Health IT Stimulus Could Bring $3 Billion in New Funds to California

New issue brief analyzes opportunities and recommends state action; Sacramento briefing scheduled

The federal stimulus bill signed by President Barack Obama last week offers unprecedented opportunities to increase health information technology (health IT) adoption among California providers and facilitate the secure exchange of patient health information, according to a new issue brief published by the California HealthCare Foundation (CHCF).

“Used effectively, health IT can help improve the quality, safety, and efficiency of health care in California,” said Sam Karp, CHCF vice president of programs. “But the State of California must take specific steps to assist physicians, hospitals, community health centers, and others to qualify for federal incentive payments to adopt and implement electronic health records, and to be competitive as various new federal grant programs become available.”

The Health Information Technology for Economic and Clinical Health Act (HITECH), a component of the American Recovery and Reinvestment Act of 2009, provides roughly $36 billion in outlays for health information exchange infrastructure and incentive payments to physician practices adopting electronic health records (EHRs), chronic disease management systems, and other technologies. In California, the stimulus funding could add up to more than $3 billion, according to the issue brief.

Unlike most other industries that have implemented information technology advances, said Karp, “health care has retained many of the characteristics of a cottage industry.” Despite decades of attempted automation, focus on quality and consistency, and modest investment in health IT, “health care practice remains largely unchanged, fragmented, inconsistent, and only intermittently automated. While many hospitals and large medical groups have adopted health IT systems, many more small hospitals and physicians in small practices or in underserved communities have not had the resources, financial incentives, or economies of scale to do so.”

CHCF’s issue brief outlines necessary steps to take advantage of these provisions and makes specific recommendations to Governor Schwarzenegger and the California Legislature to ensure that California successfully competes for and makes effective use of HITECH funds. The key recommendations include:

  • Appoint a Deputy Secretary of Health Information Technology, within the Health and Human Services Agency, to coordinate and drive health IT and health information exchange planning and implementation.
  • Appoint a nonprofit “state-designated entity” to apply for HIE implementation funding on behalf of the state.
  • Establish policies, procedures, and information systems required to support Medi-Cal incentive payments for adoption of EHRs by physicians, hospitals, community health centers, and others.
  • Actively engage with federal officials and policymakers to ensure California has a meaningful voice at the table during the regulatory process that will determine the HITECH Act’s specific funding mechanisms.
  • Appropriate funds in the amount required to match the federal funding authorized under the HITECH Act in order for California to take full advantage of the opportunities available through the Act.
  • Take steps to educate patients, consumers, and the public on existing health privacy safeguards and new protections intended to ensure the confidentiality and security of personal health information.

“New financing and new information systems alone will not transform the health care system,” said Karp. “Evidence has shown this will require better aligned financial incentives to improve clinical performance, greater innovation in the development of lower-cost care models, and engaged patient participation in their own care. But HITECH is a significant down payment on the infrastructure that will be required.”

Thousands of new jobs will likely be created to support adoption and implementation of electronic health records, said Karp. “These jobs will be in software and hardware development and sales, system installation, and support of clinicians and office staff. More indirectly, companies in the supply chain — for example, producers of routers and circuit boards — should experience job growth. But there could be some job loss, too, for example in medical records management and transcription of physicians’ notes.”

For the past ten years, CHCF has worked to accelerate the adoption and effective use of new information technologies in health care, pushing for national data standards, interoperable systems (so providers and patients may effectively transfer information between electronic systems), development of patient privacy protections, and promoting use of patient-centered and patient-controlled tools for self-management of chronic conditions.

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About the California Health Care Foundation

The California Health Care Foundation is dedicated to advancing meaningful, measurable improvements in the way the health care delivery system provides care to the people of California, particularly those with low incomes and those whose needs are not well served by the status quo. We work to ensure that people have access to the care they need, when they need it, at a price they can afford.