I

104TH CONGRESS

1ST SESSION H. R. 1766

To provide for the establishment of a modernized and simplified health

information network for medicare and medicaid, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

JUNE 7, 1995

Mr. HOBSON (for himself, Mr. SAWYER, and Mrs. JOHNSON of Connecticut)

introduced the following bill; which was referred to the Committee on

Commerce, and in addition to the Committee on Ways and Means, for

a period to be subsequently determined by the Speaker, in each case for

consideration of such provisions as fall within the jurisdiction of the committee concerned

A BILL

To provide for the establishment of a modernized and simplified health information network for medicare and medicaid, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Health Information Modernization and Security Act’’.

6 (b) TABLE OF CONTENTS.—The table of contents is

7 as follows:

Sec. 1. Short title; table of contents.
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TITLE I—PURPOSE AND REPEAL OF DATA BANK

Sec. 101. Purpose.

Sec. 102. Repeal of data bank.

TITLE II—ADMINISTRATIVE SIMPLIFICATION

Sec. 201. Administrative simplification.

TITLE III—EFFECTIVE DATES

Sec. 301. Effective dates.

1 TITLE I—PURPOSE AND REPEAL

2 OF DATA BANK

3 SEC. 101. PURPOSE.

4 It is the purpose of this Act to improve the medicare

5 program under title XVIII of the Social Security Act, the

6 medicaid program under title XIX of such Act, and the

7 efficiency and effectiveness of the health care system, by

8 encouraging the development of a health information net9 work through the establishment of standards and require10 ments for the electronic transmission of certain health in11 formation.

12 SEC. 102. REPEAL OF DATA BANK.

13 (a) IN GENERAL.—Section 1144 of the Social Secu14 rity Act (42 U.S.C. 1320b–14) and section 101(f) of the

15 Employee Retirement Income Security Act of 1974 (29

16 U.S.C. 1021(f)) are repealed.

17 (b) INTERNAL REVENUE CODE PROVISION.—Section

18 6103(l) of the Internal Revenue Code of 1986 is amended

19 by striking paragraph (12).
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1 (c) IDENTIFICATION OF MEDICARE SECONDARY

2 PAYER SITUATIONS.—Section 1862(b) of the Social Secu3 rity Act (42 U.S.C. 1395y(b)) is amended by striking

4 paragraph (5).

5 (d) CONFORMING AMENDMENTS.—

6 (1) Section 1902(a)(25)(A)(i) of the Social Se7 curity Act (42 U.S.C. 1396a(a)(25)(A)(i)) is amend8 ed by striking ‘‘including the use of information col9 lected by the Medicare and Medicaid Coverage Data

10 Bank under section 1144 and any additional meas11 ures’’.

12 (2) Subsection (a)(8)(B) of section 552a of title

13 5, United States Code, is amended—

14 (A) in clause (v), by inserting ‘‘; or’’ at the

15 end;

16 (B) in clause (vi), by striking ‘‘or’’ at the

17 end; and

18 (C) by striking clause (vii).

19 TITLE II—ADMINISTRATIVE

20 SIMPLIFICATION

21 SEC. 201. ADMINISTRATIVE SIMPLIFICATION.

22 (a) IN GENERAL.—Title XI of the Social Security Act

23 (42 U.S.C. 1301 et seq.) is amended by adding at the end

24 the following new part:
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1 ‘‘PART C—ADMINISTRATIVE SIMPLIFICATION

2 ‘‘SEC. 1171. DEFINITIONS.

3 ‘‘For purposes of this part:

4 ‘‘(1) CODE SET.—The term ‘code set’ means

5 any set of codes used for encoding data elements,

6 such as tables of terms, medical concepts, medical

7 diagnostic codes, or medical procedure codes.

8 ‘‘(2) COORDINATION OF BENEFITS.—The term

9 ‘coordination of benefits’ means determining and co10 ordinating the financial obligations of health plans

11 when health care benefits are payable under 2 or

12 more health plans.

13 ‘‘(3) EQUIVALENT HEALTH CARE PROGRAM.—

14 The term ‘equivalent health care program’ means—

15 ‘‘(A) the health care program for active

16 military personnel under title 10, United States

17 Code;

18 ‘‘(B) the veterans health care program

19 under chapter 17 of title 38, United States

20 Code;

21 ‘‘(C) the Civilian Health and Medical Pro22 gram of the Uniformed Services (CHAMPUS),

23 as defined in section 1073(4) of title 10, United

24 States Code;
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1 ‘‘(D) the Indian health service program

2 under the Indian Health Care Improvement Act

3 (25 U.S.C. 1601 et seq.); and

4 ‘‘(E) the Federal Employees Health Bene5 fit Plan under chapter 89 of title 5, United

6 States Code.

7 (4) HEALTH CARE PROVIDER.—The term

8 ‘health care provider’ includes a provider of services

9 (as defined in section 1861(u), a provider of medical

10 or other health services (as defined in section

11 1861(s))), and any other person furnishing health

12 care services or supplies.

