[Senate Hearing 107-1054]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 107-1054

  E-HEALTH AND CONSUMER EMPOWERMENT: HOW CONSUMERS CAN USE TECHNOLOGY 
            TODAY AND IN THE FUTURE TO IMPROVE THEIR HEALTH

=======================================================================

                                HEARING

                               before the

             SUBCOMMITTEE ON SCIENCE, TECHNOLOGY, AND SPACE

                                 of the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 23, 2001

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation


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                            WASHINGTON : 2003
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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

              ERNEST F. HOLLINGS, South Carolina, Chairman
DANIEL K. INOUYE, Hawaii             JOHN McCAIN, Arizona
JOHN D. ROCKEFELLER IV, West         TED STEVENS, Alaska
    Virginia                         CONRAD BURNS, Montana
JOHN F. KERRY, Massachusetts         TRENT LOTT, Mississippi
JOHN B. BREAUX, Louisiana            KAY BAILEY HUTCHISON, Texas
BYRON L. DORGAN, North Dakota        OLYMPIA J. SNOWE, Maine
RON WYDEN, Oregon                    SAM BROWNBACK, Kansas
MAX CLELAND, Georgia                 GORDON SMITH, Oregon
BARBARA BOXER, California            PETER G. FITZGERALD, Illinois
JOHN EDWARDS, North Carolina         JOHN ENSIGN, Nevada
JEAN CARNAHAN, Missouri              GEORGE ALLEN, Virginia
BILL NELSON, Florida
               Kevin D. Kayes, Democratic Staff Director
                  Moses Boyd, Democratic Chief Counsel
                  Mark Buse, Republican Staff Director
               Jeanne Bumpus, Republican General Counsel
                              ----------                              

             SUBCOMMITTEE ON SCIENCE, TECHNOLOGY, AND SPACE

                      RON WYDEN, Oregon, Chairman
JOHN D. ROCKEFELLER IV, West         GEORGE ALLEN, Virginia
    Virginia                         TED STEVENS, Alaska
JOHN F. KERRY, Massachusetts         CONRAD BURNS, Montana
BYRON L. DORGAN, North Dakota        TRENT LOTT, Mississippi
MAX CLELAND, Georgia                 KAY BAILEY HUTCHISON, Texas
JOHN EDWARDS, North Carolina         SAM BROWNBACK, Kansas
JEAN CARNAHAN, Missouri              PETER G. FITZGERALD, Illinois
BILL NELSON, Florida


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on July 23, 2001....................................     1
Statement of Senator Allen.......................................     3
Statement of Senator Wyden.......................................     1

                               Witnesses

Fuller, Sherrilynne S., Head, Division of Biomedical Informatics, 
  Professor, Department of Medical Education, University of 
  Washington School of Medicine..................................    30
    Prepared statement...........................................    33
Kenagy, John W., MD, MPA, Harvard Business School................    51
    Prepared statement...........................................    53
May, Willie E., Chief, Analytical Chemistry Division, Chemical 
  Science and Technology Laboratory, National Institute of 
  Standards and Technology (NIST)................................    57
    Prepared statement...........................................    60
Patterson, Albert, Vice President for Contracting, Premier, Inc..    66
    Prepared statement...........................................    68
Scully, Tom, Administrator, Centers for Medicare & Medicaid 
  Services; accompanied by Captain Cynthia Wark..................     5
    Prepared statement...........................................    10

                                Appendix

Kuhn, Herb, Corporate Vice President, Premier, Inc., letter to 
  Hon. Ron Wyden.................................................    89

 
  E-HEALTH AND CONSUMER EMPOWERMENT: HOW CONSUMERS CAN USE TECHNOLOGY 
            TODAY AND IN THE FUTURE TO IMPROVE THEIR HEALTH

                              ----------                              


                         MONDAY, JULY 23, 2001

                               U.S. Senate,
      Subcommittee on Science, Technology, & Space,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 1:05 p.m., in 
room SR-253, Russell Senate Office Building, Hon. Ron Wyden, 
Chairman of the Subcommittee, presiding.

             OPENING STATEMENT OF HON. RON WYDEN, 
                    U.S. SENATOR FROM OREGON

    Senator Wyden. The Subcommittee will come to order, and I 
will have a short opening statement before I begin. I want to 
take this opportunity to say publicly how much I am looking 
forward to serving with Senator Allen on this Subcommittee. He 
has already shown, in a very short period of time, that he is 
going to make special efforts to address important technology 
issues.
    In a sense, our States are similarly situated. Both 
Virginia and Oregon are very rural States where agriculture is, 
and will always be, extraordinarily important. In both States, 
there is a tremendous interest in technology. I think that our 
previously demonstrated interest in working together on other 
issues gives us an opportunity for a special alliance, and I 
very much look forward to the opportunity to serve with you, 
Senator Allen. I am going to make a short opening statement to 
begin with, but I especially want to welcome you and tell you 
how much I look forward to serving with you.
    Senator Allen. Thank you, Senator Wyden. I appreciate it.
    Senator Wyden. When I served as codirector of the Oregon 
Gray Panthers, senior citizens often talked to me about their 
hope that our health care system could be made more user-
friendly, convenient, and lower in cost. Even then, there was 
discussion about various exciting-sounding technology, such as 
smart cards, electronic medical records, and what seniors, the 
Gray Panthers described as, in their words, those ``fancy 
gadgets''. It seemed the day when seniors and other Americans 
would have great access to empowering technologies were just 
ahead.
    Today's technologies offer an unprecedented opportunity to 
reshape American health care, but in some respects the path to 
enhanced new health looks a little bit like a steeple chase. 
There are a fair number of obstacles in front of us. This 
Subcommittee is going to work aggressively, and on a bipartisan 
basis, to lower the hurdles that limit the expanded use of e-
health in our health care system.
    At the outset, I want to note that I believe that several 
of the problems blocking the increased use of e-health care are 
similar to the legal, regulatory, and cultural problems that 
challenge our health care system as a whole. That is why this 
Subcommittee has asked Dr. John Kenagy to testify here today. 
His work, based on the theory that disruptive innovation, which 
has formed so many other fields of our economy, ought to be 
extended to health care, looks like just the sort of jolt that 
is needed to secure the changes that seniors described to me in 
my Gray Panther days.
    I believe that the vast majority of the obstacles to 
increased utilization of e-health can be achieved without 
enacting an avalanche of additional federal laws, but in some 
areas new legislation may, in fact, be needed to move this 
country forward.
    One area that I believe ought to be examined is a 
requirement that all medical claims in the United States be 
submitted, captured, adjudicated, and paid using secure 
Internet technologies within 15 days. If it cannot be done 
within that time, the payer must notify the patient and the 
provider with a reason why.
    Experts that I have consulted, such as medical economists 
and health information technology authority J.D. Kleinke 
suggest that such a requirement ought to be in place, certainly 
within 2 years, and that such a rule would make handling a 
claim fairly similar to ordering a book on Amazon.com.
    I would like to note the Health Care Financing 
Administration, has made this a special priority and we are 
very pleased that the Director, Tom Scully, is here. The Health 
Care Financing Administration--known by its new name as the 
Centers for Medicare & Medicaid Services--has already begun to 
make significant headway in changing and improving the system 
for paying claims in this country.
    American health care, which now chokes on administrative 
paperwork and redundancy, lags behind most other industries in 
electronic payment efficiencies and claims payment reform could 
significantly benefit the entire health care system. Certainly 
patients and doctors would be happier. The reform would improve 
data reporting, and, thereby, improve the quality of health 
care by saving time and money and reducing medical errors.
    Broader efficiencies could be achieved from the technical 
standardization that electronic submission would necessitate 
and would allow us to build on the Health Insurance Portability 
and Accountability Act. Most significantly, if all the payers 
were required to modernize their payment systems to utilize the 
Internet at the same time, our Government would be removing the 
current competitive economic disadvantage that innovative 
programs now face.
    Incredibly, today's health system perversely penalizes the 
innovative that use technology to pay claims faster and more 
efficiently than their competitors. Innovators find themselves 
with reduced investment income and less profit to show for 
their good deeds.
    There are going to be a number of other issues that this 
Subcommittee will examine in connection with the e-health area. 
We will look at the development of a private sector-led program 
to monitor and even certify e-health information on public web 
sites, how hospitals and physicians could share a web site for 
patient admission and procedure scheduling without violating 
federal antireferral and antikick-back laws, and health care e-
mail and reimbursement questions. In addition, the Subcommittee 
intends to explore how e-health can assist in responding to the 
health workforce shortage.
    We are very pleased that Tom Scully is with us today. He 
has made it clear in previous public statements that he 
recognizes the web's potential for empowering patients and 
their families. He would also like outcomes and price 
information, currently in the possession of the Federal 
Government, made widely available. We are pleased that his 
tenure is going to be an activist one, and that he is back in 
public service. This Subcommittee intends to work with him 
often.
    I also want to welcome our other panelists. In addition to 
Mr. Scully and Dr. Kenagy, we will have Dr. Sherrilynne Fuller 
from the University of Washington School of Medicine, Dr. 
Willie May of the National Institute of Standards and 
Technology, and Mr. Albert Patterson, of Premier, Incorporated.
    We have asked all our witnesses to limit their statements 
so there will be time for questions. Their full written 
testimony will be made a part of the record, but first, I want 
to hear from Senator Allen.

                STATEMENT OF HON. GEORGE ALLEN, 
                   U.S. SENATOR FROM VIRGINIA

    Senator Allen. Thank you, Mr. Chairman, and I want to thank 
you for calling this hearing today. I think this is a great way 
for you to start the chairmanship of this Subcommittee, by 
having hearings on issues that are pertinent, relevant, and 
educating, not just to yourself as a leader and myself as a 
Senator, but to our other Senators, of the information and 
insight we glean from the Subcommittee hearings, so that we can 
hopefully improve the lives of our constituents, whether they 
are in Oregon, or Virginia, or anywhere else in the United 
States.
    And since the United States is respected as having the best 
health care system in the world, although it is the most 
expensive. We so often have been the leaders in technology, and 
we might as well also be the leader in the adaptation and 
utilization of technology to improve health care.
    So I very much commend you, Mr. Chairman, and do look 
forward to working with you. I am sorry I missed the meeting 
last Monday on cyber terrorism and cyber crime issues, but I am 
sure we will have a chance to revisit those issues in the 
future.
    I, too, would like to welcome all of our guests here today. 
I look forward to hearing your testimony, and your testimony 
will certainly serve as the insight we need into any 
legislative initiatives that might come from the comments and 
the testimony here today.
    As our Chairman, Senator Wyden well knows, technology is 
involved in everything in our lives, and it is improving, IT--
we talk about technology generally, IT more specifically--is 
improving all sectors of our economy. It is making our 
manufacturers more efficient, with better quality and also 
fewer pollutants. It is improving services. It is improving 
agribusiness. It is improving education and communications, and 
it is very logical, naturally, that the health care provisions 
would also get improved by using technology, in addition to 
obviously the life sciences and medical sciences research.
    We do not have to look very far, Mr. Chairman, to see the 
conditions of our health care industry. It is the largest 
industry or economic sector in our country. It is comprised of 
hundreds of thousands of physicians and other health care 
professionals, thousands of hospitals, and in 1998 expenditures 
of over $1 billion.
    Now, the expenditures in the provision of health care 
clearly will be increasing, because our population is 
increasing in age, and so there is clearly going to be an 
increase.
    Now, the escalating cost of health care has caused many 
companies and consumer groups and the Federal Government to put 
pressure on the health care service providers to reduce cost 
through cost-efficient methods of servicing a growing number of 
health care consumers. Now, fortunately, Mr. Chairman we are 
going to hear about some of these ideas, but there are some 
innovative tools that can help, and the tools are information 
technologies. These technologies offer the possibilities to 
make significant reductions in administrative and clinical 
transactions.
    There will be, as you say, and I agree with you, there will 
be fewer medical errors, because there will be better analysis 
of the actual patient's condition. There will be less 
paperwork. Sure, maybe somebody will have to print out 
something, because you are not going to have a terminal at 
every single, or a screen at every single spot, but 
nevertheless, it is going to reduce paperwork.
    There will be more allocation of dollars, and most 
importantly, the time and attention of the nurse or the other 
health care professionals to be spending time not worrying 
about paperwork and duplicative and triplicative entries of 
data, but mainly paying attention and spending time with that 
patient.
    I think the allocation of more time to patient care rather 
than paperwork and bureaucracy procedures would be desirable. 
To the extent any of our witnesses can elucidate on that, it 
would be great.
    Now, according to ITAA, which is Information Technology 
Association of America, a leading trade association serving the 
information technology industry, an industry-wide investment in 
information technology of about $18 billion would yield a gross 
savings of more than $120 billion over a 6-year period. That is 
a 6-to-1 return on investment, which sounds like a great idea.
    I do think that you have to look at the cost-benefit 
analysis, and when it is done, and hopefully some of the 
witnesses here will lead us that way, and make sure most 
importantly that the deployment of new technologies is done in 
a smooth way, always caring first and foremost about patient 
care, but I do not doubt that in an established older industry, 
changing standing procedures and practices can be a challenging 
situation.
    But I think our Subcommittee here and, indeed, our Full 
Committee, what we are doing is seeking to identify ways in 
which we may assist, or, as Chairman Wyden says, ``Knock down 
those hurdles''--those hurdles that prevent or may prevent this 
opportunity and technology to go forward, and so I am pleased 
we are seeking the advice of those who are considered to be the 
experts, our witnesses today. So again I thank you, Mr. 
Chairman, for holding this very important hearing, and I look 
forward to listening and learning from our witnesses.
    Thank you, Mr. Chairman.
    Senator Wyden. I thank my colleague for an excellent 
statement, and you are absolutely right, this is going to be an 
exercise in knocking down barriers, and I look forward to doing 
it together.
    Mr. Scully, welcome. We are excited to have you, and 
looking out I can see that you have got a chance to demonstrate 
for senior citizens and the people that your agency serves a 
little bit of how the new world is going to work, and you hold 
forth in any way that you find helpful.

STATEMENT OF TOM SCULLY, ADMINISTRATOR, CENTERS FOR MEDICARE & 
               MEDICAID SERVICES; ACCOMPANIED BY 
                      CAPTAIN CYNTHIA WARK

    Mr. Scully. Mr. Chairman, thank you for having me, and 
Senator Allen, first off, I would like to say, Senator, 
Chairman Wyden has been a friend of mine for over 13 years, 
since the first day in the first Bush administration where I 
did a lot of the White House health care, but he is an old 
friend, and he has been committed to finding new and creative 
ways to improving health care for a long time, so I look 
forward to working with you again and Senator Allen.
    And Senator Allen, as Senator Wyden knows, I have long been 
an active Republican in the State of Virginia, so I am happy 
you are here, and as a not-quite-so-illustrious graduate of the 
University of Virginia--he was a very good quarterback. I was 
not--I am also happy to look forward to working with you.
    Also, I would like to thank Captain Cynthia Wark of the 
Public Health Service for coming to help me out. I do not want 
you to think she had to come help me because I am incompetent 
on the Internet, but really she helped put together a lot of 
our web site and a lot of things we are going to talk about 
today, Dialysis Compare, and so she is going to very ably 
assist me today.
    E-health issues are so big and so broad, and the impact on 
what we are going to do in health care in the next decade or so 
is so broad, I do not know where to start, but what I thought I 
would do today is talk a little about where we are and some of 
the things that we have that are underutilized, and one of the 
things that I found out when I did take this job 7 weeks ago--
in my 7 weeks this has probably become my major hot button, 
that is what we are going to do on e-health, and how we are 
going to improve the use of the resources we already have.
    CMS--that is one of my other goals, is to get Chairman 
Wyden to start using our new name, the Centers for Medicare-
Medicaid Services. When he starts using them, I will know I 
have won. But CMS is the world's largest health insurer. We 
cover, through Medicare and Medicaid, more than 70 million 
Americans, and we will pay out $476 billion in benefits this 
year between the two programs, which is a pretty stunning 
number.
    Thirty-one percent of seniors now have access to the 
Internet. That is up from about 7 percent 5 years ago, and when 
I came in here and I looked at our web site, which I have to 
say as a former health care lawyer and hospital person I had 
never actually looked at Medicare's web site, which tells me a 
lot of other people have not, either, and most seniors have 
not.
    There is an enormous amount of information on there 
already, and we are going to strive to push more on there every 
day. We have already announced a few weeks ago a $35 million 
education campaign this fall, and that $35 million is a big 
number.
    In fact, I am spending the rest of the day picking ad 
firms, and I can tell you, the reason I picked $35 million is, 
that is what a Presidential ad campaign spends in 2 months, and 
that level of impact we are looking to have this fall to 
educate seniors is the same kind of very broad-based, massive 
education effort to get seniors to start asking more questions 
about their program, to check the web site, to call 1-800-
MEDICARE.
    But we found that the tools already on there to educate 
seniors, they do not use. We are going to go through these in a 
few minutes, but when I went out and checked where I live in 
Alexandria, Virginia, on Dialysis Compare, and found out the 
information that was on there, there was no way in the world 
that anyone in Alexandria, Virginia that is on kidney dialysis 
should ever pick a dialysis center without looking at our web 
site.
    When I went through to look at the nursing homes, which you 
are going to do in a minute, I found there was a ton of 
information in Alexandria, Virginia and every town in America 
on the nursing homes that you could pick for your parents, and 
when you look at the information we have, and we are going to 
continue to add in the next couple of years, it is an enormous 
educational tool for all seniors and for the families and for 
their kids.
    So we have lots of goals, and I will talk about some others 
with HIPAA and other health issues in a moment. The first thing 
I want to do is get people to start using our web site more, 
and we have a lot more information up there. Starting in about 
a month, and one of my goals in the next 4 years is to educate, 
educate, educate seniors, and I think this is a very good place 
to start.
    So what I want to do briefly is run through a couple of 
them. I picked, surprise, surprise, two different groups from 
Oregon and one from Virginia. I do not know why we did that, 
just a wild guess, but I think we are going to start off with 
just going through basically what is on our web site for 
Dialysis Compare in Portland--unfortunately, one of the things 
Medicare does not cover is reading glasses, so I cannot quite 
read this as well as you probably can, but----
    Senator Allen. From this angle, we need binoculars.
    Mr. Scully. What it does is, if you click up there a little 
bit and click through Dialysis Compare, maybe you can click 
through the ones that are in there. There is a lot of 
information in there about dialysis centers. I do not know if 
you are familiar with kidney dialysis. It is probably one of 
the sickest and lowest income groups we have in Medicare. That 
is $14 billion a year in the Medicare program, a very low 
income, very sick population, and they tend to go--with all due 
respect to the nephrologists, they tend to go where the 
nephrologists suggest that They go, and there is a wide choice 
of dialysis centers, and my interest is in educating people on 
kidney dialysis about where to go, and when you look through 
these dialysis centers in Portland, you will find actually the 
ones in Portland--I looked through this last night--are 
actually pretty good. You are lucky.
    If you look at the national rate of hemodialysis, which I 
think is the key Dialysis Compare standard, you will see the 
national rate is 83 percent, the State rate is 84 percent, and 
fortunately for Senator Wyden, the three major ones in the 
Portland area are all significantly above the national average, 
but I can tell you if you look in Alexandria there are a couple 
that are way below the national average, and if you look in 
Baltimore, where I looked for one last week, there was one 
hospital that had a 17 percent hemodialysis rate, so there is 
an enormous difference, and if you are on kidney dialysis that 
is the key rate, as to whether you are better than expected, 
worse than expected, and what the rates are, and kidney 
dialysis is essentially universal coverage.
    There is a certain amount of deductible for the first 
certain number of days that you are on dialysis, but eventually 
all people--the only universal coverage we have in this country 
is for people on dialysis, so Medicare is effectively 
eventually paying all the bills. We pay, I think, 86 percent of 
all dialysis bills, because of the deductibles, but it is 
basically a federalized program, regardless of age.
    So we are paying the bills. Seniors should have the 
information--everyone on dialysis is not a senior. These are 
people of all ages--they should have the information to pick 
the right dialysis center. They do not have it. They should be 
more aware of this.
    Very few people use this, and this is, again, for people of 
all ages, and I am determined to go out as part of this fall 
education campaign to get dialysis patients on the web and find 
out where dialysis centers are, ask the doctors where they 
should be going, make choices based on their best health care 
outcomes, actually Captain Wark has spent a lot of time on this 
herself and helped to put this together.
    This has been around. This is a model for what we are going 
to do in Medicare dialysis, that we have terrific outcomes, we 
have terrific information. There is no reason why any dialysis 
patient in the country should not ask these questions. This 
information is readily available, and we want to make sure 
every dialysis patient is aware of it and looks at it, and this 
is a model I have for going on with nursing homes and hospitals 
down the road.
    This is the type of information we should have on patient 
outcomes for everybody, all through the health care systems, 
and I think the Dialysis Compare system is terrific, probably 
better than our other patient information right now. We are 
going to try to give every corner of health care this type of 
comparative information.
    The second one I think is Health Care Compare, which I 
think--in this example I'm showing you on the screen--is also 
in Portland, Oregon, and again we have had a big problem with 
managed care plans dropping out of Medicare Plus Choice. 
Another major initiative of mine is to get them hopefully, with 
the Senate's help, get more of them to stay in and convince 
them this is a good partnership with the Federal Government to 
stay in the Medicare Plus Choice program.
    Senator Wyden. I will not use this opportunity to try to 
put you on the spot to a higher AAPCC rate, or anything like 
that. That will help us. I am going to spare you that one.
    Mr. Scully. I would love to work with the Senate to make 
the AAPCC work better, but I know, Senator Wyden, and 
fortunately in Oregon you have a broader base of Medicare Plus 
Choice than other places have. In Northern Virginia there is 
basically one, Kaiser. It is the only choice you have. In many 
other metropolitan areas, there are multiple ones, but again, 
if you look on here, these are the various plans that are 
available in Portland.
    It goes through great levels of detail. There are actually 
hundreds of pages of comparisons behind here, comparing quality 
cost, copayments, drug coverage. If you are not looking on our 
web site and you are picking a private health care plan in 
Portland, you are probably making the wrong decision.
    Just from the number of hits we get, most seniors are not 
aware of this, but we are going to try to get the seniors and 
their kids and their families to say, look, this is a resource, 
we are going to use it, and this is a big part of our education 
campaign this fall, because there are a lot of benefits out 
there for seniors that are worried about prescription drugs.
    Hopefully on a bipartisan basis we will get a Medicare 
reform and prescription drug bill done this year, but until 
then, Medicare Plus Choice is a terrific place to have the 
option to get prescription drugs and a lot of plans, and a lot 
of them are not aware of that, so we want to educate them as to 
their options out there.
    But if you look through the plans here in Oregon, there are 
enormous levels of information. I mean, if you went through 
here, I believe it would take you 45 minutes just to go through 
the available information and read it, on the health plans in 
Oregon, in Portland, and it is very, very helpful if you are 
trying to pick the right health plan for your parent, or for a 
family member, or for yourself.
    The last one I wanted to show, and this is a little more 
controversial, is the Nursing Home Compare web site, and the 
reason it is controversial is, it basically lists--I put the 
one in here for Alexandria, Virginia. One of the nursing homes 
in here is actually two doors down from my house, so I am 
particularly familiar with it.
    But again, if you are picking a nursing home any place, not 
to go on our web site and find out what the history of these 
are--I happen to live next to the Woodbine Rehab Facility in 
Alexandria. When you look down here and you flip through these 
facilities, there is a lot of very good comparative data.
    Now, the nursing home industry would tell you this is not 
objective data, because it is based on State survey and 
certification rules, but I am currently working very closely 
with the nursing homes to put together a new health care 
quality measurement for the whole nursing home industry that we 
hope will be up and running in the next, certainly the next few 
months. We are not quite there yet, but we are working on it.
    And I think that you will find that basically one of the 
most sensitive things people do in their lives is finding a 
nursing home or long-term care facility for a loved one or 
parent, and there is a lot of information people do not use, 
and again I have been in the health care industry for 20 years. 
I was totally unaware of this until I took this job, and my 
guess is most seniors are not as well, so our goal basically is 
to take this type of material, collect a lot more of it, put it 
out on the Internet, and advertise heavily to seniors and their 
families, this is available, get them to call.
    If they do not have access to the Internet, and a lot of 
them do not, call 1-800-MEDICARE and ask questions, and our 
operators by November 1 will have all this information in front 
of them. They will be on our web site. They will be able to 
give you localized information about Portland or Philadelphia, 
or Alexandria, or wherever else you want to go, which ones not 
exist right now, and our goal is to basically get every senior 
in the country to be--and in the case of dialysis centers, it 
is nonseniors as well--aware of the coverage that is available 
to them, aware of the options available to them, get them to 
ask questions, and get good, quick answers from the Medicare 
system.
    Seniors like Medicare. Congressmen all dislike HCFA. 
Hopefully they will like CMS better, but we are working on that 
one, but seniors do like Medicare, and it is a popular program, 
but our polling and our focus groups tell us that they really 
do not know much about it. They have very little understanding 
of the different coverages available to them, the choices 
available to them, and their opportunities in Medicare in their 
towns and cities and counties, and we want to make sure that is 
considerably better.
    Anyway, there is a lot more in my written testimony, but I 
will just jump to one other thing I think is important that 
Senator Wyden alluded to. One of our personal goals is to 
collect data on quality and start in a cooperative way with the 
industry involvement to collect and disseminate it. We have 
done a very intensive analysis of the industry, and the 
dialysis folks like it. They like being compared. They like 
having their outcomes known. It has worked extremely well.
    As I said, we are working on some other industries going 
forward but I think one of the other major benefits of the 
improvements in technology is, we have enormous capabilities to 
collect quality data and put it out there. Chairman Wyden is a 
giant believer in markets, and markets only work if people have 
information, and one of my other goals is to collect as much 
information as we possibly can on the health care system and 
put it out there for consumers, who I believe, in health care 
are starved for information, so we have made hopefully a good 
start in that direction.
    We look forward to working with this committee and the 
Senate to push these goals forward as quickly as possible, and 
I hope the one thing you will see most tangibly this fall is, I 
think you are going to be in a very dark cave to miss our 
advertising campaign. Our information tells us about 97 percent 
of seniors will be aware of it by the time we are finished, 
before Christmas, and we hope that will be a very, very 
positive step forward to getting all seniors to understand what 
their benefits are.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Scully follows:]

Prepared Statement of Tom Scully, Administrator, Centers for Medicare & 
                           Medicaid Services

    Chairman Wyden, Senator Allen, other distinguished members of the 
Subcommittee, thank you for inviting me to discuss the potential of new 
electronic technologies to help Medicare beneficiaries. This is an 
important issue, and I appreciate your interest and your efforts to 
ensure Medicare is well positioned to take full advantage of the 
opportunities that emerging electronic technologies present. I will 
also discuss some of the steps we are taking now to harness this power 
to improve Medicare services and the way we do business. I look forward 
to working with you on these initial steps.
    As you know, we live in an age where technological advancements are 
improving almost every aspect of our lives--from developing artificial 
hearts to improving our ability to communicate, and from deciphering 
the genetic code to performing cross-continental surgery using 
electronic data transfer. Today we can perform many tasks faster and 
cheaper than ever before. As the world's largest health insurer, it is 
critical for the Centers for Medicare & Medicaid Services (CMS) to 
embrace technological advancements to expand our interaction with 
Medicare providers and ultimately improve the care and service that 
Medicare and Medicaid beneficiaries receive.
    I am dedicated to ensuring that we seek opportunities to take 
advantage of all of the advancements that can help the people involved 
with Medicare, including health plans, physicians and providers, and 
the beneficiaries who depend on them. Medicare is a highly automated 
and fast payer in the health insurance industry

                               BACKGROUND

    CMS is the world's largest health insurer, providing coverage to 
more than 70 million Americans. This year the Medicare, Medicaid, and 
SCHIP programs will pay an estimated $476 billion in benefits, 
Approximately $375 of which are Federal costs. Each year Medicare alone 
processes nearly one billion claims from over one million physicians 
and other health care providers who care for the nearly 40 million 
Medicare beneficiaries. This is a tremendous undertaking. Moreover, 
Medicare is complex and physicians, providers, and beneficiaries alike 
have complained that it is confusing and cumbersome to work with. We 
have a responsibility to employ every appropriate means to improve the 
way we do business and the care our beneficiaries receive. We recognize 
these challenges, and we know that electronic technologies present new 
opportunities to help address them.
    We have begun to take advantage of electronic technologies in many 
ways in the Medicare program. We are taking steps to use technology in 
other ways to improve our programs. For instance, we are using 
Internet-based tools to educate Medicare beneficiaries about their 
health care options, to help them understand the alternatives available 
to them and how their choices might impact them. Additionally, we are 
implementing the Health Insurance Portability and Accountability Act of 
1996 (HIPAA) provisions, which mandated a broad array of administrative 
simplifications for electronic transactions in the entire health care 
industry, including Medicare and Medicaid. Once fully implemented, 
these improvements will make it easier and more efficient for 
physicians, providers, and insurers to exchange health-and claims-
related data, enhancing their ability to provide high-quality care for 
patients. And we are using technology to make Medicare as simple and 
understandable for physicians and other health care providers as 
possible so they can spend more time with their patients and less time 
on paperwork.
    These initiatives are important, and they represent strong steps in 
the right direction. However, I recognize that there is more that we 
can do--other ways to take advantage of the opportunities that new 
technologies present to help Medicare beneficiaries. I look forward to 
continuing to work with you as we consider and investigate other ways 
that Medicare can take advantage of all that electronic technology has 
to offer.

