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109th Congress                                            Rept. 109-601
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 1

======================================================================
 
              BETTER HEALTH INFORMATION SYSTEM ACT OF 2006

                                _______
                                

 July 26, 2006.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

    Mr. Barton of Texas, from the Committee on Energy and Commerce, 
                        submitted the following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 4157]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Energy and Commerce, to whom was referred 
the bill (H.R. 4157) to amend the Social Security Act to 
encourage the dissemination, security, confidentiality, and 
usefulness of health information technology, having considered 
the same, report favorably thereon with amendments and 
recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     2
Purpose and Summary..............................................    13
Background and Need for Legislation..............................    14
Hearings.........................................................    22
Committee Consideration..........................................    23
Committee Votes..................................................    23
Committee Oversight Findings.....................................    32
Statement of General Performance Goals and Objectives............    32
New Budget Authority, Entitlement Authority, and Tax Expenditures    32
Committee Cost Estimate..........................................    32
Congressional Budget Office Estimate.............................    32
Federal Mandates Statement.......................................    37
Advisory Committee Statement.....................................    37
Constitutional Authority Statement...............................    37
Applicability to Legislative Branch..............................    38
Section-by-Section Analysis of the Legislation...................    38
Changes in Existing Law Made by the Bill, as Reported............    40
Dissenting Views.................................................    54

                               Amendment

  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Better Health 
Information System Act of 2006''.
  (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title and table of contents.
Sec. 2. Preserving privacy and security laws.

TITLE I--COORDINATION FOR, PLANNING FOR, AND INTEROPERABILITY OF HEALTH 
                         INFORMATION TECHNOLOGY

Sec. 101. Office of the National Coordinator for Health Information 
Technology.
Sec. 102. Report on the American Health Information Community.
Sec. 103. Interoperability planning process; Federal information 
collection activities.
Sec. 104. Ensuring health care providers may maintain health 
information in electronic form.
Sec. 105. Study and report on State, regional, and community health 
information exchanges.
Sec. 106. Grants to integrated health systems to promote health 
information technologies to improve coordination of care for the 
uninsured, underinsured, and medically underserved.
Sec. 107. Demonstration program.

    TITLE II--EXPEDITED MODIFICATION PROCEDURES FOR AND ADOPTION OF 
                   TRANSACTIONAL STANDARDS AND CODES

Sec. 201. Procedures to ensure timely updating of standards that enable 
electronic exchanges.
Sec. 202. Upgrading ASC X12 and NCPDP standards.
Sec. 203. Coding and documentation of non-medical information.

TITLE III--PROMOTING THE USE OF HEALTH INFORMATION TECHNOLOGY TO BETTER 
                         COORDINATE HEALTH CARE

Sec. 301. Safe harbors to antikickback civil penalties and criminal 
penalties for provision of health information technology and training 
services.
Sec. 302. Exception to limitation on certain physician referrals (under 
Stark) for provision of health information technology and training 
services to health care professionals.

SEC. 2. PRESERVING PRIVACY AND SECURITY LAWS.

  Nothing in this Act (or the amendments made by this Act) shall be 
construed to affect the scope, substance, or applicability of section 
264(c) of the Health Insurance Portability and Accountability Act of 
1996 and any regulation issued pursuant to such section.

TITLE I--COORDINATION FOR, PLANNING FOR, AND INTEROPERABILITY OF HEALTH 
                         INFORMATION TECHNOLOGY

SEC. 101. OFFICE OF THE NATIONAL COORDINATOR FOR HEALTH INFORMATION 
                    TECHNOLOGY.

  (a) In General.--Title II of the Public Health Service Act is amended 
by adding at the end the following new part:

                ``PART D--HEALTH INFORMATION TECHNOLOGY

``SEC. 271. OFFICE OF THE NATIONAL COORDINATOR FOR HEALTH INFORMATION 
                    TECHNOLOGY.

  ``(a) Establishment.--There is established within the Department of 
Health and Human Services an Office of the National Coordinator for 
Health Information Technology that shall be headed by the National 
Coordinator for Health Information Technology (referred to in this part 
as the `National Coordinator'). The National Coordinator shall be 
appointed by and report directly to the Secretary. The National 
Coordinator shall be paid at a rate equal to the rate of basic pay for 
level IV of the Executive Schedule.
  ``(b) Goals of Nationwide Interoperable Health Information Technology 
Infrastructure.--The National Coordinator shall perform the duties 
under subsection (c) in a manner consistent with the development of a 
nationwide interoperable health information technology infrastructure 
that--
          ``(1) improves health care quality, promotes data accuracy, 
        reduces medical errors, increases the efficiency of care, and 
        advances the delivery of appropriate, evidence-based health 
        care services;
          ``(2) promotes wellness, disease prevention, and management 
        of chronic illnesses by increasing the availability and 
        transparency of information related to the health care needs of 
        an individual for such individual;
          ``(3) promotes the availability of appropriate and accurate 
        information necessary to make medical decisions in a usable 
        form at the time and in the location that the medical service 
        involved is provided;
          ``(4) produces greater value for health care expenditures by 
        reducing health care costs that result from inefficiency, 
        medical errors, inappropriate care, and incomplete or 
        inaccurate information;
          ``(5) promotes a more effective marketplace, greater 
        competition, greater systems analysis, increased consumer 
        choice, enhanced quality, and improved outcomes in health care 
        services;
          ``(6) with respect to health information of consumers, 
        advances the portability of such information and the ability of 
        such consumers to share and use such information to assist in 
        the management of their health care;
          ``(7) improves the coordination of information and the 
        provision of such services through an effective infrastructure 
        for the secure and authorized exchange and use of health care 
        information;
          ``(8) is consistent with legally applicable requirements with 
        respect to securing and protecting the confidentiality of 
        individually identifiable health information of a patient;
          ``(9) promotes the creation and maintenance of transportable, 
        secure, Internet-based personal health records, including 
        promoting the efforts of health care payers and health plan 
        administrators for a health plan, such as Federal agencies, 
        private health plans, and third party administrators, to 
        provide for such records on behalf of members of such a plan;
          ``(10) promotes access to and review of the electronic health 
        record of a patient by such patient;
          ``(11) promotes health research and health care quality 
        research and assessment; and
          ``(12) promotes the efficient and streamlined development, 
        submission, and maintenance of electronic health care clinical 
        trial data.
  ``(c) Duties of the National Coordinator.--
          ``(1) Strategic planner for interoperable health information 
        technology.--The National Coordinator shall provide for a 
        strategic plan for the nationwide implementation of 
        interoperable health information technology in both the public 
        and private health care sectors consistent with subsection (b).
          ``(2) Principal advisor to the secretary.--The National 
        Coordinator shall serve as the principal advisor to the 
        Secretary on the development, application, and use of health 
        information technology, and shall coordinate the policies and 
        programs of the Department of Health and Human Services for 
        promoting the use of health information technology.
          ``(3) Intragovernmental coordinator.--The National 
        Coordinator shall ensure that health information technology 
        policies and programs of the Department of Health and Human 
        Services are coordinated with those of relevant executive 
        branch agencies and departments with a goal to avoid 
        duplication of effort, to align the health information 
        architecture of each agency or department toward a common 
        approach, to ensure that each agency or department conducts 
        programs within the areas of its greatest expertise and its 
        mission in order to create a national interoperable health 
        information system capable of meeting national public health 
        needs effectively and efficiently, and to assist Federal 
        agencies and departments in security programs, policies, and 
        protections to prevent unauthorized access to individually 
        identifiable health information created, maintained, or in the 
        temporary possession of that agency or department. The 
        coordination authority provided to the National Coordinator 
        under the previous sentence shall supercede any such authority 
        otherwise provided to any other official of the Department of 
        Health and Human Services. For the purposes of this paragraph, 
        the term `unauthorized access' means access that is not 
        authorized by that agency or department including unauthorized 
        employee access.
          ``(4) Advisor to omb.--The National Coordinator shall provide 
        to the Director of the Office of Management and Budget comments 
        and advice with respect to specific Federal health information 
        technology programs.
          ``(5) Promoter of health information technology in medically 
        underserved communities.--The National Coordinator shall--
                  ``(A) identify sources of funds that will be made 
                available to promote and support the planning and 
                adoption of health information technology in medically 
                underserved communities, including in urban and rural 
                areas, either through grants or technical assistance;
                  ``(B) coordinate with the funding sources to help 
                such communities connect to identified funding; and
                  ``(C) collaborate with the Agency for Healthcare 
                Research and Quality and the Health Services Resources 
                Administration and other Federal agencies to support 
                technical assistance, knowledge dissemination, and 
                resource development, to medically underserved 
                communities seeking to plan for and adopt technology 
                and establish electronic health information networks 
                across providers.''.
  (b) Treatment of Executive Order 13335.--Executive Order 13335 shall 
not have any force or effect after the date of the enactment of this 
Act.
  (c) Transition From ONCHIT Under Executive Order.--
          (1) In general.--All functions, personnel, assets, 
        liabilities, administrative actions, and statutory reporting 
        requirements applicable to the old National Coordinator or the 
        Office of the old National Coordinator on the date before the 
        date of the enactment of this Act shall be transferred, and 
        applied in the same manner and under the same terms and 
        conditions, to the new National Coordinator and the Office of 
        the new National Coordinator as of the date of the enactment of 
        this Act.
          (2) Rule of construction.-- Nothing in this section or the 
        amendment made by this section shall be construed as requiring 
        the duplication of Federal efforts with respect to the 
        establishment of the Office of the National Coordinator for 
        Health Information Technology, regardless of whether such 
        efforts are carried out before or after the date of the 
        enactment of this Act.
          (3) Acting national coordinator.--Before the appointment of 
        the new National Coordinator, the old National Coordinator 
        shall act as the National Coordinator for Health Information 
        Technology until the office is filled as provided in section 
        271(a) of the Public Health Service Act, as added by subsection 
        (a). The Secretary of Health and Human Services may appoint the 
        old National Coordinator as the new National Coordinator.
          (4) Definitions.--For purposes of this subsection:
                  (A) New national coordinator.--The term ``new 
                National Coordinator'' means the National Coordinator 
                for Health Information Technology appointed under 
                section 271(a) of the Public Health Service Act, as 
                added by subsection (a).
                  (B) Old national coordinator.--The term ``old 
                National Coordinator'' means the National Coordinator 
                for Health Information Technology appointed under 
                Executive Order 13335.

SEC. 102. REPORT ON THE AMERICAN HEALTH INFORMATION COMMUNITY.

  Not later than one year after the date of the enactment of this Act, 
the Secretary of Health and Human Services shall submit to Congress a 
report on the work conducted by the American Health Information 
Community (in this section referred to as ``AHIC''), as established by 
the Secretary. Such report shall include the following:
          (1) A description of the accomplishments of AHIC, with 
        respect to the promotion of the development of national 
        guidelines, the development of a nationwide health information 
        network, and the increased adoption of health information 
        technology.
          (2) Information on how model privacy and security policies 
        may be used to protect confidentiality of health information, 
        and an assessment of how existing policies compare to such 
        model policies.
          (3) Information on the progress in--
                  (A) establishing uniform industry-wide health 
                information technology standards;
                  (B) achieving an internet-based nationwide health 
                information network; and
                  (C) achieving interoperable electronic health record 
                adoption across health care providers.
          (4) Recommendations for the transition of AHIC to a longer-
        term advisory and facilitation entity, including--
                  (A) a schedule for such transition;
                  (B) options for structuring the entity as either a 
                public-private or private sector entity;
                  (C) the role of the Federal Government in the entity;
                  (D) steps for--
                          (i) continued leadership in the facilitation 
                        of guidelines or standards;
                          (ii) the alignment of financial incentives; 
                        and
                          (iii) the long-term plan for health care 
                        transformation through information technology; 
                        and
                  (E) the elimination or revision of the functions of 
                AHIC during the development of the nationwide health 
                information network.

SEC. 103. INTEROPERABILITY PLANNING PROCESS; FEDERAL INFORMATION 
                    COLLECTION ACTIVITIES.

  Part D of title II of the Public Health Service Act, as added by 
section 101, is amended by adding at the end the following new section:

``SEC. 272. INTEROPERABILITY PLANNING PROCESS; FEDERAL INFORMATION 
                    COLLECTION ACTIVITIES.

  ``(a) Strategic Interoperability Planning Process.--
          ``(1) Assessment and endorsement of core strategic 
        guidelines.--
                  ``(A) In general.--Not later than December 31, 2006, 
                the National Coordinator shall publish a strategic 
                plan, including a schedule, for the assessment and the 
                endorsement of core interoperability guidelines for 
                significant use cases consistent with this subsection. 
                The National Coordinator may update such plan from time 
                to time.
                  ``(B) Endorsement.--
                          ``(i) In general.--Consistent with the 
                        schedule under this paragraph and not later 
                        than one year after the publication of such 
                        schedule, the National Coordinator shall 
                        endorse a subset of core interoperability 
                        guidelines for significant use cases. The 
                        National Coordinator shall continue to endorse 
                        subsets of core interoperability guidelines for 
                        significant use cases annually consistent with 
                        the schedule published pursuant to this 
                        paragraph, with endorsement of all such 
                        guidelines completed not later than August 31, 
                        2009.
                          ``(ii) Consultation.--All such endorsements 
                        shall be in consultation with the American 
                        Health Information Community and other 
                        appropriate entities.
                          ``(iii) Voluntary compliance.--Compliance 
                        with such guidelines shall be voluntary, 
                        subject to subsection (b)(1).
                  ``(C) Consultation with other parties.--The National 
                Coordinator shall develop and implement such strategic 
                plan in consultation with the American Health 
                Information Community and other appropriate entities.
                  ``(D) Definitions.--For purposes of this section:
                          ``(i) Interoperability guideline.--The term 
                        `interoperability guideline' means a guideline 
                        to improve and promote the interoperability of 
                        health information technology for purposes of 
                        electronically accessing and exchanging health 
                        information. Such term includes named 
                        standards, architectures, software schemes for 
                        identification, authentication, and security, 
                        and other information needed to ensure the 
                        reproducible development of common solutions 
                        across disparate entities.
                          ``(ii) Core interoperability guideline.--The 
                        term `core interoperability guideline' means an 
                        interoperability guideline that the National 
                        Coordinator determines is essential and 
                        necessary for purposes described in clause (i).
                          ``(iii) Significant use case.--The term 
                        `significant use case' means a category (as 
                        specified by the National Coordinator) that 
                        identifies a significant use or purpose for the 
                        interoperability of health information 
                        technology, such as for the exchange of 
                        laboratory information, drug prescribing, 
                        clinical research, and electronic health 
                        records.
          ``(2) National survey.--
                  ``(A) In general.--Not later than August 31, 2008, 
                the National Coordinator shall conduct one or more 
                surveys designed to measure the capability of entities 
                (including Federal agencies, State and local government 
                agencies, and private sector entities) to exchange 
                electronic health information by appropriate 
                significant use case. Such surveys shall identify the 
                extent to which the type of health information, the use 
                for such information, or any other appropriate 
                characterization of such information may relate to the 
                capability of such entities to exchange health 
                information in a manner that is consistent with methods 
                to improve the interoperability of health information 
                and with core interoperability guidelines.
                  ``(B) Dissemination of survey results.--The National 
                Coordinator shall disseminate the results of such 
                surveys in a manner so as to--
                          ``(i) inform the public on the capabilities 
                        of entities to exchange electronic health 
                        information;
                          ``(ii) assist in establishing a more 
                        interoperable information architecture; and
                          ``(iii) identify the status of health 
                        information systems used in Federal agencies 
                        and the status of such systems with respect to 
                        interoperability guidelines.
  ``(b) Federal Health Information Collection Activities.--
          ``(1) Requirements.--With respect to a core interoperability 
        guideline endorsed under subsection (a)(1)(B) for a significant 
        use case, the President shall take measures to ensure that 
        Federal activities involving the broad collection and 
        submission of health information are consistent with such 
        guideline within three years after the date of such 
        endorsement.
          ``(2) Promoting use of non-identifiable health information to 
        improve health research and health care quality.--
                  ``(A) In general.--Where feasible, and consistent 
                with applicable privacy or security or other laws, the 
                President, in consultation with the Secretary, shall 
                take measures to allow timely access to useful 
                categories of non-identifiable health information in 
                records maintained by the Federal government, or 
                maintained by entities under contract with the Federal 
                government, to advance health care quality and health 
                research where such information is in a form that can 
                be used in such research. The President shall consult 
                with appropriate Federal agencies, and solicit public 
                comment, on useful categories of information, and 
                appropriate measures to take. The President may 
                consider the administrative burden and the potential 
                for improvements in health care quality in determining 
                such appropriate measures. In addition, the President, 
                in consultation with the Secretary, shall encourage 
                voluntary private and public sector efforts to allow 
                access to such useful categories of non-identifiable 
                health information to advance health care quality and 
                health research.
                  ``(B) Non-identifiable health information defined.--
                For purposes of this paragraph, the term `non-
                identifiable health information' means information that 
                is not individually identifiable health information as 
                defined in rules promulgated pursuant to section 264(c) 
                of the Health Insurance Portability and Accountability 
                Act of 1996 (42 U.S.C. 1320d-2 note), and includes 
                information that has been de-identified so that it is 
                no longer individually identifiable health information, 
                as defined in such rules.
          ``(3) Annual review and report.--For each year during the 
        five-year period following the date of the enactment of this 
        section, the National Coordinator shall review the operation of 
        health information collection by and submission to the Federal 
        government and the purchases (and planned purchases) of health 
        information technology by the Federal government. For each such 
        year and based on the review for such year, the National 
        Coordinator shall submit to the President and Congress 
        recommendations on methods to--
                  ``(A) streamline (and eliminate redundancy in) 
                Federal systems used for the collection and submission 
                of health information;
                  ``(B) improve efficiency in such collection and 
                submission;
                  ``(C) increase the ability to assess health care 
                quality; and
                  ``(D) reduce health care costs.''.

