E-Prescribing Incentives Offer Model For Electronic Records – CBO’s Orszag

Proponents of the universal adoption of electronic health records might look to follow the "carrot and stick" incentives for electronic prescribing created by the new Medicare Improvements Act, Congressional Budget Office Director Peter Orszag suggests.

Orszag testified at a House Ways and Means Committee hearing on universal health technology July 24 - the day after the House Energy and Commerce Committee passed the "Protecting Records, Optimizing Treatment, and Easing Communication through Healthcare Technology Act of 2008," H.R. 6357. Ways and Means shares jurisdiction on the bill with Commerce.

H.R. 6357 aims to facilitate the exchange of information among health care providers and encourage the use of an electronic record for each person in the U.S. by 2014, but such developments come at no small cost. CBO estimates a universal health infrastructure will add $50 billion to $70 billion to the overall health care system, excluding the expenses of annual upkeep.

While widespread implementation of electronic health records may be a ways away, such records offer several potential benefits to pharma stakeholders.

Bonuses Mainly Draw In Those Near Adoption

Some anticipate such records will provide a wealth of real-time data on the outcomes of medication use. FDA also is developing a guidance on how to conduct post-market safety studies drawing upon both electronic health records and medical claims data ("¹ (Also see "FDA’s Post-Market Pharmacoepidemiologic Study Guidance Is 3 Years Away" - Pink Sheet, 12 May, 2008.), p. 21). And both health records and medical claims will be the backbone of FDA's Sentinel safety network (² (Also see "FDA’s Sentinel Framework Should Preclude “Unbridled” Data Mining – Platt" - Pink Sheet, 23 Jun, 2008.) p. 11).

During the hearing, Orszag said that "the carrot could take the form of a bonus or a tax incentive for adoption" of EHRs.

But he said that the reward system alone is probably not enough. "Typically subsidies are only attacking those entities close to adopting," he explained.

The stick entails mapping out a period of time by which physicians and hospitals would have to adopt EHRs and penalizing those who do not.

"One can combine it - as recently [done] in the e-prescribing pieces of health care legislation - and provide a subsidy for some period of time and then a penalty thereafter," Orszag recommended. "I believe that the only way we're going to get to universal adoption is ultimately through some stick, or some kind of penalty."

Under the new Medicare Improvements law, physicians receive a percent increase on Medicare payments, with greater amounts offered for earlier implementation through 2013.

Beginning in 2012, penalties for not adopting e-prescribing start at a 1 percent decrease in physician payments and decline by an additional half percent each year that follows (³ 'The Pink Sheet,' July 21, 2008, p. 21). CMS plans to implement the incentives through its Physician Quality Reporting Initiative.

H.R. 6357 - sponsored by Commerce Committee Chairman John Dingell, D-Mich., Ranking Minority Member Joe Barton, R-Texas, and several committee colleagues - provides some incentives but they are not tied to a specific implementation schedule. Nor does it propose penalties for not adopting EHRs.

Under the bill, HHS would award competitive grants to eligible facilities to offset costs of putting an information technology infrastructure in place.

The bill proposes $560 million in grants and loans to health care providers, giving preference to smaller entities and those in rural or medically underserved areas.

Many physicians are reluctant to make the switch to electronic records, as with e-prescribing, in part because of the costs tied to implementing and maintaining the technology.

According to a national survey, published July 3 in The New England Journal of Medicine, only 17 percent of physicians in the U.S. have a basic system of electronic health records.

Initial Costs Could Top $25,000 Per Physician

Studies show total costs for office-based electronic health records would average about $25,000 to $45,000 per physician, with additional annual costs of $3,000 to $9,000 for maintenance and upkeep, according to data compiled by the Congressional Budget Office.

Costs include the price of hardware, software and technical assistance needed for installation; licensing fees; maintenance; and time lost while health care providers learn the new system instead of treating patients.

Orszag's perspectives on health services research issues have been influential. His testimony a year ago on expanding research on the comparative effectiveness of health services helped to slow momentum on those proposals. Orszag noted that the pending proposals entailed significant federal spending and while substantial savings might result, those savings were 10 years away (⁴ (Also see "Savings From Expanded Comparative Effectiveness Could Be Decade Away – CBO" - Pink Sheet, 18 Jun, 2007.), p. 19).

In his Ways and Means appearance, the CBO director did not quantify potential savings.

He did suggest that an electronic records infrastructure would ultimately save money, while enabling physicians to better track medications and procedures for improved care.

"In order to alter that system of incentives we need to know what better care is ... we need more information on what works and what doesn't, specifically at the clinical level," Orszag said. "We also need incentives in comparative effectiveness."

Ways and Means Health Subcommittee Chairman, Pete Stark, D-Calif., commented that outcomes research would be "impossible to develop" without a universal database of health care records.

Privacy issues are frequently raised with EHRs and H.R. 6357 has several provisions on the matter. Patients would be required to consent to use of information when used for non-medical purposes, even when provided without identifying information. The bill also includes penalties for breaching privacy. Exceptions to penalties are provided for individuals who unintentionally acquire records data and do not use it.

Provisions Against Using Data For Marketing

Rep. Barton highlighted the privacy provisions, including one to restrict sale of patient information for marketing purposes.

According to the bill, "a communication by a covered entity or business associate that is about a product or service and that encourages recipients of the communication to purchase or use the product or service shall not be considered a health care operation ... unless the communication is made as described in [the Health Insurance Portability and Accountability Act's] definition of marketing in section 164.501."

Additionally, it states that a covered entity or business associate may not receive direct payment for any such communication.

Barton said he was "pleased" the language will offer patients more control over the dissemination and use of their information, in a statement after the Commerce Committee cleared the bill. "All of this means that a medical patient has to give permission before identifiable information can, for instance, be downloaded to a large database someplace else."

Ways and Means Committee Ranking Republican David Camp, Mich., suggested during the hearing that use of records should be more clearly restricted to only medical uses.

"I think we have to make sure that we keep certain and simple truths in place and that is this idea that those involved in health care can consult with others in health care for purposes of treatment," Camp said. "We don't want to erode that to the point where we hurt those positive things that are moving forward."

In June, Camp introduced the Promoting Health Information Technology Act of 2008, H.R. 6179, which utilizes public-private partnerships and tax incentives to encourage adoption of health IT while protecting patient privacy.

- Carlene Olsen ([email protected])