                         BENEFICIARY EDUCATION

    Secretary Thompson and I have placed a high priority on using 
Internet-based technologies to help beneficiaries better understand 
their Medicare options. More and more, people with Medicare and those 
who will soon be eligible for Medicare use the Internet. In fact, 
Internet access among people with Medicare has increased dramatically 
from 1997 to 1999. Findings from the CMS-sponsored Medicare Current 
Beneficiary Survey indicate that the percentage of Medicare 
beneficiaries reporting access to the Internet climbed from 6.8 percent 
in 1997 to 21.3 percent in 1999. And, according to Jupiter 
Communications, older adults (people 50 and older) spend more hours 
online each week than any other age group, including college students 
and teenagers. In fact, senior citizens are the fastest growing sector 
of the online audience, exploding from a meager 600,000 in 1995 to an 
estimated 13 million in 1998, according to SeniorNet. Last year, 
eMarketer released an eRetail Report that supports this trend: in 1999, 
almost 10 million seniors, or 17 percent of all Americans aged 55 and 
older were active Internet users.
    With Medicare beneficiaries using the Internet more and more every 
day, we have a tremendous opportunity to use this technology to help 
inform them about their Medicare options. Medicare beneficiaries and 
everyone involved in helping them with their health care decisions can 
use the wealth of information available on our award-winning 
beneficiary Internet site, www.medicare.gov, which is uniquely designed 
to provide customized comparative information on various Medicare-
related topics.
    For example, as of October 1, 2001, we will activate a Medicare 
Personal Plan Finder to assist beneficiaries in narrowing down and 
comparing their health plan choices based on the characteristics that 
are most important to them. The Medicare Personal Plan Finder will give 
users the ability to compare out-of-pocket costs among their health 
insurance options, and explore more detailed information for the plans 
on which they choose to focus. This tool will pull data from existing 
Medicare databases and web applications, and bring multiple search 
results together in a more useable and personalized manner. And for 
those beneficiaries who still prefer more traditional modes of 
communication, the Medicare Personal Plan Finder also will facilitate 
the 1-800-MEDICARE Help Line customer service representatives to more 
effectively help callers identify the health insurance options that are 
most appropriate for them. In addition to assistance via the telephone, 
the customer service representatives also will be able to provide a 
``print-on-demand'' package of materials to send to the beneficiary for 
further review at a later time. This will be a good way to give more 
beneficiaries access to information, while introducing some of the ways 
the power of technology can work for them.
    In addition to the Medicare Personal Plan Finder, there are a 
number of other interactive databases accessible on www.medicare.gov 
that allow visitors to search for information.
     Prescription Drug Assistance Programs provides information 
on programs that offer discounts or free medication to individuals in 
need. Beneficiaries can search for these programs by state, or by drug 
manufacturers. It also has a frequently asked questions section that 
includes information on prescription drug coverage and the President's 
Medicare prescription drug discount card program.
     Dialysis Facility Compare gives detailed information about 
Medicare approved dialysis facilities. This includes dialysis facility 
characteristics like the address and telephone number of the facility, 
whether the facility has shifts starting at 5:00 pm or later, the 
number of treatment stations, and the types of dialysis offered. 
Dialysis Facility Compare also contains quality measures and a glossary 
of terms used on the site.
     Nursing Home Compare is one of many efforts included in 
CMS' initiative to increase information about the quality of care in 
nursing homes. The primary purpose of this database is to provide 
information about the performance of approximately 17,000 Medicare- and 
Medicaid-certified nursing homes across the country. The database has 
detailed information gathered from the States that conduct surveys and 
certify the facilities, including whether any quality deficiencies were 
found, and how severe they were. Furthermore, it has characteristics of 
the nursing home residents, including the percentage of residents with 
pressure sores, percentage of residents with urinary incontinence, and 
more. And it has information about the number of beds, type of 
ownership, and whether or not the nursing home participates in 
Medicare, Medicaid, or both.
     Medigap Compare enables users to search for private health 
insurance plans that they can purchase to supplement original fee-for-
service Medicare. The database includes basic information about each 
reporting insurance company, including which of the 10 Medigap plans 
they offer, to whom they are offered, and rating method. It also 
provides information on how to contact Medigap insurance companies in 
each state.
     Medicare Health Plan Compare was the first interactive 
database on www.medicare.gov, and provides detailed information on 
Medicare's health plan options, including the Original Medicare Plan, 
Medicare+Choice plan, and private-fee-for-service plans. Medicare 
Health Plan Compare also contains benefits and services offered by each 
Medicare+Choice plan, including: detailed information on premiums, co-
pays and benefits, and more. And it has quality information about 
health plans such as health plan performance measures. The database 
also includes information about the number of plan members who have 
disenrolled from their Medicare managed care plans.
     Helpful Contacts provides state-specific contact 
information and phone numbers for agencies that can assist people with 
Medicare. Also included are websites that can provide assistance on a 
variety of topics of interest to people with Medicare such as: 
understanding their Medicare bill, Medicare rights and benefits, 
dealing with complaints and appeals, and managed care. Users can search 
this site by topic or by type of organization.
     Local Medicare Events allows visitors to search for 
upcoming activities in their area, including health fairs or 
presentations covering a range of Medicare topics. Visitors can search 
by state, month, event type, and topic to get information on events.
    These database resources distill tremendous amounts of information 
for our beneficiaries and their families, presenting appropriate data 
so that the public can get their arms around the information they need 
and really use it to make decisions. This is a good start, and we know 
there is more that we can do to inform beneficiaries. We need to 
continue to offer other information electronically. Some of the 
additional information www.medicare.gov currently offers includes:
     A Variety of Medicare Publications for visitors to view, 
print, or order, including the Medicare & You handbook, which we mail 
every year to 34 million Medicare households, as well as the Guide to 
Health Insurance for People with Medicare. Many publications are 
available in Spanish and Chinese.
     The Medicare Basics section, which enables visitors to get 
answers to their questions about Medicare including eligibility 
requirements, how to enroll, coverage, billing, premium amounts for the 
Original Medicare Plan, how to read a Medicare Summary Notice, and a 
copy of materials in the beneficiary Initial Enrollment Package. There 
also are links to various Medicare publications that have information 
on Medicare benefits and places to find assistance for beneficiaries to 
pay health care costs.
     Fraud and Abuse Information that describes common Medicare 
fraud, how to report suspected fraud, and ongoing fraud campaigns. 
Website visitors also can obtain tips for spotting and stopping waste, 
fraud and abuse, and an online brochure for beneficiaries to guide 
their efforts to protect themselves and the Medicare program.
     Health Information about Medicare preventive benefits, 
references to publications, and websites with information that can help 
beneficiaries stay healthy. Current references and websites fall under 
the following disease-specific areas: cervical cancer, colorectal 
cancer, depression, diabetes, dialysis and kidneys, flu and pneumonia, 
mammography, and osteoporosis.
     A Screen Reader Version that allows people who are blind 
or visually impaired and who use screen readers for Internet 
communications to access the site.
     Spanish and Chinese Sections that consolidates all of the 
information currently available in these languages. This includes 
publications, fact sheets, and information on how to order 
publications. Medicare Health Plan Compare is completely available in 
Spanish, as well as inspection results for nursing homes. An increasing 
number of our Medicare publications are available in Chinese.
     Frequently Asked Questions section that has been 
redesigned to allow users to find the information they need quickly and 
efficiently. We have added a new search tool that allows users to 
search by category or phrase to find answers to their questions. 
Visitors can provide feedback using a rating scale on how satisfied 
they were with the answer. If visitors are unable to find answers, they 
can submit a question to us. Prior to submitting a question, the tool 
uses a knowledge base to provide customers with suggested answers to 
their questions. Also included is a subscription service that allows 
users to receive an update notification when questions are updated.
    Taken together, this constitutes a huge volume of information 
presented in an easy-to-use format. Will every Medicare beneficiary 
need all of this information? Probably not--and we certainly hope they 
will not need it all at once. But it is available to them 24 hours a 
day, seven days a week, whenever they need it. And we continue to add 
more information that beneficiaries and their families might find 
useful. The Internet is a powerful tool, and we know we must continue 
working hard to ensure we use it to make life easier for our Medicare 
beneficiaries. In addition, this information will continue to be 
available through 1-800-MEDICARE and local community organizations.

                     ADMINISTRATIVE SIMPLIFICATION

    In addition to the Internet, we are taking advantage of other 
electronic technologies to improve the way we do business. As I 
mentioned, in Medicare alone we process nearly one billion claims a 
year. Using electronic technology has made us a highly automated, 
efficient, and fast payer. Over 90 percent of Medicare claims are 
processed electronically, and we pay those claims an average 14.9 days 
after receipt. It costs us roughly $1 to $2 to process a claim. While 
we are proud of this efficiency, there are other ways that we, along 
with the entire health care industry can use electronic technology to 
improve the way we do business. To that end, the Administration has 
proposed user fees to encourage providers to submit claims 
electronically.
    Congress recognized the opportunities that modern technological 
advancements present when it enacted the Administrative Simplification 
provisions in the Health Insurance Portability and Accountability Act 
of 1996 (HIPAA). These provisions require the Secretary of Health and 
Human Services, in coordination with standard setting organizations, to 
develop regulations standardizing electronic health care transactions. 
This includes data exchanged for payment of health care claims, 
determination of a person's eligibility for insurance coverage, and 
enrollment in or disenrollment from a health insurance plan. When 
Congress passed HIPAA, the health care industry had voluntary standards 
for data collection and electronic information transmission, but not 
everyone used them or applied them uniformly. This prevented the 
industry as a whole from moving to a single, efficient electronic 
transaction environment. Following Congress's leadership, as we move 
towards standardized transactions we should start to see tremendous 
administrative cost savings in both providing and paying for health 
care. Additionally, we anticipate that without the many different 
communication formats used previously, there will be much less 
confusion around the transmission of health and claims information for 
both patients and providers.
    We know that standardizing these electronic transactions can 
improve the efficiency of health care by improving patient care, saving 
money, and limiting frustration. However, we also know that such an 
important shift requires big changes in many areas, and so has the 
potential of raising costs, at least in the short run. These changes 
will not be easy, nor will they be cheap. Every ``covered entity'' 
under HIPAA, which includes health plans, physicians, providers, and 
information clearinghouses, will have to refine its computer systems in 
order to implement the new standardized formats. Changes like this will 
help to make the health care industry more efficient, but the increased 
efficiency depends on the entire industry's significant up-front 
investment to standardize operations. We also need to take due care to 
ensure that the HIPAA standards are appropriate and remain up-to-date 
with rapidly progressing medical information capabilities.
    At the same time we recognize that these changes could make it 
easier for unauthorized people to access health and insurance 
information. Because of this increased risk of inappropriate access to 
medical records, Congress wisely included privacy requirements in 
HIPAA. In April, Secretary Thompson announced that the two-year period 
would begin for the industry to implement privacy protections, as 
published in our privacy rule. These protections are intended to ensure 
that the privacy of health information is not inadvertently compromised 
by progress in technology. There is broad support in the health care 
industry for these uniform privacy standards, but implementing the 
standards also will require additional investment by the health care 
industry. While we all know that privacy of medical records is 
extremely important, I am concerned about the costliness of 
implementing the standards, and I am committed to working closely with 
the health care industry to implement these standards effectively.
    In addition, we will be publishing final regulations for HIPAA 
security standards, which will provide guidance on how these privacy 
protections will be implemented. These protections will require even 
more education about the new regulations, for patients, physicians, 
providers, plans, and others impacted by the rule. It should also be 
recognized that sending individually identifiable information over the 
Internet must be accompanied by appropriate security protections. And 
so we are taking important steps to involve all components of the 
health care industry in the development and implementation of the HIPAA 
Administrative Simplification provisions, and to ease their transition 
into compliance with the law.
    The new electronic transaction standards, which the industry must 
begin complying with on October 16, 2002, are not set in law, nor were 
they being established unilaterally by the government. Rather, in 
accordance with HIPAA, we used a process that leaned heavily on private 
sector participation as well as substantial input from the full range 
of individuals and entities that will be affected by the changes. In 
this way we will develop a standard way of communicating electronically 
that will work best for all of the people who use the health system. We 
are working with standards setting organizations that specialize in 
developing national standards. These experts include representatives 
from the American National Standards Institute X12 standards 
organization, the National Uniform Claims Committee, the National 
Uniform Billing Committee, the American Dental Association, the 
Workgroup on Electronic Data Interchange, and the National Committee on 
Vital and Health Statistics. We continue to work with industry groups, 
holding numerous meetings and conference calls to elicit input from a 
broad array of providers and insurers. And we have solicited comments 
from impacted individuals and others in the public as the new rules 
have been proposed, and they have responded. In fact, we received about 
17,000 comment letters when we proposed our rule on transaction and 
code sets, and more than 50,000 on the privacy rule.

                    PHYSICIAN AND PROVIDER EDUCATION

    One of my top priorities as Administrator is to improve the 
responsiveness of CMS. Responsiveness is one of the standards by which 
we are--and should be--measured. In this spirit, we are taking several 
steps to communicate with providers through electronic as well as 
traditional avenues.
    Secretary Thompson and I recently announced a multifaceted approach 
to improve our responsiveness to providers. This approach encourages us 
to listen, to learn, and then to administer our health care programs as 
effectively as possible. We are listening more to the public--the local 
seniors, providers, State workers, and the people who deal with 
Medicare and Medicaid in the real world. Some of the people who we hear 
from the most are the physicians and providers who are dealing with our 
rules every day. They are the ones caring for our beneficiaries, and 
they are the ones filling out many of the forms, trying to understand 
the rules, and working to do the things they spent years training to 
do--making people healthy. Under the first part of this approach, we 
will conduct public listening sessions across the country to hear 
directly from physicians and providers about how we can reduce 
regulatory burden and confusion in Medicare, while controlling costs 
and maintaining quality of care.
    The second part will focus specifically on the collective expertise 
the industry groups who represent these physicians and providers. We 
will convene seven workgroups, with a senior CMS official as each 
group's principle contact, to suggest ways we can improve their 
interactions with the Medicare program. This type of input is good for 
our beneficiaries because regulatory reform will allow physicians and 
providers to spend more time caring for beneficiaries, and it will 
encourage physicians and providers to remain in the Medicare program.
    In the third part of our plan, I am forming a group of in-house 
experts from the wide array of Medicare's program areas. I am asking 
them to think innovatively about new ways of doing business, reducing 
administrative burdens, and simplifying our rules and regulations in 
ways that control costs and continue to afford high quality care for 
beneficiaries. CMS staff have dealt with the system for years, and they 
have suggestions about how we can operate the Medicare program more 
simply and effectively.
    While we are listening and learning, we also are teaching. We have 
long understood that when providers are well informed, it enables them 
to provide better care to our beneficiaries. And we know that we can 
use modern technology to help inform physicians and providers. Our new 
culture of responsiveness will help to build and improve education 
efforts through these emerging technologies. In response to increased 
health professional use of the Internet as a learning tool, we created 
a web-based Medicare education site. There are a variety of resources 
available on the Internet at our Medicare Learning Network, 
www.hcfa.gov/medlearn. This network provides timely, accurate, and 
relevant information about Medicare coverage and payment policies.
    Among the featured tools on this site are quick reference guides to 
help users more easily access information resources on the CMS website, 
including resources that contain information about outpatient 
prospective payment systems (PPS), home health PPS, clinical trials, 
immunizations, and ambulance fee schedules. We also have available, 
free of charge, downloadable computer based training courses and 
manuals for physicians, providers, and suppliers on topics ranging from 
women's health to resident training to billing Medicare for services. 
Additionally, there is information about the satellite broadcast 
training sessions we offer for physicians and providers on topics 
ranging from emerging health issues to our payment systems to fraud and 
abuse. And the site has downloadable booklets with information about 
the various health benefits that Medicare covers, including women's 
health, as well as information on other training programs that Medicare 
offers for physicians and providers. In addition to being web-based, 
these booklets are available in CD-ROM.
    Our site also offers physicians and providers the ability to 
subscribe to listserves and mailing lists for topics like complex 
payment systems and clinical trials. Furthermore, to be as inclusive as 
possible, we maintain a current calendar on upcoming CMS town hall 
meetings, training sessions, and satellite broadcasts relevant to 
physicians and other providers. To help site visitors continue to 
expand their horizons, we also have links to other physician-oriented 
sites of interest.
    We also have entered into an interagency agreement with the Centers 
of Disease Control and Prevention to promote our products to a more 
clinician-based target audience. We are placing products on their web 
page, collecting specific feedback information from users, and 
reviewing existing education videos and computer-based training modules 
to ensure that the modules qualify for continuing education credits. We 
also are converting the existing CD-ROM-based modules to web-based 
training modules, and assisting in the development of future web-based 
tools to ensure these valuable learning tools are distributed as widely 
as possible.
    Although we have a great deal of valuable information available, we 
are not satisfied that we are reaching as many users as possible. So we 
will continue to upgrade this site. We plan to develop a national 
network of Medicare Learning Network faculty featuring nationally 
recognized experts on distance learning, professional education, and 
customer service. We are going to integrate clinical aspects of 
Medicare Learning Network products with the billing and payment 
education aspects to attract a wider audience of clinicians. And to 
ensure we are getting the best bang for our buck, we will establish 
processes to evaluate the effectiveness of Medicare Learning Network 
products and activities and venues to receive continuous feedback from 
the provider community. This is an ongoing process, and we will 
continue to work hard and solicit input from Congress and the physician 
and provider community on how we can use new technologies to improve 
Medicare.

                               CONCLUSION

    I recognize the crucial role that technology plays now and will 
continue to play for health care in America as electronic and medical 
advancements are made. I cannot begin to imagine all of the fantastic 
improvements that technological progress will bring, but I know that 
Medicare's future depends on taking advantage of them. We have already 
started by using the Internet and other technologies to share 
tremendous amounts of information with beneficiaries and physicians and 
providers, while being sensitive to the privacy concerns surrounding 
the use of technology. However, there is much more that we can do. I 
appreciate your interest in Medicare's use of technology, and your 
support of our efforts to improve it in the future. Thank you for 
inviting me to discuss these issues with you today, and I am happy to 
answer your questions.