13 ‘‘(5) HEALTH INFORMATION.—The term ‘health

14 information’ means any information, whether oral or

15 recorded in any form or medium that—

16 ‘‘(A) is created or received by a health care

17 provider, health plan, public health authority,

18 employer, life insurer, school or university, or

19 health information network service; and

20 ‘‘(B) relates to the past, present, or future

21 physical or mental health or condition of an in22 dividual, the provision of health care to an indi23 vidual, or the past, present, or future payment

24 for the provision of health care to an individual.
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1 ‘‘(6) HEALTH INFORMATION NETWORK.—The

2 term ‘health information network’ means the health

3 information system that is formed through the appli4 cation of the requirements and standards established

5 under this part.

6 ‘‘(7) HEALTH INFORMATION NETWORK SERV7 ICE.—The term ‘health information network service’

8 means a public or private entity that—

9 ‘‘(A) processes or facilitates the processing

10 of nonstandard data elements of health infor11 mation into standard data elements;

12 ‘‘(B) provides the means by which persons

13 may meet the requirements of this part; or

14 ‘‘(C) provides specific information process15 ing services.

16 ‘‘(8) HEALTH PLAN.—The term ‘health plan’

17 means a plan which provides, or pays the cost of,

18 health benefits. Such term includes the following, or

19 any combination thereof:

20 ‘‘(A) Part A or part B of the medicare

21 program under title XVIII.

22 ‘‘(B) The medicaid program under title

23 XIX.

24 ‘‘(C) A medicare supplemental policy (as

25 defined in section 1882(g)(1)).
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1 ‘‘(D) Coverage issued as a supplement to

2 liability insurance.

3 ‘‘(E) General liability insurance.

4 ‘‘(F) Worker’s compensation or similar in5 surance.

6 ‘‘(G) Automobile or automobile medical7 payment insurance.

8 ‘‘(H) A long-term care policy, including a

9 nursing home fixed indemnity policy (unless the

10 Secretary determines that such a policy does

11 not provide sufficiently comprehensive coverage

12 of a benefit so that the policy should be treated

13 as a health plan).

14 ‘‘(I) A hospital or fixed indemnity income15 protection policy.

16 ‘‘(J) An equivalent health care program.

17 ‘‘(K) An employee welfare benefit plan, as

18 defined in section 3(1) of the Employee Retire19 ment Income Security Act of 1974 (29 U.S.C.

20 1002(1)), but only to the extent the plan is es21 tablished or maintained for the purpose of pro22 viding health benefits and has 50 or more par23 ticipating employees.

24 ‘‘(L) An employee welfare benefit plan or

25 any other arrangement which is established or
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1 maintained for the purpose of offering or pro2 viding health benefits to the employees of 2 or

3 more employers.

4 ‘‘(M) Such other plan or arrangement as

5 the Secretary determines is a health plan.

6 ‘‘(9) INDIVIDUALLY IDENTIFIABLE HEALTH IN7 FORMATION.—The term ‘individually identifiable

8 health information’ means any information, includ9 ing demographic information collected from an indi10 vidual, that—

11 ‘‘(A) is created or received by a health care

12 provider, health plan, employer, or health infor13 mation network service; and

14 ‘‘(B) relates to the past, present, or future

15 physical or mental health or condition of an in16 dividual, the provision of health care to an indi17 vidual, or the past, present, or future payment

18 for the provision of health care to an individual,

19 and—

20 ‘‘(i) identifies an individual; or

21 ‘‘(ii) with respect to which there is a

22 reasonable basis to believe that the infor23 mation can be used to identify an individ24 ual.
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1 ‘‘(10) SECRETARY.—The term ‘Secretary’

2 means the Secretary of Health and Human Services.

3 ‘‘(11) STANDARD SETTING ORGANIZATION.—

4 The term ‘standard setting organization’ means a

5 standard setting organization accredited by the

6 American National Standards Institute or any other

7 private organization (including the National Council

8 for Prescription Drug Programs and the Health In9 formation Standards Planning Panel) that develops

10 standards for information transactions, data ele11 ments, or any other standard that is necessary to or

12 will facilitate the implementation of this part, if the

13 standard development procedures of the organization

14 are open to the public and are based on a broad con15 sensus of opinion.