SEC. 104. ENSURING HEALTH CARE PROVIDERS MAY MAINTAIN HEALTH 
                    INFORMATION IN ELECTRONIC FORM.

  Part D of title II of the Public Health Service Act, as added by 
section 101(a) and amended by section 103, is amended by adding at the 
end the following new section:

``SEC. 273. ENSURING HEALTH CARE PROVIDERS MAY MAINTAIN HEALTH 
                    INFORMATION IN ELECTRONIC FORM.

  ``(a) In General.--Any health care provider that participates in a 
health care program that receives Federal funds shall be deemed as 
meeting any requirement for the maintenance of data in paper form under 
such program (whether or not for purposes of management, billing, 
reporting, reimbursement, or otherwise) if the required data is 
maintained in an electronic form.
  ``(b) Relation to State Laws.--Beginning on the date that is one year 
after the date of the enactment of this section, subsection (a) shall 
supersede any contrary provision of State law.
  ``(c) Construction.--Nothing in this section shall be construed as--
          ``(1) requiring health care providers to maintain or submit 
        data in electronic form;
          ``(2) preventing a State from permitting health care 
        providers to maintain or submit data in paper form; or
          ``(3) preventing a State from requiring health care providers 
        to maintain or submit data in electronic form.''.

SEC. 105. STUDY AND REPORT ON STATE, REGIONAL, AND COMMUNITY HEALTH 
                    INFORMATION EXCHANGES.

  (a) Study.--The Secretary of Health and Human Services shall conduct 
a study on issues related to the development, operation, and 
implementation of State, regional, and community health information 
exchanges. Such study shall include the following, with respect to such 
health information exchanges:
          (1) Profiles detailing the current stages of such health 
        information exchanges with respect to the progression of the 
        development, operation, implementation, organization, and 
        governance of such exchanges.
          (2) The impact of such exchanges on healthcare quality, 
        safety, and efficiency, including--
                  (A) any impact on the coordination of health 
                information and services across healthcare providers 
                and other organizations relevant to health care;
                  (B) any impact on the availability of health 
                information at the point-of-care to make timely medical 
                decisions;
                  (C) any benefits with respect to the promotion of 
                wellness, disease prevention, and chronic disease 
                management;
                  (D) any improvement with respect to public health 
                preparedness and response;
                  (E) any impact on the widespread adoption of 
                interoperable health information technology, including 
                electronic health records;
                  (F) any contributions to achieving an Internet-based 
                national health information network;
                  (G) any contribution of health information exchanges 
                to consumer access and to consumers' use of their 
                health information; and
                  (H) any impact on the operation of--
                          (i) the Medicaid program;
                          (ii) the State Children's Health Insurance 
                        Program (SCHIP);
                          (iii) disproportionate share hospitals 
                        described in section 1923 of the Social 
                        Security Act;
                          (iv) Federally-qualified health centers; or
                          (v) managed care plans, if a significant 
                        number of the plan's enrollees are 
                        beneficiaries in the Medicaid program or SCHIP.
          (3) Best practice models for financing, incentivizing, and 
        sustaining such health information exchanges.
          (4) Information identifying the common principles, policies, 
        tools, and standards used (or proposed) in the public and 
        private sectors to support the development, operation, and 
        implementation of such health information exchanges.
          (5) A description of any areas in which Federal government 
        leadership is needed to support growth and sustainability of 
        such health information exchanges.
  (b) Report.--Not later than one year after the date of enactment of 
this Act, the Secretary of Health and Human Services shall submit to 
Congress a report on the study described in subsection (a), including 
such recommendations as the Secretary determines appropriate to 
facilitate the development, operation, and implementation of health 
information exchanges.

SEC. 106. GRANTS TO INTEGRATED HEALTH SYSTEMS TO PROMOTE HEALTH 
                    INFORMATION TECHNOLOGIES TO IMPROVE COORDINATION OF 
                    CARE FOR THE UNINSURED, UNDERINSURED, AND MEDICALLY 
                    UNDERSERVED.

  Subpart I of part D of title III of the Public Health Service Act (42 
U.S.C. 254b et seq.) is amended by adding at the end the following:

``SEC. 330M. GRANTS FOR IMPROVEMENT OF THE COORDINATION OF CARE FOR THE 
                    UNINSURED, UNDERINSURED, AND MEDICALLY UNDERSERVED.

  ``(a) In General.--The Secretary may make grants to integrated health 
care systems, in accordance with this section, for projects to better 
coordinate the provision of health care through the adoption of new 
health information technology, or the significant improvement of 
existing health information technology, to improve the provision of 
health care to uninsured, underinsured, and medically underserved 
individuals (including in urban and rural areas) through health-related 
information about such individuals, throughout such a system and at the 
point of service.
  ``(b) Eligibility.--
          ``(1) Application.--To be eligible to receive a grant under 
        this section, an integrated health care system shall prepare 
        and submit to the Secretary an application, at such time, in 
        such manner, and containing such information as the Secretary 
        may require, including--
                  ``(A) a description of the project that the system 
                will carry out using the funds provided under the 
                grant;
                  ``(B) a description of the manner in which the 
                project funded under the grant will advance the goal 
                specified in subsection (a); and
                  ``(C) a description of the populations to be served 
                by the adoption or improvement of health information 
                technology.
          ``(2) Optional reporting condition.--The Secretary may also 
        condition the provision of a grant to an integrated health care 
        system under this section for a project on the submission by 
        such system to the Secretary of a report on the impact of the 
        health information technology adopted (or improved) under such 
        project on the delivery of health care and the quality of care 
        (in accordance with applicable measures of such quality). Such 
        report shall be at such time and in such form and manner as 
        specified by the Secretary.
  ``(c) Integrated Health Care System Defined.--For purposes of this 
section, the term `integrated health care system' means a system of 
health care providers that is organized to provide care in a 
coordinated fashion and has a demonstrated commitment to provide 
uninsured, underinsured, and medically underserved individuals with 
access to such care.
  ``(d) Priorities.--In making grants under this section, the Secretary 
shall give priority to an integrated health care system--
          ``(1) that can demonstrate past successful community-wide 
        efforts to improve the quality of care provided and the 
        coordination of care for the uninsured, underinsured, and 
        medically underserved; or
          ``(2) if the project to be funded through such a grant--
                  ``(A) will improve the delivery of health care and 
                the quality of care provided; and
                  ``(B) will demonstrate savings for State or Federal 
                health care benefits programs or entities legally 
                obligated under Federal law to provide health care from 
                the reduction of duplicative health care services, 
                administrative costs, and medical errors.
  ``(e) Limitation, Matching Requirement, and Conditions.--
          ``(1) Limitation on use of funds.--None of the funds provided 
        under a grant made under this section may be used for a project 
        providing for the adoption or improvement of health information 
        technology that is used exclusively for financial record 
        keeping, billing, or other non-clinical applications.
          ``(2) Matching requirement.--To be eligible for a grant under 
        this section an integrated health care system shall contribute 
        non-Federal contributions to the costs of carrying out the 
        project for which the grant is awarded in an amount equal to $1 
        for each $5 of Federal funds provided under the grant.
  ``(f) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section $15,000,000 for each of fiscal 
years 2007 and 2008.''.

SEC. 107. DEMONSTRATION PROGRAM.

  (a) In General.--The Secretary of Health and Human Services shall 
establish a demonstration program under which the Secretary makes 
grants to small physician practices (including such practices that 
furnish services to individuals with chronic illnesses) that are 
located in rural areas or medically underserved urban areas for the 
purchase and support of health information technology.
  (b) Eligibility.--To be eligible to receive a grant under this 
section, an applicant shall prepare and submit to the Secretary of 
Health and Human Services an application, at such time, in such manner, 
and containing such information, as the Secretary may require.
  (c) Reporting.--
          (1) Required reports by small physician practices.--A small 
        physician practice receiving a grant under subsection (a) shall 
        submit to the Secretary of Health and Human Services an 
        evaluation on the health information technology funded by such 
        grant. Such evaluation shall include information on--
                  (A) barriers to the adoption of health information 
                technology by the small physician practice;
                  (B) issues for such practice in the use of health 
                information technology;
                  (C) the effect health information technology will 
                have on the quality of health care furnished by such 
                practice; and
                  (D) the effect of the rules under sections 1128A, 
                1128B, and 1877 of the Social Security Act and any 
                medical liability rules on such practice.
          (2) Report to congress.--Not later than January 1, 2009, the 
        Secretary of Health and Human Services shall submit to Congress 
        a report on the results of the demonstration program under this 
        section.
  (d) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section $5,000,000 for each of fiscal 
years 2007 and 2008.

    TITLE II--EXPEDITED MODIFICATION PROCEDURES FOR AND ADOPTION OF 
                   TRANSACTIONAL STANDARDS AND CODES

SEC. 201. PROCEDURES TO ENSURE TIMELY UPDATING OF STANDARDS THAT ENABLE 
                    ELECTRONIC EXCHANGES.

  Section 1174(b) of the Social Security Act (42 U.S.C. 1320d-3(b)) is 
amended--
          (1) in paragraph (1)--
                  (A) in the first sentence, by inserting ``and in 
                accordance with paragraph (3)'' before the period; and
                  (B) by adding at the end the following new sentence: 
                ``For purposes of this subsection and section 
                1173(c)(2), the term `modification' includes a new 
                version or a version upgrade.''; and
          (2) by adding at the end the following new paragraph:
          ``(3) Expedited procedures for adoption of additions and 
        modifications to standards.--
                  ``(A) In general.--For purposes of paragraph (1), the 
                Secretary shall provide for an expedited upgrade 
                program (in this paragraph referred to as the `upgrade 
                program'), in accordance with this paragraph, to 
                develop and approve additions and modifications to the 
                standards adopted under section 1173(a) to improve the 
                quality of such standards or to extend the 
                functionality of such standards to meet evolving 
                requirements in health care.
                  ``(B) Publication of notices.--Under the upgrade 
                program:
                          ``(i) Voluntary notice of initiation of 
                        process.--Not later than 30 days after the date 
                        the Secretary receives a notice from a standard 
                        setting organization that the organization is 
                        initiating a process to develop an addition or 
                        modification to a standard adopted under 
                        section 1173(a), the Secretary shall publish a 
                        notice in the Federal Register that--
                                  ``(I) identifies the subject matter 
                                of the addition or modification;
                                  ``(II) provides a description of how 
                                persons may participate in the 
                                development process; and
                                  ``(III) invites public participation 
                                in such process.
                          ``(ii) Voluntary notice of preliminary draft 
                        of additions or modifications to standards.--
                        Not later than 30 days after the date of the 
                        date the Secretary receives a notice from a 
                        standard setting organization that the 
                        organization has prepared a preliminary draft 
                        of an addition or modification to a standard 
                        adopted by section 1173(a), the Secretary shall 
                        publish a notice in the Federal Register that--
                                  ``(I) identifies the subject matter 
                                of (and summarizes) the addition or 
                                modification;
                                  ``(II) specifies the procedure for 
                                obtaining the draft;
                                  ``(III) provides a description of how 
                                persons may submit comments in writing 
                                and at any public hearing or meeting 
                                held by the organization on the 
                                addition or modification; and
                                  ``(IV) invites submission of such 
                                comments and participation in such 
                                hearing or meeting without requiring 
                                the public to pay a fee to participate.
                          ``(iii) Notice of proposed addition or 
                        modification to standards.--Not later than 30 
                        days after the date of the date the Secretary 
                        receives a notice from a standard setting 
                        organization that the organization has a 
                        proposed addition or modification to a standard 
                        adopted under section 1173(a) that the 
                        organization intends to submit under 
                        subparagraph (D)(iii), the Secretary shall 
                        publish a notice in the Federal Register that 
                        contains, with respect to the proposed addition 
                        or modification, the information required in 
                        the notice under clause (ii) with respect to 
                        the addition or modification.
                          ``(iv) Construction.--Nothing in this 
                        paragraph shall be construed as requiring a 
                        standard setting organization to request the 
                        notices described in clauses (i) and (ii) with 
                        respect to an addition or modification to a 
                        standard in order to qualify for an expedited 
                        determination under subparagraph (C) with 
                        respect to a proposal submitted to the 
                        Secretary for adoption of such addition or 
                        modification.
                  ``(C) Provision of expedited determination.--Under 
                the upgrade program and with respect to a proposal by a 
                standard setting organization for an addition or 
                modification to a standard adopted under section 
                1173(a), if the Secretary determines that the standard 
                setting organization developed such addition or 
                modification in accordance with the requirements of 
                subparagraph (D) and the National Committee on Vital 
                and Health Statistics recommends approval of such 
                addition or modification under subparagraph (E), the 
                Secretary shall provide for expedited treatment of such 
                proposal in accordance with subparagraph (F).
                  ``(D) Requirements.--The requirements under this 
                subparagraph with respect to a proposed addition or 
                modification to a standard by a standard setting 
                organization are the following:
                          ``(i) Request for publication of notice.--The 
                        standard setting organization submits to the 
                        Secretary a request for publication in the 
                        Federal Register of a notice described in 
                        subparagraph (B)(iii) for the proposed addition 
                        or modification.
                          ``(ii) Process for receipt and consideration 
                        of public comment.--The standard setting 
                        organization provides for a process through 
                        which, after the publication of the notice 
                        referred to under clause (i), the 
                        organization--
                                  ``(I) receives and responds to public 
                                comments submitted on a timely basis on 
                                the proposed addition or modification 
                                before submitting such proposed 
                                addition or modification to the 
                                National Committee on Vital and Health 
                                Statistics under clause (iii);
                                  ``(II) makes publicly available a 
                                written explanation for its response in 
                                the proposed addition or modification 
                                to comments submitted on a timely 
                                basis; and
                                  ``(III) makes public comments 
                                received under clause (I) available, or 
                                provides access to such comments, to 
                                the Secretary.
                          ``(iii) Submittal of final proposed addition 
                        or modification to ncvhs.--After completion of 
                        the process under clause (ii), the standard 
                        setting organization submits the proposed 
                        addition or modification to the National 
                        Committee on Vital and Health Statistics for 
                        review and consideration under subparagraph 
                        (E). Such submission shall include information 
                        on the organization's compliance with the 
                        notice and comment requirements (and responses 
                        to those comments) under clause (ii).
                  ``(E) Hearing and recommendations by national 
                committee on vital and health statistics.--Under the 
                upgrade program, upon receipt of a proposal submitted 
                by a standard setting organization under subparagraph 
                (D)(iii) for the adoption of an addition or 
                modification to a standard, the National Committee on 
                Vital and Health Statistics shall provide notice to the 
                public and a reasonable opportunity for public 
                testimony at a hearing on such addition or 
                modification. The Secretary may participate in such 
                hearing in such capacity (including presiding ex 
                officio) as the Secretary shall determine appropriate. 
                Not later than 90 days after the date of receipt of the 
                proposal, the Committee shall submit to the Secretary 
                its recommendation to adopt (or not adopt) the proposed 
                addition or modification.
                  ``(F) Determination by secretary to accept or reject 
                national committee on vital and health statistics 
                recommendation.--
                          ``(i) Timely determination.--Under the 
                        upgrade program, if the National Committee on 
                        Vital and Health Statistics submits to the 
                        Secretary a recommendation under subparagraph 
                        (E) to adopt a proposed addition or 
                        modification, not later than 90 days after the 
                        date of receipt of such recommendation the 
                        Secretary shall make a determination to accept 
                        or reject the recommendation and shall publish 
                        notice of such determination in the Federal 
                        Register not later than 30 days after the date 
                        of the determination.
                          ``(ii) Contents of notice.--If the 
                        determination is to reject the recommendation, 
                        such notice shall include the reasons for the 
                        rejection. If the determination is to accept 
                        the recommendation, as part of such notice the 
                        Secretary shall promulgate the modified 
                        standard (including the accepted proposed 
                        addition or modification accepted).
                          ``(iii) Limitation on consideration.--The 
                        Secretary shall not consider a proposal under 
                        this subparagraph unless the Secretary 
                        determines that the requirements of 
                        subparagraph (D) (including publication of 
                        notice and opportunity for public comment) have 
                        been met with respect to the proposal.
                  ``(G) Exemption from paperwork reduction act.--
                Chapter 35 of title 44, United States Code, shall not 
                apply to a final rule promulgated under subparagraph 
                (F).''.

