II

104TH CONGRESS

1ST SESSION S. 872

To provide for the establishment of a modernized and simplified health

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

IN THE SENATE OF THE UNITED STATES

MAY 26 (legislative day, MAY 15), 1995

Mr. BOND (for himself and Mr. LIEBERMAN) introduced the following bill;

which was read twice and referred to the Committee on Finance

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.

TITLE I—PURPOSE AND REPEAL OF DATA BANK

Sec. 101. Purpose.

Sec. 102. Repeal of data bank.
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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16 U.S.C. 1021(f)) are repealed.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).

20 (c) IDENTIFICATION OF MEDICARE SECONDARY

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

2 paragraph (5).

3 (d) CONFORMING AMENDMENTS.—

4 (1) Section 1902(a)(25)(A)(i) of the Social Se5 curity Act (42 U.S.C. 1396a(a)(25)(A)(i)) is amend6 ed by striking ‘‘including the use of information col7 lected by the Medicare and Medicaid Coverage Data

8 Bank under section 1144 and any additional meas9 ures’’.

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

11 5, United States Code, is amended—

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

13 end;

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

15 end; and

16 (C) by striking clause (vii).

17 TITLE II—ADMINISTRATIVE

18 SIMPLIFICATION

19 SEC. 201. ADMINISTRATIVE SIMPLIFICATION.

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

21 (42 U.S.C. 1301 et seq.) is amended by adding at the end

22 the following new part:

23 ‘‘PART C—ADMINISTRATIVE SIMPLIFICATION

24 ‘‘SEC. 1171. DEFINITIONS.

25 ‘‘For purposes of this part:
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1 ‘‘(1) CODE SET.—The term ‘code set’ means

2 any set of codes used for encoding data elements,

3 such as tables of terms, medical concepts, medical

4 diagnostic codes, or medical procedure codes.

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

6 ‘coordination of benefits’ means determining and co7 ordinating the financial obligations of health plans

8 when health care benefits are payable under 2 or

9 more health plans.

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

11 The term ‘equivalent health care program’ means—

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

13 military personnel under title 10, United States

14 Code;

15 ‘‘(B) the veterans health care program

16 under chapter 17 of title 38, United States

17 Code;

18 ‘‘(C) the Civilian Health and Medical Pro19 gram of the Uniformed Services (CHAMPUS),

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

21 States Code;

22 ‘‘(D) the Indian health service program

23 under the Indian Health Care Improvement Act

24 (25 U.S.C. 1601 et seq.); and
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1 ‘‘(E) the Federal Employees Health Bene2 fit Plan under chapter 89 of title 5, United

3 States Code.

4 ‘‘(4) HEALTH CARE PROVIDER.—The term

5 ‘health care provider’ includes a provider of services

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

7 or other health services (as defined in section

8 1861(s))), and any other person furnishing health

9 care services or supplies.

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

11 information’ means any information, whether oral or

12 recorded in any form or medium that—

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

14 provider, health plan, public health authority,

15 employer, life insurer, school or university, or

16 health information network service; and

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

18 physical or mental health or condition of an in19 dividual, the provision of health care to an indi20 vidual, or the past, present, or future payment

21 for the provision of health care to an individual.

22 ‘‘(6) HEALTH INFORMATION NETWORK.—The

23 term ‘health information network’ means the health

24 information system that is formed through the appli-
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1 cation of the requirements and standards established

2 under this part.

3 ‘‘(7) HEALTH INFORMATION NETWORK SERV4 ICE.—The term ‘health information network service’

5 means a public or private entity that—

6 ‘‘(A) processes or facilitates the processing

7 of nonstandard data elements of health infor8 mation into standard data elements;

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

10 may meet the requirements of this part; or

11 ‘‘(C) provides specific information process12 ing services.

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

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

15 health benefits. Such term includes the following, or

16 any combination thereof:

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

18 program under title XVIII.

19 ‘‘(B) The medicaid program under title

20 XIX.

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

22 defined in section 1882(g)(1)).

23 ‘‘(D) Coverage issued as a supplement to

24 liability insurance.

25 ‘‘(E) General liability insurance.
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1 ‘‘(F) Worker’s compensation or similar in2 surance.

