for HIE implementation include incentives to stakeholders, 

assurances regarding privacy and security, and health information system 

interoperability. 

Interoperability is defined with three levels of standards required, from controlled 

clinical vocabularies, to standardized message structures and entity identification, to a 

secure communications infrastructure. However, standards are not enough for 

interoperability. The necessity for inter-institutional exchange of data is forcing a change 

in the character of standards from the traditional, flexible standards currently in use 

between systems in the same institution to more complete, rigorous, and tested 

implementation specifications integrated across standards for specific use cases. 

Systemic barriers to the rapid deployment of this evolution must be addressed. 

This process is likely to take decades before full interoperability of clinical 

information systems is a reality. There are some low hanging fruit that can be harvested 

in the near-term, however; medication history, lab results, and interpretive reports, for 

example. There is an existing suite of standards that addresses these areas of 

interoperability but most of the standards are not rigorously defined for specific use cases 

and are inconsistently implemented by vendors. While the HHS AHIC and ONC efforts 

to kick-start interoperable health information exchange is a good and positive process; it 

is the start of a very long road. Sustained federal leadership is crucial to achieving these 

goals and to promoting a smarter healthcare system over time. 

Introduction 

Chairman Deal, Congressman Brown, distinguished members of the Subcommittee, 

I am honored to be here today. My name is Bill Braithwaite and I am testifying today on 

behalf of the eHealth Initiative and its Foundation (eHI). I serve as the Chief Medical 

Officer of both organizations, which are independent, national, non-profit organizations 

whose missions are the same: to improve the quality, safety, and efficiency of health and 

healthcare through information and information technology. 

In addition to our main work with communities, we work actively with Congress 

and the Administration to support these goals and applaud their strong commitment. eHI 

looks forward to working with you on potential legislation in this area. 

The big picture 

The field of healthcare is now so vast and complex that practicing medicine with an 

acceptable error rate is proving to be humanly impossible without the support of 

integrated information technology. The number of deaths caused by medical errors in our 

healthcare system every year has been estimated to be 100,000 or higher. I think we 

would all agree; that is totally unacceptable. And in most cases it is the system that is at 

fault: we still practice medicine under the old paradigm where the doctor and the patient 

interact from memory to arrive at healthcare decisions for the patient. The only way to 

significantly improve the quality, safety, and efficiency of our healthcare system is to 

bring the information system into the exam room, as it were, and to change the paradigm 

of clinical practice so that it routinely involves the doctor, the patient, and the computer 

working together to provide the best healthcare advice possible. The way to implement 

this new approach is through direct interaction with a Clinical Decision Support System 

(CDSS). Such a system must be integrated into the clinical environment in a way that 

supports rather than disrupts the efficient flow of the process of healthcare. Since most of 

the data on which clinical decisions are made actually originate outside the exam room, 

the CDSS by itself is not functional without a way to access the sources of the clinical 

data, the labs, pharmacies, radiology centers, etc. This, then, is the impetus for eHI’s 

emphasis on interoperable health information exchange initiatives. 

Of course, none of these technological innovations will be implemented unless there 

are sufficient incentives to get these systems incorporated into healthcare practice under a 
33

sustainable business model. The needed incentives can take many forms, including payfor-performance programs that pay providers for higher quality care delivered, and they 

are discussed in detail in our paper entitled, “Parallel Pathways to Quality Healthcare”. 

In addition, none of the required information sharing will be allowed unless there are 

sufficient assurances to patients and providers alike that the shared information will be 

private and secure. In the interest of time, I will leave these two critical prerequisites for 

others to discuss and refer you to the eHI website for further background material [see 

http://www.ehealthintitiative.org/]. 

Interoperability 

Since most data on which clinical decisions are based come from outside the exam 

room or other locations where clinical decisions are being made, interoperability for 

clinical data exchange is a basic and necessary requirement. However, in the healthcare 

industry there has been some confusion about the meaning of the term, ‘interoperability’. 

The following definitions come from a meta-analysis of over 100 such definitions done 

by a technical committee of HL7, an international healthcare standards setting 

organization. 

Interoperability is the ability of two or more systems or components to exchange 

information and to use the information that has been exchanged accurately, 

securely, and verifiably, when and where needed. 

Healthcare interoperability also assures the clear and reliable communication of 

meaning by providing the correct context and exact meaning of the shared 

information as approved by designated communities of practice. This adds value by 

allowing the information to be accurately linked to related information, further 

developed and applied by computer systems and by care providers for the real-time 

delivery of optimal patient care. 

It is important to understand all the implications of the term, ‘interoperability’, at 

different levels of abstraction from binary bits of information flowing through a wire at 

the bottom to the transfer of clinical knowledge at the top. At the highest levels, the 

context and the exact meaning of information must be preserved and made available for 

use. In this case, ‘use’ means that the information can be processed by a computer to 

reach conclusions about what advice to give to a clinician to optimize patient care. That 

means that the terminology used to describe clinical concepts must be standardized, 

controlled, and coded in enough detail to differentiate between closely related conditions 

that might require different treatments, for example. Larger categories of clinical 

concepts typically used for reimbursement transactions are not sufficiently detailed for 

this purpose. There are also a large number of clinical concepts which are referred to by 

different names in different geographic locations. Where locally defined terms are used 

in lieu of terms from a national standard controlled terminology, then mechanisms must 

be in place to make the translation to the national standard, a process called 

‘normalization’, so that another location that uses its own local terms for a clinical 

concept can preserve the correct context and exact meaning. As simple examples that 

require such standardization, there are 17 different terms that represent the same concept 

of high blood pressure and there are 27 different potential values for the concept of sex 

and many different ways to encode them. 

At the lowest levels, interoperability implies that there is a standard mechanism that 

all participants can use to exchange the information securely. Most of us use the worldwide-web every day and understand the power of having such a communications 

infrastructure available to all. Healthcare, of course, requires such an infrastructure to 

include more security features than the standard internet connectivity we all use, 

including authentication, authorization, auditing, encryption, and digital signatures. 

In the middle levels are the standards for aggregating discrete data elements together 

into a meaningful message sent from one system to another in response to an event or 
34

‘trigger’, standards for identifying the healthcare providers and the patients, and 

standards for a plethora of other elements that are unique and specific to the use case 

being implemented. 

Clearly, interoperability requires the consistent and rigorous integration of standards 

of many types and necessarily from many sources. When the only electronic information 

exchange being considered was that between one system and the next operated by the 

same institution, it was easy for the technical team(s) to discuss all the specific technical 

decisions that have to be made before even a well defined standard can be used in a 

particular business use case. Once the problem is expanded to include the exchange of 

information among many institutions that may not even be in the same region of the 

country, the required degree of specificity is sorely lacking in most of the consensus 

standards available today and the standards development and maintenance process is 

perceived to be slow and cumbersome. 

It is also critical, with the increasing number of participants in inter-institutional 

health information exchanges, that the implementations of the standards be tested be 

conformant to those standards. For example, HL7 standards for transmitting numeric lab 

results from a laboratory information system to a clinical information system or 

repository within an institution were some of the earliest implementations of HL7 

standards. [Note that HL7 celebrated its 20th anniversary as a standards developing 

organization in 2006.] However, there are still implementations today where a laboratory 

(part of a national reference laboratory company) transmits the numeric result of a test in 

the comment field of a “standard” HL7 message, instead of the result field. This is 

accommodated in today’s world by writing tailored interfaces for each data flow to bring 

them to a common implementation of a standard. This is expensive in the short term and 

untenable in the long term. 

The full implementation of standards requires an effective processes for, and 

ongoing investment in, standards development, support and maintenance, migration, and 

integration. A range of supporting tools need to be developed and implemented to assist 

organizations in migrating to standards, including implementation guides, conformance 

processes, and educational materials. Demonstration and implementation projects are 

critical to the migration toward an interoperable, electronic healthcare system, in that they 

test and evaluate feasibility, uncover additional barriers and workable solutions to 

overcome them, provide replicable practices and tools for others, confirm value for a 

wide range community stakeholders, and build awareness of the benefits. 

The sometimes heard proclamation that, “HIE should wait until the standards are 

done,” is made by those woefully ignorant of the tasks involved. The many issues 

discussed above indicate the enormous progress that has been made in the understanding, 

specification, and adoption of standards. Standards are not static, however, and they 

must evolve to meet the continuous advances in the delivery of healthcare and can never 

be ‘done’. To become and remain acceptable, the standards process requires some effort 

and participation by everyone concerned. 

Low hanging fruit 

Given that the timeline for full interoperability between clinical information systems 

is likely to be measured in decades, what can we do in the meantime to reap some of the 

value of the HIE that we can implement today? If you ask clinicians what the most 

important information is when they are seeing a patient without a medical record, they 

quickly iterate medication history, allergies, lab results, problem list, and interpretive 

reports (e.g., radiology, pathology, and operative reports that are already in electronic 

form through dictation). The wish list from the patient, however, starts with the data they 

now have to fill out multiple times on the medical clipboard. Great progress has already 

been made on many of these and the efforts under the contracts issued by HHS through 

the Office of the National Coordinator of Health Information Technology (ONC) [see 
35

http://www.hhs.gov/healthit/] are focusing on these early wins as well as prototypes for 

the nationwide infrastructure. Results from these funded efforts are expected by the end 

of this year. In addition, important public-private sector partnerships, such as the Markle 

Foundation’s Connecting for Health initiative [see http://www.connectingforhealth.org], 

with additional support from the Robert Wood Johnson Foundation, have provided a 

great deal of guidance on the technical aspects of health information exchange as well as 

key principles and policies for information sharing. 

Although medication history is not directly involved in most ePrescribing initiatives, 

it is closely related and likely to evolve quickly based on existing standards as 

ePrescribing implementations proceed. Laboratory results are being exchanged in some 

environments today and standards for exchanging most types of results already exist. 

Full integration with lab test ordering is still being worked on. One approach for 

interpretive reports that looks promising is the use of a standard electronic message that 

contains both a human readable representation of the data and a structured and coded 

form suitable for processing by a computer. Thus, those source systems that are only 

capable of producing the human readable form (similar to a web page) can still 

participate in the HIE while those systems with more capability can include data that is 

fully understood by a computer program. This will allow a migration over time from a 

simple and easy to produce form of data that is still compatible with the more 

sophisticated forms in both directions. 

It should be absolutely clear from this discussion and these examples, however, that 

we are still many years away from the fully interoperable health information exchange 

environment of our vision and there are several intractable barriers to more rapid progress 

of which we should be aware. 

The business case for a vendor to incur the costs of switching to a standard is often 

muddled at best: short-term narrow objectives are the enemy of long-term, broad 

interoperability goals. Even when a vendor understands that implementing standards is 

good for the product, the resources to do it are not always available. Purchasers have to 

be informed and insist on standards-based implementations whenever feasible. 

Existing standards must be ‘constrained’ (a term of art used by standards setting 

organizations) into rigorous implementation guides for each particular ‘use case’ (another 

term of art). A use case is like the outline of a play that defines the goal, the actors, the 

roles they play, the trigger event(s) that cause them to interact, the data elements that they 

must exchange, etc. Given a general use case, an implementation guide will allow an 

implementer to program an information system in a consistent way. It may take several 

implementation guides based on several standards to implement a particular use case, and 

the combination of these is often called an ‘integration profile’. 

There is a fairly well recognized first set of standards that are already being adopted 

for HIE. These include: HL7 data interchange standards, the HL7 Reference Information 

Model, the DICOM standard for imaging, the NCPDP SCRIPT prescription drug 

information standard, the LOINC vocabulary for laboratory tests, the IEEE/CEN/ISO 

1073 medical device communication standard, the ASC X12 administrative transaction 

standard, HL7 Data Types, HL7 Clinical Document Architecture (CDA), and the HL7 

Clinical Context Management Specification (CCOW). Work remains to be done in a 

number of other domains, including standards related to terminology (and their uniform 

distribution within the National Library of Medicine’s Unified Medical Language System 

(UMLS)), clinical templates, clinical guidelines, representation of business rules, 

representation of decision support rules, data elements, disease registries, tool sets, 

security, identifiers, and the electronic health record. 

Conclusion 

In conclusion, I’d like to thank the Committee for providing me the opportunity to 

share my insights and expertise on behalf of eHI and its Foundation today. There is a 
36

long road ahead but it is filled with the promise of better health for all Americans in their 

own communities if we work together and get it right on interoperability. Nothing could 

be more important and eHI will be there to help every step of the way. 

APPENDIX A

Health Information Exchange: The eHealth Initiative and Foundation’s State, 

Regional and Community-Based Program Work 

Recognizing that healthcare is local—and that to stimulate change in how healthcare 

is delivered, one must drive change both at the national level and local levels—eHI has 

been focusing its efforts on supporting multi-stakeholder collaboration at the state, 

regional and community levels, bringing its common principles, policies and standards 

developed nationally to those who are delivering healthcare in markets across the U.S. 

This work is being conducted through the direct funding of learning laboratories at the 

community level and advocacy and education for additional funding to support local 

efforts; the building of a coalition or “community” of over 2,000 stakeholders working on 

health information exchange within over 250 states, regions and communities across the 

U.S. to share insights and effect change; and the provision of direct technical assistance 

to leaders within states and regions who are developing strategies and plans to facilitate 

HIT adoption and health information exchange. 

The eHealth Initiative Foundation began its Connecting Communities program in FY 

2003, through the leadership and foresight of Congressman C.W. Bill Young (R-FL). 

Though a special appropriation administered by the Department of Health and Human 

Services’ Office of the Secretary, and in years past by the Health Resources and Services 

Administration’s Office of the Advancement for Telehealth (HRSA/OAT), Connecting 

Communities continues to provide seed funding and technical support to a set of 

“learning laboratories” led by multi-stakeholder collaboratives, who are experimenting 

with the development of models for sustainability for their health information exchange 

efforts. This program will yield valuable lessons learned. Learning laboratories will 

inform the efforts of policy-makers, and national leaders both in the public and private 

sectors who must take actions to clear barriers to interoperability and health information 

mobility. 

The 2006 Connecting Communities award program will provide learning 

laboratories for the development and implementation of sustainable business models for 

health information exchange and build healthcare purchaser and payer awareness of the 

value that health information exchange capabilities can provide in improving the quality, 

safety and efficiency of care to stimulate ongoing interest in supporting such activities at 

the state, regional and local levels. Successful awardees will have engaged the 

commitment of purchasers and payers representing at least 30 percent of covered lives 

within their markets, to participate in a pilot or implementation of an incentives program 

that will not only support quality goals, but also directly or indirectly, support the health 

information exchange capabilities which are necessary to achieve those quality goals. 

They will also have engaged the commitment of a large percentage of practicing 

clinicians--including small physician practices--who have committed to both utilizing the 

health information exchange capabilities, and participating in the incentives program. 

The Connecting Communities program is also directly aiding in a task vital to our 

nation in the wake of Hurricane Katrina: helping to strengthen Gulf Coast healthcare 

services and regional electronic health information infrastructure in Alabama, Florida, 

Louisiana, Mississippi, and Texas by supporting public-private sector partnerships as 

well as assessment, planning, operational, and communications activities related to the 

development of health information networks within and across the Gulf States. Prior to 

Hurricane Katrina, work was being conducted by the Foundation for eHealth Initiative in 

the Gulf Coast state of Louisiana to assist in general health information technology policy 

efforts. 
37

The program is also producing informative research and tools valuable to emerging 

health information exchanges and related policy formation. For example, the Connecting 

Communities Toolkit is a unique, multi-layered, one-stop resource offering structured, 

how-to synthesis of principles and tools designed to equip states, regions and local 

communities with the information and expertise to begin or advance local health 

information exchange initiatives and organizations. It offers insight into areas crucial to 

start-up and successful survival such as organizational structure, value creation, 

financing, practice transformation, quality, information-sharing policies, technical aspects 

and public policy and advocacy. Importantly, it is a distillation of cumulative knowledge 

resulting from working with multiple stakeholders in different communities. 

Communities contribute toolkit resources themselves in the spirit of sharing insights with 

their peers. Its release comes at a critical time as health information exchanges are 

coming into existence across America and seeking expert advice. 

Through eHI’s activities on health information exchange, the organization has: 

become the hub of best practice development and sharing for driving transformation 

through health information exchange, providing a full range of tools and resources for 

states, regions and communities who are navigating the organizational, legal, financial, 

clinical and technical aspects of health information exchange. It is also actively 

supporting stakeholders engaged in transformation and health information exchange 

efforts in more than 250 states, regions and communities across the U.S. 

In regards to states, the eHealth Initiative has or is in the process of actively 

supporting 13 states across the country in developing strategies, policies, and plans for 

improving health and healthcare through health information technology and exchange 

through its State Policy Summit Initiatives. The goal of these initiatives is to help state 

public policy officials and key stakeholders in the healthcare and business communities 

develop state policy agendas and frameworks which support the rapid development and 

implementation of healthcare information technology and exchange. Some of the states 

currently being supported by eHI include Arizona, Kansas, Minnesota, New Hampshire, 

New York, and Ohio. 

 MR. DEAL. Thank you. Mr. Mertz. 

MR. MERTZ. Thank you, Mr. Chairman. I am Alan Mertz, President 

of the American Clinical Laboratory Association. The ACLA represents 

the Nation’s leading national, regional, and local laboratories. Mr. 

Chairman, most patients are probably familiar with our members, mostly 

by the boxes they see out in front of the doctor’s office that are Quest 

Diagnostics or LabCorp. That is where the specimens are put in those 

boxes, and our members are the people who collect those specimens, 

transport them to a laboratory, do the testing overnight, and then report 

of those results usually back the next morning. Some times millions 

every day, and testing is absolutely a critical part of our healthcare 

system. It provides the physicians with the objective data they need to 

not only diagnose, but effectively treat and monitor disease. 

 Our members also have, part of the reason we are here today, an 

extensive history of providing these doctors and hospitals with health 

information technology involved in streamlining laboratory test 

requisition, and also speeding the delivery of test results. Let me give 

you just a little bit of background about laboratory testing and how 

important it is to the medical record, and then I will talk about some of 
38

the legislative proposals. Laboratories and the information they provide 

are really the heart of the medical record. It is not well known to the 

layman that laboratory data actually represents 60 percent of the medical 

record, and while the diagnostic tests we do comprise only 1.6 percent of 

Medicare spending and about 5 percent of overall health spending, they 

influence 70 percent of clinical decision making. Not only does this 

information improve outcomes and decrease costs, but laboratory data is 

becoming an even more essential building block for assessing quality 

care and it is playing an increasingly critical role for quality and pay-forperformance initiatives. 

 The laboratories, Mr. Chairman, have made a tremendous investment 

in connecting to physician offices and hospitals, and it sort of served as 

the catalyst in the evolution of health IT. Just let me give you one 

example of the penetration that they have had with the physician’s 

offices. Quest Diagnostics, our largest member, has business 

relationships with half of the physicians and hospitals in the United 

States, and this is just one laboratory company. Quest Diagnostics 

receives 40 percent of its orders and sends 60 percent of its results via the 

Internet. This is a critically important and highly valued function. It is 

so important that since 1995 our labs have had a limited exception under 

the Stark law so that they can provide these electronic connections and 

interfaces with physician offices. 

 This has been a fundamental capability for laboratories to render 

services to providers. It is a function that must be maintained in any 

changes that are made to Stark. Congressman Brown made a point at the 

beginning about the IOM report on errors and duplication cost and 

electronic ordering and results with laboratories. It is a critically 

important part of improving legibility, decreasing error rates, producing 

more timely results, and even monitoring duplicatation of testing. 

 Let me talk just about three quick points about H.R. 4157. We 

believe it has several needed improvements. Number one, we believe 

that if it is enacted it would further prompt adoption of health IT. We 

believe that any exemption in the law for Stark for IT should be carefully 

crafted to guard against abuses while still allowing the diffusion of IT, 

and we believe it strikes that balance. We also support the legislation’s 

Federal preemption of State laws that contradict the Stark law exceptions 

and anti-kickback safe harbors. Today there are several State laws that 

are complicated and have different requirements than the Federal Stark 

law, and we believe that the preemption provisions there are very 

important. 

 H.R. 4157 also addresses the need for Federal preemption in State 

laws related to privacy. We support this provision because of the 

patchwork of State laws as an impediment to health information 
39

exchange. Let me give you one example. LabCorp, another large 

national laboratory, has been invited to participate in regional Medicare 

chronic care or health support pilot programs. Chairman Deal, LabCorp 

has been invited to participate in an effort in your own State with 

CIGNA HealthCare in Georgia, as well as a program operating in central 

Florida operated by Green Ribbon Health. These entities will offer selfcare guidance and support to chronically ill Medicare beneficiaries to 

help them manage diabetes and chronic heart disease problems. 

 LabCorp’s role in the programs will be to transmit critical laboratory 

data to CIGNA and to Green Ribbon Health for those beneficiaries who 

voluntarily participate in the program. However, the State laws in 

Florida and Georgia governing the release of lab results have prevented 

LabCorp from transmitting these results. In essence, Florida and Georgia 

laws preclude providing test results to anyone other than the ordering 

physician, and there is no provision in the State laws that would allow 

even the patient to give their consent. These laws would effectively bar 

any transmittal, and even the patient’s consent does not allow us to 

transmit those results. 

 Let me conclude also with the needed provisions regarding moving 

from ICD-9 diagnostic codes to ICD-10. Under the Medicare program 

the laboratories are paid by including these ICD-9 codes on their claims 

to provide medical necessities. These codes are provided by the 

physician to the laboratory, and are subsequently attached to the claim 

and submitted to CMS. So we really have no control of what diagnosis 

codes are put into the claim, and if they are not done correctly, we are 

not paid. So moving to the ICD-10 we want to be very careful about 

doing that because it is immensely more complicated. ICD-9 provides 

about 13,000 diagnosis codes. Moving to the ICD-10 provides 120,000 

diagnosis codes, making it much more complicated. 

 I have attached an example to my testimony of where today there is 

one ICD-9 code for a sports injury, it will be replaced by something like 

39 different codes, diagnosis codes included. You have to now tell 

whether you were struck by a baseball, golf ball, a baseball bat, and so 

forth, whereas you used to be able to just say this person was injured in 

the head by a ball. So it is much more complicated. What we are asking 

for here not to go ahead with this, but to give us a five-year transition 

period instead of two years, because of the complexity of this, and we 

have to train doctors as to how to do this, otherwise, we will not be paid. 

 So in conclusion the ACLA supports the Health Information 

Technology Promotion Act’s new anti-kickback safe harbors and Stark 

law exception, the bill’s proposed preemption of State privacy laws like 

the example that I gave, and the replacement of the ICD-9 code but with 

a five-year transition period. Thank you, Mr. Chairman. 
40

 [The prepared statement of Alan Mertz follows:] 

PREPARED STATEMENT OF ALAN MERTZ, PRESIDENT, AMERICAN CLINICAL LABORATORY 

ASSOCIATION

Chairman Deal, Ranking Member Brown, and distinguished subcommittee 

members, thank you for the opportunity to testify today on behalf of the American 

Clinical Laboratory Association (ACLA) representing national, regional, and local 

laboratories. My name is Alan Mertz, President of ACLA, and I appreciate your interest 

in legislative proposals that will accelerate the widespread adoption of the electronic 

health record. ACLA members have an extensive history of providing the nation’s 

hospitals and physicians with leading-edge health information technology (IT) 

streamlining laboratory test requisition and speeding the delivery of test results. 

The Health Information Technology Promotion Act of 2005 (HR 4157) proposes 

several needed improvements to facilitate the diffusion of health IT throughout the 

United States. These changes will help promote better outcomes for patients. Among the 

improvements are new Anti-kickback Safe Harbors and Stark Law exceptions; a study of, 

and subsequent authority to preempt some state privacy laws; and the replacement of 

ICD-9 diagnosis codes with ICD-10 codes. 

Laboratories play a critical role in healthcare delivery by allowing for the rapid and 

timely utilization of health information by providers. Laboratories and the medical 

information they provide are the heart of the medical record. Laboratory data represent 

60% of the medical record. Diagnostic tests comprise only 5 % of total hospital costs and 

only 1.6% of Medicare costs, but they influence a much larger portion (as much as 60-

70%) of clinical decision-making that improves care and decreases cost. Virtually every 

health care community (i.e. Regional Health Information Organizations or RHIOs) that is 

trying to develop an electronic health information infrastructure is looking to laboratories 

first. A recent nationwide survey by the eHealth Initiative found that, of those who have 

electronic health information exchange efforts under way, 60% plan to exchange 

laboratory information within six months to support quality, safety and efficiency goals. 

In a survey of hospitals, the number one IT function in the majority of hospitals today is 

the electronic order entry and review of results for diagnostic services. 

The reach of laboratories into physician offices and hospitals vis-à-vis the provision 

of this hardware and software has served as a ‘catalyst’ in the evolution of health IT. For 

example, Quest Diagnostics Incorporated, a member of ACLA, has business relationships 

with approximately half of the physicians and hospitals in the U.S. Quest Diagnostics 

Incorporated receives 40% of orders and sends 60% of its results via the internet. 

Similar means of laboratory connectivity are offered by other ACLA’s other members. 

The federal government, quality organizations, the Medicare Payment Advisory 

Commission (MedPAC) and others recognize that laboratory data are the essential 

building block for assessing quality care and will have a critical role in pay-for-quality 

initiatives. Laboratories can and have been used to measure a provider’s performance as 

a critical component of health care delivery; however, this contribution cannot be realized 

without incurring additional cost that must be recognized and reimbursed. In a detailed 

study of practice and laboratory connectivity, the eHealth Initiative recently 

recommended incentives that could be provided for including electronic laboratory data 

as part of pay-for-performance reporting. One example from the report would be to 

provide short term incentives, based on the volume of laboratory messages processed, up 

to a monthly dollar limit per clinician that would encourage implementation of interfaces. 

Incentives such as these can be an important driver of adoption of new technologies. By 

providing incentives encouraging the transmission of laboratory test requisition and 

results reporting, the healthcare system will actually save money through reductions in 

duplicative testing, better coordinated care and decreases in morbidity and mortality. 
41

Because of the value that laboratories convey in the data they transmit, they have 

pioneered the provision of secure, streamlined IT solutions to order and transmit 

laboratory tests. This is a critically important and highly valued function. So important 

that since 1995 laboratories have had a limited exception under the Stark Law to provide 

“items, devices, or supplies that are used solely to...order or communicate the results of 

tests or procedures for such entity.”1

 This is a fundamental capability for laboratories to 

render services to providers and a critically important function that must be maintained. 

Clinicians place a high value on being able to order laboratory services and receive 

laboratory results electronically because it improves legibility, decreases error rates, 

produces more timely results (including STAT testing), and allows the monitoring of 

redundant or duplicative testing. The result is improved clinical outcomes, and improved 

clinical care efficiency with the long-term benefit of reduced healthcare costs. 

We recognize physicians, hospitals and other providers routinely cite the fear of 

legal action/debarment from Medicare as one of the biggest deterrents towards adoption 

of health IT. Accordingly, HR 4157 establishes a new exemption for the provision of 

health IT and related training. ACLA believes this legislative proposal, if enacted, would 

help to address some of these concerns and prompt further adoption of the health IT; 

however, ACLA believes such an exemption should be crafted carefully to diffuse the 

technology while guarding against abuses. By doing so, providers will continue to 

compete on the services they are providing and not, for instance, the size of a monitor. 

However, in any law or regulation laboratories must be among those entities permitted to 

offer these items or services because of the critical role laboratories have, and continue to 

play in facilitating health IT adoption in the health care community. ACLA was 

particularly perplexed with HHS’ Office of the Inspector General’s recent notice on the 

establishment of new Stark Law exceptions and Anti-Kickback Safe Harbors which 

proposes to exclude laboratories from the newly created exemptions. 

ACLA also supports the legislation’s federal preemption of state laws that contradict 

the Stark Law exceptions and Anti-Kickback Safe Harbors established under the bill. 

Today, there are several states whose ‘Stark’ laws are complicated and have different 

requirements than the federal law. Similar to the privacy issue (which I’ll talk about 

shortly), the problem is not just that these state laws are more stringent, but that there are 

many different standards. The differences in these state laws fall into several categories, 

e.g. the scope of the exceptions to the prohibition or the scope of what is considered a 

‘designated health service.’ By creating a federal preemption, Congress can help address 

the fear and confusion many providers continue to have as they contemplate adoption of 

various health IT solutions. 

