Privacy Trumps Profit in $19 Billion Health Stimulus

By Nicole Gaouette

Feb. 13 (Bloomberg) -- Patients’ advocates claimed victory in a battle over the privacy of health records as the U.S. Congress approved the economic stimulus bill, which contains $19 billion for health-care information.

U.S. House and Senate negotiators’ compromise reflects stricter standards that privacy advocates wanted for marketing, selling and disclosing health data. Both houses approved the $787 billion stimulus plan today and sent it to President Barack Obama for his signature.

The legislation contains $2 billion in grants to create a national system of computerized health records and $17 billion in higher Medicare and Medicaid reimbursements for doctors and hospitals to adopt the technology. Electronic records will improve care and reduce costs, Obama said. The legislation also will boost the health-records industry, led by Allscripts-Misys Healthcare Solutions Inc., Quality Systems Inc. and Athenahealth Inc.

“We’ve dramatically improved on the status-quo, wholly unregulated system where private patient data was bought and sold like any commodity,” Caroline Fredrickson, director of the American Civil Liberties Union’s Washington legislative office, said in an interview today.

Business advocates argued privacy provisions would cost too much, a position that was reflected in the version of the stimulus bill passed by the Senate earlier this week.

“We raised concerns about the unintended consequences of some of these provisions,” said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, in a telephone interview yesterday. The Washington-based group represents 1,300 managed- care companies, including WellPoint Inc. and UnitedHealth Group Inc.

Obama’s Overhaul

A national system of patient records is central to Obama’s plan to overhaul health care. The legislation would make doctors eligible for $40,000 to $65,000 grants if they begin using health-information technology. Hospitals would be eligible for millions more in Medicaid and Medicare payments. Penalties for those who fail to adopt the systems would start in 2014.

Paying doctors to use electronic health records “is the single most important thing we can do to improve the quality and lower the cost of health care in America,” said Glen Tullman, chief executive officer of Chicago-based Allscripts-Misys, in an e-mail.

Currently, drug companies can pay pharmacies to mine patient data for sales pitches. The bill would require pharmacies, including CVS Caremark Corp., the pharmacy-benefits manager and drugstore chain, to get customer permission to market drugs they aren’t already taking.

The bill also would tighten restrictions on the sale of medical data and require patients be told when their records are disclosed.

Added Costs

The disclosure provisions would add millions in administrative costs, according to the Healthcare Leadership Council, an industry group that includes Johnson & Johnson, of New Brunswick, New Jersey, Medtronic Inc. of Minneapolis and Sanofi-Aventis SA of Paris.

Wiring the offices of the nation’s 550,000 doctors and providing software to store and share medical data will cost more than $5 billion, said Richard Close, a Jefferies & Co. analyst in Nashville, in a phone interview. Most estimates say no more than a quarter of physicians now use digital records.

Companies whose customers include hospitals and large medical practices also may gain from the stimulus. General Electric Co., the biggest maker of medical-imaging equipment, unveiled a technology “starter kit” for new hospitals in November.

“I am thrilled that the final bill includes vital privacy protections for patients’ electronic information,” said Representative Ed Markey, a Massachusetts Democrat and consumer advocate, in a statement. He said the bill “will help improve medical care, reduce costs and reduce medical errors.”

To contact the reporters on this story: Nicole Gaouette in Washington at ngaouette@bloomberg.net;

Last Updated: February 13, 2009 22:59 EST