SEC. 202. UPGRADING ASC X12 AND NCPDP STANDARDS.

  The Secretary of Health and Human Services shall provide by notice 
published in the Federal Register for the following replacements of 
standards to apply to transactions occurring on or after April 1, 2009:
          (1) Accredited standards committee x12 (asc x12) standard.--
        The replacement of the Accredited Standards Committee X12 (ASC 
        X12) version 4010 adopted under section 1173(a) of such Act (42 
        U.S.C. 1320d-2(a)) with the ASC X12 version 5010, as reviewed 
        by the National Committee on Vital Health Statistics.
          (2) National council for prescription drug programs (ncpdp) 
        telecommunications standards.--The replacement of the National 
        Council for Prescription Drug Programs (NCPDP) 
        Telecommunications Standards version 5.1 adopted under section 
        1173(a) of such Act (42 U.S.C. 1320d-2(a)) with whichever is 
        the latest version of the NCPDP Telecommunications Standards 
        that has been approved by such Council and reviewed by the 
        National Committee on Vital Health Statistics as of April 1, 
        2007.

SEC. 203. CODING AND DOCUMENTATION OF NON-MEDICAL INFORMATION.

  In any regulation or other action implementing the International 
Classification of Diseases, 10th revision, Clinical Modification (ICD-
10-CM), the International Classification of Diseases, 10th revision, 
Procedure Coding System (ICD-10-PCS), or other version of the 
International Classification of Diseases, 10th revision, the Secretary 
of Health and Human Services shall ensure that no health care provider 
is required to code to a level of specificity that would require 
documentation of non-medical information on the external cause of any 
given type of injury.

TITLE III--PROMOTING THE USE OF HEALTH INFORMATION TECHNOLOGY TO BETTER 
                         COORDINATE HEALTH CARE

SEC. 301. SAFE HARBORS TO ANTIKICKBACK CIVIL PENALTIES AND CRIMINAL 
                    PENALTIES FOR PROVISION OF HEALTH INFORMATION 
                    TECHNOLOGY AND TRAINING SERVICES.

  (a) For Civil Penalties.--Section 1128A of the Social Security Act 
(42 U.S.C. 1320a-7a) is amended--
          (1) in subsection (b), by adding at the end the following new 
        paragraph:
  ``(4) For purposes of this subsection, inducements to reduce or limit 
services described in paragraph (1) shall not include the practical or 
other advantages resulting from health information technology or 
related installation, maintenance, support, or training services.''; 
and
          (2) in subsection (i), by adding at the end the following new 
        paragraph:
          ``(8) The term `health information technology' means 
        hardware, software, license, right, intellectual property, 
        equipment, or other information technology (including new 
        versions, upgrades, and connectivity) designed primarily for 
        the electronic creation, maintenance, or exchange of health 
        information to better coordinate care or improve health care 
        quality, efficiency, or research.''.
  (b) For Criminal Penalties.--Section 1128B(b)(3) of such Act (42 
U.S.C. 1320a-7b(b)(3)) is amended--
          (1) in subparagraph (G), by striking ``and'' at the end;
          (2) in the subparagraph (H) added by section 237(d) of the 
        Medicare Prescription Drug, Improvement, and Modernization Act 
        of 2003 (Public Law 108-173; 117 Stat. 2213)--
                  (A) by moving such subparagraph 2 ems to the left; 
                and
                  (B) by striking the period at the end and inserting a 
                semicolon;
          (3) in the subparagraph (H) added by section 431(a) of such 
        Act (117 Stat. 2287)--
                  (A) by redesignating such subparagraph as 
                subparagraph (I);
                  (B) by moving such subparagraph 2 ems to the left; 
                and
                  (C) by striking the period at the end and inserting 
                ``; and''; and
          (4) by adding at the end the following new subparagraph:
          ``(J) any nonmonetary remuneration (in the form of health 
        information technology, as defined in section 1128A(i)(8), or 
        related installation, maintenance, support or training 
        services) made to a person by an entity that is a hospital, 
        group practice, prescription drug plan sponsor, or Medicare 
        Advantage organization if--
                  ``(i) the provision of such remuneration is without 
                an agreement between the parties or legal condition 
                that--
                          ``(I) limits or restricts the use of the 
                        health information technology to services 
                        provided by the physician to individuals 
                        receiving services at the entity;
                          ``(II) limits or restricts the use of the 
                        health information technology in conjunction 
                        with other health information technology; or
                          ``(III) conditions the provision of such 
                        remuneration on the referral of patients or 
                        business to the entity;
                  ``(ii) such remuneration is arranged for in a written 
                agreement that is signed by the parties involved (or 
                their representatives) and that specifies the 
                remuneration solicited or received (or offered or paid) 
                and states that the provision of such remuneration is 
                made for the primary purpose of better coordination of 
                care or improvement of health quality, efficiency, or 
                research; and
                  ``(iii) the entity providing the remuneration (or a 
                representative of such entity) has not taken any action 
                to disable any basic feature of any hardware or 
                software component of such remuneration that would 
                permit interoperability.''.
  (c) Effective Date and Effect on State Laws.--
          (1) Effective date.--The amendments made by subsections (a) 
        and (b) shall take effect on the date that is 120 days after 
        the date of the enactment of this Act.
          (2) Preemption of state laws.--No State (as defined in 
        section 1101(a) of the Social Security Act (42 U.S.C. 1301(a)) 
        for purposes of title XI of such Act) shall have in effect a 
        State law that imposes a criminal or civil penalty for a 
        transaction described in section 1128A(b)(4) or section 
        1128B(b)(3)(J) of such Act, as added by subsections (a)(1) and 
        (b), respectively, if the conditions described in the 
        respective provision, with respect to such transaction, are 
        met.
  (d) Study and Report to Assess Effect of Safe Harbors on Health 
System.--
          (1) In general.--The Inspector General of the Department of 
        Health and Human Services shall conduct a study to determine 
        the impact of each of the safe harbors described in paragraph 
        (3). In particular, the study shall examine the following:
                  (A) The effectiveness of each safe harbor in 
                increasing the adoption of health information 
                technology.
                  (B) The types of health information technology 
                provided under each safe harbor.
                  (C) The extent to which the financial or other 
                business relationships between providers under each 
                safe harbor have changed as a result of the safe harbor 
                in a way that adversely affects or benefits the health 
                care system or choices available to consumers.
                  (D) The impact of the adoption of health information 
                technology on health care quality, cost, and access 
                under each safe harbor.
          (2) Report.--Not later than three years after the effective 
        date described in subsection (c)(1), the Secretary of Health 
        and Human Services shall submit to Congress a report on the 
        study under paragraph (1).
          (3) Safe harbors described.--For purposes of paragraphs (1) 
        and (2), the safe harbors described in this paragraph are--
                  (A) the safe harbor under section 1128A(b)(4) of such 
                Act (42 U.S.C. 1320a-7a(b)(4)), as added by subsection 
                (a)(1); and
                  (B) the safe harbor under section 1128B(b)(3)(J) of 
                such Act (42 U.S.C. 1320a-7b(b)(3)(J)), as added by 
                subsection (b).

SEC. 302. EXCEPTION TO LIMITATION ON CERTAIN PHYSICIAN REFERRALS (UNDER 
                    STARK) FOR PROVISION OF HEALTH INFORMATION 
                    TECHNOLOGY AND TRAINING SERVICES TO HEALTH CARE 
                    PROFESSIONALS.

  (a) In General.--Section 1877(b) of the Social Security Act (42 
U.S.C. 1395nn(b)) is amended by adding at the end the following new 
paragraph:
          ``(6) Information technology and training services.--
                  ``(A) In general.--Any nonmonetary remuneration (in 
                the form of health information technology or related 
                installation, maintenance, support or training 
                services) made by an entity that is a hospital, group 
                practice, prescription drug plan sponsor, or a Medicare 
                Advantage organization to a physician if--
                          ``(i) the provision of such remuneration is 
                        without an agreement between the parties or 
                        legal condition that--
                                  ``(I) limits or restricts the use of 
                                the health information technology to 
                                services provided by the physician to 
                                individuals receiving services at the 
                                entity;
                                  ``(II) limits or restricts the use of 
                                the health information technology in 
                                conjunction with other health 
                                information technology; or
                                  ``(III) conditions the provision of 
                                such remuneration on the referral of 
                                patients or business to the entity;
                          ``(ii) such remuneration is arranged for in a 
                        written agreement that is signed by the parties 
                        involved (or their representatives) and that 
                        specifies the remuneration made and states that 
                        the provision of such remuneration is made for 
                        the primary purpose of better coordination of 
                        care or improvement of health quality, 
                        efficiency, or research; and
                          ``(iii) the entity (or a representative of 
                        such entity) has not taken any action to 
                        disable any basic feature of any hardware or 
                        software component of such remuneration that 
                        would permit interoperability.
                  ``(B) Health information technology defined.--For 
                purposes of subparagraph (A), the term `health 
                information technology' means hardware, software, 
                license, right, intellectual property, equipment, or 
                other information technology (including new versions, 
                upgrades, and connectivity) designed primarily for the 
                electronic creation, maintenance, or exchange of health 
                information to better coordinate care or improve health 
                care quality, efficiency, or research.''.
  (b) Effective Date and Effect on State Laws.--
          (1) Effective date.--The amendment made by subsection (a) 
        shall take effect on the date that is 120 days after the date 
        of the enactment of this Act.
          (2) Preemption of state laws.--No State (as defined in 
        section 1101(a) of the Social Security Act (42 U.S.C. 1301(a)) 
        for purposes of title XI of such Act) shall have in effect a 
        State law that imposes a criminal or civil penalty for a 
        transaction described in section 1877(b)(6) of such Act, as 
        added by subsection (a), if the conditions described in such 
        section, with respect to such transaction, are met.
  (c) Study and Report to Assess Effect of Exception on Health 
System.--
          (1) In general.--The Inspector General of the Department of 
        Health and Human Services shall conduct a study to determine 
        the impact of the exception under section 1877(b)(6) of such 
        Act (42 U.S.C. 1395nn(b)(6)), as added by subsection (a). In 
        particular, the study shall examine the following:
                  (A) The effectiveness of the exception in increasing 
                the adoption of health information technology.
                  (B) The types of health information technology 
                provided under the exception.
                  (C) The extent to which the financial or other 
                business relationships between providers under the 
                exception have changed as a result of the exception in 
                a way that adversely affects or benefits the health 
                care system or choices available to consumers.
                  (D) The impact of the adoption of health information 
                technology on health care quality, cost, and access 
                under the exception.
          (2) Report.--Not later than three years after the effective 
        date described in subsection (b)(1), the Secretary of Health 
        and Human Services shall submit to Congress a report on the 
        study under paragraph (1).

  Amend the title so as to read:

      A bill to promote a better health information system.

                          Purpose and Summary

    The purpose of H.R. 4157, ``Better Health Information 
System Act of 2006,'' is to promote a better health information 
system. Broad use of information technology throughout the 
health care system is essential to improve the quality and 
efficiency of health care delivery. Adoption of health 
information technology (health IT) is increasingly necessary to 
deliver state-of-the-art care to individuals with chronic 
illness and to promote interoperability between providers, both 
private and public, and payers. Efficiencies gained by the 
coordinated development of health IT will accelerate and 
advance private and public efforts to improve quality, lower 
costs, reduce fraud and abuse, and promote the coordination of 
care to achieve better health outcomes.
    Title I codifies and expands the authorities and duties of 
the National Coordinator for Health Information Technology 
(National Coordinator) at the Department of Health and Human 
Services (HHS). This includes a number of responsibilities such 
as endorsing interoperability guidelines under a schedule, 
conducting a National survey on the information exchange 
capabilities of certain entities, and reviewing Federal 
information systems and security practices. Title I requires 
that certain Federal health information collection systems be 
capable of receiving information in a form consistent with any 
guidelines endorsed by the National Coordinator within three 
years of endorsement. Title I also provides that the President 
take steps to promote the use of nonidentifiable electronic 
health information for health and health care research. In 
addition, Title I provides for a report on the work conducted 
by the American Health Information Community (Community) and 
its role in the future as well as a report on financing 
incentives. In addition, Title I provides grants to help 
integrated health systems relay health information and better 
coordinate the delivery of care for uninsured, underinsured and 
medically underserved populations. Finally, Title I contains a 
demonstration program to promote adoption of health IT in the 
small physician setting.
    Title II makes revisions to Section 1173 of the Social 
Security Act and streamlines the process for updating additions 
and modifications to the Health Insurance Portability and 
Accountability Act (HIPPA) electronic financial and 
administrative healthcare transaction standards. Title II also 
sets deadlines for upgrading certain other electronic 
transaction standards. The bill as reported doesn't maintain 
provisions which would have mandated by 2009 a transition from 
the current 9th version of the International Classification of 
Diseases (ICD-9) to the 10th version for diseases and 
procedures (ICD-10 CM and ICD-10-PCS) for purposes of billing 
and transactions that were originally in H.R. 4157 as 
introduced. Upon adoption of the 10th version, however, the 
bill as reported prohibits requiring providers to code to a 
level of specificity that necessitates documentation of non-
medical external causes of injury.
    Lastly, Title III creates safe harbors for providing 
certain health IT or related services under both Section 1128B 
of the Social Security Act (anti-kickback law) and Section 1877 
of the Social Security Act (the physician referral law), 
contingent on a number of conditions in such safe harbors.

                  Background and Need for Legislation

    Today's health IT provides substantial opportunity to 
improve health and health care. At the simplest level, an e-
mail with attachments transmitted through a broadband 
connection increases the speed of exchanging health information 
among providers. Much larger advantages come from placing 
health information into formats which allow software to sort or 
aggregate such information for multiple purposes. These 
purposes include greater data sharing, intelligent support to 
physicians for patient care, remote patient monitoring, use of 
nonidentifiable patient information for studies, quality 
measure reporting, pricing transparency, bio-surveillance, and 
provision of personal health records to involve patients in 
their own care.
    Changing the way health records are created, stored, 
maintained, and transferred across the health care industry is 
not easy. Many observers, however, believe adoption of more 
sophisticated health IT and practices has been slower than has 
occurred in other industries. Moreover, greater functionality 
of electronic health information systems depends on integration 
in a manner that allows for the interoperable exchange of such 
information.
    The primary engine for advancing a better health 
information system is and will continue to be the private 
sector. Software and technology vendors are making products 
with increasing value and function. Participants in the health 
care industry are improving quality of care and efficiency by 
adopting new technologies, which provide a good return on 
investments.
    The policies and programs in the Better Health Information 
System Act of 2006 are by no means exhaustive. Moreover, the 
legislation reflects a subset of efforts already underway 
through the leadership of the President, the Secretary of HHS, 
and others.