3 ‘‘(G) Automobile or automobile medical4 payment insurance.

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

6 nursing home fixed indemnity policy (unless the

7 Secretary determines that such a policy does

8 not provide sufficiently comprehensive coverage

9 of a benefit so that the policy should be treated

10 as a health plan).

11 ‘‘(I) A hospital or fixed indemnity income12 protection policy.

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

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

15 defined in section 3(1) of the Employee Retire16 ment Income Security Act of 1974 (29 U.S.C.

17 1002(1)), but only to the extent the plan is es18 tablished or maintained for the purpose of pro19 viding health benefits and has 50 or more par20 ticipating employees.

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

22 any other arrangement which is established or

23 maintained for the purpose of offering or pro24 viding health benefits to the employees of 2 or

25 more employers.
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1 ‘‘(M) Such other plan or arrangement as

2 the Secretary determines is a health plan.

3 ‘‘(9) INDIVIDUALLY IDENTIFIABLE HEALTH IN4 FORMATION.—The term ‘individually identifiable

5 health information’ means any information, includ6 ing demographic information collected from an indi7 vidual, that—

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

9 provider, health plan, employer, or health infor10 mation network service; and

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

12 physical or mental health or condition of an in13 dividual, the provision of health care to an indi14 vidual, or the past, present, or future payment

15 for the provision of health care to an individual,

16 and—

17 ‘‘(i) identifies an individual; or

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

19 reasonable basis to believe that the infor20 mation can be used to identify an individ21 ual.

22 ‘‘(10) SECRETARY.—The term ‘Secretary’

23 means the Secretary of Health and Human Services.

24 ‘‘(11) STANDARD SETTING ORGANIZATION.—

25 The term ‘standard setting organization’ means a
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1 standard setting organization accredited by the

2 American National Standards Institute or any other

3 private organization (including the National Council

4 for Prescription Drug Programs and the Health In5 formation Standards Planning Panel) that develops

6 standards for information transactions, data ele7 ments, or any other standard that is necessary to or

8 will facilitate the implementation of this part, if the

9 standard development procedures of the organization

10 are open to the public and are based on a broad con11 sensus of opinion.

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

13 ‘standard transaction’ means, when referring to an

14 information transaction or to data elements of

15 health information, any transaction that meets the

16 requirements and implementation specifications

17 adopted by the Secretary under sections 1172 and

18 1173.

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

20 ‘‘(a) ADOPTION OF STANDARDS.—

21 ‘‘(1) IN GENERAL.—Pursuant to section 1173,

22 the Secretary shall adopt standards for information

23 transactions and data elements of health information

24 and modifications to the standards under this part

25 that are—
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1 ‘‘(A) consistent with the objective of reduc2 ing the administrative costs of providing and

3 paying for health care; and

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

5 setting organization.

6 ‘‘(2) ADDITIONAL STANDARDS UNDER CERTAIN

7 CONDITIONS.—If the Secretary determines that a

8 standard developed or modified by a standard set9 ting organization is impractical and more costly to

10 implement than a standard that is in use and gen11 erally accepted, the Secretary may adopt the stand12 ard that is in use and generally accepted in addition

13 to the standard developed or modified by the stand14 ard setting organization. The Secretary shall publish

15 in the Federal Register the analysis upon which the

16 Secretary based the determination to adopt such ad17 ditional standard.

18 ‘‘(3) SPECIAL RULE RELATING TO DATA ELE19 MENTS.—The Secretary may adopt or modify a

20 standard relating to data elements that is different

21 from the standard developed by a standard setting

22 organization, if—

23 ‘‘(A) the different standard or modification

24 will substantially reduce administrative costs to
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1 health care providers and health plans com2 pared to the alternative; and

3 ‘‘(B) the standard or modification is pro4 mulgated in accordance with the rulemaking

5 procedures of subchapter III of chapter 5 of

6 title 5, United States Code.