Another of the much-needed changes that HR 4157 addresses is the need for federal 

preemption of state laws related to the security and confidentiality of health information. 

HR 4157 requires a study of: 1) the degree to which laws vary among the states; 2) 

between state laws and HIPAA; 3) how such variations adversely impact confidentiality 

and the electronic exchange of health information. Upon enactment, Congress will have 

three years to pass legislation establishing uniform federal standards and preempting state 

laws with regard to confidentiality and privacy. If not, then the Secretary of HHS is 

permitted to adopt regulations based on the results of the study. 

ACLA supports this provision because the patchwork of state privacy laws is an 

impediment to health information exchange. For example, LabCorp, a large national 

laboratory, has been invited to participate in two of the eight regional Medicare Health 

Support pilot programs (previously known as the Chronic Care Improvement Program) 

authorized by section 721 of the Medicare Modernization Act. Chairman Deal, LabCorp 

has been invited to participate in an effort with CIGNA HealthCare in your home state of 

Georgia as well as a program operating in central Florida being operated by Green 

 

1

 42 USC 1395nn(h)(1)(C) 
42

Ribbon Health, LLC. These entities will offer self-care guidance and support to 

chronically ill Medicare beneficiaries to help them manage their health, adhere to their 

physicians’ plan of care, and ensure that they seek the medical care and Medicarecovered benefits that they need. LabCorp’s role in the pilot programs would be to 

transmit laboratory data to CIGNA HealthCare and Green Ribbon Health for those 

beneficiaries who voluntarily participate in the program. This information would then be 

used to help monitor the conditions of participants and ultimately, improve their 

outcomes. 

Unfortunately, despite the well-intended efforts of these programs, more restrictive 

state laws in Florida and Georgia governing the release of lab results have prevented 

LabCorp from transmitting these important results to Green Ribbon Health or CIGNA 

HealthCare until its concerns about the application of those laws to these requests have 

been addressed. More specifically, the Florida and Georgia laws preclude providing test 

results to anyone other than the ordering physician or provider (or to a person specifically 

authorized by the ordering physician). In this case, had there been a federal preemption 

of state laws we would be talking about the successes/failures of these program and not 

‘red tape.’ 

HR 4157 also addresses the needed replacement of the International Classification 

of Diseases, 9th edition, Clinical Modification (ICD-9-CM) diagnosis and procedure 

billing codes with ICD-10-CM/PCS codes. ICD diagnosis codes are used by inpatient 

and outpatient providers for billing and reimbursement. Under the Medicare program, 

laboratories are paid by including ICD-9 codes on their claims to provide medical 

necessity. These ICD-9 codes are provided by the physician to the laboratory and are 

subsequently attached to a claim and submitted to CMS. Today, as many laboratories 

will attest, problems persist with physicians not providing the appropriate ICD-9 codes in 

order for laboratories to get paid. Currently, ICD-9 provides approximately 13,000 

diagnosis codes. Take into account that ICD-10 provides 120,000 diagnosis codes, and 

one can see the potential for massive delays in reimbursement for laboratories and many 

other providers and thus the need for an extended phase in of the new system. 

To give you an example of the difference between ICD-9 and ICD-10 consider how 

a physician would document an accidental sports injury. Under ICD-9, a diagnosis of a 

sports injury caused by striking against or being struck requires a single code: E917.0, 

described as “Striking against or struck accidentally in sports without subsequent fall; 

includes kicked or stepped on during game (football, rugby), struck by hit or thrown ball, 

struck by hockey stick or puck. Under ICD-10, a similar diagnosis requires one of 24 

codes, meaning that the physician must document the causation (see attachment). 

 ACLA recommends that the implementation period for the transition to ICD-10 be 

changed from a two-year phase in period to a five-year period. Doing so would provide 

adequate time to reprogram all health care providers’ and payers’ computer systems to 

accommodate the new, longer ICD-10 codes. In addition, considerable time and expense 

will also have to be spent on client education and testing of the new systems. During this 

‘transition period’ it should be permissible for providers to bill using either the ICD-9 or 

ICD-10 standards. 

In conclusion, ACLA supports the Health Information Technology Promotion Act’s 

new Anti-kickback Safe Harbors and Stark Law exceptions, the bill’s proposed 

preemption of some state privacy laws, and a replacement of the ICD-9 with ICD-10 with 

a five-year transition period. 

I’d like to end on this note. It has been said that every effort in the health care 

public policy arena aims to improve three different aspects of health care: better, faster, 

and cheaper. Nothing to date has been able to meet all three objectives – some systems 

provide two of the three but always at the expense of the third. I believe health IT is the 

answer. Health IT will make health care better by improving outcomes; faster, by 

facilitating not only the delivery of information but the coordination of care; and cheaper, 
43

by reducing the costs of doing business, be it a reduction in duplicative testing or by 

saving precious time previously spent on data entry. 

Mr. Chairman, thank you for the opportunity to share ACLA’s perspective on ways 

to promote electronic health records and a smarter health information system. We are 

ready to work with you on this important and vital legislation. If you have questions or 

need any additional information, please do not hesitate to contact us. 

 MR. DEAL. Thank you. Mr. Vaughan. 

MR. VAUGHAN. Mr. Chairman, members of the committee, thank 

you for inviting us today. Consumers Union is the independent, nonprofit publisher of Consumer Reports, and we do not just test toasters, we 

work on health issues, and had a large article on this topic in the March 

issue. We strongly support the movement toward electronic health 

records as a way to improve quality and moderate health costs. 

 But we believe that the American public will not fully support or 

fully use or fully benefit from the great potential of such systems unless 

more is done soon to ensure the privacy of medical information. As 

IBM’s testimony just said, the privacy issues and the public’s 

perceptions of those issues must be addressed in order for personal health 

records to succeed. Patients need meaningful control over their medical 

records, the right to keep their records private, and they should not be 

forced to give up privacy as a condition of treatment. We talk of 

consumer-directed healthcare, an ownership society, and personal 

empowerment. Mr. Shadegg was talking about choice. The right to 

privacy is the heart of all of that. 

 There must be a strong enforcement of privacy laws, and if privacy is 

violated, people should be notified of that breach and given a private 

right of action, as Georgia is one of the States that allows that. The State 

should have the right to enact privacy laws above and beyond HIPAA’s 

terribly minimalist provisions in our opinion. Dr. Detmer’s testimony 

has a neat point about how complex that could be, particularly if you 

look at Virginia, Maryland, and D.C. How would a computer keep track 

of all that? But rather than coming down to the Federal level, could we 

work with the governors and the State legislators to say what did the 

States feel they needed to do and see if there was a model law that we 

could come up to rather than come down. 

 Privacy needs to be strengthened, not weakened, and we urge you to 

oppose legislation that would preempt stronger State laws or let HHS 

bureaucrats weaken the Fourth Amendment. As we like to say, one size 

does not fit all, and this is the way we look at that. Attached are a set of 

consumer privacy principles on my statement that we hope you might 

look at as you consider legislation. Assuming we can get true privacy, 

we would like to see quick dissemination of good systems. We 
44

recommend, however, against making broad exceptions to the antikickback and physician referral laws for donations. 

 Given the Federal budget situation, it is very understandable if 

people would look for a sort of free way to promote dissemination, like 

suspending these anti-fraud laws. We believe, however, that such action 

would have a very limited impact on the adoption of IT and would not be 

always good for consumers. This approach may not be free. It may have 

a cost. Basically there are no free lunches in life. I would bet you that 

Adam Smith would say most businesses do not give away something of 

value to another business unless they expect a return on the investment. 

 When a hospital system offers an IT package to doctors, it hopes the 

ease of communication between them and the goodwill generated by the 

gift will encourage referrals, regardless of whether that facility is the best 

quality or value facility for the patient. There is a parallel example in an 

area we know that causes higher and more costly utilization. Why do 

pharmaceutical companies give away free drug samples? It is because in 

our culture the act of giving a gift, even a trinket, conveys a 

psychological sense of obligation, I owe you one. That is human nature. 

In the case of free drugs, it leads to higher utilization and high costs 

products. 

 So please be skeptical. Companies, many for profit, who spend 98 

percent of the year telling Congress they are not paid enough by 

Medicare and Medicaid, they are all going broke, they have found some 

money that they now want to donate to a bunch of small businessmen 

making about $160,000 a year, who are very smart businessmen, but 

have not been smart enough to realize they need to move to IT. It is kind 

of strange. I think it would increase care coordination under the right 

situation, but please be careful in how you draft this. 

 We think there are better ways to encourage more adoption of IT that 

do not weaken the anti-fraud laws. For example, you might explore with 

CBO whether, as you fix the Medicare doctor payment system in a 

budget neutral, time-limited way you could voluntarily encourage 

physicians to install certified IT by adjusting the practice expense 

payment and then collect it back at the end of the five-year cycle. It 

might be tough but worth talking to CBO about. Representative 

Murphy’s bill kind of gets into that a little bit in section 8. 

 In conclusion, these anti-fraud laws are very delicate things, and we 

hope you will be careful, as I know you will be. Thank you, sir. 

 [The prepared statement of Bill Vaughan follows:] 
45

PREPARED STATEMENT OF BILL VAUGHAN, SENIOR POLICY ANALYST, CONSUMER’S UNION

Mr. Chairman, Members of the Committee: 

Thank you for inviting us to testify today. Consumers Union is the independent, 

non-profit publisher of Consumer Reports, and we work on a wide range of health issues, 

including prescription drug safety and effectiveness, health insurance and health care 

costs. 

The Potential 

We strongly support the movement toward electronic systems of health records 

(EHR) and information exchange. By harnessing the power of modern information 

technology systems we can improve the quality of American health care and moderate 

health costs by: 

• reducing errors, 

• eliminating service duplication, 

• promoting pay-for-performance, and 

• providing the data necessary to evaluate the true comparative effectiveness of 

various treatments and drugs. 

As just one example of the tremendous improvements in quality and cost savings 

that are possible, Consumers Union has been conducting a national campaign to promote 

the disclosure of hospital infection rates (www.StopHospitalInfections.org). Each year, 

there are about 2 million patients who acquire infections in hospitals, and about 90,000 

die. The increased cost to the health care sector is in the tens of billions of dollars. We 

have been working at the state level to pass laws to require hospitals to report their rate of 

infection in the belief that public disclosure will prompt hospitals to adopt effective 

methods to reduce their infection rates. Electronic medical records technology and the 

public disclosure of more types of de-identified patient care data will make it easier for 

consumers to reward those who provide quality. 

The Critical Need to Ensure Privacy 

While there can be important public and private benefits of creating an effective 

electronic medical records system, we believe (and polls demonstrate1

) that the American 

public will not support, fully use, or benefit2

 from the great potential of such systems 

unless more is done—now--to ensure the privacy, security, and appropriate use of 

medical information. This requires enabling patients to decide when, with whom, and to 

what extent their medical information is shared. As Dr. David Brailer, head of the Office 

of the National Coordinator for Health Information Technology, responded March 3 to a 

letter (see Attachment #1) from consumer groups, “we will achieve our goal of 

widespread [EHR] adoption only if patients are confident that their health information is 

private and secure.” Today, it is not private or secure. 

This concern should especially resonate with public officials such as you, who are so 

subject to prying eyes and gossiping tongues.3

 I think we all have to admit that there is no 

hack-proof database or system. Once our medical data is moving electronically, it is 

 

1

 See as just one example Caroline Broder, “Survey: Consumers Concerned About Control, Access 

to Medical Info,” Healthcare IT-News, January 18, 2006. 2

 For example, polling of Americans shows 63% to 75% would not participate in, or are concerned 

about loss of medical privacy in an electronic system. See work of Professor Alan Westin, February 

23, 2005; California Health Care Foundation, January 2000; and 65 Federal Register 82,466. 3

 Testimony of Joy Pitts, Assistant Research Professor, Georgetown University, July 27, 2005 

before the Ways and Means Health Subcommittee, citing the Rep. Velasquez and former President 

Clinton examples, page 2. See also Robert Dallek’s An Unfinished Life (p. 261ff) for a description 

of LBJ’s efforts to obtain medical information on JFK and how Kennedy avoided certain important 

medical tests so as not to have a medical record. 
46

subject to threats from hackers, identity thieves and others. That is simply a fact of life, 

re-confirmed almost daily by new stories of financial and medical record data violations.4

Beyond the likely scenarios of security breaches, the value of electronic health 

information is such that many organizations will want to exploit secondary data sources 

for private financial gain, rarely (if ever) with patient knowledge, let alone consent. 

So what can we do to minimize concerns and improve privacy in electronic health 

records? 

The American public needs to be given meaningful control over their medical 

records. That means they must have a right to keep their records private and that they 

cannot be forced to give up control of their most private medical information as a 

condition of treatment. 

The penalties for violations of privacy are inadequate and have major gaps.5

 There 

must be strong enforcement of privacy and security laws, and if a person’s privacy is 

compromised or violated, they should be notified of that breach and have a private right 

of action. 

The States should have the right to enact privacy laws above and beyond HIPAA’s 

absolutely minimal provisions and that right must not be pre-empted. Privacy needs to be 

strengthened, not weakened, and we urge you to oppose legislation that would pre-empt 

stronger State laws or delegate to the Secretary of HHS authority to pre-empt such laws.

These State laws offer extra protection and peace of mind to patients with mental health, 

STD, cancer and other treatment issues. As 30 organizations in the Mental Health Liaison 

Group wrote Congress on November 15, 2005, adding improved privacy protections to 

proposed EHR bills is essential in the mental health sector.6

Some will say that it is too complex or too expensive to allow people to control their 

medical information. But that’s why computers are so wonderful! They can be designed 

to deal with huge numbers of variables—like 50 state laws-- and to create special files 

where certain data (such as a mental health record) is only available to a designated 

provider on a “need to know basis.” If we do not meaningfully address the privacy issue, 

polls show the public will not trust this system, many will go to a medical underground 

‘off-the-books’7

, and we will just increase public cynicism about big government and big 

business controlling our lives. In an age when the talk is of consumer driven health care, 

and ownership, and empowerment, forcing people to share their most secret personal 

medical information is not the path to take. 

Attached are a set of consumer principles that was developed under the leadership of 

the National Partnership for Women & Families and that Consumers Union, AARP, and 

seventeen other groups are supporting.8 We urge you to include these principles in 

whatever legislation you may develop. 

 

4

 As HHS said in the Federal Register, “there is no such thing as a totally secure [electronic 

information] system that carries no risk.” 68 Federal Register at 8,346. For very recent examples of 

hacking and intentional misuse of data, see Information Week, March 9, 2006, “PIN Scandal ‘Worst 

Hack Ever’; Citibank Only the Start,” and The Washington Post, March 14, 2006, Business Section, 

page 2, “Datran Media Settles Probe.” 

5

 Joy Pitts, op. cit., p. 4. 

6

 See letter from National organizations representing consumers, family members, advocates, 

professionals and providers, c/o Peter Newbould, American Psychological Association Practice 

Organization, 750 First Street, NE, Washington, DC 20002. 

7

 Reportedly millions of Americans already forgo sensitive treatments because of privacy concerns. 

65 Federal Register 82,778. 
47

Oppose Incentives to Promote Technology Give-Aways that may Distort Health 

Care Delivery 

Assuming true privacy and increased security, we all would like to promote the 

fastest possible movement to EHRs and a ‘networked’ health care system so as to benefit 

from the quality and cost savings potentials. We recommend, however, against making 

blanket exceptions to the anti-kickback and physician referral laws for donations of EHR 

systems. 

Given the Federal budget situation, it is understandable that some are attracted by 

the idea that such blanket exceptions might be a ‘free’ ways to promote EHR technology 

dissemination. We believe, however, that such action would have a very limited impact 

on the adoption of EHR systems and would not be good for consumers. This approach is 

not free—it has a cost, as we describe below. 

Most businesses don’t give away something of value to another businessperson 

unless they expect a return on the investment. When a hospital system offers an IT 

package to a non-affiliated physician group, it hopes the ease of communication between 

them (and the goodwill generated by the gift) will encourage referrals to its facilities, 

regardless of whether that facility is the best quality or value facility for the patient. 

There is a parallel example in an area we know causes higher and more costly 

utilization: Why do pharmaceutical companies give free drug samples (and pens and pads 

of paper, etc., etc.) to doctors? Because in our society and culture, the act of giving a gift, 

even a trinket, conveys a psychological sense of obligation—”I owe you one.” That is 

human nature. In the case of ‘free’ drugs, it leads to increased utilization of high cost 

products. That is what the anti-kickback and physician referral rules tried to deal with: 

the act of giving something of value creates “ties” that cause referrals and utilization to 

go up, without regard to need, cost, or quality. 

It is worth spending a minute more on the ‘free’ drug example. There has been a 

great deal of concern about the way drugs are promoted and the impact that has on costs 

and quality of care. The January 25, 2006 issue of JAMA (Vol. 295, No. 4, p. 429ff) 

carried an article by some of America’s most distinguished physicians entitled, “Health 

Industry Practices That Create Conflicts of Interest: A Policy Proposal for Academic 

Medical Centers,” that calls on the nation’s teaching hospitals to lead an ethical 

revolution and reject all industry gifts, since those gifts distort the practice and integrity 

of medicine. As the doctors wrote: 

Social science research demonstrates that the impulse to reciprocate for even small 

gifts is a powerful influence on people’s behavior. Individuals receiving gifts are 

often unable to remain objective: they reweigh information and choices in light of 

the gift. So too, those people who give or accept gifts with no explicit “strings 

attached” still carry an expectation of some kind of reciprocity. Indeed, 

researchers suggest that the expectation of reciprocity may be the primary motive 

for gift-giving. 

Researchers have specifically studied industry gifts to physicians. Receiving gifts 

is associated with positive physician attitudes toward pharmaceutical 

representatives. Physicians who request additions to hospital drug formularies are 

far more likely to have accepted free meals or travel funds from drug 

manufacturers. The rate of drug prescriptions by physicians increases substantially 

after they see sales representatives, attend company-supported symposia, or accept 

samples. The systematic review of the medical literature on gifting by Wazana 
48

found that an overwhelming majority of interactions had negative results on 

clinical care.9

If medical practice is distorted by the relatively small value of drug company gifts, 

imagine the consequences of large EHR technology “gifts”! 

What if Congress proposed (though it would not take a law) that companies and 

providers could give money or equipment to a truly neutral charity in an area (for 

example, the Red Cross, the American Public Health Association, a State Medicaid 

Agency) that would then distribute the gift on some basis of need and there would be no 

tie between the donor and the recipient? I think most potential donors would find lots of 

reasons why that wouldn’t work. And that should tell you everything: the donor wants a 

“tie” with the recipient that will result in goodwill and increased referrals. For 

consumers, the problem is that the “tie” and resulting increased referrals may not be the 

best for the patient because the donor may not be the best or lowest-cost provider in an 

area. And donors who have the resources to give may just increase their economic 

dominance in an area, thus reducing future competition and driving up costs. 

Look for real solutions to speeding dissemination of IT 

There are better ways to encourage more adoption of EHRs. Once progress is made 

on technology and process standards and there is more agreement on the best hardware 

and software paths, Congress may want to promote the dissemination of such technology 

and pay for it in a way that does not distort practice patterns. You might explore with 

CBO whether, as you try to fix the Medicare physician payment system (SGR), a budget 

neutral, time-limited way to encourage physician installation of certified EHR could be 

possible. For example, would CBO score as neutral a system where on a voluntary basis, 

a physician could greatly increase their practice expense payments for several years so 

they could more easily finance the installation of a ‘certified’ EHR system. Then in the 

next several years they would repay that ‘advanced’ amount through reduced practice 

expense payments, on the grounds that the installation of the equipment will reduce 

paperwork and clerical practice expense in future years. Another encouragement to take 

advantage of this opportunity would be a requirement that by a date certain all MedicareMedicaid EHRs would have to be through certified systems. 

Congress could also help providers in the future by using the certification process to 

obtain a discount price for EHR hardware and software. 

In summary, we urge you to consider alternatives to encouraging the dissemination 

of this new generation of equipment in ways that do not weaken the nation’s anti-fraud 

laws. 

If Congress feels compelled to proceed with anti-kickback and anti-referral law 

changes, we urge you to consider limited exceptions based on modifications to the 

Administration’s October 2005 proposed regulations. 

These draft regulations would permit exceptions—but not blanket exemptions--to 

the anti-kickback and physician referral laws for EHR donations. Consumers Union, the 

National Partnership for Women & Families, and five other national organizations filed 

 

9

 Eleven footnote references to sources for statements omitted from quote. For a less scholarly 

description, see “The Drug Pushers, by Carl Elliott, MD, Ph’D in The Atlantic Monthly, April, 

2006: “After awhile even the most steel-willed doctors may look forward to visits by a [drug] rep, if 

only in the self-interested way that they look forward to the UPS truck pulling up in their driveway. 

A rep at the door means a delivery has arrived: take-out for the staff, trinkets for the kids, and, most 

indispensably, drug samples on the house. Although samples are the single largest marketing 

expense for the drug industry, they pay handsome dividends: doctors who accept samples of a drug 

are far more likely to prescribe that drug later on. Such gifts do not come with an explicit quid pro 

quo, of course. Whatever obligation doctors feel to write scripts for a rep’s products usually comes 

from the general sense of reciprocity implied by the ritual of gift-giving.” 
49

formal comments expressing serious concern about the exceptions and urging major 

changes (see attachment #2). 

For example, we recommend changing the regulations to: 

--delay the effective date of the exceptions until the product certification 

process for ambulatory care that the Administration is now aggressively 

supporting is in place (otherwise you encourage donations that may lead to 

technological dead-ends and wasted time and effort—e.g., Beta v. VHS 

competing donations); 

--limit the exception to donations to physicians or clinics that provide a certain 

level of uncompensated charity care or serve a significant number of Medicaid 

patients; or if that is not possible, require donors to offer the technology to all 

(their) physicians, not just those who provide high volumes of profitable 

business; 

--sunset the exemptions; 

--require recipients to copay a portion of the cost: totally free equipment is 

likely to sit in the closet. The equipment needs to be something that the 

recipient wants enough to put some of his own resources into. 

Thank you all for your time and attention. 

Attachment #1 

Health Information Technology – Consumer Principles 

March 2006 

An interoperable system of electronic health information holds many potential 

benefits for consumers, including: better coordination of health care regardless of patient 

location, higher quality and more efficient care, increased system transparency, and 

patient access to information about providers that allows them to make better decisions. 

At the same time, such a system raises serious concerns among consumers about personal 

privacy, data security, and the potential misuse of their information. And while an 

interoperable system of electronic health information holds great promise, the many 

possible benefits will not be realized unless appropriate policy measures are established 

up front. 

Consumer protections and potential benefits from health information technology 

(HIT) should not be left to chance. The success of efforts to promote widespread 

adoption of HIT, including electronic connectivity and data exchange across health care 

institutions, ultimately will depend on the willingness of consumers to accept the 

technology. Given the pervasive concerns expressed by the public about unauthorized 

disclosure and use of their health information, it is critical to build a foundation of public 

trust. To that end, as efforts move forward to develop networks for the electronic 

exchange of information between institutions, there must be a clear, deliberate, and open 

forum for addressing and setting matters of policy. As organizations representing a broad 

and diverse set of consumer interests, we believe that the following set of principles 

should underpin such efforts. 

Principles 

Individuals should be able to access their personally identifiable health information 

conveniently and affordably. 

 Individuals should have a means of direct, secure access to their electronic 

health information that does not require physician or institutional mediation. 

 Individuals should have access to all electronic records pertaining to 

themselves (except in cases of danger to the patient or another person). 
50

 Individuals should be able to supplement, request correction of, and share their 

personally identifiable health information without unreasonable fees or 

burdensome processes. 

Individuals should know how their personally identifiable health information may be 

used and who has access to it. 

 Individuals should receive easily understood information identifying the types 

of entities with access to their personal health information and all the ways it 

may be used or shared. The explanation should include any sharing for 

purposes other than the immediate care of the individual, and should explicitly 

identify intentions for data use such as public health protection, quality 

improvement, prevention of medical errors, medical research or commercial 

purposes. 

 Access to personal health information must be limited to authorized individuals 

or entities. 

 Tracking and audit trail systems should be in place that permit individuals to 

review which entities have entered, accessed, modified and/or transmitted any 

of their personally identifiable health information. 

Individuals should have control over whether and how their personally identifiable 

health information is shared. 

 Individuals should be able to opt out of having their personally identifiable 

health information – in whole or in part – shared across an electronic health 

information network. 

 Individuals should be able to limit the extent to which their health information 

(with or without personal identifiers) is made available for commercial 

purposes. 

 Individuals should be able to designate someone else, such as a family member, 

caregiver or legal guardian, to have access to and exercise control over how 

records are shared, and also should be able to rescind this designation. 

Systems for electronic health data exchange must protect the integrity, security, privacy 

and confidentiality of an individual’s information. 

 Personally identifiable health information should be protected by reasonable 

safeguards against such risks as loss or unauthorized access, destruction, use, 

modification, or disclosure of data. These safeguards must be developed at the 

front end and must follow the information as it is accessed or transferred. 

 Individuals should be notified in a timely manner if their personally identifiable 

health information is subject to a security breach or privacy violation. 

 Meaningful legal and financial remedies should exist to address any security 

breaches or privacy violations. 

 Federal privacy standards that restrict the use and disclosure of personally 

identifiable health information should apply to all entities engaged in health 

information exchanges. 

The governance and administration of electronic health information networks should be 

transparent, and publicly accountable. 

 Independent bodies, accountable to the public, should oversee electronic health 

information sharing. 
51

 Consumers should have equal footing with other stakeholders. 

Recognizing the potential of electronic patient data to support quality measurement, 

provider and institutional performance assessment, relative effectiveness and outcomes 

research, prescription drug monitoring, patient safety, public health, informed 

decisionmaking by patients and other public interest objectives, systems should be 

designed to fully leverage that potential, while protecting patient privacy. 

Implementation of any regional or national electronic health information network 

should be accompanied by a significant consumer education program so that people 

understand how the network will operate, what information will and will not be available 

on the network, the value of the network, its privacy and security protections, how to 

participate in it, and the rights, benefits and remedies afforded to them. These efforts 

should include outreach to those without health insurance coverage. 

AARP 

AFL-CIO 

American Federation of State, County and Municipal Employees 

American Federation of Teachers 

Center for Medical Consumers 

Communications Workers of America 

Consumers Union 

Department for Professional Employees, AFL-CIO 

Childbirth Connection 

Health Care for All 

Health Privacy Project 

International Association of Machinists and Aerospace Workers 

International Union, United Auto Workers 

March of Dimes 

National Coalition for Cancer Survivorship 

National Consumers League 

National Partnership for Women & Families 

Service Employees International Union 

Title II Community AIDS National Network 

United Steelworkers International Union (USW) 

Attachment #2

Comments of Groups on HHS Proposed Regulations on anti-kickback and 

physician referral10

Comments on Office of the Inspector General Proposed Rule OIG-405-P 

As organizations representing a wide range of consumer interests, we are pleased to 

have the opportunity to comment on the proposed rule OIG-405-P that would add a new 

paragraph (x) to the existing safe harbor regulations at 42 CFR 1001.952. The proposed 

safe harbor would protect donation of specific items and services for prescribing drugs 

electronically. The preamble to the regulations also describes the scope of two planned 

additional safe harbors for electronic health records software and directly-related training 

services, but the Office has not proposed actual regulatory language for such a safe 

harbor. 

 

10 This is the comment on anti-kickback proposed rule. Basically identical comments were filed on 

CMS-1303-P, relating to the physician referral proposed rule. 
52

We recognize the potential of health information technology (HIT) to improve 

health care quality. Furthermore, we support efforts by the Department to promote the 

use of HIT by physicians and other health care providers, and are encouraged by the 

prospect of reduced errors and higher quality if e-prescribing is implemented. Below are 

our comments on the proposed safe harbor. 

Pre-interoperability Electronic Health Records Safe Harbor 

The Office is considering the creation of a safe harbor for donations of electronic 

health record technology made prior to the adoption of product certification criteria by 

the Secretary. We oppose this provision and recommend it not be included in the final 

regulations. 