   CERTAIN INITIATIVES AT THE DEPARTMENT OF HEALTH AND HUMAN SERVICES

    On April 27, 2004, the President signed Executive Order 
13335 (EO) announcing his commitment to the promotion of health 
IT to lower costs, reduce medical errors, improve quality of 
care, and provide better information for patients and 
physicians. In particular, the President called for widespread 
adoption of electronic health records (EHRs) within 10 years so 
that health information will follow patients throughout their 
care in a seamless and secure manner. Toward that vision, the 
EO directed the Secretary of HHS to establish within the Office 
of the Secretary the position of National Coordinator for 
Health Information Technology (National Coordinator) with 
responsibilities for coordinating Federal health IT programs 
with those of relevant executive branch agencies as well as 
coordinating with the private sector on their health IT 
efforts.
    On July 21, 2004, during the Department's Health IT Summit, 
the Administration published the ``Strategic Framework: The 
Decade of Health Information Technology: Delivering Consumer-
centric and Information-rich Health Care'' (The Framework). The 
Framework outlined an approach toward nationwide implementation 
of interoperable EHRs and identified four major goals. These 
goals are: (1) inform clinical practice by accelerating the use 
of EHRs; (2) interconnect clinicians so that they can exchange 
health information using advanced and secure electronic 
communication; (3) personalize care with consumer-based health 
records and better information for consumers; and (4) improve 
public health through advanced bio-surveillance methods and 
streamlined collection of data for quality measurement and 
research.
    On July 14, 2005, Secretary Leavitt formally announced the 
formation of a national collaboration, the American Health 
Information Community (the Community), a public-private body 
formed pursuant to the Federal Advisory Committee Act to help 
transition the Nation to EHRs in a smooth, market-led way. The 
Community will provide input and recommendations to the 
Secretary on the use of common standards and on achievement of 
interoperability among EHRs while assuring that the privacy and 
security of those records are protected.
    HHS is providing contracts in a number of areas. Those 
include a process to harmonize and make refinements to industry 
wide standards; create a process to specify criteria for 
certain EHR products; development of models for health 
information exchange; and evaluation of variation of State laws 
around privacy and security that may pose challenges for health 
information exchange.
    HHS is doing a number of things to assist in the 
development of a national interoperable health IT 
infrastructure including: evaluation of health care providers 
in small practices to determine their EHR adoption rates; 
setting standards to support electronic prescriptions for 
Medicare; and proposing exceptions to the physician self 
referral and anti kickback statutes.
    The bill reported out of Committee is intended to enhance 
these efforts.

                            INTEROPERABILITY

    The Commission on Systemic Interoperability, authorized by 
the MMA, held its first meeting on January 10, 2005. 
Interoperability focuses on the need for healthcare information 
to be connected so information is accessible whenever and 
wherever it is needed and authorized. Interoperability issues 
often become exceedingly technical, focusing on the rules for 
how information is created, stored, and moved among computer 
systems. The Commission recommended among other items that HHS, 
advised by the American Health Information Community (AHIC) and 
in consultation with the National Committee for Vital and 
Health Statistics (NCVHS), should ensure broad acceptance, 
effective implementation, and ongoing maintenance of a complete 
set of interoperable, non-overlapping data standards that 
function to assure data in one part of the health system, when 
authorized, is available and meaningful across the complete 
range of clinical, administrative, payment system, public 
health, and research settings. Additionally, AHIC should build 
upon HIPAA to develop national standards for authentication, 
authorization, and security that will permit the necessary 
infrastructure for consumers' confident adoption of health IT. 
Standardizing data at the point of its creation will accelerate 
greatly the creation of an interoperable healthcare information 
network. HHS should work with manufacturers of drugs, devices, 
and test kits to achieve standardized identifiers and 
vocabulary in labels and packaging as well as in all data 
outputs of devices and test kits.
    The bill as reported provides for (1) the National 
Coordinator to develop a schedule for the endorsement of 
guidelines for interoperability for significant use cases which 
may include the exchange of laboratory data, drug prescribing 
data, clinical research and electronic health records; (2) the 
National Coordinator to endorse interoperability guidelines 
under a schedule it develops on a yearly basis but consistent 
with the schedule; (2) conduct of a national survey on the 
information exchange capabilities of certain entities; and (3) 
a review of Federal information systems and security practices. 
Title I also requires that certain Federal health information 
collection systems be capable of receiving information in a 
form consistent with any guidelines endorsed by the National 
Coordinator within three years of endorsement.
    The Committee believes issues surrounding interoperability 
can be very complicated. Moreover, there is no single clear 
definition of interoperability. It is important that the 
endorsements and requirements on Federal information collection 
systems be practical, not pose unnecessary administrative or 
cost burdens, and not disrupt or take away from the delivery of 
health care. Interoperability can be achieved on systems in 
many ways, including through the addition of software that 
converts information to a more interoperable format. 
Accordingly, measuring interoperability at the point of 
purchasing or donating products may not be pragmatic. A device 
or software can be placed into one information system in a 
manner that operates to meet interoperability guidelines. Yet, 
the same device or software can be placed into another system 
that may not meet interoperability guidelines. The Committee 
believes the National Coordinator and others will need to 
address the complexity of these issues in an ongoing process 
and that policies related to interoperability guidelines will 
need to be considered carefully.

                               INCENTIVES

    Generally, health information technology and related 
expenses qualify as business expenses that could either be 
depreciated or deducted under Federal tax laws.
    There are some existing Federal programs and initiatives 
underway to provide funding and other assistance for the 
adoption of health IT. Some of these initiatives include:
    Medicaid Transformation Grants within the Deficit Reduction 
Act of 2005 (Public Law 109-171) provide for payments to States 
for the adoption of innovative methods to improve the 
effectiveness and efficiency in providing medical assistance 
under Medicaid. These include methods for reducing patient 
error rates through the implementation and use of EHRs, 
electronic clinical decision support tools and e-prescribing 
programs. These grants were funded at $75 million in each of 
fiscal years 2007 and 2008.
    The MMA authorizes the Secretary of HHS to make grants to 
assist physicians in implementing electronic prescription drug 
programs. The MMA also established a Medicare Care Management 
Performance Demonstration which provides payment to each 
physician who exceeds quality and outcome measures and who uses 
health IT to manage care. $500 million was authorized for 
fiscal year 2007 and such sums as may be necessary for each of 
fiscal years 2008 and 2009. The MMA also extends for four 
years, and increases funding to $60 million, a telemedicine 
demonstration project that involves health care provider 
telemedicine networks that use high-capacity computer systems 
and medical informatics to improve primary care and prevent 
health complications in Medicare beneficiaries with diabetes.
    Within the Agency for Healthcare Research and Quality 
(AHRQ), there are numerous initiatives involving funding for 
health IT. AHRQ's $166 million in health IT investments support 
diffusion of health IT to 41 States. Many AHRQ health IT 
projects also receive funding from private charitable 
foundations, local communities, and State governments. They 
have awarded over 100 three-year grants that focus on specific 
applications of health IT to problem areas in healthcare 
delivery. They have also awarded six 5-year State contracts to 
support the development of statewide health information 
exchange (HIE). Additionally, AHRQ's National Resource Center 
for Health IT (NRC) has invested over $20 million over 5 years 
in nationwide resource and assistance for organizations 
implementing health IT and has provided access to national 
experts with experience in health IT implementation.
    The Centers for Medicare and Medicaid Services (CMS) is 
providing technical assistance to physician offices on how to 
adopt health IT tools to improve quality through the Doctor's 
Office Quality Information Technology (DOQ-IT) project. 
Additionally, the President's fiscal year 2007 budget request 
includes $169 million, an increase of $58million over fiscal 
year 2006, to continue efforts toward achieving the President's goal 
for most Americans to have electronic health records by 2014.
    The bill as reported adds to these incentives. Title I 
provides $30 million in grants over two years to help 
integrated health systems relay health information and better 
coordinate the delivery of care for uninsured, underinsured and 
medically underserved populations. Title I also contains a 
demonstration program to promote adoption of health IT in the 
small physician setting through a $10 million grant over two 
years. Importantly, as discussed below, Title III removes 
barriers to economically viable arrangements to better 
coordinate care through the use of information technology. This 
will increase adoption and improve return on investment for 
such expenditures.

                              SAFE HARBORS

    Section 1128B(b) of the Social Security Act (the anti-
kickback statute) provides criminal penalties for individuals 
or entities that knowingly and willfully offer, pay, solicit, 
or receive remuneration in order to induce or reward the 
referral of business reimbursable under any of the Federal 
health care programs, as defined in Section 1128B(f) of the 
Act. The offense is classified as a felony and is punishable by 
fines of up to $25,000 and imprisonment for up to five years. 
Violations of the anti-kickback statute may also result in the 
imposition of civil money penalties. As a result of the 
statute's broad reach, however, concern was expressed that some 
relatively innocuous commercial arrangements were covered by 
the statute and, therefore, potentially subject to criminal 
prosecution. In response, Congress required the development and 
promulgation of regulations, the so-called ``safe harbor'' 
provisions, that would specify various payment and business 
practices that would not be treated as criminal offenses under 
the anti-kickback statute. Since July 29, 1991, the HHS Office 
of Inspector General (OIG) has published a series of final 
regulations establishing ``safe harbors'' in various areas.
    Section 1877 of the Social Security Act (the physician 
self-referral law): (1) prohibits a physician from making 
referrals for certain designated health services (DHS) payable 
by Medicare to an entity with which he or she (or an immediate 
family member) has a financial relationship (ownership interest 
or compensation arrangement), unless an exception applies; and 
(2) prohibits the entity from submitting claims to Medicare for 
those referred services, unless an exception applies. The 
statute establishes a number of exceptions and grants the 
Secretary of HHS authority to create additional regulatory 
exceptions for financial relationships that do not pose a risk 
of program or patient abuse.
    Section 101 of the MMA added a new Section 1860D to the 
Social Security Act establishing a prescription drug benefit in 
the Medicare program. As part of the new legislation, Congress 
directed the Secretary to adopt standards for electronic 
prescribing with the objective of improving patient safety, 
quality of care, and efficiency in the delivery of care. The 
MMA directs the Secretary, in consultation with the Attorney 
General, to create an exception to the physician self-referral 
prohibition and a safe harbor under the anti-kickback statute 
to protect certain arrangements involving the provision of non-
monetary remuneration (consisting of items and services in the 
form of hardware, software, or information technology and 
training services) that is necessary and used solely to receive 
and transmit electronic prescription drug information in 
accordance with electronic prescribing standards published by 
the Secretary.
    Fear of self-referral and anti-kickback laws often stands 
in the way of diffusion and use of health information 
technology and better coordination of care. Today, nothing 
prevents a physician from purchasing his own system under his 
own license, performing his own maintenance, or conducting his 
own training and upkeep. Yet obtaining these items through a 
proven system in a hospital or from another health care entity 
can reduce risk and allow for economies of scale. One of the 
most significant risks to a physician's office is an unproven 
and unused system. Connecting to an existing system can reduce 
this risk premium.
    There are numerous reasons for a health care entity to 
provide software, training, licensing agreements, etc. that do 
not involve an agreement for referrals. First, connecting 
providers creates faster and cheaper information flow between 
parties. Second, such information flow improves coordination of 
care which leads to better follow-up care for patients. This 
translates into improved outcomes and less complication. Third, 
better outcomes reduce liability expenses for health care 
entities such as hospitals. Fourth, better coordination of care 
means less duplicative tests and procedures.
    EHRs can not only aggregate data but also keep track 
through an audit trail of each time a record has been accessed, 
who opened the record, and what data was entered. This should 
be a valuable tool for identifying fraud including kickbacks 
and fraud during billing. Just the fact that an EHR can perform 
this function will be a deterrent. Moreover, fraud can be 
detected and reduced through a variety of information 
technology capabilities, including abnormal pattern 
recognition, powerful system audits, practice pattern 
monitoring, and tracking of controlled substances.
    Title III provides for limited safe harbors for hospitals, 
group practices, prescription drug plan sponsors, and Medicare 
Advantage organizations providing certain health information 
technology or related services under both Section 1128B of the 
Social Security Act (the anti- kickback statute) and Section 
1877 of the Social Security Act (the physician self-referral 
law). These have been crafted with the above considerations in 
mind. However, the Committee does not support agreements 
between parties that are conditioned on referrals.

                          PRIVACY AND SECURITY

    H.R. 4157 as introduced would provide for a study regarding 
Federal and State privacy and security standards and a new 
preemption scheme that would fully preempt State standards 
within a certain timeframe. The purpose of this provision was 
to reduce barriers to an interstate electronic health 
information system. Several parties objected to such a change. 
Other parties have argued for additional and substantial 
changes to the current Federal privacy rules. HHS is currently 
assessing variations in State laws and organization level 
business policies aroundprivacy and security practices, 
including variations in implementation of HIPAA privacy and security 
requirements that may pose challenges to automated health information 
exchange and interoperability.
    The bill reported out of Committee preserves the existing 
Federal-State relationship and does not rewrite the current 
privacy rules. As discussed below, these rules are the product 
of a great deal of process and debate and are very extensive in 
nature. Several privacy and security laws are currently under 
review by the Committee.
    HIPAA Sections 261 through 264 requires the Secretary of 
HHS to publicize standards for the electronic exchange, 
privacy, and security of health information. Collectively, 
these are known as the Administrative Simplification 
provisions. HIPAA Section 264 provides that if Congress fails 
to enact legislation governing the privacy of individually 
identifiable health information within 3 years (of 1996), HHS 
is to promulgate regulations containing such standards. Section 
264 of HIPAA also provides that such regulations do not preempt 
contrary state law if the provision of state law imposes 
requirements, standards, or implementation specifications that 
are more stringent than those imposed by the federal 
regulations.
    Because Congress was unable to enact health privacy 
legislation within the 3-year deadline, HHS developed proposed 
Standards for Privacy of Individually Identifiable Health 
Information, known as the ``Privacy Rule,'' and released it for 
public comment on November 3, 1999. The Department received 
over 52,000 public comments. The final Privacy Rule (described 
below) was published December 28, 2000. In March 2002, the 
Department proposed and released for public comment 
modifications to the Privacy Rule. The Department received over 
11,000 comments. The final modifications were published in 
final form on August 14, 2002.
    The Privacy Rule establishes a set of national standards 
for the protection of certain health information. The Privacy 
Rule standards address the use and disclosure of individually 
identifiable health information (protected health information) 
by organizations directly subject to the rule called ``covered 
entities.'' These include most healthcare providers, health 
plans, and health care clearinghouses. Other groups called 
``business associates'' of a covered entity may need to follow 
certain contractual requirements as required by HIPAA but are 
not themselves subject to the same enforcement authorities 
under HIPAA. The Rule also sets standards governing an 
individuals' privacy rights to understand and control how their 
health information is used. Within HHS, the Office for Civil 
Rights (OC) has responsibility for implementing and enforcing 
the Privacy Rule with respect to voluntary compliance 
activities and civil money penalties.
    A covered entity is permitted to use and disclose protected 
health information fairly freely without an individual's 
authorization to the individual and for treatment, payment, and 
health care operations. In addition, no authorization is needed 
for disclosing health information for ``public interest'' 
purposes (including, but not limited to, research, public 
health, law enforcement and disclosures required by law) so 
long as the covered entity meets the specific requirements 
imposed by the Rule.
    For a number of purposes, (such as including information in 
facility directories and dealing with family and friends 
involved in a patient's care) a covered entity may use and 
disclose protected health information without an individual's 
written authorization so long as they give the individual the 
opportunity to object.
    A central aspect of the Privacy Rule is the principle of 
``minimum necessary''. A covered entity must develop and 
implement policies and procedures to reasonably limit uses and 
disclosures of protected health information to the minimum 
necessary needed to accomplish the intended purpose of the use, 
disclosure, or request. A key exception to the minimum 
necessary rule is made for treatment: the minimum necessary 
rule does not apply when a provider asks for or discloses 
health information for treatment purposes.
    A covered entity must develop and implement written privacy 
policies and procedures that are consistent with the Privacy 
Rule. A covered entity must designate a privacy official 
responsible for developing and implementing its privacy 
policies and procedures as well as a contact person or contact 
office responsible for receiving complaints and providing 
individuals with information on the covered entity's privacy 
practices. A covered entity must train all workforce members on 
its privacy policies and procedures as necessary and 
appropriate for them to carry out their functions. A covered 
entity must have and apply appropriate sanctions against 
workforce members who violate its privacy policies and 
procedures or the Privacy Rule. Also, a covered entity must 
mitigate, to the extent practicable, any harmful effect it 
learns was caused by use or disclosure of protected health 
information by its workforce or its business associates in 
violation of its privacy policies and procedures or the Privacy 
Rule.
    A covered entity must maintain reasonable and appropriate 
administrative, technical, and physical safeguards to prevent 
intentional or unintentional use or disclosure of protected 
health information in violation of the Privacy Rule and to 
limit its incidental use and disclosure pursuant to otherwise 
permitted or required use or disclosure. For example, such 
safeguards could include shredding documents containing 
protected health information before discarding them, securing 
medical records with lock and key or pass-code, and limiting 
access to keys or pass codes.
    The HIPAA Privacy Rule preempts provisions of state law 
that are contrary to the Federal standard. In accordance with 
Section 264 of HIPAA, the Privacy Rule provides exceptions from 
this preemption for contrary State laws that: (1) relate to the 
privacy of individually identifiable health information and 
provide greater privacy protections or privacy rights with 
respect to such information; (2) provide for the reporting of 
disease or injury, child abuse, birth or death, or for public 
health surveillance, investigation, or intervention; or (3) 
require certain health plan reporting such as for management or 
financial audits.
    The final rule adopting HIPAA standards for security was 
published in the Federal Register on February 20, 2003. This 
final rule specifies a series of administrative, technical, and 
physical security procedures for covered entities to assure the 
confidentiality of electronic protected health information. The 
security standards define administrative, physical, 
andtechnical safeguards to protect the confidentiality, integrity, and 
availability of electronic protected health information. The standards 
require covered entities to implement basic safeguards to protect 
electronic protected health information from unauthorized access, 
alteration, deletion, and transmission.
    HHS may impose civil money penalties on a covered entity of 
$100 per failure to comply with a requirement. That penalty may 
not exceed $25,000 per year for multiple violations of the same 
Privacy Rule requirement in a calendar year. A person who 
knowingly obtains or discloses individually identifiable health 
information in violation of HIPAA faces a fine of $50,000 and 
up to one year in prison. The criminal penalties increase to 
$100,000 and up to five years imprisonment if the wrongful 
conduct involves false pretenses and to $250,000 and up to ten 
years imprisonment if the wrongful conduct involves the intent 
to sell, transfer, or use individually identifiable health 
information for commercial advantage, personal gain, or 
malicious harm. The United States Department of Justice, the 
department responsible for criminal enforcement of the Privacy 
Rule, has taken the position that these criminal penalties may 
only be applied to the ``covered entity'' and may not be 
imposed on employees or certain others.
    The Privacy Act of 1974, as amended at 5 U.S.C. 552a, 
applies to Federal agencies and protects records that can be 
retrieved by personal identifiers such as a name, social 
security number, or other identifying number or symbol. The 
Privacy Act prohibits disclosure of these records without 
individual written consent unless one of the twelve disclosure 
exceptions enumerated in the Act applies. These records are 
held in Privacy Act systems of records, and a notice of any 
such system is published in the Federal Register. These notices 
identify the legal authority for collecting and storing the 
records, a description of whose records will be collected, the 
type of information to be collected, and how such records will 
be used.
    The bill reported out of Committee maintains all of the 
above protections while preserving the existing Federal-State 
relationships among laws. Regulations must balance the need to 
get the right information at the right time with privacy and 
security concerns. This will be a subject of ongoing review for 
the Committee. Title I does provide a role for the National 
Coordinator in assisting other Federal Departments and agencies 
in security issues.