    Senator Wyden. Mr. Scully, that was an excellent statement. 
Does your colleague have anything she would like to add?
    Captain Wark. No, just that I am pleased to be here to 
demonstrate some of our enhancements to the web site we have 
made.
    Senator Wyden. Senator Allen.
    Senator Allen. Mr. Chairman, thank you.
    Mr. Scully, I was listening closely. I have a few 
questions, some on your testimony, and also reading through 
your written statement. As far as the comparisons, and the poor 
consumers, you mentioned the nursing homes and the nursing home 
folks that you are working with obviously are going to be 
helping the CMS. It is not just a change in acronyms from HCFA, 
but actually an actual change that is meaningful and has some 
common sense.
    You mentioned that they had a problem with some of the 
information, in that whatever the studies were as far as 
nursing homes are based off of State records, and I assume the 
logic of that, or the reason is because States administer it 
differently, or they have different criteria. What has been the 
response from the private sector on some of these ideas, and 
how can it be worked out in such a way that it does not end up 
being a costly nightmare with a bunch of data entry that ends 
up being changed every few years?
    Mr. Scully. Well, it has to be done right, obviously, is 
the first answer. I think the dialysis was done before I got 
here, but the one thing I looked at when I first came in was 
the information on dialysis happened to be terrific and very 
positive, and on truth in advertising, I was on the board of 
directors of one of the bigger dialysis companies until a few 
months ago, and I asked them what they thought, because when I 
was nominated they said, it is great, they like it, it has been 
very helpful to get people educated as to what their options 
are.
    Maybe somebody does not like it, but generally it has been 
supported by the industry as being good for seniors in helping 
to educate them as to what their options are.
    I think the managed care world has also been very 
supportive. The nursing home complaint, which is probably a 
legitimate one, is the nursing home data on our web site now is 
all based on, under Medicaid, which is where most of the 
nursing home money is spent, and Medicare as well.
    The States generally do the survey and certification of the 
nursing homes, so in Alexandria, Woodbine, for instance, the 
State of Virginia does the certification, so when you look on a 
web site you may find one nursing home in Alexandria, for 
instance, had 27 violations last year, and another one had 3, 
and the nursing homes would argue that is very subjective.
    You may have one inspector that does not like them, who 
they had a bad history with, and it is not an objective 
measurement, it is a very subjective measurement, so they are 
nervous about that.
    One of the things we are working on right now is to come up 
with basically some Nation-wide quality standards, and that is 
a project that is in development now. I do not want to 
prematurely announce it because it is not done, but we are 
working with them to address those concerns, and they have been 
very cooperative. The last 3 or 4 years have been kind of 
rough, as you probably know from the nursing home business.
    One of the benefits I have had--I have never worked in the 
nursing home business, but I would say they are very anxious to 
work to rehabilitate--whether it is deserved or not, their 
image has not been particularly supersensitive, and in some 
ways I think that is good, because I think they seem to be much 
more willing to look at new ideas, to educate consumers than 
they might have been 3 or 4 years ago, but we are working with 
them.
    People get very scared when they talk about hospitals. For 
instance, I was in the hospital business, and I was misquoted 
my fourth day on this job that I wanted to rank hospitals. That 
is not what we have in mind.
    What we do have in mind, and Premier I notice is testifying 
after us today, again during my preconfirmation period I had a 
terrific briefing from Premier on the fact that they have, I 
think, 420 member hospitals, and they collected extremely good 
comparative quality information on about 20 different treatment 
categories in all 420 of their hospitals, so you have 420 
participating hospitals, and they have a graph for each one.
    Whether it is stroke treatment or heart treatment, 
pneumonia treatment, the top 20 treatments they have in their 
hospitals, they had all 420 of their hospitals compared on a 
graph as far as the quality, so they had measurements they 
could operate their own hospitals against.
    So we are not interested in going out and ranking 
hospitals, or nursing homes, or dialysis centers. That is not 
what this is. What it basically does is show where people are 
better or worse, and where they can improve their performance, 
and I think that is vital if you have a market-driven and 
constantly improving health care system.
    Senator Allen. Well, what pleased me about your answer, and 
it is not surprising, is you are working with those who are 
affected to make sure that they are in agreement with it, and 
then you can have, if you can get the whole industry, or the 
whole, say, the nursing home situation, not just get those in 
one State, but all the States to agree here are the standards, 
because if they are at a place in Southwest Virginia, or 
Northeast Tennessee, they may send their parents either side of 
the line, or here in the metro D.C. area they might want their 
parents to be in a place in Maryland, or Virginia, maybe even 
West Virginia for that matter, or Delaware, places that are all 
relatively close to this area.
    So if you have a uniform standard, which all the nursing 
homes across the country, not just within a State, can utilize 
in developing it, I think that improves its credibility and 
also the compliance, and again they are going to be the ones 
having an input that data. Nursing homes are barely getting by 
as it is, with the reimbursement rates being as low as they 
are, and having the difficulty of hiring nurses, and obviously 
they want to bring in some qualified people from overseas as 
technology folks were a few years ago. The nursing home health 
care industry is looking the same way for immigrants.
    Let me ask you another question, and this is off your 
written testimony, where you state, the Health Insurance 
Portability Accountability Act of 1996, HIPAA, requires the 
Secretary of Health and Human Resources, in coordination with 
standard-setting organizations, to develop standards for 
electronic health care transactions.
    In that, two questions. One, do you have an estimate of how 
much cost savings will arise from these new standards when they 
are related, or how much savings, and do you have an estimate--
and I know you have just gotten on the job--but are there any 
estimates of how much the private sector will have to spend to 
conform with these standards?
    Mr. Scully. Well, I do not have any numbers, but I have 
heard a lot of talk, talked to a lot of people about it. My 
concerns--and it is a tough thing to balance. My goal is to try 
to have HIPAA regs, which are basically to have consistent data 
transaction information and codes out there Nation-wide by all 
users by, I think it is October 2002, and there is two tough 
things to balance here.
    One is in the first Bush administration I remember sitting 
around having this exact discussion 12 years ago. We are all 
going to have standard measurements, standard coding, and we 
are going to make everybody streamline their reporting system 
so that everybody would be on e-commerce, and this was a big 
project of the Deputy Secretary of HHS back then, and I 
remember spending a lot of time on this, and 12 years later you 
come back and nothing has changed.
    So the one thing we want to do is keep the pressure on as 
much as you can to change. I mean, updating technology is 
important, but it is costly, and I have talked to a lot of Blue 
Cross plans who have said, look, if we are forced to do this in 
the next 18 months, our partners, they could be ready, but the 
hospitals are not, and I know that is true, a lot of hospitals 
will not be ready, and if you push us to come up with one 
standard data set, we are going to spend a ton of money, and it 
is just going to be mass confusion, and be careful that you do 
not blow up the whole system, also a very valid concern, but 
one of the things I have found is, if you take the pressure 
off, change will never happen.
    So there is a delicate balance there between making sure we 
do not foolishly spend money and force a lot of the plans out 
there to spend money, which actually is coming out of all of 
our pockets, inevitably, while at the same time, if you do not 
push for change and streamlining of technology, it will never 
happen, and the people that push those changes, that is one of 
the roles of the Federal Government I think that is valuable, 
is standard setting for the Federal Government.
    I am well aware of all the pressures. I have not heard from 
Trigon, but I have heard from a lot of others. Blue Cross said 
this is a big problem, and we are going to do our best to 
balance that.
    Again, if we went out today and said, no, we are not going 
to do it, then I would be sitting here again in another decade 
saying, you know, we really ought to have one set of standard 
coding, so we are trying to balance that the best we can.
    Senator Allen. Thank you very much. Thank you, Mr. 
Chairman.
    Senator Wyden. Thank you, Senator.
    Mr Scully, your agency is really a treasure trove of health 
care data concerning quality and price. The fact of the matter 
is that Americans can get good price information on just about 
everything else that they buy that is important to them, other 
than health care. I think what you are trying to do in terms of 
launching this quiet revolution, in terms of getting 
information that the Government now possesses out to people, is 
extraordinarily important.
    I think you are on target in terms of making it clear that 
you are not going to rate anybody, but you are going to get 
this information out so that you empower people to make choices 
on their own.
    Tell us, if you would, about how you see this evolving, 
particularly on the price issue, which is not out today. If you 
would, give us a timetable, or a process by which you are going 
to go about getting this done.
    I want to make it clear, I am going to support you in every 
way possible, whether you are going to try to do this 
administratively, or come to the Hill and ask for support. But, 
I have to tell you, I was just flabbergasted at the fact that 
when you made common sense comments in a speech about getting 
quality and price information, it created such a thunderstorm 
that it arrived on the front page of the paper. I think it is 
an indication that this is something of a revolution, a 
revolution for the consumer borne out of these technologies.
    Tell us, if you would, how you see it going forward, 
particularly on the price issue, your timetable, the process, 
and know that you are going to have my full support on this.
    Mr. Scully. Well, as you know, Senator, since you have 
known me, Mr. Chairman, for a long time, that was accidental. 
That was my fourth day on the job, and I feel very strong about 
those views, and that is the same talk I have been giving for 
years in the private sector about my views on getting more 
information on health care.
    It just so happens, when it is your fourth day on the job, 
and you have not really--it was inadvertent that it got that 
much press for me to be announcing administrative initiatives, 
but I can tell you that the Secretary and everyone else in the 
White House feel equally strongly about getting market 
information out about what is going on in health care.
    I think probably a few would have liked it if I had asked 
them first. That was my first couple of days after 
confirmation. But anyway, you live and learn. After you have 
been out of Government for 8 years you forget you can get a lot 
of attention with one little speech, but I feel very committed 
to it.
    I do not know if there is a set timetable. I mean, I came 
out of the hospital sector, and I spent a lot of time working 
with my own former hospital members, many of whom are in both 
of your States, talking about this, and it is a little bit 
controversial, but as you know, philosophically I am a big 
supporter of the Medicare program, but the Medicare program is 
hard to put out relative prices because the Federal Government 
fixes the prices. Everybody pays the same amount.
    So one of my views about the information is, the Federal 
Government is going to pay every hospital and every nursing 
home and every doctor the same amount of money. It is much more 
difficult for doctors, by the way, but if you are going to pay 
providers the same amount of money, you ought to know what the 
relative quality is the taxpayer is paying for, so if you are 
going to go out and have heart surgery at George Washington or 
Georgetown, or Sibley, or Alexandria Hospital, and the 
Government is paying the same price relatively for all of it, 
you ought to know what the quality is and what the outcomes are 
going to be.
    I think we are a ways off from doing that. That is the kind 
of concept that scares a lot of people, depending on how it is 
done, and I probably scared a lot of people, even though I did 
not say it, saying we are going to rate hospitals, because I 
have no idea to do that.
    But I do think the world is moving that way. Nursing homes 
are moving that way. Dialysis centers are moving that way. 
Health plans are moving that way. Everybody is, I think, there. 
The issue is, what is the fair measurement? I think everybody 
is willing to do that. The issue is, and it is a totally 
reasonable one, if you are a hospital the last thing you want 
to do is have somebody pumping out information that is not 
fair. The same thing with the nursing homes.
    So the real issue, and the challenge to the Federal 
Government, is to come up with standards for measurement that 
are fair, because it is not fair to put out outcomes that 
mislead people, or that give you the impression that--you know, 
for instance, with nursing homes there is a lot of information 
out there. If you look at the nursing homes in Alexandria, for 
instance, which I am fairly familiar with, there are huge 
differences in levels of acuity for what those people try to 
treat.
    If you have a very sick person in your family, you probably 
want to put them in one nursing home as opposed to the other. 
Some are kind of entry-level, lower acuity, more family-
friendly, apartment-type situations, and others are high 
acuity, almost sub-acute hospitals, so giving people just flat-
out information that all facilities are the same is not fair, 
so I think in all these sectors the key ingredient is not the 
people are afraid of information. In some cases that may scare 
some people, but the real issue is fairness, and I do not think 
we are going to put out any measurement until we are sure it is 
fair. That is what we are working on.
    I think the dialysis information is fair. It has been well-
received in that industry because it is fair, and the 
information on our web site is fair, and I think that is the 
struggle. If the Government is going to put out information 
that is going to move consumers to make different choices, 
which is what the goal is, it has got to be perceived to be 
fair or we are going to have a big problem on our hands, and a 
lot of people--I think 10, 12 years ago, someone you know, Bill 
Roper, who was then the HCFA administrator, who is a good 
friend of mine, put out mortality data in hospitals, and that 
maybe is not a fair measurement of what is going on in the 
hospital, and it caused an explosion, and so my goal is to put 
out information, but only when it is ready to be put out, so 
that it will be perceived to be fair.
    Senator Wyden. I think that is a thoughtful answer. You are 
talking about jump-starting these comprehensive changes, and 
clearly, it has to be tied to standardization, which, of 
course, is part of HIPAA. Do you see any reason why, after a 
relatively short period of time, you could not have, as I 
suggested, all of the claims in this country submitted, 
captured, adjudicated, and paid within a short period of time?
    Mr. Scully. I do not think so. I think, as you know, Mr. 
Chairman, I also recently dropped off the board of a big 
managed care company, too, so I learned a fair amount about 
managed care claims, and I went through some ups and downs with 
Oxford, and I think it is possible to do that. I think the 
adjudication is much more difficult, but to get clean claims 
paid more quickly, that is obviously the goal of HIPAA.
    If you have all hospitals and physicians and providers 
submitting the same claims data, there is no reason why, in 
Virginia, for instance, that Aetna and Trigon and Cigna and 
whoever else are paying claims in Richmond, the claims may be 
different, but the forms could be constant, and that is going 
to speed up the process for providers as well, so that is what 
the goal of HIPAA is, and I think that will be a step in the 
right direction.
    But certainly it is technologically possible. I think the 
claims process in the appeals is a little more delicate.
    Senator Wyden. One of the reasons that I am interested in 
this is that I have been told that less than 50 percent of 
claims in the private sector are now being paid electronically. 
It seems to me that if you make those kinds of changes using 
Internet technology system-wide, you really do have a chance, 
as you are trying to do, to jump-start comprehensive reforms. I 
think it would solve a lot of problems. It puts everybody on 
the same footing so that you eliminate these perverse penalties 
against people who do pay claims promptly. However, I am 
willing, frankly, to say, let us make an exception to this if 
you notify a provider or a patient. It seems to me that in the 
Internet age you ought to be able to get through this process 
quickly, and that the exercise of getting claims paid should 
not be bureaucratic water torture, as it has been for so many 
years.
    I have a couple of other questions for you. As you know, in 
effect, the contractors, the insurance companies really drive 
much of the work of the Medicare program, and for the last 20 
years your predecessors then at HCFA and now, of course, CMS, 
have talked about contractor reform, and suffice it to say 
there has been an awful lot of resistance to contractor reform. 
How do you see the contractors figuring into your agenda for a 
broader role for e-health, and also getting more information 
out?
    In the past you have talked about people like Visa and 
American Express running some of these functions, and I am 
willing to look at those kinds of approaches. I think you are 
talking about putting more competitive juices into the system, 
and I think that is appropriate. I would like to hear from you 
about contractors and the broader e-health agenda, and how it 
figures into getting information out.
    Mr. Scully. Well, we would love your help on that. I think 
it is a big piece of the health agenda, because again, when I 
first got to OMB in 1978-1979, we had 71 contractors. We were 
going to reform contractors and get it down to 15. When I came 
back 12 years later, we still had 51, so not much has changed.
    Part of it is an accident of history. When the program was 
invented in 1965, it was a compromise between the AMA and the 
AHA and hospital groups, and that is why we have part A and 
part B, and it was a delicately crafted balance, and it has 
worked pretty well.
    Basically, what you had in most States until recent years 
was the Blue Cross plans with a couple of exceptions, Mutual of 
Omaha, basically, with the local contractors or carriers who 
were fiscal intermediaries. They have become somewhat less 
interested in being in the program, and for the purposes of us 
having greater efficiency, we want to get it down from 51 
cooperatively over the next 4 or 5 years to about 18 to 20. We 
think that is about the right number, and so we are encouraging 
the people who do not want to be in the program to get out.
    For years if you were a Blue Cross plan it was kind of a 
requirement, kind of emotionally almost to be the contractor in 
your State. More and more have dropped out. North Carolina Blue 
Cross dropped out about a month and a half ago. We are not 
necessarily discouraging that. We want to find people who want 
to be partners with the Federal Government running this 
program. We want to consolidate the systems. We want to find 
the people that are best at running these programs and work 
with them, and we think 18 to 20 is the right number.
    Every State has part A and part B contractors, which does 
not make much sense, in some cases the same Blue Cross plans, 
but even if you just combine part A and part B, you would end 
up with 30 contractors right now, so you want to start with 
that basic number and whittle them down.
    One of the things that I think is completely inane about 
the Medicare contracting system is their cost-plus contracts, 
and I mean, cost contracts are in my opinion a joke. I have not 
found any place in the world where cost contracts work. We used 
to have cost-plus Medicare, and hospitals piled everything in 
the cost base.
    Once we went to the DRG's, which is basically a capitated 
system, the system was much more efficient by all measures, and 
so one of our goals is to find the best contractors and give 
them a set of cost-plus contracts, give them basically an 
incentive to make a reasonable margin, become long-term, good, 
reliable Government contracting partners, and then make it a 
more stable Government contracting business.
    So we really want to find people that we think are really 
good at this program, that are committed to it, that want to 
provide good services, that will make it a lot easier for us to 
come up with common systems to make the claims processing even 
more streamlined, and to give the patients better information, 
and that is our goal.
    Senator Wyden. Could you see using electronic efficiency as 
one of the measures to run one of these contracts in the 
future?
    Mr. Scully. Yes. Right now we have a very limited ability 
We have no ability to move basically the prime contractor for 
part A is the national Blue Cross-Blue Shield Association. That 
is a very awkward relationship. They are great people. I work 
with them every day, and generally when we have a problem we 
can move it around, but it is a very artificial construct, and 
we are pushing to reform it, and the difference between the 
last 20 years and this year is that normally at least in my 4 
years in the prior Bush administration this was usually about 
priority number 15 in OMB and about number 20 with the 
Secretary, and it never got the attention.
    One of the good things about Secretary Thompson is, before 
he got confirmed, he spent a week with me up at the then HCFA 
in Baltimore, and the one thing that stunned him the most was 
our contracting system. This is very high up on his agenda, so 
he is going to push for it very hard. As you know, he talks 
about it all the time. He thinks the fact that the contracts 
are not--and I think the Blue Cross program is very 
cooperative.
    Look, we do not want to throw anybody out of the program. 
We want to actually fund people who want to be in this program, 
work with you to get it down to the people who are going to 
look at this as a core business opportunity, and end up with a 
more efficient program in 4 or 5 years. We are not interested 
in publicly executing Blue Cross plans State by State. We want 
to work with them on a friendly basis, and so far the Blue 
Cross plans have been very receptive to that, and we want to 
find the people that want to be partners in the long term and 
work with them to make it a good business opportunity for them.
    Senator Wyden. Let me ask you about a couple of other 
barriers. Obviously, the majority of medical encounters in this 
country, the vast bulk of instances where people come in 
contact with medical providers, are physician office-based. 
However, the most complicated and expensive of all of the 
encounters, bypass surgery, involves not just a physician's 
office, but the in-patient facility where the surgery occurs, 
out-patient rehab facility following the surgery, and the 
patient's community pharmacy. Information just flows on both 
ends of the system.
    Unfortunately, there is not a coordination of the 
information systems, things like scheduling, and various other 
kinds of processes, because of the referral and kick-back laws. 
Do you think that that is an area that ought to be looked at in 
terms of the e-health agenda? Certainly it would be 
contentious, but in terms of sharing information so as to 
schedule and simplify the administrative processes, you have 
got to link these two, and you should not say every time you 
link the two, that it is a violation of the antireferral 
principles and the kick-back laws.
    Mr. Scully. That is a pretty complex question, but I am 
glad that the Senator can ask that. I do not really want the 
Justice Department to visit my home tonight, so I am not sure I 
should answer that one. I am just kidding.
    Senator Wyden. Pete Stark will call first.
    [Laughter.]
    Mr. Scully. I think it is something we should look at, and 
clearly the information transfer, and one of the benefits, as 
you know, one of the reasons Medicare Plus Choice and Medicare 
capitated contracts are popular is because that kind of 
information flow can work back and forth.
    One of my concerns about Medicare, one of three biggest 
flaws in Medicare, which I am going to hopefully try to get to 
some demonstration projects this fall is that Medicare Plus 
Choice really, right now, with the exception of one plan in 
Philadelphia, there is one PPO in Philadelphia, is a Medicare 
closed panel HMO option, so you either have the Government run 
a fee-for-service program, or you have got a closed panel HMO 
where you have a restricted network.
    There is one PPO in the country that I am aware of, 
Sterling, which is a fee-for-service plan as well, but 
generally what is most popular, whether it is in Oregon or 
Virginia, are these point-of-service contracts and point-of-
service plans which are hybrids, or closed networks if you want 
to save, if you want to have a low fee payment deductible, but 
if you have colon cancer and you want to get a specialist, you 
can go and pay a little more.
    That is really what is exploding in the under-65 market, 
and that is what people want, and that choice does not exist in 
Medicare, and the benefit to that is, when you have that kind 
of information, you get a little bit of more--when you are in 
one network like that you do share more information. There is 
more information moving back and forth within contracted 
providers, but it also gives people the freedom to choose, 
which is what is lacking in Medicare, and one of the reasons 
why Medicare's private sector health plan has not gone very 
well, because it lacks the flexibility that people are 
demanding in the under-65 market.
    I think as you give them that direction, we get more 
Medicare point-of-service contracts and PPO's, you will get a 
little bit of that flexibility people want, but you will still 
have much more of the information-sharing and the ability to 
track patients, monitor what they are doing, and coordinate 
care a lot better.
    Senator Wyden. I understand both the VA and the Kaiser 
system have figured out a way of putting together an integrated 
electronic medical record system which has not gotten them 
afoul of the kick-back and the referral laws. I hope that you 
will look at that, because it is something that I have heard 
from a number of providers and scholars that have worked in the 
area.
    One of the other areas I mentioned in my opening statement 
was the idea of a private sector-led e-health certification 
program, with the idea being that because there are so many web 
sites out there now, getting out so much information, suffice 
it to say some of it is not up to the kind of quality it ought 
to be.
    If you all go forward with this initiative in terms of 
getting out information on quality and price, it seems to me 
that would dovetail very nicely with the kind of e-health 
certification program where you could cooperate with the 
private sector to help the sites ensure that people knew where 
they could get quality information. What would be your thoughts 
on that?
    Mr. Scully. Well, I am always a little hesitant to get into 
regulating health care sites, but I do think----
    Senator Wyden. I am not talking about regulating sites at 
all. I am talking about the private sector going forward with 
an e-health certification program, and you all helping them in 
their work, because you are getting out information on outcomes 
and price.
    Mr. Scully. To be honest with you, Mr. Chairman, I have not 
thought it through, but I do think the concept is obviously a 
good idea, and just looking through for today, I did not get 
into it, because I did not have enough time, but there are a 
lot of great web sites out there, and I have started asking the 
staff, most of the good managed care plans have web sites, or 
nurse call-in lines, where I deal with my kids. When my kids 
get sick, I check the web to find out, before I take them to 
the doctor, if there are any indications of what the problem 
is.
    Now, not everybody is going to do that, but certainly 
information we have out there that something should be viable, 
we do not do it in Medicare, but Web MD has a basic site. The 
Navy has a terrific site for people in the Navy to check for 
kind of a quasi self-diagnosis, but there is a lot of great 
information out there, and I think finding a way to target what 
is best, the most useful for consumers, is a great idea.
    Some of these things we have actually talked about tying 
into our web site. We have not gotten there yet, but we have 
talked about what quality web sites would be good referrals for 
the Medicare.gov web site. That is a dicey thing to get into 
when you are sort of certifying products, but I have not really 
thought it through.
    Obviously, there is a lot of information out there. The one 
thing we do want to make sure is, make sure the patients and 
consumers have access to it.
    Senator Wyden. One of the other concerns I hear from 
doctors is that it is hard to get understandable, 
straightforward information about Medicare and Medicare changes 
to them in a way that is usable. How do you see your e-health 
initiative, and your initiatives in terms of getting 
information out, helping to assist doctors, making it more 
convenient for them to learn about these issues?
    Mr. Scully. One thing we have already done, and that is 
being a hospital person up until 7 weeks ago I was on the other 
side of this, is the perception--I do not think it is a fair 
one--that there was the strafing runs from CMS that we just 
pump out information in regs all the time.
    We have already announced, the Secretary announced a month 
ago, right after I came in, that we basically are going to put 
out a quarterly compendium of all the regulations, so for 
instance, for the last quarter we put out a compendium that 
lists everything we put out as far as program notices and 
regulations, and if it is not out there as a compendium for the 
last quarter of the year, it is not going to come out, so you 
will see it coming, and then once a month on the same day, 
starting in the fourth quarter, we are going to put out 
regulations. Everything coming out of CMS is going to come out 
one day a month.
    So the benefit of that, among many others, is that as a 
former lawyer--I would not even tell you how much they had to 
pay me an hour, but at Patton Boggs there are an awful lot of 
lawyers out there cruising through the Federal Register looking 
for new regulations and other things coming out of CMS, and out 
of the Government. I have been trying to tell our staff that, 
hey, look, have the information come out more regularly and 
more predictably, so that physicians, hospitals, nursing home 
administrators can know it is coming out. It is valuable to the 
outside world.
    So we are going to start doing that in the fourth quarter, 
which is a quarterly compendium of everything coming out of the 
agency. You get it once a month, and if it does not come out on 
those days, it will not be coming.
    Senator Wyden. I have been asking you about what I think 
are some of the barriers to e-health, because this is what I 
have heard from practitioners in the field. If we reversed, 
where we are on the dias and at the witness table, what would 
you say are the biggest barriers at this point to e-health in 
this country? What would be, in your view, the biggest barriers 
to expanded use of e-health?
    Mr. Scully. Well, first of all, that switch would be a very 
bad thing for the people in Oregon.
    [Laughter.]
    Mr. Scully. You know, I think the problem is, it is a great 
benefit for people and for patients. We have an incredibly 
diverse health care system with an unbelievably creative and 
diverse group of providers, but the problem is, like any other 
sector in the country it is so balkanized and so diverse it is 
hard to come up with standards, and obviously, every time you 
come up with a standard, as you said with HIPAA, it is going to 
cause problems for people. It is going to cost money, and so 
for instance, in Northern Virginia, the biggest entity is 
Inova, but they still have many other market competitors.
    I am not encouraging that much consolidation, but I am 
saying there are a lot of different entities that are not big 
corporations generally running health care, and the biggest of 
corporations have a fraction of the market share in health 
care.
    You have got whatever, 75 different Blue Cross plans. The 
biggest hospital chain probably has 200 hospitals out of 6,000. 
It is just a very diversified provider network, which is 
terrific, but it leads to a lot of different standards, and it 
lends itself to a lot of creativity, but not so much as far as 
standardization.
    Senator Wyden. So you would put standardization as probably 
the single biggest barrier, as of today?
    Mr. Scully. Yes, because I think change is difficult, and 
understandably. You can see the problems we have going on with 
HIPAA. When you change--I mean, I can just give you example of 
stuff. When people say we are ready for HIPAA, I went over and 
spent the day at Greater Southeast Hospital in Anacostia about 
3 months ago, and they are doing a great job of trying to 
revitalize that hospital, but they have paper records 
everywhere, and you tell them to stop everything they are doing 
and turn that hospital around and go back to making sure they 
computerize all the paper records in the next 2 years, that is 
a number 1 fiscal priority for that hospital? Probably not.
    I mean, it is a very low income neighborhood, and it is a 
very challenged hospital, and for them to go out and say, let 
us stop everything else and make sure we are HIPAA compliant--
that is the balance you have. It is tough.
    Senator Wyden. What is striking about this, though, is that 
experts tell me that handling medical claims ought to be like 
using Amazon.com. There are likely more book titles on line now 
than there are medical procedures. I think what you are doing 
is extraordinarily important, and we are going to help you in 
any way, and, obviously, we are going to learn as we go.
    I was working on this yesterday, and talked to some 
scholars in the field. They were arguing, and said as you get 
price information out to the public it actually might bid up 
the cost of health care, because everybody is going to want to 
go out and buy the very best. But I am on the side of markets, 
and I know Senator Allen is as well, and suffice it to say, the 
question of health care data and quality is not the most 
sensationalistic subject around. But I think it is of 
extraordinary importance, and I really want to wrap up this 
afternoon by commending you. I think this is an initiative that 
is going to pay very big dividends in the years ahead.
    Anything you would like to add further?
    Mr. Scully. Well, just one thing to note that I did not 
mention, which I forgot, you and I have discussed the 
President's drug discount card, and I do not want to get into 
the merits of that here, but the biggest behavioral driver of 
that is starting next year we are going to publish publicly the 
prices of all the participating PBM's, and people are starved 
for information.
    When you find seniors who are very active in pursuing the 
best deals for their own health care costs, they are going to 
go on the web and see what the various prices of drugs are, 
that is going to have a big impact in the world, and I think 
people are starved for information. There is no reason not to 
give it to them.
    Senator Wyden. Tell us how that would work. Let us take 
Coos Bay, Oregon, or Arlington, Virginia. If you are a senior 
who is 68-years old and paying $300 or $400 a month for your 
medicine, and you would like to lower the cost of your 
medicine, how would your initiative help that person in Coos 
Bay, Oregon, or Arlington, Virginia?
    Mr. Scully. Well, first I would say we definitely do not 
want to oversell this. This is not the solution to every 
senior's drug problem There are many different forms of this 
proposal. Senator Hagel had a bill last year. This proposal 
actually has been sitting around HCFA for a long time. It is a 
staff proposal.
    I would say the importance of this proposal is that every 
drug reform bill, whether it is Senator Graham's, Senator 
Daschle's, Congressman Thomas', this is a big component of all 
of them. Our actuaries tell us from 35 to 70 percent of the 
savings of every one of these drug proposals comes from 
consolidating market share, so our view is, why wait, because 
all of these bills, the subsidy value, whatever Congress 
decides to spend, you have got $300 billion in your budget 
resolution on a Medicare prescription drug subsidy. We can 
debate the subsidies. The administration cannot do that. You 
have to spend the money.
    But the structure of giving seniors market power can be 
done now. The only people in the world to walk into an 
Alexandria, Virginia pharmacy and pay over-the-counter prices 
are seniors and the uninsured. Seniors pay retail drug prices, 
14 million of them. 10 million do not have insurance coverage, 
and 4 million have Medigap, which includes--the two Medigap 
plans do not include any basic negotiation, so what we are 
trying to do, basically, is consolidate people into purchasing 
networks.
    Right now, a lot of seniors get discount cards, but they 
generally have a wallet full of them. They'll have a Walgreen's 
one, and they will have an AARP one, and they will have five or 
six others, so none of them can really consolidate market 
power, because let us say you are the AARP, and you walk into 
Pfizer and say, I have got 3 million seniors signed up. I would 
like to negotiate a discount, and Pfizer says,well, you know 
what, those 3 million seniors all have nine discount cards 
each. There is no way to prove you have market power to move 
market share.
    We believe by using the good name of Medicare, and we are 
going to use our 1-800 number where if you call up, starting 
this fall, in Coos Bay, and you say, I heard about the Medicare 
drug discount card, what can I do, the operator will say, there 
are four of them available in Coos Bay, which would you like, 
and we will transfer you to one, and you will be enrolled in 
that. You will only be able to get one. You will only be able 
to switch every 6 months.
    Senator Wyden. Let us stop right there, because this is 
helpful, and I want to walk exactly through it.
    So the senior gets on the phone, on the 800 number, and 
they say, for example, there are four programs. Will the person 
tell the senior at that point what the various prices are for 
coverage?
    Mr. Scully. Yes. The maximum is $25 one-time enrollment. We 
believe that it will quickly be zero, and we know of one 
company that will immediately--Caremark has already told us 
that they will charge zero. Some of the companies that want to 
participate were concerned they could not get the startup cost 
if they did not have a one-time enrollment fee, so we allowed 
up to $25. It is very possible, and I believe if the senior 
calls up 1-800-Medicare, and they say one is $20 and another is 
zero, an awful lot of people are going to go for the zero.
    Senator Wyden. But the senior will not be able, at that 
point, to ask for a comparison on particular drugs. Say the 
person who paid $400 a month for their medicine, the biggest 
share of it, $250, was for extra. At that point, what they 
would be told is there are four programs that would get a 
discount that are part of the discount card, but they still 
have to shop around to see if they could get it for $400 or 
$325 or $280 or something.
    Mr. Scully. The one thing is, no senior is worse off. After 
the end of the first year, the benefit of being on the web is 
the senior taking Lipitor, for instance, which I take, might 
say, look, Express Scrips have negotiated a great deal with 
Lipitor, I an going to sign up with them, or Caremark has 
negotiated a terrific deal with Prevacol. I will sign up with 
them. The goal is to move market share.
    Right now, seniors just pay over-the-counter prices for 
everything. We do not believe this is going to solve all of 
their problems, but if you are paying $200 a month for a drug 
and you now are going to pay $160, that is a lot better than 
you have now. We do not want to oversell, because it is not 
like an insurance plan here you are walking in and paying $10 
for a copayment. All it is going to do is give them the bulk 
purchasing power to lower their existing costs. It is not going 
to solve all the problems, but certainly it will save money 
quite a bit.
    Senator Wyden. How do we get to the day, because this is 
really what seniors have been asking me about for years, where 
they, in their particular town or State, can find out that 
Lipitor over here costs X amount, and Lipitor over here is $40 
less, and Lipitor over here is $80 less? Is there any way that 
sometime soon we could put that online?
    Mr. Scully. Our expectation is PBM's will have that online 
January 1, 2003. That is one of the goals of this program. If 
you look, there was an article in the Washington Post last week 
where they talked about somebody going to buy Lipitor at four 
different drug stores as a senior, and they had basically a 
200-percent variation in price within a mile of each other, and 
that is the kind of thing that seniors have to deal with, and a 
lot of people do not.
    In fact, I went through this discussion with some members 
of the Finance Committee the other day, and they said, ``Well, 
we do not get discounts now.'' I asked them all to dig out 
their cards, and the FEHBP Blue Cross card, which I have on the 
bottom, says PCS.
    They already have a negotiated drug discount. Every Member 
of Congress does. All federal employees do, almost everybody--I 
can tell you from Oxford almost everybody in a private health 
plan, almost every major health plan in the country already 
contracts with one of these people to negotiate bulk discounts 
on drugs Seniors do not get that, and they are really the only 
people in the country, outside the uninsured, who do not. It is 
crazy.
    So the fundamental idea of this is to pool seniors in the 
purchasing groups to get those discounts now, and then we can 
go on to discuss in Congress hopefully about what are the 
appropriate levels of subsidy, and for whom, during the course 
of the fall.
    Senator Wyden. So in January of 2003, at least for the 
PBM's, or the big buyers in a community, it will be possible 
for seniors to comparison shop for individual medicines?
    Mr. Scully. It is a requirement to participate in this 
program as of January 2003. We are actually going to publish 
discounts off the AWP, average wholesale price, this year, but 
as you know that is frequently a meaningless number. They are 
actually going to have to publish their real prices, starting 
in a year, and they have all said they will do that, and we 
expect a number of the drug store chains will probably have a 
plan. We hope that Epic, which is the small drug stores, will 
probably have a plan.
    Senator Wyden. I think the initiative will dovetail very 
well with the Snowe-Wyden and prescription drug legislation, 
the bipartisan prescription drug legislation.
     Senator Allen, do you have any further questions?
    Senator Allen. I have no further questions. I have enjoyed 
listening to yours and listening to your comments in answering 
the Chairman's questions.
    As Ranking Member, I like to look at the folks that the 
President selected, and I will tell you, Mr. Scully, the 
President and Secretary Thompson have really picked a person 
who is great. Not only are you articulate, but best of all is 
your experience and your knowledge and your background in the 
private sector, and bringing those consumer-driven, market-
oriented competitive juices from the private sector to your 
position now with CMS is great.
    I would only suggest to you, remember, when you are 
implementing these standards, make sure the cost of putting in 
these standards and whatever these requirements are, make sure 
the costs are much less than the value to the customers, and 
for the actual service, and I am sure you will.
    Thank you for coming back into service.
    Senator Wyden. What I think is helpful about the way you 
are approaching it, Mr. Scully, is that e-health can only work 
at its optimal level if you have the best and most current 
data. You, in effect, are making it clear that you want to get 
better data out to people, and that will be the fuel that is 
needed to run any health program that best serves the public. 
We look forward to working with you. Unless you have anything 
further you would like to add, we will excuse you at this time.
    Mr. Scully. Thanks.
    Senator Wyden. Thank you.
    Our next panel, Dr. Sherrilynne Fuller, Dr. John Kenagy, 
Dr. Willie May, and Mr. Albert Patterson, if you would come 
forward.
    We are happy to welcome all of you. Why don't we begin with 
you, Dr. Fuller.

         STATEMENT OF DR. SHERRILYNNE S. FULLER, HEAD, 
        DIVISION OF BIOMEDICAL INFORMATICS, PROFESSOR, 
        DEPARTMENT OF MEDICAL EDUCATION, UNIVERSITY OF 
                 WASHINGTON SCHOOL OF MEDICINE

    Dr. Fuller. Good afternoon. I want to thank you, Chairman 
Wyden and Ranking Member Allen and the members of the 
Subcommittee, for inviting me to participate today. Improving 
quality and cost-effectiveness of health care for our Nation's 
270 million citizens is one of the great challenges of our 
time, and I am very pleased to be able to participate in this 
discussion, particularly as a member of the Pacific Northwest 
contingent, and I want to first give a little background.
    I am here as a representative of the President's 
Information Technology Advisory Committee, or PITAC, as it is 
familiarly known, and I am the cochair of the PITAC panel on 
transforming health care. You should all have copies of the 
report we issued in February of this year.
    PITAC is a group of 24 information technology leaders in 
industry and academe. Our charge is to provide independent 
guidance to the President on maintaining U.S. leadership in 
high performance computing, networking, and information 
technology research and development.
    In February 1999, PITAC issued a major report on the status 
of information technology research and development, and that is 
the maroon document we have provided to you. In that report, we 
describe 10 major areas of our national life, including health 
care, in which information technology can have a transforming 
effect to benefit all Americans.
    As a followup to that report PITAC established a number of 
panels to conduct a more targeted analysis of the barriers and 
challenges in implementing information technology. My cochair 
on the panel was my friend and colleague, Dr. Ted Shortliffe, I 
know also a friend of Chairman Wyden's, professor and chair of 
the Department of Medical Informatics at the College of 
Physicians and Surgeons at Columbia University.
    He has been very interested in the federal role in health 
information technology for years, as I have been. We have 
provided you with his recent paper from Health Affairs, in 
which he gives an historical context while identifying problems 
and some potential solutions.
    Our panel reviewed the literature and consulted widely with 
federal and private sector experts in developing our findings 
and our report. Because the focus of the hearing today is 
information technology and how it can empower health care 
consumers, I want to read you a part of our panel's patient- 
and consumer-centric vision of better health care.

          ``Telemedicine applications are commonplace. Specialists use 
        videoconfer-
        encing and telesensing methods to interview and even to examine 
        patients who may be hundreds of miles away. Patients are 
        empowered in making decisions about their own care through new 
        models of interaction with our physicians, and ever-increasing 
        access to biomedical information via digital medical libraries 
        and the Internet. New communications and monitoring 
        technologies support treatment of patients comfortably in their 
        own homes.''

