Health and Human Services' IT rules open up market to newcomers

New federal rules that will grant medical practitioners billions of dollars to buy health information technology might make it easier for vendors new to the health IT industry to gain market share in a sector largely dominated by companies that have adhered to stricter standards, health consultants said.

The rules governing the acceptable use of e-health records to qualify for federal funding, which the Obama administration released on Tuesday, are simpler and clearer than those initially proposed in December 2009, experts said. The earlier proposal sparked concerns among small practices and hospitals, and some IT companies that meeting the first stage of requirements for meaningful use would be too time-intensive and costly.

Doctors must comply with the meaningful use rules, which include installing certified e-health systems, to receive a portion of roughly $27 billion in bonus Medicare and Medicaid payments. The government says the extra payments will encourage providers to buy health IT systems that increase safety, reduce costs and improve care.

"They did make a very serious effort to accommodate the real-world barriers that physicians have," said David C. Kibbe, an IT consultant and senior adviser to the American Academy of Family Physicians. "The bar is significantly lower for stage one" compared with what was in the draft.

The December draft proposal would have demanded doctors comply with 25 objectives during the first year of implementation. The final rules reduce that number to 15 core objectives, including routine security monitoring, checks on drug interactions, e-prescribing and transmission of instructions for the treatment of patients using a standard computerized provider order entry.

The rules then allow doctors to pick five more demanding requirements from a menu of 10. Among them are e-health records that contain data fields for laboratory test results, the ability to send patient reminders for follow-up care, and submission of clinical surveillance data to public health agencies.

In addition, the new regulations loosen CPOE requirements by directing doctors to use the process only for entering medication orders. The earlier proposal would have required them to enter orders for medications, laboratory work, imaging studies and several other services.

Under both the proposed and final rules, additional requirements to meet the government's definition of meaningful use would and still will be phased in during five years.

The Health and Human Services Department projects that certified e-health record software will be available for purchase in the fall.

Companies entering the health IT field for the first time might have a leg up on more established industry players, according to Kibbe. "No products have been certified yet," he said. "If you have a legacy product that is significantly more comprehensive and complicated, and a new product that hits the nail on the head for meaningful use and just does that, you might think the newer companies have an advantage in meeting meaningful use for their customers."

The rules will allow other innovative companies such as Microsoft Corp., Intel Corp. and Google, to penetrate the health IT space, Kibbe said.

But some health IT service companies that partner with various software vendors, including legacy product providers, say there's plenty of room for more market participants. "The pie got bigger," said Harry Greenspun, chief medical officer at Dell Services, the nation's largest health IT services company. Veteran vendors can expand their hold on the market and new entrants potentially might have an easier time accessing the market, he added.

On Tuesday, HHS released a related regulation that finalizes certification standards initially released on Dec. 30. Registration for incentive payments will start January 2011, and HHS will begin disbursing the money to doctors and hospitals next spring.

"The government has lowered the barrier for adoption," added Greenspun, who previously served as the chief medical officer for Northrop Grumman Corp., which developed AHLTA, the Defense Department's electronic health record system.

Now that the government has relaxed some of the rules, the administration is more likely to reach the ambitious goal of establishing a nationwide network of e-health records by 2015, he said.

The Brookings Institution, a Washington think tank, and the Markle Foundation, a New York-based research institute that studies health IT and security issues, released a joint-statement in support of the rules. "These regulations provide a promising foundation for encouraging the effective use of health information to improve patient care," said Mark B. McClellan, director of the Engelberg Center for Health Care Reform at Brookings and a former administrator of the Centers for Medicare and Medicaid Services.

Carol Diamond, managing director of the Markle Foundation, added, "The final rule has added flexibility to encourage providers to participate in the first phase of this critical effort to improve health, promote efficiency, drive innovation and protect privacy."

Consumer advocates provided qualified approval. "By making some reasonable concessions but standing firm against industry pressure to gut the regulations, the administration moved to improve patient safety and coordination of care, and to make our health system more efficient," Christine Bechtel, vice president of the National Partnership for Women and Families, a patient-rights group, said in a statement.

She noted, however, "As we move forward, the regulations should be strengthened so providers who violate privacy laws are ineligible for federal IT dollars, and so providers are required to give all patients timely access to their health information."

In addition, Greenspun said unintended consequences of the regulations might not surface until state governments, privacy groups, budget analysts and other stakeholders have more time to closely inspect the 864 pages of regulations.