                                Hearings

    On March 16, 2006, the Subcommittee on Health held a 
hearing entitled ``Legislative Proposals to Promote Electronic 
Health Records and a Smarter Health Information System.'' The 
Subcommittee received testimony from: Mr. Ivo Nelson, 
Healthcare Industry Leader, Global Americas, IBM; Dr. William 
Braithwaite, MD, PhD, Chief Clinical Officer, eHealth 
Initiative and Foundation for eHealth Initiative; Mr. Alan 
Mertz, President, American Clinical Laboratory Association; Mr. 
Bill Vaughan, Senior Policy Analyst, Consumers Union; Mr. Mark 
Neaman, President and CEO, Evanston Northwestern Healthcare; 
Mr. James Pyles, Attorney Member, Powers, Pyles, Sutter, and 
Verville, P.C.; and Dr. Don Detmer; President and CEO, American 
Medical Informatics Association.

                        Committee Consideration

    On Thursday, June 8, 2006, the Subcommittee on Health met 
in open markup session and approved H.R. 4157 for Full 
Committee consideration, amended, by a voice vote, a quorum 
being present.
    On Thursday, June 15, 2006, the Full Committee met in open 
markup session and ordered H.R. 4157 favorably reported to the 
House, amended, by a record vote of 28 yeas and 14 nays, a 
quorum being present.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. The 
following are the recorded votes taken on amendments offered to 
the measure, including the names of those Members voting for 
and against. A motion by Mr. Barton to order H.R. 4157 reported 
to the House, amended, was agreed to by a record vote of 28 
yeas and 14 nays.


                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee held an oversight 
hearing and made findings that are reflected in this report.

         Statement of General Performance Goals and Objectives

    The purpose of H.R. 4157, the Better Health Information 
System Act of 2006, is to provide for a better health 
information system.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee finds that H.R. 
4157, the Better Health Information System Act of 2006, would 
result in no new or increased budget authority, entitlement 
authority, or tax expenditures or revenues.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, July 5, 2006.
Hon. Joe Barton,
Chairman, Committee on Energy and Commerce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 4157, the Better 
Health Information System Act of 2006.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Tom Bradley.
            Sincerely,
                                          Donald B. Marron,
                                                   Acting Director.
    Enclosure.

H.R. 4157--Better Health Information System Act of 2006

    Summary: CBO estimates that implementing H.R. 4157 would 
cost $4 million in 2007 and $38 million over the 2007-2011 
period, assuming appropriation of the authorized amounts. 
Enacting the bill would have no effect on direct spending or 
revenues.
    H.R. 4157 would amend the Public Health Service Act (PHSA) 
to codify the establishment and responsibilities of the Office 
of the National Coordinator for Health Information Technology. 
The bill also would require the Secretary to conduct several 
studies on programs to promote the development and adoption of 
health information technology, and would authorize the 
appropriation of $20 million a year for 2007 and 2008 for 
grants to facilitate the adoption of certain health information 
technology.
    In addition, H.R. 4157 would modify the Social Security Act 
to:
           Specify procedures for adopting updated 
        standards for the electronic exchange of health data, 
        and require that certain updated standards be 
        implemented in 2009; and
           Establish ``safe harbors'' for donations of 
        health information technology that might otherwise be 
        subject to civil monetary penalties, criminal 
        penalties, or sanctions for violating the prohibitions 
        on certain physician referrals.
    H.R. 4157 would preempt, in some circumstances, state laws 
that govern record-keeping requirements and that establish 
civil or criminal penalties for the exchange of health 
information technology. Because those preemptions would limit 
the application of state laws, they would be intergovernmental 
mandates as defined in the Unfunded Mandates Reform Act (UMRA). 
CBO estimates, however, that the costs of the mandates to 
states would be small and, thus, would not exceed the threshold 
established in UMRA ($64 million in 2006, adjusted annually for 
inflation).
    The bill would impose a private-sector mandate on health 
plans, providers, and clearing houses by requiring them to 
adopt updated standards for claims transactions by 2009. CBO 
assumes that this deadline would be met under current law, 
however, so the mandate would impose no additional cost on 
those private-sector entities.
    Estimated cost to the Federal Government: The estimated 
cost of H.R. 4157 is shown in the following table. The costs of 
this legislation fall within budget function 550 (health).

----------------------------------------------------------------------------------------------------------------
                                                                    By fiscal year, in millions of dollars--
                                                               -------------------------------------------------
                                                                  2007      2008      2009      2010      2011
----------------------------------------------------------------------------------------------------------------
                                  CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Authorization level...........................................        20        20         0         0         0
Estimated outlays.............................................         4        14        14         5         1
----------------------------------------------------------------------------------------------------------------

Basis of estimate

    On April 27, 2004, the President issued Executive Order 
13335, which established within the Office of the Secretary of 
Health and Human Services (HHS) the position of National Health 
Information Technology Coordinator. The Secretary subsequently 
established the Office of the National Coordinator of Health 
Information Technology (ONCHIT) to support the adoption of 
interoperable health information technology. Funding for ONCHIT 
totaled $62 million for 2006: $43 million was appropriated to 
ONCHIT, and $19 million was reprogrammed from other activities. 
The President requested $116 million for ONCHIT for 2007.
    H.R. 4157 would amend the Public Health Service Act to 
codify the establishment and responsibilities of the Office of 
the National Coordinator for Health Information Technology, 
specify procedures for adopting updated standards for the 
electronic exchange of health data, and establish safe harbors 
for donations of health information technology.
    For this estimate, CBO assumes that H.R. 4157 will be 
enacted near the end of fiscal year 2006, that the authorized 
amounts will be appropriated each year, and that outlays will 
follow historical patterns for similar activities of the 
Department of Health and Human Services.
            Health Information Technology and Quality
    The National Coordinator for Health Information Technology 
serves as the senior advisor to the Secretary of HHS and the 
President on all health information technology programs and 
initiatives, and is responsible for:
           Developing and maintaining a strategic plan 
        to guide the nationwide implementation of electronic 
        health records in both the public and private health 
        care sectors;
           Coordinating spending by federal agencies 
        for health information technology programs and 
        initiatives; and
           Coordinating outreach activities to the 
        private sector on health information technology 
        matters.
    H.R. 4157 would codify the establishment and 
responsibilities of the Office of the National Coordinator for 
Health Information Technology. The bill would require the 
Secretary of HHS to prepare reports on certain activities 
initiated pursuant to the Executive Order to promote the 
development of a nationwide health information network and on 
issues related to the development, operation, and 
implementation of state, regional, and community organizations 
that share and coordinate the deployment and use of health 
information technology (so-called health information 
exchanges). CBO estimates that implementing those provisions 
would not change the cost of ONCHIT's activities.
    The bill also would authorize the appropriation of $15 
million a year for 2007 and 2008 for grants to integrated 
health systems to promote the adoption and use of health 
information technology for the purpose of improving 
coordination of care for uninsured and underserved populations. 
In addition, it would authorize the appropriation of $5 million 
a year for 2007 and 2008 for grants to small physician 
practices located in rural or medically underserved areas for 
the purchase and support of health information technology. 
Based on spending patterns for similar programs that provide 
grants to health care providers, CBO estimates that 
implementing those grant programs would cost $4 million in 2007 
and $38 million over the 2007-2011 period, assuming 
appropriation of the specified amounts.
            Standards for the Electronic Exchange of Health Data
    H.R. 4157 would require the Secretary of HHS to establish 
expedited procedures for adopting updates to standards that 
enable the electronic exchange of health data. The bill also 
would require that two sets of standards apply to certain 
health information transactions by April 1, 2009: the ``X12'' 
standards developed by the Accredited Standards Committee for 
electronic data interchange, and the updated telecommunication 
standards adopted by the National Council for Prescription Drug 
Programs. CBO estimates that implementing those provisions 
would not have a significant effect on federal spending.
            Safe Harbors for Donations of Health Information Technology
    H.R. 4157 would establish ``safe harbors'' for donations of 
health information technology that might otherwise be subject 
to civil monetary penalties, criminal penalties, or sanctions 
for violating the prohibitions on certain physician referrals. 
The bill would permit certain entities (hospitals, group 
practices, Medicare Advantage plans, and prescription drug 
plans) to donate health information technology (hardware; 
software; or related maintenance, support, or training 
services) to physicians.
    The Administration has identified the current application 
of those penalties and sanctions as an impediment to the 
success of efforts to promote the widespread adoption of 
interoperable health information technology. Accordingly, the 
HHS Office of the Inspector General and the Centers for 
Medicare & Medicaid Services, under authority existing in 
current law, are engaged in a rule-making process to establish 
safe harbors for donations of health information technology 
that would balance enforcement of program-integrity rules with 
promotion of the adoption of interoperable health information 
technology. In the preliminary stage of the rule-making 
process, those offices described a framework that would limit:
           Entities eligible for the safe harbor (a 
        hospital may donate to members of its medical staff; a 
        group practice may donate to physicians who are members 
        of the group practice; and Medicare Advantage plans and 
        prescription drug plans may donate to their prescribing 
        physicians), and
           Eligible donations (software and related 
        training).
    CBO anticipates that the final rules will establish a set 
of eligible entities and donations similar to those specified 
in the bill. Therefore, CBO estimates that enacting the safe-
harbor provisions in H.R. 4157 would not have a significant 
effect on federal spending.
            Budgetary Effects of Health Information Technology
    CBO expects that the use of information technology in the 
health care sector will continue to grow under current law, and 
that expanded use of such technology will likely produce 
improvements in the quality of the health care provided to U.S. 
residents. In some cases, thatimprovement in the quality of 
health care might mean less use of medical services; in other cases, it 
might mean an increase in utilization.
    Under current law, CBO also expects that the expanded use 
of health information technology will likely result in 
increased efficiency in the health care system. That is, the 
use of information technology will result in more health 
benefits per dollar of spending than would otherwise be 
realized.
    Experts caution, however, that the evidence is mixed 
concerning whether those improvements in quality and efficiency 
will also result in lower spending for health care, either in 
the private sector or for government programs.\1\ In her recent 
testimony to the Senate Subcommittee on Technology, Innovation, 
and Competitiveness, Dr. Carolyn Clancy (Director of the Agency 
for Health Research and Quality) noted that, if poorly designed 
or implemented, health information technology will not bring 
those benefits, and in some cases may even lead to new medical 
errors and potential costs. She also noted that achieving 
improvements in health care and realizing potential cost 
savings will require real process change and will not result 
from simply acquiring and deploying hardware and software.
---------------------------------------------------------------------------
    \1\ See, for example:
    Testimony of Carolyn Clancy, MD to the Subcommittee on Technology, 
Innovation and Competitiveness of the Senate Committee on Commerce, 
Science, and Transportation, June 21, 2006. (http://
commerce.senate.gov/public/_files/Clancy062106.pdf)
    Clifford Goodman, ``Savings In Electronic Medical Record Systems? 
Do It For The Quality'', Health Affairs, Sept/Oct 2005. (http://
content.healthaffairs.org/cgi/content/full/24/5/1124)
    Paul B. Ginsburg, Ph.D., ``Controlling Health Care Costs'', NEJM, 
Oct 14, 2004. (http://content.nejm.org/cgi/content/full/351/16/1591)
    James Walker, ``Electronic Medical Records And Health Care 
Transformation'', Health Affairs, Sept./Oct. 2005. (http://
content.healthaffairs.org/cgi/content/full/24/5/1118)
---------------------------------------------------------------------------
    To the extent that health information technology will 
result in lower spending for health care, much of those savings 
would not be passed through as a reduction in direct spending 
for federal programs--particularly Medicare--under current law. 
For example, two areas account for much of the potential 
savings reported in the literature: reductions in the cost of 
care during a hospital stay, and administrative savings for 
providers and claims processors. Under current law, Medicare's 
payment rates for hospital inpatient services are updated each 
year to reflect changes in general inflation rates, and do not 
reflect changes in the costs that hospitals incur (either for 
administrative activities or for providing health care 
services). Medicare might realize savings in the cost of 
processing claims. However, funding for Medicare's claims-
processing activities is subject to appropriation, so such 
savings could only be realized through the appropriations 
process.
    In preparing an estimate of the budgetary effect of 
enacting this bill--or other legislation involving health 
information technology--CBO focuses on the extent to which the 
bill would change the rate at which the use of health 
technology will grow or how well that technology will be 
designed and implemented under current law. CBO then evaluates 
the extent to which those changes, in conjunction with other 
provisions in current law and in the proposed legislation, 
would affect direct spending.
    CBO estimates that enacting H.R. 4157 would not 
significantly affect either the rate at which the use of health 
technology will grow or how well that technology will be 
designed and implemented. Therefore, CBO estimates enacting the 
bill would have no effect on spending by the federal 
government, other than the specific appropriations it would 
authorize.
    Estimated impact on state, local, and tribal governments: 
H.R. 4157 would preempt, in some circumstances, state laws that 
govern record-keeping requirements and that establish civil or 
criminal penalties for the exchange of health information 
technology. While those preemptions would be intergovernmental 
mandates as defined in UMRA, CBO estimates that the costs of 
the mandates to states would be small and, thus, would not 
exceed the thresholds established in UMRA ($64 million in 2006, 
adjusted annually for inflation).
    The bill would preempt state laws that require providers to 
maintain data in paper form, if those providers receive federal 
funds and maintains the data electronically. In most cases, 
such a preemption would be a condition of aid and thus not an 
intergovernmental mandate, as most federal assistance to health 
care providers comes through state governments as part of 
agreements with the federal government. However, some federal 
assistance goes directly to providers, independent of federal 
agreements with state governments, and in those cases the 
preemption of state laws requiring paper documentation would be 
an intergovernmental mandate. CBO estimates, however, that the 
preemption would not significantly affect the budgets of state, 
local, or tribal governments because it would impose no duty on 
those governments that would result in additional spending or a 
loss of revenues.
    The bill also would change safe-harbor guidelines for the 
exchange of health information technology, and it would preempt 
state laws that would assess civil or criminal penalties on 
exchanges of information that the bill would allow. While this 
preemption could affect the ability of states to assess 
penalties and collect revenues, CBO estimates that any such 
losses would be small.
    Estimated impact on the private sector: The bill would 
impose a private-sector mandate on health plans, providers, and 
clearing houses by requiring them to adopt updated standards 
for claims transactions by April 1, 2009. The bill would 
require them to move from version 4010 to version 5010 of the 
Accredited Standards Committee X12 standards. It would also 
require them to move from version 5.1 of the National Council 
for Prescription Drug Programs Telecommunication Standards to 
the most recent version approved as of April 1, 2008.
    CBO assumes that this deadline would be met under current 
law. Thus, this mandate would impose no additional costs on 
private-sector entities.
    Estimate prepared by: Federal costs: Tom Bradley, Jeanne De 
Sa, and Camile Williams; impact on state, local and tribal 
governments: Leo Lex; impact on the private sector: Stuart 
Hagen and Julie Lee.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional authority for this legislation is provided in 
Article I, section 8, clause 3, which grants Congress the power 
to regulate commerce with foreign nations, among the several 
States, and with the Indian tribes.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation


Section 1. Short title and table of contents

    This Act may be cited as the ``Better Health Information 
System Act of 2006.''