The Department is moving aggressively to put product certification criteria for 

ambulatory care in place in 2006. Promoting investment in this technology before DHHS 

adopts those criteria may seriously impede reaching the goal of a common platform – a 

goal which is part of the rationale for making this safe harbor. Furthermore, allowing the 

safe harbor to be in effect prior to certification could encourage providers and 

manufacturers to press for delay in adoption of the certification standards in order to 

avoid having to make new investments or to retain the market advantages they have 

created by installing their systems in physician offices. 

Post-interoperability Electronic Health Records Safe Harbor 

In a parallel proposed rule, CMS-1303-P, the Department has included the actual 

text of a proposed regulation to provide an exception to the Stark statute for donations of 

electronic health records software if the donation is made after the product certification 

criteria are adopted and if the software is compliant with the certification requirements. 

We support the intent of this exception but have some concerns about some of the text; 

we have outlined our concerns in comments filed today on CMS-1303-P. The Office has 

asked for comments on its plans for a similar safe harbor, described in section II.B.2 of 

proposed OIG-405-P. Our comments on the potential safe harbor are similar to those 

expressed with regard to the Stark exception. For convenience, our views are set forth 

below in the context of the proposed CMS Stark exception text. 

Subsection §411.357(x)(4) [of CMS 1303-P] requires that neither the selection of 

the physician nor the amount or nature of the items and services donated can turn on the 

volume or value of referrals or other business generated between donor and recipient. The 

section then enumerates six specific criteria that a donor might use that would be deemed 

compliant with the exception requirements: 

1) total volume of prescriptions the recipient writes; 

2) size of the medical practice; 

3) number of hours the physician practices medicine; 

4) extent of use of automated technology in the recipient’s medical practice; 

5) if the donor is a hospital, whether the physician is on its staff; or 

6) another method that “is based on any reasonable and verifiable manner that is not 

directly related to the volume or value of referrals or other business generated 

between the parties.” 

This section is the heart of the proposed rule. The widespread adoption of EHR and 

EP technology can bring great benefits to patients, providers and insurers. Health 

information technology can help reduce medical errors, encourage patient activation and 

adherence to recommended regimens, and provide tools to evaluate clinical effectiveness, 

population health status, and the quality of medical care. The drive to promote the wider 

use of EHR and EP technology should not, however, trump the consumer protection or 

program integrity brought by the antifraud and abuse prohibitions. Donors should not be 

allowed to selectively fund physicians based on the volume of their prescribing, size of 

practice, or whether they are likely to be high users of technology since these could be 
53

proxies for the generation of referrals and revenue. We therefore recommend the 

following changes: 

−−Eliminate item #6, above. It is too open-ended and subjective and could become a 

major loophole. 

−−Our preference would be to require that donors offer the technology to all their 

physicians. In the case of hospitals that would be all physicians with privileges; for 

MCOs, all physicians in the MCO network; for group practices, all physicians in the 

group. In the case of an MCO, where it might be impractical to include all network 

participants, donors could be permitted to give priority to those physicians or clinics 

that have a certain percentage of their patients in the MCO. Similarly, for hospitals 

the alternative might be all physicians with privileges of a general category such as: 

a) practice privileges, or b) admitting privileges. 

−−Add a new exception that permits the donation to a physician or clinic that 

provides a certain level of uncompensated charity care or a combination of charity 

care and Medicaid patients. It is these providers – the community clinics, solo 

practitioners in rural communities or medically underserved areas – who are least 

likely to have the resources to make the health information technology investments 

on their own. 

In the preamble to the proposed regulations the Department asks for comments on a 

cap on the value of the EHR donation, either a maximum percentage of the value of the 

technology (which would require the physician to share the costs) or the lower of a fixed 

dollar amount or the percentage of value. We believe it would be hard to use a fixed 

dollar amount cap. The cost of technology will change over time and vary depending on 

the nature of the system. A cap on the percentage of the value of the technology being 

donated appears to be the more viable option. The physicians or clinics with high 

Medicaid and/or charity care caseloads should be exempted from cost-sharing. 

Subsection 417.357(x)(9). This subsection requires that any donated EHR software 

contain electronic prescribing capability that complies with the electronic prescription 

drug program standards under Medicare Part D at the time the items and services are 

furnished. In the preamble the Department states that it “wants to ensure that integrated 

packages that could positively impact patient care are not excluded from the 

postinteroperability exception.” We support the development of software in ways that 

promote avoidance of medical errors, improve quality of care, and/or enhance public 

health preparedness. It would be desirable that, as the Secretary adopts additional 

standards for EP, and for EMR systems, any donations qualifying for this exemption also 

have to comply with those standards without the necessity that the Department amend 

these regulations. We suggest the Department consider that possibility in shaping the 

final regulations. 

Sunset section 411.357(x) entirely at a designated date. The rationale for allowing an 

exception to antifraud prohibitions decreases with the passage of time. Physicians may 

not purchase EHR technology now, but in the future having such technology will be a 

standard and necessary part of medical practice. At that point there will be no need for 

third parties to donate such technology. Furthermore, if interoperability becomes the 

norm, incompatibility across a network of providers ceases to be an issue. We therefore 

strongly urge that this entire section authorizing the Stark law exception for EHR be 

eliminated not later than five years from the date of publication of the final regulations. 

Alternatively, the sunset date could be delayed for up to two additional years if the 

Secretary makes an administrative finding that there is still a need for the exception to 

promote adoption of EHR technology. 

While we support some limited exceptions to the physician self-referral prohibition, 

and the creation of additional safe harbors under the Anti-Kickback statute, for donations 

of EP and EHR technology, we believe these exceptions will have only a modest impact 
54

on the expansion of their use. Of much more importance are the standards harmonization 

and product certification efforts the Department already has underway. Equally important 

will be direct funding of loans and grants to states and providers and financial incentives 

for the adoption of HIT being incorporated in federally supported health care programs, 

including Medicare, Medicaid, FEHBP, TriCare, and SCHIP. 

Thank you for considering our comments. 

National Partnership for Women & Families 

AFL-CIO 

American Federation of State, Federal and Municipal Employees 

Consumers Union 

Department for Professional Employees, AFL-CIO 

National Consumers League 

Service Employees International Union 

 MR. DEAL. Thank you. Mr. Neaman. 

MR. NEAMAN. Chairman Deal and members of the subcommittee, 

good afternoon. On behalf of the Healthcare Leadership Council, thank 

you for the opportunity to testify before you this afternoon on the 

importance of health information technology and some of the important 

steps that need to be taken to create a national health information 

network. I am here this afternoon wearing two hats, first as the 

Chairman of the Healthcare Leadership Council, a coalition of many of 

the Nation’s leading healthcare companies and organizations. The HLC 

has a longstanding interest in this issue and shares the President’s and 

this Congress’ commitment to achieving widespread adoption of health 

information technology. 

 I am also here today speaking as the President and Chief Executive 

Officer of Evanston Northwestern Healthcare, a large academic medical 

center in northern Illinois comprised of three hospitals, a 500-physician 

multi-specialty group practice, and a medical research institute that has 

over $100 million of NIH grants. At our organization the dream of 

electronic medical records is no longer a dream. It is a reality across all 

three of our hospitals and over 70 of our doctor offices and clinics. We 

have had a full electronic medical record up and running for over two 

years, and I can tell you that it is powerful and transformational and 

really makes a difference in the quality of care and the reduction of 

medical errors, improvement of life for our nurses and our pharmacists 

and our staff, and improving the efficiency for all consumers. 

 In 2003 we launched the EPIC comprehensive electronic medical 

records system that indeed provides all of our hospitals and physicians 

with a single, legible, unified source of clinical information. The 

healthcare professionals at Evanston can tell you firsthand, and with 

great confidence, that health information technology can and must 

transform our Nation’s healthcare system for the better. We have been 

able to deliver medications to patients faster. We have significantly 
55

reduced medical errors, and in one specific example when the 

manufacturer of Vioxx took the drug out of commission, we were able to 

communicate and identify over 2,000 patients on the drug, communicate 

with their physicians and the patients, and make changes to this drug in 

three hours. That would be impossible to achieve with paper records. 

 The task before us is to make sure that this capability is available to 

all patients in the United States through interoperable electronic health 

records, and today I would like to highlight three challenges that must be 

met in order to achieve this goal. First, we have to have a multi-State 

interoperable health information system that must have uniform Federal 

standard governing patient privacy. Our current confidentiality 

framework rests upon literally thousands of State statutes, regulations, 

common law principles, and advisories. Not only do States differ from 

each other on their privacy rules, but virtually no State requirement is 

identical to the Federal HIPAA privacy regulation. This checkerboard of 

varying rules would definitely stand in the way of an interoperable multiState information network. 

 To address this problem, we urge Congress to act on H.R. 4157, the 

Health Information Technology Promotion Act of 2005, which is cosponsored by several members of this subcommittee. This bill 

establishes a process to ensure a uniform national standards is achieved 

that preserves and protects the security and confidentiality of patient 

health information. We believe this legislation is critical to achieving the 

Nation’s HIT objectives. Another challenge we face concerns HIT 

financing. Developing the EPIC system at Evanston Northwestern 

Healthcare required over $40 million of investment and our operating 

expenses initially went up by over $5 million per year to make sure that 

the system runs and runs well. 

 Many healthcare providers, I would suggest most, do not have the 

capital on hand to make this kind of investment, not only in our hospitals 

but certainly in our physician offices. We believe that is in the Nation’s 

interest, given the importance of interoperable HIT to patient safety and 

the Nation’s emergency preparedness to drive implementation through 

financial incentives and creative funding mechanisms, and we are 

prepared to work to help you shape such an initiative. Finally, we 

believe that greater physician adoption is essential for electronic health 

records to occur in our hospitals and medical groups and to occur well. 

 This will lead to greater integration of physician and hospital 

information systems that will result in better quality of care for patients 

and saved lives. For this to happen though, Congress needs to provide 

exceptions to the current physician’s self referral prohibitions and antikickback rules that were not intended to prohibit the kind of beneficial 

patient-centered actions we are discussing today. Let me close, Mr. 
56

Chairman, by again thanking the subcommittee for spotlighting the vital 

importance of these issues. We look forward to working with you in the 

months ahead to bring advances in technology closer to the patients and 

families that we are privileged to serve, and we would be very pleased to 

address your questions. Thank you. 

 [The prepared statement of Mark Neaman follows:] 

PREPARED STATEMENT OF MARK NEAMAN, PRESIDENT AND CEO, EVANSTON 

NORTHWESTERN HEALTHCARE, ON BEHALF OF HEALTHCARE LEADERSHIP COUNCIL

Chairman Deal and Members of the Subcommittee, I want to thank you on behalf of 

the members of the Healthcare Leadership Council (HLC) for the opportunity to testify 

on legislative proposals that will promote electronic health records and a smarter health 

information system. 

My name is Mark Neaman and I am president and CEO of Evanston Northwestern 

Healthcare of Evanston, Illinois. We are an academic health center connected with 

Northwestern University, comprised of three hospitals, a 463-physician medical group, a 

home health services agency and a medical research institute. 

My interest in coming before you today is twofold. First, I am chairman of the 

Healthcare Leadership Council (HLC), a not-for-profit membership organization 

comprised of chief executives of the nation’s leading health care companies and 

organizations. Fostering innovation and constantly improving the affordability and 

quality of American health care are the goals uniting HLC members. Members of HLC – 

hospitals, health plans, pharmaceutical companies, medical device manufacturers, biotech 

firms, health product distributors, pharmacies and academic medical centers – envision a 

quality driven system built upon the strengths of the private sector. 

More to the point, the Healthcare Leadership Council shares President Bush’s goal 

that most Americans have electronic health records by 2014. And we appreciate the bipartisan commitment by Congress to encourage widespread adoption of health 

information technology. 

I’m also here to share my own institution’s experiences with health information 

technology. In July of 2001, the Board of Directors of Evanston Northwestern 

Healthcare gave the go-ahead to design and implement a patient-centric electronic health 

record system, a system that we call EPIC. Our goal was to utilize health information 

technology in a way that would improve clinical outcomes, enhance patient safety, 

provide greater patient satisfaction, and create a better working environment for our 

system’s health care professionals. 

I can testify, from our own experience, that all of the discussion about the promise 

of health information technology is not hyperbole. It is quite real. Let me give you some 

examples. 

EPIC was launched in our Medical Group offices in January 2003 and then 

introduced incrementally in our hospitals over the next 12 months. We now have, 

throughout our three hospitals and all of our physician offices, a single, unified source of 

clinical information. With this accessible, comprehensive database, we have cut in half 

the amount of time it takes to deliver the first dose of an antibiotic to an inpatient, 

because of the speed with which we can check the possibility of conflicting medications 

or allergic reactions. In one year, we reduced by 20 percent the number of reported 

medication errors. 

I think it would be useful for the committee to hear of a particular anecdotal benefit 

of the EPIC system. When the drug Vioxx was pulled from usage by the drug’s 

manufacturer, we were able to use the EPIC system to remove the drug from our 

hospitals and physician offices, block future orders, send notices to physicians regarding 
57

which of their patients were on the drug, and send electronic links to websites with 

information on Vioxx substitutes. This process affected over 2,000 patients and was 

completed in just three hours. To undertake this same task manually, utilizing paper 

records to try to find which patients were taking Vioxx, would have taken days if not 

weeks. 

It is important to note that Health Information Technology is not just limited to 

electronic medical records, it also includes integrated medication delivery systems that 

reduce bedside intravenous medication delivery errors and the resultant harm to the 

patient. These state-of-the-art systems enable communication between doctors, patients, 

and pharmacies to ensure that the proper patient is receiving the proper drug in the proper 

dosage after the proper precautions were taken. 

The Healthcare Leadership Council has such a strong interest in this issue because 

we’ve seen firsthand what widespread adoption of HIT can mean for patients and health 

care providers. Several HLC member organizations have been among the earliest 

adopters and pioneers of health information technology. We believe HIT has the power 

to transform our health care system and provide increased efficiencies in delivering 

health care; contribute to greater patient safety and better patient care; and achieve 

clinical and business process improvements. 

Our interest in this issue is long-standing. In the summer of 2003, HLC established 

a Technical Advisory Board, comprised of clinicians and others with information 

technology expertise within HLC’s member companies to provide information about their 

HIT implementation experiences. 

Attached to my testimony is a copy of the White Paper that resulted from this effort. 

The paper attempted to quantify key benefits of HIT along with barriers to HIT 

implementation. The paper concluded with the following recommendations: 

• Standards to assure interoperability; 

• Financial incentives and funding mechanisms; 

• Liability protections to facilitate sharing of safety and quality data; and 

• Stakeholder collaboration on best practices. 

In looking at these recommendations, it is clear that there has been significant progress 

since 2004. 

Last summer, the President signed into law the, “Patient Safety and Quality 

Improvement Act.” HLC advocated for this legislation as an important step toward 

fostering a culture of safety – through liability protections to allow voluntary 

information-sharing and reporting. I thank the Subcommittee members for all of your 

work to enact this important legislation. 

In the area of standards, several public and private sector initiatives are making great 

strides to identify or develop health information interoperability standards that will 

enable disparate systems to “speak the same language.” And the work of the 

Certification Commission for Health Information Technology will complement these 

efforts by certifying that products are compliant with criteria for functionality, 

interoperability and security. This will help reduce provider investment risks and 

improve user satisfaction. 

As important as it is to applaud the progress that has been made, it is necessary to 

focus on the barriers that stand in the way of widespread HIT implementation. We have 

some significant challenges ahead of us, and I’ll begin by discussing patient privacy 

regulations and standards. 

Developing a multi-state, interoperable system depends on national technical 

standards as well as national uniform standards for confidentiality and security. The 

Health Insurance Portability and Accountability Act (HIPAA) governs the privacy and 

security of medical information. Though HIPAA established federal privacy and security 

standards, it permits significant state variations that create serious impediments to 
58

interoperable electronic health records, particularly when patient information must be 

sent across state lines. 

We believe Congressional action to establish a uniform federal privacy standard is 

essential in order to ensure the viability of a national health information network. 

Because the HIPAA Privacy Rule’s preemption standard permits significant state 

variation, providers, clearinghouses and health plans are required to comply with the 

federal law as well as many state privacy restrictions that differ to some degree from the 

HIPAA privacy rule. 

State health privacy protections vary widely and are found in thousands of statutes, 

regulations, common law principles and advisories. Health information privacy 

protections can be found in a state’s health code as well as its laws and regulations 

governing criminal procedure, social welfare, domestic relations, evidence, public health, 

revenue and taxation, human resources, consumer affairs, probate and many others. 

Virtually no state requirement is identical to the federal rule. 

HLC is not alone in calling for action in this area. The 11 member Commission on 

Systemic Interoperability, authorized by the Medicare Prescription Drug, Modernization, 

and Improvement Act to develop recommendations on HIT implementation and adoption, 

recommended that Congress authorize the Secretary of HHS to develop a uniform federal 

health information privacy standard for the nation, based on HIPAA and preempting state 

privacy laws, in order to enable data interoperability throughout the country. 

H.R. 4157, the “Health Information Technology Promotion Act of 2005,” which 

several Members of the Subcommittee have cosponsored, anticipates and addresses this 

need. 

The bill sets forth a process by which the Secretary of HHS develops a uniform 

standard for privacy laws. The bill does not simply adopt HIPAA “as is.” Rather, the 

legislation requires the Secretary to conduct a study of state and federal security and 

confidentiality laws to determine the degree of variance and how such variation adversely 

impacts the privacy and security of health information as well as the strengths and 

weaknesses of such laws. 

The Secretary then submits a report to Congress including a determination as to 

whether state and federal security and confidentiality laws should be conformed to create 

a single set of national standards; and what such standards should be. If the Secretary 

determines that a single federal standard is necessary and Congress does not act to create 

a standard in three years, the HIPAA privacy regulation, as modified by the Secretary 

based on the results of the study, will become the national standard. We believe that this 

legislation is critical to achieve our critical HIT objectives. 

Since 1996, HLC has led the Confidentiality Coalition, a broad-based group of 

organizations who support workable national uniform privacy standards. The 

Confidentiality Coalition includes over 100 physician specialty and subspecialty groups, 

nurses, pharmacists, employers, hospitals, nursing homes, biotechnology researchers, 

health plans, pharmaceutical benefit management and pharmaceutical companies. 

Many organizations and companies that are members or supporters of the 

Confidentiality Coalition sent a letter to Chairman Deal in support of a national standard 

for privacy and the provisions of H.R. 4157 that lay the groundwork for developing such 

a standard. 

In discussing this issue, let me make one point abundantly clear. While we believe 

strongly in the need for a national privacy standard, HLC believes just as strongly that 

any regional or national system designed to facilitate the sharing of electronic health 

information must protect the confidentiality of patient information. 

Health care providers and others involved in health care operations have appointed 

privacy officers, adopted compliance plans and conducted training with their employees 

to assure patients that they will protect their privacy in accordance with the HIPPA 

privacy rule. 
59

Addressing this issue appropriately will be essential to achieving the interoperability 

necessary to improve the quality and cost effectiveness of the health care system – while 

still assuring patients’ confidence that their information will be kept private. 

To further underscore the importance of this issue to HIT development, I have 

attached to my testimony a map developed by the Indiana Network for Patient Care. 

Each dot represents a patient seen at an Indianapolis hospital during a six month period. 

While the dots are stacked very deep around Indianapolis as you would expect, patients 

served by the Indiana health providers during this period were also located in 48 of the 50 

states. Today’s health care providers, meeting the needs of a mobile society, serve 

patients from multiple and far-flung jurisdictions. Looking at this map it is easy to see 

why regional agreements will not be adequate to address the myriad regulations with 

which providers and others will need to comply to achieve “interoperability.” 

In addition to national privacy standards, the lack of funding or adequate resources – 

combined with the high costs of HIT systems – was repeatedly cited in our member study 

as a barrier to effective implementation of HIT systems. There are significant front-end 

and ongoing maintenance and operational costs for HIT, including software, hardware, 

training, upgrades, and maintenance. Systems are virtually unaffordable for those 

providers who do not have ready access to the operating capital needed for such an 

investment. 

Developing the EPIC system at Evanston Northwestern Healthcare required hard 

capital costs of $35 million. This does not include an additional $7.5 million for 

consultants to write code for the system and undertake other essential tasks. 

Furthermore, our annual operating costs are increased by $5.5 million to support 

additional IT staff, training and software maintenance agreements. 

In an age in which health care providers, in many cases, must deal with rising costs 

associated with uncompensated care, medical liability rates, homeland security needs and 

addressing staffing shortages, it is a simple fact that many providers do not have the 

financial wherewithal to invest in these new systems. 

HLC believes that the federal government should drive the nation’s implementation of 

HIT through financial incentives and funding mechanisms to help providers defray the 

huge costs of acquiring and operating HIT. Rapid implementation of interoperable HIT 

is also a critical component of the nation’s emergency preparedness. 

While the Agency for Healthcare Research and Quality (AHRQ) and Office of the 

National Coordinator for Health Information Technology (ONC) contracts and grants will 

support the development of a national information network and interoperability 

standards, we need to do more to get every provider using electronic health records now. 

HLC advocates the consideration and implementation of multiple HIT funding 

mechanisms. However, we also recognize that current fiscal deficits and budget 

constraints will limit the ability of Congress to directly fund any new program or 

initiative. HLC is working with the chief financial officers of our member companies 

and organizations to develop workable, creative financing proposals for HIT. We look 

forward to sharing those ideas with the subcommittee. 

There is one other critical issue I need to address today. One way Congress can 

facilitate greater physician adoption of electronic health records is to allow hospitals and 

medical groups that have successfully implemented electronic health records to share 

their expertise and IT investment with physician offices. This will facilitate better 

integration of hospital and physician information systems to improve continuity of care, 

decrease duplicate tests and provide greater safety and quality of care to consumers. By 

providing exceptions to the physician self-referral prohibition (Stark) and anti-kickback 

rules for HIT, Congress can accelerate physician use of electronic health records. 

Current law prohibits anyone who knowingly and willfully receives or pays anything 

of value to influence the referral of federal health care program business, including 

Medicare and Medicaid. Physicians are also prohibited from ordering designated health 
60

services for Medicare patients from entities with which the physician has a financial 

relationship – including compensation arrangements. The penalties for violating Stark 

and anti-kickback rules are significant. The Stark law is a “strict liability” statute and no 

element of intent is required. Violators are subject to significant civil monetary penalties 

and risk being excluded from participation in the Medicare and Medicaid programs. The 

anti-kickback law is a criminal statute that also provides significant penalties – including 

fines and imprisonment – for knowing and willful violations. 

Though HHS has released proposed regulations that would provide limited exceptions 

to the Stark and anti-kickback rules for e-prescribing and electronic health records, 

industry analysis suggests that the exceptions will be of little value to hospitals and 

medical groups wanting to assist physicians with the adoption of HIT because they are 

too restrictive and contain overly burdensome requirements on donors and recipients of 

IT products. 

Due to the severe consequences of violating these laws, providers need a workable 

safe harbor for HIT. Congress must provide a clear roadmap for hospitals, medical 

groups and others to provide HIT hardware, software, and related training maintenance 

and support services to physicians. 

Pending legislation, such as H.R. 4157, establishes a safe harbor to the anti-kickback 

and physician self-referral rules for the provision of health information technology and 

related training services to health professionals. 

Under the safe harbor, non-monetary remuneration in the form of HIT and training 

services is allowable if the remuneration is made without conditions that limit the use of 

HIT to services provided by physicians to individuals receiving services at the entity; 

restrict the use of HIT in conjunction with other HIT; or take into account the volume or 

value of referrals. 

We believe that enactment of this type of safeharbor will help spur adoption of 

electronic health records and provide immediate benefits to consumers in the form of 

improved quality of care and patient safety. 

In conclusion, HLC believes that HIT legislation should especially focus on areas in 

which Congress and the President must act to remove barriers and facilitate successful 

implementation of HIT. Therefore, HIT legislation should accelerate the adoption of 

health information technology and interoperable electronic health records by ensuring 

uniform IT standards including privacy and security and providing exceptions to Stark 

and anti-kickback rules to allow hospitals, medical groups and others to share their 

expertise and investment in electronic health records with physician offices. HLC will 

continue to work with Congress to continue to explore other funding mechanisms to 

promote wide spread adoption of HIT. 

The Healthcare Leadership Council appreciates the opportunity to testify on the 

development of health care information technology, and I will also be pleased to discuss 

in greater detail with the subcommittee our firsthand experiences with health information 

technology at Evanston Northwestern Healthcare. Any questions about my testimony or 

these issues can be addressed to me or to Ms. Theresa Doyle, Senior Vice President for 

Policy, Healthcare Leadership Council (telephone 202-452-8700, e-mail tdoyle@hlc.org). 
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91

 MR. DEAL. Thank you. Mr. Pyles. 

MR. PYLES. Good afternoon, Mr. Chairman. I am pleased to be 

here. I am Jim Pyles, representing the American Psychoanalytic 

Association, and I would like to just associate my remarks a bit, I guess, 

with the remarks of Mr. Vaughan, who I think beautifully expressed the 

concerns of consumers, and those are largely the same concerns by our 

members because we found that psychotherapists are essentially the 

canaries in the coal mine when it comes to medical privacy. When there 
92

is a threat to medical privacy you cannot provide effective 

psychotherapy. It just does not happen. 

 I have worked on this issue now for about 15 years, and I found that 

there is absolutely no end to the number of people who want to eliminate 

your medical privacy so they can help you. So I would urge you to think 

carefully about that. The fundamental question I think we have to ask 

ourselves as we look at a health IT system is are we going to compel 

Americans to disclose all of their most sensitive health information about 

themselves and their families into or from a national interoperable health 

information system without meaningful, informed patient consent, 

against their will, without adequate enforcement against unauthorized 

uses, disclosures, and just essentially disregarding their views. 

 One of the things I have not heard much of in the testimony today is 

what do the patients want, and I will be addressing that. I have learned 

in working on this issue that if you have no privacy, you have no liberty, 

and if you have no privacy, we do not have access to effective 

healthcare. It just does not happen. If Americans do not have a right to 

privacy to their innermost thoughts and their genetic makeup, what 

possible privacy could they have, what other things could be more 

private than that? What does meaningful consent and privacy mean? 

According to HHS it means the ability of individuals to determine for 

themselves when, how, and to what extent information about them is 

communicated. I think if you ask any person on the street they will have 

the same definition. 

 Courts have said it really is essentially the right to control the 

disclosure of your information, at least in some routine circumstances. 

Why is the right so important? Again, HHS concluded that in short the 

entire health delivery system is built upon the willingness of individuals 

to share the most intimate details of their lives with their healthcare 

providers. If that does not happen, an IT system is irrelevant, so that is 

the most significant concern when it comes to effective healthcare. HHS 

also concluded that unless public fears are allayed, it will be unable to 

obtain the full benefits of an electronic health information system. And 

yesterday former Speaker Newt Gingrich presented testimony before the 

Subcommittee on the Federal Work Gorce, and here is what he had to 

say about the patient’s right to control their information: “Individuals 

have the right to control and must have the ability to control who can 

access their personal information.” I could not agree with Mr. Gingrich 

more. 

 We know that we have sources already of national privacy standards. 

They appear in the Hippocratic Oath. It dates back to the 5th Century 

B.C., which is administered by 98 percent of the medical schools in this 

country to their graduates. We know that established standards for the 
93

ethical practice of medicine adopted by every segment of the medical 

profession to essentially assure the patients that their information will not 

be disclosed without their consent. The AMA standard, for example, 

says, and I quote, “The physician should not reveal confidential 

communications or information without the express consent of the 

patient unless otherwise required to do so by law.” We also know that 

this right to privacy for personal information is a fundamental concept of 

our system of government. It is embedded in the Fourteenth 

Amendment, the Fifth, the Fourth, and the First Amendments to the U.S. 

Constitution. This is the informational branch of the right to privacy, not 

the decisional branch where there is so much controversy. The Supreme 

Court is rock solid on protecting the right to informational privacy, and 

as I said, consent must be voluntary and it must be informed. 

 We also know that this right to privacy is grounded in the physicianpatient privilege recognized in most States, including your own. The 

psychotherapist-patient privilege is recognized in all 50 States and the 

District of Columbia and in Federal common law. The right to privacy is 

also reflected in the tort laws and the statutory laws of all 50 States, and 

the States of Tennessee and California have the right to privacy in their 

State constitutions. We know also that the citizens of Georgia and the 

citizens of Ohio think pretty keenly about their right to privacy, and they 

have enacted a lot of laws to specifically protect it. 

