(March 7, 2007) Steps California can take to pro­mote widespread adoption of health informa­tion technology are outlined in a new report from the state Legis­lative Analyst’s Office (LAO).

Broader adop­tion of health information technology (HIT) could help improve the quality of health care and reduce health care costs, the February 12 report concludes, rec­ommending the Legislature act now to encourage the development and expansion of HIT in California.

Recognition that greater use of HIT can improve health care in California is an element in the health care reform proposals presented by Governor Arnold Schwarzenegger, Senate and Assembly Democratic leaders and Senate Republi­cans.

Potential Savings
Several entities have reported savings and financial benefits from the adoption of HIT tools. A hospital in Boston, Mass., estimated that it achieved a new savings of $5 million to $10 million per year fol­lowing the installation of a computerized physician order entry system, which also reduced serious medication errors by 55 percent.

The LAO report also cited the potential for nationwide savings, referring to a 2005 report by RAND, a non-profit research in­stitution. The RAND report estimated that a comprehensive network of electronic health records could be established in the United States in 15 years and would create an average annual net savings of $34 bil­lion.

Another study reported that a group of small physician providers mostly experi­enced net financial benefits within several years, primarily as a result of efficiency gains and increased billing.

Recommendations
The LAO report recommended the following strategies to foster the develop­ment and expansion of HIT in California.

Seek Non-General Fund Resources

• Establish a low-interest loan program to assist Medi-Cal providers with the costs of HIT systems through a combination of loans, grants, training and innovative reimbursement methods.
• Create new Medi-Cal reimburse­ment policies that compensate providers on a limited-term basis for implement­ing and transitioning to electronic health records-based operations.
• Establish a grant program to sup­port the development of regional health information organizations or other forms of health information exchange in the state.
• Set up a contract to provide train­ing opportunities for Medi-Cal practitio­ners to prepare them for the implementa­tion of HIT in their practices, thereby reducing the challenges faced by smaller providers with little resources or experi­ence in information technology.

Use State’s Purchasing Power

• Authorize Medi-Cal to negotiate with HIT vendors to obtain discounted prices for Medi-Cal care providers on electronic health records that meet se­lected criteria.
• Require the California Public Employees’ Retirement System (Cal-PERS) to report on its activities to develop electronic health records for its members and the costs and efficacy of requiring its contracting health plans to make personal health records available to CalPERS members.

Promote Policy Coordination

• Authorize the California office in charge of implementing the federal Health Insurance Portability and Accountability Act (HIPAA) to lead a public-private advisory body to coor­dinate state HIT policy with health care stakeholders. The advisory body would assess the progress of regional health information organization development in the state and make recommendations for additional actions to coordinate data shar­ing efforts.
• Require the new advisory body to recommend changes to state privacy laws and other health care statutes that would remove impediments to HIT adop­tion while maintaining consumer protec­tions.

Support for HIT
Legislation supported by the Califor­nia Chamber of Commerce last year, SB 1672 (Maldonado; R-Santa Maria), aimed to establish a low-interest loan program for non-profit health provider organiza­tions purchasing a health care informa­tion technology system.

The LAO report recommends the same type of program and refers to SB 1672, reiterating that the bill offered a sound approach to aid in reducing acquisition costs for health care providers establish­ing electronic health records.

SB 1672 stalled in the Senate Appro­priations Committee last June.

The CalChamber wrote in its letter supporting SB 1672 that a comprehensive automated health record system could reduce the paperwork burden and cost of dictation and “chart pulls,” improve effi­ciency and patient safety in prescriptions, computerize patient reminders, improve communication in the referral process and coordination of care between provid­ers, and coordinate non-clinical features such as billing and scheduling.

Staff Contact: Marti Fisher