That is especially important with an aging population.
    What must be done, then, to harness the enormous potential 
of information technology to empower health care consumers and 
maximize effectiveness of providers and services? Our panel 
concluded that we have a very long way to go. Critical long-
term research, technology and policy issues stand between us 
and the consumer-centric health care that PITAC describes.
    As a Nation, we simply do not have a broadly disseminated 
national vision of how information technology can enable 
improved healthcare and more cost-effective systems. Given the 
fragmented nature of our health care system, it is perhaps not 
surprising that provider organizations and others in the health 
care industry have not come together with a coordinated ensured 
model of what is required, and I think the previous hour's 
testimony documents that very, very clearly.
    More surprising, however, is a lack of federal leadership, 
particularly health and human services, in bringing the 
community together, convening, guiding, educating, 
demonstrating, and ensuring the strategic role that information 
technology can play.
    Currently, information technology is applied on a piecemeal 
basis in public health, medical research, and delivery of 
health care services throughout the United States and 
throughout the Federal Government. We have evidence, and this 
has been noted earlier, that computer-based records can 
substantially improve patient care outcomes and cost, but 
provider organizations lack information about the efficiency of 
IT solutions in terms of both cost and quality, so it is very 
difficult for them to make appropriate decisions about IT 
investments.
    There is a real problem of incentives in this regard. We do 
not have a reimbursement strategy in place to encourage greater 
investment by health care organizations in advanced 
technologies, and an industry that is already financially 
stressed has difficulty justifying speculative technology 
investments in the absence of fiscal incentives and strong 
supporting data.
    In medical research, information technology is typically 
viewed as a tool that researchers may use for very specific 
disease research process, but the result of that researcher-by-
researcher approach, and using, by the way, often off-the-shelf 
software, is redundant effort and very slow adoption of 
cutting-edge technologies, plus a failure to recognize that the 
IT, in and of itself, is a vital and challenging area for 
biomedical research.
    The human genome was decoded this year not by individual 
researchers working on desktop computers but by teams of 
researchers who have access to some of the world's fastest 
supercomputers capable of storing and analyzing vast data sets 
of genetic information. The researchers noted that advanced IT 
systems accelerated the decoding by as much as a decade.
    That is a wonderful success story, and we continue to 
generate enormous amounts of raw data in clinical trials from 
bench research, but making sense of that raw data in the 
context of previously published research requires sophisticated 
information retrieval and management approaches not yet 
invented.
    The recent death of a healthy volunteer in an asthma 
clinical trial, for instance, can be traced to inadequate 
review of the historical literature regarding documented fatal 
reactions to a drug. In spite of the impressive data bases from 
the National Library of Medicine, vital information is still 
not at our finger tips. We need better user interfaces, more 
reliable software and systems, and more accessible high quality 
knowledge repositories for use in patient care.
    Human life maybe at risk if, for example, information sent 
to medical monitoring or dosage equipment is corrupted, or if 
electronic mail records cannot be accessed in a timely, 
reliable fashion. We need to develop integrated decision 
support systems that can proactively foster best practices in 
clinical decisionmaking. Such systems require advanced 
information technology methods and tools that do not exist 
today.
    A couple of examples. Automated reminders to clinicians and 
patients. I currently get regular reminders to follow up with 
my dog and my cat's care, immunization and checkups. I do not 
get them on myself or my daughter. A second example, rapid 
alerts to clinicians and patients regarding abnormal lab 
findings can speed up treatments, but the software to deliver 
that functionality is not available in most hospitals today.
    I should note here that our PITAC health care report points 
to a significant workforce issue, limiting the research 
progress toward a more consumer-focused health care system 
through information technology. Only a tiny group of 
practitioners and researchers today can operate at the nexus of 
medicine and IT. We urgently need to expand the cadre of 
professionals who have expertise in both fields, and who can 
develop, deploy, and manage the technologies needed by the 
health care sector.
    So looking at these problems, and what should we do about 
them, overall our report argues that the Nation must invest in 
research and development focused on realizing the potential of 
information technology to support 21st Century patient-centered 
health care. Just as we currently focus on research findings in 
medicine to help us prevent, treat, and cure human diseases, we 
recommend that the Department of Health and Human Services take 
the lead in this effort. We recommend that enabling technology 
centers be established, and large-scale research programs to 
study and develop practical uses of information technology in 
health care systems and biomedical research.
    Instead of jumping to solutions, we need to be sure we have 
the facts and the research findings to provide the evidence 
that this, indeed, is a correct solution to the problem. That 
funding is currently not available. We currently have a 
patchwork and piecemeal approach to implementing technology, 
most of which was not designed for the life and death issues of 
patient care, or the scale and demands of complex information 
systems.
    Enabling technology centers could build on the very good 
program models of the National Institutes of Health's National 
Library of Medicine, the integrated academic systems and 
telemedicine grant programs, both of which the States 
represented by Senators Wyden and Allen have benefited from, as 
has my own State of Washington and many others. But right now 
those kinds of broad, large-scale, long-term programs are 
simply not being funded. It is very much a project-oriented 
approach to funding, if funding is even available for IT 
research in health care.
    We believe these enabling technology centers would provide 
a resource for developing the dual-trained workforce I 
mentioned earlier, and would also bring together researchers, 
clinicians, most importantly, patients, providers, industry, 
and Government stakeholders to solve these problems.
    Some of the important unanswered questions, and some of 
these have been alluded to already today, involve the use of 
telemedicine for consultation. Studies, including studies I 
have been involved in, have repeatedly shown very high levels 
of satisfaction among rural patients, their primary care 
providers, and specialists. In spite of this positive response, 
the approach is not yet in general use.
    Many limiting factors have been identified, including cost, 
rural connectivity, clinical efficacy, and regulatory issues. 
However, adequate funding of studies over long periods of time 
could permit the development of approaches to solving these and 
many other problems. Use of provider-patient e-mail is a 
potentially cost-effective approach, but is it clinically 
effective? Is it cost-effective? Does it reduce patient visits? 
Does it improve patient satisfaction? We simply do not have the 
research data on a large scale to respond to those kinds of 
questions.
    We have heard a fair amount about the use of the Web to 
obtain health information. Increasingly, patients and providers 
look for information on the Web. We know that, but they 
encounter a bewildering quantity of information of variable 
quality. We need to study the types of questions patients and 
clinicians are seeking answers to, where they are looking, and 
develop strategies for helping them to find accurate answers.
    A particular problem I might note based on my own work with 
Native American tribes that needs further study is that much of 
the available health information on the Web does not address 
the needs of minority populations. We need to look at how we 
can respond to those issues.
    Use of IT to prevent medical errors. That seems like an 
obvious area in an approach to preventing medical errors, but 
there are many research issues involved in doing this, and we 
need to be able to answer questions about how to do this in a 
cost-effective way, in a way that benefits the health care 
team, and that does not slow down the processes of health care.
    IT offers many solutions to these problems, but such 
solutions require not only organizational commitment and 
effective demonstrations, but fundamental research in 
biomedical computing, human cognition, and telecommunications. 
PITAC strongly believes that information technologies hold the 
potential to dramatically improve the U.S. health care system, 
but we need a national commitment to do the research. It will 
take to develop an array of 21st Century patient applications 
of information technologies.
    Thank you very much for inviting my participation.
    [The prepared statement of Dr. Fuller follows:]

    Prepared Statement of Sherrilynne S. Fuller, Head, Division of 
  Biomedical Informatics, Professor, Department of Medical Education, 
              University of Washington School of Medicine

    Good afternoon. I want to thank Chairman Wyden, Ranking Member 
Allen, and the members of the Subcommittee for the opportunity to be 
here today. Improving the quality and cost-effectiveness of health care 
for our Nation's more than 270 million citizens is one of the great 
challenges of our time, so I am pleased to be able to join in this 
discussion.

                               BACKGROUND

    I am here as a representative of the President's Information 
Technology Advisory Committee, or PITAC, and the co-chair of PITAC's 
Panel on Transforming Health Care. The PITAC is a group of 22 
information technology leaders in industry, research, and academe whose 
charge is to provide independent guidance to the President on 
maintaining U.S. leadership in high performance computing, networking, 
and information technology research and development. In February 1999, 
PITAC issued ``Information Technology Research: Investing in Our 
Future,'' a major report on the status of information technology 
research and development. In that report, we described 10 major areas 
of our national life--including health care--in which information 
technology could have a transforming impact that will benefit all 
Americans.
    As a followup to that initial report, PITAC established a number of 
Committee panels to conduct more targeted analyses of the information 
technology barriers and opportunities in specific transformational 
challenge areas. To date, PITAC has issued panel reports on 
``Transforming Access to Government Through Information Technology'' 
(September 2000); ``Developing Open Source Software To Advance High End 
Computing'' (October 2000); and ``Digital Libraries: Universal Access 
to Human Knowledge''; ``Using Information Technology To Transform the 
Way We Learn''; and ``Transforming Health Care Through Information 
Technology'' (all in February 2001). My co-chair on PITAC's Panel on 
Transforming Health Care was Dr. Ted Shortliffe, professor and chair of 
the Department of Medical Informatics at the College of Physicians and 
Surgeons, Columbia University, who has been particularly interested for 
several years in the Federal role in health care information 
technology. The Panel reviewed the current literature and consulted 
widely with Federal and private-sector experts over the course of a 
year in developing the findings and recommendations of our report.

                 PITAC TRANSFORMING HEALTH CARE REPORT

    Our panel concluded that information technology offers the 
potential to expand access to health care significantly, to improve its 
quality, to reduce its costs, and to transform the conduct of 
biomedical research. The quality of U.S. health care and medical 
research are the envy of the world, but U.S. health care costs as a 
percentage of gross domestic product are among the highest in the world 
and are increasing despite recent changes in health care organization 
and financing. Further, a recent report from the Institute of Medicine 
(IOM), ``To Err is Human,'' points out that despite our favorable 
reputation for especially complex care management, our health care 
system is not nearly as safe as it could be. The report argues that 
significant improvements in care would be possible if modern clinical 
information systems were widely implemented and a sound national health 
information infrastructure were in place.
    Because the focus of this hearing is how information technology can 
empower health care consumers, I want to read you part of our Panel's 
patient- and consumer-centric vision of better health care enabled by 
information technology:
    ``Telemedicine applications are commonplace. Specialists use 
videoconferencing and telesensing methods to interview and even to 
examine patients who may be hundreds of miles away. . . . Patients are 
empowered in making decisions about their own care through new models 
of interaction with their physicians and ever-increasing access to 
biomedical information via digital medical libraries and the Internet. 
New communications and monitoring technologies support treatment of 
patients comfortably from their own homes.''
    The health sector will experience unprecedented change as it begins 
to take advantage of information technologies to increase productivity 
and to improve the quality of care in the ways the PITAC panel 
envisions. While new technologies can provide great opportunities for 
advances, key challenges exist to realizing the potential benefits to 
Americans' health and health care. The Panel made the following 
findings about these challenges:
    1. The U.S. lacks a broadly disseminated and accepted national 
vision for information technology in health care.
    Health care organizations are not well prepared to adopt 
information technology and applications effectively. Health care is 
largely a decentralized industry populated by diverse organizations 
with different motives, resources, and incentives. Fiscal constraints 
hinder the industry's ability to make major investments in information 
infrastructure and applications unless these investments can be shown 
to lead to significant and low-risk returns. Provider organizations 
lack information about the efficiency of information technology 
solutions in terms of both cost and quality, making it difficult for 
them to make decisions about information technology investments. We now 
have sufficient evidence to state that computer-based patient records 
can substantially improve patient care, outcomes, and costs. Yet to 
date we do not have the national commitment to assure that Americans 
will reap the benefits of this technology.
    2. Critical, long-term research, technology, and policy issues need 
to be addressed if we are to realize the potential of information 
technology to improve the practice of health care.
    While significant advances in information technology have been 
achieved, many hard problems remain. For example, user interfaces that 
are easier to use and more easily integrated into the ergonomic 
patterns of health care can catalyze greater acceptance and use of 
innovative computer-based tools in medicine. Robotics and remote 
visualization methods supported by high-reliability and low-latency 
communications are needed to enable applications such as telepresence 
surgery. Reliability of systems and software is critical for many 
health care applications. Human life may be at risk if information sent 
to medical monitoring or dosage equipment is corrupted or degraded, or 
if electronic medical records cannot be accessed in a timely, reliable 
way.
    Knowledge repositories are also an important research topic, 
including techniques for integrating data from multiple sources. 
Stronger forms of authentication are needed, both for persons accessing 
data and for assuring the integrity of the information. Methods are 
needed to protect patients' privacy while allowing valuable medical 
research and necessary reimbursement tasks to be performed. Better 
access-control methods would make it possible to partition and isolate 
the data elements as needed to protect patient privacy. Improvements in 
computational capability are therefore essential, including faster 
processing and more networked resources to meet the increased demands 
of modeling complex systems and performing information retrieval, data 
analysis, and automated inferencing.
    From a policy perspective, perhaps the most significant problem is 
the lack of reimbursement for a range of applications that have 
demonstrated value, e.g., telemedicine, patient-provider interactions 
over the Internet, efforts to reduce medical errors, and initiatives 
that link a patient's data across provider organizations. We have 
sufficient evidence, for example, that computer-based patient records 
can substantially improve patient care, outcomes, and costs. But many 
provider organizations lack information about the efficiency of IT 
solutions in terms of both cost and quality, so it is difficult for 
them to make appropriate decisions about IT investments. (For a history 
and discussion of the health care community's role in networking, see 
Edward H. Shortliffe's article ``Networking Health: Learning From 
Others, Taking the Lead,'' Health Affairs, November/December 2000, 
attached to this testimony.)
    Further complicating matters is the fact that health care providers 
are currently licensed by individual states and are generally 
prohibited from providing care across state lines. This becomes a clear 
issue when a patient is in one state but the physician at the other end 
of a telemedicine link is in another. Liability claims are also handled 
at the state level, with considerable variation among states.
    3. The introduction of integrated decision-support systems that can 
proactively foster best practices requires enhanced information 
technology methods and tools.
    Decision-support tools can provide critical links between a current 
patient's condition and previous clinical studies. Existing systems 
largely focus on detecting errors at the source, through such methods 
as range checking, alerts, and reminders, or post-hoc quality 
monitoring and review. While these types of systems are vital 
components for improving quality of care, important information is 
often unavailable or inaccessible because it is spread across multiple 
information systems and/or organizations with differing systems. This 
can result in poor coordination of care and increased illness and 
mortality.
    Scientists are generating enormous amounts of raw data from 
clinical trials as well as bench research. However, making sense of the 
raw data in the context of previously published research requires 
sophisticated information retrieval and management approaches not yet 
invented. For example, the recent death of a healthy volunteer in an 
asthma clinical trial can be traced to inadequate review of the 
historical literature regarding known, fatal reactions to a drug. In 
spite of the impressive National Library of Medicine databases, vital 
information is still not ``at our fingertips.'' (See July 17, 2001, 
article from The Baltimore Sun attached to this testimony.)
    Two examples of other technologies that could make a difference in 
patient care: automated reminders to clinicians and patients regarding 
treatments, followup visits, and the like; and Rapid Alerts to 
clinicians and patients regarding abnormal lab findings. However, 
software that will deliver the power and functionality required for 
such time-critical communications is lacking in most hospitals today.
    As a new report from the Robert Wood Johnson Foundation points out, 
``eHealth interventions have been shown to enhance social support and 
cognitive functioning; enhance learning efficiency; improve clinical 
decision-making and practice; reduce health services utilization; and 
lower health care costs among certain groups.'' However, the report 
goes on to note that ``most assessments of eHealth interventions have 
been limited to small groups that may not be representative of the 
parent population, have not been randomized control trials, had limited 
follow-up periods or only assessed proprietary interventions that may 
or may not be replicable. . . . eHealth developers do not routinely 
conduct evaluations, especially post-market assessment for 
effectiveness. And when commercial companies and other private sector 
organizations DO conduct evaluations, the results are often not 
publicly available.'' (See Eng, T.R., ``The eHealth Landscape: A 
Terrain Map of Emerging Information and Communication Technologies in 
Health and Health Care,'' The Robert Wood Johnson Foundation, 2001. 
Available at: www.rwjf.org.)
    We cannot wait for industry to deliver solutions because we do not 
yet know all of the questions. What we need is a national commitment to 
do the research it will take to develop an array of 21st century 
patient-centric applications of information technology. The challenge 
of going beyond current methods to ones that proactively foster best 
practices will require a whole new generation of advanced technologies 
based on efforts in the following areas:
     Expanding the range and granularity of routinely captured 
data
     Standardizing terminology
     Developing robust techniques for incorporating new data 
types into existing clinical data repositories, e.g., images and 
patient genotype
     Organizing and collecting large-scale databases to 
determine best practices
     Developing guidelines based on such evidence
     Implementing guidelines so that they are usable 
effectively at the point of care, including embedded decision support 
that is continually updated as new evidence accumulates
     Reducing the cost and difficulty of integrating 
applications that reside on heterogeneous technologies
    4. Achieving the potential of information technology to improve 
health care will be constrained until we develop a larger cadre of 
researchers and practitioners who operate at the nexus of health and 
computing/ communications.
    In part, the missing national vision of information technology's 
key role in the U.S. health care system is due to a lack of critical 
investment by the biomedical community in computer infrastructure and 
enabling technologies. This issue becomes increasingly difficult to 
solve because the number of individuals who understand both the health 
care milieu and information technology is remarkably small. Yet, if we 
are to improve health care quality, increasing the number of trained 
professionals with biomedical information technology expertise is a 
critical need.
    5. The biomedical community, including the Federal research 
agencies, has tended to rely on information technology innovations that 
are produced by investments in other parts of Government.
    Although the quality of U.S. health care is increasingly dependent 
on the effective use of new and emerging information technologies, 
Federal health agencies have played a limited role in supporting 
research and development in computer science. Unfortunately, the health 
care and biomedical research communities have generally viewed 
information technology as a tool to enable health care applications and 
support biomedical research, rather than a critical research field. The 
Department of Health and Human Services (DHHS) has heavily leveraged 
information technology research and development investments made by 
other Federal agencies such as the Defense Advanced Research Projects 
Agency (DARPA), the Department of Energy (DOE), the National 
Aeronautics and Space Administration (NASA), and the National Science 
Foundation (NSF). While DARPA, DOE, NASA, NSF, and other Federal 
agencies consistently make significant investments in fundamental 
information technology research and development, their primary mission 
is not health care and therefore their priorities do not necessarily 
match the critical needs of health care research and education.
    DHHS has failed to make vital investments in fundamental 
information technology research and development and, as a result, 
health care lags behind other sectors. If DHHS does not begin to make 
substantial investments in information technology research and 
development, two serious problems will arise. First, the pace at which 
biomedicine benefits from information technology research will be 
adversely affected. Second, the needs of the biomedical community will 
not be reflected in the priorities of the other Federal agencies unless 
the biomedical community itself is involved in information technology 
research. Similarly, the biomedical research agencies must collaborate 
on an equal footing with the other Federal research agencies that have 
dominated information technology research in the past.
    6. The role and management of information technology in the 
Department of Health and Human Services has several limitations, which 
must be addressed if the health care community is to benefit from the 
promise of the information age.
    DHHS does not have a clear, strategic vision of the benefit that 
the department and all of its agencies could receive from information 
technology research and use of information technology tools. It is 
evident that the decentralized management approach of DHHS has 
adversely affected both the development of a coherent information 
technology vision and the influence of departmental activities 
regarding information technology and its role in health care and 
biomedical research. It is important to change this practice and ensure 
that DHHS has the necessary leadership and budget and a coordinated 
information technology effort across all its agencies. In our 
discussions with DHHS agencies, it became clear that they do not have a 
mandate or budget to support information technology research, even 
though it is fundamental to their mission.
    Although the Administration and Congress have placed a high level 
of confidence in information technology's benefit to this country, DHHS 
is not perceived as a significant player in Federal information 
technology research or policy development. It is clear, however, that 
state-of-the-art research advances in any field require state-of-the-
art investments aimed at solving problems, developing the technology, 
and building the right infrastructure.

                        PITAC'S RECOMMENDATIONS

    Over all, our report argues that the Nation must invest in research 
and development focused on realizing the potential of information 
technology to support 21st century patient-centered health care, just 
as we are focusing on the potential of research findings in 
microbiology to help treat and cure human diseases. We believe that we 
cannot get where we need to go within the current patchwork, piecemeal 
implementations of technologies, most of which were not designed for 
the life-and-death issues of patient care or the scale and demands of 
health information systems.
    1. The Federal government should establish pilot projects, Enabling 
Technology Centers, and large-scale research programs to extend 
practical uses of information technology to patient care, health care 
systems, and biomedical research.
    The Enabling Technology Centers could build on the very good 
program models of the National Library of Medicine's integrated 
academic systems and telemedicine grant programs, which have supported 
the development of applications linking distributed organizations via 
networks and prototyping technologies for specific health care uses. 
(For examples of NLM advanced networking applications projects, see 
list attached to this testimony.) These Centers would serve as a 
resource for developing the dual-trained workforce in biomedical 
information technologies that we believe is critical for the future, 
and would also bring together researchers, clinicians, patients, 
providers, industry, and government stakeholders to solve health care-
specific problems.
    With regard to large-scale research projects, the Nation is making 
significant investments in disease-oriented studies. But there is very 
little funding to support large scale, long-term studies of information 
technology interventions with large populations--across disease types. 
DHHS's Agency for Healthcare Research Quality and the National Library 
of Medicine of the National Institutes of Health have funded most of 
the health IT research to date. And NLM has also led in building 
medicine's vital resource databases, including the PubMED and genome 
databases. However, the funding is inadequate to meet the depth and 
breadth of the problems. For example:
    Use of provider/patient email--Is it clinically effective? Cost 
effective? Does it reduce patient visits? Improve patient satisfaction?
    Telemedicine for consultations--Studies have repeatedly shown high 
levels of satisfaction with this approach among rural patients, their 
primary care providers and specialists. In spite of this apparently 
positive response, the approach not yet in general use. Many limiting 
factors have been identified, including cost of rural connectivity and 
regulatory issues. However, adequate research funding of studies over 
longer periods of time could provide the answers needed to solve these 
problems.
    Remote-care applications that integrate sensor technologies and/or 
remote instrumentation to monitor patients--For example, a significant 
number of people who reside in nursing homes are there more for health 
``security'' reasons than for heath care ``needs.'' Many residents in 
extended-care facilities could be cared for at home at significantly 
reduced costs if the appropriate telemedicine tools were available to 
enable remote monitoring. Additionally, many of the home-health visits 
conducted today are based on the need to observe or monitor a patient's 
status, a function that could be accomplished through interactive video 
systems coupled with the appropriate instrumentation and a simple-to-
use interface.
    Using the Web to obtain health information--Increasingly, patients 
(and providers) seek medical information on the Web. But they encounter 
a bewildering quantity of information of variable quality. We need to 
study the types of questions patients are seeking answers to and where 
are they looking, and develop strategies for helping them find answers. 
A particular problem based on my own work with Native American tribes 
is that much of the available health information on the Web does not 
adequately address the needs of minority populations. (See ``Health 
Information on the Internet: Accessibility, Quality, and Readability in 
English and Spanish,'' Berland, JAMA, Volume 285(20), 23/30 May 2001. 
This empirical study found issues in both health content and search 
engine efficiency.)

                           FEDERAL LEADERSHIP

    The following recommendations of PITAC's report flow from the 
Health Care Panel's view that the Federal government's key health-care 
agency, DHHS, must develop a much more active and visible leadership 
role in articulating, developing, and modeling information technology 
methods and systems for improving U.S. health care. We also urge that 
NIH and other Federal science agencies collaborate on an advanced 
infrastructure for the biomedical research community. And we ask the 
Congress to enhance existing rules on information privacy. These 
proposals are needed to spearhead the broad changes we are describing 
across the decentralized and diversified landscape of the Nation's 
health care sector.
    2. NIH, in close collaboration with NSF, DARPA, and DOE, should 
design and deploy a scalable national computing and information 
infrastructure to support the biomedical research community. This 
infrastructure should include an aggressive biomedical computing 
capability similar to that of the Department of Energy National Nuclear 
Security Administration's (DOE/NNSA) Accelerated Strategic Computing 
program.
    Computational biology and other biomedical problems require the 
fastest computing cycles and information processing capabilities 
achievable today. And as we seek to improve our knowledge of the human 
body, these computing requirements will grow exponentially. There 
should be a biomedical equivalent of the DOE/NNSA program to provide 
multi-teraops/teraflops computing capability to high-end users and to 
fund the development of improved algorithms and enabling technologies 
for terascale systems. Facilities with mid-level computers also should 
be made available for researchers to develop and test software before 
moving to large systems. These mid-level systems can also be used for 
developing new algorithms and applications for biological problems.
    To enable this distributed, scalable computing environment, 
investments are needed in software to support grid technologies to 
permit dynamic allocation of computing and information processing 
capability across geographically distributed locations as needed. Long-
term information storage and management of biomedical databases are 
also important computing infrastructure requirements. DHHS should work 
with the community to decide which databases are to be maintained, for 
how long, and by whom. DHHS also should provide the necessary funding 
to support the infrastructure needed to maintain the databases over the 
long term.
    3. Congress should enhance existing privacy rules by enacting 
legislation that assures sound practices for managing personally 
identifiable health information of any kind.
    Protections are needed that deal with unauthorized access and 
disclosure and that allow for appropriate access and amendment by 
patients. Governing the stewardship of and access to medical 
information is an important issue. Legislation should identify the 
national standards by which information can be shared, should permit 
electronic authentication of information, and should include sanctions/
penalties for violations. Despite the recent announcement of privacy 
regulations in response to the Health Insurance Portability and 
Accountability Act of 1996 (HIPAA), uncertainties can be dealt with 
convincingly only by a clear legislative mandate.
    4. Establish programs to increase the pool of biomedical research 
and health care professionals with training at the intersection of 
health and information technology.
    The Panel applauds the efforts of the NIH 's Biomedical Information 
Science and Technology Initiative to establish National Programs of 
Excellence in Biomedical Computing to support learning at the 
interfaces among biology, mathematics, and computation. Such programs 
can play a significant role in educating biomedical-computation 
researchers. DHHS should identify and nurture similar programs to 
provide training at the intersection of information technology and 
health care professionals. For new applications of information 
technology to health care to be envisioned, developed, and implemented, 
it will be necessary to build teams of health care application experts, 
biomedical researchers, and computer scientists. Such teams can build 
bridges among near-, mid-, and long-term R&D to help ensure rapid 
adoption of new technologies in the health care system. DHHS should 
explore other educational opportunities, such as expanding health 
informatics training programs and curricula within the schools of 
health professions and computer science departments.
    5. DHHS should outline its vision for using information technology 
to improve health care in this country and subsequently devote the 
necessary resources to do the basic information technology research 
critical to accomplishing these goals in the long term.
    DHHS should develop an agenda to remove the policy barriers that 
currently inhibit the use of information technology in support of 
health care. This might, for example, include the development of an 
expanded agenda at the Centers for Medicare and Medicaid Services (CMS) 
(formerly the Health Care Financing Administration) to evaluate the 
impact of such technologies on care quality and costs and to provide 
reimbursement (or other incentives) should the impact prove to be 
socially valuable.
    The Department should also establish an aggressive research program 
in computer science that is motivated by health needs. It is important 
that the research program address long-term needs, rather than the 
application of existing information technology to biomedical problems. 
Some entities within DHHS, most notably NLM but also other elements of 
NIH and AHRQ, have invested in research in applications of computing 
and communications technologies. But much of this work has had short-
term goals and DHHS itself has not made information technology research 
and development in health-related activities a priority. Financially 
stressed health care organizations will not increase their commitment 
to the use of information technology without strong leadership and 
demonstrations of value. (For examples of the types of research and 
development DHHS might encourage, see pages 14-15 of ``Transforming 
Health Care Through Information Technology.'')
    6. DHHS should appoint a senior information technology leader to 
provide strategic leadership across DHHS and focus on the importance of 
information technology in addressing pressing problems in health care.
    Information technology is of critical importance to the Nation and 
can be instrumental in providing the best possible health care to all 
of our citizens. At this time, information technology research and use 
are not viewed within DHHS as strategically as is necessary. We 
therefore recommend that DHHS create a high-level position designed to 
provide the necessary vision for the agency in its efforts to 
incorporate information technology in its agency mission and strategy. 
While we cannot best judge how this should be accomplished, we 
recommend that the position be at least at a level equivalent to the 
deputy undersecretary. This person should be an expert who operates at 
the nexus of health and computing/ communications. In addition, a 
budget should be provided to facilitate this person's coordinating and 
educational activities.

                               CONCLUSION

    PITAC strongly believes that information technologies hold the 
potential to dramatically improve the U.S. health care system. The 
barriers are diverse, ranging as they do from basic technology 
questions that require fundamental research, to human, organizational, 
and social factors that complicate the application of technology in a 
complex setting such as health care. But in almost all such areas, 
there is a role for the Federal government to play. Our health care 
report has outlined those roles and we hope that you and your 
colleagues will find our suggestions engaging and persuasive. The 
Nation has much to gain if IT is more effectively applied to prevent 
disease, to reduce errors and expense, and to improve the overall 
quality of health care for our citizens.
    The PITAC will be happy to provide the subcommittee with additional 
information and to work with members pursuing these significant aspects 
of U.S. health care quality.
    Thank you.
                                 ______
                                 

                 [From Health Affairs, Nov.-Dec. 2000]

        Networking Health: Learning From Others, Taking The Lead

                      (By Edward H. Shortliffe) *

    The Internet was created without much help from biomedical 
researchers or HHS. The time for leadership has arrived.
---------------------------------------------------------------------------
    * Ted Shortliffe is professor and chair of the Department of 
Medical Informatics, College of Physicians and Surgeons, Columbia 
University, in New York City. He was a principal developer of the 
medical expert system known as MYCIN in the 1970s, before obtaining his 
medical training in internal medicine. His e-mail address is 
.
    The author acknowledges the role of Jerry Sheehan from the National 
Research Council (NRC) and the members of the NRC Committee on 
Enhancing the Internet for Health Applications, for discussions and 
comments on an earlier draft of this paper.
---------------------------------------------------------------------------
    Abstract: The Internet provides one of the most compelling examples 
of the way in which government research investments can, in time, lead 
to innovations of broad social and economic impact. This paper reviews 
the history of the Internet's evolution, emphasizing in particular its 
relationship to biomedical computing and to the nation's health care 
system. Here I summarize current national research programs, 
emphasizing the need for greater involvement by the medical research 
community and leadership from Federal health care agencies.
    Complex issues have arisen regarding the Internet and its potential 
role in health and health care, and they have naturally gained popular 
attention. The questions and concerns rest, however, on a history of 
networking development that dates back at least to the 1960's. By the 
mid-1990's it appeared that a revolution was upon us, but the sudden 
attention to the Internet was actually the result of its newly 
developed and most influential application, the World Wide Web.\1\ Our 
attempts to place the Internet in context as a health care and 
biomedical issue will benefit from consideration of its evolution and 
of the gradual way in which it has penetrated not only our culture but 
also our thinking about scientific research and health care delivery.
    Medical researchers--especially those addressing problems in 
biomedical computation--were involved as network users and 
experimenters almost from the Internet's beginning, but their influence 
on the Internet's development was limited. Today's health care 
community needs to anticipate and influence the next generation of the 
Internet and to work to ensure its effective and suitable role as a 
critical element in the health care system. To do so, we need to 
understand our achievements to date as well as the missed opportunities 
and the nature of the barriers that still exist.
    This paper summarizes the evolution of the Internet, emphasizing a 
biomedical perspective.\2\ I also summarize recent organizational and 
logistical developments, propose some likely future directions, and 
offer my views on the role that the health care community could and 
should be playing as the technology evolves. Much of what follows 
reflects my personal recollection and opinion and my recent experiences 
in studying the state of the Internet and its current and potential 
role in health care and biomedicine.\3\

                         HISTORICAL PERSPECTIVE

    The technology of packet-switched networking, on which the Internet 
is based, arose in the 1960's. In the latter half of that decade the 
U.S. Department of Defense, through its Advanced Research Projects 
Agency (ARPA), sought to use the technology to link a handful of 
computers that were involved with defense-related research.\4\ Some of 
these machines were on university campuses, while others were at 
Federal sites or in the facilities of government contractors. This was 
the era of an unpopular war in Southeast Asia, and much suspicion 
lurked on college campuses about the motives behind this kind of 
technology and its potential military uses. Ironically, some of the 
most vocal protestors of that era are no doubt heavily invested in 
today's dot-com startup companies.
    By the 1970's it became clear that the ARPANET, as this network 
became known, was a boon to collaborative research in computer science 
and in a variety of application domains. Although its initial emphasis 
had been on remote login to computers (Telnet) and file sharing among 
machines (file transfer protocol, or FTP), an early application known 
as electronic mail was an unexpected success. E-mail quickly penetrated 
the ARPANET research community and accounted for much of the traffic on 
the national network. In addition, by the late 1970's Ethernet 
technology had been introduced, and campuses and research organizations 
were implementing the first local area networks (LANs). These networks 
facilitated connectivity to the national network from various 
locations. By 1982 the networking protocol known as transmission 
control protocol/Internet protocol (TCP/IP) had been introduced; it 
became the dominant standard for communications both on the national 
network and, in time, on local networks as well.
    As more parties became connected to the ARPANET, the need arose for 
more robust addressing conventions. Several new naming systems were 
introduced before the domain system of today (with the familiar .edu, 
.org, .gov, .com, and .net suffixes) was eventually implemented. 
Network speeds increased, and an ARPANET culture began to emerge. There 
was a strong sense of community, of openness and free speech, and of 
the need to avoid commercial activities. As recently as the late 1980's 
there was still no consensus that commercial organizations other than 
government research contractors should be allowed to connect to the 
Internet. Organizations such as the Electronic Frontier Foundation were 
created to defend free speech and openness on the Net and to provide 
resources for persons who wished to learn more about privacy, 
copyright, and intellectual property issues in the new electronic 
environment.\5\
    If the 1970's were the decade in which the computer science 
research community discovered and built upon the ARPANET, the 1980's 
were the time when this experience began to be generalized to other 
branches of science. Nobel laureate and geneticist Joshua Lederberg had 
pointed to this potential as early as 1978.\6\ He was later 
instrumental in promoting the notion of network-based 
``collaboratories''--a concept that has begun to gain acceptance in 
scientific communities, including medical research.\7\
    By the mid-1980's the generalization of the technology and its 
growing maturity led to the gradual transfer of its oversight from the 
Department of Defense to the National Science Foundation (NSF), where 
it was known as NSFnet. Parallel networking activities, such as CSnet 
for the non-ARPA-related computer science community and BITNET for 
academic institutions, eventually merged, and the resulting 
conglomeration adopted the Internet name.
    Acceptance of the role of the Internet in science failed to spark 
much interest within the health care delivery community. Practitioners 
largely remained unaware of the Internet, and the only health centers 
that were connected to the national network were those affiliated with 
research universities, in which case their network connection was 
typically ``borrowed'' from their main campus.
    Several Federal entities played major roles in the evolution of the 
Internet and the development of policies regarding its use in the late 
1980's and early 1990's. Most prominent among these were the Department 
of Defense (in particular its research arm, ARPA), the Department of 
Energy (DOE), the NSF, and the National Aeronautics and Space 
Administration (NASA).\8\ These entities, and others with networking 
interests, formed the Federal Networking Council (FNC), which in turn 
formed an advisory group from the private sector, known as the FNC 
Advisory Committee (FNCAC). The Department of Health and Human Services 
(HHS) has been represented on the FNC by the National Library of 
Medicine (NLM), the agency at the National Institutes of Health (NIH) 
that has been most closely associated with biomedical computing and 
communications, including research programs, since the 1960's, when 
Medline was first introduced there.