7 ‘‘(b) SECURITY STANDARDS FOR HEALTH INFORMA8 TION NETWORK.—

9 ‘‘(1) IN GENERAL.—Each person, who main10 tains or transmits health information or data ele11 ments of health information and is subject to this

12 part, shall maintain reasonable and appropriate ad13 ministrative, technical, and physical safeguards—

14 ‘‘(A) to ensure the integrity and confiden15 tiality of the information;

16 ‘‘(B) to protect against any reasonably an17 ticipated—

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

19 or integrity of the information; and

20 ‘‘(ii) unauthorized uses or disclosures

21 of the information; and

22 ‘‘(C) to otherwise ensure compliance with

23 this part by the officers and employees of such

24 person.
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1 ‘‘(2) SECURITY STANDARDS.—The Secretary

2 shall establish security standards and modifications

3 to such standards with respect to health information

4 network services, health plans, and health care pro5 viders that—

6 ‘‘(A) take into account—

7 ‘‘(i) the technical capabilities of record

8 systems used to maintain health informa9 tion;

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

11 ‘‘(iii) the need for training persons

12 who have access to health information;

13 ‘‘(iv) the value of audit trails in com14 puterized record systems; and

15 ‘‘(v) the needs and capabilities of

16 small health care providers and rural

17 health care providers (as such providers

18 are defined by the Secretary); and

19 ‘‘(B) ensure that a health information net20 work service, if it is part of a larger organiza21 tion, has policies and security procedures which

22 isolate the activities of such service with respect

23 to processing information in a manner that pre24 vents unauthorized access to such information

25 by such larger organization.
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1 The security standards established by the Secretary

2 shall be based on the standards developed or modi3 fied by standard setting organizations. If such

4 standards do not exist, the Secretary shall rely on

5 the recommendations of the Health Information Ad6 visory Committee and shall consult with appropriate

7 government agencies and private organizations in ac8 cordance with subsection (e).

9 ‘‘(c) PRIVACY STANDARDS FOR HEALTH INFORMA10 TION NETWORK.—The Secretary shall establish standards

11 and modifications to such standards with respect to the

12 privacy of individually identifiable health information that

13 is in the health information network. Such standards shall

14 include standards concerning at least the following:

15 ‘‘(1) The rights of an individual who is the sub16 ject of such information.

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

18 exercise of such rights.

19 ‘‘(3) The uses and disclosures of such informa20 tion that are authorized or required.

21 ‘‘(4) Safeguards for the security of such infor22 mation and adequate security practices.

23 ‘‘(d) IMPLEMENTATION SPECIFICATIONS.—The Sec24 retary shall establish specifications for implementing each
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1 of the standards and the modifications to the standards

2 adopted pursuant to subsection (a).

3 ‘‘(e) ASSISTANCE TO THE SECRETARY.—In comply4 ing with the requirements of this part, the Secretary shall

5 rely on recommendations of the Health Information Advi6 sory Committee established under section 1179 and shall

7 consult with appropriate Federal and State agencies and

8 private organizations. The Secretary shall publish in the

9 Federal Register the recommendations of the Health In10 formation Advisory Committee regarding the adoption of

11 a standard under this part.

12 ‘‘SEC. 1173. STANDARDS FOR INFORMATION TRANSACTIONS

13 AND DATA ELEMENTS.

14 ‘‘(a) IN GENERAL.—

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

16 shall adopt standards for transactions and data ele17 ments to make health information uniformly avail18 able to be exchanged electronically, that is—

19 ‘‘(A) appropriate for the following financial

20 and administrative transactions: claims (includ21 ing coordination of benefits) or equivalent en22 counter information, claims attachments, enroll23 ment and disenrollment, eligibility, health care

24 payment and remittance advice, premium pay-
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1 ments, first report of injury, claims status, and

2 referral certification and authorization; and

3 ‘‘(B) related to other financial and admin4 istrative transactions determined appropriate by

5 the Secretary consistent with the goals of im6 proving the operation of the health care system

7 and reducing administrative costs.

8 ‘‘(2) ACCOMMODATION OF SPECIFIC PROVID9 ERS.—Nothing in this part shall prevent the Sec10 retary from adopting standards that accommodate

11 the specific needs of different types of health care

12 providers.