16 ‘‘(12) STANDARD TRANSACTION.—The term

17 ‘standard transaction’ means, when referring to an

18 information transaction or to data elements of

19 health information, any transaction that meets the

20 requirements and implementation specifications

21 adopted by the Secretary under sections 1172 and

22 1173.

23 ‘‘SEC. 1172. GENERAL REQUIREMENTS ON SECRETARY.

24 ‘‘(a) ADOPTION OF STANDARDS.—
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1 ‘‘(1) IN GENERAL.—Pursuant to section 1173,

2 the Secretary shall adopt standards for information

3 transactions and data elements of health information

4 and modifications to the standards under this part

5 that are—

6 ‘‘(A) consistent with the objective of reduc7 ing the administrative costs of providing and

8 paying for health care; and

9 ‘‘(B) developed or modified by a standards

10 setting organization.

11 ‘‘(2) ADDITIONAL STANDARDS UNDER CERTAIN

12 CONDITIONS.—If the Secretary determines that a

13 standard developed or modified by a standard set14 ting organization is impractical and more costly to

15 implement than a standard that is in use and gen16 erally accepted, the Secretary may adopt the stand17 ard that is in use and generally accepted in addition

18 to the standard developed or modified by the stand19 ard setting organization. The Secretary shall publish

20 in the Federal Register the analysis upon which the

21 Secretary based the determination to adopt such ad22 ditional standard.

23 ‘‘(3) SPECIAL RULE RELATING TO DATA ELE24 MENTS.—The Secretary may adopt or modify a

25 standard relating to data elements that is different
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1 from the standard developed by a standard setting

2 organization, if—

3 ‘‘(A) the different standard or modification

4 will substantially reduce administrative costs to

5 health care providers and health plans com6 pared to the alternative; and

7 ‘‘(B) the standard or modification is pro8 mulgated in accordance with the rulemaking

9 procedures of subchapter III of chapter 5 of

10 title 5, United States Code.

11 ‘‘(b) SECURITY STANDARDS FOR HEALTH INFORMA12 TION NETWORK.—

13 ‘‘(1) IN GENERAL.—Each person, who main14 tains or transmits health information or data ele15 ments of health information and is subject to this

16 part, shall maintain reasonable and appropriate ad17 ministrative, technical, and physical safeguards—

18 ‘‘(A) to ensure the integrity and confiden19 tiality of the information;

20 ‘‘(B) to protect against any reasonably an21 ticipated—

22 ‘‘(i) threats or hazards to the security

23 or integrity of the information; and

24 ‘‘(ii) unauthorized uses or disclosures

25 of the information; and
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1 ‘‘(C) to otherwise ensure compliance with

2 this part by the officers and employees of such

3 person.

4 ‘‘(2) SECURITY STANDARDS.—The Secretary

5 shall establish security standards and modifications

6 to such standards with respect to health information

7 network services, health plans, and health care pro8 viders that—

9 ‘‘(A) take into account—

10 ‘‘(i) the technical capabilities of record

11 systems used to maintain health informa12 tion;

13 ‘‘(ii) the costs of security measures;

14 ‘‘(iii) the need for training persons

15 who have access to health information;

16 ‘‘(iv) the value of audit trails in com17 puterized record systems; and

18 ‘‘(v) the needs and capabilities of

19 small health care providers and rural

20 health care providers (as such providers

21 are defined by the Secretary); and

22 ‘‘(B) ensure that a health information net23 work service, if it is part of a larger organiza24 tion, has policies and security procedures which

25 isolate the activities of such service with respect
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1 to processing information in a manner that pre2 vents unauthorized access to such information

3 by such larger organization.

4 The security standards established by the Secretary

5 shall be based on the standards developed or modi6 fied by standard setting organizations. If such

7 standards do not exist, the Secretary shall rely on

8 the recommendations of the Health Information Ad9 visory Committee and shall consult with appropriate

10 government agencies and private organizations in ac11 cordance with subsection (e).

12 ‘‘(c) PRIVACY STANDARDS FOR HEALTH INFORMA13 TION NETWORK.—The Secretary shall establish standards

14 and modifications to such standards with respect to the

15 privacy of individually identifiable health information that

16 is in the health information network. Such standards shall

17 include standards concerning at least the following:

18 ‘‘(1) The rights of an individual who is the sub19 ject of such information.

20 ‘‘(2) The procedures to be established for the

21 exercise of such rights.

22 ‘‘(3) The uses and disclosures of such informa23 tion that are authorized or required.

24 ‘‘(4) Safeguards for the security of such infor25 mation and adequate security practices.
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1 ‘‘(d) IMPLEMENTATION SPECIFICATIONS.—The Sec2 retary shall establish specifications for implementing each

3 of the standards and the modifications to the standards

4 adopted pursuant to subsection (a).