Section 2. Preserving privacy and security laws

    Section 2 states that nothing in this Act affects the 
scope, substance, or applicability of privacy and security 
regulations pursuant to the Health Insurance Portability and 
Accountability Act of 1996 (HIPAA; Public Law 104-191).

Section 101. Office of the National Coordinator for Health Information 
        Technology

    Section 101 codifies the Office of National Coordinator for 
Health Information Technology (National Coordinator) including 
National goals and duties. This would include work with other 
agencies regarding the security of health information.

Section 102. Report on the American Health Information Community

    Section 102 requires a report to Congress within one year 
on the work of the American Health Information Community 
(Community) along with recommendations for the transition of 
the Community to a longer-term advisory and facilitation 
entity.

Section 103. Interoperability planning process; Federal information 
        collection activities

    Section 103 provides that the National Coordinator shall 
conduct by August 31, 2008 a national survey to measure the 
capabilities of entities to exchange electronic health 
information.
    This section requires that not later than December 31, 
2006, the National Coordinator to publish a strategic plan, 
including a schedule, for the assessment and endorsement of 
core interoperability guidelines for significant use cases. The 
National Coordinator has substantial flexibility in how to 
administer this section and to interpret the terms ``core,'' 
``interoperability,'' and ``significant use cases.'' Moreover, 
the scope and meaning of those terms may change as technology 
adoption, software, and health care practices evolve.
    The National Coordinator shall endorse a subset of core 
interoperability guidelines not later than one year after the 
publication of the schedule, and annually thereafter, with 
endorsement of all such guidelines consistent with the schedule 
by August 31, 2009.
    Section 103 requires the President to assure that 
activities involving the broad collection and submission of 
health information allow for submissions consistent with core 
interoperability guidelines within three years of endorsement 
of such guidelines by the National Coordinator.
    Further, the section requires the President to take 
measures to allow access to useful categories of non-
identifiable health information in records maintained by the 
Federal government or entities under contract with the Federal 
government to advance health care quality and health research.
    Section 103 also requires, for five years following the 
date of enactment of this Act, the National Coordinator to 
review and make recommendations regarding the operation of 
health information collection and exchange in the Federal 
government and the proposed purchasing plans of Federal 
agencies.

Section 104. Ensuring health care providers may maintain health 
        information in electronic form

    Section 104 assures that any health care provider may 
maintain records in electronic form for Federally-funded 
programs.

Section 105. Study and report on state, regional, and community health 
        information exchanges

    Section 105 requires the Secretary of HHS to conduct a 
study on issues related to the development, operation, and 
implementation of State, regional, and community health 
information exchanges.

Section 106. Grants to integrated health systems to promote health 
        information technologies to improve coordination of care for 
        the uninsured, underinsured, and medically underserved.

    Section 106 authorizes the Secretary to make grants to 
integrated health care systems for projects to bettor 
coordinate the provision of healthcare through the adoption of 
new health information technology or the significant 
improvement of existing health information technology.

Section 107. Demonstration program

    Section 107 requires the Secretary to establish a 
demonstration program under which grants are awarded to small 
physician practices that are located in rural areas or 
medically underserved urban areas for the purchase and support 
of health information technology.

Section 201. Procedures to ensure timely updating of standards that 
        enable electronic exchanges

    Section 201 streamlines the current procedures under 
Section 1173(a) of the Social Security Act for updating 
standards that enable electronic exchanges.

Section 202. Upgrade ASC X12 and NCPDP standards

    Section 202 requires upgrading to the Accredited Standards 
Committee X12 (ASC X12) version 5010. This section also 
requires upgrading the National Council for Prescription Drug 
Programs (NCPDP) telecommunications standards to the latest 
version as approved by the Council and reviewed by the National 
Committee on Vital Health Statistics (NCVHS) as of April 1, 
2007. Both of these standards would be applied to transactions 
occurring on or after April 1, 2009.

Section 203. Coding and documentation of non-medical information

    Section 203 specifies that in any regulation or other 
action implementing the International Classification of 
Diseases, 10th revision, Clinical Modification (ICD-10-CM) or 
the International Classification of Diseases, 10th revision, 
Procedure Coding System (ICD-10-PCS), the Secretary of HHS 
shall ensure that no health care provider is required to code 
to a level of specificity that would require documentation of 
non-medical information on the external cause of any given type 
of injury.

Section 301. Safe harbors to antikickback civil penalties and criminal 
        penalties for provision of health information technology and 
        training services

    Section 301 creates a safe harbor from current anti-
kickback laws for providing certain health information 
technology or training and related services. The safe harbor 
requires that any such provision of technology, training, or 
related services not be pursuant to an agreement limiting its 
use by entity, limiting its connection to other technology, or 
conditioned on the referral of patients.

Section 302. Exception to limitation on certain physician referrals 
        (under Stark) for provision of health information technology 
        and training services to health care professionals

    Section 302 creates a safe harbor from current physician 
self-referral rules for providing certain health information 
technology or training and related services. The safe harbor 
requires that any such provision of technology, training or 
related services not be pursuant to an agreement limiting its 
use by entity, limiting its connection to other technology, or 
conditioned on the referral of patients.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

PUBLIC HEALTH SERVICE ACT

           *       *       *       *       *       *       *



TITLE II--ADMINISTRATION AND MISCELLANEOUS PROVISIONS

           *       *       *       *       *       *       *



                 PART D--HEALTH INFORMATION TECHNOLOGY

SEC. 271. OFFICE OF THE NATIONAL COORDINATOR FOR HEALTH INFORMATION 
                    TECHNOLOGY.

  (a) Establishment.--There is established within the 
Department of Health and Human Services an Office of the 
National Coordinator for Health Information Technology that 
shall be headed by the National Coordinator for Health 
Information Technology (referred to in this part as the 
``National Coordinator''). The National Coordinator shall be 
appointed by and report directly to the Secretary. The National 
Coordinator shall be paid at a rate equal to the rate of basic 
pay for level IV of the Executive Schedule.
  (b) Goals of Nationwide Interoperable Health Information 
Technology Infrastructure.--The National Coordinator shall 
perform the duties under subsection (c) in a manner consistent 
with the development of a nationwide interoperable health 
information technology infrastructure that--
          (1) improves health care quality, promotes data 
        accuracy, reduces medical errors, increases the 
        efficiency of care, and advances the delivery of 
        appropriate, evidence-based health care services;
          (2) promotes wellness, disease prevention, and 
        management of chronic illnesses by increasing the 
        availability and transparency of information related to 
        the health care needs of an individual for such 
        individual;
          (3) promotes the availability of appropriate and 
        accurate information necessary to make medical 
        decisions in a usable form at the time and in the 
        location that the medical service involved is provided;
          (4) produces greater value for health care 
        expenditures by reducing health care costs that result 
        from inefficiency, medical errors, inappropriate care, 
        and incomplete or inaccurate information;
          (5) promotes a more effective marketplace, greater 
        competition, greater systems analysis, increased 
        consumer choice, enhanced quality, and improved 
        outcomes in health care services;
          (6) with respect to health information of consumers, 
        advances the portability of such information and the 
        ability of such consumers to share and use such 
        information to assist in the management of their health 
        care;
          (7) improves the coordination of information and the 
        provision of such services through an effective 
        infrastructure for the secure and authorized exchange 
        and use of health care information;
          (8) is consistent with legally applicable 
        requirements with respect to securing and protecting 
        the confidentiality of individually identifiable health 
        information of a patient;
          (9) promotes the creation and maintenance of 
        transportable, secure, Internet-based personal health 
        records, including promoting the efforts of health care 
        payers and health plan administrators for a health 
        plan, such as Federal agencies, private health plans, 
        and third party administrators, to provide for such 
        records on behalf of members of such a plan;
          (10) promotes access to and review of the electronic 
        health record of a patient by such patient;
          (11) promotes health research and health care quality 
        research and assessment; and
          (12) promotes the efficient and streamlined 
        development, submission, and maintenance of electronic 
        health care clinical trial data.
  (c) Duties of the National Coordinator.--
          (1) Strategic planner for interoperable health 
        information technology.--The National Coordinator shall 
        provide for a strategic plan for the nationwide 
        implementation of interoperable health information 
        technology in both the public and private health care 
        sectors consistent with subsection (b).
          (2) Principal advisor to the secretary.--The National 
        Coordinator shall serve as the principal advisor to the 
        Secretary on the development, application, and use of 
        health information technology, and shall coordinate the 
        policies and programs of the Department of Health and 
        Human Services for promoting the use of health 
        information technology.
          (3) Intragovernmental coordinator.--The National 
        Coordinator shall ensure that health information 
        technology policies and programs of the Department of 
        Health and Human Services are coordinated with those of 
        relevant executive branch agencies and departments with 
        a goal to avoid duplication of effort, to align the 
        health information architecture of each agency or 
        department toward a common approach, to ensure that 
        each agency or department conducts programs within the 
        areas of its greatest expertise and its mission in 
        order to create a national interoperable health 
        information system capable of meeting national public 
        health needs effectively and efficiently, and to assist 
        Federal agencies and departments in security programs, 
        policies, and protections to prevent unauthorized 
        access to individually identifiable health information 
        created, maintained, or in the temporary possession of 
        that agency or department. The coordination authority 
        provided to the National Coordinator under the previous 
        sentence shall supercede any such authority otherwise 
        provided to any other official of the Department of 
        Health and Human Services. For the purposes of this 
        paragraph, the term ``unauthorized access'' means 
        access that is not authorized by that agency or 
        department including unauthorized employee access.
          (4) Advisor to omb.--The National Coordinator shall 
        provide to the Director of the Office of Management and 
        Budget comments and advice with respect to specific 
        Federal health information technology programs.
          (5) Promoter of health information technology in 
        medically underserved communities.--The National 
        Coordinator shall--
                  (A) identify sources of funds that will be 
                made available to promote and support the 
                planning and adoption of health information 
                technology in medically underserved 
                communities, including in urban and rural 
                areas, either through grants or technical 
                assistance;
                  (B) coordinate with the funding sources to 
                help such communities connect to identified 
                funding; and
                  (C) collaborate with the Agency for 
                Healthcare Research and Quality and the Health 
                Services Resources Administration and other 
                Federal agencies to support technical 
                assistance, knowledge dissemination, and 
                resource development, to medically underserved 
                communities seeking to plan for and adopt 
                technology and establish electronic health 
                information networks across providers.

SEC. 272. INTEROPERABILITY PLANNING PROCESS; FEDERAL INFORMATION 
                    COLLECTION ACTIVITIES.

  (a) Strategic Interoperability Planning Process.--
          (1) Assessment and endorsement of core strategic 
        guidelines.--
                  (A) In general.--Not later than December 31, 
                2006, the National Coordinator shall publish a 
                strategic plan, including a schedule, for the 
                assessment and the endorsement of core 
                interoperability guidelines for significant use 
                cases consistent with this subsection. The 
                National Coordinator may update such plan from 
                time to time.
                  (B) Endorsement.--
                          (i) In general.--Consistent with the 
                        schedule under this paragraph and not 
                        later than one year after the 
                        publication of such schedule, the 
                        National Coordinator shall endorse a 
                        subset of core interoperability 
                        guidelines for significant use cases. 
                        The National Coordinator shall continue 
                        to endorse subsets of core 
                        interoperability guidelines for 
                        significant use cases annually 
                        consistent with the schedule published 
                        pursuant to this paragraph, with 
                        endorsement of all such guidelines 
                        completed not later than August 31, 
                        2009.
                          (ii) Consultation.--All such 
                        endorsements shall be in consultation 
                        with the American Health Information 
                        Community and other appropriate 
                        entities.
                          (iii) Voluntary compliance.--
                        Compliance with such guidelines shall 
                        be voluntary, subject to subsection 
                        (b)(1).
                  (C) Consultation with other parties.--The 
                National Coordinator shall develop and 
                implement such strategic plan in consultation 
                with the American Health Information Community 
                and other appropriate entities.
                  (D) Definitions.--For purposes of this 
                section:
                          (i) Interoperability guideline.--The 
                        term ``interoperability guideline'' 
                        means a guideline to improve and 
                        promote the interoperability of health 
                        information technology for purposes of 
                        electronically accessing and exchanging 
                        health information. Such term includes 
                        named standards, architectures, 
                        software schemes for identification, 
                        authentication, and security, and other 
                        information needed to ensure the 
                        reproducible development of common 
                        solutions across disparate entities.
                          (ii) Core interoperability 
                        guideline.--The term ``core 
                        interoperability guideline'' means an 
                        interoperability guideline that the 
                        National Coordinator determines is 
                        essential and necessary for purposes 
                        described in clause (i).
                          (iii) Significant use case.--The term 
                        ``significant use case'' means a 
                        category (as specified by the National 
                        Coordinator) that identifies a 
                        significant use or purpose for the 
                        interoperability of health information 
                        technology, such as for the exchange of 
                        laboratory information, drug 
                        prescribing, clinical research, and 
                        electronic health records.
          (2) National survey.--
                  (A) In general.--Not later than August 31, 
                2008, the National Coordinator shall conduct 
                one or more surveys designed to measure the 
                capability of entities (including Federal 
                agencies, State and local government agencies, 
                and private sector entities) to exchange 
                electronic health information by appropriate 
                significant use case. Such surveys shall 
                identify the extent to which the type of health 
                information, the use for such information, or 
                any other appropriate characterization of such 
                information may relate to the capability of 
                such entities to exchange health information in 
                a manner that is consistent with methods to 
                improve the interoperability of health 
                information and with core interoperability 
                guidelines.
                  (B) Dissemination of survey results.--The 
                National Coordinator shall disseminate the 
                results of such surveys in a manner so as to--
                          (i) inform the public on the 
                        capabilities of entities to exchange 
                        electronic health information;
                          (ii) assist in establishing a more 
                        interoperable information architecture; 
                        and
                          (iii) identify the status of health 
                        information systems used in Federal 
                        agencies and the status of such systems 
                        with respect to interoperability 
                        guidelines.
  (b) Federal Health Information Collection Activities.--
          (1) Requirements.--With respect to a core 
        interoperability guideline endorsed under subsection 
        (a)(1)(B) for a significant use case, the President 
        shall take measures to ensure that Federal activities 
        involving the broad collection and submission of health 
        information are consistent with such guideline within 
        three years after the date of such endorsement.
          (2) Promoting use of non-identifiable health 
        information to improve health research and health care 
        quality.--
                  (A) In general.--Where feasible, and 
                consistent with applicable privacy or security 
                or other laws, the President, in consultation 
                with the Secretary, shall take measures to 
                allow timely access to useful categories of 
                non-identifiable health information in records 
                maintained by the Federal government, or 
                maintained by entities under contract with the 
                Federal government, to advance health care 
                quality and health research where such 
                information is in a form that can be used in 
                such research. The President shall consult with 
                appropriate Federal agencies, and solicit 
                public comment, on useful categories of 
                information, and appropriate measures to take. 
                The President may consider the administrative 
                burden and the potential for improvements in 
                health care quality in determining such 
                appropriate measures. In addition, the 
                President, in consultation with the Secretary, 
                shall encourage voluntary private and public 
                sector efforts to allow access to such useful 
                categories of non-identifiable health 
                information to advance health care quality and 
                health research.
                  (B) Non-identifiable health information 
                defined.--For purposes of this paragraph, the 
                term ``non-identifiable health information'' 
                means information that is not individually 
                identifiable health information as defined in 
                rules promulgated pursuant to section 264(c) of 
                the Health Insurance Portability and 
                Accountability Act of 1996 (42 U.S.C. 1320d-2 
                note), and includes information that has been 
                de-identified so that it is no longer 
                individually identifiable health information, 
                as defined in such rules.
          (3) Annual review and report.--For each year during 
        the five-year period following the date of the 
        enactment of this section, the National Coordinator 
        shall review the operation of health information 
        collection by and submission to the Federal government 
        and the purchases (and planned purchases) of health 
        information technology by the Federal government. For 
        each such year and based on the review for such year, 
        the National Coordinator shall submit to the President 
        and Congress recommendations on methods to--
                  (A) streamline (and eliminate redundancy in) 
                Federal systems used for the collection and 
                submission of health information;
                  (B) improve efficiency in such collection and 
                submission;
                  (C) increase the ability to assess health 
                care quality; and
                  (D) reduce health care costs.