13 ‘‘(b) UNIQUE HEALTH IDENTIFIERS.—

14 ‘‘(1) ADOPTION OF STANDARDS.—The Sec15 retary shall adopt standards providing for a stand16 ard unique health identifier for each individual, em17 ployer, health plan, and health care provider for use

18 in the health care system. In developing unique

19 health identifiers for each health plan and health

20 care provider, the Secretary shall take into account

21 multiple uses for identifiers and multiple locations

22 and specialty classifications for health care provid23 ers.

24 ‘‘(2) PENALTIES.—For provision regarding

25 criminal penalties, see section 1177.
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1 ‘‘(c) CODE SETS.—

2 ‘‘(1) IN GENERAL.—The Secretary, in consulta3 tion with the Health Information Advisory Commit4 tee, experts from the private sector, and Federal and

5 State agencies, shall—

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

7 elements from among the code sets that have

8 been developed by private and public entities; or

9 ‘‘(B) establish code sets for such data ele10 ments if no code sets for the data elements

11 have been developed.

12 ‘‘(2) DISTRIBUTION.—The Secretary shall es13 tablish efficient and low-cost procedures for distribu14 tion (including electronic distribution) of code sets

15 and modifications made to such code sets under sec16 tion 1174(b).

17 ‘‘(d) ELECTRONIC SIGNATURE.—

18 ‘‘(1) IN GENERAL.—The Secretary, in coordina19 tion with the Secretary of Commerce and after con20 sultation with the Health Information Advisory

21 Committee, shall promulgate regulations specifying

22 procedures for the electronic transmission and au23 thentication of signatures, compliance with which

24 will be deemed to satisfy Federal and State statu25 tory requirements for written signatures with respect
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1 to information transactions required by this part

2 and written signatures on medical records and pre3 scriptions.

4 ‘‘(2) PAYMENTS FOR SERVICES AND PRE5 MIUMS.—Nothing in this part shall be construed to

6 prohibit the payment of health care services or

7 health plan premiums by debit, credit, payment card

8 or numbers, or other electronic means.

9 ‘‘(e) TRANSFER OF INFORMATION BETWEEN

10 HEALTH PLANS.—The Secretary shall develop rules and

11 procedures—

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

13 health plans when health care benefits are payable

14 under two or more health plans; and

15 ‘‘(2) for transferring among health plans appro16 priate standard data elements needed for the coordi17 nation of benefits, the sequential processing of

18 claims, and other data elements for individuals who

19 have more than one health plan.

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

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

22 of this part, the Secretary determines that additional

23 transaction standards for coordinating benefits are nec24 essary to reduce administrative costs or duplicative (or in25 appropriate) payment of claims, the Secretary shall estab-
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1 lish further transaction standards for the coordination of

2 benefits between health plans.

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

4 otherwise required by law, the standards adopted under

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

6 confidential commercial information by an entity operat7 ing a health information network.

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

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

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

11 Secretary shall adopt standards relating to the informa12 tion transactions, data elements of health information, se13 curity, and privacy described in sections 1172 and 1173.

14 Standards relating to claims attachments shall be adopted

15 not later than 30 months after such date.

16 ‘‘(b) ADDITIONS AND MODIFICATIONS TO STAND17 ARDS.—

18 ‘‘(1) IN GENERAL.—Except as provided in para19 graph (2), the Secretary shall review the standards

20 adopted under this part and shall adopt additional

21 or modified standards, that have been developed or

22 modified by a standard setting organization, as de23 termined appropriate, but not more frequently than

24 once every 6 months. Any addition or modification

25 to such standards shall be completed in a manner
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1 which minimizes the disruption and cost of compli2 ance.

3 ‘‘(2) SPECIAL RULES.—

4 ‘‘(A) FIRST 12-MONTH PERIOD.—Except

5 with respect to additions and modifications to

6 code sets under subparagraph (B), the Sec7 retary shall not adopt any modifications to the

8 standards adopted under this part during the

9 12-month period beginning on the date such

10 standards are initially adopted under paragraph

11 (1) unless the Secretary determines that a

12 modification is necessary in order to permit

13 compliance with requirements relating to the

14 standards.

15 ‘‘(B) ADDITIONS AND MODIFICATIONS TO

16 CODE SETS.—

17 ‘‘(i) IN GENERAL.—The Secretary

18 shall ensure that procedures exist for the

19 routine maintenance, testing, enhancement,

20 and expansion of code sets.