5 ‘‘(e) ASSISTANCE TO THE SECRETARY.—In comply6 ing with the requirements of this part, the Secretary shall

7 rely on recommendations of the Health Information Advi8 sory Committee established under section 1179 and shall

9 consult with appropriate Federal and State agencies and

10 private organizations. The Secretary shall publish in the

11 Federal Register the recommendations of the Health In12 formation Advisory Committee regarding the adoption of

13 a standard under this part.

14 ‘‘SEC. 1173. STANDARDS FOR INFORMATION TRANSACTIONS

15 AND DATA ELEMENTS.

16 ‘‘(a) IN GENERAL.—

17 ‘‘(1) GENERAL REQUIREMENTS.—The Secretary

18 shall adopt standards for transactions and data ele19 ments to make health information uniformly avail20 able to be exchanged electronically, that is—

21 ‘‘(A) appropriate for the following financial

22 and administrative transactions: claims (includ23 ing coordination of benefits) or equivalent en24 counter information, claims attachments, enroll25 ment and disenrollment, eligibility, health care
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1 payment and remittance advice, premium pay2 ments, first report of injury, claims status, and

3 referral certification and authorization; and

4 ‘‘(B) related to other financial and admin5 istrative transactions determined appropriate by

6 the Secretary consistent with the goals of im7 proving the operation of the health care system

8 and reducing administrative costs.

9 ‘‘(2) ACCOMMODATION OF SPECIFIC PROVID10 ERS.—Nothing in this part shall prevent the Sec11 retary from adopting standards that accommodate

12 the specific needs of different types of health care

13 providers.

14 ‘‘(b) UNIQUE HEALTH IDENTIFIERS.—

15 ‘‘(1) ADOPTION OF STANDARDS.—The Sec16 retary shall adopt standards providing for a stand17 ard unique health identifier for each individual, em18 ployer, health plan, and health care provider for use

19 in the health care system. In developing unique

20 health identifiers for each health plan and health

21 care provider, the Secretary shall take into account

22 multiple uses for identifiers and multiple locations

23 and specialty classifications for health care provid24 ers.
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1 ‘‘(2) PENALTIES.—For provision regarding

2 criminal penalties, see section 1177.

3 ‘‘(c) CODE SETS.—

4 ‘‘(1) IN GENERAL.—The Secretary, in consulta5 tion with the Health Information Advisory Commit6 tee, experts from the private sector, and Federal and

7 State agencies, shall—

8 ‘‘(A) select code sets for appropriate data

9 elements from among the code sets that have

10 been developed by private and public entities; or

11 ‘‘(B) establish code sets for such data ele12 ments if no code sets for the data elements

13 have been developed.

14 ‘‘(2) DISTRIBUTION.—The Secretary shall es15 tablish efficient and low-cost procedures for distribu16 tion (including electronic distribution) of code sets

17 and modifications made to such code sets under sec18 tion 1174(b).

19 ‘‘(d) ELECTRONIC SIGNATURE.—

20 ‘‘(1) IN GENERAL.—The Secretary, in coordina21 tion with the Secretary of Commerce and after con22 sultation with the Health Information Advisory

23 Committee, shall promulgate regulations specifying

24 procedures for the electronic transmission and au25 thentication of signatures, compliance with which
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1 will be deemed to satisfy Federal and State statu2 tory requirements for written signatures with respect

3 to information transactions required by this part

4 and written signatures on medical records and pre5 scriptions.

6 ‘‘(2) PAYMENTS FOR SERVICES AND PRE7 MIUMS.—Nothing in this part shall be construed to

8 prohibit the payment of health care services or

9 health plan premiums by debit, credit, payment card

10 or numbers, or other electronic means.

11 ‘‘(e) TRANSFER OF INFORMATION BETWEEN

12 HEALTH PLANS.—The Secretary shall develop rules and

13 procedures—

14 ‘‘(1) for determining the financial liability of

15 health plans when health care benefits are payable

16 under two or more health plans; and

17 ‘‘(2) for transferring among health plans appro18 priate standard data elements needed for the coordi19 nation of benefits, the sequential processing of

20 claims, and other data elements for individuals who

21 have more than one health plan.

22 ‘‘(f) COORDINATION OF BENEFITS.—If, at the end of

23 the 5-year period beginning on the date of the enactment

24 of this part, the Secretary determines that additional

25 transaction standards for coordinating benefits are nec-
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1 essary to reduce administrative costs or duplicative (or in2 appropriate) payment of claims, the Secretary shall estab3 lish further transaction standards for the coordination of

4 benefits between health plans.

5 ‘‘(g) PROTECTION OF TRADE SECRETS.—Except as

6 otherwise required by law, the standards adopted under

7 this part, shall not require disclosure of trade secrets or

8 confidential commercial information by an entity operat9 ing a health information network.

