[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 1227 Introduced in Senate (IS)]







109th CONGRESS
  1st Session
                                S. 1227

To improve quality in health care by providing incentives for adoption 
                   of modern information technology.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 13, 2005

Ms. Stabenow (for herself and Ms. Snowe) introduced the following bill; 
     which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To improve quality in health care by providing incentives for adoption 
                   of modern information technology.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Health Information Technology Act of 
2005''.

SEC. 2. INFORMATICS SYSTEMS GRANT PROGRAM.

    (a) Grants.--
            (1) In general.--The Secretary of Health and Human Services 
        (in this section referred to as the ``Secretary'') shall 
        establish a program to award grants to eligible entities that 
        have submitted applications in accordance with subsection (b) 
        for the purpose of assisting such entities in offsetting the 
        costs incurred after December 31, 2004, that are related to 
        clinical health care informatics systems and services designed 
        to improve quality in health care and patient safety.
            (2) Duration.--The authority of the Secretary to make 
        grants under this section shall terminate on September 30, 
        2010.
            (3) Costs defined.--For purposes of this section, the term 
        ``costs'' shall include total expenditures incurred for--
                    (A) purchasing, leasing, and installing computer 
                software and hardware, including handheld computer 
                technologies, and related services;
                    (B) making improvements to existing computer 
                software and hardware;
                    (C) purchasing or leasing communications 
                capabilities necessary for clinical data access, 
                storage, and exchange;
                    (D) services associated with acquiring, 
                implementing, operating, or optimizing the use of new 
                or existing computer software and hardware and clinical 
                health care informatics systems;
                    (E) providing education and training to eligible 
                entity staff on information systems and technology 
                designed to improve patient safety and quality of care; 
                and
                    (F) purchasing, leasing, subscribing, integrating, 
                or servicing clinical decision support tools that--
                            (i) integrate patient-specific clinical 
                        data with well-established national treatment 
                        guidelines; and
                            (ii) provide ongoing continuous quality 
                        improvement functions that allow providers to 
                        assess improvement rates over time and against 
                        averages for similar providers.
            (4) Eligible entity defined.--For purposes of this section, 
        the term ``eligible entity'' means the following entities:
                    (A) Hospital.--A hospital (as defined in section 
                1861(e) of the Social Security Act (42 U.S.C. 
                1395x(e))).
                    (B) Critical access hospital.--A critical access 
                hospital (as defined in section 1861(mm)(1) of such Act 
                (42 U.S.C. 1395x(mm)(1))).
                    (C) Skilled nursing facility.--A skilled nursing 
                facility (as defined in section 1819(a) of such Act (42 
                U.S.C. 1395i-3(a))).
                    (D) Federally qualified health center.--A Federally 
                qualified health center (as defined in section 
                1861(aa)(4) of such Act (42 U.S.C. 1395x(aa)(4))).
                    (E) Physician.--A physician (as defined in section 
                1861(r) of such Act (42 U.S.C. 1395x(r))).
                    (F) Physician group practice.--A physician group 
                practice.
                    (G) Community mental health center.--A community 
                mental health center (as defined in section 
                1861(ff)(3)(B) of such Act (42 U.S.C. 
                1395x(ff)(3)(B))).
    (b) Application.--
            (1) In general.--An eligible entity seeking a grant under 
        this section shall submit an application to the Secretary at 
        such time, in such form and manner, and containing the 
        information described in paragraph (2).
            (2) Information described.--The information described in 
        this paragraph is the following information:
                    (A) A description of--
                            (i) the clinical health care informatics 
                        system and services that the eligible entity 
                        intends to implement with the assistance 
                        received under this section; and
                            (ii) how the system will improve quality in 
                        health care and patient safety, including 
                        estimates of the impact on the health of, and 
                        the health costs associated with the treatment 
                        of, patients with heart disease, cancer, 
                        stroke, diabetes, chronic obstructive pulmonary 
                        disease, asthma, or any other disease or 
                        condition specified by the Secretary.
                    (B) Any additional information that the Secretary 
                may specify.
    (c) Priority for Certain Eligible Entities.--In awarding grants 
under this section, the Secretary shall give priority--