21 ‘‘(ii) ADDITIONAL RULES.—If a code

22 set is modified under this subsection, the

23 modified code set shall include instructions

24 on how data elements of health informa25 tion that were encoded prior to the modi-
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1 fication may be converted or translated so

2 as to preserve the informational value of

3 the data elements that existed before the

4 modification. Any modification to a code

5 set under this subsection shall be imple6 mented in a manner that minimizes the

7 disruption and cost of complying with such

8 modification.

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

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

11 any of the information transactions described in section

12 1173(a) with a health plan as a standard transaction, the

13 health plan shall conduct such standard transaction in a

14 timely manner and the information transmitted or re15 ceived in connection with such transaction shall be in the

16 form of standard data elements of health information.

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

18 plan may satisfy the requirement imposed on such plan

19 under subsection (a) by directly transmitting standard

20 data elements of health information or submitting non21 standard data elements to a health information network

22 service for processing into standard data elements and

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

2 person conducting an information transaction with a

3 health plan 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—

4 ‘‘(i) the transmission by health care

5 providers of financial or administrative

6 transactions in electronic form to health

7 plans and requires the use of the standards

8 adopted under this part relating to infor9 mation transactions and data elements; or

10 ‘‘(ii) the privacy of individually identi11 fiable health information;

12 ‘‘(B) provides for the coordination of bene13 fits and such provision is in effect on the date

14 of the enactment of this part; or

15 ‘‘(C) is a provision the Secretary deter16 mines is necessary to prevent fraud and abuse

17 with respect to controlled substances, or for

18 other purposes.

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

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

21 power, or procedures established under any law providing

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

23 or death, public health surveillance, or public health inves24 tigation or intervention.
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1 ‘‘SEC. 1179. HEALTH INFORMATION ADVISORY COMMITTEE.

2 ‘‘(a) ESTABLISHMENT.—There is established a com3 mittee to be known as the Health Information Advisory

4 Committee (hereafter in this section referred to as the

5 ‘committee’).

6 ‘‘(b) DUTIES.—The committee shall—

7 ‘‘(1) provide assistance to the Secretary in com8 plying with the requirements imposed on the Sec9 retary under this part;

10 ‘‘(2) study the issues related to the adoption of

11 uniform data standards for patient medical record

12 information and the electronic exchange of such in13 formation;

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

15 years after the date of the enactment of this part

16 recommendations and legislative proposals for such

17 standards and electronic exchange; and

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

19 Secretary and the Congress on the status and the

20 future of the health information network.

21 ‘‘(c) MEMBERSHIP.—

22 ‘‘(1) IN GENERAL.—The committee shall con23 sist of 15 members of whom—

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

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

26 of the House of Representatives after consulta-
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1 tion with the minority leader of the House of

2 Representatives; and

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

4 pro tempore of the Senate after consultation

5 with the minority leader of the Senate.

6 The appointments of the members shall be made not

7 later than 60 days after the date of the enactment

8 of this part. The President shall designate 1 member

9 as the Chair.

10 ‘‘(2) EXPERTISE.—The membership of the com11 mittee shall consist of individuals who are of recog12 nized standing and distinction in the areas of infor13 mation systems, information networking and inte14 gration, consumer health, health care financial man15 agement, or privacy, and who possess the dem16 onstrated capacity to discharge the duties imposed

17 on the committee.

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

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

20 the members first appointed shall serve staggered

21 terms such that the terms of not more than 3 mem22 bers expire at one time.

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

24 days after the date on which a majority of the mem-
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1 bers have been appointed, the committee shall hold

2 its first meeting.

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

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

5 committee shall submit a report to Congress, health care

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

7 health information network to exchange health informa8 tion regarding—

9 ‘‘(1) the extent to which entities using the

10 health information network are meeting the stand11 ards adopted under this part and working together

12 to form an integrated network that meets the needs

13 of its users;

14 ‘‘(2) the extent to which such entities are meet15 ing the privacy and security standards established

16 pursuant to this part and the types of penalties as17 sessed for noncompliance with such standards;

18 ‘‘(3) whether the Federal and State Govern19 ments are receiving information of sufficient quality

20 to meet their responsibilities under this part;

21 ‘‘(4) any problems that exist with respect to im22 plementation of the health information network; and

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

24 part are being met.
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1 ‘‘SEC. 1180. STANDARDS FOR PATIENT MEDICAL RECORD

2 INFORMATION.

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

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

5 this part recommend to Congress a plan for developing

6 and implementing uniform data standards for patient

7 medical record information and the electronic exchange of

8 such information.