 And if you look at tab two, which I will not go into, it lists the 

privacy laws in the State of Georgia that could be preempted by a bill 

such as H.R. 4157. Both of these States also recognize the private act of 

action which HIPAA does not. There are many other States that 

recognize similar privacy protections in areas of mental health 

information, genetic testing information, cancer diagnosis and treatment 

information, HIV/AIDS, drug and alcohol abuse diagnosis and treatment, 

birth defects, and many of these States give a private right of action. So I 

would urge you to be very careful about any bill that would preempt 

these laws the citizens of these States have said they need and want. 

 There are many other privacy protections under State law. Twentynine States now have breach protection or breach notification laws. I 

mentioned private rights of action are there. Let us look for a moment at 

the right of privacy under HIPAA. The HIPAA privacy rule really 

should be named a HIPAA disclosure rule because it provides regulatory 

permission for all covered entities and business associates to use and 

disclose identifiable health information for all routine purposes defined 

as treatment, payment, and healthcare operations, without notice to the 

patient, without the patient’s consent over the individual’s objection, 

even if the individual pays privately, and even retroactive to the 
94

beginning of time, even information that was created prior to the 

compliance date. 

 Treatment, payment and healthcare operations, the reason for which 

this information can be disclosed without permission is a lengthy list. If 

you look at tab four you will see that list of purposes. HHS responded to 

many of the concerns that consumers had in adopting that regulation by 

saying it was only a floor, that still practitioners could still obtain 

consent, that more stringent laws remain in effect, and that ethical 

standards retain their vitality. I would urge you that with any law that 

you are thinking of today you preserve those protections. What does the 

public want and expect? If you look at HHS’ findings they have found 

that the public has a common belief and strong expectation that their 

identifiable information will not be disclosed without their consent. 

Sixty-five percent of Americans would not disclose sensitive information 

and necessary information to their physicians and providers if they 

thought it would go into the electronic record. 

 Seventy-five percent are concerned about the loss of medical privacy 

due to the use of electronic information, and we know that this concern 

translates into adverse effects on healthcare. Six hundred thousand 

people a year according to HHS, 600,000 people a year, do not seek early 

diagnosis and treatment for cancer, 2 million more annually do not seek 

needed treatment for mental illness. Thousands do not seek treatment for 

sexually transmitted diseases. One in six Americans takes evasive 

actions to avoid privacy violations, including providing inaccurate 

information, changing physicians or avoiding healthcare altogether, and 

87 percent of physicians report withholding information from a patient’s 

medical record due to privacy concerns. 

 So we would urge you to start this process with strong privacy 

protections. Also, we know that an IT system poses a greater threat to 

health information privacy. The President’s Information Technology 

Advisory Committee concluded that the Nation’s electronic information 

systems are highly vulnerable to corruption by hackers and others, that 

the threat is growing by over 20 percent annually, and the increasing 

vulnerabilities cannot be addressed by current technology. 

 MR. DEAL. May I ask you to summarize rather quickly, please? 

 MR. PYLES. I will. In conclusion, I would just like to say that the 

the right course of action for Congress to take, I believe, is ground any 

health IT system in strong privacy protections reflected in the history of 

the Nation in its medical and professional standards, the law of 

psychotherapy patient privilege, and the constitutional common law 

provide for meaningful, informed patient consent, provide a private right 

of action, and prompt notification for any breaches. Lastly, I would just 

mention the concern for the loss of medical privacy should be a 
95

particular concern for Members of this body because under the Supreme 

Court’s decision in 2001, Bartnicki v. Vopper, the court held that 

information about a public official or a public event which is obtained, 

even if it is obtained unlawfully, can be published by the press and the 

press has a First Amendment right to do it, and Congress cannot prevent 

that publication. 

 So we know these electronic information systems cannot be rendered 

secure. It is very likely that elections in the future are going to turn on 

what is in a politician’s medical record as well as his talents he brings to 

the table. Thanks very much. 

 [The prepared statement of James C. Pyles follows:] 
96

PREPARED STATEMENT OF JAMES C. PYLES, ATTORNEY MEMBER, POWES, PYLES, SUTTER 

AND VERVILLE, P.C. 
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124

 MR. DEAL. Thank you. Dr. Detmer. 

MR. DETMER. Good afternoon, Chairman Deal, members of the 

Health Subcommittee. I am Don Detmer, President and CEO of the 
125

American Medical Informatics Association, whose 3,500 members 

include physicians, nurses, other health professionals, computer and 

information scientists and managers, biomedical engineers, academic 

researchers, and educators. Over the years AMIA’s members have been 

the pioneers of information knowledge relating to healthcare. In the 

early days of HIPAA rulemaking from 1996 to 1998, I served as the 

Chairman of the National Committee on Vital and Health Statistics, and I 

also was a member of the IOM committees that produced the Errors 

report and the Chasm report. More recently, I was one of the Speakers 

appointments to the Commission on Systemic Interoperability. 

 It is a pleasure to appear before you today. I would like to briefly 

summarize a few key points, and my written testimony expands on those 

to some extent. The need for Federal leadership. Today, too few 

individuals have access to electronic health record systems and there is 

little interconnectedness of the systems that exist. And yet, significant 

improvements in healthcare safety and quality cannot be achieved 

without robust secure electronic record systems that can be securely 

communicated across a national information network as we heard from 

Mr. Neaman. Without Federal leadership our national goal of safe, 

efficient, effective, equitable, timely, and patient-centered care will 

remain unfulfilled dream because the necessary integrated health 

information systems will not be there. 

 My comments will touch on a few points that are needed to move our 

national vision forward at this time. First, the Office of the National 

Coordinator for Health Information Technology, ONC, led by Dr. David 

Brailer, is doing an excellent job. H.R. 4157, the Health Information 

Technology Promotion Act would establish the ONC in statute and 

AMIA applauds this. Second, the Department of Health and Human 

Services should be given explicit responsibility and sufficient ongoing 

resources for the National Library of Medicine to assure that the ongoing 

maintenance and open dissemination of agreed health information 

standards can be pursued as Dr. Braithwaite mentioned. 

 Similarly, we are pleased that H.R. 4157 provides explicit and 

reasonable rulemaking procedures for the Department to undertake long 

overdue upgrades of data vocabularies and classification systems, the 

U.S. thus showing the world and shaping global vocabularies and 

classifications as a source of primary data in electronic health records, 

including contemporary disease classifications and coding systems, 

specifically ICD-10, for a host of legitimate purposes that go well 

beyond reimbursement. Today they just do not accurately reflect modern 

medical practice, nor do they help the needs of medical researchers. 

 HIPAA. From my perspective as a physician, the privacy rule has 

been largely successful in clarifying the individual rights of all patients 
126

in relation to their health data on a national basis in establishing the 

responsibilities and legal obligations of all providers to whom patients 

interact. It is now time to take a rigorous look at lessons learned. Some 

argue that States must have the capacity to enact more stringent 

requirements for privacy. In the name of better health and healthcare, I 

must respectfully disagree. In fact, I do not see how, in practical terms, 

we can get to widespread adoption of electronic health records without 

establishing meaningful floor to ceiling standards that preempt 

idiosyncratic State approaches. Speaking realistically, only through 

Federal and State leadership can we truly connect our Nation for 

healthcare purposes. 

 As a matter of record, AMIA has supported the need for appropriate 

Federal protection of genetic data. H.R. 4157 calls for a study of the 

impact of varying State statutes on the rights and protections afforded to 

patients and importantly on the impact of the requirements on the quality, 

cost, and effectiveness of healthcare. The study of HIPAA privacy and 

security standards represents an absolute minimum. Two other items 

will be valuable to add to the study. First, in addition to the effects on 

care, the study should examine effects on legitimate biomedical research. 

And, second, our Nation genuinely needs a consistent way to reliably and 

accurately authenticate the identity. Both safety and privacy are 

compromised when the right health information for one patient gets 

associated with or sent to the wrong patient. 

 Addressing disincentives to HIT dissemination. Reasonable safe 

harbors to permit dissemination of health information technologies and 

services intended to improve healthcare quality, efficiency, and access 

would encourage the deployment of essential health information systems. 

And I am very pleased that provisions to that effect are included in 

Chairman Deal’s bill. 

Educating the workforce. Ultimately health IT comes down to 

healthcare workers and patients being sufficiently skilled to take real 

advantages of the opportunities for improved care, efficiency, and access 

that health information technologies and the interconnected national 

health information infrastructure can provide. 

 In November 2005, AHIMA, the American Health Information 

Management Association, and AMIA, my organization, convened a 

workforce summit to develop initial strategies to address challenges 

relating to effective implementation of electronic health records and 

personal health records. The resulting white paper, I guess you might 

call it line paper, Building the Workforce for Health Information 

Transformation, presents nine targeted recommendations that key 

stakeholders, including government, can use to support the existing 

workforce and ensure that sufficient number of well-qualified health 
127

information specialists are available to achieve the necessary health 

transformation through IT. 

 We commend this report to you, and AMIA and AHIMA stand ready 

to help address this challenge. I firmly believe that the development and 

deployment of an interoperable, interconnected national health 

information system is not purely a healthcare issue. It is a matter of 

national security. Whether we face, God forbid, another Hurricane 

Katrina or an outbreak of avian flu in humans or another episode of 

bioterrorism, we simply must have a reliable health information and 

communication system for our people’s well-being. Our Nation’s safety 

depends on it. Thank you again for the opportunity to testify, and I look 

forward to responding to questions. 

 [The prepared statement of Don E. Detmer follows:] 

PREPARED STATEMENT OF DR. DON E. DETMER, PRESIDENT AND CHIEF EXECUTIVE 

OFFICER, AMERICAN MEDICAL INFORMATICS ASSOCIATION

Good morning. Chairman Deal, Ranking Member Brown, members of the Health 

subcommittee: thank you for the opportunity to appear before you today. My name is 

Don Detmer. I am President and CEO of the American Medical Informatics Association, 

whose 3200 members include physicians, nurses, computer and information scientists and 

managers, biomedical engineers, academic researchers and educators. Over the years 

AMIA has provided many of the thought leaders who have pioneered the innovative use 

of information technologies in healthcare. In addition to my role with AMIA, I am a 

Professor of Medical Education in the Department of Public Health Sciences at the 

University of Virginia. I practiced as a vascular surgeon for twenty-five years. 

From 1996 to 1998 I had the privilege of serving as Chairman of the National 

Committee on Vital and Health Statistics, whose mission, broadly, is to advise the 

Department of Health and Human Services on shaping a national information strategy to 

improve the nation’s health. My tenure at NCVHS coincided with the expansion of the 

Committee’s charge enacted in the Health Insurance Portability and Accountability Act 

of 1996, which gave the Committee significant responsibilities in regard to administrative 

simplification and privacy. More recently, I was a member of the Commission on 

Systemic Interoperability, which was created by the Medicare Modernization Act, and 

which made a series of recommendations concerning the adoption and implementation of 

health information technology in an October 2005 report to Congress entitled, Ending the 

Document Game: Connecting and Transforming Your Healthcare Through Information 

Technology. 

As you consider, and I hope pass, legislation that aims to facilitate movement 

toward a ‘smarter’ health care system through the promotion of widespread adoption of 

electronic health records (EHRs) and personal health records (PHRs), let me comment 

today on three important issues: 

• first, there is a critical need for ongoing Federal leadership in encouraging and 

shaping a national health information system that benefits all stakeholders, 

especially patients; 

• second, we should focus on “lessons learned” from the rollout of HIPAA 

standards to date and identify issues to be considered as additional health 

information standards and initiatives are developed and disseminated; 
128

• and, third, we should address some current disincentives – both real and 

perceived – that slow the implementation of health information technologies in 

our healthcare system, the most information-intensive enterprise in our 

economy. 

The Continuing Need for Federal Leadership

While it is the undoubted world leader in high technology clinical care and 

biomedical research, the US healthcare system is an incredibly fragmented mix of very 

large and very small players – a conglomeration of 21st century medical science and 

cottage-industry business practices, and too often characterized by uneven access, 

delivery and outcomes. Significant improvements in healthcare safety and quality will 

not be achieved for Americans without robust, secure electronic health records within a 

national health information infrastructure (NHII). Market forces alone have not driven 

the necessary integration of the interests and needs of disparate participants: hospitals – 

physicians and other providers – payers – employers – researchers – educators – and, 

most important, patients. As a result, too few individuals have access to electronic health 

record systems today and there is little interconnectedness of the systems that exist. 

Without Federal leadership to encourage the deployment of interconnected, interoperable 

health information systems, our progress toward integrated and quality-based care 

delivery will continue to be lurching and inconsistent. 

AMIA has been encouraged by Congressional attention to health information issues 

as evidenced by the introduction of HR 4157, the Health Information Technology 

Promotion Act, and HR 2234, the 21st Century Health Information Act, as well as the 

passage by the Senate late last year of S 1418, the Wired for Health Care Quality Act. 

And, we have been pleased to provide input to several legislative proposals to make 

personal health records (PHRs) available to Federal Employee Health Benefit Plan 

(FEHBP) beneficiaries. These bills are important not only for their specific provisions, 

some of which I will focus on today, but also because they convey an important message 

to the public – that their elected representatives recognize the critical importance of 

improving the health care system in ways that will empower consumers, while also 

improving the quality, safety, cost-effectiveness and accessibility of healthcare. 

Over the last two plus years, the Office of the National Coordinator for Health 

Information Technology (ONC), which is headed by Dr. David Brailer, a Fellow of 

AMIA’s College of Medical Informatics, has done an excellent job in communicating a 

vision to support widespread adoption of interoperable electronic health records within 

the next 10 years. AMIA is pleased that among the projects currently funded by the ONC 

are contracts for an Internet-based national health information network and for the 

development of processes for the harmonization of the various health information 

standards that are emerging. AMIA itself has a contract with the ONC to create a plan 

for a national framework for clinical decision support. In regard to interoperability 

standards and the development of processes to certify health information technologies 

that can actually ‘talk’ to each other and will allow the seamless integration of 

information systems to facilitate quality care, AMIA is also very supportive of the work 

of the public-private American Health Information Community (AHIC). 

We believe strongly that HHS should be given explicit responsibility for ensuring 

the ongoing maintenance and dissemination of health information standards, with 

authorization for licensing and/or other types of support. To give you a successful 

example of Federal leadership, I would point to Secretary Tommy Thompson’s drive to 

complete the licensure and distribution of SNOMED-CT, a vital ‘dictionary’ of medical 

terminology, by the National Library of Medicine in 2004. AMIA firmly believes that 

the Department should draw heavily on the resources and expertise of the NLM, and we 

support additional funding for the Library to ensure that approved vocabulary and other 

data content standards are maintained, coordinated and updated regularly to permit 
129

appropriate alignment and uniformity of the sets of standards that underlie genuinely 

workable EHRs and PHRs. Just like the NLM’s PubMed, these standards should be 

openly available on the internet. 

Importantly, HR 4157, the Health Information Technology Promotion Act, 

introduced by Chairman Deal and Representative Nancy Johnson, provides explicit and 

reasonable rulemaking procedures by which HHS can undertake long overdue upgrades 

to data vocabularies and classification systems. Simply, if we are going to facilitate 

development of an interoperative nationwide network of electronic health records 

(EHRs), we must address the issue of interoperative data. This means that we must have 

standard vocabularies as the source of our primary data in the electronic health record, 

and use contemporary disease classifications and coding systems, (ICD-10), not only for 

traditional reimbursement purposes but to permit meaningful and accurate secondary uses 

of data for quality, biosurveillance, and public health monitoring, health research, injury 

prevention and policy making. As a physician and a health informatician, I find it 

unacceptable that the US remains one of a true handful of countries in the world to use a 

30-year old classification system for diagnoses and inpatient procedures. If we are 

serious about deploying electronic health record systems for the benefit of individual 

patients and the nation as a whole, we must attend to the need to improve data standards 

and speed our capacity to update those standards. At the end of the day, our data systems 

and standards should primarily foster better care, not better reimbursement. 

 HR 4157 establishes the Office of the National Coordinator for Health Information 

Technology in statute, and I believe this step is a crucial one in clarifying Federal 

leadership. As part of our support for the Office of the National Coordinator, AMIA will 

continue to urge the appropriators on both sides of the Hill to provide for adequate 

funding of the ONC. 

Examining HIPAA Lessons Learned So Far

As we move to develop an interconnected, interoperable health information system 

that will facilitate quality, access and patient-centeredness on a national and international 

basis, it is prudent to identify lessons we have learned so far from the administrative 

simplification provisions of HIPAA. Though the road was often difficult, if not actually 

painful, we have made a great deal of progress in establishing the rights of individuals to 

expect that their health information will be used appropriately and their privacy and 

confidentiality protected, and in imposing meaningful and reasonable obligations on 

health care providers, plans and payers, and others to comply with consistent Federal 

standards for the use, disclosure and transmission of health information. 

Where once some people in the healthcare system may have treated individual 

health information too cavalierly on at least some occasions, from my perspective it is 

manifestly clear that since the Privacy Rule took effect in 2003, doctors, hospitals, 

pharmacies, health plans and others have made really extraordinary efforts to inform 

individuals of their rights and to establish policies and procedures that protect sensitive 

health information. Today every individual has a Federal right to access his or her 

medical record and to expect that the healthcare system will keep that record secure and 

confidential. And these norms are national – no longer are your rights, or the legal 

responsibilities of those healthcare providers you deal with, defined by the unique 

features of the State in which you live. Even if HIPAA may have ‘backed’ the nation 

into reasonable privacy and confidentiality protections, the roll-out has proved, on the 

whole, successful. 

Notwithstanding what I think have been extremely good faith efforts to ensure that 

personal data is adequately protected, I do not discount that some people – for instance, 

those with concerns about the security of especially sensitive information, such as HIV 

status or relating to mental health treatment – have continued concerns about health 

privacy. To my knowledge there have not been reports of any large-scale violations of 
130

the framework set in place by the HIPAA Privacy Rule. That is, individually identifiable 

health information is used and disclosed only for “treatment, payment and health care 

operations” or as otherwise specifically authorized by the individual. Does the Privacy 

Rule protect against patently unethical or extraordinarily careless acts – like the leaking 

of a celebrity’s medical record to a tabloid magazine or the disposal of old medical 

records in a dumpster or a straightforward instance of identity theft? Of course not – but 

we cannot expect even the most carefully crafted information standards to prevent all 

illegal behavior. In such instances, active pursuit and strong penalties are needed when 

intrusions and misuses are identified, as a lesson to dissuade others from similar illegal 

behavior. 

Some argue that the States must have the capacity to enact ‘more stringent’ 

standards for health information – as is true under the current Privacy Rule – for all 

health information standards, including those that are absolutely necessary for the 

development of an interconnected, interoperable national health information system. In 

the name of better healthcare, I must respectfully disagree. About half of all Americans 

live near State lines and multiple State approaches complicate the efficient and seamless 

transmission of crucial health information. For example, it is hardly unusual for an 

individual to work in the District, live in Maryland, and receive health care in Virginia, 

with payments made by an insurer located in still another state. If we are to ensure realtime availability of accurate and complete clinical information at the point of care, we 

simply cannot have the standards for the use, disclosure and transmission of the patient’s 

health information subject to idiosyncratic requirements of individual States. 

Personally, I don’t see how we can get to the common standards and interoperability 

that underlie the widespread adoption of electronic health records without Federal 

preemption of conflicting State laws. But rather than simply assert that proposition, let 

me note that, in relation to the Privacy Rule, since 1999 AMIA has called for a study of 

the impact of the lack of Federal preemption and the impact of varying State statutes on 

the rights and protections afforded to individuals and upon the quality, cost and 

effectiveness of health care. Thus, I am very pleased that HR 4157 calls upon the 

Secretary to undertake such a study in relation to standards that have been adopted 

subsequent to HIPAA. This is a prudent approach; however, if the study shows that 

varying State laws and requirements have a negative impact on health care delivery, 

quality and access, and that HIPAA has established meaningful privacy and security 

protections, it makes sense to move forward without delay on Federal preemption for all 

adopted HIPAA standards. 

As you may recall, the original HIPAA legislation called for the development of a 

unique personal healthcare identifier for individuals. All other developed economies in 

the world have already or are currently implementing such identifiers to assure proper 

authentication of people seeking care services. Whether we do so with via a voluntary 

opt-out approach or through the use of reliable identification algorithms, the United 

States needs a uniform approach to authenticating one’s identity, and having the benefit 

of a unique identifier to help increase the ease and accuracy of this authentication is not 

trivial. Indeed, I fear that short of such a move, we will be left behind the other nations 

with whom we should be seeking secure ways to collaborate on global standards. This 

topic was a key recommendation from the Commission on Systemic Interoperability, and 

I would strongly recommend that consideration of the issues involved in the reliable 

authentication of individuals be included in the Secretarial study called for in HR 4157. 

 

Disincentives That Have Slowed Implementation of Information Technologies

From 1999 through 2003 I had the privilege to serve as the Gillings Professor of 

Health Management at Cambridge University in England and to consult to the National 

IT programme of the National Health Service. As you may know, the British government 

is investing billions of pounds to implement a fully functional, patient-friendly, electronic 
131

health record and system. While this task might appear to be easier in some aspects 

because of Britain’s single-payer system, of particular note to me was the observation 

that, even before the government’s new investment, well over 80 percent of England’s 

primary care physicians were facilitating patient care electronically. Today they are 

moving forward with booking appointments, writing prescriptions, making electronic 

referrals, recording clinical notes and tracking treatment compliance. By contrast, it is 

estimated that fewer than 20 percent of US primary care physicians utilize electronic 

health records. 

Interestingly, England’s primary care practices were ‘wired’ initially not because of 

government investment, but because the British pharmaceutical industry years ago 

offered to supply the necessary hardware and software to primary care doctors in return 

for access to anonymized prescribing information. In the United States I think such an 

arrangement would be seen as unseemly at best, and illegal at worst; certainly in the U.K. 

there were those who held the same view. While the British are neither less ethical nor 

more permissive of the misuse of identifiable health information than are Americans, in 

this country hospitals, physicians and other providers are incredibly reluctant to pursue 

any innovative financing for health IT, including networks that can securely link together 

a region’s providers, because of their concerns about the Stark self-referral prohibitions 

and other fraud and abuse standards. 

Whether these concerns are reasonable, today we have hospital lawyers who 

absolutely insist that it is simply not acceptable for any third party to furnish any 

information technologies – whether hardware, software, training or other services – to 

any provider at less than a full, fair market price. Yet, the aims of HIT dissemination are 

to improve the availability of accurate and timely health information in order to improve 

the quality of care, and I am aware of no evidence that such dissemination by a hospital, 

for instance, could actually serve to drive ‘new’ referrals or business into that hospital. 

While some healthcare systems and providers are moving forward under the current 

standards, the general consensus in the healthcare community is that the Stark provisions, 

while quite important in many respects, are significantly constraining progress on the 

roll-out of electronic health record systems. 

It is in the interest of all stakeholders, particularly patients, that functional electronic 

health records and an interoperable health information system be deployed as promptly as 

possible. But the entities that are one key to making crucial progress with that 

deployment, the small and rural physician practices that still provide a majority of health 

care services in this country, are those that are least able to afford the capital investment 

for the purchase and hassle of implementing state-of-the art IT systems. Especially 

because most of the ‘savings’ of health IT accrue to other system participants, including 

employers, health plans and patients, financial outlays necessary for the purchase of the 

very building blocks of an NHII should reasonably come from a wide variety of sources, 

including government outlays and pay-for-performance programs. Actually, pay-forperformance programs represent a clear argument for payers to provide some of the 

financing for health IT – because in order to pay-for-performance you have to be able to 

track performance and quality in the delivery of care, and to do that efficiently you need 

sophisticated information capabilities embedded in the healthcare system. Reasonable 

safe harbors for dissemination of health information technologies and services intended 

to improve healthcare quality, efficiency and access would encourage deployment of 

essential health information systems, and I am very pleased that provisions to that effect 

are included in Chairman Deal’s bill. 

Educating the Healthcare Workforce

There is no question that momentum for bringing healthcare into the information 

century is building, but this won’t happen purely through a widespread distribution of 

hardware and software and standards and certifications. Ultimately, IT comes down to 
132

healthcare workers and patients being sufficiently skilled to take real advantage of the 

opportunities for improved care and efficiency and access that health information 

technologies and an interconnected national health information infrastructure can 

provide. Assuring these skills throughout the workforce will necessitate sufficient 

numbers of well educated health informaticians. Because the field is advancing so 

rapidly, we are seriously undersupplied to meet this challenge. 

Last year to help address this challenge, AMIA announced its 10 by 10 program, 

which aims to realize a goal of training 10,000 health care professionals, especially in 

applied clinical informatics by the year 2010; we just passed our first 100 graduates of a 

largely web-based course developed by William Hersh and his colleagues at the Oregon 

Health and Science University. Other universities intend to participate as well. Our 

program uses classes, tutorials, web-based and in-person sessions to equip health care 

professionals to use health information and health information technologies to benefit 

patient care and to advance medical knowledge. In fact, we know from the research of 

AMIA members that well-trained health providers combined with robust IT systems can 

produce safer, higher quality care delivery. 

With the supply of physicians essentially constant and the nursing workforce aging 

along with the baby boomers, we will only be able to address the increasing demands for 

care of a growing and aging population by developing a better trained workforce, 

especially more nurses skilled in the use of information and information systems. 

Increased Federal support for education and training will be needed to address this 

workforce reality – and in November 2005 AMIA, in conjunction with our colleagues of 

the American Health Information Management Association (AHIMA), convened a 

workforce summit, which included broad representation of stakeholders across the 

healthcare enterprise, to develop initial strategies to address challenges related to 

effective implementation of EHRs and PHRs. The resulting white paper, Building the 

Workforce for Health Information Transformation presents nine targeted 

recommendations that the industry – including employers, employees, vendors, the 

government and professional organizations – can use to prepare the existing workforce to 

use technology tools and to ensure that we have a sufficient number of well-qualified 

health information specialists to achieve the promise of health IT transformation. 

A Few Conclusions

In terms of the development and implementation of integrated health information 

systems with sophisticated capabilities, we have seen a great deal of progress in the last 

few years. Within the Veteran’s Administration, for instance, the case for improved 

safety and higher quality through the proper use of IT systems – including electronic 

records, decision-support programs, and process tracking and change analyses – has been 

largely made. We have seen the creation of the Office of the National Coordinator for 

Information Technology and a Commission to Certify Health Information Technology. 

The Commission on Systemic Interoperability mandated by the MMA has provided an 

important set of recommendations to Congress, and Secretary Leavitt has pressed the 

American Health Information Community (AHIC) to take on a range of public-private 

initiatives to develop information standards, certify new technologies, and provide longterm planning and governance for the electronic health environment. 

Someday we may look back at this moment and say, “The rest is history” – but not 

just yet. Additional legislation and Federal support, and the development of accepted, 

enterprise-wide standards will be required if true interoperability and connectedness are 

to occur. Clearly, HR 4157 does not try to address all of the issues involved in creating 

an NHII to improve healthcare quality, access and patient-centeredness. But it does 

forthrightly address some key ‘sticking points’ that are keeping the nation from moving 

forward as quickly as we should and among them are first, establishment of the Office of 

the National Coordinator in statute; second, addressing the impact on patient’s rights and 
133

on healthcare quality and safety of varying and conflicting State and Federal information 

standards; and, third, reducing some current disincentives to the adoption of available 

health information technologies. AMIA looks forward to prompt consideration of the 

legislation and to supporting its implementation. 

Finally, let’s not forget that an interoperable, interconnected national information 

system is not only a healthcare issue; it is a matter of national security. When I testified 

to the House Ways and Means Committee on July 25, 2005, I stated that it wasn’t clear 

what would bring this reality to the American public. I mentioned an outbreak of avian 

flu in a US population center or an episode of bioterrorism or the occurrence of 

transmissible disease in our food supply chain. Instead, a few months later Hurricane 

Katrina drove home my point. In the first weeks and months after this national disaster, 

two contrasting points were made abundantly clear. First, public health and individual 

patient care of thousands of Americans was jeopardized as paper medical records were 

destroyed by mud. Second, the electronic medication and health records of veterans were 

available wherever and whenever their availability was authorized, offering immediate 

help to hundreds. People’s lives do hang in this balance. 