10 ‘‘SEC. 1174. TIMETABLES FOR ADOPTION OF STANDARDS.

11 ‘‘(a) INITIAL STANDARDS.—Not later than 18

12 months after the date of the enactment of this part, the

13 Secretary shall adopt standards relating to the informa14 tion transactions, data elements of health information, se15 curity, and privacy described in sections 1172 and 1173.

16 Standards relating to claims attachments shall be adopted

17 not later than 30 months after such date.

18 ‘‘(b) ADDITIONS AND MODIFICATIONS TO STAND19 ARDS.—

20 ‘‘(1) IN GENERAL.—Except as provided in para21 graph (2), the Secretary shall review the standards

22 adopted under this part and shall adopt additional

23 or modified standards, that have been developed or

24 modified by a standard setting organization, as de25 termined appropriate, but not more frequently than
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1 once every 6 months. Any addition or modification

2 to such standards shall be completed in a manner

3 which minimizes the disruption and cost of compli4 ance.

5 ‘‘(2) SPECIAL RULES.—

6 ‘‘(A) FIRST 12-MONTH PERIOD.—Except

7 with respect to additions and modifications to

8 code sets under subparagraph (B), the Sec9 retary shall not adopt any modifications to the

10 standards adopted under this part during the

11 12-month period beginning on the date such

12 standards are initially adopted under paragraph

13 (1) unless the Secretary determines that a

14 modification is necessary in order to permit

15 compliance with requirements relating to the

16 standards.

17 ‘‘(B) ADDITIONS AND MODIFICATIONS TO

18 CODE SETS.—

19 ‘‘(i) IN GENERAL.—The Secretary

20 shall ensure that procedures exist for the

21 routine maintenance, testing, enhancement,

22 and expansion of code sets.

23 ‘‘(ii) ADDITIONAL RULES.—If a code

24 set is modified under this subsection, the

25 modified code set shall include instructions
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1 on how data elements of health informa2 tion that were encoded prior to the modi3 fication may be converted or translated so

4 as to preserve the informational value of

5 the data elements that existed before the

6 modification. Any modification to a code

7 set under this subsection shall be imple8 mented in a manner that minimizes the

9 disruption and cost of complying with such

10 modification.

11 ‘‘SEC. 1175. REQUIREMENTS FOR HEALTH PLANS.

12 ‘‘(a) IN GENERAL.—If a person desires to conduct

13 any of the information transactions described in section

14 1173(a) with a health plan as a standard transaction, the

15 health plan shall conduct such standard transaction in a

16 timely manner and the information transmitted or re17 ceived in connection with such transaction shall be in the

18 form of standard data elements of health information.

19 ‘‘(b) SATISFACTION OF REQUIREMENTS.—A health

20 plan may satisfy the requirement imposed on such plan

21 under subsection (a) by directly transmitting standard

22 data elements of health information or submitting non23 standard data elements to a health information network

24 service for processing into standard data elements and

25 transmission.
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1 ‘‘(c) HEALTH PLANS DEALING WITH PERSONS.—A

2 health plan conducting an information transaction with a

3 person may not—

4 ‘‘(1) adversely affect the time, manner, or

5 amount of payment of a claim because an informa6 tion transaction is conducted as a standard trans7 action pursuant to this part; or

8 ‘‘(2) in any other manner discourage the use of

9 a standard adopted under this part.

10 ‘‘(d) TIMETABLES FOR COMPLIANCE WITH RE11 QUIREMENTS.—

12 ‘‘(1) INITIAL COMPLIANCE.—

13 ‘‘(A) IN GENERAL.—Not later than 24

14 months after the date on which standards are

15 adopted under sections 1172 and 1173 with re16 spect to any type of information transaction or

17 data element of health information or with re18 spect to security or privacy, a health plan shall

19 comply with the requirements of this part with

20 respect to such transaction or data element.

21 ‘‘(B) SPECIAL RULE FOR SMALL HEALTH

22 PLANS.—In the case of a small health plan,

23 paragraph (1) shall be applied by substituting

24 ‘‘36 months’’ for ‘‘24 months’’. For purposes of
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1 this subsection, the Secretary shall determine

2 the plans that qualify as small health plans.

3 ‘‘(e) COMPLIANCE WITH MODIFIED STANDARDS.—If

4 the Secretary adopts a modified standard under section

5 1172 or 1173, a health plan shall be required to comply

6 with the modified standard at such time as the Secretary

7 determines appropriate taking into account the time need8 ed to comply due to the nature and extent of the modifica9 tion. However, the time determined appropriate under the

10 preceding sentence shall be not earlier than the last day

11 of the 180-day period beginning on the date such modified

12 standard is adopted. The Secretary may extend the time

13 for compliance for small health plans, if the Secretary de14 termines such extension is appropriate.