9 ‘‘SEC. 1181. GRANTS FOR DEMONSTRATION PROJECTS.

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

11 for demonstration projects to promote the development

12 and use of electronically integrated clinical information

13 systems and computerized patient medical records.

14 ‘‘(b) APPLICATIONS.—

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

16 this section for any fiscal year, an applicant shall

17 submit an application to the Secretary in accordance

18 with the procedures established by the Secretary.

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

20 may not approve an application submitted under

21 paragraph (1) unless the application includes assur22 ances satisfactory to the Secretary regarding the fol23 lowing:

24 ‘‘(A) USE OF EXISTING TECHNOLOGY.—

25 Funds received under this section will be used

26 to apply telecommunications and information
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1 systems technology that is in existence on the

2 date the application is submitted in a manner

3 that improves the quality of health care, re4 duces the costs of such care, and protects the

5 privacy and confidentiality of information relat6 ing to the physical or mental condition of an in7 dividual.

8 ‘‘(B) USE OF EXISTING INFORMATION SYS9 TEMS.—Funds received under this section will

10 be used—

11 ‘‘(i) to enhance telecommunications or

12 information systems that are operating on

13 the date the application is submitted;

14 ‘‘(ii) to integrate telecommunications

15 or information systems that are operating

16 on such date; or

17 ‘‘(iii) to connect additional users to

18 telecommunications or information net19 works or systems that are operating on

20 such date.

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

22 shall make available funds for the demonstra23 tion project in an amount that equals at least

24 20 percent of the cost of the project.
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1 ‘‘(c) GEOGRAPHIC DIVERSITY.— In making grants

2 under this section, the Secretary shall, to the extent prac3 ticable, make grants to persons representing different geo4 graphic areas of the United States, including urban and

5 rural areas.

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

7 review at least annually the compliance of a person

8 receiv ing a grant under this section with the provisions

9 of this part. The Secretary shall establish a procedure for

10 determining whether such a person has failed to comply

11 substantially with the provisions of this part and the sanc12 tions to be imposed for any such noncompliance.

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

14 an annual report to the President for transmittal to Con15 gress containing a description of the activities carried out

16 under this section.

17 ‘‘SEC. 1182. AUTHORIZATION OF APPROPRIATIONS.

18 ‘‘There are authorized to be appropriated such sums

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

20 part.’’.

21 (b) CONFORMING AMENDMENTS.—

22 (1) REQUIREMENT FOR MEDICARE PROVID23 ERS.—Section 1866(a)(1) of the Social Security Act

24 (42 U.S.C. 1395cc(a)(1)) is amended—
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1 (A) by striking ‘‘and’’ at the end of sub2 paragraph (P);

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

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

5 (C) by inserting immediately after sub6 paragraph (Q) the following new subparagraph:

7 ‘‘(R) to contract only with a health infor8 mation network service (as defined in section

9 1171(7)) that meets the standards established

10 under sections 1172 and 1173.’’.

11 (2) CLERICAL AMENDMENTS.—

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

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

14 title and inserting the following:

15 ‘‘TITLE XI—GENERAL PROVI16 SIONS, PEER REVIEW, AND

17 ADMINISTRATIVE SIM18 PLIFICATION

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

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

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

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

23 title’’.
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1 TITLE III—EFFECTIVE DATES

2 SEC. 301. EFFECTIVE DATES.

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

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

5 of the enactment of this Act.

6 (b) REPEAL OF DATA BANK.—The provisions of sec7 tion 102 shall take effect on the date the Secretary of

8 Health and Human Services provides written notice to the

9 Congress that the Medicare and Medicaid Coverage Data

10 Bank is no longer necessary because of the operation of

11 the health information network established pursuant to

12 this Act.

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