We must have a reliable, ubiquitous electronic health information system for our 

nation. It is crucial for personal health, public health and the economic interests of our 

country. While widespread dissemination of electronic health record systems and the 

development of a functional NHII will facilitate broad improvements in health care 

quality, access and affordability, it will also assist in protecting our security and I would 

urge your leadership in facilitating this development with all due speed. 

Thank you for the opportunity to appear before you today. I will be happy to answer 

any questions. 

 MR. DEAL. Thank you very much. Thanks to all of you. There 

were some very interesting comments. I think with maybe one 

exception, Mr. Pyles being the exception, most of you have agreed we 

need to do something in this area. Mr. Vaughan has his reservations 

about it. I understand the privacy issue, and I certainly agree with it. 

Hearing some of the testimony sort of reminds me of the old joke about 

the fellow who went to his doctor, and the doctor asked him, what is 

wrong with you, and he says that is what I am paying you to figure out. 

We all want to protect our privacy but there has to be some degree of 

sharing of that. Now I think that the question of preemption of State law 

is one of the more significant issues that we have to deal with here. 

 I understand too that there are some very pragmatic problems when 

you allow States to have their own set of rules. My congressional district 

borders three States, and the Chattanooga area is to the immediate north 

of my district. We have doctors who have patients that go to the 

hospitals in Chattanooga. Other parts of my State, of course, Augusta, 

which is on the South Carolina border, Columbus, which is on the 

Alabama border, if we do not have some degree of uniformity of those 

kinds of regulations statutorily, how do we avoid, if nothing else, those 

cross-State dealings back and forth of the hospitals and doctors who may 

be in different States, how do we avoid those kind of problems where 

one State’s rules may be different from the other State’s rules? Is that a 

problem or is that not a problem? Mr. Pyles. 
134

 MR. PYLES. I would be glad to address that, and I also want to say 

that I do not disagree that something needs to be done in this area. I 

think something needs to be done particularly with respect to HIPAA 

because you have got HIPAA authorizing disclosure for treatment and 

payment of healthcare operations in your State and most others and 

standards of medical ethics prohibiting it, so it causes confusion in the 

consumer community. They do not know if they have a right to privacy 

or not, and this leads to confusion in the practitioner community. I think 

a good argument can be made for having greater uniformity and 

therefore understandability in the privacy standards across the country. 

 MR. DEAL. Should we not be able to all agree on what those would 

be? 

 MR. PYLES. I would agree with that, and that is why I cited the 

standards of medical ethics which apply across the country that contain a 

consistent privacy standard that has been applied for years, cited the 

constitutional common law that applies in every State, the 

psychotherapist-patient privilege, and the patient physician privilege 

which again applies under the State. What we are suggesting is let us 

look at the common standards we now have that apply across the country 

and all three of the States your district borders on. Every doctor in those 

States is subject to standards of medical ethics, everyone is subject to the 

constitutional common law and physician-patient privilege. We have 

national standards for privacy. We just do not have them in Federal law. 

 MR. DEAL. Mr. Vaughan, you made reference to a possible model 

law. Is there one that has been proposed by the National Association of 

State Legislators, for example? 

 MR. VAUGHAN. Not to my knowledge. I am just reading Don’s 

testimony. This is a problem and how do we deal with it. And it strikes 

me that under your leadership you could call for the NGA and the 

National Conference of State Legislators to come together and to really 

identify where the differences are and where the commonality is, and like 

when you make a change in long-term care insurance you give the NAIC 

a couple years to come up with a model, Reagan stuff, and then it goes 

into effect. You could set up a structure that kind of brings the States 

together and say what is really important to us and let us try to talk a 

common language and not this tower of babble, and you have a couple 

years to do it. 

 It is such detailed work. You do not want this all on your desk, I 

would think. Get these groups together and see where the commonality 

lies, and let us try to bring this up for the American public rather than 

down to a minimum. 

 MR. DEAL. Mr. Mertz. 
135

 MR. MERTZ. Mr. Chairman, I just wanted to comment on that. We 

think that the HIPAA standard does create some uniformity. The 

weakness of it is that it does not preempt these literally thousands of 

conflicting State rules that are creating an obstacle. And the examples I 

gave you were various States that actually bar the laboratories from 

providing lab results. If you set up regional organizations or web-based 

electronic health records, under the State laws that exist today, we could 

not transmit laboratory results which make up 60 percent of someone’s 

medical record. That medical record that is on the web would be missing 

60 percent of the data that a physician needs. And so we think that the 

HIPAA standard is a very good one and very protective and sets the 

standard. 

 We believe that preemption is necessary. You are only doing a study 

which I think would hopefully identify these conflicting State laws to 

have the States go back and try to undo the laws. I was involved in 

doing a study of State laws. There are thousands and thousands and 

thousands of rules that would take 100 years for the States to unravel all 

of those. That is why we need one good strong Federal standard. 

 MR. DEAL. My time is expired. Mr. Waxman. 

 MR. WAXMAN. Thank you, Mr. Chairman. Following along the 

same inquiry, I am concerned about creating a national health 

information infrastructure without strong privacy protections for patients. 

HIT will allow providers to not only keep their patients’ healthcare 

records electronically, but share them with others more easily. I do not 

presume that any of you would be comfortable letting an employer or a 

health plan know if you were genetically predisposed to mental illness or 

have the public know your grandchild had been exposed to AIDS or 

allow a co-worker to learn that your husband or wife has a fertility 

problem. These clearly are very private matters. 

 With the expansion of the use of electronic medical records comes an 

increase in the potential for breaches of privacy and the pirating of 

sensitive personal medical information by unauthorized parties. HIPAA, 

the Health Insurance Portability Accountability Act, set minimum 

Federal standards for use in disclosure of personal information. 

However, when HIPAA was passed, Congress was unable to come to 

agreement in certain areas so States were allowed to enact additional 

consumer protections. Similarly, Congress has been unable to come to 

agreement and pass a Federal genetic non-discrimination law prohibiting 

employers from learning about and using genetic information about their 

employees in the work place. Still, there are some HIT proponents who 

would be comfortable with HIPAA as a Federal privacy standard that 

would also preempt all State privacy and security laws such as State 

genetic non-discrimination laws. So Mr. Pyles, could you comment on 
136

what would have to be included in a Federal privacy law for it to be 

protective, especially if it were to supersede State laws? 

 MR. PYLES. Thank you. I will be glad to do that. First and 

foremost, I think we would want to see a law grounded in the principles, 

as I said, of standards of medical ethics, otherwise, we would have 

Congress perhaps authorizing the unethical practice of medicine, which I 

do not think any physician would want to see happen or any practitioner. 

It ought to be granted, and the right to privacy reflected in our founding 

principles of the Constitution, and again those are remarkably similar. 

There was a comment about thousands of State laws. In fact, there are 

core concepts in those laws that are remarkably similar. As I said, every 

State protects mental health information, recognizes a psychotherapistpatient privilege, but beyond that we would need things that HIPAA does 

not provide. Things like breach notice requirements where patients 

whose privacy has been breached will be notified and the Secretary will 

be notified so that we can see a list of companies that do not do a very 

good job of protecting medical privacy. That could probably be the best 

enforcement measure we could have. 

 There should be a private right of action that nearly every State 

recognizes because we know that HHS has done a very poor job. There 

are over 17,000 privacy complaints that have been filed since April 14, 

2003, the implementation date of HIPAA, and only one enforcement 

action. So we think that there should be an opportunity for patients to 

establish electronic black boxes. We do not think IT and privacy are 

incompatible. We think you can actually enhance privacy through the 

use of health IT, but you need to establish the principles at the beginning. 

You cannot retrofit an IT system for privacy. 

 MR. WAXMAN. Some States know the ways personal health 

information can be used without consent. Many States have more 

protective laws about specific types of sensitive information, HIV/AIDS, 

mental health records, genetic tests and more. And many States have 

more meaningful consent requirements. These are the kinds of things 

you think ought to be in a Federal law if we are going to have 

preemption. 

 MR. PYLES. I would agree. I would support perhaps a study done by 

the Secretary as H.R. 4157 provides. But it would have to be a study that 

is first and foremost directed to identify the commonalities that we see 

across the country in medical ethics and State laws, in constitutional law. 

We should build on the foundations we have and that we’ve formed in 

this country. We should not assume that we have to operate with a blank 

slate. 

 MR. WAXMAN. The Federal law only directly applies to providers, 

health plans, and health clearinghouses. Many States’ privacy laws 
137

directly apply to a broader range of individuals and entities like those 

that transcribe records or those that copy or transport files. Do you think 

that ought to be a Federal law? 

 MR. PYLES. Absolutely, Mr. Congressman. Oddly enough, HIPAA 

does not apply to hackers unless they happen to be providers or insurers 

or healthcare clearinghouses. We would think that as with many State 

laws, Congress should provide for privacy protections that run with the 

information and should apply to whoever handles the information. It is 

the same to the patient whether a private individual breaches their 

privacy or an insurer. 

 MR. WAXMAN. Thank you very much, Mr. Chairman. 

 MR. DEAL. Thank you. I hope we will have a second round too. If 

we do not have more Members show up, we may have a chance to go 

around again. Dr. Burgess. 

 MR. BURGESS. Thank you, Mr. Chairman. I forget who it was in 

their opening statement that referenced the disasters down on the Gulf 

Coast, which there is no place clearer that we do need to fix this problem. 

The records room at LSU, you walk through there, the place is ruined 

and will be ruined for the rest of our natural lifetimes. Contrast that with 

the parking lot at the arena at Dallas, Texas where you had 400 private 

doctors show up to triage people after they got off the buses from the 

Superdome. And I do not remember the drugstore precisely, I think it 

was Walgreen’s, set up one of their remote computer terminals there. 

They did not have medical records, but at least they had pharmaceutical 

information on a lot of the people that got off the buses, and it made 

piecing together the medical story a lot more straightforward, so the 

value was proven to me that day, but it a difficult climb. 

 And, Mr. Nelson, I just wondered if you had a thought as to how 

much, looking forward, how much is this likely to cost? If we just look 

at the Federal government component of healthcare, Medicare, Medicaid, 

VA, Federal prison system, Indian Health Service, Federal qualified 

health centers, about 50 percent of the healthcare expenditures are 

accounted for by the Federal government. Do you have an idea as to 

what it is going to cost Secretary Levitt when he says he is going to build 

this platform? 

 MR. NELSON. I cannot give you a specific number. I can say that 

some of the building blocks that have been put in place, I think by Dr. 

Brailer if you take the proposal, for example, it essentially was a lot like 

what a venture capitalist would do when they are trying to infuse an 

investment and then get a return on that investment. Although that may 

have been about a $20 million investment on his part spread out across 

four major corporations, I could tell you for a company like IBM we are 

taking that and we are starting to build on it. At the end of the day, I 
138

suspect that we will probably invest 10 to 20 times that amount into 

helping to fix the healthcare problems as a part of our replicating the 

opportunity that he has provided us across this country. 

 So, you know, I applaud that immensely without necessarily having 

a number that the actual Federal government itself has to invest. I think 

private enterprise is going to go a long ways in helping solve the 

problem. 

 MR. BURGESS. When I think back to my days in practice, it is a big 

expense for a single physician’s office to do this. If a hospital puts in an 

expensive system they of course have borne the cost of that, then to bring 

individual doctors offices on board would be a relatively inexpensive 

process because most of the software expense has already been handled. 

But if the doctors offices then have to individually go out and contract 

with the software licenses and what have you it does become a good deal 

more expensive. So, Mr. Neaman, I wonder if there are any thoughts 

you have of how we might reform some of the Stark laws to allow this to 

be a more facile process. 

 MR. NEAMAN. Thank you. Your comments are absolutely on track 

in terms of the relative cost and the ability of extending from the hospital 

systems to doctor offices. In our own experience for our three hospitals, 

again we invested a little bit over $40 million to get the system up and 

running. In our experience it takes on an incremental basis of 

approximately $50,000 per physician to incrementally bring additional 

doctors up on the system, so it is a rather large expense. It is also a time 

consuming expense. We are inhibited by Stark and the anti-kickback 

provisions from extending our system to other physicians who are in 

independent or private practice, and that is a big hurdle to overcome, not 

a risk that we want to take given the penalties that are involved with 

those statutes. So it would be a relatively easy thing to extend the 

systems and the software to other physicians if we are permitted to do it 

under the Stark regulations. 

 MR. NELSON. If I could comment on that, please. 

 MR. BURGESS. Yes, please. 

 MR. NELSON. The $50,000 is certainly a substantial amount of 

money. To put that in perspective, our data shows that that will represent 

the cost. The actual market pricing and what physicians are willing to 

bear, the costs that they are actually willing to pay, is probably more than 

$300 to $400 per doctor per month range, so there is a bit of a gap there 

between what the cost is and what the delivery is. Of course, with the 

Internet and hosting services they do not necessarily have to go out and 

buy complete systems. The average size of a physician’s group is like 

2.5 or less, so they are small groups. They do not have the capital to be 
139

able to spend the money, and so we are going to have to come up with 

alternate solutions that are very cost effective to make that work. 

 MR. MERTZ. Congressman, can I make a quick comment on that? 

We represent the labs and you were not in the room at the time. 

 MR. BURGESS. Let me make one other point because I am about to 

run out of time. If we get a second round, I will be happy to come back 

to you. From the physician’s perspective too it is also a question of time 

for us to do electronic prescribing or even electronic medical records. 

The average physician has to see between 30 and 50 patients a day in 

order to pay the overhead and take something home, and if you add a 

minute and a half to two minutes to every transaction in order to be up to 

date with electronic medical records or prescribing that is two hours, and 

how are we going to compensate the physician for that time? 

 MR. NELSON. We are actually doing this right now in Westchester 

County up north of New York City. There are 60,000 IBM employees. 

The HR department of IBM actually provided an incentive to the 

physicians to the tune of 50 cents per member per month to actually use 

the system, so they get paid in order to get the cost benefits, and what not 

on a minimum level of adoption. The ROI on that was less than two 

years. We are seeing a much higher level of adoption than what we 

expected, you know, but it is a great model, I think, that we could use 

across other endeavors like this. And I agree 100 percent with your 

comments on time and doctors. 

 MR. BURGESS. But there the insurance plan bore some of that 

expense to incentivize the doctors to practice. 

 MR. NELSON. And we need to keep in mind that a great deal of 

benefit that comes from these systems goes back to the employer and to 

the payer. 

 MR. BURGESS. Sure. Thank you, Mr. Chairman. 

 MR. DEAL. Ms. Capps. 

 MS. CAPPS. Thank you, Mr. Chairman. I have about four or five 

questions I want to try to get into the brief time so I am maybe asking for 

brief responses. Mr. Nelson, I will start with you. We have been hearing 

from others on the panel about the complexity of multiple State privacy 

laws. I wanted to know technologically do we have--can you speak to 

the capability of technology to accommodate different State privacy 

laws? 

 MR. NELSON. I do not think it is a technical problem at all. 

 MS. CAPPS. Okay. 

 MR. NELSON. The technology can handle it and we have experience 

with ATMs, the banking industries, all of which have their own unique 

regulatory issues. 
140

 MS. CAPPS. So that is not the issue. But then let me ask about 

privacy, and I guess I will address you, Mr. Pyles, but I do not care who 

jumps in. Under current legislative proposals do patients have to consent 

to having anonymous information shared with researchers? Do they 

have to give their approval? 

 MR. PYLES. I am sorry. Could you restate the question? 

 MS. CAPPS. Under current legislative proposals, or at least some of 

them, do patients have to consent like give some significant assent either 

in writing to having anonymous information shared with researchers? 

 MR. PYLES. Well, I do not know about pending legislation. If it is 

de-identified information then it certainly could be disclosed under 

HIPAA. 

 MS. CAPPS. Without them even knowing if it is anonymous. 

 MR. PYLES. Without them knowing, that is correct. Yes. And under 

the proposed legislation, I cannot think of any of the proposed legislation 

that addresses that issue. 

 MS. CAPPS. The way it is now then, who is responsible for 

determining whether this is legitimate, you know, if lines have been 

crossed if there has been boundaries, and in proposed legislation? 

 MR. PYLES. Well, under HIPAA it is very, very difficult to know 

that their information has been disclosed and therefore, since they get no 

consent or opportunity, so that in effect is no notice, I am stunned that 

there are 17,000 complaints that HHS has received because I do not 

know how those patients would have known. So there must be many 

thousands, tens of thousands more breaches of privacy that are out there 

that people would object to if they just knew about it, but they probably 

do not. 

 MS. CAPPS. And they do not know about it. In some of the proposed 

legislation, is this dealt with? 

 MR. PYLES. No, that is one of the things most disturbing about all of 

the legislative proposals I see. It seems that privacy is always the last 

issue to be discussed, if it is discussed at all. A number of the proposals 

do not mention anything about privacy at all. 

 MS. CAPPS. They do not mention privacy at all. 

 MR. PYLES. Correct. 

 MS. CAPPS. Well, that is certainly something I would hope, given 

the questions today that certainly is on our minds, and we reflect our 

constituents so I am hopeful that this will be interjected into any kind of 

studies. Mr. Chairman, I would hope that that would be the case. I am 

wondering now with the little more time that I have if you, Mr. Pyles, or 

anyone could comment on some of the shortcomings in Federal law 

currently with regard to enforcement of Federal uses of personal health 
141

information. You touched on it a bit. The disparity is, are there States 

that do a better job, for example? 

 MR. PYLES. Well, States can do a better job but even with the 

authorization for disclosures, without consent under HIPAA, it also 

means that patients often cannot even assert the rights they have under 

State law because many States prohibit the disclosure of many types of 

information. But HIPAA allows the disclosure, and if a practitioner 

follows HIPAA then not even a patient would know enough to assert 

their State rights. Plus HIPAA requires a notice of privacy practices to 

be given to every individual. The notice compels the practitioner to 

describe the disclosures that are made under HIPAA, authorized under 

HIPAA, even if that is not their practice. 

 So they are all supposed to include a notice of rights the patients 

would have under State laws, but I have seen very few notices that 

include any reference to State rights. 

 MS. CAPPS. But Mr. Nelson, if we can use him as the standard, says 

there is no barrier in the technology for allowing-- 

 MR. PYLES. I have total confidence in Mr. Nelson. If Congress said 

that a national privacy standard had to reflect the right to privacy under 

medical ethics, constitutional law, and law of privilege, that tomorrow 

morning Mr. Nelson would have a product on the street that did just that, 

and also accounted for variations in the State laws. 

 MS. CAPPS. And accounting for the variations in State laws, so there 

is nothing that should stand in the way of this being pursued in the 

interest of consumers or patients. 

 MR. PYLES. Well, I am not the-- 

 MR. MERTZ. Could I comment? 

 MS. CAPPS. I would love to hear-- 

 MR. MERTZ. I am with American Clinical Labs. What is a 

technological barrier, the example I gave there is definitely a barrier in 

State laws. I gave the example of in Florida and Georgia, the laws do not 

allow the laboratories to transmit results to an electronic health record. If 

there is a disease management program that has been mandated under 

Medicare, we cannot transmit because they forbid us transmitting lab 

results to anybody except the ordering physician, even with the patient’s 

consent. We cannot provide lab results for disease management, for an 

electronic health record. 

 So with all due respect, maybe you could build a computer that could 

do it but we cannot transmit the results, so that is a State barrier that is 

absolutely insurmountable for us with these programs. 

 MR. DEAL. That would be a very remarkable State law that did not 

allow a disclosure with patient consent. 

MR. MERTZ. Well, it is not remarkable in Georgia and Florida. 
142

 MR. DEAL. Well, I know one thing. The citizens of Georgia care a 

lot about their privacy judging from the laws you have on the books. 

 MR. MERTZ. Well, it is not remarkable there because there are 

dozens of States that have those laws, so it is not unusual at all, Mr. 

Chairman. 

 MR. DETMER. I do think that one of the really strong points is that 

you do mandate a study and I think there will be things we will learn 

from that, and I think that is why in fact I really am so supportive of that 

part of the legislation. 

 MS. CAPPS. Mr. Chairman, this has been a good hearing. 

 MR. DEAL. Thank you very much. Mr. Green. 

 MR. GREEN. Thank you, Mr. Chairman. Having served years in the 

legislature before, I tell people I lost my mind and came to Congress. I 

am surprised a lot of States have it where they prohibit the individual 

patient from receiving that information. I assume it is not just Georgia 

and Florida. It must be a number of States. 

 MR. MERTZ. Well, it is unusual and it is one of those areas where 

the State law actually prohibits the patient from having access to their 

own records, which we find kind of odd. Again, we are the labs. We do 

the testing, and our business is really to get the data back to the 

physician. But, you know, Congressman, there are so many important 

things. Diabetes management, they need to get hemoglobin H1C tests 

every six months. We have almost 10,000 people die a year just because 

they are not tested for their hemoglobin regularly. So these programs are 

so important to save people’s lives, or cholesterol, people with heart 

disease. It is essential that these programs be able to manage their 

disease, and so that is why, while we are very careful, we do not want to 

give results out to everybody. Genetic tests, we are the people who do 

the genetic tests. We certainly do not want to send those out to anybody 

who does not have an absolute need for disease management, 

hemoglobin, diabetes, asthma, heart disease, yes, those are important 

tests but we will be careful about it. 

 MR. GREEN. Mr. Vaughan, do you have a response to that? 

 MR. VAUGHAN. We are very much for consumers being able to have 

access to their medical records and if there is an error in there and it asks 

for an edit and a correction, yes, this is the kind of thing that we need to 

work out. 

 MR. GREEN. Can you tell me, does Texas have that prohibition? 

 MR. MERTZ. I have not looked at Texas specifically. I know that 

Georgia, Florida, New York, California do have them. I would have to 

get back to you on Texas. 

 MR. GREEN. We can check because-- 
143

 MR. MERTZ. Generally what the State laws say is that the ordering 

physician or his or her designee may get the lab results, and 

unfortunately it has been interpreted to mean the designee is only 

someone in the doctor’s office can get the results so generally, almost in 

every State, we cannot report to a RIO or to a disease management 

organization, so I think Texas would be the same. 

 MR. GREEN. I will have to talk to my legislators because that is a 

concern because I think the patient ought to make that decision anyway. 

Mr. Vaughan, you give some examples of your concern about the abuses 

under the Stark and anti-kickback laws, and Dr. Burgess talked about, 

and the panel all morning has talked about some of the things we have to 

do to be able to protect that. How are physicians’ choices influencing the 

patients affected now on some of the examples? 

 MR. VAUGHAN. Well, the law was designed to deal with the fact, 

and started with labs, that doctors who invested in a lab everybody who 

walked in, you know, maybe just, gee, am I pregnant, would get a full 

lab workup. There was just documentation by GAO and OIG of 

tremendous over-utilization, and then we found the same things in Xrays and MRI machines and so forth, and so it spread to try to get a 

bright line because the anti-kickback laws, you have to prove intent. 

This was meant to be a bright line to say, gee, people who make these 

investments or get remuneration tend to, whether they are aware of it or 

not, start over-ordering and start doing more of a particular service, and it 

was driving up cost something awful. 

 The worry is that if stuff is provided free or at a reduced rate to a 

doctor it makes you a good friend of that person who gave it to you, and 

you tend to gravitate that way. Maybe that is not the best place to send 

your patient, and so that is what we are trying to be careful about, 

opening that door to over-utilization or misapplication of medicine. It is 

important to coordinate care, goodness, yes, but how about making that 

part of pay-for-performance or finding other ways to coordinate the care. 

 MR. GREEN. One of the suggestions I know--in fact, we are having 

enough trouble dealing with our lobbying reform, much less looking too 

much at the physicians situation, but on the electronic records technology 

that is something that has obviously a greater good. Not that a doctor 

having immediate access to the test, but if we are looking at the good as a 

whole, is there a way that we can draft something if we are trying to 

actually have that that maybe we would not run afoul of those whether it 

is IBM or whoever is selling this equipment that they do not all decide 

that is the one. 

 I know one of the suggestions I heard is that, for example, for the 

greater good we might want to have some non-profit or maybe the 

medical society in a given community or a State saying this is the 
144

depository, this is the information, and anyone who is a member, for 

example, could then access that without someone feeling like maybe they 

are utilizing that. 

 MR. VAUGHAN. I mean a way to deal that you would not have to 

change any laws or get any IG opinions is if people have some money 

and they want to encourage the spread of this technology to doctors in a 

State who maybe do not have the resources or behind the eight ball on it, 

give it to a foundation, Robert Wood Johnson or some State foundation 

and they would give out the money. I think you will find a lot of 

opposition or objections to that idea, and that should tell you something. 

The people who want to give this hardware and software, they want a tie 

with that doctor. They want a tie that binds so that that doctor will send 

patients to that hospital. Coordinating care with the patients is great, but 

if that hospital that gives the data or the software, is it the best place for 

that patient. 

 MR. GREEN. I see I am out of time. Mr. Chairman, if you would 

allow me just to ask if anyone else on the panel would like to respond. 

 MR. DETMER. Yes. I just wanted to weigh in on this. Right now 

our biggest challenge in the U.S. is particularly the small provider office. 

That is really our biggest challenge. The hospitals, frankly, are getting 

there and they are building their systems. The thing is our country is a 

very complex, large place, and I think some of these issues are working, 

do work, can work, and will work in some settings, but in other settings 

that opportunity and that kind of option is just maybe going to be very 

hard to put in play. I think what we are really advocating for, if we can 

get the regulations right, security and those kinds of design features. 

Then our feeling is to have this connectivity means that actually a doctor 

in West Bicycle, Texas can easily get a consultation with the Mayo 

Clinic electronically, as easy as they can actually with the provider that 

maybe gave them that connection. 

 In actual fact I think it is that kind of connectivity that really has 

significant offsets in terms of these arrangements. So I would like to 

think you could craft it. I certainly hope you could craft it because I 

think we need it. 

 MR. GREEN. Thank you, Mr. Chairman. 

 MR. DEAL. Thank you. I believe we will start a second round. Is 

that okay with you all? Okay. Let me start it off. I am going to try to 

simplify because I think of it in rather simplistic terms, in terms of the 

problems that I see are encountered. First of all, with regard to a hospital 

sharing its software with physicians, virtually all of my physicians 

practice in only one hospital. It does not make a whole lot of sense to me 

that they should not have some way when the patient goes to the hospital 

instead of asking the patient when he comes back to the doctor’s office, 
145

well, what did they tell you. It sort of reminds me of a story of one of 

my clients. I asked him one time, I said, well, what did the doctor tell 

you? He said I have no idea. I do not even think he spoke English. 

 We have got to have a better way of transmitting information that 

helps the patient. The one situation, the hospital sharing what their tests 

were, what their findings were back with the treating physician, he needs 

to know that. Also, let us suppose there is a consult with a specialist in 

the same community who does something. He prescribes some 

medication. Instead of the patient then going back to his primary doctor 

and being asked, well, what did he give you? Well, I do not really know. 

What did he tell you? I am not really sure. I did not understand all that. 

There has to be a better way of doing this. Now there are several things 

that pop out to me as major problems of what I am talking about. We 

have alluded to them in some of your testimony. 

 One is the coding and whether we are talking about the ICD-9 versus 

the ICD-10. Mr. Mertz alluded to some of the potential problems with 

the additional codings that are there. Let us talk about that for just a 

minute. How many of you believe we should go to a broader coding 

such as the ICD-10? Would anybody care to comment? Dr. Detmer. 

 MR. DETMER. Yes. Actually I am actually a fellow of the American 

College of Sports Medicine, and you held up your sheet talking about 

some of these sports issues. I practiced surgery, vascular surgery, as well 

as sports medicine for about 25 years, and for 15 years I published a fair 

amount of work that was internationally verified as being valid. To this 

day, the coding words or the diagnosis I made in athletes, sometimes 

Olympic athletes, still does not exist in ICD-9, as well as being able to 

for payment purposes, I would have to find a code that is sort of related 

to the leg. In actual fact, what works for billing does not capture what 

you really need to really try to do research as well as even just talk about. 

For example, asthma today does not have a lot of the codes in 9 that 

really are in 10. So there is a set of these. 