                          GROWTH IN THE 1990'S

    In 1989 Federal legislators began to promote the notion of a new 
national research program that would push the technology of the 
Internet and bring it to a level of quality and sophistication that 
would attract an even larger segment of society. One of the leaders of 
this effort, Sen. Al Gore (D-TN), argued that such technologies could 
address major societal needs while promoting U.S. economic 
competitiveness. He and others built bipartisan support for legislation 
in the area, which was eventually signed into law as the High 
Performance Computing and Communications (HPCC) Act of 1991.\9\
    The political process to gain support for the HPCC initiative from 
Congress required a substantial educational effort. One enduring tool 
has been an annual ``blue book,'' which outlines several societal 
``grand challenges'' and argues for the role of high-performance 
computing and communications in achieving those goals. Many of the 
examples in these books have been drawn from biomedical science. The 
annual reports are now placed on the Web for public review as well as 
being distributed in printed form.\10\
     Health-sector involvement. The need soon arose to create 
an office that would help to coordinate the cross-agency activities. 
The first director of the National Coordinating Office (NCO) for the 
HPCC initiative was Donald A.B. Lindberg. Already playing a key role in 
the medical community as director of the NLM, Lindberg agreed to take 
on the additional responsibilities associated with the NCO 
directorship, and he established its first office on the NLM grounds in 
Bethesda, Maryland. Locating the office at the NLM helped to make clear 
the link between medicine and the new research programs, and some of 
the research dollars were appropriated for advanced networking programs 
and testbeds that were promoted by the NLM.\11\
     Enter the Web. By far the greatest change in the Internet 
environment of the 1990's was the introduction and rapid adoption of 
the WorldWide Web. The Web has had a remarkable impact on our global 
society in just a few short years.\12\ Its penetration into our homes, 
schools, and workplaces has arguably exceeded the rate of adoption of 
earlier popular consumer technologies such as television.
    By April 1995 the Internet had been fully ``privatized'' and was no 
longer dependent on Federal funding for any component of the backbone 
(that is, the major high-speed lines that criss-cross the country and 
to which the regional networks connect). Thus, the Internet is an 
important and impressive example of how, over time, a speculative 
government research program that would not have been undertaken in the 
private sector can lead to technologies and systems that are 
commercially viable on their own. The increasing use of national 
networking by society has resulted in projections that Internet traffic 
on commercial communications systems will soon exceed the traffic 
derived from traditional voice telephony.\13\ With explosive growth in 
other communications technologies, ranging from highspeed modems and 
cable modems to wireless communication systems and satellites, the 
communications vendors of the future will deal with products and 
services that we have only begun to contemplate. The Telecommunications 
Act of 1996 was intended, in part, to deregulate the industry so that 
novel alliances and new methods of communication could be more 
effectively introduced.

                INVOLVEMENT OF THE BIOMEDICAL COMMUNITY

    In the early 1970's, when the ARPANET was still young, two medical 
computing groups were affiliated with computer science departments that 
were among the earliest users of the network. At Stanford University 
there was an active collaboration between artificial intelligence (AI) 
researchers from the Computer Science Department and scientists from 
the Departments of Chemistry, Genetics, and Internal Medicine. Working 
first on a system to infer organic structures from mass spectral data 
(the Dendral program), and later on clinical problems in diagnosis and 
therapy planning (the MYCIN system), they proposed the creation of a 
mainframe computing resource to be shared among a national community of 
researchers interested in AI applications in biomedicine.\14\ The 
resource, known as SUMEX-AIM, was funded in 1973 by a grant from the 
NIH Division of Research Resources (DRR).With the help of the DRR, the 
SUMEX machine became the first non-Defense-funded machine connected to 
the ARPANET. This resource continued for almost 20 years and supported 
a wide variety of collaborative research activities that depended upon 
the ARPANET for access.\15\
    Much of the network use by biomedical researchers was focused on 
remote logins, since the computers themselves were being made available 
to distant users who did not have similar resources on their own 
campuses. However, e-mail rapidly became a major element in the 
community building that occurred, leading to Lederberg's prescient 
observations in 1978 about the role of the network in support of 
scientific research activities.\16\
    By the late 1970's other university-based biomedical computing 
resources began to join the ARPANET club, but the greater biomedical 
community did not begin to use the national network until the 1980's. 
The NIH (with the exception of the NLM) was slow to realize the 
importance of the Internet and came online much later than did most of 
the academic research institutions that it funded and with which its 
scientists and program officers were interacting.
    In 1986 several planning panels were commissioned to help to 
develop a 10-year plan for the NLM. One panel proposed the role of 
electronic information in support of biomedical sciences.\17\ This 
insight led in time to the creation of the NLM's National Center for 
Biotechnology Information (NCBI) and, arguably, to the emergence of 
bioinformatics as a distinct discipline.
    A second panel was charged with providing advice in the field of 
medical informatics; one of its recommendations dealt specifically with 
electronic communications.\18\ The panel noted that ``only small 
segments of the biomedical research community have access to the 
integrated computing and network communications services that are 
essential to future medical information systems.'' They accordingly 
urged the NLM to work to ensure that ``by the end of the next decade, 
there will be a national computer network for use by the entire 
biomedical community, both clinical and research professionals. The 
network will have advanced electronic-mail features, as well as 
capabilities for large file transfer, remote computer log-in, and 
transmitted graphics protocols. It will either be part of a larger 
national network of scientists or will have gateways to other federally 
sponsored networks.'' \19\ A decade later the biomedical community did 
have the WorldWide Web and much of what the committee had proposed, 
although it was achieved through the natural evolution of the Internet 
and not from that community's efforts.
    By the late 1980's, frustrated by the slow movement of the 
biomedical community in areas related to wide area networking, I and 
others began to promote the notion that we needed more effective 
leadership from HHS. This was the theme of an unpublished talk that I 
gave at the Symposium on Computer Applications in Medical Care in 1989 
as well as one I presented in 1990 at the annual meeting of the Society 
for Medical Decision Making.\20\ My concern was that the health care 
community, fragmented as it is, has a special need for Federal guidance 
in understanding and suitably adopting a complex technology such as the 
Internet. Yet HHS showed no emphasis on networking policy and 
involvement like those in other ``mission-oriented'' agencies, such as 
NASA. It seemed clear to me that wide area networking was just as 
important to the present and future of health care as it was to 
defense, energy management, and space exploration. It seemed illogical 
that HHS was allowing the other agencies to dominate the evolution of 
networking technology and related national policy.
    The biomedical research community rapidly adopted Internet 
technologies in the 1990's, especially after the introduction of the 
WorldWide Web. In addition, the public has shown its appetite for 
health information in its aggressive use of the Web to explore 
medically related sites. Nearly every Federal health agency has moved 
to develop online resources (with major efforts by the NLM, the NIH, 
and the Agency for Healthcare Research and Quality [AHRQ]). The NLM has 
offered a connections grant program to encourage hospitals to link to 
the Internet, but there has been no coordinated Federal effort to bring 
together health care organizations in areas related to the Internet and 
its potential clinical use.

                          RECENT DEVELOPMENTS

    At the end of the HPCC initiative's first 5 years, the Clinton 
administration sought to define what the next phase should be in the 
evolution of Federal research and development (R&D) in this area. Many 
of the president's speeches pointed to the role of the Internet in 
education, for example, where he has expressed a strong commitment to 
wiring the nation's schools. On the research side, he proposed a new 
program that has been dubbed the Next Generation Internet (NGI). Recent 
Federal budgets have included approximately $100 million annually in 
incremental funding for NGI-related research, with those dollars 
distributed principally to four key entities (Defense, the NSF, Energy, 
and NASA). The NLM has received a small component (around $5 million).
    There has been some confusion about the nature of the NGI program 
because some have seen it as simply the creation of a newer, faster 
Internet and have wanted to be sure that they (or their constituents) 
are included in any connections program. The approval of the program 
was delayed in 1997 partly because of concerns that the NGI would 
create a Nation of ``haves'' and ``have-nots'' in which rural areas, or 
universities other than the major research centers, would be left 
behind. The NCO and Federal agencies drafted an implementation plan to 
clarify the research goals of the program as well as the plans for 
spending the appropriated funds.\21\
    As the Federal Government was proposing the NGI program, a 
consortium of research universities was forming to address issues of 
Internet support for academic research. Members of the consortium 
agreed to make major upgrades to their campus networks and then 
proposed to work together to ensure high-bandwidth connectivity among 
their campuses. As the ``regular Internet'' has become congested with 
routine, nonscientific use, there has been a growing sense of the need 
for a more protected or higher-quality network that could support 
research (as the original ARPANET did). The original consortium was 
called Internet2, which led to confusion in Congress about the 
relationship between Internet2 and the NGI. With the involvement of 
nearly 200 universities, the consortium has incorporated and is now 
formally known as the University Consortium for Advanced Internet 
Development (UCAID).\22\
    The ``alternate network'' to which the Internet2 organization 
initially sought connectivity was an NSF-funded network, overseen by 
MCI WorldCom and known as the vBNS (very high speed Backbone Network 
System), created to connect NSF-funded supercomputers in Illinois and 
California. Subsequently, UCAID broadened its infrastructure options to 
include a new network called Abilene, developed jointly with commercial 
partners (Cisco Systems, Nortel Networks, and Qwest Communications).
    The HPCC legislation called for the creation of a private-sector 
Presidential advisory committee to assist the White House and its 
Office of Science and Technology Policy (OSTP) with planning and policy 
in national information technology research. Known as the Presidential 
Information Technology Advisory Committee (PITAC), this committee was 
created in 1997 and draws its members from industry and academe. The 
committee meets several times a year and has produced reports and 
recommendations that have informed recent information technology (IT) 
research-funding activities.\23\
     The research agenda. PITAC has identified several major 
areas in which research is needed relative to the future of the 
Internet and high-performance computing: (1) methods for scaling the 
Internet to meet the needs of a global society; (2) solutions to the 
problems of the ``last mile'' (the lower-speed connections between the 
nation's homes and offices and the Internet); (3) development of new 
applications that will drive our understanding of what technical 
challenges remain; (4) creation of the devices that will provide 
connectivity to the networked society; (5) new generations of software, 
an area in profound need of research investment; (6) supercomputing 
that will work in tandem with the national network; (7) economic models 
for the future networked society (and how resulting insights should 
affect Federal regulatory philosophy and approaches); and (8) social 
and ethical concerns (topics that are especially important for health 
and health care, of which data privacy and confidentiality are 
prominent examples).\24\
     What lies ahead. Given the bipartisan support for the NGI 
program in Congress, it seems likely that Federal research investment 
in the future of the Internet will continue. The research program 
undoubtedly will be accompanied by congressional efforts to ensure that 
traditionally underserved regions and schools are not left out as the 
Internet advances and improves.
    The commercial sector will continue to invest heavily in the 
Internet, both as users of the technology and, for telecommunications 
companies, as service providers and innovators. The rapid rise of the 
Web has shown us, however, that it would be folly to try to anticipate 
the rate of change or the new technologies that may arise in the decade 
ahead. We should probably look to industry largely for incremental 
change and for efforts to make the technology more robust, while 
academe and science will continue to be the source for paradigm shifts 
(such as the Web or, on the horizon, wearable wireless devices) that 
will be adopted by the commercial world. Interactions with regulatory 
policy will be extremely important.
    But what of research? What will be filling the pipeline for 20 to 
thirty years hence in the way that the networking investment by ARPA 
did in the 1960's and 1970's? The Nation must have a balanced IT 
research portfolio, supporting both short-term demonstrations and 
longer-term innovation and technology development. We are in an era 
when Congress has been much more focused on short-term benefits from 
research investment, and many observers believe that the historical 
evolution of the Internet is ample evidence of how shortsighted that 
view of research can be. Investment into research on medical computing 
must be similarly balanced between basic and more applied 
investigations. We will be lost if we demand short-term payoffs from 
all research activities.
    Partnerships among industry, academe, and government have become an 
important way to define shared responsibilities in IT research. 
Universities are developing innovative technologies with government 
grant support and then working closely with industry as technology-
transfer challenges become clear. Ample opportunities exist for these 
kinds of academic/industry partnerships in health-related Internet 
applications.

                     NEED FOR STRATEGIC LEADERSHIP

    Issues of vision and leadership are often crucial determinants of a 
successful health care application of IT, including applications that 
depend on the Internet. Limited, focused applications may arise at a 
grassroots level in an organization and be successfully applied. 
However, when applications require complex interactions across the 
organization and beyond (as is generally the case for networking 
infrastructure and projects that build upon such infrastructure to link 
the organization to individuals outside it), the skills and talents of 
individual participants must be applied in the context of institutional 
leadership and a shared vision of what the organization is trying to 
accomplish. Yet health care organizations are often perceived as 
failing to use IT as effectively as it is used elsewhere. Some 
comparisons with the evolution of IT leadership in other industrial 
settings therefore may be illuminating.
     The private sector. Until the 1980's the lead information 
system managers for major corporations typically played a technical, 
service-oriented role. They brought technical computing and 
communications skills to the organization, plus management abilities. 
In recent years, however, the role of information systems has become 
more strategic as corporations plan for the future; identify new 
business opportunities; and implement new practices for communicating 
with clients, distributing products, and managing inventories as well 
as finance. As a result, the technology managers are increasingly 
identified as key strategic leaders. Their titles have generally 
evolved (today typically to chief information officer [CIO] or vice-
president for information systems and technology) to reflect this 
central role. When their roles were considered technical rather than 
strategic, they often reported to the chief financial or administrative 
officer. Today they more typically report to the chief executive 
officer (CEO) and participate actively in high-level strategic 
planning, priority setting, and decisionmaking. In fact, Peter Drucker 
has suggested that the CEO of the future will be the CIO.\25\
    Another important change has occurred during the past two decades. 
Originally IT leaders had little industry-specific expertise (for 
example, a drug company CIO would typically not have a medical or 
pharmacology background). Their responsibilities were largely confined 
to managing large-scale technical installations and implementations. It 
is now axiomatic in some industries that CIOs should have deep industry 
expertise. Ideally, they grow up in an industry and combine domain 
training or expertise with education in, or an inclination toward, 
information systems.
    By analogy, it would be natural to expect the IT leaders of large 
health care organizations to play increasingly strategic roles and to 
have deep knowledge of health care delivery and the culture of clinical 
practice. In health care, however, the pre-1980 model still widely 
persists. This is true at all levels, from community-based hospitals to 
large biomedical research universities to HHS, and it may help to 
explain why the health community has had so much difficulty making 
optimal use of IT.
    The reporting level and professional background of the 
``information strategy leader'' in an organization inevitably 
influences the attention that information management receives. In 
addition, a health care professional who also serves as CIO for a 
hospital or health department might place a higher priority on the 
establishment of electronic medical records, responsive to the needs of 
clinicians, than would a technical specialist CIO who moved up from the 
IT development ranks. This is not to suggest that every information 
strategy leader in health care needs to be clinically trained as well. 
However, the CIO must function as a professional peer of the 
organization's senior leadership.
    What will it take to influence the culture of IT management, and 
recognition of its strategic role, in health care organizations? Major 
educational issues exist, both to familiarize health care leaders with 
the fundamental role that IT should be playing in their organizations 
and to produce a larger cadre of future CIOs who have the combination 
of technical and management skills, plus knowledge of the complex 
medical environment. Effective implementation of the NGI for health 
care, and its use for highly leveraged applications and demonstration 
projects, will require an investment and commitment from medical 
organizations. It also will require visionary leadership that 
understands the strategic role of the technology and the return on 
investment that can be expected.
     The Federal role. If the previous points are valid for 
large health care systems and medical centers, they are equally 
important for government bodies that oversee health care policy, 
provide care, finance health insurance, or attend to public health. It 
is remarkable, thus, that HHS--a major insurer and provider of health 
care, as well as the principal organization responsible for the 
nation's public health--should have no strategic, cross-agency 
leadership in IT. Each agency within HHS is attempting to deal with IT 
issues within its own boundaries but without a departmentwide vision or 
effective coordinating mechanism.\26\ Although the various agencies 
have very different functions and roles, experience in other segments 
of society has demonstrated consistently that IT, properly managed and 
designed, can provide a coordinated infrastructure on which diverse 
needs can be built. Current IT leadership for HHS is focused largely on 
internal service computing and networking issues, without a broad 
mandate to plan and coordinate across all agencies. There is similarly 
no individual charged with convening public/private bodies in the area, 
with educating the health community about key IT issues that affect 
health care, with providing departmentwide strategic leadership in the 
area, or with attempting to evolve the IT culture of the health care 
system, both within government and in the private sector. In effect, 
the country needs a ``health care CIO,'' for many of the same reasons 
that have led to the evolution of such positions in industry over the 
past two decades. Imagine the impact on the health care community, for 
example, if Internet-based submission of Medicare claims were made 
mandatory.

                          CONCLUDING COMMENTS

    In health care we have learned that creating useful information 
technologies is not enough. Effective implementation of new information 
technologies in complex environments like the U.S. health care system 
requires vision, commitment, and leadership at the highest levels, a 
well-funded research agenda, and a grassroots community of capable 
participants. The issues are emotionally and politically charged. 
Resolving them will require the concerted effort of many public- and 
private-sector organizations. Without deliberate, sustained action, the 
fundamental conflicts represented in these policy areas will keep the 
Internet from fulfilling its promise in health care.
    Top-level IT leadership is required at HHS. The department should 
follow the example of successful health care delivery organizations and 
identify a senior strategic leader to oversee the coordination and 
integration of health IT initiatives throughout HHS. Not only should 
this person assume responsibility for coordinating the IT activities of 
all HHS agencies, but he or she also should create mechanisms that 
allow agencies to coordinate their support for fundamental IT research 
and development in health disciplines. Similarly, this person should 
work with health professionals, the health information systems 
community, and vendors to begin to address more effectively the 
significant coordinating issues and cultural changes that will be 
needed for IT to realize its potential in health care. The National 
Committee on Vital and Health Statistics (NCVHS), which already has a 
record of accomplishment in the area of IT coordination, might be an 
appropriate mechanism upon which to build, but a committee alone cannot 
do the work. Instead, the NCVHS could play an advisory role in 
supporting the work of the Federal leader for health care IT strategy.
    HHS needs to take more seriously the need for its aggressive 
involvement in the area of national networking.\27\ The NLM cannot be 
expected to handle these issues for the entire department. Core 
biomedical science agencies need to understand that health care 
applications can help to drive the underlying science of computing and 
communications and that IT investment is an important area for NIH 
support. To make the argument, biomedical computing researchers must 
continue to do the kind of work that will show the national IT research 
community that both basic and applied IT research efforts in 
biomedicine have important generic contributions to make.
    The health care community could be doing much more with networking 
than it has to date, but it must recognize (1) the forces that are 
preventing optimal cooperation among our organizations, given an 
inherently distributed, competitive environment; (2) the logistical 
barriers to systems integration, largely in the area of standards 
development for data exchange and terminology; and (3) the difficulty 
in justifying institutional investment by demonstrating cost 
effectiveness in an environment where intuition is not enough but 
formal experiments are often flawed or impossible to perform.
    Despite these problems, the future of wide area networking for the 
health care community is exciting.\28\ The biomedical community has 
every reason to support the NGI effort and to contribute to it 
aggressively.

                                Endnotes

    1. ``The Year of the Internet,'' Time, 25 December 1995, 21.
    2. Portions of this paper are adapted from a presentation given by 
the author at the Annual Fall Symposium of the American Medical 
Informatics Association, Orlando, Florida, November 1998.
    3. National Research Council, Network Health: Prescriptions for the 
Internet (Washington: National Academy Press, 2000).
    4. R. Kahn, ``The Role of Government in the Evolution of the 
Internet,'' Communications of the ACM 37, no. 8 (1994): 15.
    5. R. Gelman and S. McCandlish, Protecting Yourself Online: The 
Definitive Resource on Safety, Freedom, and Privacy in Cyberspace (San 
Francisco: Harper Edge, 1998).
    6. J. Lederberg, ``Digital Communications and the Conduct of 
Science: The New Literacy,'' Proceedings of the IEEE 66, no. 1 (1978): 
1314.
    7. V. Cerf and the Committee on a National Collaboratory, Computer 
Science and Telecommunications Board, National Research Council, 
National Collaboratories: Applying Information Technology for 
Scientific Research (Washington: National Academy Press, 1993); R. 
Kouzes, J. Myers, and W. Wulf, ``Collaboratories: Doing Science on the 
Internet,'' IEEE Computer (August 1996): 40; and E. Shortliffe et al., 
``A Study of Collaboration among Medical Informatics Research 
Laboratories,'' Artificial Intelligence in Medicine 12, no. 2 (1998): 
97.
    8. The name of ARPA has switched between DARPA and ARPA several 
times, depending on whether the administration has wanted the word 
``Defense'' associated with the agency's title.
    9. When Al Gore's father was a U.S. senator in the 1950's, he was 
instrumental in passing legislation that led to the creation of the 
interstate highway system. This analogy led some observers to dub the 
Internet Gore's ``information superhighway,'' a nickname that became 
heavily used in the first part of the 1990's.
    10. ``About the National Coordinating Office,'' August 2000,  (4 September 2000).
    11. D. Lindberg and B. Humphreys, ``The High-Performance Computing 
and Communications Program, the National Information Infrastructure, 
and Health Care,'' Journal of the American Medical Informatics 
Association 2, no. 3 (1995): 156. In time, it became clear that the NCO 
directorship was a major responsibility and that it required a full-
time commitment. With Lindberg's resignation and the appointment of new 
leadership, the NCO moved to the offices of the NSF in Arlington, 
Virginia. The responsibilities of the NCO are much broader than 
networking alone. Coordination among agencies is promoted not only in 
large-scale networking (LSN) but also in high-end computing and 
communications (HECC); high-confidence systems (HCS); human-centered 
systems (HuCS); and education, training, and human resources (ETHR). 
Coordinated working groups in all of these areas involve agency 
representatives from several of the participating government 
organizations. The NCO provides support to the Committee on Computing, 
Information, and Communications (CCIC), the overall oversight group for 
such topics within the president's Office of Science and Technology 
Policy (OSTP). For information about the National Coordinating Office, 
its mission, and its relationship to other government organizations, 
see the NCO's home page, .
    12. ``The Year of the Internet''; and ``The Internet,'' Economist 
(1 July 1995): S1.
    13. Vint Cerf, WorldCom Communications, personal communication, 
June 1997.
    14. B. Buchanan and E. Feigenbaum, ``DENDRAL and Meta-DENDRAL: 
Their Applications Dimension,'' Artificial Intelligence 11, no. 1-2 
(1978): 5; and B. Buchanan and E. Shortliffe, eds., Rule-Based Expert 
Systems: The MYCIN Experiments of the Stanford Heuristic Programming 
Project (Reading, Mass.: Addison-Wesley, 1984).
    15. A sister AI-in-Medicine (AIM) machine was funded by the DRR a 
few years later at Rutgers University. The Rutgers Resource similarly 
supported collaborative research and featured a connection to the 
ARPANET.
    16. Lederberg, ``Digital Communications.''
    17. Planning Panel Number 3, Long Range Plan on Obtaining Factual 
Information from Data Bases (Bethesda, Md.: National Library of 
Medicine, 1986).
    18. Planning Panel Number 4, Long Range Plan on Medical Informatics 
(Bethesda, Md.: NLM, 1986).
    19. Ibid., 65.
    20. E. Shortliffe, ``Medical Informatics and Clinical Decision 
Making: The Science and the Pragmatics,'' Medical Decision Making 11, 
no. 4 (1991): S2.
    21. See ``NGI Implementation Plan,'' February 1998,  (4 September 2000).
    22. See the Internet2 home page,  (4 September 
2000).
    23. The details of the advisory committee's activities can be found 
at the NCO's Web site, . Its 1999 report to the 
president is available on the site as well: ``PITAC--Report to the 
President,'' 24 February 1999,  (4 September 
2000).
    24. National Research Council, For the Record: Protecting 
Electronic Health Information (Washington: National Academy Press, 
1997).
    25. P. Drucker, Management Challenges for the Twenty-first Century 
(New York: Harper Business Press, 1999).
    26. An HHS data council comprises representatives from all of the 
major agencies, but it suffers from the problems of all committees that 
lack a coordinated reporting mechanism to a central authority charged 
with giving direction and heeding advice.
    27. NRC, Networking Health. 
    28. E. Shortliffe, ``Health Care and the Next Generation Internet'' 
(editorial), Annals of Internal Medicine (15 July 1998): 138.
                                 ______
                                 

                [From the Baltimore Sun, July 17, 2001]

  Hopkins Faults Safety Lapses--Panel Says Volunteer Likely Died From 
          Drug Used In Asthma Study; Board, Researcher Blamed