            (1) first, to eligible entities--
                    (A) that are exempt from tax under section 501(a) 
                of the Internal Revenue Code of 1986; and
                    (B)(i) in which the total of individuals that are 
                eligible for benefits under the medicare program under 
                title XVIII of the Social Security Act, the medicaid 
                program under title XIX of such Act, or under the State 
                children's health insurance program under title XXI of 
                such Act make up a high percentage (as determined 
                appropriate by the Secretary) of the total patient 
                population of the entity; or
                    (ii) that provide services to a large number (as 
                determined appropriate by the Secretary) of such 
                individuals;
            (2) then, to eligible entities that meet the requirement 
        under clause (i) or (ii) of paragraph (1)(B); and
            (3) then, to other eligible entities.
    (d) Reserve Funds for Entities in Health Professional Shortage 
Areas or Rural Areas.--
            (1) In general.--Subject to paragraph (2), the Secretary 
        shall ensure that at least 20 percent of the funds available 
        for making grants under this section to--
                    (A) hospitals and critical access hospitals are 
                used for making grants to such hospitals that are 
                located exclusively in an applicable area;
                    (B) skilled nursing facilities are used for making 
                grants to such facilities that are located exclusively 
                in an applicable area;
                    (C) Federally qualified health centers are used for 
                making grants to such centers that are located 
                exclusively in an applicable area;
                    (D) physicians and physician group practices are 
                used for making grants to physicians and such practices 
                that are located exclusively in an applicable area; and
                    (E) community mental health centers are used for 
                making grants to such centers that are located 
                exclusively in an applicable area.
            (2) Availability of reserve funds if limited number of 
        entities apply for reserved grants.--If the Secretary estimates 
        that the amount of funds reserved under subparagraph (A), (B), 
        (C), (D), or (E) of paragraph (1) for the type of entity 
        involved exceeds the maximum amount of funds permitted for such 
        entities under subsection (e), the Secretary may reduce the 
        amount reserved for such entities by an amount equal to such 
        excess and use such funds for awarding grants to other eligible 
        entities.
            (3) Applicable area defined.--For purposes of paragraph 
        (1), the term ``applicable area'' means--
                    (A) an area that is designated as a health 
                professional shortage area under section 332(a)(1)(A) 
                of the Public Health Service Act;
                    (B) a rural area (as such term is defined for 
                purposes of section 1886(d) of the Social Security Act 
                (42 U.S.C. 1395ww(d))); or
                    (C) a rural census tract of a metropolitan 
                statistical area (as determined under the most recent 
                modification of the Goldsmith Modification, originally 
                published in the Federal Register on February 27, 1992 
                (57 Fed. Reg. 6725)).
    (e) Amount of Grant.--
            (1) Amount.--
                    (A) In general.--Subject to subparagraph (B) and 
                paragraph (2), the Secretary shall determine the amount 
                of a grant awarded under this section.
                    (B) Consideration.--In determining the amount of a 
                grant under this section, the Secretary shall take into 
                account the ability to take an expense deduction for 
                health care informatics system expenses under section 
                179C of the Internal Revenue Code of 1986, as added by 
                section 5.
            (2) Limitation.--
                    (A) In general.--A grant awarded under this section 
                may not exceed the lesser of--
                            (i) an amount equal to the applicable 
                        percentage of the costs incurred by the 
                        eligible entity for the project for which the 
                        entity is seeking assistance under this 
                        section; or
                            (ii) in the case of a grant made to--
                                    (I) a hospital or a critical access 
                                hospital, $1,000,000;
                                    (II) a skilled nursing facility, 
                                $200,000;
                                    (III) a Federally qualified health 
                                center, $150,000;
                                    (IV) a physician, $15,000;
                                    (V) a physician group practice, an 
                                amount equal to $15,000 multiplied by 
                                the number of physicians in the 
                                practice; or
                                    (VI) a community mental health 
                                center, $75,000.
                    (B) Applicable percentage.--For purposes of 
                subparagraph (A)(i), the term ``applicable percentage'' 
                means, with respect to an eligible entity for the 
                period involved, the percentage of total revenues 
                (excluding grants and gifts from Federal, State, local 