15 ‘‘SEC. 1176. GENERAL PENALTY FOR FAILURE TO COMPLY

16 WITH REQUIREMENTS AND STANDARDS.

17 ‘‘(a) GENERAL PENALTY.—

18 ‘‘(1) IN GENERAL.—Except as provided in sub19 section (b), the Secretary shall impose on any person

20 that violates a requirement or standard—

21 ‘‘(A) with respect to information trans22 actions, data elements of health information, or

23 security imposed under section 1172 or 1173;

24 or
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1 ‘‘(B) with respect to health plans imposed

2 under section 1175;

3 a penalty of not more than $100 for each such viola4 tion of a specific standard or requirement, but the

5 total amount imposed for all such violations of a

6 specific standard or requirement during the calendar

7 year shall not exceed $25,000.

8 ‘‘(2) PROCEDURES.—The provisions of section

9 1128A (other than subsections (a) and (b) and the

10 second sentence of subsection (f)) shall apply to the

11 imposition of a civil money penalty under this sub12 section in the same manner as such provisions apply

13 to the imposition of a penalty under such section

14 1128A.

15 ‘‘(b) LIMITATIONS.—

16 ‘‘(1) NONCOMPLIANCE NOT DISCOVERED.—A

17 penalty may not be imposed under subsection (a) if

18 it is established to the satisfaction of the Secretary

19 that the person liable for the penalty did not know,

20 and by exercising reasonable diligence would not

21 have known, that such person failed to comply with

22 the requirement or standard described in subsection

23 (a).

24 ‘‘(2) FAILURES DUE TO REASONABLE CAUSE.—
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1 ‘‘(A) IN GENERAL.—Except as provided in

2 subparagraph (B), a penalty may not be im3 posed under subsection (a) if—

4 ‘‘(i) the failure to comply was due to

5 reasonable cause and not to willful neglect;

6 and

7 ‘‘(ii) the failure to comply is corrected

8 during the 30-day period beginning on the

9 1st date the person liable for the penalty

10 knew, or by exercising reasonable diligence

11 would have known, that the failure to com12 ply occurred.

13 ‘‘(B) EXTENSION OF PERIOD.—

14 ‘‘(i) NO PENALTY.—The period re15 ferred to in subparagraph (A)(ii) may be

16 extended as determined appropriate by the

17 Secretary based on the nature and extent

18 of the failure to comply.

19 ‘‘(ii) ASSISTANCE.—If the Secretary

20 determines that a health plan failed to

21 comply because such plan was unable to

22 comply, the Secretary may provide tech23 nical assistance to such plan during the pe24 riod described in clause (i). Such assist-
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1 ance shall be provided in any manner de2 termined appropriate by the Secretary.

3 ‘‘(3) REDUCTION.—In the case of a failure to

4 comply which is due to reasonable cause and not to

5 willful neglect, any penalty under subsection (a) that

6 is not entirely waived under paragraph (2) may be

7 waived to the extent that the payment of such pen8 alty would be excessive relative to the compliance

9 failure involved.

10 ‘‘SEC. 1177. WRONGFUL DISCLOSURE OF INDIVIDUALLY

11 IDENTIFIABLE HEALTH INFORMATION.

12 ‘‘(a) OFFENSE.—A person who knowingly—

13 ‘‘(1) uses or causes to be used a unique health

14 identifier for a purpose that is not authorized by the

15 Secretary;

16 ‘‘(2) obtains individually identifiable health in17 formation relating to an individual in violation of the

18 privacy standards established pursuant to this part;

19 or

20 ‘‘(3) discloses individually identifiable health in21 formation to another person in violation of the pri22 vacy standards established pursuant to this part,

23 shall be punished as provided in subsection (b).

24 ‘‘(b) PENALTIES.—A person described in subsection

25 (a) shall—
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1 ‘‘(1) be fined not more than $50,000, impris2 oned not more than 1 year, or both;

3 ‘‘(2) if the offense is committed under false pre4 tenses, be fined not more than $100,000, imprisoned

5 not more than 5 years, or both; and

6 ‘‘(3) if the offense is committed with intent to

7 sell, transfer, or use individually identifiable health

8 information for commercial advantage, personal

9 gain, or malicious harm, fined not more than

10 $250,000, imprisoned not more than 10 years, or

11 both.

12 ‘‘SEC. 1178. EFFECT ON STATE LAW.