SEC. 273. ENSURING HEALTH CARE PROVIDERS MAY MAINTAIN HEALTH 
                    INFORMATION IN ELECTRONIC FORM.

  (a) In General.--Any health care provider that participates 
in a health care program that receives Federal funds shall be 
deemed as meeting any requirement for the maintenance of data 
in paper form under such program (whether or not for purposes 
of management, billing, reporting, reimbursement, or otherwise) 
if the required data is maintained in an electronic form.
  (b) Relation to State Laws.--Beginning on the date that is 
one year after the date of the enactment of this section, 
subsection (a) shall supersede any contrary provision of State 
law.
  (c) Construction.--Nothing in this section shall be construed 
as--
          (1) requiring health care providers to maintain or 
        submit data in electronic form;
          (2) preventing a State from permitting health care 
        providers to maintain or submit data in paper form; or
          (3) preventing a State from requiring health care 
        providers to maintain or submit data in electronic 
        form.

TITLE III--GENERAL POWERS AND DUTIES OF PUBLIC HEALTH SERVICE

           *       *       *       *       *       *       *


                      Part D--Primary Health Care

Subpart I--Health Centers

           *       *       *       *       *       *       *


SEC. 330M. GRANTS FOR IMPROVEMENT OF THE COORDINATION OF CARE FOR THE 
                    UNINSURED, UNDERINSURED, AND MEDICALLY UNDERSERVED.

  (a) In General.--The Secretary may make grants to integrated 
health care systems, in accordance with this section, for 
projects to better coordinate the provision of health care 
through the adoption of new health information technology, or 
the significant improvement of existing health information 
technology, to improve the provision of health care to 
uninsured, underinsured, and medically underserved individuals 
(including in urban and rural areas) through health-related 
information about such individuals, throughout such a system 
and at the point of service.
  (b) Eligibility.--
          (1) Application.--To be eligible to receive a grant 
        under this section, an integrated health care system 
        shall prepare and submit to the Secretary an 
        application, at such time, in such manner, and 
        containing such information as the Secretary may 
        require, including--
                  (A) a description of the project that the 
                system will carry out using the funds provided 
                under the grant;
                  (B) a description of the manner in which the 
                project funded under the grant will advance the 
                goal specified in subsection (a); and
                  (C) a description of the populations to be 
                served by the adoption or improvement of health 
                information technology.
          (2) Optional reporting condition.--The Secretary may 
        also condition the provision of a grant to an 
        integrated health care system under this section for a 
        project on the submission by such system to the 
        Secretary of a report on the impact of the health 
        information technology adopted (or improved) under such 
        project on the delivery of health care and the quality 
        of care (in accordance with applicable measures of such 
        quality). Such report shall be at such time and in such 
        form and manner as specified by the Secretary.
  (c) Integrated Health Care System Defined.--For purposes of 
this section, the term ``integrated health care system'' means 
a system of health care providers that is organized to provide 
care in a coordinated fashion and has a demonstrated commitment 
to provide uninsured, underinsured, and medically underserved 
individuals with access to such care.
  (d) Priorities.--In making grants under this section, the 
Secretary shall give priority to an integrated health care 
system--
          (1) that can demonstrate past successful community-
        wide efforts to improve the quality of care provided 
        and the coordination of care for the uninsured, 
        underinsured, and medically underserved; or
          (2) if the project to be funded through such a 
        grant--
                  (A) will improve the delivery of health care 
                and the quality of care provided; and
                  (B) will demonstrate savings for State or 
                Federal health care benefits programs or 
                entities legally obligated under Federal law to 
                provide health care from the reduction of 
                duplicative health care services, 
                administrative costs, and medical errors.
  (e) Limitation, Matching Requirement, and Conditions.--
          (1) Limitation on use of funds.--None of the funds 
        provided under a grant made under this section may be 
        used for a project providing for the adoption or 
        improvement of health information technology that is 
        used exclusively for financial record keeping, billing, 
        or other non-clinical applications.
          (2) Matching requirement.--To be eligible for a grant 
        under this section an integrated health care system 
        shall contribute non-Federal contributions to the costs 
        of carrying out the project for which the grant is 
        awarded in an amount equal to $1 for each $5 of Federal 
        funds provided under the grant.
  (f) Authorization of Appropriations.--There are authorized to 
be appropriated to carry out this section $15,000,000 for each 
of fiscal years 2007 and 2008.

           *       *       *       *       *       *       *

                              ----------                              


SOCIAL SECURITY ACT

           *       *       *       *       *       *       *


     TITLE XI--GENERAL PROVISIONS, PEER REVIEW, AND ADMINISTRATIVE 
                             SIMPLIFICATION

Part A--General Provisions

           *       *       *       *       *       *       *


                        CIVIL MONETARY PENALTIES

  Sec. 1128A. (a) * * *
  (b)(1) * * *

           *       *       *       *       *       *       *

  (4) For purposes of this subsection, inducements to reduce or 
limit services described in paragraph (1) shall not include the 
practical or other advantages resulting from health information 
technology or related installation, maintenance, support, or 
training services.

           *       *       *       *       *       *       *

  (i) For the purposes of this section:
          (1) * * *

           *       *       *       *       *       *       *

          (8) The term ``health information technology'' means 
        hardware, software, license, right, intellectual 
        property, equipment, or other information technology 
        (including new versions, upgrades, and connectivity) 
        designed primarily for the electronic creation, 
        maintenance, or exchange of health information to 
        better coordinate care or improve health care quality, 
        efficiency, or research.

           *       *       *       *       *       *       *


   CRIMINAL PENALTIES FOR ACTS INVOLVING FEDERAL HEALTH CARE PROGRAMS

  Sec. 1128B. (a) * * *
  (b)(1) * * *

           *       *       *       *       *       *       *

  (3) Paragraphs (1) and (2) shall not apply to--
          (A) * * *

           *       *       *       *       *       *       *

          (G) the waiver or reduction by pharmacies (including 
        pharmacies of the Indian Health Service, Indian tribes, 
        tribal organizations, and urban Indian organizations) 
        of any cost-sharing imposed under part D of title 
        XVIII, if the conditions described in clauses (i) 
        through (iii) of section 1128A(i)(6)(A) are met with 
        respect to the waiver or reduction (except that, in the 
        case of such a waiver or reduction on behalf of a 
        subsidy eligible individual (as defined in section 
        1860D-14(a)(3)), section 1128A(i)(6)(A) shall be 
        applied without regard to clauses (ii) and (iii) of 
        that section); [and]
          (H) any remuneration between a federally qualified 
        health center (or an entity controlled by such a health 
        center) and an MA organization pursuant to a written 
        agreement described in section 1853(a)(4)[.];
          [(H)] (I) any remuneration between a health center 
        entity described under clause (i) or (ii) of section 
        1905(l)(2)(B) and any individual or entity providing 
        goods, items, services, donations, loans, or a 
        combination thereof, to such health center entity 
        pursuant to a contract, lease, grant, loan, or other 
        agreement, if such agreement contributes to the ability 
        of the health center entity to maintain or increase the 
        availability, or enhance the quality, of services 
        provided to a medically underserved population served 
        by the health center entity[.]; and
          (J) any nonmonetary remuneration (in the form of 
        health information technology, as defined in section 
        1128A(i)(8), or related installation, maintenance, 
        support or training services) made to a person by an 
        entity that is a hospital, group practice, prescription 
        drug plan sponsor, or Medicare Advantage organization 
        if--
                  (i) the provision of such remuneration is 
                without an agreement between the parties or 
                legal condition that--
                          (I) limits or restricts the use of 
                        the health information technology to 
                        services provided by the physician to 
                        individuals receiving services at the 
                        entity;
                          (II) limits or restricts the use of 
                        the health information technology in 
                        conjunction with other health 
                        information technology; or
                          (III) conditions the provision of 
                        such remuneration on the referral of 
                        patients or business to the entity;
                  (ii) such remuneration is arranged for in a 
                written agreement that is signed by the parties 
                involved (or their representatives) and that 
                specifies the remuneration solicited or 
                received (or offered or paid) and states that 
                the provision of such remuneration is made for 
                the primary purpose of better coordination of 
                care or improvement of health quality, 
                efficiency, or research; and
                  (iii) the entity providing the remuneration 
                (or a representative of such entity) has not 
                taken any action to disable any basic feature 
                of any hardware or software component of such 
                remuneration that would permit 
                interoperability.

           *       *       *       *       *       *       *


Part C--Administrative Simplification

           *       *       *       *       *       *       *


                  TIMETABLES FOR ADOPTION OF STANDARDS

  Sec. 1174. (a) * * *
  (b) Additions and Modifications to Standards.--
          (1) In general.--Except as provided in paragraph (2), 
        the Secretary shall review the standards adopted under 
        section 1173, and shall adopt modifications to the 
        standards (including additions to the standards), as 
        determined appropriate, but not more frequently than 
        once every 12 monthsand in accordance with paragraph 
        (3). Any addition or modification to a standard shall 
        be completed in a manner which minimizes the disruption 
        and cost of compliance. For purposes of this subsection 
        and section 1173(c)(2), the term ``modification'' 
        includes a new version or a version upgrade.

           *       *       *       *       *       *       *

          (3) Expedited procedures for adoption of additions 
        and modifications to standards.--
                  (A) In general.--For purposes of paragraph 
                (1), the Secretary shall provide for an 
                expedited upgrade program (in this paragraph 
                referred to as the ``upgrade program''), in 
                accordance with this paragraph, to develop and 
                approve additions and modifications to the 
                standards adopted under section 1173(a) to 
                improve the quality of such standards or to 
                extend the functionality of such standards to 
                meet evolving requirements in health care.
                  (B) Publication of notices.--Under the 
                upgrade program:
                          (i) Voluntary notice of initiation of 
                        process.--Not later than 30 days after 
                        the date the Secretary receives a 
                        notice from a standard setting 
                        organization that the organization is 
                        initiating a process to develop an 
                        addition or modification to a standard 
                        adopted under section 1173(a), the 
                        Secretary shall publish a notice in the 
                        Federal Register that--
                                  (I) identifies the subject 
                                matter of the addition or 
                                modification;
                                  (II) provides a description 
                                of how persons may participate 
                                in the development process; and
                                  (III) invites public 
                                participation in such process.
                          (ii) Voluntary notice of preliminary 
                        draft of additions or modifications to 
                        standards.--Not later than 30 days 
                        after the date of the date the 
                        Secretary receives a notice from a 
                        standard setting organization that the 
                        organization has prepared a preliminary 
                        draft of an addition or modification to 
                        a standard adopted by section 1173(a), 
                        the Secretary shall publish a notice in 
                        the Federal Register that--
                                  (I) identifies the subject 
                                matter of (and summarizes) the 
                                addition or modification;
                                  (II) specifies the procedure 
                                for obtaining the draft;
                                  (III) provides a description 
                                of how persons may submit 
                                comments in writing and at any 
                                public hearing or meeting held 
                                by the organization on the 
                                addition or modification; and
                                  (IV) invites submission of 
                                such comments and participation 
                                in such hearing or meeting 
                                without requiring the public to 
                                pay a fee to participate.
                          (iii) Notice of proposed addition or 
                        modification to standards.--Not later 
                        than 30 days after the date of the date 
                        the Secretary receives a notice from a 
                        standard setting organization that the 
                        organization has a proposed addition or 
                        modification to a standard adopted 
                        under section 1173(a) that the 
                        organization intends to submit under 
                        subparagraph (D)(iii), the Secretary 
                        shall publish a notice in the Federal 
                        Register that contains, with respect to 
                        the proposed addition or modification, 
                        the information required in the notice 
                        under clause (ii) with respect to the 
                        addition or modification.
                          (iv) Construction.--Nothing in this 
                        paragraph shall be construed as 
                        requiring a standard setting 
                        organization to request the notices 
                        described in clauses (i) and (ii) with 
                        respect to an addition or modification 
                        to a standard in order to qualify for 
                        an expedited determination under 
                        subparagraph (C) with respect to a 
                        proposal submitted to the Secretary for 
                        adoption of such addition or 
                        modification.
                  (C) Provision of expedited determination.--
                Under the upgrade program and with respect to a 
                proposal by a standard setting organization for 
                an addition or modification to a standard 
                adopted under section 1173(a), if the Secretary 
                determines that the standard setting 
                organization developed such addition or 
                modification in accordance with the 
                requirements of subparagraph (D) and the 
                National Committee on Vital and Health 
                Statistics recommends approval of such addition 
                or modification under subparagraph (E), the 
                Secretary shall provide for expedited treatment 
                of such proposal in accordance with 
                subparagraph (F).
                  (D) Requirements.--The requirements under 
                this subparagraph with respect to a proposed 
                addition or modification to a standard by a 
                standard setting organization are the 
                following:
                          (i) Request for publication of 
                        notice.--The standard setting 
                        organization submits to the Secretary a 
                        request for publication in the Federal 
                        Register of a notice described in 
                        subparagraph (B)(iii) for the proposed 
                        addition or modification.
                          (ii) Process for receipt and 
                        consideration of public comment.--The 
                        standard setting organization provides 
                        for a process through which, after the 
                        publication of the notice referred to 
                        under clause (i), the organization--
                                  (I) receives and responds to 
                                public comments submitted on a 
                                timely basis on the proposed 
                                addition or modification before 
                                submitting such proposed 
                                addition or modification to the 
                                National Committee on Vital and 
                                Health Statistics under clause 
                                (iii);
                                  (II) makes publicly available 
                                a written explanation for its 
                                response in the proposed 
                                addition or modification to 
                                comments submitted on a timely 
                                basis; and
                                  (III) makes public comments 
                                received under clause (I) 
                                available, or provides access 
                                to such comments, to the 
                                Secretary.
                          (iii) Submittal of final proposed 
                        addition or modification to ncvhs.--
                        After completion of the process under 
                        clause (ii), the standard setting 
                        organization submits the proposed 
                        addition or modification to the 
                        National Committee on Vital and Health 
                        Statistics for review and consideration 
                        under subparagraph (E). Such submission 
                        shall include information on the 
                        organization's compliance with the 
                        notice and comment requirements (and 
                        responses to those comments) under 
                        clause (ii).
                  (E) Hearing and recommendations by national 
                committee on vital and health statistics.--
                Under the upgrade program, upon receipt of a 
                proposal submitted by a standard setting 
                organization under subparagraph (D)(iii) for 
                the adoption of an addition or modification to 
                a standard, the National Committee on Vital and 
                Health Statistics shall provide notice to the 
                public and a reasonable opportunity for public 
                testimony at a hearing on such addition or 
                modification. The Secretary may participate in 
                such hearing in such capacity (including 
                presiding ex officio) as the Secretary shall 
                determine appropriate. Not later than 90 days 
                after the date of receipt of the proposal, the 
                Committee shall submit to the Secretary its 
                recommendation to adopt (or not adopt) the 
                proposed addition or modification.
                  (F) Determination by secretary to accept or 
                reject national committee on vital and health 
                statistics recommendation.--
                          (i) Timely determination.--Under the 
                        upgrade program, if the National 
                        Committee on Vital and Health 
                        Statistics submits to the Secretary a 
                        recommendation under subparagraph (E) 
                        to adopt a proposed addition or 
                        modification, not later than 90 days 
                        after the date of receipt of such 
                        recommendation the Secretary shall make 
                        a determination to accept or reject the 
                        recommendation and shall publish notice 
                        of such determination in the Federal 
                        Register not later than 30 days after 
                        the date of the determination.
                          (ii) Contents of notice.--If the 
                        determination is to reject the 
                        recommendation, such notice shall 
                        include the reasons for the rejection. 
                        If the determination is to accept the 
                        recommendation, as part of such notice 
                        the Secretary shall promulgate the 
                        modified standard (including the 
                        accepted proposed addition or 
                        modification accepted).
                          (iii) Limitation on consideration.--
                        The Secretary shall not consider a 
                        proposal under this subparagraph unless 
                        the Secretary determines that the 
                        requirements of subparagraph (D) 
                        (including publication of notice and 
                        opportunity for public comment) have 
                        been met with respect to the proposal.
                  (G) Exemption from paperwork reduction act.--
                Chapter 35 of title 44, United States Code, 
                shall not apply to a final rule promulgated 
                under subparagraph (F).