                government, and private sources) for such period that 
                consists of total revenues from the medicare program, 
                the medicaid program, and the State children's health 
                insurance program under titles XVIII, XIX, and XXI, 
                respectively, of the Social Security Act.
    (f) Requirements.--
            (1) Compliant with standards.--A clinical health care 
        informatics system funded under this section and placed in 
        service on or after the date the standards are adopted under 
        section 4 shall be compliant with such standards.
            (2) Furnishing the secretary with information.--
                    (A) In general.--An eligible entity receiving a 
                grant under this section shall furnish the Secretary 
                with such information as the Secretary may require to--
                            (i) evaluate the project for which the 
                        grant is made; and
                            (ii) ensure that assistance provided under 
                        the grant is expended for the purposes for 
                        which it is made.
                    (B) Coordination.--The Secretary shall ensure that 
                the requirements for furnishing information under 
                subparagraph (A) are coordinated with other 
                requirements for furnishing information to the 
                Secretary that the eligible entity is subject to.
    (g) Studies.--The Secretary shall conduct studies to--
            (1) evaluate the use of clinical health care informatics 
        systems and services implemented with assistance under this 
        section to measure and report quality data based on accepted 
        clinical performance measures; and
            (2) assess the impact of such systems and services on 
        improving patient care, reducing costs, and increasing 
        efficiencies.
    (h) Reports.--
            (1) Interim reports.--
                    (A) In general.--The Secretary shall submit, at 
                least annually, a report to the appropriate committees 
                of Congress on the grant program established under this 
                section.
                    (B) Contents.--A report submitted pursuant to 
                subparagraph (A) shall include information on--
                            (i) the number of grants made;
                            (ii) the nature of the projects for which 
                        assistance is provided under the grant program;
                            (iii) the geographic distribution of grant 
                        recipients;
                            (iv) the impact of the projects on the 
                        health of, and the health costs associated with 
                        the treatment of, patients with heart disease, 
                        cancer, stroke, diabetes, chronic obstructive 
                        pulmonary disease, asthma, or any other disease 
                        or conditions specified by the Secretary;
                            (v) the results of the studies conducted 
                        under subsection (g); and
                            (vi) such other matters as the Secretary 
                        determines appropriate.
            (2) Final report.--Not later than 180 days after the 
        completion of all of the projects for which assistance is 
        provided under this section, the Secretary shall submit a final 
        report to the appropriate committees of Congress on the grant 
        program established under this section, together with such 
        recommendations for legislation and administrative action as 
        the Secretary determines appropriate.
    (i) Funding.--
            (1) Hospitals.--There are appropriated from the Federal 
        Hospital Insurance Trust Fund under section 1817 of the Social 
        Security Act (42 U.S.C. 1395i) $250,000,000, for each of the 
        fiscal years 2006 through 2010, for the purpose of making 
        grants under this section to eligible entities that are 
        hospitals or critical access hospitals.
            (2) Skilled nursing facilities.--There are appropriated 
        from the Federal Hospital Insurance Trust Fund under section 
        1817 of the Social Security Act (42 U.S.C. 1395i) $100,000,000, 
        for each of the fiscal years 2006 through 2010, for the purpose 
        of making grants under this section to eligible entities that 
        are skilled nursing facilities.
            (3) Federally qualified health centers.--There are 
        appropriated from the Federal Supplementary Medical Insurance 
        Trust Fund under section 1841 of the Social Security Act (42 
        U.S.C. 1395t) $40,000,000, for each of the fiscal years 2006 
        through 2010, for the purpose of making grants under this 
        section to eligible entities that are Federally qualified 
        health centers.
            (4) Physicians.--There are appropriated from the Federal 
        Supplementary Medical Insurance Trust Fund under section 1841 
        of the Social Security Act (42 U.S.C. 1395t) $400,000,000, for 
        each of the fiscal years 2006 through 2010, for the purpose of 
        making grants under this section to eligible entities that are 
        physicians or physician group practices.
            (5) Community mental health centers.--There are 
        appropriated from the Federal Supplementary Medical Insurance 
        Trust Fund under section 1841 of the Social Security Act (42 
        U.S.C. 1395t) $20,000,000, for each of the fiscal years 2006 
        through 2010, for the purpose of making grants under this 
        section to eligible entities that are community mental health 
        centers.