                  (By Jonathan Bor and Tom Pelton) \1\

    A Johns Hopkins panel investigating the death of a 24-year-old 
woman in an asthma experiment has concluded that she most likely died 
from a drug given to her in the test, and it faulted both the lead 
researcher and an internal oversight board for safety lapses.
---------------------------------------------------------------------------
    \1\ Sun Staff, Originally published July 17, 2001.
---------------------------------------------------------------------------
    The panel said the Institutional Review Board at Hopkins' Bayview 
campus should never have approved the study because the scientist did 
not present sufficient evidence that the drug used in the experiment 
was safe.
    The consent form signed by volunteers was ``misleading'' and 
``inadequate,'' the panel said, because it failed to disclose that the 
drug, hexamethonium, was no longer used clinically, lacked approval by 
the U.S. Food and Drug Administration and could cause severe side 
effects, even death.
    Additionally, Dr. Alkis Togias, the physician who ran the study at 
the Johns Hopkins Asthma and Allergy Center, should have suspended it 
after an earlier subject developed a cough that persisted for 9 days.
    At that point, Togias should have performed more research on the 
drug's potential toxicity before giving it to other people, the panel 
said.
    Ellen Roche of Reisterstown, who was healthy before participating 
in the experiment, died June 2 at Bayview of lung damage and multiple 
organ failure. A lab technician at the asthma center, she was the third 
volunteer who inhaled the drug in the study.
    The experiment was to have included 10 subjects, but Hopkins halted 
it when Roche was hospitalized with a cough and fever.
    Several medical journal articles in the 1950's and 1960's linked 
hexamethonium to rare cases of fatal lung disease. But Togias did not 
find these articles until after Roche became ill, according to Hopkins 
officials.
    Her death is being investigated by the FDA and the Federal Office 
of Human Research Protection. A preliminary FDA report 2 weeks ago 
faulted Togias for failing to follow safety procedures.
    The report prepared by the Hopkins panel was released yesterday at 
a news briefing on the Hopkins medical campus in East Baltimore.
    ``I am the father of a 25-year-old daughter and I can imagine what 
the family is going through,'' said Dr. Edward D. Miller, Hopkins 
medical dean and chief executive officer. ``We accept full 
institutional responsibility for her death.'' The seven-member panel, 
all Hopkins professors, was chaired by Dr. Lewis C. Becker, a 
cardiologist. The committee included an ethicist and specialists in 
various medical disciplines. Two outside consultants also advised the 
panel.
    ``This was a horrible tragedy to have befallen any healthy 
volunteer,'' said Becker. ``But Ellen gave her life in a truly noble 
cause, to try to understand asthma and to try to help people who suffer 
from this condition.''
    Roche died from adult respiratory distress syndrome, a condition in 
which small air passages of the lungs break down and lose the ability 
to supply the blood with oxygen.
    The reason this happened might never be known, Becker said, but he 
said the condition was most likely a reaction to the drug. Tests have 
shown no evidence that Roche caught an infection in the experiment, 
though she later developed a secondary infection while being treated at 
the Bayview medical center.
    Hopkins has taken several steps to ensure that further tragedies 
are avoided in medical experiments, said Dr. Chi Dang, vice dean for 
research.
    These include the creation of a third Institutional Review Board--
in addition to Bayview, another board currently operates at the main 
campus--to monitor the large volume of experiments. Random inspections 
of studies under way will also be increased, he said.
    Dang said the university has suspended 10 additional experiments 
under the direction of Togias. It has also halted 16 other studies 
involving the use of drugs not approved by the FDA. The Hopkins 
investigating panel faulted the Institutional Review Board for not 
requiring Togias to ask the FDA whether its approval for the experiment 
was needed.
    Reactions to the Hopkins report varied yesterday, with some 
praising the institution for a thorough review and others criticizing 
it for approving the experiment in the first place.
    Sheldon Krimsky, a science policy analyst at Tufts University, 
said: ``It sounds like the university has not issued a whitewash. It 
sounds like they are doing some real soul-searching and that they 
admitted wrongs.''
    Dr. Frederick Wolff, a professor emeritus at the George Washington 
School of Medicine, said he found it ``foolish'' and ``lazy'' that 
Togias and the Hopkins review board failed to look up the 1950's 
medical journal articles warning of lung damage caused by 
hexamethonium.
    ``Anyone trained in academic medicine knows how to do this 
research,'' Wolff said. ``This is just laziness. What happened is not 
just an indictment of one researcher, but of a system in which people 
don't bother to research the literature anymore.''
    Togias had searched an electronic medical data base, called PubMed, 
which lists articles back to about 1960. And he had consulted 
contemporary edition medical textbooks, but none of them mentioned the 
1950's-era reports on hexamethonium's toxicity, according to Hopkins 
officials.
    The Hopkins committee acknowledged, however, that a routine search 
using two popular Internet search engines, Yahoo and Google, would have 
produced a French medical school's Web site that listed the past 
studies.
    While the panel believed the researcher made a ``good faith 
effort'' to learn of the drug's effects, some members said Togias 
should have found the articles.
    Craig Schoenfeld, a lawyer representing Roche's parents, said the 
family had no immediate comment. Dr. Gary Briefel, chairman of the 
Bayview Institutional Review Board, which approved Togias' experiment, 
also declined to comment, according to a university spokeswoman.
    In the fatal experiment, Togias and other doctors were attempting 
to discover the neurological mechanism--or reflex--that protects the 
lungs of healthy people against asthma attacks. They administered 
hexamethonium to see whether it would block the reflex.
    Hexamethonium was used as a high blood pressure medication during 
the 1950's and `60's, but it was taken off the market in 1972 after the 
FDA ruled that it was ineffective.
    Togias designed the study and submitted it to the Bayview review 
board, which approved it.
    According to the investigatory panel, the review board should never 
have approved the study because Togias did not present enough data 
demonstrating the safety of hexamethonium. While he did present four 
studies showing that inhaled hexamethonium produced only temporary 
problems--such as dizziness--the studies included only 20 patients.
    ``Small clinical trials give uncertain estimates for even frequent 
adverse events, and may miss even relatively common toxicity,'' the 
report said.
    Togias did not have a response yesterday to the Hopkins report, 
said his attorney, Daniel Kracov.
    However, some of Togias' thoughts about Roche's death can be found 
in a letter that Kracov sent yesterday to the FDA.
    On June 28, an FDA investigator faulted Togias for failing to 
obtain necessary FDA approval, neglecting to warn his subjects of the 
risks of inhaling a nonapproved drug, and failing to report that the 
first volunteer in his study coughed for 9 days after inhaling 
hexamethonium.
    ``It is important to note that while Dr. Togias takes issue with a 
number of the FDA's regulatory findings, our response is not intended 
to suggest any diminution in Dr. Togias' deep concern and sorrow 
regarding the death that occurred,'' Kracov wrote.
    Togias believes it would be ``unfair'' to point the finger of blame 
only at him, according to the letter. Togias relied upon the Hopkins 
review board to guide him on whether to seek FDA approval, and the 
board did not tell him to consult the Federal agency, the letter says.
    He did not report the first volunteer's cough because he thought it 
was caused by a cold, his lawyer said.
    According to the Hopkins panel, Roche received two doses of 
hexamethonium May 4. The drug was administered with a nebulizer, a 
device that turns a liquid substance into an aerosol.
    On May 7, she reported that she had been sick for 2 days. Her 
symptoms began with a cough and progressed to a fever. Two days later, 
on Togias' advice, Roche returned to the asthma center for tests, which 
revealed a lung inflammation and a 101-degree fever. She was admitted 
to Bayview.
    Within days, her condition worsened, and she was transferred to the 
intensive care unit. Tests revealed a ``ground glass'' appearance to 
her lungs, evidence that they were injured and that tissues were 
breaking down, the panel said.
    A week into her hospital stay, the young woman was placed on a 
respirator. Later, she developed kidney failure and her blood pressure 
dropped dangerously low.
    ``Given her worsening condition and unsupportable oxygenation, the 
family elected to withdraw [life] support and Ms. Roche died,'' the 
report said.
    Although Roche worked at the asthma center, she did not report 
directly to the scientists conducting the experiment. She had 
participated in several other research studies before enrolling in 
Togias' project. For that experiment, a doctor drew her name from a 
registry of past volunteers and called to ask whether she wanted to 
take part.
    Two likely reasons Roche volunteered were an ``altruistic desire to 
help people with asthma'' and compensation of $365, the panel said.
                                 ______
                                 
       Examples of NIH Advanced Networking Applications Projects
                       biomedical tele-immersion

    By combining teleconferencing, telepresence, and virtual reality, 
Tele-Immersion enables teachers and students to interact with three-
dimensional models, point, gesture, converse, and see each other.
    Contact: Jonathan C. Silverstein, MD, University of Illinois at 
Chicago, School of Biomedical and Health Information Services, 1919 W. 
Taylor, Chicago, IL 60612-7249; Phone 312-996-5112; Fax: 312-996-8342.

 CONNECTIVITY, SECURITY, AND PERFORMANCE OF AN NGI TESTBED FOR MEDICAL 
                          IMAGING APPLICATIONS

    This project implements an NGI testbed in Northern California's San 
Francisco Bay Area for medical imaging applications. The clinical 
applications include: impact of telemammography consultation service in 
a regional environment compared with a local level; and how real-time 
interactive teaching in breast imaging would improve the confidence 
level of general practice radiologists.
    Contact: H.K. Huang, D.Sc., University of California, San 
Francisco, Department of Radiology, 530 Parnassus Avenue, Rm. CL-158, 
San Francisco, CA 94143-0628; Phone: 415-476-6044.

   INDIANAPOLIS TESTBED NETWORK FOR NGI APPLICATIONS TO TELEMEDICINE

    The Indianapolis Network for Patient Care (INPC) provides a testbed 
of NGI technologies including IP security (IPsec), Quality of Service 
(QoS) in televideo applications at a nursing home, and IP roaming 
capabilities with a portable wireless workstation. (Clement J. 
MacDonald, M.D.)

           A MULTICENTER CLINICAL TRIAL USING NGI TECHNOLOGY

    This project provides the infrastructure of a multicenter clinical 
trial of new therapies for adrenoleukodystrophy (ALD), a fatal 
neurologic genetic disorder. It enables the formation of a worldwide 
imaging network of clinical institutions to evaluate ALD therapies. 
Three centers collaborate on this project. The Imaging Science and 
Information Systems (ISIS) Center at Georgetown University Medical 
Center, the Kennedy Krieger Institute and the Department of Radiology 
at Johns Hopkins University. NGI technology will be used to speed the 
transmission and evaluation of high quality MRI images. The project 
provides procedures to ensure medical data privacy and security.
    Contact: Hugo W. Moser, M.D., Kennedy Krieger Research Institute, 
Inc., 707 North Broadway, Baltimore, MD 21205; Phone: 410-502-9405; 
Fax: 410-502-9839.

    HUMAN EMBRYOLOGY DIGITAL LIBRARY AND COLLABORATORY SUPPORT TOOLS

    This application enables collaboration between multiple, 
distributed researchers and advances clinical and educational goals. It 
integrates existing data capture and analysis procedures at the 
National Museum of Health and Medicine (NMHM) into a high performance 
testbed network that includes a petabyte archive and analysis 
capability.
    Contact: J. Mark Pullen, Ph.D., George Mason University, Computer 
Science MS 4A5, 4400 University Drive, Fairfax, VA 22030; Phone: 703-
993-1538; Fax: 703-993-1710.

      MEDICAL NOMADIC COMPUTING APPLICATIONS FOR PATIENT TRANSPORT

    This project provides real-time transmission of multimedia patient 
data from an incident scene and during transport to a receiving center 
enabling diagnostic and treatment opportunities prior to arrival. It 
includes acute ischemic stroke and trauma scene response--to define a 
range of Quality of Service (QoS) requirements for multiple critical 
care applications.
    Contact: David M. Gagliano, TRW, Inc., One Federal Systems Park 
Drive, Fairfax, VA 22033; Phone: 703-345-7497.

        NEXT GENERATION INTERNET (NGI) IMPLEMENTATION TO SERVE 
                         VISIBLE HUMAN DATASETS

    This project develops a production system to serve visible human 
datasets. These include a comprehensive set of interactive 2-D and 3-D 
browsers with arbitrary 2D cutting and 3-D visualizations. An 
interactive Web navigation engine is deployed to create and visualize 
anatomic fly-through, under haptic control of the user.
    Contact: Brian D. Athey, Ph.D., University of Michigan School of 
Medicine, Ann Arbor, Michigan 48109-0616; Phone: 734-763-6150; Fax: 
734-763-1166.

    Senator Wyden. Dr. Fuller, thank you for an excellent 
statement.
    Dr. Kenagy, we welcome you. I want to note that when 
``Forbes Magazine'' last year described you as the man who 
would save health care, I thought that was a fairly sweeping 
kind of statement. I would not like to have an article state 
that Ron Wyden is the man who could save Government. I think 
that would be a little pressure to try to handle. We welcome 
you and note you do have roots in Oregon, so please proceed.

 STATEMENT OF JOHN W. KENAGY, MD, MPA, HARVARD BUSINESS SCHOOL

    Dr. Kenagy. Thank you, Senator, Chairman Wyden. I 
appreciate your support and interest in this. This is not the 
standard way we approach things. That is what makes disruptive 
innovation so challenging but also so powerful, and your 
leadership in bringing these views to the committee, to the 
Senate, should be noted, because it is not the standard, and I 
certainly appreciated it.
    I appreciate this opportunity to speak. This is a very 
important subject. I speak from the point of view of a 
physician. Health care is very troubled. A few examples. We 
must improve our systems for patient safety and quality. 
Indigent care and 40 million uninsured remain unresolved 
puzzles. Finally, health care costs appear to be rising, and at 
double digit rates, while our economy slows, placing an 
increasing competitive burden on our major employers and 
governmental resources.
    Chairman Wyden, Senator allen, these problems have existed 
in one form or another the entire 30 years I have been a 
physician, and we are no closer to solving them now than the 
day I received my medical degree. This is what makes the 
concept of disruptive innovation so timely.
    Developed by Harvard Business School Professor Clayton 
Christensen, the core of the strategy is that paradoxically the 
capabilities of our successful organizations and institutions 
and the advice of our best industry experts become our 
disabilities when faced with developing more reliable, low-cost 
disruptive solutions.
    Trapped by the business models that led to our success, we 
miss opportunities to develop new products and services based 
on simpler, less complex ideas, and technologies that are 
promising but initially do not have great functionality. The 
established organizations and industry experts cannot see it.
    Why consider telephones, when telegraph is doing quite 
nicely? Why give up profitable mainframe and minicomputers for 
those dinky personal computers? Why bother with discount 
merchandising when our big downtown department store has it 
all? Why build low-cost or accessible ambulatory or diagnostic 
centers when our hospital has all those full-service operating 
rooms and laboratories? Why should I change my practice? It has 
worked great for years?
    That is the innovator's dilemma. Doing well what we do best 
causes us to overshoot the needs of many of our patients and 
miss simple opportunities to create more reliable, accessible, 
low-cost health care, and history suggests these opportunities 
are great.
    Whenever an industry makes a dramatic transformation, 
whenever someone rewrites the script it is almost always 
through disruptive change. Many of our economy's most powerful 
and successful companies had their origins in disruptive 
innovation. AT&T, Microsoft, Intel, Cisco, Toyota, Sony, 
Merrill Lynch, Charles Schwab, Sears, Wal Mart, and in health 
care the Mayo Clinic, Blue Cross, Brigham and Women's Hospital, 
Kaiser Permanente, and many others all had their origins in 
simple, less costly ideas that improved underneath the leaders 
and then supplanted them.
    So disruptive innovation is a strategy tool, a new lens 
through which to view opportunity.
    So what are the disruptive issues today? It is not the pace 
of present innovation. We have lots of innovation. What is 
important are the opportunities presented by innovations that 
are not happening. The first innovator's dilemma: established 
organizations innovate based on their present business models. 
We call that sustaining innovation, but cannot initiate 
disruptive change because the processes and values that led to 
their success also trap them.
    Their capabilities, great though they may be, become their 
innovative disabilities. What are we investing in now in health 
care? New technology to do better what is profitable, high-tech 
medicine, big silver bullet technological solutions to our 
problems, cardiopulmonary disease, cancer, more procedures, 
sicker patients, but where is the bulk of health care? The 
other 95 percent, which we tend to ignore, try to avoid, or 
exit because they represent unattractive tiers of the market, 
but that is exactly the place where disruptive ideas begin and 
develop.
    The second innovator's dilemma: the developers of new 
technology must sell to their best customers, the established 
institutions. This means that investment pours into sustaining 
innovation, improving functionality of present products and 
services. Internet connectivity may be a new enabling 
technology for transformation and health care, but at present, 
we treat it as a technical challenge to adapt to our present 
business needs. Disruptive innovation suggests that if e-health 
initiatives transform health care, they will come from outside 
and under, not through present systems.
    A final innovator's dilemma: regulation tends to pour 
concrete around the status quo. In all industries, established 
institutions commonly use regulation to stave off disruptive 
challenges. In addition, well-intentioned regulation can kill 
disruption simply by sapping the innovative energy out of an 
organization as it tries to negotiate regulatory barriers and 
avoid political land mines.
    Health care is troubled, Senators. At present, the 
solutions appear inadequate. This is truly a time for 
leadership. Government and health care industry leaders need to 
step forward, not to regulate the existing system, but to 
coordinate the removal of barriers that prevent disruptive 
innovation from happening.
    Leadership must specifically create the environment that 
will allow insurers, regulators, managed care organizations, 
hospitals, and health care providers, professionals, to create 
together the new partnerships, organizations, and institutions, 
the new capabilities that will lead health care into the 21st 
Century. Then our patients can realize the benefits that will 
come with disruption because it is the fundamental mechanism 
through which we will build a higher quality, more convenient, 
lower cost health care system.
    If leaders with such a vision do, indeed, step forward we 
will all have access to more health are not less, no trade-
offs. Wise men have said, it is insanity to repeat the same 
behaviors and expect different results. That was Mr. Anonymous. 
You cannot solve the problems of the present with the solutions 
that have produced them. That was Einstein. Anonymous and 
Einstein, two classic disruptive thinkers.
    Thank you.
    [The prepared statement of Dr. Kenagy follows:]

 Prepared Statement of John W. Kenagy, MD, MPA, Harvard Business School

           DISRUPTIVE INNOVATION IN HEALTH CARE--NO TRADEOFFS

    Tradeoffs.--Throughout history there have been tradeoffs for 
suppliers and customers. Higher quality products cost more and 
customers paid a higher price. For traditional U.S. automobiles through 
1970's, if you wanted higher quality, you bought a Cadillac, the 
tradeoff for customer's--a higher price. More convenience often meant a 
product with less functionality. If suppliers wanted to decrease 
delivery times, they faced the tradeoff of increased inventory.
    No Tradeoffs.--But historically the tradeoffs have been broken. You 
can now buy high quality cars that are convenient and low cost. 
Computer technology is another example--continued higher quality, 
greater convenience and lower cost. And whenever the tradeoffs have 
been broken, it has been through Disruptive Innovation.
    Disruptive Innovation.--In any industry, a disruptive innovation 
sneaks in from below. While the dominant players are focused on 
improving their present products or services, they miss less complex, 
more convenient, less costly innovations initially designed for 
simpler, less demanding needs. Starting with worse functionality, the 
disruptions improve over time--improve so much they meet needs of the 
mainstream with higher quality, more reliable and convenient, lower 
cost products and services. There are many examples of disruptive 
innovation occurring in healthcare in the past. No tradeoffs.
    The Dilemma.--Historically, the leading institutions never lead a 
disruptive innovation. While they continue to reap benefits out of the 
top end of the market (sustaining innovation), they miss the 
opportunity to create new products and services based on ideas and 
technologies that are promising, but initially do not have great 
functionality and are based in simpler, less costly business models. 
``Why worry about those crummy Japanese cars? Americans want big cars 
with fins.'' ``Why give up profitable mainframes and minicomputers for 
those dinky new personal computers?'' ``Why bother with discount 
merchandising when our big downtown department store prospers?'' ``Why 
build an ambulatory surgery center when we have all these empty, full 
service operating rooms?'' ``Why change the way I practice? It's worked 
great for years.''
    The Opportunity.--Find a new view of our options through Disruptive 
Innovation. Develop a new common language for change. Create the 
environments that allow disruptive innovations to grow and proper. 
Present policy initiatives in healthcare offer us some form of the 
following:
     Decrease available health care;
     Wring more cost out of the system;
     Increase governmental and private subsidy.
    A policy initiative based on disruptive innovation offers the 
opportunity for industry transformation. When the tradeoffs are broken, 
we have the opportunity for more, much more, for less. We can do the 
same for healthcare--more, much more for our patients, more reliably, 
more conveniently and for lower cost.
                                 ______
                                 
       A Brief Commentary on Disruptive Innovation in Healthcare

                              THE PROBLEMS

    We face many problems in healthcare today. A few examples:
     We must improve our systems for patient safety and quality 
improvement.
     We face severe man (and women) power shortages, 
particularly in nursing.
     Major healthcare institutions across the country incur 
losses in the multi-million dollar range.
     Indigent care and 40 million uninsured remain unresolved 
puzzles.
     Most clinicians find their practice environment has 
deteriorated significantly.
     Health care costs appear to be rising at a double-digit 
rate while our economy slows, placing an increasing competitive burden 
on our major employers and government.

                         THE PRESENT SOLUTIONS

    Despite these well-recognized problems, intense effort and 
investment, present policy and strategy seem limited to five, well-
worn, ``no-win'' solutions.
     Control costs by decreasing available healthcare.
     Wring more cost out of the system.
     Find a technological ``silver bullet'' solution.
     Increase organizational market power to leverage higher 
reimbursements.
     Increase governmental and private subsidies.
    It seems as if we have heard this story before.

    [GRAPHIC] [TIFF OMITTED] T9265.001
    
                               THE ISSUE

    Large numbers of dedicated, intelligent people have spent a great 
deal of time, effort and money on solving our healthcare problems and 
yet they are unresolved and the solutions proposed appear inadequate. 
Are there other examples when the Best Leadership with the Most 
Resources doing all the Right Things failed? Is there a way to take a 
different view, find a new common language, discover another way to 
frame our problems and there solutions?

                  A ``DISRUPTIVE VIEW'' OF THE PROBLEM

    Being surrounded by difficult problems and inadequate, conventional 
wisdom solutions is what makes the notion of Disruptive Innovation such 
a timely idea. Coined by Harvard Business School professor Clay 
Christensen, it is at the heart of his book ``The Innovator's 
Dilemma.'' The core of his argument is that success handcuffs 
organizations. Paradoxically, the very act of successfully serving 
their best customers well makes them vulnerable. While they continue to 
improve and reap maximum benefits out of the top end of the market 
(sustaining innovation), they miss the opportunity to create new 
products and services based on ideas and technologies that are 
promising, but initially do not have great functionality, and most 
importantly are based in simpler, less costly business models. The 
established organizations scoff: why worry about telephones when 
telegrams are doing quite nicely? Why give up profitable mainframes and 
minicomputers for those dinky new personal computers? Why bother with 
discount merchandising when our big downtown department store prospers? 
Why build an ambulatory surgery center when we have all these empty, 
full service operating rooms? Why change the way I practice. . . . it's 
worked great for years?
    The more successful you are the worse it gets. Companies with the 
best technologies, the most effective products, the best services and 
particularly the most prosperous businesses always work on improving 
what they do best, sustaining innovation--they don't (in fact they 
usually cannot) work on the technologically simple, but poorly 
functioning ideas that eventually grow to dominate the market. That's 
the ``innovator's dilemma'' doing what you do best, will cause you to 
overshoot the needs of many of your customers and miss great but 
simpler opportunities that can serve those you have left behind. And 
those simpler opportunities can grow to meet mainstream needs.

           WHAT IS THE OPPORTUNITY OF DISRUPTIVE INNOVATION?

    History suggests the opportunity is great. Whenever an industry 
makes a dramatic change, whenever somebody rewrites the script, it is 
almost always through disruptive innovation. And the disruption is 
never led by the established leadership.
    Success has been great; many of our economies most powerful and 
successful companies had their origins in disruptive innovation, AT&T, 
Microsoft, Cisco, Intel, Toyota, Sony, Merrill Lynch, Charles Schwab, 
Sears, Barnes and Noble, and many others had their origin in simple, 
poorly functional, less costly ideas that improved underneath the 
leaders and eventually supplanted them. Finally, it is the customer who 
benefits the most as disruptive innovation has always brought more--
better quality products and services at lower and lower cost.
    So disruptive Innovation is a strategy tool. A new way to see 
success and failure, a new common language for success and a different 
lens through which to view our ideas and the environment in which our 
ideas live, to better tailor them for growth and expansion.

                  DISRUPTIVE INNOVATION IN HEALTHCARE

    But what about healthcare? When I help a healthcare audience 
discover disruptive innovation, I come to a slide that lists many of 
the great companies who started as disrupters and I can see the 
audience mentally saying ``no, not us.'' Where is the healthcare on the 
list?
    In fact, many of our great institutions began with simple ideas in 
a corner of the market the leaders did not care about. For example, The 
Mayo Clinic started when two frontier Minnesota surgeons had the still 
disruptive idea that there is ``no place for individualism in 
healthcare.'' Baylor University Hospital's Depression Era innovation of 
guaranteeing Dallas school teachers 21 days of hospital care for $6 per 
year became Blue Cross. The inability to obtain healthcare for WWII 
shipyard workers and the technologically simple innovations of 
capitation and salaried physicians led to Kaiser Permanente, the 
largest healthcare organization in America. Surgery and anesthesia 
similarly began as disruptive innovations, derided by the established 
institutions, just as more recent changes such as out-patient surgery 
centers, angioplasty and non-MD clinicians.

              WHAT DOES A DISRUPTIVE INNOVATION LOOK LIKE?

    How can you identify an innovation as disruptive? Look for the five 
cardinal characteristics of Disruptive Innovation listed below.
    1. Technological simplicity, initially ``worse'' functionality.
    2. Fundamentally simpler, less costly business model starting in 
market tiers that are overlooked or financially unattractive to the 
leaders.
    3. Takes root in markets where institutional and regulatory 
barriers can be minimized.
    4. Customers do not have to change their ways as incremental 
improvement moves the disruption to more sophisticated users.
    5. The innovation eventually allows many more accessible, 
appropriately skilled people to do the work formerly done by 
centralized, expensive specialists. No tradeoffs; more for less.

               WHAT ARE THE ``DISRUPTIVE'' ISSUES TODAY?

    It is not the pace of present innovation that is important, but 
rather the opportunities presented by innovations that are not 
occurring.
    Disruptive innovation has been the source for great change in many 
industries and has worked in healthcare in the past. Why not now? What 
is happening? It's another part of the lesson; put on your disruptive 
lens and take another view.
    First, present leadership never leads disruptive change because the 
business models that led to their success also trap them; their 
capabilities are their innovative disabilities. They continue to 
improve functionality but that only overshoots the needs of more and 
more patients and aggravates the problem. We will use hospitals as an 
example but the same is true for physicians and other institutions. 
What are your hospitals investing in now? All the places they can make 
a profit, cardiac-pulmonary, orthopedics, more procedures, sicker and 
sicker patients, but where is the bulk of healthcare--it is in the 
other 95 percent. Because hospitals are saddled with the high cost 
business models that led to their success in the 60's and 70's they 
exit unprofitable tiers of the market to move upstream. We overshoot 
the needs of most of our patients and everyone starts to crowd into the 
upper end of the market--a space where there is little room and no air 
to breath.
    Second, the developers of new technology must meet the needs of 
their best customers. This means more investment poured into sustaining 
innovation improving the functionality of present products and services 
based in traditional business models. Internet connectivity may be a 
new enabling technology but established institutions treat it as a 
technical problem to be adapted to present needs. Disruptive innovation 
suggests that if e-health initiatives transform healthcare, they will 
come from ``outside and under,'' not the present established 
organizations and institutions.
    Third, as the established institutions overshoot the needs of more 
patients, the basis of competition changes from increasing 
functionality to new parameters for success--reliability, access, 
customization, convenience and low cost. Poorly equipped to compete on 
this basis, the leaders turn to market power, subsidy and regulation 
for support. When present business models fail, particularly when they 
involve entrenched and highly valued institutions, the pressure for 
increasing subsidies and protective regulation becomes almost 
overwhelming.
    Finally, regulation pours concrete around the status quo. Attempts 
to use regulation to stave off disruptive attacks are quite common. 
U.S. automakers, for example, relied on import quotas as long as they 
could to keep disruptive Toyota and Honda at bay. The links between 
healthcare institutions, Federal and State regulators, and insurance 
companies are strong and wielded to preserve the status quo. In 
addition, because healthcare is so complex and dynamic, well-meaning 
regulatory institutions such as the JCOHA, HCFA or the FDA, can kill 
disruptions simply by sapping the innovative energy out of an 
organization as it tries to negotiate regulatory barriers or defuse 
bureaucratic land-mines.
    These are not simple issues; regulators are not bogey men and 
everyone else victims, but, a remember #3 in ``What's a Disruptive 
Innovation Look Like'' above. Disruptive innovations take root (and 
grow) in markets where organizational and regulatory barriers are 
minimized.

                        THE NEED FOR LEADERSHIP

    Once an industry is in crisis, individual leaders become paralyzed. 
They're incapable of embracing disruptive approaches because the 
profitability of the institutions they lead has been so eroded. 
Typically, not only do they ignore the potential disruptions, they work 
to actively discredit and oppose them. Thus far, this pattern has held 
true in the healthcare industry as well.
    Successful disruptive transformation of this system will unfold 
more quickly, and far less painfully for everyone, if leaders at 
regional and national levels work together--not to regulate the 
existing system but to coordinate the removal of barriers that have 
prevented disruptions from happening.
    Government and health care industry leaders need to step forward--
to help insurers, regulators, managed care organizations, hospitals, 
and health professionals work together to facilitate disruption instead 
of uniting to prevent it. Then patients can realize the opportunities 
that come with disruption--because it is the fundamental mechanism 
through which we will build a higher quality, more convenient, lower 
cost healthcare system. If the leaders with such a vision do indeed 
step forward, we will all have access to more healthcare, not less. No 
tradeoffs.
    Wise men have said:
     ``Insanity is repeating the same behaviors and expecting 
different results''-- Anonymous.\1\
---------------------------------------------------------------------------
    \1\ Anonymous and Einstein, two classic disruptive thinkers.
---------------------------------------------------------------------------
     ``You cannot solve the problems of the present with the 
solutions that produced them.''-- Einstein.\1\

    Senator Wyden. Thank you. We will have some questions in 
just a moment.
    Dr. May.