13 ‘‘(a) GENERAL EFFECT.—

14 ‘‘(1) GENERAL RULE.—Except as provided in

15 paragraph (2), a provision, requirement, or standard

16 under this part shall supersede any contrary provi17 sion of State law, including a provision of State law

18 that requires medical or health plan records (includ19 ing billing information) to be maintained or trans20 mitted in written rather than electronic form.

21 ‘‘(2) EXCEPTIONS.—A provision, requirement,

22 or standard under this part shall not supersede a

23 contrary provision of State law, if the provision of

24 State law—
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1 ‘‘(A) provides requirements or standards

2 that are more stringent than the requirements

3 or standards under this part with respect to the

4 privacy of individually identifiable health infor5 mation; or

6 ‘‘(B) is a provision the Secretary deter7 mines is necessary to prevent fraud and abuse

8 with respect to controlled substances, or for

9 other purposes.

10 ‘‘(b) PUBLIC HEALTH REPORTING.—Nothing in this

11 part shall be construed to invalidate or limit the authority,

12 power, or procedures established under any law providing

13 for the reporting of disease or injury, child abuse, birth,

14 or death, public health surveillance, or public health inves15 tigation or intervention.

16 ‘‘SEC. 1179. HEALTH INFORMATION ADVISORY COMMITTEE.

17 ‘‘(a) ESTABLISHMENT.—There is established a com18 mittee to be known as the Health Information Advisory

19 Committee (hereafter in this section referred to as the

20 ‘committee’).

21 ‘‘(b) DUTIES.—The committee shall—

22 ‘‘(1) provide assistance to the Secretary in com23 plying with the requirements imposed on the Sec24 retary under this part;
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1 ‘‘(2) study the issues related to the adoption of

2 uniform data standards for patient medical record

3 information and the electronic exchange of such in4 formation;

5 ‘‘(3) report to the Secretary not later than 4

6 years after the date of the enactment of this part

7 recommendations and legislative proposals for such

8 standards and electronic exchange; and

9 ‘‘(4) be generally responsible for advising the

10 Secretary and the Congress on the status and the

11 future of the health information network.

12 ‘‘(c) MEMBERSHIP.—

13 ‘‘(1) IN GENERAL.—The committee shall con14 sist of 15 members of whom—

15 ‘‘(A) 3 shall be appointed by the President;

16 ‘‘(B) 6 shall be appointed by the Speaker

17 of the House of Representatives after consulta18 tion with the minority leader of the House of

19 Representatives; and

20 ‘‘(C) 6 shall be appointed by the President

21 pro tempore of the Senate after consultation

22 with the minority leader of the Senate.

23 The appointments of the members shall be made not

24 later than 60 days after the date of the enactment
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1 of this part. The President shall designate 1 member

2 as the Chair.

3 ‘‘(2) EXPERTISE.—The membership of the com4 mittee shall consist of individuals who are of recog5 nized standing and distinction in the areas of infor6 mation systems, information networking and inte7 gration, consumer health, health care financial man8 agement, or privacy, and who possess the dem9 onstrated capacity to discharge the duties imposed

10 on the committee.

11 ‘‘(3) TERMS.—Each member of the committee

12 shall be appointed for a term of 5 years, except that

13 the members first appointed shall serve staggered

14 terms such that the terms of not more than 3 mem15 bers expire at one time.

16 ‘‘(4) INITIAL MEETING.—Not later than 30

17 days after the date on which a majority of the mem18 bers have been appointed, the committee shall hold

19 its first meeting.

20 ‘‘(d) REPORTS.—Not later than 1 year after the date

21 of the enactment of this part, and annually thereafter, the

22 committee shall submit a report to Congress, health care

23 providers, health plans, and other entities that use the

24 health information network to exchange health informa25 tion regarding—
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1 ‘‘(1) the extent to which entities using the

2 health information network are meeting the stand3 ards adopted under this part and working together

4 to form an integrated network that meets the needs

5 of its users;

6 ‘‘(2) the extent to which such entities are meet7 ing the privacy and security standards established

8 pursuant to this part and the types of penalties as9 sessed for noncompliance with such standards;

10 ‘‘(3) whether the Federal and State Govern11 ments are receiving information of sufficient quality

12 to meet their responsibilities under this part;

13 ‘‘(4) any problems that exist with respect to im14 plementation of the health information network; and

15 ‘‘(5) the extent to which timetables under this

16 part are being met.

17 ‘‘SEC. 1180. STANDARDS FOR PATIENT MEDICAL RECORD

18 INFORMATION.

19 ‘‘The Secretary shall, not earlier than 4 years and

20 not later than 6 years after the date of the enactment of

21 this part recommend to Congress a plan for developing

22 and implementing uniform data standards for patient

23 medical record information and the electronic exchange of

24 such information.
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1 ‘‘SEC. 1181. GRANTS FOR DEMONSTRATION PROJECTS.