SEC. 3. ADJUSTMENTS TO MEDICARE PAYMENTS FOR HEALTH INFORMATION 
              TECHNOLOGY ENABLED QUALITY SERVICES.

    (a) Adjustments.--The Secretary of Health and Human Services (in 
this section referred to as the ``Secretary'') shall establish a 
methodology for making adjustments in payment amounts under title XVIII 
of the Social Security Act (42 U.S.C. 1395 et seq.) made to providers 
of services and suppliers who--
            (1) furnish items or services for which payment is made 
        under such title; and
            (2) in the course of furnishing such items and services, 
        use health information technology and technology services with 
        patient-specific applications that the Secretary determines 
        improves the quality and accuracy of clinical decision-making, 
        compliance, health care delivery, and efficiency, such as 
        electronic medical records, electronic prescribing, clinical 
        decision support tools integrating well-established national 
        treatment guidelines with continuous quality improvement 
        functions, and computerized physician order entry with clinical 
        decision-support capabilities.
    (b) Requirements.--The methodology established under subsection (a) 
shall--
            (1) include the establishment of new codes, modification of 
        existing codes, and adjustment of evaluation and management 
        modifiers to such codes, that take into account the costs of 
        acquiring, using, and maintaining health information technology 
        and services with patient-specific applications;
            (2) first address adjustments for payments for items and 
        services related to the diagnosis or treatment of heart 
        disease, cancer, stroke, diabetes, chronic obstructive 
        pulmonary disease (COPD), and other diseases and conditions 
        that result in high expenditures under the medicare program and 
        for which effective health information technology exists; and
            (3) take into account estimated aggregate annual savings in 
        overall payments under such title XVIII attributable to the use 
        of health information technology and services with patient-
        specific applications.
    (c) Duration.--The Secretary may reduce or eliminate adjustments 
made to payments pursuant to subsection (a) as payment methodologies 
under title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) 
are adjusted to reflect provider quality and efficiency.
    (d) Rule of Construction.--In making national coverage 
determinations under section 1862(a) of the Social Security Act (42 
U.S.C. 1395y(a)) with respect to maintaining health information 
technology and services with patient-specific applications, in 
determining whether the health information technology and services are 
reasonable and necessary for the diagnosis or treatment of illness or 
injury or to improve the functioning of a malformed body member, the 
Secretary shall consider whether the health information technology and 
services improve the health of medicare beneficiaries, including the 
improvement of clinical outcomes or cost-effectiveness of treatment.
    (e) Definitions.--In this section:
            (1) Provider of services.--The term ``provider of 
        services'' has the meaning given that term under section 
        1861(u) of the Social Security Act (42 U.S.C. 1395x(u)).
            (2) Supplier.--The term ``supplier'' has the meaning given 
        that term under section 1861(d) of such Act (42 U.S.C. 
        1395x(d)).

SEC. 4. INTEROPERABILITY.

    (a) Development and Adoption of Standards.--
            (1) In general.--Not later than 2 years after the date of 
        enactment of this Act, the Secretary of Health and Human 
        Services (in this section referred to as the ``Secretary'') 
        shall provide for the development and adoption under programs 
        administered by the Secretary of national data and 
        communication health information technology standards that 
        promote the efficient exchange of data between varieties of 
        provider health information technology systems. In carrying out 
        the preceding sentence, the Secretary may adopt existing 
        standards consistent with standards established under 
        subsections (b)(2)(B)(i) and (e)(4) of section 1860D-4 of the 
        Social Security Act (42 U.S.C. 1395w-104).
            (2) Requirements.--The standards developed and adopted 
        under paragraph (1) shall be designed to--
                    (A) enable health information technology to be used 
                for the collection and use of clinically specific data;
                    (B) promote the interoperability of health care 
                information across health care settings, including 
                reporting to the Secretary and other Federal agencies; 
                and
                    (C) facilitate clinical decision support through 
                the use of health information technology.
    (b) Implementation of Procedures for the Secretary to Accept Data 
Using Standards.--
            (1) Data from new health care reporting requirements.--Not 
        later than January 1, 2008, the Secretary shall implement 
        procedures to enable the Department of Health and Human 
        Services to accept the optional submission of data derived from 
        health care reporting requirements established after the date 
        of enactment of this Act using data standards adopted under 
        this section.
            (2) Data from all requirements.--
                    (A) In general.--Not later than January 1, 2010, 
                the Secretary shall implement procedures to enable the 
                Department of Health and Human Services to accept the 
                optional submission of data derived from all health 
                care reporting requirements using data standards 
                adopted under this section.
                    (B) Limitation.--
                            (i) In general.--On and after January 1, 
                        2010, if an entity or individual elects to 
                        submit data to the Secretary using data 
                        standards adopted under this section, the 
                        Secretary, subject to clause (ii), may not 
                        require such entity or individual to also 
                        submit such data in an additional format.
                            (ii) Exception.--The Secretary may provide 
                        for an exception, not to exceed 2 years, to the 
                        limitation under clause (i) with respect to 
                        certain types of data if the Secretary 
                        determines that such an exception is 
                        appropriate.

SEC. 5. ELECTION TO EXPENSE HEALTH CARE INFORMATICS SYSTEMS.

    (a) In General.--Part VI of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to itemized deductions for 
individuals and corporations) is amended by inserting after section 
179B the following new section:

``SEC. 179C. HEALTH CARE INFORMATICS SYSTEM EXPENDITURES.