         STATEMENT OF WILLIE E. MAY, CHIEF, ANALYTICAL

            CHEMISTRY DIVISION, CHEMICAL SCIENCE AND

           TECHNOLOGY LABORATORY, NATIONAL INSTITUTE

               OF STANDARDS AND TECHNOLOGY (NIST)

    Dr. May. Good afternoon. My name is Willie Eugene May. I am 
Chief of the Analytical Chemistry Division at the National 
Institute of Standards and Technology in Gaithersburg, 
Maryland, and I would like to thank you, Mr. Chairman and 
members of this Subcommittee for the invitation to testify 
today on the measurement standards needed to improve the 
efficiency of health care delivery, and to comment on the role 
of reliable data in e-health.
    I will now briefly summarize my written statement that was 
provided earlier for the record. Information technology will 
play an increasingly important role in the management and 
interchange of health care data. Improved efficiency at a 
significant reduction in cost should result since a 
considerable portion of health care cost roughly 20 percent is 
associated with processing information.
    However, additional savings would result from accuracy-
based clinical measurements that are traceable to national and/
or international standards. This will be the focus of my 
testimony today.
    Clinical measurements that are reliable and comparable over 
both time and space are essential for optimal patient care, 
most efficient use of available health care funds, and full 
utilization of the potential of new information technology 
tools. The accuracy and traceability of data from medical tests 
are becoming increasingly important. Typically, medical 
guidelines are derived from clinical studies where medical 
outcomes are correlated with medical test results.
    Such data are often collected from many different 
laboratories and instruments in different parts of the world 
and at different times. However, effective use of such data 
will require that any differences observed be attributable to 
clinical parameters being measured, and not the measurement 
processes.
    Valid decisionmaking requires that a medical test result 
from an individual patient, from a different laboratory at a 
later time, be correlated to the clinical study data for the 
broader population. This can be best accomplished if all 
measurements are of known quality, linked to a common truth. 
NIST can provide the measurement quality assurance tools needed 
to improve measurement accuracy and reliability.
    In my written statement, I have provided quite a bit of 
information regarding the magnitude and scope of the health 
care measurement problem. To summarize here, measurements are 
responsible for 10 to 15 percent of the $1.3 trillion annual 
cost of health care in the United States, a significant 
portion, 25 to 30 percent of health care related measurements 
are performed for nondiagnostic reasons--retests, error 
prevention and/or detection.
    To illustrate the need for measurement data of increased 
accuracy and reliability, I focused on two clinical diagnostic 
markers related to heart disease, the number 1 cause of death 
in the United States, accounting for roughly one-third of all 
deaths annually. One of the markers discussed, blood 
cholesterol, is a risk factor for coronary heart disease. Dr. 
George D. Klee of the Mayo Clinic has used frequency 
distributions for cholesterol values for 20,000 patients to 
mathematically model the wide variations in medical diagnoses 
that small measurement biases or errors can produce.
    In this group, 249 patients per 1,000 had cholesterol 
levels higher than the 240 milligram per deciliter level where 
current guidelines call for further testing and/or possible 
need for medication. Even a plus 3 percent error in the test 
would result in an additional 51 persons per 1,000 being 
incorrectly reported to need medical intervention. In this 
false positive case, patients could require retesting, and/or 
be subjected to prescribed medical intervention, both entailing 
unnecessary costs.
    Conversely, this model shows that if there were a minus 3 
percent bias, 46 people would be missed, and thereby have 
treatments delayed or omitted altogether, both leading to 
potentially dire circumstances.
    The General Accounting Office report of December 1994 on 
cholesterol measurement test accuracy and factors that 
influence cholesterol levels states that the variability of 
cholesterol in blood measurements decreased from 18 percent in 
1969 to 5 percent in 1994. NIST (with its definitive methods 
and standard reference materials), in cooperation with the 
Centers for Disease Control (with its reference methods and 
reference laboratory system), and the College of American 
Pathologists (responsible for proficiency testing most of the 
clinical laboratories in the United States), maintain this 
reference system that was largely responsible for improvements 
that represent a potential savings of $100 million per year in 
treatment costs for misdiagnosed patients, in addition to lives 
saved through timely and accurate diagnoses.
    The measurement variability has improved further since 
1994, and is now roughly 3 percent. We think that our 
provision, that is, NIST's provision of a new standard 
reference material for lipids and protein serum in 1997 to 
address computability problems experienced with some of the 
clinical analyzers contributed significantly to this 
improvement. However, Dr. Klee's data showed that additional 
cost and patient benefits would result from reducing this 
variability still further.
    A second marker discussed, Cardiac Troponin-I, is a heart 
muscle protein that is released into the blood stream following 
acute myocardial infarction. In controlled studies, Troponin-I 
has been shown to be a highly specific diagnostic marker for 
heart attack. However, at this time, data from tests for 
Troponin-I can only be used in a very restricted manner. 
Medical decision points for this test are manufacturer 
specific, and therefore, decisions cannot be made based on 
norms established for broader population groups.
    Each of the three assays cited in my written statement 
measures different isoforms of this complex protein. Efforts 
are underway involving NIST, the medical professional 
community, and IVD manufacturers to identify the specific form 
to be measured. While the range of reported results for 
Troponin-I represents one of the more extreme situations, 
medically significant differences exist for many other 
important clinical diagnostic markers.
    In addition to reliability and cost concerns, another 
important measurement and standards-related commerce and 
competitiveness issue has recently emerged, the European 
Directive on in vitro diagnostic medical devices. By December 
2003 manufacturers must declare that any IVD products to be 
sold within the European Union complies with all essential 
requirements of this directive.
    One of these requirements is that IVD products be traceable 
to standards of the higher order--whatever that means. Our 
interpretation is nationally and/or internationally recognized 
reference methods and/or certified reference materials. At 
present, IVD devices are used in clinical laboratories to 
measure more than 300 different chemical or biochemical 
species. Reference methods and/or materials exist for about 30 
of these. Approximately 60 percent of the IVD products 
currently on the European market are imported from the United 
States.
    As we look to the future, ``and the future is now,'' in 
many ways--Senator Allen, I thought you might appreciate that.
    Senator Allen. I have heard that.
    [Laughter.]
    Dr. May. We realize that home diagnostics is a rapidly 
growing field that will eventually encompass many devices and 
technologies, ranging from single-use test strips such as for 
glucose--that my mother uses--to sophisticated multianalyte 
monitors, or sensors.
    As such point-of-care-testing devices migrate from the 
clinical laboratory to the home environment, there are concerns 
that the accuracy of these measurements might suffer, and 
further reduce the comparability of data from which medical 
decisions are made. Today, it is not uncommon for diabetic 
patients to discover that they get different blood glucose 
readings from devices from different manufacturers. Accuracy-
based point-of-care testing standards will become increasingly 
important for assuring U.S. dominance of the worldwide IVD 
market, and to foster better and more affordable health care, 
both at home and abroad.
    In conclusion, I was asked to focus my testimony on the 
measurement standards needed to improve efficiency and health 
care delivery, and to comment on the role of reliable data in 
e-health. Unreliable and inconsistent measurement data 
contribute to waste and inefficiency in health care delivery. 
Accuracy based reference methods and reference materials that 
NIST can provide will help to increase the reliability of 
health care measurement data from which medical decisions are 
made, and facilitate continued access to the EU market for U.S. 
manufacturers of IVD products.
    Certainly, information technology will play an increasingly 
important role in that management and interchange of health 
care data. Improved efficiency and a significant reduction in 
cost should result. However, further savings will result from a 
more effective linkage between clinical measurement results and 
medical decisionmaking. Health care measurements of improved 
quality are necessary as input data to fully realize the 
benefits that information technology can provide.
    This completes my statement.
    [The prepared statement of Dr. May follows:]

   Prepared Statement of Willie E. May, Chief, Analytical Chemistry 
    Division, Chemical Science and Technology Laboratory, National 
              Institute of Standards and Technology (NIST)

    Mr. Chairman and Members of the Subcommittee, thank you for the 
invitation to testify today. My name is Willie E. May. I am Chief of 
the Analytical Chemistry Division, Chemical Science and Technology 
Laboratory, National Institute of Standards and Technology (NIST). I am 
pleased to be offered the opportunity to add to this discussion 
regarding ways and means for increasing the effectiveness of our health 
care system. I will focus on the role that national measurement 
standards can play in increasing the accuracy and reliability of health 
care measurements that should lead to better medical decisionmaking and 
more efficient use of available health care resources.

                                OVERVIEW

    Chemical and physical measurements provide information that is 
extremely important for the prevention, diagnosis, and treatment of 
disease. Clinical measurement results used by medical and other health 
care decisionmakers that are reliable and comparable over both space 
and time are essential for optimal patient care, most efficient use of 
available health care funds, and full utilization of the potential of 
new information technology tools. The accuracy and traceability of the 
data from medical tests are becoming increasingly important. Typically, 
medical guidelines are derived from clinical studies where medical 
outcomes are correlated with medical test results. Such data are often 
collected using many different laboratories and instruments, in 
different parts of the world, and at different times. However, 
effective use of such data will require that any differences observed 
be attributable to the clinical parameter(s) being measured and not to 
the measurement processes. Valid decisionmaking requires that a medical 
test result for an individual patient--from a different laboratory at a 
later time--be correlated to the clinical study data for the broader 
population. This can be only accomplished if all measurement results 
are of known quality. NIST can contribute to increased efficiency in 
health care delivery by providing the measurement quality assurance 
tools--reference measurement methods, certified reference materials and 
calibrations--needed to improve measurement accuracy and reliability.

                MEASUREMENT RELIABILITY AND COST ISSUES

    A 1999 study by the National Academy of Sciences Institute of 
Medicine discussed the impact of medical errors on health care costs 
within the United States. While the majority of medical errors are not 
due to inaccurate measurements, improved measurement accuracy could 
save lives, a significant amount of time and money, and improve our 
quality of life. Health care costs are estimated to exceed $1.3T in 
2001 and currently represent over 14 percent of the U.S. GDP. Estimates 
of the portion of these costs that are measurement related vary by 
which activities are included, but typically range from 10 percent--15 
percent. The Washington Post and Medical Laboratory Observer have 
reported that 25 percent--30 percent of health-related measurements are 
performed for non-diagnostic reasons (re-test, error prevention and 
detection). While not providing an explicit number for the cost of non-
diagnostic measurements, the Committee on Quality of Health Care in 
America, in a 1999 Report, ``To Err Is Human: Building a Safer Health 
System (http://books.nap.edu/html/to--err--is--human/exec--summ.html), 
stated that ``Dollars spent on having to repeat diagnostic tests . . . 
are dollars not available for other purposes. Purchasers and patients 
pay for errors when insurance costs and copayments are inflated by 
services that would not have been necessary had proper care been 
provided. It is impossible for the Nation to achieve the greatest value 
possible from the billions of dollars spent on medical care if the care 
contains errors.'' The ``German Health Report of 1998'' (www.gbe-
bund.de) states explicitly that ``the costs of repeat measurement 
amounts to $1.5 B U.S. per year in Germany.'' If normalized to the U.S. 
GDP for that year, these costs would be $7.4 B. Even modest 
improvements in measurement accuracy and quality assurance will result 
in multi-billion dollar savings in health care costs.
    Considerable data exist to demonstrate the effectiveness of NIST's 
measurement, standards and calibration activities in the areas of 
clinical chemistry, radiation therapy, and medical imaging. The 
accuracy of all 26 million mammograms and 600,000 cancer patients 
treated with radiation (per year) trace to physical measurement 
standards at NIST. A flat panel display metrology standard has been 
developed in our Electronics and Electrical Engineering Laboratory that 
has allowed the Mayo Clinic, Scottsdale, AZ, to upgrade its diagnostic 
capabilities by moving from traditional x-ray photo images viewed on 
light panels to video flat panel displays. Converting from radiographs 
to digital images viewed on flat panel displays eliminated the need for 
an estimated one million radiographs per year (estimated at about $1.50 
per radiograph.). The NIST Advanced Technology Program (ATP) has 
awarded several grants to companies seeking to improve the flow of 
information between health care providers. For example, VitalWorks of 
Waltham, MA, used ATP support to adapt an existing computer note-
writing system so that it could capture clinical data automatically 
through a pleasing user interface. This new technology makes it easy 
and productive for physicians to enter patient data directly into 
computers, an advance that overcomes a major obstacle to the conversion 
from paper to electronic medical records. NIST also develops and 
disseminates organizational performance metrics for health care through 
its Baldrige National Quality Program.
    As you can see, NIST has many activities that contribute to 
improving the effectiveness of health care delivery; however, I'll talk 
in detail only about the area that I'm most familiar with--measurement 
methods and standards for clinical diagnostic markers. For more than 20 
years, NIST has developed, maintained and refined ``Definitive 
Methods'' for health status markers to support the national reference 
system for clinical measurements, including but not limited to calcium, 
chloride, cholesterol, creatinine, glucose, lithium, magnesium, 
potassium, sodium, triglycerides, urea, and uric acid. NIST methods for 
these health status indicators have been used to value-assign Standard 
Reference Materials that NIST sells to the public and reference serum 
pools used by the Centers for Disease Control and Prevention (CDC) as 
the anchor point for its reference methods and by the College American 
Pathologists (CAP) as its benchmark for proficiency testing more than 
15,000 U.S. clinical laboratories. Improved accuracy facilitated by 
this program has led to better diagnosis, treatment and reduced health 
care costs. The provision of these accuracy-based anchor points for the 
clinical measurement community also facilitates the development and 
critical evaluation of new measurement technologies for providing 
cheaper and faster test results.

    Results of Measurements of Troponin-I from Same Sample Pool Using
           Immunoassay Kits from Three Different Manufacturers
------------------------------------------------------------------------
                                                  Troponin-I
              Assay Manufacturer                Concentration    #labs
                                                    ng/mL      reporting
------------------------------------------------------------------------
A.............................................         19.9          115
B.............................................          6.7          489
C.............................................         0.85           7
------------------------------------------------------------------------
From G.S. Bodor, Denver Health and Hospitals personal communication
  1997.

    A new generation of health status markers, now emerging, shows 
great promise from the clinical diagnostic perspective, but offers new 
and more difficult challenges for measurements and standardization. 
Many of the new markers are proteins, peptides, or other large 
biomolecules, usually present at very low concentrations. Because of 
the vast market for tests for these new markers, many different 
approaches have been developed that often provide different answers. 
For example, Cardiac Troponin-I is a protein that is found in heart 
muscle that is released into the blood following acute myocardial 
infarction (AMI). In controlled studies, it has been shown to be a 
highly specific diagnostic marker for heart attack. Currently, data 
from tests for Cardiac Troponin-I can be used only in a very restricted 
manner. Medical decision points are manufacturer-specific, and 
therefore, decisions cannot be made based on norms established from 
broad population groups. While the range of results reported in the 
Table provided here are a bit extreme, this lack of comparability 
exists for many other very important clinical diagnostic markers, whose 
utility are therefore not being fully realized. This lack of 
comparability among Cardiac Troponin-I assays is very significant since 
heart disease is the No. 1 cause of death in the United States--
accounting for \1/3\ of all deaths. Acute myocardial infarction is 
responsible for 30 percent of these deaths. Approximately 6 million 
people visit Emergency Rooms (ERs) annually for chest pain and 
approximately 3 million of these are admitted for possible AMI. Of 
these, 2 million are not diagnosed as having AMI [false positive result 
that potentially lead to unnecessary medical costs]. Of those not 
admitted, 2 percent-8 percent actually had an AMI [false negative 
result that might cause delayed treatment which could result in severe 
medical consequences].
    Recently, Dr. George G. Klee of the Mayo Clinic in Rochester, MN, 
has shared information with us regarding the effect of measurement bias 
on medical decisionmaking. He used the frequency distributions of 
cholesterol values from 20,000 patients to mathematically model the 
wide variations in medical diagnoses that small measurement biases/
errors can produce. As an example, in this group, 249 patients per 
1000, had cholesterol levels higher than 240 mg/dL--the level at which 
current guidelines call for further testing and the possible need for 
medication. A +3 percent error in the test would result in an 
additional 51 persons per 1000, being incorrectly reported to need this 
medical intervention. In this false positive case, patients could 
either get retested or be subjected to the prescribed medical 
intervention, both entailing unnecessary costs. His work showed that if 
conversely, there were a -3 percent bias, 46 people would be missed and 
thereby have treatment delayed or omitted altogether, both potentially 
leading to dire consequences.
    In 1969, the variability of cholesterol in blood measurements was 
reported to be 18 percent in College of American Pathologists 
Proficiency Testing Surveys. Over the next 25 years, NIST (definitive 
measurement methods and Standard Reference Materials) in cooperation 
with the CAP (proficiency testing) and the CDC (reference methods and 
reference laboratory network) established and maintains a reference 
system for cholesterol measurements that has contributed to a steady 
decrease in the measurement variability to the ? 5 percent level in 
1994 [Cholesterol Measurement Test Accuracy and Factors that Influence 
Cholesterol Levels, General Accounting Office Report GAO/PEMD-95-8, 
December 1994]. These improvements represent potential savings of over 
$100M per year in treatment costs for misdiagnosed patients, in 
addition to the lives saved through timely and accurate diagnosis.
    Driven by the availability of new sensor-based measurement 
technologies, more and more clinical testing is being done outside the 
traditional clinical laboratory. The annual U.S. market alone for this 
new form of clinical measurements, called point-of-care testing (POCT), 
is currently estimated at a billion dollars and is estimated to be 
growing at an annual rate of 10 percent. POCT is expected to be used 
extensively in the home as a part of a self-care trend, which is also 
experiencing rapid growth. Some studies have indicated that POCT can 
provide nearly the same level of diagnostic value as centralized 
testing, but at half the cost. Therefore the standards infrastructure 
that has supported clinical chemistry for the past three decades must 
adapt to support POCT. New techniques and non-biohazard standards based 
on biomimetic materials are needed to assure the accuracy of POCT. NIST 
leadership in developing accurate and internationally recognized and 
accepted POCT standards will help assure continued U.S. dominance of 
the worldwide in vitro diagnostics (IVD) market and foster better and 
more affordable health care both at home and abroad.

            NEW MEASUREMENT AND STANDARDS-RELATED COMMERCE 
                       AND COMPETITIVENESS ISSUES

    In addition to the reliability and related cost issues that we have 
discussed up to now, another important measurement-related driver has 
recently emerged. On December 7, 1998, the European Directive 98/79/EC 
on in vitro diagnostic medical devices was published in the Official 
Journal of the European Communities, marking the start of a transition 
period of 5 years. An in  vitro diagnostic device is any medical device 
intended for use in the testing of samples derived from the human body. 
The stated purposes of the directive are to eliminate trade barriers 
within Europe by ensuring access to the entire European Union (EU) 
market with one single product approval (CE marking), and at the same 
time to maintain or improve the level of health protection attained in 
the EU Member States. By December 2003 all new IVD products that are 
placed on the EU market must be labeled with the CE mark. In order to 
apply the CE mark, the manufacturer must declare that his product 
complies with all the ``essential requirements'' of the Directive. One 
of the major components of this directive is a requirement that 
products be traceable to ``standards of the highest order'', e.g., 
nationally/internationally recognized certified reference materials 
(CRMs). At present, neither CRMs nor reference methods are available 
for most of the several hundred analytes that are measured in medical 
laboratories. Excluding home diagnostics, the overall worldwide in-
vitro diagnostic market is approximately $20 billion. The total IVD 
market in Europe was about $5.6 billion in 1998. Approximately 60 
percent of the IVD products on the European market are imported from 
the USA.
    In November 2000, NIST convened a Workshop on ``Measurement 
Traceability for Clinical Laboratory and in Vitro Diagnostic Testing 
Systems''. There were over 150 participants in attendance, with 
representatives from the IVD industry, regulatory agencies, 
international standards laboratories, commercial providers of clinical 
reference materials and proficiency testing services, and professionals 
involved in standardization of laboratory methods. The consensus of the 
group was for the establishment of global reference systems composed of 
reference laboratories, reference methods, reference materials (issued 
by National Measurements and Standards Institutes), and a mechanism for 
demonstrating measurement equivalence among national standards. The 
participants agreed that internationally recognized measurement and 
standards laboratories should be the initial nodes in this reference 
network, and that this system should expand rapidly to include nodes 
distributed around the world. There was concurrence that when properly 
implemented, measurement traceability--to national and/or 
internationally recognized standards--is a value-added component that 
will improve patient care, testing accuracy, reliability and 
availability, market access, and, in the long run, reduce costs. They 
all agreed that NIST should continue to provide leadership in the 
establishment of this reference system.

                      WHY NIST SHOULD BE INVOLVED

    As stated earlier, NIST has many activities that contribute to 
improving the effectiveness of health care delivery and has a long 
history of excellence in the development of unbiased and authoritative 
measurement methods, reference materials, calibrations, and evaluated 
data bases. These, coupled with new innovative preventive, diagnostic 
and treatment technologies, can play a key role in enhancing the 
quality of life in the U.S. and throughout the world. According to the 
Advanced Medical Technology Association (formerly, Health Industry 
Manufacturers Association), ``the lack of organized measurement-related 
research can be best addressed by the coordinated efforts of NIST 
working together with industry''. Standards-related research and 
measurement services, and the development and transfer of new 
measurement technologies are part of NIST's congressionally mandated 
mission and can help to facilitate the reduction of the overall cost of 
health care in the U.S. Close working relationships are already 
established with industry, the public sector and international 
organizations concerned with public health to assure that new 
measurement and technology needs are understood and properly addressed.
    There are a number of technical, regulatory, and economic needs for 
traceability to national measurement standards: instrumentation used in 
the area of health care diagnostics and therapy requires accurate 
calibration; regulatory agencies such as the FDA and NRC require NIST 
traceability for medical devices and radiation therapy instrumentation; 
one-third of U.S. hospital patients' treatment involves 
radiopharmaceuticals with dosages traceable to NIST; and proliferation 
of foreign requirements for quality systems documentation (such as 
European Directive 98/79/EC on in vitro diagnostic medical devices) 
will greatly expand the need for NIST traceability for export of U.S. 
health care technology. The NIST role in health care is complementary 
to the role of the National Institutes of Health (NIH). NIH relies on 
NIST and CDC to facilitate clinical measurement accuracy and on the 
College of American Pathologists for proficiency testing of hospital 
and clinical laboratories in the U.S. For 15 years, the CAP maintained 
a Reference Laboratory at NIST for the development of advanced clinical 
methods and reference materials.

                                SUMMARY

    I was asked to focus my testimony on the measurement standards 
needed to improve efficiency in health care delivery and to comment on 
the role of reliable data in e-health. I hope that I have provided you 
with useful information regarding the waste and inefficiency caused by 
unreliable and inconsistent health care measurement data as well as the 
benefits of nationally and internationally traceable measurements and 
standards in addressing increasing needs for measurement quality 
systems documentation.
    In addition to NIST's chemical and physical measurement standards 
activities, expertise resides in our Information Technology Laboratory 
to work with the health care community to overcome barriers to the 
effective integration of information technologies into the 
administrative and clinical measurement sectors of the health care 
industry. It is estimated that as much as 20 percent of health care 
costs is associated with processing information. The implementation of 
standards to support electronic interchange of information could result 
in tremendous savings--some estimates are as high as $9B per year.
    Additional savings would result from more effective linkage of 
measurement results with medical decisionmaking. However, to fully 
realize the benefits that information technology can provide to health 
care delivery, we need health care measurements of improved quality as 
input data.
    In closing, I have tried to demonstrate that NIST can make 
significant contributions to increasing the efficiency of health care 
delivery.
    Thank you Mr. Chairman. This completes my statement and I will be 
happy to entertain questions.

                                 ______
                                 
        Current State and Issues Regarding Point-of-Care-Testing

                                SUMMARY

    Driven by the availability of new sensor-based measurement 
technologies, more and more clinical testing is being done outside the 
traditional clinical laboratory. The annual U.S. market alone for this 
new form of clinical measurements, called point-of-care testing (POCT), 
is currently estimated at a billion dollars and is estimated to grow at 
an annual rate of 10 percent. POCT is expected to be used extensively 
in the home as part of a self-care trend, which is currently 
experiencing a 70 percent growth rate. Published studies have concluded 
that POCT provides at least the same level of diagnostic value as 
centralized testing, but at half the cost. The standards infrastructure 
that has supported clinical chemistry for the past two decades must 
adapt to support POCT. Collaborative efforts will be needed among 
National Standards Laboratories, in-vitro diagnostic device (IVD) 
manufacturers, and others in the medical professional community to 
develop appropriate technologies and non-biohazardous standards to 
facilitate the provision of data used in medical decisionmaking that 
are accurate and traceable to national/international standards. NIST 
participation in developing traceable POCT standards will help to 
assure continued U.S. dominance of the worldwide IVD market and to 
foster more affordable healthcare both at home and abroad.

                      PROBLEM MAGNITUDE AND SCOPE

    As we look to the future, we realize that home diagnostics is a 
rapidly growing field that will eventually encompass many devices and 
technologies ranging from single-use test strips (such as for blood 
glucose testing) to sophisticated multi-analyte monitors. As such 
point-of-care-testing (POCT) devices migrate from the clinical 
laboratory to the home environment, there are concerns that the 
accuracy of the measurements made by such devices will suffer, further 
reducing comparability of data from which medical decisions are made.
    The most widely used home testing devices are for glucose. Diabetes 
affects more than 10 million Americans and its prevalence rose from--5 
percent to 7 percent during the 1990's (1-2). Acute and chronic 
complications of diabetes include hypoglycemia, diabetic ketoacidosis, 
impaired immunity, cardiovascular disease, kidney disease, and nerve 
disease (3). The cost of diabetes is extraordinary, accounting for 1 of 
every 8 health care dollars spent in the United States of America (3). 
Diabetes is characterized by excess glucose in the blood and treatment 
of diabetes focuses on reducing the excess glucose and normalizing 
other associated metabolic abnormalities (4). Current regimens to treat 
diabetes are imperfect and individuals with diabetes rely on the 
results of blood glucose monitoring systems for therapeutic adjustments 
to minimize low and high excursions of blood glucose. Today, it is not 
uncommon for diabetic patients to discover that they get different 
blood glucose readings from devices made by different manufacturers.
    Self-monitoring blood glucose (SMBG) devices are unique among 
medical devices in the high volume of use (daily use by many of the 
nation's 16 million diabetics) for critical decisionmaking and for the 
unusual setting (patient homes) in which this testing occurs. Although 
home blood glucose monitoring has clearly revolutionized diabetic care 
and changed both the therapy and outcome for this disease, use of these 
testing systems remains problematic. In 1993, Devreese and Leroux-Roels 
(5) published a laboratory assessment of five blood glucose monitoring 
systems. For the five systems, results of the same low and normal 
samples ranged from 1.35 to 3.5 mmol/L (24-63 mg/dL) and 4.0 to 6.4 
mmol/L (79.3-115 mg/dL), respectively. Since the publication of this 
study, technology of blood glucose monitoring systems has advanced. 
Furthermore, it should be noted that this study deviated from the way 
consumers use these systems. Each of the investigators in this study 
used venous blood treated with an anticoagulant (lithium heparin). 
Home-based systems use fresh whole blood and measure glucose using 
systems based on either electrochemical or photometric principles in 
which electric current or light intensity is actually measured and then 
related to blood glucose levels.
    Most units require blood from a finger prick to be deposited on a 
test strip or cartridge that has been impregnated with one of a variety 
of glucose-specific enzymes. In addition to the variability that may 
result from the use of different types of impregnated test strips or 
cartridges, they also exhibit lot-to-lot variability. Each manufacturer 
uses its own in-house method to calibrate its systems. Many 
manufacturers do offer quality controls to consumers to verify proper 
function of the selected system, but these materials are specific for 
each system. There is no ``higher order'' measurement traceability for 
these systems at this time. The lack of common ground for comparison of 
the SMBG device performance in home--use settings is a problem that 
needs to be solved. According to the CDC, ``The evolution of blood 
glucose monitoring systems, without traceability to higher order 
standards (reference methods or certified reference materials), may 
result in high analytical variation.''
    The ability of the FDA to regulate these devices and to provide 
guidance to manufacturers has been hampered by inadequate data 
regarding the performance of glucose meters used in home settings. The 
FDA has recognized that improving the accuracy and performance of SMBG 
devices is an urgent task. NIST and FDA have had discussions regarding 
the need for a study to determine how SMBG devices perform in the hands 
of actual users--How accurate are the results? (6). The CDC is also 
planning a study to investigate the degree of analytical variation 
between several leading (in terms of use) systems used for measuring 
glucose in the home (7).
    On a more personal note, a respected scientist and former NIST 
employee has developed adult-onset diabetes, and uses a personal 
monitoring device for pin-prick glucose monitoring measurements. He 
ordered a new model, which operated on a slightly different principle, 
and was to return the old one to the manufacturer. Accordingly, he 
unpacked the new model and took a blood glucose reading that was 
totally incompatible with the last reading from the old model. Being a 
scientist, he unpacked the old one and took comparable, back-to-back 
readings to confirm the incompatibility. The results from the two were 
considerably different. He immediately called NIST and asked us to 
think about developing standards for these instruments!!

                           HOW NIST CAN HELP

    In the short term, NIST can help by assisting CDC and FDA in their 
investigations of the performance of glucose monitors. We have been 
asked to provide the reference method and whole blood reference 
materials to support these studies. In the longer term, additional 
activities would be required. For the past two decades, NIST (and other 
standards producers such as USP, CAP, etc.) have tailored clinical 
standards for use in the largely solution-based clinical laboratory. 
These reference materials are not appropriate for use with the new 
surface-based technologies being developed for POCT. Current laboratory 
approaches rely mainly on fixed instrumentation and bulk solutions that 
can be calibrated and then utilized to make a number of determinations 
before the next calibration cycle. On the other hand, POCT technology 
comes in both reusable and single-use-disposable formats. POCT vendors 
have developed QC/QA tests for use with their devices during 
manufacture and use, and since such devices are subject to regulatory 
approval by the FDA, the vendors have done extensive testing to 
demonstrate their devices' efficacies. However, the vendor-developed 
testing is often as proprietary as the devices themselves, and 
according to a professor of clinical pathology at a large university 
hospital ``the lack of adequate independent test standards is a major 
impediment for both hospital and POCT that will grow more significant 
as POCT expands into the personal care market.'' Recent international 
trade regulations on IVD devices further exacerbate the need for 
traceable standards. The EU IVD directive mandates that new IVD 
devices, calibrators, and control devices be traceable to ``standards 
of the highest order'' by 2003.
    Currently, serum or blood-based materials are used to calibrate 
many POCT devices to mimic closely the conditions of the actual assay. 
These materials are costly and difficult to prepare, risky to use 
because of possible contamination by HIV or hepatitis viruses, require 
controlled storage and disposal conditions, and may be subject to 
degradation in a few weeks. The use of blood-based calibrants is 
feasible for hospital and some settings where the constraints can be 
managed, but such approaches are not reasonable for less controlled 
environments such as home care.
    A new generation of clinical standards is needed based on 
biomimetic materials, synthetic substances with properties similar to 
physiological materials. These materials will have a tremendous impact 
on clinical analyses by simplifying the preparation, handling, storage, 
and use of calibration samples. Over the past 20 years, there has been 
a large research effort to develop artificial blood components that 
might be used for formulating low biohazard, long-shelf-life POCT 
standards. One of the biggest challenges in POCT measurement 
standardization is in the determination of ``blood gases'' such as 
oxygen and carbon dioxide. For example with biomimetic blood gas 
standards, oxygen is the most difficult because of its reactivity (on 
storage), its difficulty in delivery (interference from 
perfluorocarbons with some membrane sensors), the need for intermediate 
level (<100 percent saturated) calibrants, and the need for buffer 
capacity (because of changes in concentration that can occur on 
exposure to air or from diffusion through plastic tubing in the 
instrument).
    Another class of biomimetic materials is based on liposomes--
macrochemical structures comprised of a phospholipid bilayer membrane 
surrounding an aqueous cavity. Because of their composition, they are 
often treated as model cells in research. The aqueous interior of a 
liposome can be used to hold a wide variety of hydrophilic materials 
such as electrolytes (ions), enzymes, sugars, etc. or can be filled 
with detectable bio-markers. Liposomes can be synthesized so that they 
have excellent stability when stored at room temperature for over a 
year, and furthermore, they tend to stabilize the materials 
encapsulated within their structure. These characteristics make them 
excellent candidates for the cellular components of biomimetic fluid 
standards. But even in the protected environment of a liposome 
interior, the transitory nature and reactivity of physiological 
materials will make it challenging to create standards.
    We expect that the research on the use of biomimetics as surrogates 
for physiological materials will only be a portion of the effort 
required to exploit these materials as POCT standards. A significant 
effort will be required to develop packaging to make such standards 
clinically useful and to ensure their viability over time. As non-
invasive optical sensing technologies are developed and come to market, 
still other types of standards will be needed to link the increasing 
number of home-based measurements to universal truths.