 We do not know how slippery this all is because it is very hard to 

track down. But suffice it to say there has been a lot of progress in 

medicine in 23 years, and that is how old that coding system is. So, yes, 

it does create problems. We not only need to worry about 10, but that is 

why I talked about the National Library of Medicine. We need to put in 

this process that can keep that going over time so that we do not have 

these very tough dislocations every ten or so years. We really need to 

put in process something that will catch us up but then hopefully keep us 

up. 

 MR. DEAL. Mr. Mertz. 

 MR. MERTZ. Yes. Just briefly on that. ACLA labs, we support 

moving to the ICD-10, but I would just remind you, first of all, you are 
146

going from 12,000 or 13,000 codes to 120,000 codes, so it is ten times as 

complex. You may recall that we are just now after four or five years 

finally adjusting to the HIPAA transaction codes, the new claim 

standards that took us years to get that. That was much less complicated 

than moving to this. We almost had a train wreck where providers were 

not going to get paid by payers because of the complexity of it. So we 

just want to make sure as we move to this, two years is not enough. We 

need at least five years to train the people on new systems. 

 We have to train all of the doctors who submit the diagnosis to us. 

They are going to have to put eight or ten times as much information on 

the form that the doctor sends to the lab. If every T is not crossed and 

every I is not dotted, we do not get paid. We perform the test. We do no 

get paid, and the system will really shut down. So I would just urge 

some caution in having a long enough transition period so that we can go 

there. 

 MR. DEAL. Yes, Dr. Braithwaite. 

 MR. BRAITHWAITE. Mr. Chairman, I think that many of the systems 

that are in electronic health record systems today are based on these 

coding systems. We get paid for practicing medicine when we submit a 

certain code. The problem is that those codes are very broad, they are 

very general, and they do not really reflect, this is what Dr. Detmer said, 

what is actually done to the patient. If we cannot come up with a coding 

system that is detailed enough so that what we record in our electronic 

health systems actually represents what is done to the patient, then we 

cannot even look forward to that vision I put forward about how we can 

practice medicine better in the future by actually having computers help 

us to interpret what those codes mean with respect to the rest of the data 

about that patient, not necessarily ICD-10, SNOMED CT is a national 

coding system for example that has that level of clinical information. 

 As we implement electronic health record systems we now have 

computers to help us to come up with the right code. It does not have to 

be done manually out of a book with pen and paper as it is done now in 

most places for ICD. So I think there is a good balance. 

 MR. DETMER. You also mentioned the importance of the patient 

being in play here, and if you have terminology where the patient can see 

some of these codes that do not really reflect particularly what happened 

you really help bring that patient into that care environment. 

 MR. DEAL. Very good points. Ms. Capps. 

 MS. CAPPS. Thank you again, and you are talking about barriers of 

some kind and maybe we need to pursue that line of questioning that you 

started, Mr. Chairman, but I want to see about HIT implementation, what 

barriers there might be there. And I will continue with you, Dr. 

Braithwaite. Everyone seems to agree that adoption of electronic health 
147

records and a move toward interoperability would allow different 

providers, health plans, labs, and others to talk to each other, and that 

that is a good thing. It would improve quality, save resources, eliminate 

harmful errors. 

 Yet, a recent Rand study found only about 20 to 25 percent of 

hospitals and 15 to 20 percent of physicians offices have an HIT system. 

Talk a little bit more, I know we brought this up, but focus in on barriers 

to implementation. And if we design some legislation, we are going to 

hopefully have a study, but what should we do or could we do that might 

help get past some of those barriers? And anyone else can jump in as 

well. 

 MR. BRAITHWAITE. Well, as I mentioned, one of the major barriers 

is the incentive system. We are reimbursed in the system for piece work. 

We are not reimbursed for the health of the patient. And so coming up 

with several different mechanisms to incent the appropriate 

implementation of health information technology in the clinical practice 

would be appropriate. I think in surveys that we have done, people have 

problems with up front funding as has been discussed. The capitalization 

of this in practices that do not really have that much capital is difficult. 

Coming up with the changes in the reimbursement policies so that, for 

example, a pay-for-performance program under Medicare that actually 

paid for improved outcomes of the patient based on the data that is 

produced from an electronic health system would in fact encourage the 

physicians to get information technology in their clinics and provide 

higher quality care, as long as the result was not that their incomes 

actually went down because of these strange reimbursement policies that 

come out sometimes. 

 I think in aligning incentives so that the people who purchase the 

systems and the people who benefit from them are appropriately aligned 

with the implementation of health information technology. 

 MR. MERTZ. May I address that? As I mentioned in my statement, 

some of our national labs, they are connected with about 50 percent of 

the physician offices, and the figure that was given is right. It costs 

$30,000 to $50,000 to create this conductivity with the physician office. 

It is not just the hardware and the software but the training, marrying all 

the different systems. It is extremely complicated. Half of the offices 

that we do not have relationships with tend to be the smaller practices 

where they do not have the resources to do it. 

 The labs, we have been the ones who invested millions and millions 

of dollars. We pay for this conductivity. But you get to a small 

physician office, and they do not have the volume of lab tests to make it 

economical for the labs to make a $50,000 investment so that they can 

order the results of their tests and get the results electronically. So that 
148

is, I think, one of the key areas where help is needed to provide 

incentives and resources. We get paid for doing the test. We do not get 

paid for spending $50,000 to hook them up electronically. So that is 

where we need some help. 

 MR. NEAMAN. If I could just comment from the perspective of 

somebody that has done it and been there, I think half of the issues relate 

to financing, where are you going to find the money to do it. 

 MS. CAPPS. Right. 

 MR. NEAMAN. The other half relates to the huge behavioral changes 

for electronic medical records, and the hospitals and the doctor’s offices-

- 

 MS. CAPPS. Behavior changes by whom, everybody? 

 MR. NEAMAN. Every clinician, every nurse, every physician, every 

technologist under an electronic medical records system must change the 

way they practice. It is no longer writing things out by hand or trying to 

decipher the physician’s handwriting. Everything changes, and for the 

most part it changes for the better. 

 MS. CAPPS. Several of you have mentioned incentives. Voluntary, 

is that sufficient? If we are the ones who would design legislation, is it 

significant enough for our national interest to mandate some things, or 

are we even to the point of talking about that? 

 MR. NEAMAN. I think, from the providers’ side, the hospitals and 

the physicians lack trust. If there is going to be anywhere near the 

sufficient level of funding to bring doctor offices or hospitals up when 

we are facing another $36 billion of Medicare cuts. 

 MS. CAPPS. I hear you on that one. 

 MR. NEAMAN. I think it is going to have to be again some kind of 

opportunity included in the private sector to invest monies to make this a 

real reality, unless the Congress wants to take on a project like rebuilding 

the Federal highway system of hundreds of billions of dollars to really 

make this a reality in the near future. 

 MR. DETMER. I think I would like to comment on that, I think that 

puts tension in this, as it is not like there is an EHR system. 

 MS. CAPPS. Right. 

 MR. DETMER. In fact, there have been some very good studies done 

that show that if you go for EHR light, in other words, the cheapest kind 

of way to just get something in, you do not have the decision support 

infrastructure where you really get your quality, safety, and your ROI 

pay back. By one calculus of that, if you are willing and can find the 

scratch to pay four times more you will get 12 times back. So it is not 

like it is just sort of the thing to do. And so education and change 

management is a major piece of this. The other thing that I want to echo, 
149

again, that I mentioned earlier in my testimony has to do with 

authentication. 

 It was interesting, the day that the commission report on systemic 

interoperability was put out, and I was on that commission, we happened 

to have our annual meeting. The same afternoon we had a presentation 

of some of the folks that were on the commission and talking about it. A 

woman in the audience said I have a problem for you. She says I am 

Mary Smith. I have a problem with authentication. 

 MS. CAPPS. Great. 

 MR. DETMER. She says I get other people’s bank statements when I 

do on line banking. I need some unique way both for my protection as 

well as for everybody else’s to identify who that is. This issue of being 

able to have at least a national way of uniquely identifying folks is really 

something that is a barrier that, again I think is a Federal issue if we are 

going to address it. Thank you. 

 MS. CAPPS. And I know I have overstayed my time but this is our 

last round. I started out by talking as a nurse about patient safety and the 

benefits of IT. Somewhere in our study, I would hope we could find 

some way of demonstrating that in the long run the initial outlays will be 

significant of resources. There ought to be a pay back to society at least 

for mortality rates dropping, and I would--we get to that as IT--can the 

study even demonstrate some things? 

 MR. NEAMAN. In our studies, we can tell you that right now. It does 

not take a long term. We have shown in our studies in our hospitals, our 

doctor offices, there is a payback, economic, clinical, saving lives. It 

works. It absolutely works. 

 MS. CAPPS. And is there demonstration of that already? 

 MR. NEAMAN. In our system, yes. 

 MR. DETMER. Speaking of the nurse and the education challenge, 

the strategy we really need is educating nurses in particular. 

 MS. CAPPS. I do not believe we will end up doing all of this, not all 

of it, but a fair amount of it at least in the-- 

 MR. NEAMAN. If I might, just get a lot of great benefit out of it too. 

 MS. CAPPS. I should say. 

 MR. NEAMAN. Better care. In our studies we saved 20 percent of 

the nurse’s time instead of babysitting the chart and trying to decipher 

the doctor’s handwriting. 

 MS. CAPPS. And you are all talking about it in acute care probably, 

but look at long-term care and who delivers that care and who has to take 

a huge chunk out of every hour of patient care to documenting. 

 MR. NEAMAN. Absolutely. 

 MR. DEAL. Let me go to Dr. Burgess next. 

 MS. CAPPS. It is tough for the doctors, isn’t it? Thank you. 
150

 MR. DEAL. Dr. Burgess. 

 MR. BURGESS. You know, I think back over 25 years of medical 

practice, the two things that came out of Washington that destroyed a 

better part of the joy of life were the Stark laws and HIPAA, and I cannot 

help but feel we are today with the grand daddy of them all, and I do 

worry about what the world will look like so it is terribly important for us 

to get that right. So with that sort of onus, Mr. Mertz, I interrupted you 

before. Let me let you finish what you were trying to tell me about the 

Stark laws. 

 MR. MERTZ. Well, actually the point I was trying to make, I 

eventually made which was that it is a sizable investment, $50,000 or so, 

to set up that conductivity between the labs and the physician offices. So 

it is going to take a lot of money and the labs have made that investment. 

I just want to reiterate, we very much support the Stark law in many 

ways because it does not allow the abuses that happened many, many 

years ago. We are able to only provide the equipment that is needed just 

very narrowly to ordering tests and reporting results. 

 But we see the need to expand it a little bit to allow more investment 

and IT. We just want to make sure that we are still included in an 

exemption, but that it is done carefully. So I appreciate the opportunity 

to finish up. Thank you. 

 MR. BURGESS. And, Mr. Vaughan, on that, does it ever increase the 

cost of care to not share information? 

 MR. VAUGHAN. Sure. 

 MR. BURGESS. I can tell you in my hometown of Denton, Texas that 

I encounter that situation every day where they’ve got two hospitals that 

are competing, and not only do they not communicate with each other, 

they are forbidden from communicating with each other. So a CAT scan 

in one hospital on a Friday night means you get a CAT scan in the next 

hospital if you go into the other emergency room on the next Friday 

night because you did not like the care you got across town. It is a 

system that creates more expenditure, I believe, by not communicating. 

 MR. VAUGHAN. Absolutely. This is where so much of the savings 

will be, but how you can get this information, the software, the hardware, 

into doctors offices, how can we do it where it does not lead to some 

distortions that we might not even see for a while where one hospital that 

has got good cash flow in a year, the other one has been doing charity 

care, might be a little starved. This one donates some stuff. Just 

consciously or unconsciously doctors will say I like those guys. They 

have been helping me. They have been helping my office. I move my 

patients there and they may not have the best department and everything. 
151

 So you get those goofy, almost unconscious distortions, can’t we pay 

for this up front? I know with the Federal budget situation, you know, 

get a life. There is no cash lying around. 

 MR. BURGESS. Mr. Neaman has found the savings for us in the 

Medicare, is that what you just told us a minute ago? 

 MR. NEAMAN. In our system, yes. 

 MR. BURGESS. So how much money are you going to save us? If 

the Chairman and I are successful in getting this done and your company 

is the one that gets the contract, are we going to save that $34 billion in 

Medicare this year that we can then turn back over? 

 MR. NEAMAN. I can only comment on our system and what we have 

actually found. The point being is that the systems that we have 

experienced really do save lives and they do less testing, not more 

testing, and they protect patients from abuses of testing. We have even 

shown in our studies that the efficiency improves so much that we were 

able to save cost-wise $17 million a year in our system by doing things 

right the first time, not having to do them time and time and time again, 

so there is a small incremental savings once you get the system up and 

running. 

 Again, all the other benefits are tremendous. I think Mr. Vaughan’s 

examples might be a little confused with what the real issues are here. In 

the examples of over-testing, such as too many lab tests or too many Xrays when a physician owns that equipment, that is not what we are 

talking about here. If you want to preclude that, then do not let 

physicians own MRI machines, a whole other issue. 

MR. BURGESS. It is not a good idea, by the way, but continue. 

 MR. NEAMAN. I was not advocating it as a principle, particularly my 

orthopedic surgeons would let me know about that. But what we are 

talking about here is the sharing of data, and shouldn’t we be focused on 

the patient here, to share that data between our hospitals and our 

physicians. Doesn’t the American public expect our hospitals and 

doctors to work together around a central point of data? The answer is 

quite clear in our experience. Absolutely yes. 

 MR. BURGESS. Mr. Pyles. 

 MR. PYLES. I have been wanting to get this in. You asked a 

question in your last round, and I think it touches on what you are asking 

now. How much you save I think is going to depend on how much you 

need. The numbers I have seen on the cost of wiring the country for 

health IT are $176 billion initially as start up-front costs and $46 billion 

annually. Now keep in mind you are going to have to replace that 

information system. They have a life span of about, as I understand it, 

three to four years, so you are going to be continually replacing them. 
152

 It is not to say you should not do it, but when you are talking about a 

solo practitioner in Shady Side, Maryland where my family physician is, 

that is a big chunk. His share of that is a big chunk. He was chosen 

actually as one of 200 physicians in Maryland to use an electronic 

information system by Blue Cross. He has found that it is out of order. 

He carried around a little box that he is supposed to input information in. 

He cannot communicate with the system, at least a minimum of three 

times a day, and the information he gets back is often times so garbled he 

cannot understand it. So he is a little frustrated. I have heard healthcare 

is the last area where we do not have IT. It may not be such a bad thing 

because we are dealing with people’s lives, and we would not impose a 

drug or a procedure on the public unless it was proven safe and effective 

for patient use. So I would just urge you to be careful. 

 As a lawyer, one of the questions I have always had too is what is the 

standard of care for an electronic health information system? When you 

go into the hospital and a patient has a seizure you punch the screen to 

get the patient’s current status and what they are on, and it says access 

denied and you prescribe something and the patient dies. What is the 

standard of liability there? A judge is going to have to figure that out. 

Were you negligent? Was the hospital negligent? Was it expected for 

the system to be down once a week, once a month, once a year? My 

computer is down a minimum of twice a week. Maybe these systems are 

more reliable but that is a whole area that is completely unexplored as far 

as I can tell. I do not see any standard of care like a Xerox standard. 

Xerox will tell you the copier machine will never be down more than 

four hours. 

 MR. BURGESS. Can Dr. Detmer respond, Mr. Chairman? 

 MR. DEAL. Sure. 

 MR. DETMER. I agree with him on one point, and I disagree with 

him on another. I agree with him that IT is not some kind of magic. It 

has got to be done right for it to work, and we have heard from some 

places that are doing it right, and, boy, it does work. That is why this 

education issue is also a huge piece of this, because if you just try to do 

it, I am not sure in fact you will ever see a ROI. 

 On the other hand, if you do it right I think we now do have enough 

body of evidence to be able to speak to safety, efficiency, cost 

effectiveness, patient centeredness, timeliness. As prices drop, you do 

start improving equity as well, and that is a U.S. problem. 

 MR. DEAL. Why don’t we let Mr. Nelson defend his industry? 

 MR. NELSON. I think the comment that I would make is we’ve got to 

keep in mind that the bulk of the healthcare dollar really goes to chronic 

disease, and there are not a lot of them. Interesting, you know, there is 

various data out there to support this, but the average patient when we 
153

get down to actually looking at it on a by patient basis, they have on 

average between five and ten physicians if you have a chronic disease. 

Those doctors do not talk to each other. So it is real obvious that the 

only way that we are going to actually make that work and reduce the 

redundant tests and improve the quality of medical errors and all that is if 

we give smart people information so that they can make smart decisions, 

but allow those smart people and physicians, I think as Dr. Burgess 

mentioned earlier, it has got to be in a way so that the physician is not 

penalized in the process. 

 We got 16 percent of the gross national product right now going to 

healthcare which is far over any other country in the world. Any other 

outcomes are not even in the top ten right now, you know. I think it is a 

shifting of the dollar that we are talking about. Medicare and Medicaid 

employers and payers are the ones that are the biggest beneficiaries of 

these systems, and we shift the dollars to some extent from there to the 

primary care physician, which are the guys who really I think are in 

control of the healthcare system today. 

 MR. DEAL. Well, thank you. 

 MR. BURGESS. Mr. Chairman, could I ask a question? 

 MR. DEAL. Sure. 

 MR. BURGESS. We are going to have a bill before us either in this 

subcommittee or the full committee about this, and if it would not be out 

of order to ask each of our respondents to give us their impressions about 

what they like, what they dislike about the bill. This is important that we 

get it right because this could be the headache for the next two or three 

generations of physicians or the benefit for the next two or three 

generations of physicians. 

 MR. DEAL. Certainly. That would be appropriate, and there may be 

other questions from other members of our committee that were not here 

that may be submitted to you in writing. We would appreciate your 

response on that. I commend all of you. Somewhat different points of 

view on some issues, but generally I think there is a consensus that this is 

an area that is worth exploring. It is worth us trying to move forward on 

the issue. We appreciate your various points of view. As Dr. Burgess 

indicated, if we can move a legislative agenda, we would appreciate your 

further comments with regard to that as we attempt to refine those. We 

do appreciate your time, and thank you for your attention and your being 

with us on this occasion. I am not going to adjourn the hearing because 

we expect to have in the next few weeks a follow-up panel that will be 

from a Federal point of view and so therefore in light of the fact that that 

further panel will elaborate on the same general issue, we will simply 

just suspend this session of the hearing on IT. Thank you all for being 

here. 
154

 [Whereupon, at 1:56 p.m., the Subcommittee adjourned.] 

RESPONSE FOR THE RECORD BY WILLIAM BRAITHWAITE, MD, PHD, CHIEF CLINICAL 

OFFICER, EHEALTH INITIATIVE AND FOUNDATION FOR EHEALTH INITATIVE

Responses to Questions following March 16, 2006 Subcommittee on Health Hearing 

entitled: “Legislative Proposals to Promote Electronic Health Records and a Smarter 

Information System” 

1. How important is it to think realistically and not try to do everything at 

once in terms of a complete electronic medical record, but instead focus 

on things like e-prescribing, lab results, and patient information? 

Through eHI’s Working Group for Value Creation, Working Group for Practice 

Transformation and other organizational efforts, eHI is exploring important issues in this 

topic area. To the question specifically, trying to do everything at once in terms of a 

complete electronic medical record, to me, is like trying to boil the ocean. Although an 

electronic health record system for every clinician, including functional clinical decision 

support systems, is a necessary vision and goal to work toward, this development and 

implementation process will take decades to complete. It is much better to implement 

some “low hanging fruit” for which a return on the investment can be demonstrated as a 

way to support the longer term effort. 

To the functions you mentioned, e-prescribing, lab results, and patient information, I 

would add medication history (including allergies) and clinical reports to complete the set 

of commonly mentioned electronic health information exchange functions that clinicians 

agree would help provide higher quality healthcare in the short term. 

2. Can you give an example of some of the decision support systems that are 

possible by moving towards smarter information systems? 

Some examples of decision support functions include: 

• Advising a clinician that a drug he/she is trying to prescribe has 

contraindications that must be considered (and possibly explained or justified) 

such as allergies, potential drug-drug interactions, instance of another 

prescription or OTC drug the patient is taking with similar physiological 

activity and existence of a less expensive alternative with similar activity. 

• Advising a clinician that a lab test that he/she is trying to order was done 

recently on the same patient and present the results of that test for consideration 

to avoid redundant procedures. 

• Advising a clinician that a result of a test (laboratory, radiology, pathology, or 

other) indicates an abnormality that has not been documented and/or acted 

upon. 

• Advising a clinician that a screening or follow-up test judged to be appropriate 

for the particular patient (age, weight, sex, diagnoses, health status, etc.) has not 

yet been ordered or has been ordered but not produced a result in the expected 

timeframe (e.g., results of ordered Hgb A1c test have not been received within 

2 weeks of follow-up patient visit for diabetes control). 

• Advising a patient that a refill of a prescription for a drug that should be taken 

daily to treat a chronic disease is overdue. 
155

RESPONSE FOR THE RECORD BY ALAN MERTZ, PRESIDENT, AMERICAN CLINICAL 

LABORATORY ASSOCIATION

April 18, 2006 

The Honorable Nathan Deal 

Chairman, Subcommittee on Health 

House Energy & Commerce Committee 

2125 Rayburn House Office Building 

Washington, D.C. 20515-6115 

Dear Chairman Deal: 

Thank you for the opportunity to testify before the Subcommittee on Health at the 

March 16, 2006 hearing entitled, “Legislative Proposals to Promote Electronic Health 

Records and a Smarter Information System.” Per your request, attached are answers to 

the questions posed in the April 11th letter to the American Clinical Laboratory 

Association (ACLA). 

The Honorable Nathan Deal

1. What particular function of healthcare do labs provide that makes them a 

good starting ground for smarter health information systems? Laboratory 

data are the heart of the medical record. Laboratory data represent 60-70% of 

the medical record while comprising only 5% of total hospital costs and only 

1.6% of Medicare costs. The vital information provided by laboratory data 

directs the diagnosis and treatment of disease, improves the efficiency of the 

clinical care provided, and most importantly, improves clinical outcomes for 

patients. The long-term benefit of these effects is reduced health care costs. 

For instance, 62% of the Health Plan Employer Data and Information Set 

(HEDIS) effectiveness of care measures are informed by diagnostic tests. 

Diagnostic tests are specified as important to measure in 80% of the clinical 

evidence based guidelines for the most costly disease conditions in the U.S. It 

is for these reasons that virtually every health care community trying to develop 

an electronic health information infrastructure is looking to laboratories first. 

In a survey of hospitals, the number one health care information technology 

(IT) function in use by the majority of hospitals today is the electronic order 

entry and review of results for diagnostic services. For example, ACLA 

member Quest Diagnostics, a commercial laboratory with business 

relationships with over half of the nation’s physicians and hospitals, currently 

sends 60% of its results and gets 40% of orders via the Internet. The 

investment that laboratories have made in health IT also includes public health 

– ACLA member companies report to over 3,000 public health agencies at the 

local, regional, and national level – much of which is done via electronic 

means. 

2. I understand that labs have a limited exception under the Stark law. Can 

you explain how this exception works and whether there are any examples 

of abuse in this area with respect to labs? The terms of the Stark law are 

defined to exclude from the law’s scope the provision of hardware or software 

by a clinical laboratory to an ordering clinician provided such items are “used 

solely to order or communicate the results of tests or procedures for such 
156

entity.” This provision was added to the Stark law when it was amended by 

Congress in 1993. Under the terms of this provision, laboratories are not 

permitted to include other types of functionality in the hardware or software 

they are providing to the ordering physician without charging fair market value 

for this added functionality. For example, one of ACLA’s members currently 

offers a product which, in addition to being able to order tests and transmit 

results, also enables the physician the means to electronically order prescription 

drugs. Due to the limited nature of the Stark law provision discussed above, 

this laboratory must charge fair market value to the participating physician for 

this additional e-prescribing functionality. The laboratory provision has helped 

shepherd health information technology into numerous physician offices and 

hospitals throughout the country today. The ability to provide clinicians with 

this limited hardware and software is fundamental to rendering efficient, 

comprehensive laboratory services to patients - a critically important function 

that must be maintained. Clinicians place a high value on being able to order 

laboratory services and receive laboratory results electronically because it 

improves legibility, decreases error rates, produces more timely results, and 

allows the monitoring of redundant or duplicative testing. ACLA member 

laboratories strive to fully comply with the parameters of the Stark law and we 

are not aware of any examples of abuse in this area. 

3. With respect to ICD-9/ICD-10 issues, would it be safe to say that we would 

get more detailed and accurate information by switching to ICD-10? If 

yes, why have we been so slow to move toward this code change? Transition 

from ICD-9 to ICD-10 does hold great promise – provided clinicians accurately 

use the more detailed diagnosis and procedure codes offered by the ICD-10 

Clinical Modification (CM) and Procedural Coding System (or PCS). More 

detailed procedure codes could allow for enhanced tracking and analysis of 

clinical and economic benefits and better outcomes research. However, the 

transition to ICD-10 has justifiably been slow due to the massive overhaul to 

providers and payers’ computer systems, and the time and expense needed to 

provide appropriate client education, training and testing of the new systems. 

This transition would be particularly difficult for laboratories since they bill 

Medicare directly, yet depend on the ordering physician for the diagnosis codes 

to include on the claim they submit to Medicare. While the current iteration of 

ICD-9 consists of roughly 13,000 diagnosis codes, problems persist today with 

physicians not providing the appropriate ICD-9 codes in order for laboratories 

to get paid. ICD-10’s 120,000 codes have the potential for delays in 

reimbursement if providers are not well educated on how to use the new 

system. Finally, other regulatory changes (including the replacement of 

Version 5010 of the 837 claim standard) must occur before ICD-10-CM can be 

implemented 

4. Having uniform standards for the transmission of laboratory results is an 

essential part of promoting electronic health records and a smarter health 

IT system. Can you share with the Subcommittee what progress has been 

made in establishing such uniform standards? Much work has already been 

accomplished in developing uniform standards for laboratory result reporting. 

Currently, most laboratories and other diagnostic services use HL7 to send their 

results electronically from their reporting systems to their care systems. In that 

transmission most laboratories utilize Logical Observation Identifiers Names 

and Codes (LOINC) to facilitate the exchange and pooling of results, such as 

blood hemoglobin or serum potassium for clinical care, outcomes management, 

and research. The laboratory portion of the LOINC database contains the 

categories of chemistry, hematology, serology, microbiology (including 
157

parasitology and virology), and toxicology. The Consolidated Health 

Informatics (CHI) initiative, one of the Office of Management and Budget's 

eGov initiatives adopted LOINC as one of its core uniform standards on March 

21, 2003. However, what is also needed is an implementation guide for this 

system, given the variability among laboratories in reporting different LOINC 

codes for the same test (there are over 25,000 LOINC codes for laboratory 

tests). The EHR-Lab Interoperability and Connectivity Standards (ELINCS) 

project, a non-proprietary effort involving various players within the health 

care delivery system (including those focused on the transmission of lab 

results), has been doing just that. In March of 2005, ELINCS, through the 

leadership of the California Healthcare Foundation, began developing an 

implementation guide to ‘map’ the top 80% of performed laboratory tests. This 

‘mapping’ essentially creates uniformity among laboratories, providers and 

vendors alike in terms of which LOINC codes refer to which laboratory results. 

The initial effort was completed in late 2005 (v1.0) and additional work on v2.0 

is nearing completion, which expands the project to cover the top 95% of all 

performed tests (around 170 tests). In September of 2005 the Certification 

Commission for Health Information Technology (CCHIT), which was awarded 

an HHS contract for health IT product certification, included ELINCS v1.0 

among the handful of interoperability specifications it has proposed for its first 

round of certification criteria for electronic health record systems. 

5. Establishing an electronic connection between labs and physicians or 

hospitals for ordering tests and receiving results can be very costly. This 

cost is a significant barrier for many physician offices, particularly smaller 

practices. How costly is it to establish such interfaces, why is it so costly, 

and what is the impact on health care practices? The eHealth Initiative, in a 

recent report entitled, “Practice and Laboratory Connectivity,” estimated that 

establishing custom interfaces between physicians, hospitals and laboratories 

can cost anywhere between $30,000 to $50,000. This high cost is due to two 

factors: (1) the cost of the actual hardware/software, installation and training of 

staff; and (2) the cost to “marry’ the existing data streams of the participating 

provider and the laboratory. This cost burden, most often paid to a vendor, is 

the direct result of the lack of uniform electronic test requisition and result 

reporting standards. Due to the significant cost involved with establishing this 

connectivity, the provision of this technology is a business decision – one 

which often times prevents this technology from reaching both rural and small 

physician/hospital locations. However, with the ongoing work of the ELINCS 

project in creating an implementation guide for electronic results reporting (and 

plans to tackle the test requisition in the near future), it is our hope that in the 

next few years the cost prohibitive nature of custom interfaces will abate, 

thereby leading to greater access to this technology for physicians/hospitals 

both in rural areas and in smaller practices. 