2 ‘‘(a) IN GENERAL.—The Secretary may make grants

3 for demonstration projects to promote the development

4 and use of electronically integrated clinical information

5 systems and computerized patient medical records.

6 ‘‘(b) APPLICATIONS.—

7 ‘‘(1) SUBMISSION.—To apply for a grant under

8 this section for any fiscal year, an applicant shall

9 submit an application to the Secretary in accordance

10 with the procedures established by the Secretary.

11 ‘‘(2) CRITERIA FOR APPROVAL.—The Secretary

12 may not approve an application submitted under

13 paragraph (1) unless the application includes assur14 ances satisfactory to the Secretary regarding the fol15 lowing:

16 ‘‘(A) USE OF EXISTING TECHNOLOGY.—

17 Funds received under this section will be used

18 to apply telecommunications and information

19 systems technology that is in existence on the

20 date the application is submitted in a manner

21 that improves the quality of health care, re22 duces the costs of such care, and protects the

23 privacy and confidentiality of information relat24 ing to the physical or mental condition of an in25 dividual.
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1 ‘‘(B) USE OF EXISTING INFORMATION SYS2 TEMS.—Funds received under this section will

3 be used—

4 ‘‘(i) to enhance telecommunications or

5 information systems that are operating on

6 the date the application is submitted;

7 ‘‘(ii) to integrate telecommunications

8 or information systems that are operating

9 on such date; or

10 ‘‘(iii) to connect additional users to

11 telecommunications or information net12 works or systems that are operating on

13 such date.

14 ‘‘(C) MATCHING FUNDS.—The applicant

15 shall make available funds for the demonstra16 tion project in an amount that equals at least

17 50 percent of the cost of the project.

18 ‘‘(c) GEOGRAPHIC DIVERSITY.—In making grants

19 under this section, the Secretary shall, to the extent prac20 ticable, make grants to persons representing different geo21 graphic areas of the United States, including urban and

22 rural areas.

23 ‘‘(d) REVIEW AND SANCTIONS.—The Secretary shall

24 review at least annually the compliance of a person receiv25 ing a grant under this section with the provisions of this
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1 part. The Secretary shall establish a procedure for deter2 mining whether such a person has failed to comply sub3 stantially with the provisions of this part and the sanctions

4 to be imposed for any such noncompliance.

5 ‘‘(e) ANNUAL REPORT.—The Secretary shall submit

6 an annual report to the President for transmittal to Con7 gress containing a description of the activities carried out

8 under this section.

9 ‘‘SEC. 1182. AUTHORIZATION OF APPROPRIATIONS.

10 ‘‘There are authorized to be appropriated such sums

11 as may be necessary to carry out the purposes of this

12 part.’’.

13 (b) CONFORMING AMENDMENTS.—

14 (1) REQUIREMENT FOR MEDICARE PROVID15 ERS.—Section 1866(a)(1) of the Social Security Act

16 (42 U.S.C. 1395cc(a)(1)) is amended—

17 (A) by striking ‘‘and’’ at the end of sub18 paragraph (P);

19 (B) by striking the period at the end of

20 subparagraph (Q) and inserting ‘‘; and’’; and

21 (C) by inserting immediately after sub22 paragraph (Q) the following new subparagraph:

23 ‘‘(R) to contract only with a health infor24 mation network service (as defined in section
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1 1171(7)) that meets the standards established

2 under sections 1172 and 1173.’’.

3 (2) CLERICAL AMENDMENTS.—

4 (A) Title XI of the Social Security Act (42

5 U.S.C. 1301 et seq.) is amended by striking the

6 title and inserting the following:

7 ‘‘TITLE XI—GENERAL PROVI8 SIONS, PEER REVIEW, AND

9 ADMINISTRATIVE SIM10 PLIFICATION

11 (B) Parts A and B of title XI of the Social

12 Security Act (42 U.S.C. 1301 et seq.) are

13 amended by striking ‘‘this title’’ each place it

14 appears and inserting ‘‘parts A and B of this

15 title’’.

16 TITLE III—EFFECTIVE DATES

17 SEC. 301. EFFECTIVE DATES.

18 (a) IN GENERAL.—Except as provided in subsection

19 (b), the provisions of this Act shall take effect on the date

20 of the enactment of this Act.

21 (b) REPEAL OF DATA BANK.—The provisions of sec22 tion 102 shall take effect on the date the Secretary of

23 Health and Human Services provides written notice to the

24 Congress that the Medicare and Medicaid Coverage Data

25 Bank is no longer necessary because of the operation of
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1 the health information network established pursuant to

2 this Act.

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