    ``(a) Treatment of Expenditures.--
            ``(1) In general.--An eligible entity may elect to treat 
        any qualified health care informatics system expenditure which 
        is paid or incurred by the taxpayer as an expense which is not 
        chargeable to capital account. Any expenditure which is so 
        treated shall be allowed as a deduction.
            ``(2) Election.--An election under paragraph (1) shall be 
        made under rules similar to the rules of section 179(c).
    ``(b) Limitations.--
            ``(1) Dollar limitation.--With respect to any eligible 
        entity, the aggregate cost which may be taken into account 
        under subsection (a)(1) for any taxable year shall not exceed, 
        when added to any cost taken into account under this section in 
        any preceding taxable year, the dollar amount specified under 
        section 2(e)(2)(A)(ii) of the Health Information Technology Act 
        of 2005.
            ``(2) Applicable rules.--For purposes of this subsection, 
        rules similar to the rules of paragraphs (3) and (4) of 
        subsection (b) and paragraphs (6), (7), and (8) of subsection 
        (d) of section 179 shall apply.
    ``(c) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Qualified health care informatics system 
        expenditures.--
                    ``(A) In general.--The term `qualified health care 
                informatics system expenditure' means, with respect to 
                any taxable year, any direct or indirect costs incurred 
                and properly taken into account with respect to the 
                purchase or installation of equipment and facilities 
                relating to any qualified health care informatics 
                system. Such term shall include so much of the purchase 
                price paid by the lessor of equipment and facilities 
                subject to a lease described in subparagraph (B)(ii) as 
                is attributable to expenditures incurred by the lessee 
                which would otherwise be described in the preceding 
                sentence.
                    ``(B) When expenditures taken into account.--
                            ``(i) In general.--Qualified health care 
                        informatics system expenditures shall be taken 
                        into account under this section only with 
                        respect to equipment and facilities--
                                    ``(I) the original use of which 
                                commences with the taxpayer, and
                                    ``(II) which are placed in service 
                                after December 31, 2004, and before 
                                October 1, 2010.
                            ``(ii) Sale-leasebacks.--For purposes of 
                        clause (i), if property--
                                    ``(I) is originally placed in 
                                service after December 31, 2004, and 
                                before October 1, 2010, by any person, 
                                and
                                    ``(II) sold and leased back by such 
                                person within 3 months after the date 
                                such property was originally placed in 
                                service,
                        such property shall be treated as originally 
                        placed in service not earlier than the date on 
                        which such property is used under the leaseback 
                        referred to in subclause (II).
                    ``(C) Grants, etc. excluded.--The term `qualified 
                health care informatics system expenditure' shall not 
                include any amount to the extent such amount is funded 
                by any grant, contract, or otherwise by another person 
                (or any governmental entity).
            ``(2) Qualified health care informatics system.--The term 
        `qualified health care informatics system' means a system 
        which--
                    ``(A) has been individually approved by the 
                Secretary of Health and Human Services for purposes of 
                this section,
                    ``(B) consists of electronic health record systems 
                and other health information technologies, and
                    ``(C) meets the standards adopted by the Secretary 
                of Health and Human Services under section 4 of the 
                Health Information Technology Act of 2005 by not later 
                than the date which is 60 days after the date of the 
                adoption of such standards.
            ``(3) Eligible entity.--The term `eligible entity' has the 
        meaning given such term by section 2(a)(4) of the Health 
        Information Technology Act of 2005.
            ``(4) Property used outside the united states, etc., not 
        qualified.--No expenditures shall be taken into account under 
        subsection (a)(1) with respect to the portion of the cost of 
        any property referred to in section 50(b) or with respect to 
        the portion of the cost of any property specified in an 
        election under section 179.
            ``(5) Ordinary income recapture.--For purposes of section 
        1245, the amount of the deduction allowable under subsection 
        (a)(1) with respect to any property which is of a character 
        subject to the allowance for depreciation shall be treated as a 
        deduction allowed for depreciation under section 167.''.
    (b) Conforming Amendments.--
            (1) Section 263(a)(1) of the Internal Revenue Code of 1986 
        (relating to capital expenditures) is amended by striking 
        ``or'' at the end of subparagraph (H), by striking the period 
        at the end of subparagraph (I) and inserting ``, or'', and by 
        adding at the end the following new subparagraph:
                    ``(J) expenditures for which a deduction is allowed 
                under section 179C.''.
            (2) The table of sections for part VI of subchapter A of 
        chapter 1 of such Code is amended by inserting after the item 
        relating to section 190 the following new item:

``Sec. 179C. Health care informatics system expenditures.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 2004.

SEC. 6. SENSE OF THE SENATE.

    It is the sense of the Senate that the provisions of, and 
amendments made by, this Act should achieve deficit neutrality over the 
5-year period beginning on October 1, 2005.
                                 <all>