Thank you once again for the opportunity to testify before the Subcommittee. If you 

have questions or need any additional information, please do not hesitate to contact me. 

Sincerely, 

 

Alan Mertz 

 President 
158

RESPONSE FOR THE RECORD BY MARK NEAMAN, PRESIDENT AND CEO, EVANSTON 

NORTHWESTERN HEALTHCARE, ON BEHALF OF HEALTHCARE LEADERSHIP COUNCIL
159
160
161

RESPONSE FOR THE RECORD BY JAMES C. PYLES, ATTORNEY MEMBER, POWERS, PYLES,

SUTTER AND VERVILLE, P.C. 

April 25, 2006 

Dear Mr. Grant, 

 

Please accept my response to the letter from Chairman Deal of April 11. I was unable to 

respond to the letter when it arrived because I was completing the petition for certiorari to 

the Supreme Court in Citizens for Health v. Leavitt which challenges the constitutionality 

of the HIPAA Amended Privacy Rule. That petition had to be filed on April 13, and I had 

to be out of the office until this week. My secretary reminded me that this was due today. 

I think you will find the answers helpful. 

 

Question 1: 

 

The question does not accurately state the question I raised. My question was, " Will 

Congress compel Americans to disclose all of their most sensitive health information 

about themselves and their families to and from a national “interoperable” health 

information system without meaningful, informed patient consent, against their will 

and without adequate enforcement against unauthorized uses and disclosures?" 

The question to me also incorrectly states that "under current health care operations 

providers may exchange identifiable health information for the purpose of treatment and 

billing." In fact, the Amended Health Information Privacy Rule that is currently in effect, 

authorizes covered entities (including doctors, other providers, health plans and health 

care clearing houses as well as their business associates) to use and disclose virtually 

any of an individual's identifiable health information for the purposes of treatment, 

payment and health care operations. These are separate terms and purposes. Treatment 

and payment are generally defined as uses for the patient's treatment where the patient 

has requested that treatment and payment where the patient has requested that an 

insurance claim be filed. So these uses and disclosures are somewhat within the patient’s 

control. Health care operations, by contrast, are a broad list of uses generally for the 

benefit of the covered entity that are completely outside of the patient’s control that 

include underwriting and premium rating, business planning and development, 

management activities, and due diligence in connection with the sale of a business. 45 

CFR 164. 501, 65 Fed. Reg. at 82,803-04. As the American Medical Association said in 

its comments on the Amended Rule, "As currently defined, "health care operations" 

includes a broad array of activities unrelated to a patient's individual treatment or 

payment and extending far beyond the necessary disclosures and uses patients would 

expect when they seek health care...An optional consent provision combined with a 

broad definition of health care operations would effectively compel patients, as a 

condition of obtaining health care services, to allow uses and disclosures of their 

protected health information that are not routine or necessary for a covered entity 

to run its business." AMA letter to HHS, p. 7 (April 26, 2002). 

 The question also states, "Of course, doctors may also not disclose information if 

they choose or other rules do not constrain it." That choice is not as available as the 

statement implies. Covered entities may provide a consent process for disclosures for 

treatment, payment and health care operations, but only by entering into an agreement 

with the patient to restrict uses and disclosures. 45 CFR 164.522; 67 Fed. Reg. at 53,213. 

Covered entities are further discouraged from entering into such arrangements because 

failure to act in accordance with such agreements can result in a violation of the Rule and 

civil penalties. 67 Fed. Reg. at 53,213. 
162

The statement, however, reveals the real change that the Amended Rule made in the 

practice of medicine and the right to medical privacy. It is correct that under the 

Amended Rule, for the first time in the nation’s history, covered entities have been given 

the federal authority to decide whether a patient’s health information will be disclosed 

without the patient’s consent and even over the patient’s objection. The practice under 

constitutional law, medical ethics and the laws of most states, prior to the Amended Rule, 

was for THE PATIENT to be able to decide whether his or her identifiable health 

information would be disclosed. In other words, a patient’s identifiable health 

information could not be disclosed without the patient’s consent. This long established 

principle was recognized in the Original Health Information Privacy Rule. 65 Fed. Reg. 

at 82,474. 

When many consumers and practitioners raised the concern that the proposed 

Amended Rule would violate medical ethics and state laws, HHS responded that The 

Amended Rule was only intended as a “floor” of protections and that more stringent state 

privacy laws and standards of medical ethics would remain in effect. 67 Fed. Reg. at 

53,212. However, the decision making power was taken from the patients and vested 

solely in the hands of covered entities. 

So in answer to the specific question whether current law fails the test, the answer is 

that the Amended Rule does fail that test to the extent that it authorizes covered entities to 

disclose Americans’ identifiable health information without their consent and against 

their will. But HHS contends that current law is only a “floor” of privacy protections and 

was not even intended to be a “best practices” standard. 67 Fed. Reg. at 53,212. Some 

who testified at the hearing desire for the Amended Rule to become the national privacy 

standard. The effect would be for the “floor” to also become the “ceiling” which would 

leave little room for consumers’ ethical and constitutional rights to health information 

privacy. The HIPAA Amended Rule cannot be made the national privacy standard 

because it essentially eliminates the individual’s right to health information privacy rather 

than protecting it. 

Question 2:

Should a patient be able to “block” a doctor who needs to send certain medical 

information for the purpose of billing? 

Answer—A doctor should always act in accordance with standards of medical 

ethics. The standards of medical ethics of the American Medical Association, as well as 

virtually every other medical society, state that, “The physician should not reveal 

confidential communications of information without the express consent of the patient, 

unless required to do so by law.” See Tab 1 to my testimony, item 16.a. HHS also found 

that this is has been the established practice throughout the history of the country. 65 Fed. 

Reg. at 82,474. 

So if a patient, a Congressman for example, wishes to file an insurance claim for 

treatment of the flu, he or she should be able to expect that their psychiatric record or 

genetic test for a predisposition for cancer will not be disclosed without their consent. If 

the insurance company insists that they have to have the entire medical record to pay the 

claim, the Congressman should have the right to pay privately and not have to disclose 

this information against his or her will. If we do not allow patients to assert their 

traditional right to privacy, they will avoid seeking needed health care and/or instruct 

their physicians to falsify their medical records. HHS has found that many Americans 

already are taking such self protective measures and physicians are withholding 

information from patient records. 65 Fed. Reg. at 82,468. Thus, protection of the right to 

privacy is essential for effective, high quality health care. See HHS determination to this 

effect. 65 Fed. Reg. at 82,467. 
163

So the short answer to your question is that a doctor should only be able to disclose 

a patient’s identifiable health information for billing purposes with the patient’s consent. 

If this means that the claim cannot be paid, the patient will have to pay privately (as has 

always been the case). The physician can determine this, as they always have, by 

determining prior to providing the services whether the patient will consent to the 

disclosure of information necessary for insurance coverage or agree to pay privately. 

What a physician cannot do in the ethical practice of medicine, is disclose a patient’s 

identifiable health information for billing or other purposes without the patient’s consent, 

unless required to do so by law. 

Question 3:

Should a patient be able to edit or block the sharing of identifiable health information 

between a physician and a specialist? 

Answer—Again, we believe in the ethical practice of medicine under which a 

patient’s identifiable health information cannot be disclosed, even to another physician, 

without the patient’s consent. There is no reason why this consent cannot be obtained at 

the time the patient is accepted for treatment by the first physician. This is not a novel 

concept. This has been the established practice, as reflected in standards of medical 

ethics, throughout the history of the country. 

For example, psychoanalysts often seek consultations from other practitioners, but 

they never do so without obtaining the patient’s consent. Certainly, no physician, even a 

physician to whom a patient was referred, would ever treat a patient without his or her 

consent. 

We do believe, however, that there are situations in which a physician should be 

able to infer consent where it is necessary to carry out treatment that a patient has 

requested. This is essentially the approach that was taken in the Original Privacy Rule 

which allowed health care providers in an “indirect treatment relationship” (such as a 

consult) to review an individual’s identifiable health information without express 

consent. 45 CFR 164.506(a)(2)(i) (65 Fed. Reg. at 82,810). 

The point that must be appreciated is that if the individual’s right to privacy for 

identifiable health information is not protected, the information will simply not exist, 

because the patient will refuse to disclose it. This was expressly recognized by the 

Supreme Court in Jaffee v. Redmond, 116 S. Ct. 1923, 1929 (1996). That decision has 

now been followed in over 150 other cases. 

The right of consent is not new or novel. It is the core concept of medical ethics and 

the right of all law abiding citizens “to be let alone” as protected by the First, Fourth, 

Fifth, Ninth, and Fourteenth Amendments to the Constitution. As HHS has found, the 

right to privacy is a “fundamental right” of all Americans. 65 Fed. Reg. at 82,464. 

Do not hesitate to contact me if you have further questions. 

 Jim Pyles 

 On behalf of the American 

 Psychoanalytic Association 
164

RESPONSE FOR THE RECORD BY DON E. DETMER, PRESIDENT AND CHIEF EXECUTIVE 

OFFICER, AMERICAN MEDICAL INFORMATICS ASSOCIATION

1. It seems important that when we’re talking about electronic health records that 

we would need to come up with a common medical terminology. Is the 

licensure of SNOMED the final step in coming up with this common 

terminology or does more need to be done? 

Response: The initial comment is accurate; that is, we need to have a common 

medical terminology. The licensure of SNOMED was not the final step in coming up 

with a common terminology and more does need to be done. Today, we have three 

problems. First, we don’t have a global system that brings SNOMED and ICD-10 

together and, second, we don’t have an agreed-upon manner by which the world will 

maintain the terminology and classification system going forward. Medicine constantly 

changes due to new discoveries about human biology and diseases, new technologies, and 

new treatments. The challenge is to find a way to support those groups who can do this 

kind of work well and also support a method and manner of giving the world timely open 

access to the terminology and classification into the future. The USA would be very wise 

to license SNOMED and subsequent terminology and classification for use by the world 

and not just for USA institutions from the National Library of Medicine as well as 

support the ongoing maintenance of the standard terminology and classification systems 

through the NLM; an extra $6-8 million per year would give the NLM the funding it 

would need to support this but the benefit to the USA itself would more than offset this 

cost. A joint task force of AMIA and AHIMA experts is currently working on a white 

paper that discusses this issue in some detail and a copy of that report will be sent to you 

as soon as it becomes available. Additional funding for informatics research on this and 

related issues such as that mentioned in the next paragraph is needed. 

The third problem relates to the movement within the USA of giving patients 

electronic health records populated upon information used in paying insurance claims. 

The current terminology on insurance claims that used ICD-9 is so outdated that it will 

only serve as an approximate representation of a person’s health status, treatment, or 

disease condition(s). We have very little data to show us just how well or poorly it 

reflects reality but many experts are concerned about the potential distribution of millions 

of records of dubious accuracy and the confusion this will cause physicians as well as 

patients as they seek to sort out reality from ‘billing’ data. We will have integrated 

computer-based personal and clinician health records in the future and this makes the 

challenge of addressing the remaining terminology and classification issues for now and 

going forward. 

2. You mentioned the need for ways to authenticate or identify individual patients 

– what are the privacy aspects associated with a unique personal identifiers, as 

was called for in the original HIPAA legislation? 

Response: The privacy aspects of authentication or identification of individual 

patients fall into two categories based upon what one consider ‘privacy rights’ to entail in 

a free society. If ‘privacy rights’ are defined as a ‘right to be left alone’, they imply 

something different than if ‘privacy rights’ are defined as the ‘right to remain unknown’. 

Since I do not believe a modern society can exist by operating with the second definition 

as the dominant operating policy, I will respond to policy dimensions relating to the first 

definition. Indeed, the testimony of one witness at the hearing reflected that latter 

perspective. 

The original HIPAA legislation called for unique personal identifiers for health for a 

number of reasons. First, all developed economies in the world have adopted this 
165

approach as the most reliable and cost-effective manner of personal identification for 

health purposes. Today, we are seeing rising interest and indeed rapid movement to give 

citizens their personal health information. It is crucial for both health care safety and 

personal privacy that both doctors and patients exchange data solely to those to whom it 

is intended and no one else. In all likelihood we will use an algorithm in addition to a 

unique identifier. If one does not have access to a person’s social security number (SSN) 

for example, the accuracy of the algorithm drops considerably. To assure the greatest 

accuracy, a unique personal identifier is the most sensible approach. 

At the minimum we need national public policy that will assign a unique health 

identifier with an opt-out arrangement for those citizens who fall into the latter category 

mentioned above. Suggestions have included the SSN plus a four digit PIN and a range 

of other suggestions have been made. There is ample testimony before the NCVHS on 

this topic. I see some value for using the first five digits of the SSN plus a four digit PIN 

that the individual selects. 

3. We have heard complaints about the negative impact of the HIPAA privacy 

rule on clinical research – how would legitimate clinical research uses of 

information be better facilitated? 

This question has many potential responses. Unfortunately, the potential for HIPAA 

to be revised so that it could better support clinical research without legislation being 

passed or regulations being developed that would in reality make clinical research even 

more difficult to undertake is a compelling consideration. In light of this, only one 

recommendation follows. As the nation moves toward an approach to authenticate all 

individuals in order to improve patient safety and protect the privacy of their data, the 

citizen at the time of identifier selection could be given the option of ‘ticking a box’ to 

allow him or her to be contacted by researcher(s) having clinical research protocols 

approved by a legitimate institutional review board to see if the individual had any 

interest in participating in such a study or studies. 

Those citizens who chose neither to have a unique identifier nor participate in 

research would not be able to be notified but certainly millions of citizens both could and 

would choose to participate. This would be enormously helpful to the clinical research 

community. Obviously, those who chose not to collaborate would still gain the benefits 

from any findings coming from those sharing their data. Of course, if sufficient numbers 

of people opted out in a certain category of age or sex, no valid research would be 

achievable since sample sizes might be too small. This creates a problem known as ‘free 

riders’. Too many free riders and the train won’t leave the station. If there is interest in 

other ways to improve clinical research, I can respond further. 

Don E. Detmer, MD, MA, President and CEO, American Medical Informatics 

Association 
166

SUBMISSION FOR THE RECORD BY THE BLUE CROSS AND BLUE SHIELD ASSOCIATION

Introduction 

The Blue Cross and Blue Shield Association (BCBSA) appreciates the opportunity 

to provide testimony to the Committee on H.R. 4157, the Health Information Technology 

Promotion Act of 2005, and applauds the effort to facilitate and encourage the 

widespread adoption of health information technology (health IT). 

BCBSA is made up of 38 independent, locally operated Blue Cross and Blue Shield 

companies that collectively provide healthcare coverage for more than 93 million people 

– nearly one-in-three Americans. Blue Cross and Blue Shield Plans across the country 

are leaders in advancing health information technology, giving providers and consumers 

tools and information to help them make better health care decisions. Plans are sharing 

clinically relevant claims information with physicians; giving consumers access to their 

medical information through personal health records and other internet-based tools; and 

helping providers adopt health IT, including e-prescribing and electronic health records 

(EHRs). 

BCBSA is committed to a health care system that can assure greater patient safety, 

improved quality of care and increased efficiency. We believe that achieving this goal 

requires nationwide adoption of health IT based on interoperability standards that support 

the exchange of information among providers, payers, consumers and government. That 

is why we strongly support the requirement in H.R. 4157 to establish interoperability 

standards through a public-private collaborative process. 

However, we are concerned that the provision calling for switching from ICD-9 to ICD10 billing codes by October 1, 2009 would threaten the goal of widespread adoption of 

health IT. Switching to ICD-10 by 2009 is unworkable because: 

• ICD-10 is a massive undertaking, not only for payers and hospitals but also for 

physicians; 

• Industry is running at maximum capacity with HIPAA mandates; 

• Much preliminary work is needed to make the switch feasible; and 

• Medicare would be put at great risk. 

Our testimony below will explain these factors, and offer as an alternative three 

additional years to switch to ICD-10, with full compliance no sooner than October 1, 

2012. 

In addition, we would like to draw the Committee’s attention to a specific issue 

concerning the provision creating new safe harbors under the federal anti-fraud and antikickback laws: the prohibition on taking into account the volume or value of referrals by 

entities donating health IT to physician. As explained below, this prohibition would have 

a chilling effect on donations of health IT that are already taking place today. 

Switching to ICD-10 by 2009 is Unworkable 

In 2003, the Robert E. Nolan Company – a respected business consulting firm – 

estimated that implementing ICD-10 would cost providers and payers up to $14 billion. 

This cost is indicative of the complexities involved in switching from ICD-9 to ICD-10. 

Provider and Payer Systems will require a Massive Overhaul 

ICD codes are ubiquitous in health care. Providers process and store diagnosis and 

procedure codes in virtually every one of their computer systems, many of which are 

linked to share information. Payers use diagnosis and procedure codes not only to 

process claims, but also to design benefit packages, construct fee schedules, operate 

disease management and quality improvement programs, make medical necessity 

determinations, and prevent fraud and abuse. 

The new ICD-10 coding systems are significantly more complicated than ICD-9. 

ICD-9-CM (volumes 1 & 2) uses about 13,000 codes for diagnoses; ICD-10-CM uses 
167

120,000 codes for diagnoses. ICD-9-CM (volume 3) uses about 11,000 codes for 

procedures; ICD-10-PCS uses 87,000 codes for procedures. 

To handle these new ICD-10 codes, provider and payer systems must be completely 

redesigned: field sizes will have to be expanded, alphanumeric composition allowed, and 

code values and their interpretation completely redefined. IT staff will have to install 

new code sets, remap and testing every interface used with vendor software (front-end 

and back-end) and modify all reports used by providers and payers in clinical, financial, 

reimbursement and quality analyses. 

Such far-reaching changes demand adequate time to avoid costly mistakes and 

disruptions in claims payments. 

Physician Practices will Require a Massive Overhaul 

If the advantages of the new coding system are to be realized, physicians will need 

to become substantially more precise and detailed in documenting patients’ medical 

records. To make sure they get the right information from patients to assure proper 

coding, physicians will need to know ahead of time all of the information that will be 

required to code according to the new standard – an impossible task without new 

electronic decision support systems that take physicians through the “decision tree” for 

each possible diagnosis. Unfortunately, fewer than 15% of physicians currently have 

electronic health records systems that could be modified to provide such decision 

support. A report published last year in the Annals of Internal Medicine projects on the 

basis of current trends that in five years’ time only 25% of physicians in solo or small 

group practices will have electronic health records. 

Once they gather the needed information, physicians will need to put additional time 

and effort into documenting patients’ medical records, and completing what is sure to 

become a greatly expanded “superbill” to assure proper reimbursement. In turn, the 

physician’s coders will need to increase their medical knowledge, and the medical staff 

will need to be aware of the challenges to the physicians and be prepared for greater 

interaction between the coding staff and the physicians. 

Industry is Already at Maximum Capacity with HIPAA 

Implementing ICD-10 by 2009 would cause system overload. Payers and providers 

are currently working hard to implement pending and planned HIPAA tasks. These need 

to be completed or well underway before implementing ICD-10 because they require the 

same staff resources. Providers, payers and vendors will all have resources stretched thin 

over the next several years. 

Currently the health care industry is still working to fully implement all of the initial 

HIPAA transactions. For payers this work includes trading partner testing and making 

improvements to the level of response in both the claims status and eligibility response 

transactions. 

Another major task currently underway is implementation of the National Provider 

Identifier (NPI). This project has proven to be much more difficult than originally 

contemplated because of the complex relationship between NPIs and legacy identifiers. 

Crosswalks or maps between the two sets of identifiers need to be developed, and in 

some extremely complex cases re-contracting may be required. The compliance date for 

this implementation is May 2007, and will most likely require continued use of support 

staff for the remainder of that year. 

Other HIPAA projects on the horizon include electronic claims attachments, which 

will probably need to be implemented starting in 2007, implementation of the 5010 

version of the current HIPAA transactions, and the National Payer Identifier (which has 

the potential to become as complex as the National Provider Identifier). Each of these 

projects individually will require substantial human and capital resources. All of this 
168

work, coupled with the scope and complexity of the move to ICD-10, would severely 

overload system resources and expose the providers and payers to unnecessary risk. 

Much Preliminary Work Is Needed 

Important steps must happen before the switch to ICD-10 can begin. 

First, industry must move to a new version of HIPAA transactions (5010) because 

the current (4010) will not work with ICD-10. This change alone is a significant upgrade 

that will require the two years allowed under HIPAA to analyze, program, test, and 

implement this more complex version. The “implementation guide” that is part of the 

new 5010 version shows that thousands of changes will need to be made, from 

comparatively simple tasks like making a change to a single document, to extremely 

complex tasks like adding the ICD-10 code list. Only after these changes are made 

should providers and payers begin implementing ICD-10 

H.R. 4157 seeks to hurry the process of implementing version 5010 by eliminating 

notice and comment rulemaking. This would be a mistake. The notice and comment 

process is industry’s primary opportunity to raise business issues that have broad policy 

implications. To take claims attachments as an example: the SDO might focus on the 

business requirements around a specific interaction between trading partners such as an 

unsolicited claim attachment; but CMS would focus on the larger business/policy issue of 

whether or not to allow claims attachments. 

Only the agency’s comment and review process gives industry the opportunity to 

consider the proposed mandate from an enterprise or industry-wide perspective. We 

believe that global perspective review is essential for the industry and we strongly believe 

that global review opportunity must be preserved under any revised system for HIPAA 

changes. 

Second, the government must release automated crosswalks that map ICD-9 and 

ICD-10 – a complete set is not yet available – and providers, payers, and vendors must 

analyze and test those crosswalks to minimize problems. If the crosswalks do not work 

properly, historical data will be lost, resulting in an inability to run incentive (“pay-forperformance”) programs and the risk of increased fraud and improper payments. 

Any change in the underlying code set for claims will undo years of work on fraud 

detection and control based in ICD-9 coding. Payers have put logic into place within 

their systems that enable them to see patterns of utilization (such as multiple surgical 

procedures, assistant surgeon charges, unbundling, upcoding, appropriateness of care, 

excluded procedures), draw comparisons among providers, and detect claims that fall 

outside norms. 

All of this logic will have to change – which involves the manual process of 

rewriting all the validity edits – to detect claims irregularities. Depending on the detail 

and accuracy of the crosswalks, this could be a significant undertaking. Meanwhile, even 

a small increase in fraud could pose significant risk in a $1.5 trillion health care system. 

Medicare Would Be Put At Great Risk 

In the largest contracting change since Medicare’s inception, CMS is transitioning 

more than 50 fiscal intermediary and carrier contracts to 15 Part A/B Medicare 

Administrative Contractors (MACs) by 2009. This will require multiple claims 

workloads to move from multiple contractors to a single MAC with new jurisdictional 

lines. At the same time, CMS will be consolidating Medicare workloads into two data 

centers, which must be done carefully to avoid service disruptions. 

The MAC transition will be made in three cycles of competitive bidding, scheduled 

for completion by summer, 2009. This is a mammoth undertaking with multiple data 

systems being transitioned to a single entity. The GAO has noted that this massive 

consolidation in itself has the potential to cause major service problems for Medicare, and 

the schedule allows little time for CMS to make adjust for any problems. 
169

Switching to ICD-10 by 2009 would further overwhelm Medicare contractors’ IT 

departments, leading to claims backlogs, improper payments, increased opportunities for 

fraud, and provider and beneficiary dissatisfaction. 

BCBSA Recommendation 

As switching to ICD-10 by 2009 is unworkable, BCBSA recommends a minimum 

of three additional years, with compliance no sooner than October 2012. An additional 

three years would reduce the risk of HIPAA overload and Medicare meltdown, and 

would provide time for the adoption of decision support systems and significant training 

and education that physicians and other health care professionals will need. 

Pilot Testing 

An additional three years would also provide time for pilot testing, which BCBSA 

believes is critical for any major systems’ change. Adequate pilot testing is crucial to 

ensure the new system works, providers are educated, and claims will be paid: A key 

lesson from HIPAA is the importance of pilot testing to avoid costly mistakes and assure 

smooth implementation. ICD-10 is vastly different from the current billing system, with 

more than 200,000 codes (compared to 24,000 now). The World Health Organization 

(WHO) also recommends this essential step: “Before starting full-scale countrywide use 

of ICD-10, it is advisable to test adapted data registration tools and procedures in a 

number of pilot areas and hospitals. It will help early identification of outstanding 

problems and fix these before the countrywide implementation starts.” 

Once comprehensive, automated crosswalks are released, ICD-10 should be pilot 

tested. Providers and payers would then be able to adjust their systems, and develop a 

coordinated implementation strategy based on the pilot results. CMS could then set a 

compliance date that allows the industry to complete the needed adjustments. 

Safe Harbors and Limits on Volume

H.R. 4157 stipulates that in order for non-monetary remuneration (in the form of 

health information technology and related training services for a physician) to fall within 

the safe harbor, the entity offering the remuneration must not take into account the 

volume or value of referrals (or other business generated) by the physician to the entity. 

The problem with this provision is that it would have a chilling effect on donations that 

are already taking place today by health plans. 

For example, it is increasingly common for health plans to promote electronic 

prescribing by donating e-prescribing hardware and software to physicians. To optimize 

the allocation of scarce resources, the donation programs commonly target physicians on 

the basis of volume of prescriptions written or the value of the drugs prescribed. By 

taking into account volume and value, health plan donations have the most impact on 

improving physician prescribing habits and improving services provided to the greatest 

number of health plan members. 

Unlike hospitals and group practices, health plans as private payers actively seek to 

control the fraud and abuse activity the legislation seeks to address—it is a business 

imperative. As partners with the government on Medicare and Medicaid, health plans are 

designed to, and have every financial incentive to control utilization costs to compete 

effectively—the incentives of plans and of the government are aligned by the contractual 

arrangements to promote gains in efficiency and quality, and to control fraud and abuse. 

BCBSA Recommendation 

BCBSA recommends that the legislation specifically allow health plans to determine 

eligibility or the amount or nature of the items and services in a manner that takes into 

account the volume or value of referral or other business generated between the physician 

and the health plan. 
170

Conclusion 

A minimum of three additional years is critical to switch to ICD-10 – with full 

compliance by no sooner than 2012 – not only to avoid costly missteps in transitioning 

from ICD-9 to ICD-10, but also to avoid derailing important health IT initiatives to 

improve safety, quality, and efficiency. Health IT innovations are exploding as providers 

and payers devote significant resources to advancing the national priority of widespread 

adoption of interoperable electronic health records (EHRs) and personal health records 

(PHRs). For example, many Blue Cross and Blue Shield Plans are building payer-based 

EHRs and PHRs using claims data and developing regional networks for exchanging 

administrative and clinical information. Having to redirect resources for an immediate 

switch to ICD-10 could hinder initiatives promising direct consumer benefit. 
171

SUBMISSION FOR THE RECORD BY DEBORAH C. PEEL, MD, FOUNDER, PATIENT PRIVACY 

RIGHTS FOUNDATION

Chairman Deal and Members: 

The Committee on Health deserves thanks for holding hearings to examine 

legislative proposals to build a national health Information technology network. 

I appreciate the opportunity to provide written testimony on this matter of critical 

importance, not only to the future of our healthcare system but also to the future of our 

Democracy and our cherished rights to personal liberty and freedom. 

H.R. 4157, the “Health Information Technology and Promotion Act of 2005” 

promotes the adoption of information technologies to streamline and improve the 

healthcare system, but at the expense of Americans’ most cherished values: personal 

liberty and privacy. 

 

What is Privacy? 

What exactly does it mean to have the right to privacy? The Original Privacy Rule 

states, "The right of privacy is: 'the claim of individuals, groups, or institutions to 

determine for themselves when, how, and to what extent information about them is 

communicated'." 65 Fed. Reg. at 82,465 

The two key reasons HR 4157 and the other HIT bills (with the exception of HR 

2234) will eliminate every American’s right to privacy are: 

1) HR 4157 relies on the HIPAA Privacy Rule as a privacy standard. But the 

Amended Privacy Rule deprives all Americans of the right of consent, thereby 

depriving them of the right to control access to their medical records. 