           *       *       *       *       *       *       *


TITLE XVIII--HEALTH INSURANCE FOR THE AGED AND DISABLED

           *       *       *       *       *       *       *


Part E--Miscellaneous Provisions

           *       *       *       *       *       *       *


               LIMITATION ON CERTAIN PHYSICIAN REFERRALS

  Sec. 1877. (a) * * *
  (b) General Exceptions to Both Ownership and Compensation 
Arrangement Prohibitions.--Subsection (a)(1) shall not apply in 
the following cases:
          (1) * * *

           *       *       *       *       *       *       *

          (6) Information technology and training services.--
                  (A) In general.--Any nonmonetary remuneration 
                (in the form of health information technology 
                or related installation, maintenance, support 
                or training services) made by an entity that is 
                a hospital, group practice, prescription drug 
                plan sponsor, or a Medicare Advantage 
                organization to a physician if--
                          (i) the provision of such 
                        remuneration is without an agreement 
                        between the parties or legal condition 
                        that--
                                  (I) limits or restricts the 
                                use of the health information 
                                technology to services provided 
                                by the physician to individuals 
                                receiving services at the 
                                entity;
                                  (II) limits or restricts the 
                                use of the health information 
                                technology in conjunction with 
                                other health information 
                                technology; or
                                  (III) conditions the 
                                provision of such remuneration 
                                on the referral of patients or 
                                business to the entity;
                          (ii) such remuneration is arranged 
                        for in a written agreement that is 
                        signed by the parties involved (or 
                        their representatives) and that 
                        specifies the remuneration made and 
                        states that the provision of such 
                        remuneration is made for the primary 
                        purpose of better coordination of care 
                        or improvement of health quality, 
                        efficiency, or research; and
                          (iii) the entity (or a representative 
                        of such entity) has not taken any 
                        action to disable any basic feature of 
                        any hardware or software component of 
                        such remuneration that would permit 
                        interoperability.
                  (B) Health information technology defined.--
                For purposes of subparagraph (A), the term 
                ``health information technology'' means 
                hardware, software, license, right, 
                intellectual property, equipment, or other 
                information technology (including new versions, 
                upgrades, and connectivity) designed primarily 
                for the electronic creation, maintenance, or 
                exchange of health information to better 
                coordinate care or improve health care quality, 
                efficiency, or research.

           *       *       *       *       *       *       *


                            DISSENTING VIEWS

                                SUMMARY

    H.R. 4157, as amended and reported by the Committee on 
Energy and Commerce, is inadequate to effectively move the U.S. 
healthcare system into an electronic age and adopt health 
information technology, such as electronic health records, that 
will enable providers to communicate with each other to achieve 
administrative efficiencies and improve care. The bill does not 
include sufficient funding to enable providers to adopt and 
implement systems in their offices. Instead, it undermines 
existing fraud and abuse laws in the name of spreading health 
information technology. And, even though moving to an 
electronic age for healthcare records will make personal 
information more vulnerable to breach and theft, the bill fails 
to protect the privacy of patient medical information.
    The Minority offered a number of amendments in an effort to 
(1) provide funding for healthcare providers to purchase and 
adopt health information technology without undermining 
protective fraud and abuse laws; (2) improve the quality of 
care, care coordination, and patient access to information; (3) 
allow providers, labs, and others in the healthcare system to 
communicate electronically with each other 
(``interoperability''), and (4) protect the privacy of 
patient's information in a new world where information will be 
maintained electronically. These amendments were rejected on 
party-line votes.
    It is particularly disappointing that a bipartisan Senate 
bill on health information technology that passed the Senate 
unanimously on November 18, 2005, has been ignored by the 
Committee as a starting point for discussions. Instead, 
Republican colleagues chose to consider a highly partisan bill, 
greatly reducing the likelihood of enactment of health IT 
legislation this Congress.

  DEMOCRATS OFFERED A SUBSTITUTE CONSISTING OF THE BIPARTISAN SENATE 
               LEGISLATION ALONG WITH PRIVACY PROTECTIONS

    Representatives Pallone and Gonzalez offered a substitute 
that included the text of the Senate bill, S. 1418, a 
bipartisan bill that passed the Senate unanimously on November 
18, 2005, along with protections to ensure privacy of patient 
medical records. Unlike the Committee bill, the Democratic 
substitute would have ensured the rapid adoption of 
interoperable health information technology without exposing 
Federal health programs to fraud. Its stronger standards and 
guaranteed funding would more rapidly move the U.S. healthcare 
system to the electronic age.
    The Democratic substitute codifies the Office of the 
National Coordinator for Health Information Technology and 
assigns it duties, including the adoption of interoperability 
standards allowing for electronic communication between 
providers, plans, and others. It requires that the Federal 
Government purchase health information technology that meets 
interoperability standards. It also includes funding in the 
form of grants and loans for providers and regional 
collaboratives to buy and implement health information 
technology. The technology must meet standards of 
interoperability, as well. It requires the creation of a 
voluntary certification process for technology sold by vendors 
allowing providers to identify whether a product meets their 
needs and the needs of their patients before purchasing it. It 
does not make exceptions to the Stark self-referral and anti-
kickback fraud and abuse laws, but instead leverages private 
dollars for a revolving loan fund that would not create a 
conflict of interest between providers. The substitute also 
includes privacy and security protections offered by 
Representative Markey in his privacy amendment described below. 
It was defeated on a party-line vote.

    THE LEGISLATION FAILS TO PROTECT THE PRIVACY OF MEDICAL RECORDS

    H.R. 4157 does not include adequate protections to ensure 
the privacy of patient personal medical information. The 
expanded adoption and use of technology to enable electronic 
exchange of information places larger amounts of personally-
sensitive data at risk of disclosure or breach. For the 
successful adoption of health information technology, patients 
will need assurances their medical records are secure. 
President Bush has acknowledged this need, noting,

          ``One thing is the federal government has got to make 
        sure the privacy rules are strong. You're going to hear 
        us talk about medical--electronic medical records. And 
        that's exciting. But it's not so exciting if you're a 
        patient who thinks somebody could snoop on your 
        records, to put it bluntly . . . for those people--
        there's a lot of people in America who say, good, I 
        want there to be good information technology in the 
        health care field, I just don't want somebody looking 
        at my records unless I give them permission to do so. 
        And I fully understand that. And your records are 
        private, if that's the way you want them to be.'' \1\
---------------------------------------------------------------------------
    \1\ President Bush Touts Benefits of Health Care Information 
Technology; Department of Veterans Affairs Medical Center, Baltimore, 
Maryland, April 27, 2004. (www.whitehouse.gov/news/releases/2004/04/
20040427-5.html)

    The bill, however, fails to include adequate protections 
for privacy, merely affirming the limited protections in the 
current law, the Health Insurance Portability and 
Accountability Act (HIPAA).
    The HIPAA privacy rule, however, is not comprehensive and 
does not include provisions to adequately protect privacy in an 
electronic healthcare world. For example, the existing Federal 
law now only directly applies to some providers, health plans, 
and health information clearinghouses, but does not apply to 
anyone else who could receive sensitive health information, 
such as anyone the provider contracts with, or electronic 
health records companies. HIPAA alsodoes not require consent 
for the use or disclosure of health information for treatment, payment, 
or healthcare operations. This means, for example, that companies could 
use sensitive, individual information for fundraising.
    Current law privacy rules under HIPAA, which would be 
maintained under the bill, do not require that the person be 
notified if there is a breach of data where individually-
identifiable health information is lost, stolen, or used for an 
unauthorized purpose. This can include the accidental or 
erroneous disclosure of individually identifiable health 
information or the purposeful breach (hacking, theft) of a 
computer system to access information. And, while HIPAA allows 
for civil and criminal penalties to be assessed on violators by 
the Government, despite 19,420 grievances filed so far, not one 
entity has been assessed civil penalties; only two criminal 
cases have been prosecuted.
    Moreover, HIPAA does not allow an individual who has been 
harmed to pursue enforcement or seek damages; only the 
Government is permitted to do that. And because the privacy 
rule applies only to groups that misuse or disclose health 
information, such as providers, health plans, and health 
information clearinghouses, there can be no direct penalties 
assessed against anyone other than these groups. HIPAA does 
permit States to have more protective privacy laws and a number 
of States have laws that address these concerns.
    Representatives Markey and Capps offered an amendment to 
address these privacy and security concerns. Their amendment 
(1) requires patient consent to share personal health 
information electronically and allows patients to control 
access to their sensitive electronic health information; (2) 
applies protections to any individual in possession of personal 
health information; (3) allows individuals to get redress when 
their privacy is breached; (4) requires notification to 
individuals if their information is violated; (5) requires 
reasonable safeguards, such as encryption of data; and (6) does 
not preempt more protective State laws. The Markey-Capps 
amendment was defeated on a party-line vote.

 THE LEGISLATION FAILS TO PROVIDE ADEQUATE RESOURCES TO ACQUIRE HEALTH 
                         INFORMATION TECHNOLOGY

    H.R. 4157, as amended and reported by the Committee, 
provides an extremely limited amount of the funding necessary 
to encourage physicians, hospitals, and other providers to 
invest in technology. The bill authorizes $40 million over 2007 
and 2008 for integrated healthcare systems serving uninsured, 
under-insured, and medically under-served individuals, and also 
to small physician practices. By contrast, S. 1418, which 
passed the Senate unanimously, authorized $652 million over the 
2006-2010 period for health information technology.
    The lack of sufficient funding to enable providers to adopt 
health information technology is a critical flaw in the 
legislation and will make it unlikely that this bill will 
initiate a large-scale movement to electronic provider 
communication and improved quality and more coordinated care. A 
number of Democratic amendments were offered that would have 
provided substantial funding for IT in order to encourage 
faster and more comprehensive adoption of such systems. 
Representatives Brown and Gonzalez offered an amendment that 
would ensure all providers would be eligible for grants, 
Medicare add-on payments, and low-interest loans; 
Representative Stupak offered an amendment focused on rural 
providers; and Representatives Wynn, Rush, Solis, Schakowsky, 
and Engel offered an amendment to address the needs of safety 
net providers. The amendments were all defeated along largely 
party-line votes.

      THE LEGISLATION OPENS NEW OPPORTUNITIES FOR FRAUD AND ABUSE

    Instead of assisting the funding of health information 
technology, H.R. 4157 loosens current fraud and abuse laws to 
allow hospitals, group practices, prescription drug plan 
sponsors, and Medicare Advantage organizations to give free 
health information technology, maintenance, service, training, 
and more to other providers.
    These existing anti-fraud laws, known as the Stark self-
referral and anti-kickback laws, protect Medicare and Medicaid, 
as well as patients against biased decision-making by doctors, 
and ensure that doctors are not referring patients to a 
specific hospital or other provider because of free gifts they 
are receiving. While it is important to leverage private sector 
dollars for the adoption of health information technology, it 
can be done without increasing the possibility of fraud and 
abuse. H.R. 4157, on the other hand, provides the broad waivers 
to the law, which present particular problems:
    First, allowing a provider to give valuable free goods and 
services to another may influence decision-making in favor of 
the donor. In fact, the Congressional Budget Office noted in 
their analysis of the fraud loopholes in the Committee on Ways 
and Means legislation that while the language prohibits 
explicit quid pro quo, in many instances it would be implicit 
and assumed, resulting in fraudulent behavior.\2\
---------------------------------------------------------------------------
    \2\ Congressional Budget Office letter to Committee on Ways and 
Means Ranking Member Charles B. Rangel on H.R. 4157, June 15, 2006.
---------------------------------------------------------------------------
    Second, the exemption does not require that the donated 
technology meet interoperability standards. Because a hospital 
can provide a physician with free technology that only works 
with the hospital's own technology, this allows the creation of 
technology silos across the country--areas where a physician 
may only be able to electronically communicate with the 
hospital that gave the physician the free technology, and no 
one else, including other hospitals or the Government. This 
runs directly contrary to promoting technology that will allow 
providers across the country to communicate with each other.
    Third, there is no sunset on the provision, meaning that 
even when technology becomes very inexpensive, as most 
technology eventually does, the exemption and potential for 
abuse would still exist because hospitals will still be allowed 
to influence other providers with support and maintenance 
services.
    Fourth, although the exemptions do not permit a hospital to 
condition the donation of technology to a doctor on the receipt 
of referrals, a hospital is allowed to take into account the 
volume and value of referrals a physician provides to the 
hospital in determining to whom todonate technology. This means 
the hospital could choose to reward the physicians that give the 
hospital its most valuable referrals, such as those with a high 
percentage of insured patients, and thus implicitly punish the others.
    Fifth, the technology a hospital may give a physician may 
not be the best choice or fit for the physician, but without 
other incentives or funding to help the doctor, the doctor may 
have no choice but to accept the technology that is offered or 
remain a paper-based practice.
    Sixth, the definition of health information technology and 
services is broad, making the potential for fraud and abuse 
greater.
    Representative Pallone offered an amendment to provide 
direct funding to providers through grants and loans that 
leverage private sector dollars while reinstating the current 
law fraud and abuse provisions. The amendment was defeated on a 
party-line vote.

THE LEGISLATION FAILS TO ACHIEVE INTEROPERABILITY OF HEALTH INFORMATION 
                                SYSTEMS

    H.R. 4157, as amended and reported by the Committee, 
requires the National Coordinator to endorse standards for 
electronic communications that would allow providers, health 
plans, and others to communicate with each other by August 
2009, or earlier if required under the schedule the National 
Coordinator establishes. The bill, however, does not require 
the adoption of standards in the key areas of laboratory 
information, drug prescribing, clinical research, and 
ambulatory and inpatient electronic health records, and thus 
fails to guarantee national standards in these critical areas. 
Instead, the bill leaves the National Coordinator full 
discretion as to what standards to adopt.
    The bill also does not require the Federal Government to 
provide a leadership role by incorporating the standards of 
interoperability in its use of health information technology or 
purchases of health information technology. Similarly, no other 
providers or health plans are required to incorporate the use 
of the standards, nor are incentives included to encourage the 
use of the standards. The bill merely requires the Federal 
Government to receive information electronically in a format 
that meets the standards. Therefore, the Government would not 
need to implement or use all the standards for electronic 
communication, therefore allowing fiefdoms where only a handful 
of providers can communicate with each other electronically.
    Representative Eshoo offered an amendment to require the 
adoption of standards for key areas of health information 
including, at a minimum, laboratory information, drug 
prescribing, clinical research, and ambulatory and inpatient 
electronic health records within 18 months of the enactment of 
this act. This amendment also requires the Secretary of Health 
and Human Services to ensure that any purchases of health 
information technology or systems by Federal health programs 
meet the national standards of interoperability developed by 
the Government national task force. Finally, it requires the 
Federal Government to develop a voluntary certification process 
allowing buyers of health information technology to know about 
the system they are purchasing and whether it meets standards 
of interoperability. This would have encouraged an informed 
marketplace where providers and others purchasing hardware and 
software could assess more fairly and easily which technology 
best met their needs. This amendment failed on a party-line 
vote.

                               CONCLUSION

    The reported bill fails to (1) ensure providers have 
sufficient resources and incentives to acquire health 
information technology; (2) require the development of 
standards to allow electronic communication among providers in 
the key areas of lab data, prescription drug data, research, 
and ambulatory and inpatient data in a timely fashion; (3) 
protect patients and the taxpayers against fraud and improper 
kickbacks; and (4) protect patient privacy in this new 
electronic world being promoted in the bill. For those reasons, 
we oppose H.R. 4157, as reported.

                                   John D. Dingell.
                                   Henry A. Waxman.
                                   Edward J. Markey.
                                   Rick Boucher.
                                   Edolphus Towns.
                                   Frank Pallone, Jr.
                                   Bobby L. Rush.
                                   Anna G. Eshoo.
                                   bart Stupak.
                                   Eliot L. Engel.
                                   Albert R. Wynn.
                                   Gene Green.
                                   Ted Strickland.
                                   Diana DeGette.
                                   Lois Capps.
                                   Tom Allen.
                                   Jan Schakowsky.
                                   Hilda L. Solis.
                                   Tammy Baldwin.