[citation: “The consent provisions...are replaced with a new provision...that 

provides regulatory permission for covered entities to use and disclose 

protected health information for treatment, payment, healthcare operations.” 

67 Fed. Reg. at 53,211] 

2) HR 4157 sets up a process to study and eliminate all stronger state laws 

protecting medical privacy. Setting up a process to eliminate more privacyprotective state laws in the absence of a very high national standard set by 

Congress is a mistake. States’ rights to determine how best to protect citizens 

must not be eliminated without a strong national standard in place. 

These two elements of HR 4157 will create a national electronic health system with 

open access to the nation’s medical records by over 800,000 private individuals, 

corporations, and government agencies; and eliminate states’ rights to retain privacy 

protections stronger than HIPAA. 

Other aspects of the bill can be negotiated, but privacy rights cannot. Privacy must 

be the lynchpin of any system for storing and sharing the nation’s medical records. 

Consequences of Building a National Health IT System Without Privacy 

Without privacy, HR 4157 will have damaging effects that reach far beyond the 

healthcare system by making electronic medical records instantly accessible for business 

uses that have nothing to do with healthcare. Broad dissemination of the nation’s medical 

records to hundreds of thousands of covered entities will facilitate discrimination against 

every man, woman, and child. HR 4157 will enable electronic access to a mother lode of 

the most commercially valuable databases on earth: the nation’s medical databases. 

Armed with detailed medical records, private businesses and government agencies 

will be tempted to discriminate against people based on fears about their future health, 

rather give them opportunities based on their qualifications and abilities. Will we get 

jobs, promotions, or bank loans? 
172

Our children’s opportunities and livelihoods will be more severely limited than ours, 

as opportunities will be denied to them earlier in their lives. Will our children and 

grandchildren get into colleges, get jobs, or be able to buy their first homes? 

As the health care system increasingly becomes the province of big business and 

government, threats to patient privacy will increase exponentially. The immense 

commercial value of identifiable medical records explains why corporations and the 

government want unfettered access to everyone’s medical records. Privacy (the right to 

control personal health information) is an important substantive limit on the power of the 

government and the power of corporations; it limits what they can do. 

HR 4157 without privacy is a prescription for disaster. 

Introduction 

My name is Deborah C. Peel, MD. I have been practicing medicine for 32 years. My 

specialty is adult psychiatry and Freudian psychoanalysis. My career as a mental health 

professional put me at ground zero for privacy. 

No one would tell me anything if their treatment could be used to harm them. People 

paid me cash long before managed care or computers were invented, in order to assure 

their privacy. 

Mental health treatment requires the most stringent privacy protections so people 

will trust mental health professionals with their most painful and terrifying thoughts, 

feelings, and memories. Patients need privacy and the trust it engenders to speak freely 

and fully. Mental health professionals need privacy to offer effective psychotherapy, just 

as surgeons need sterile fields to operate. 

I’ve seen so many people be harmed over the past 32 years when their medical or 

prescription records were disclosed without their consent. 

Without privacy, people will refuse to get treatment and the help they need when 

they are sick. They will lie and omit data, and refuse genetic and other tests and 

treatments that could stigmatize them. People will risk worsening illness and even death, 

rather than risk losing their jobs or reputations. 

As a physician, mother, patient, and consumer, I could not stand idly by and watch 

the destruction of our privacy rights. 

No national medical privacy watchdog organization dedicated to fighting to save our 

rights to privacy existed, so I started Patient Privacy Rights Foundation about three years 

ago. Our mission is to inform and empower Americans to save their human and civil 

rights to medical privacy. 

Consequences: What happens when patients can’t control access to their medical 

records 

1) Diane O’Leary (permission was granted to tell her story). Ms O’Leary is a 

journalist by profession, living in NY. She developed a rare neurological 

condition. After the first neurologist she sought treatment from did not help her 

and the medications he prescribed made her worse, she stopped going to him 

and sought care elsewhere. But the doctor she fired sent her medical records 

with his opinions to the new specialists she consulted, without her knowledge 

or permission. He claimed the HIPAA Privacy Rule gave him the right to 

disclose her medical records. The disclosures effectively kept her from getting 

the correct diagnosis and treatment for three years. She was partially disabled 

and can no longer work as a journalist. 

2) Patricia Galvin (permission was granted to tell her story). Ms Galvin is a 

lawyer who was being seen in a sleep disorders clinic at Stanford University. 

She saw a therapist in the clinic who repeatedly assured her that the 
173

handwritten records she kept of their therapy sessions would not be entered into 

Ms Galvin’s general medical record. But they were. Once her therapy records 

were scanned and placed in her general medical record, Ms Galvin could not 

prevent the records from being repeatedly disclosed by the hospital without her 

permission, because HIPAA allows disclosures of medical records for all 

routine uses. Her medical records were sent to her insurer and employer, who 

fired her and because of some errors in the records and she also lost her 

disability coverage for an unrelated back injury. 

3) A physician whistleblower wrote Patient Privacy Rights about his concerns that 

the VA’s electronic medical records system allows anyone with access to the 

system to see any patient’s medical records without the patient’s knowledge or 

permission (permission was granted to share his story). He gave 3 examples of 

very sensitive records that VA staff could view: 

• a man had a device inserted into his penis, the nursing notes 

described the time, length, and size of his erection 

• a woman suffering from painful intercourse had detailed chart notes 

about the depth and timing of her partner’s vaginal penetration to 

remedy her symptoms 

• an x-ray technician who took a shoulder x-ray of a man had read his 

mental health notes and asked him if he was still suicidal. The man 

went to the VA psychiatrist and fired her and refused further 

treatment 

4) Parents of children diagnosed with autism expressed outrage that the CDC was 

obtaining their children’s medical records and school records without notice or 

consent, a use the HIPAA Privacy Rule makes fully legal for covered entities. 

[National Autism Association Press Release - 3/1/2006 - CDC Obtains 

Children's Confidential Records Without Parental Consent For Autism Study] 

5) A college student was expelled from GWU because his medical records 

concerning his depression were disclosed to the college without his consent. 

[GWU Suit Prompts Questions Of Student Liability; School Barred Depressed 

Student, Washington Post - 3/10/2002] 

6) Insurers now ask doctors to disclose patients’ complete medical records, using 

HIPAA to justify access without patient consent: 

Email from Robert Charles Powell, MD, PhD on 3/11/06 to a psychiatric 

listserv (permission was granted to share the email for testimony): “Now that 

HIPAA is attempting to be lord of the land, there are more and more requests 

for "all medical records and notes" -- which is an illegal request of a 

psychiatrist under the Illinois Confidentiality Act. I don't know how this 

ultimately will shake out, but it is worth noting that the Ohio Supreme Court 

recently upheld that state's confidentiality act -- almost as good as Illinois' -- 

noting (a) that the state act offered the patient more protection than HIPAA and 

therefore should be followed plus (b) that the physician had a responsibility to 

protect the patient's privacy regardless of whatever piece of paper the patient 

might have signed [the Illinois act specifies likewise that a patient can NOT 

sign away protected confidentiality rights. [Grove v. Northeast Ohio 

Nephrology Associates (Ohio Ct. App., Nos. 22594, 22585, 12/26/2005)] 
174

7) Wal-Mart: 

Quotes from the Memorandum to Wal-Mart’s Board of Directors: 

• “Redesign benefits and other aspects of the Associate experience, 

such as job design, to attract a healthier, more productive workforce.” 

• “The team is also considering additional initiatives to support this 

objective, including: all jobs to include some physical activity (e.g., 

all cashiers do some cart gathering).” 

See New York Times story October 26, 2005: Wal-Mart Memo Suggests Ways 

to Cut Employee Benefit Costs, By Steven Greenhouse and Michael Barbaro. 

[Supplemental Benefits Documentation, Board of Directors Retreat FY06, WalMart Stores, Inc., Reviewing and Revising Wal-Mart’s Benefits Strategy, 

Memorandum to the Board of Directors, 

http://www.patientprivacyrights.org/site/DocServer/WalMart_memo.pdf?docID

=501] 

8) FDIC Notice on Medical Privacy. This example is included to show how access 

to medical records is widespread, far beyond the direct uses in the healthcare 

system. Enough medical records were in the hands of banks and financial 

institutions for the FDIC to issue a formal memo on April 28, 2004. 

Furthermore, the Gramm-Leach-Bliley Financial Services Act permits banks 

and financial institutions to share medical and financial records with all their 

affiliates and non-affiliates without consumer consent. 

The FDIC acknowledges that banks and financial institutions have medical 

records, “section 411 prohibits creditors from obtaining or using medical 

information to make credit determinations. Except as permitted by the 

regulators or the FACT Act itself, section 411 treats medical information as a 

credit report when a creditor shares it with an affiliate.” Further, section 411 

states that “a creditor may not obtain or use a consumer's medical information, 

as defined in the Act, in connection with a determination of a consumer's 

eligibility, or continued eligibility, for credit.....section 411 states that when 

affiliates share certain medical information, that information will be considered 

a consumer report under the FCRA.”

9) Patients’ medical records can be sent around the world without their knowledge 

for transcribing, because under HIPAA patients have no right to consent to or 

even be notified of this “routine” practice. 

See San Francisco Chronicle story by David Lazarus: A tough lesson on 

medical privacy, Pakistani transcriber threatens UCSF over back pay 

Wednesday, October 22, 2003 URL: 

sfgate.com/article.cgi?file=/c/a/2003/10/22/MNGCO2FN8G.DTL 

10) “Placentas taken, but moms were not told.” Susan Goldman of the Oregonian 

reported on Sunday February 12, 2006, that “as many as 700 afterbirths, many 

involved in difficult deliveries, made their way to a Portland registry, records 

show.” Not getting consent to analyze women’s body parts following births of 

children with injuries or defects is a severe violation of their privacy. 
175

[http://www.oregonlive.com/search/index.ssf?/base/news/1139707514288820.x

ml?oregonian?lctop&coll=7] 

11) Patients can no longer control who can access their records, so as our medical 

records are disclosed over and over to people we do not about, our records will 

be stored in many more locations we have no knowledge of, exposing us to 

high risk of identity theft because electronic systems are NOT secure. 

See: TechWeb News March 9, 2006, by Gregg Keizer: PIN Scandal 'Worst 

Hack Ever'; Citibank Only The Start “The scam has hit national banks like 

Bank of America, Wells Fargo, and Washington Mutual, as well as smaller 

banks, all of which have re-issued debit cards in recent weeks, says a Gartner 

research vice president.” 

http://www.informationweek.com/story/showArticle.jhtml?articleID=18150247

4 ] 

12) There is no meaningful recourse or right of action under HIPAA if your 

privacy is violated. You can only complain to HHS. The woman caught in an 

FBI sting operation is only the second conviction for a privacy violation since 

HIPAA took effect. The first was a conviction for identity theft that was later 

overturned. The second story from TMCNews reported that of the 17,000 

complaints of privacy violations made to the government, only one person was 

prosecuted. 70% were dismissed because they were legally permitted 

disclosures. Because HIPAA grants legal access to over 800,000 individuals, 

corporations, and government agencies, patients have no right or opportunity to 

stop access by any of them. 

See Laredo Morning News - 3/7/2006, Alamo Woman Guilty of Selling 

Medical Information at: 

http://www.patientprivacyrights.org/site/News2?page=NewsArticle&id=5807&

news_iv_ctrl=-1 

See also TMCNet News, February 24, 2006 at 

http://www.tmcnet.com/usubmit/2006/02/24/1404832.htm 

Don’t Confuse Privacy and Security 

It is important not to confuse the privacy with security. Security can help protect 

medical records from illegal users like hackers, but it cannot restore or substitute for the 

right to control who can see and use your medical records. The terms are often used 

interchangeably, confusing their different effects on access to medical records. 

Privacy means that patients control who can see and use their electronic medical 

records, which means they can exclude any individual or corporation from having access 

to their medical information. 

Security measures such as encryption, firewalls, passwords, levels of access, and 

other physical and technical measures can help protect medical records from illegal 

access by hackers and identity thieves. But security measures do nothing to stop the over 

800,000 covered entities that currently have legal access to medical records from using 

them. Strong security measures are not a substitute for privacy. 

Need for a system of trusted couriers and trusted custodians 

The health IT system should be designed and engineered to be a system of trusted 

couriers and custodians. It should be structured to permit access to medical records only 

with patient permission (emergencies could be specifically excluded). That is how FedEx 
176

works. We trust FedEx to deliver our packet of information to only the person we 

specify. 

Instead, in the electronic world, any data broker, data warehouse, and any healthcare 

business that handles, stores or processes medical records simply appropriates them for 

corporate use. If FedEx operated like that—where anyone who happened to handle the 

packet of information could tear it open, make copies, and use and sell the data, it would 

not have any customers. 

Surely our sensitive health information should not be accessible to all covered 

entities to copy and steal just because they happen to be in a business that is connected to 

the healthcare system. 

Conclusions 

• Congress should intervene when private actions have such vast public 

consequences. The failure of Congress to intervene and specify the rights 

patients should have---the right to control access to their medical records----

will undermine significant Constitutional values and impair important 

individual privacy rights. 

• Congress should set privacy standards, not delegate the task to unelected 

officials with no Congressional or public input or oversight. 

• With ironclad privacy standards and patient privacy rights in place, patients 

will be willing to trust and use the national electronic health system and the 

incredible and transforming benefits that IT can bring to the healthcare system 

will be fully realized. 

Solutions to Insure the Privacy Of Medical Records In Electronic Networks and 

Systems 

• Patients must control who has access to their personal health information over 

any electronic health networks 

• Allow patients to opt-in and opt-out of health information networks 

• Allow patients to segregate their most sensitive medical records 

• Require audit trails of all disclosures 

• Require patient notification of all suspected or actual privacy and security 

breaches 

• Deny employer access to employee medical records 

• Allow access to de-identified medical records for research, public health, and 

other legitimate uses 

• Preserve stronger state laws protecting medical privacy 

• Enact criminal penalties for use or possession of medical records without 

permission 

Deborah C. Peel, MD 

Chairman, Patient Privacy Rights Foundation 

Austin, Texas 

512-732-0033 

www.patientprivacyrights.org 
177

SUBMISSION FOR THE RECORD BY ADVANCED MEDICAL TECHNOLOGY ASSOCIATION

AdvaMed and its member companies thank the Committee for holding this hearing 

on health information technology (HIT). HIT promises to revolutionize the health care 

delivery system and dramatically effect patient safety, quality of care, and efficiency. 

HIT products and applications are greatly expanding throughout vital sectors of the 

American health care delivery system, including clinical operations, decision support, 

devices, equipment, distribution, administrative tasks, and the interface with payers. As a 

result, HIT is helping to significantly reduce medical errors, improve the quality of care, 

speed paperwork, and reduce administrative costs. 

AdvaMed is the world's largest medical technology association representing 

manufacturers of medical devices, diagnostic products and medical information systems. 

AdvaMed’s more than 1,300 members and subsidiaries manufacture nearly 90 percent of 

the $75 billion of health care technology purchased annually in the United States and 

more than 50 percent of the $175 billion purchased annually around the world. Many of 

these technologies – such as electronic infusion pumps that administer intravenous (IV) 

drugs, verify correct drugs, and check dosages, as well as remote physiological 

monitoring (RPM) technology – save lives and improve the quality of life for patients by 

preventing medication errors and managing disease. 

The Role of Technology 

Universally interoperable electronic health records (EHR) hold great promise in 

reducing health care costs and improving the quality of care delivered to patients. The 

Department of Health and Human Services (HHS) cites two studies that estimate savings 

from implementing EHRs to be between $78 and $112 billion. HIT, however, is 

expanding far beyond the EHR to include devices that are already dramatically improving 

patient safety, quality of care, and health care efficiencies. Combined, the EHR and these 

other innovative technologies will ultimately play a major role in reducing overall health 

care costs. Examples of these innovations include: 

• Computer-assisted physician order entry devices to increase patient safety and 

health system efficiency; 

• Hand-held Personal Digital Assistants (PDAs) to allow doctors making rounds 

to immediately access each patient’s complete medical record; 

• Electronic lab results to allow test results to be stored and sent to physicians 

electronically; 

• Electronic prescription orders to allow physicians to send prescriptions directly 

to pharmacists to ensure accurate order submissions and allow pharmacists to 

conduct drug interaction reviews; 

• Infusion pumps to prevent drug overdoses and enable hospitals to re-engineer 

their systems to avoid medical errors; 

• Image-guided or computer-assisted surgery (CAS) to allow surgeons to more 

precisely position their instruments for less invasive operations and to 

document procedures; 

• Remote monitoring, telemedicine, and other devices with computerized 

components, such as implantable cardioverter-defibrillators (ICDs), to allow 

heart patients to send vital data to their physicians via a secure Internet 

connection, often reducing trips to the doctor; and 

• Picture archiving and communication (PAC) systems to store and permit the 

transmittal of radiological images, such as X-rays. 
178

Improving Patient Safety and Quality of Care 

The Institute of Medicine (IOM) estimates that 44,000 to 98,000 deaths each year 

result from preventable medical errors in hospitals. Studies have shown that there are 

errors in 24.9 percent of hospital patient records.1

 An estimate by the Food and Drug 

Administration (FDA), found that as many as 372,000 preventable adverse drug events 

occur each year.2 These errors result from administering incorrect dosages, errors in 

filling prescriptions, and adverse drug interactions. 

Technologies that support IV drug administration can help prevent medication errors 

using automated dosage limits and alerting systems. Electronic physician ordering 

systems and data management software reduce transcription and dosing errors, promote 

process standardization, increase access to patient specific medical information, and 

reduce laboratory turnaround time. 

For example, a report by the National Academies in 2003 recommended that health 

care organizations adopt information technology systems capable of collecting and 

sharing health information about patients and their care. Computerized physician order 

entry (CPOE) devices can link the health care worker with the facility’s computer system 

to avert medical errors. These computerized systems can automatically alert the 

practitioner to past drug allergies, potential drug interactions with a patient’s current 

medications, and incorrect dosing. 

The Children’s Hospital of Pittsburgh (Children’s) launched its CPOE program, 

Children’s Net, in October 2002. It helps this pediatric hospital with its special challenge 

with medication errors due to their patients’ weights, as well as meeting the regulatory 

requirements for compliance to reach certain care benchmarks. Children’s CPOE system 

allows doctors to show lab or diagnostic test results to parents at the child’s bedside, chart 

functions, and graph progress. Its warning system provides an alert if a dose seems out of 

line, based on predetermined standards, and the CPOE has reduced medication errors by 

75% and virtually eliminated weight related adverse drug events. 

Reducing Costs

By reducing duplicative care, lowering health care administration costs, and 

avoiding care errors, health information technology could save approximately $140 

billion per year, according to HHS. Studies cited by HHS in its 2004 Health IT Strategic 

Framework Report suggest the use of EHRs can reduce laboratory and radiology test 

ordering by 9 percent to 14 percent, lower ancillary test charges by up to 8 percent, 

reduce hospital admissions ($16,000 average cost) by 2 percent, and reduce excess 

medication usage by 11 percent. Two studies have estimated that ambulatory EHRs have 

the potential to save all payers $78 billion to $112 billion annually. HHS also cites 

evidence that EHRs have the potential to reduce administrative inefficiency and 

paperwork. 

A 2004 study in Critical Care Medicine found that using remote Intensivists 

(intensive care specialists) to monitor patients electronically from a remote location as 

part of an ICU telemedicine program not only improves clinical outcomes, but also 

enhances hospital financial revenues.3

 Cost savings resulted both from a reduction in the 

 

1

 Terri Simmonds. “Using The Trigger Tool to Detect Potential Harm in Medication Management.” 

Infusion Safety: Addressing Harm with High-Risk Drug Administration. The ALARIS® Center for 

Medication Safety and Clinical Improvement. San Diego, California. 2004, pp 10. 2

 Steven Tucker. “Analysis of Impact of the Food and Drug Administration’s Proposed Bar Code 

Label Requirements for Human Drug Products and Blood.” Hospital Pharmacy. 38 (11), Supplement 

1, pp S11. 

3

 Breslow MJ, Rosenfeld BA, Doerfler M, Burke G et al. Effect of a multiple-site intensive care unit 

telemedicine program on clinical and economic outcomes: An alternative paradigm for Intensivist 

staffing. Crit Care Med 2004;32:31-38. 
179

average length of stay in the ICUs (3.63 days vs. 4.35 days) and from a decrease in daily 

costs. 

In addition, picture archiving and communication systems (PACS) enable hospitals, 

imaging centers and multi-site health care organizations to manage, store and transmit 

patient medical images such as digital X-ray, MRI and CR images. Combining this kind 

of technology with a digital patient information system allowed several Boston-area 

hospitals to save an estimated $1 million annually by, in part, reducing the time spent 

searching for files and manually admitting patients.4

Policies to Foster HIT Adoption 

To assure appropriate access to continued innovations in health information 

technologies for patients, AdvaMed believes that policies should evolve with the 

technologies. We support developing incentives that will overcome the barriers to timely 

adoption HIT. Providers, payers, and medical technology manufacturers should all be 

involved in developing the ways to address these issues and enable interoperable and 

efficient use of these technologies to improve the quality of care, patient safety, and 

health outcomes overall. Specifically, we support the following provisions for inclusion 

in HIT legislation: 

Regulatory Reforms: The implementation of the International Classification of 

Diseases, version 10 (ICD-10) will have an impact on the timely adoption of life-saving 

and life-enhancing medical technology. ICD-10 is the next generation of the coding 

system that will modernize and expand CMS’s capacity to keep pace with changes in 

medical practice and technology. Its unique structure will incorporate all new procedures 

as unique codes that would explicitly identify the technology used to perform the 

procedure. The transition from the currently used ICD-9 system to the internationally 

used ICD-10 system is time-sensitive as the number of available codes under ICD-9 is 

rapidly dwindling. The availability of new codes has been raised in public meetings as a 

potential basis for CMS to deny applications for new codes, and this reluctance to issue 

new codes will hinder appropriate tracking, identification, and analysis of new medical 

services and technologies. 

In 2003, after several years of hearings, the National Committee of Vital and Health 

Statistics (NCVHS) raised concerns about the viability of the ICD-9-CM as it was 

“increasingly unable to address the needs for accurate data for health care billing, quality 

assurance, public health reporting, and health services research.” NCVHS also noted in 

2003 that these concerns have been “well documented” in the testimony and letters 

provided to the NCVHS over the past several years. HHS has yet to begin this important 

transition. 

Without adoption of ICD-10, it will be difficult to track new and emerging public 

health threats, such as avian flu. ICD-10 is also the key to collecting the information 

needed to implement a proper pay-for-performance system for providers and carry out 

Medicare’s road map for the future, which depends on accurate data on the effectiveness 

of treatments. ICD-10 will also enable better patient care through better understanding of 

the value of new procedures, improved disease management, better understanding of 

patients’ health care outcomes, and an improved ability to study patient outcomes. 

While concerns have been raised about the cost of implementing ICD-10, we note 

that the 2004 RAND study found that the financial benefits of ICD-10 significantly 

outweigh the costs, and the study did not even account for the significant costs that will 

accrue for not adopting the system in a timely fashion. Additionally, several cost 

estimates that have been circulated to attempt to dissuade support for ICD-10 are flawed 

 

4

 Networking Health: Prescriptions for the Internet, Institute of Medicine, National Academy of 

Sciences, p. 81, 2000.
180

by failing to net out costs of the normal upgrading of all payment systems that would 

occur independent of ICD-10. 

We believe that the long term and ongoing benefits of improved measurements of 

efficiency, complications, resource use, and improved accuracy of payments would more 

than offset the one-time or short-term costs of the conversion to ICD-10. 

Some existing laws and regulations present barriers to the adoption of HIT. 

Currently, unless an exception is met, provisions of the federal health care program antikickback statute prohibit the offer or acceptance of anything of value in return for patient 

or item/service referrals. Likewise, unless an exception is met, the physician self-referral 

law (the “Stark” law) bars hospitals from billing for items or services provided by 

physicians who have financial relationships with the hospital. While an exception to 

Stark has been promulgated by the Centers for Medicare and Medicaid Services for 

community-wide health information systems, the exception is not well defined or 

understood, and a much broader, clearer exception is needed. 

A parallel safe harbor to the federal health care program anti-kickback statute is also 

necessary. These barriers to the dissemination of resources (financial, equipment or 

otherwise), such as a hospital financially supporting its referring physicians in the 

acquisition and use of health information technology, must be removed. While the 

proposed EHR and e-prescribing exceptions to both the anti-kickback and Stark laws are 

an important step in the right direction, they do not go far enough to protect the adoption 

of HIT. 

In addition, AdvaMed is concerned with the impact of an increasing array of state 

and local laws on interoperable health systems that resulted from the enactment of the 

Health Insurance Portability and Accountability Act (HIPAA). Our member companies 

operate in a multi-state, multi-jurisdictional environment, and the overlapping 

multiplicity of these laws makes it costly and complex to develop compliant processes 

and systems for protecting confidentiality and securing information. AdvaMed believes 

that uniform federal standards for privacy, security, and technical regulations are critical 

to achieving a nationwide electronic health information exchange, and the lack of 

uniform federal standards should not delay this effort. 

Standards: AdvaMed endorses the FDA’s current software regulation policies, 

under which it only regulates software if its output directly results in software-directed 

treatment or diagnosis of patients. We also believe that the FDA’s regulation of any 

software associated with medical devices should be risk-based and only at the minimum 

level necessary to protect public health. Since the EHR is not a medical device and 

simply stores data for retrieval by a health care professional (EHR algorithms do not 

make diagnostic or treatment decisions), FDA regulation is not warranted for EHRs 

under the FDA’s own standards. 

Financial Incentives: Many providers lack the financial ability to make the upfront 

investment needed to install and operate an advanced health information technology 

system. The federal government and other payers should provide financial incentives 

sufficient to spur widespread, rapid adoption of health information technology throughout 

the health care system, including universal adoption of EHRs. “Pay-for-performance” 

proposals should include incentives for adoption and use of HIT. 

Direct Reimbursement: Reimbursement systems should reward new modes of 

providing services that result in quality improvement or cost reduction for patient care. 

Remote patient management of chronic diseases is one example of a quality-enhancing 

technology for which health care practitioners are not directly reimbursed under 

Medicare. Many Medicare beneficiaries living in rural or underserved urban areas are 

unable to make regular visits to their physicians. As a result, patients with treatable 

chronic diseases such as diabetes, cardiac arrhythmia, and heart failure do not receive the 

care they require to manage their conditions. 
181

Remote patient management would ensure that Medicare beneficiaries would have 

access to real-time disease management services for covered chronic conditions. Direct 

reimbursement to health care practitioners for utilization of remote patient monitoring 

devices would facilitate use of this technology and lead to improved patient outcomes. 

AdvaMed also supports providing physicians with a quality-of-care incentive bonus for 

meeting specific standards of care for covered chronic diseases. 

Quality and Safety Studies: The e-health system should be designed to assure that 

data from the electronic medical record would be available, with appropriate privacy 

protections under HIPAA, for studies to improve patient safety, and quality of care. 

Conclusion 

Again, we thank the Committee for holding this hearing today. HIT holds great 

promise for improving patient safety, improving the quality of medical care, and 

increasing efficiency. While EHR is one of the many medical devices that can attain this 

goal, HIT is expanding far beyond this and dramatically improving patient safety, quality 

of care, and health care efficiencies. 

Despite the existing and growing body of evidence that HIT will improve patient 

safety, enhance the quality of care, and increase efficiency of care provided, many 

barriers to adoption remain. We urge expeditious implementation by CMS of the ICD-10 

system and federal preemption of HIPAA rules to ensure that data may be stored, 

updated, and transmitted electronically anywhere in the United States. Legislation is 

needed to address the regulatory barriers to HIT adoption, like the federal health care 

program anti-kickback statute and the “Stark” physician self-referral law. As clinical and 

interoperability standards are developed by Congress and the private sector, it is 

paramount that the standards are designed to evolve with advancements in technologies 

and that financial incentives are provided to allow providers to purchase and maintain the 

HIT. 

○