    Senator Wyden. Doctor, thank you.
    Mr. Patterson, welcome.

STATEMENT OF ALBERT PATTERSON, VICE PRESIDENT FOR CONTRACTING, 
                         PREMIER, INC.

    Mr. Patterson. Mr. Chairman, Senator Allen, I would first 
like to thank you for the opportunity to present to you. My 
name is Bert Patterson. I am vice president of contracting for 
Premier Strategic Alliance of more than 1,800 not-for-profit 
health systems in the United States. I am also a clinician, a 
pharmacist who has practiced in organized health care for well 
over 30 years.
    For health care providers, purchasers, and suppliers across 
the country, tapping the vast potential of the Internet has 
become an integral component of strategic thinking and 
planning. Health industry observers herald the potential value 
of the Internet to promote quality-of-care improvement and cost 
efficiency through both private sector initiatives and public 
policy action.
    While enumerable e-health issues may be debated before this 
committee, I will focus my testimony on one specific 
initiative. This initiative is the adoption by the health care 
sector of an electronically readable, uniform industry data 
standard, namely the universal product number, UPN, that will 
be prominently displayed at every level of packaging and 
transmitted via bar code technology into hospital and vendor 
information systems. UPN implementation has vast potential for 
improving health care safety and quality, facilitating clinical 
product and service innovation and enhancing cost-efficiency at 
the supply chain level. The technology exists. It is used 
widely and with documented success in countless other 
industries, the retail sector perhaps being the most obvious 
example.
    Within health care, implementation has been far less 
extensive, particularly at the unit-of-use level. It is 
important to point out that the failure of the health system to 
embrace this technology does not imply reticence on the part of 
hospitals. Hospitals, in fact, are eager to develop and deploy 
this kind of technology to improve the quality of care they 
provide and to achieve economic efficiencies.
    In this regard, I wish to focus on three important areas 
where UPN as an essential health initiative can improve patient 
health and safety. UPN has great potential to, (1) facilitate 
sustain quality improvement and medical error reduction, (2) 
generate industry-wide cost-savings and efficiencies, and (3) 
enhance knowledge transfer and engender quality improvement 
through the use of comparative data.
    Although the causes of medical errors and less than 
acceptable measures of care are complex and deeply rooted, the 
most immediate and far-reaching solutions lie in the 
implementation of technology. New and emerging technology such 
as computerized physician order entry, electronic medical 
records, automated pharmacy dispensing and bar code-enabled 
bedside verification, to name a few, harbor immeasurable 
promise for the safety and quality improvement of health care 
in America.
    As numerous studies have documented, patient safety may be 
improved and reinforced through the industry-wide adoption of a 
standardized system of machine-readable codes on all medication 
packages and medical devices. In the patient-care setting, a 
bar code can help guarantee that the right drug in the right 
dose is administered in the right way to the right patient at 
the right time. Technological advances in the last few decades 
allow data of greater complexity to be embedded within a bar 
code. Making the coding of even the smallest packages possible. 
The technology is out there. It can be done.
    The Coalition for Health Care E-Standards states that the 
adoption and promotion of uniform industry data standards, 
typified by UPN, would reduce cost and improve efficiencies 
across the industry and improve patient safety and quality of 
care, and just 2 weeks ago, the National Coordinating Council 
for Medication Error Reporting and Prevention, along with the 
pharmaceutical industry information system vendors and the 
standard organizations issued recommendations for health 
industry implementation of bar code technology.
    It is clear that momentum for UPN adoption is growing. In 
addition to its potential for improving patient safety, UPN 
implementation can generate significant cost savings and 
efficiencies across the health industry. Unlike 
pharmaceuticals, to which unique national drug code numbers are 
assigned, the standardized identification of medical and 
surgical supplies has no such Government mandate. Clearly, this 
makes web-enabled linkage of information systems, even for 
purposes of comparisons alone, anything but seamless. Federal 
regulation of the identification of medical and surgical 
supplies would support industry compliance and facilitate the 
broad-based implementation of these technologies.
    The 1996 Efficient Health Care Consumer Response, EHCR 
report, predicted UPN implementation would yield annual savings 
of over $11.6 billion health care supply chain cost. These 
projected savings are based on the automation of transactions 
and the integration of a frictionless supply data stream from 
point of manufacture to point of use. EHCR projects that the 
standardized use of UPN across the supply chain would yield 
among the highest returns on investments in automated 
transactions.
    Finally, UPN implementation holds great promise for 
knowledge transfer and quality improvement through the use of 
comparative data. Perspective, Premier's signature health care 
informatics product, is the most complete cost-based, test-
level clinical and financial data warehouse in the country. In 
a nutshell, this enables us to provide an apples-to-apples 
comparison for a hospital's clinical experience.
    Unfortunately, the absence of industry-wide standard 
product identification, such as UPN, creates a situation in 
which there is no reliable referable link between a product's 
facility-specific inventory number and references to the 
products used in health care. In other words, we are unable to 
compare product to product to choose the best product 
available, back to Mr. Scully's comments this morning about 
comparing apples to apples and choosing the best.
    Let me briefly share with you an actual case study. In one 
of Premier's hospitals, Perspective's data revealed that the 
use of multiple orthopedic implant vendors was resulting in 
excessive cost. By comparing its performance in orthopedic 
implants in terms of cost, length of stay, and outcome, to that 
of the top quartile performance in this area, Premier was able 
to demonstrate to the hospital that improved vendor utilization 
would be more cost-effective.
    If the implants had unique identification numbers 
accessible across the industry by bar coding systems, critical 
vendor-level data on cost and outcome would be accessible and 
ripe for analyses. In this case, the hospital was able to 
convince its physicians that streamlined utilization of 
selected implant vendors was significantly more cost-effective, 
and yielded comparable or higher quality outcomes, but only 
after exhaustive manual tabulation of vendor data.
    Our ability to benchmark in the health care setting and to 
reap the benefits of quality improvement and cost efficiency is 
contingent on the standardized identification of all 
pharmaceuticals, medical and surgical products and supplies. 
UPN's unique identifiers offer such a tool.
    In conclusion, Premier believes that adoption of a uniform 
industry standard is a critical e-health initiative with 
potential to yield significant progress in patient safety, 
quality improvement, and cost efficiencies. On behalf of 
Premier, its hospitals and their patients, I appreciate having 
the opportunity to attest to the vast, untapped potential of 
new and existing technology implementation in e-health in the 
health care industry.
    Thank you.
    [The prepared statement of Mr. Patterson follows:]

        Prepared Statement of Albert Patterson, Vice President 
                     for Contracting, Premier, Inc.

    Mr. Chairman, distinguished members of the Subcommittee. My name is 
Albert Patterson. I am vice president of contracting for Premier, a 
strategic alliance of more than 1,800 not-for-profit hospital and 
health systems in the United States. The Premier family of companies 
provides an array of resources in support of health services delivery, 
with a focus on patient safety and quality improvement initiatives, 
including healthcare informatics, clinical technology/best-practice 
products and services, insurance consulting, and physician practice 
management. Premier, Inc. operates major facilities in San Diego, CA; 
Charlotte, NC; Chicago, IL, and Washington, DC.
    For healthcare providers, purchasers, and suppliers across the 
country, tapping the vast potential of the Internet has become an 
integral, even requisite, component of strategic thinking and planning. 
Health industry observers herald the potential value of the Internet to 
promote quality-of-care improvement and cost efficiency through both 
private sector initiatives and public policy action. As Paul Starr, 
Princeton University professor and founder of the Electronic Policy 
network, observed, improved uses of greater information hold vast 
promise for health cost reduction, coverage expansion, and greater 
innovation. Patients, too, have come to appreciate this power. Not 
simply ``opening up their email and saying `ah','' as J.D. Kleinke, 
president of Health Strategies Network recently opined, consumers are 
using Web-based resources not only to inform, but also to empower, 
themselves and their families. In effect, the ``system'' is coming to 
the ``people'' as health plans and providers establish Web sites and 
open up on-line avenues of communication with patients and each other. 
A variety of healthcare businesses on the Web now provide customized 
health information, medical advice, and a widening array of services. 
Patients with chronic conditions, such as diabetes, are now able to 
offer their physicians daily updates of their conditions through Web-
enabled reporting systems. Taken together with new e-commerce processes 
in which individual patients may order health supplies for delivery to 
their own homes, it's clear that the informational, networking and 
commercial opportunities for the healthcare industry are immense.
    While innumerable e-health issues may be debated before this 
committee, I will focus my testimony on one specific initiative. This 
initiative is the adoption by the health sector of an electronically 
readable, uniform industry data standard--namely, the Universal Product 
Number (UPN)--prominently displayed at every level of packaging and 
transmitted via bar code technology into hospital and vendor 
information systems. UPN implementation has vast potential for 
improving healthcare safety and quality, facilitating clinical product 
and service innovation, and enhancing cost-efficiency at the supply 
chain level. The technology exists. It is used widely and with 
documented success in countless other industries--the retail sector, 
perhaps, being the most obvious example. Within healthcare, 
implementation has been far less extensive, particularly at the unit-
of-use level. It's important to point out that the failure of the 
health system to embrace this technology does not imply reticence on 
the part of hospitals. Hospitals, in fact, are eager to develop and 
deploy this kind of technology to help them improve the quality of care 
they provide and to achieve additional economic efficiencies. In this 
regard, my testimony will focus on three issues:
     the potential of UPNs to facilitate sustained quality 
improvement and medical error reduction;
     the potential of UPNs to generate industry-wide cost 
savings and efficiencies;
     the potential of UPNs to enhance knowledge transfer and 
engender quality improvement through the use of comparative data.

       SUSTAINED QUALITY IMPROVEMENT AND MEDICAL ERROR REDUCTION

    From the Institute of Medicine (IOM), the Agency for Healthcare 
Research and Quality (AHRQ), the Quality Interagency Coordination Task 
Force (QuIC) and countless public, private, business, consumer, and 
healthcare organizations, the message is resounding and the mandate 
unmistakable.
    Sustained quality improvement and medical error reduction in the 
American healthcare system can be significantly enhanced through 
hospitals' and other health providers' acquisition and implementation 
of new patient safety and information technologies.
    The mounting significance of technology for the quality improvement 
of health care--a notion Premier has long championed--was underscored 
in the March 2001 IOM report, Crossing the Quality Chasm: A New Health 
System for the 21st Century. Recommending no less than a top-to-bottom 
system overhaul, the report called for the widest possible 
``utilization of information technologies to improve access to clinical 
information and support clinical decisionmaking.'' The committee 
concluded that the ``automation and standardization of clinical, 
financial and administrative transactions are essential to improving 
quality, preventing medical errors, enhancing consumer confidence . . . 
and improving efficiency.'' It is extremely regrettable that, as the 
IOM observes, ``while medical science and technology have advanced at a 
rapid pace, the healthcare delivery system itself has foundered.''
    Although the causes of medical errors and less-than-acceptable 
measures of care quality are complex and deeply rooted, the most 
immediate and far-reaching solutions are imbedded in the sphere of 
technology implementation. New and emerging technologies--such as 
computerized physician order entry (CPOE), electronic medical records, 
automated pharmacy dispensing and bar code-enabled bedside 
verification, to name a few--harbor immeasurable promise for the safety 
and quality improvement of health care in America.
    As has been documented in numerous inter-disciplinary studies, 
patient safety may be significantly improved upon and reinforced, 
beginning at the supply chain level, through the industry-wide adoption 
of a standardized system of machine-readable codes on all medication 
packages and containers and medical devices. In the patient care 
setting, a scannable bar code can help guarantee that the right drug in 
the right dose is administered in the right way to the right patient at 
the right time. Technological advances in the last few decades have 
been such that larger amounts of information, more comprehensive in 
nature, can be imbedded within a bar code, making the coding of even 
the smallest packages possible. The technology is out there. It can be 
done.
     A study published in the July 5, 1995 volume of the 
Journal of the American Medical Association (Systems Analysis of 
Adverse Drug Events) identified drug administration errors (i.e., wrong 
dose, wrong drug, missed dose, wrong time, wrong route, extra dose, 
etc.) as the cause of 58 percent of all adverse drug events (ADE). The 
vast majority of these errors, the study concluded, could have been 
prevented with the use of bedside medication verification technology.
    An underlying requirement for any bedside technology--to ensure 
patient identification and the five medication `rights' (right drug, 
right dose, right route, right time, and right frequency) is a ``unique 
symbology identifier for both the patient and medication.'' Authors of 
the study go on to observe that this unique symbology can be 
accomplished with current bar code technology, allowing all drug dosage 
forms to be labeled with its unique identifier, the National Drug Code, 
or NDC. ``Today's bar code reader technology would allow the accurate 
reading of over a dozen different bar code symbology formats,'' the 
authors observe, ``yet only 60 percent of all drugs administered at the 
bedside are so (commercially) packaged.'' The study concludes that the 
simple addition of a ``unique bar code identifier'' on all medications 
used at the bedside could prevent nearly 60 percent of all medication 
errors.
     The Coalition for Healthcare e-Standards states that the 
adoption and promotion of uniform industry data standards, typified by 
UPN and other bar coding systems, would ``reduce costs and improve 
efficiencies across the industry, and improve the safety and quality of 
care for all patients.'' In its mission statement, the Coalition cited 
the November 1999 IOM report, To Err is Human: Building a Safer Health 
System, which clearly identified the integration of bar coding 
technology as an effective tool in the prevention of medical errors and 
improvement of overall patient safety. The IOM report, itself, 
maintained that ``patient safety programs ought to incorporate well 
understood principles, such as the standardization and simplification 
of equipment, supplies and processes.'' In addition, investigators 
emphasized the safe use of drugs in both pre- and post-marketing 
processes through the development of standards for drug packaging and 
labeling.
     Two weeks ago, the National Coordinating Council for 
Medication Error Reporting and Prevention, in collaboration with the 
pharmaceutical industry, information systems vendors, regulators, and 
electronic standards-setting organizations, issued recommendations 
relative to the industry implementation of bar coding technology. While 
honing in on the application of bar codes in institutional settings, 
the Council made clear that its recommendations have ``broader 
applicability to other settings.''
    In summary, the Council recommended that the Food and Drug 
Administration and the U.S. Pharmacopeia (USP) collaborate with 
appropriate stakeholders to establish and implement uniform bar code 
standards for the immediate and intermediate packaging of all 
commercially available prescription and non-prescription medications. 
These standard bar codes would be featured on all unit-of-use 
packaging, including single and multiple unit and dosage. As you know, 
through the Federal Food Drug and Cosmetic Act, USP is responsible for 
establishing strength, quality, purity, packaging, and labeling 
standards for medicines. Regulatory requirements for bar coding would 
fall under the purview of FDA and its labeling standards for 
pharmaceuticals.
    The Council recommends that the data elements of such a bar code be 
uniformly ordered, and include, at a minimum,
     the National Drug Code (NDC) number,
     the respective lot, batch or control number, and
     expiration date.
    The NDC already enjoys regulatory standing with the FDA and is used 
by the pharmaceutical industry and numerous healthcare organizations 
for the automated tracking of drug products. The Council further 
envisions professional associations developing relevant standards of 
practice, including the repackaging and labeling of compounded 
preparations and the education of practitioners on optimal bar code 
use.
    The Council characterizes its recommendations as the ``first step 
to the ultimate use of bar codes in the medication-use process.'' As 
Council Chairman Jerry Phillips, associate director of medication error 
prevention for the FDA's office of post-marketing drug risk assessment, 
observed, ``Once implemented, we believe this standardized approach to 
bar coding technology is a primary and important mechanism to improve 
patient safety in hospitals and other health care institutions.'' The 
Pharmaceutical Research and Manufacturers of America (PhRMA) and 
Generic Pharmaceutical Association (GPhA), both dominant process 
shareholders, agree that the implementation of standardized bar codes 
would be an effective way to improve pharmaceutical product, and 
ultimately, patient safety.
     As Premier urged in its formal comments to HHS with 
respect to the Medicare inpatient prospective payment system (PPS) 
proposed rule and the current outpatient prospective payment system 
(OPPS), all new medical devices qualifying as `new technologies' (and 
therefore subject to special `pass-through' payment) ought to be 
identified by the appropriate UPN, or universal product number--a 
unique numerical sequence identifying a specific healthcare device and 
its manufacturer.
    Given that healthcare providers have agreed to accept either of two 
industry-standard data formats, we believe UPN could be readily 
incorporated into the Centers for Medicare and Medicaid Services' (CMS) 
existing coding system. By mitigating administrative and payment system 
complexity for both hospitals and CMS, and fostering wider application 
of a bar code that, recognized at all levels of the supply chain, can 
assist in ordering, tracking, and validating inventory, such 
implementation would go a long way toward improving safety in the 
patient care setting.
    As I just described, the explicit identification of medical devices 
that qualify as `new technologies' is but a single application of a 
standardized bar code system. While admittedly specific, the example is 
emblematic of this technology's inherent promise for wider integration 
in our health care delivery system.

                  COST, AFFORDABILITY, AND INNOVATION

    One of the most significant developments to come out of the e-
commerce revolution is the ability for businesses to link information 
systems seamlessly. Business-to-business (`b-to-b') e-commerce is 
defined as the direct sale of goods and services to other firms and 
government agencies. Health e-commerce b-to-b models, including medical 
and surgical supply Web sales and on-line auctions for refurbished 
equipment, are extensions of general business e-commerce. Unlike 
pharmaceuticals, to which unique government-mandated National Drug Code 
(NDC) numbers, recognized across the industry, are assigned, the 
standardized identification system for medical and surgical supplies 
has no such mandate. Clearly, this makes Web-enabled linkage of 
information systems--even for purposes of comparison alone--anything 
but seamless. Federal regulation of the identification of medical and 
surgical supplies would support industry compliance and facilitate the 
broad-based implementation of these technologies.
    Application of existing bar coding technology to the healthcare 
supply chain harbors great potential for driving down management costs. 
The 1996 Efficient Healthcare Consumer Response (EHCR) report predicted 
such developments would yield annual savings of $11.6 billion in 
healthcare supply chain costs. These projected savings are largely 
based on the industry's implementation of a series of automated trading 
transactions, and integration of a frictionless supply data stream 
across the healthcare industry, from point-of-manufacture to point-of-
use. EHCR projects that the standardized use of UPN across the supply 
chain would yield among the highest returns on investments in automated 
transactions. Most importantly, the study indicates that UPN 
implementation can result in significant efficiencies and cost savings 
for the healthcare supply chain, and ultimately, individual medical 
centers and health facilities.
    We all have become accustomed to having our purchases scanned at 
the checkout line. We know the technology is there. We know 
efficiencies can be achieved through the technology. By positioning the 
supply chain to engage in new e-commerce capabilities, the health 
industry would be able to leverage investments in health information 
networks and reduce the cost of patient care. Such positioning would 
fuel the momentum essential for the prompt introduction of new 
products, the reduction of administrative costs, and the dissemination 
of data across the supply chain.

                 OPPORTUNITIES FOR BETTER BENCHMARKING

    Technological innovation makes higher-quality health products and 
services, as well as improvements in productivity and supply chain 
efficiency, possible. Comprehensive data on--and the ability to conduct 
rigorous comparisons of--existing and emerging health practices, 
products, and services is critical to decisionmaking in the clinical 
and business spheres. Across the health industry, from the supply chain 
to the inpatient setting, comparative data--and more pointedly, the 
ability to compare and qualify different sets of data--is essential for 
clinical process and resource utilization improvement.
    Perspective, Premier's signature healthcare informatics product, is 
the most complete cost-based, test-level clinical and financial data 
warehouse in the country, permitting peer group comparisons at the 
resource consumption level. Hospitals track resource utilization and 
patient billing for products and services rendered through what is 
called a `chargemaster,' unique to each institution. Perspective 
compiles these individual chargemasters, and translates or normalizes 
them to a standardized, `master' chargemaster, if you will, enabling 
the ever-elusive `apples to apples' comparison. Now, to appreciate how 
truly monumental in scope the implementation of a standardized bar 
coding system for product identification would be, consider the 
following:
     It is likely that every distributor and user of a specific 
product identifies it with a different `inventory' or `stock' number.
     Manufacturers' product identification numbers are not 
usable for ordering from a distributor.
     Often, distributors and recipients/users of products find 
different product number on packing slips and invoices.
    The absence of standardized industry-wide product identification 
creates a situation in which there is no reliable, referable link 
between a product's facility-specific ` inventory' number and 
references to that product in the chargemaster. Utilization comparison 
at the facility or system level is rendered virtually impossible 
because providers are able to `drill down' in the data only so far. 
General comparisons are permissible with respect to a product's general 
grouping or category--i.e. catheters or stents--(often variable, 
themselves, among facilities), but isolating product specifications, or 
even the manufacturer, can prove insurmountable. Standardized product 
identification through a universal bar coding system would vastly 
improve supply chain efficiency, and make richer, more valuable data 
comparisons possible. These comparisons would facilitate true clinical 
comparability, providing for greater cost and quality improvement.
    The UPN would be especially valuable for high-cost, ` high 
technology' items, such as pacemakers, defibrillators, and orthopedic 
implants, as illustrated by the following case study.

     CASE STUDY: ACHIEVING GREATER COST EFFICIENCIES IN ORTHOPEDIC 
                              TRANSPLANTS

    An analysis of Perspective data revealed that the engagement of 
multiple orthopedic implant vendors by one of Premier's hospitals was 
resulting in needlessly excessive costs. By comparing its performance 
in orthopedic implants (hips, knees and related components) in terms of 
cost, length-of-stay and outcome, to that of the top-quartile 
performers in this area, Premier was able to demonstrate to the 
hospital that improved vendor utilization would be more cost-effective.
    Because orthopedic implants and related components are not 
identifiable across the health industry in a consistent, standardized 
way, hospitals cannot provide vendor-level data in their chargemasters. 
As a result, this valuable vendor-level data cannot be compiled and 
analyzed by Premier's Perspective data base. Its absence, and more 
pointedly, its unavailability, required Premier to go back to their 
top-performing (with respect to orthopedic implants) hospitals, one by 
one, to gather data on the vendors they engage and costs they incur.
    If the implants and related components had unique identification 
numbers, accessible across the industry by a standardized bar coding 
system, critical vendor-level data with respect to cost and outcome 
would be not only available, but ripe for analysis. In addition, 
standardized identification would make the data compiled vastly more 
accurate and reliable. The accuracy of data is absolutely critical, 
especially when comparative analyses reveal that changes in practice or 
behavior are warranted, from either clinical or business perspectives. 
In this case, the hospital was able to convince its physicians that 
streamlined utilization of selected orthopedic implant vendors was 
significantly more cost-effective. Had the vendor-level data necessary 
to make such a determination been readily available, Premier's 
Perspective data base could have conducted the analysis in a more 
prompt and effective way.
    In summation, if all medical and surgical products and supplies 
were identifiable by UPN, Premier would be able to:
     Identify cost, length-of-stay (LOS), and outcomes (re-
admissions, mortality and complications) by vendor;
     Use that information to select which vendors would be 
better for standardization;
     Identify and quantify the value of product 
standardization; and
     Identify cost, LOS, and outcomes by vendor in hospital-to-
hospital comparisons.

                               CONCLUSION

    Comparative data is the building block upon which quality and 
safety improvements in the clinical setting are achieved. To date, with 
more than 520 reporting hospitals, Premier's experience in this arena 
has yielded critical success. The fact remains, however, that our 
ability to benchmark in the healthcare setting, and to reap the 
benefits of subsequent quality improvement and greater cost efficiency, 
is contingent on the standardized identification of all--
pharmaceutical, medical, and surgical--products, devices and supplies. 
UPNs--as unique identifiers--offer such a tool.
    On behalf of Premier, its hospitals and their patients, I deeply 
appreciate having had the opportunity to attest to the vast, untapped 
potential of new and existing technology implementation in e-health and 
the health care industry.

                             ABOUT PREMIER

    Premier is totally owned by its not-for-profit healthcare systems, 
which operate or have affiliations with approximately 1,800 hospitals 
in all 50 states. The Premier family of companies provides these 
members an array of resources in support of health services delivery, 
with a focus on contributing to the improvement of clinical care 
quality, cost-effectiveness of health services, and patient and worker 
safety.
    Premier's member services include group purchasing for 
pharmaceuticals, supplies, and equipment; healthcare informatics and 
comparative data bases that help hospitals benchmark and improve; 
clinical technology services supporting hospitals' acquisition, use, 
and maintenance of biomedical equipment; consulting expertise in 
support of performance improvement; management of member-owned 
insurance programs; and support services for physician office 
management. As reflected by its organization, products and services, 
Premier is grassroots-oriented, value-based, and guided by the 
interests of its community health system owners.

    Senator Wyden. Thank you.
    Senator Allen.
    Senator Allen. Thank you. I have a whole series of 
questions. I guess I will do it in the way that you all gave 
your testimony, although there may be a strain or a thread that 
goes through all of them.
    Let me first start with Dr. Fuller. Your statement 
emphasized that the health care industry has difficulty 
justifying the expenditures for technology investments in the 
absence of any real fiscal incentive and strong supporting data 
that putting all this money into it is actually going to save 
them any money or do anything better.
    Can you elaborate on that point in reports which seem to 
suggest that there are financial incentives, therefore 
investments, and what sort of supporting data, so that we 
understand what kind of supporting data do you think is needed 
to justify such investments?
    Dr. Fuller. To respond to your question, my own experience 
is as a faculty member in an academic medical center which is 
composed of two large medical centers, affiliated hospitals, 
and a very complex environment that includes primary care 
clinics that are part of that organization, and I think the 
data issue and the primary issue has to do with the fact that 
you cannot implement just a piece of a solution and fix a 
single problem.
    It is a very complex set of information systems and 
technologies and tools existing in every hospital today, and 
certainly in academic health centers, which are composed of 
numbers of hospitals and in health care plans, and right now, 
one of the critical pieces that is missing is that the vendor 
community and the software that is available to us to implement 
are simply not responsive to the complexity of the environment 
in which we live.
    The idea of the enabling technology centers I referred to--
which could provide a way of experimenting with an entire 
system, and not just a piece of the system--was that very point 
that you are making, which is to look at the data, look at the 
evidence, look at the way that it can be implemented so that it 
becomes a seamless system. Off-the-shelf solutions simply do 
not exist today to respond to the complexities that we have all 
been discussing on this panel and that we have heard about from 
Mr. Scully earlier.
    Senator Allen. Let me follow up in this regard, then. You 
are saying that whatever adaptation software, and so forth, 
that they are off the shelf, just do not respond to the 
reality. They may be perfect for manufacturing automobiles, 
they may be perfect for something or another, but it is just 
not fit, and your response to the long-term research and 
development that is needed are dollars or money for these 
enabling technology centers.
    Has there ever been an effort made, say, from the health 
care industry to get, say, with Oracle, where some of these 
folks will say they will work with universities, and will say 
here is what a university needs. I am not talking about the 
medical schools, but an Oracle or a Cisco or whomever it may be 
and say, ``Here is what we want, can you develop it?''
    It would seem to me that the private sector folks, who are 
going to be the ones eventually involved in this and competing 
for this business, would love to work with a confederation or 
association of health care providers and service providers. Has 
that ever been attempted?
    Dr. Fuller. It actually has, and there are a number of 
examples that I could point to, a number of companies that have 
participated, but it requires an investment on the part of the 
organization. The vendor community will not come to the table 
with all of the money that is required to implement a very 
large-scale solution to a problem, and so therein lies the 
opportunity and, in fact, the solution.
    One of the strategies that has worked with a vendor 
partnership with academic and other health sciences 
organizations, and with federal funding, is the integrated 
advanced information management system program that the 
National Library of Medicine has funded for the last 15 to 20 
years.
    A number of institutions have benefited from that and, in 
fact, in our own case at the University of Washington, and 
also, I believe, at the Oregon Health Sciences University, 
which benefited from that program, there was extensive vendor 
participation. I will say that we certainly leapfrogged ahead 
in terms of a development of a complete electronic medical 
record for our medical centers that includes retrospective data 
and is very comprehensive. It was very much a result of that 
federal funding that helped us to provide the incentives for 
the organization to look at itself comprehensively, to attract 
the vendor community to work with us and so forth, but it does 
require an investment in research and development. It is not, 
again, a case of off-the-shelf software that will solve the 
problem.
    Physician order entry has been mentioned, and that is one 
of the thorniest issues of all. We are just beginning to move 
in that direction, and I think the other panelists have alluded 
to solutions that are pieces of the answer to the problem of 
having true order entry that is responsive to the needs of 
health care teams.
    Again, it is extraordinarily complex, when you are dealing 
with multiple hospitals, multiple primary care clinics, and 
trying to get a system that works seamlessly in support of 
health care teams. It is not a trivial situation, and we simply 
do not have the research evidence and the experiments have not 
been done that will provide us with the fuel to do this with as 
little pain as possible for the participating health care 
organizations.
    Senator Allen. Well, you listened to Dr. Kenagy's principle 
of disruptive innovation, as far as helping revolutionize and 
change the health care industry. I thought I noted you nodding 
in agreement. Do you agree with that?
    Dr. Fuller. That is exactly the idea that I think was 
driving our thinking about the enabling technology centers. We 
need a place to experiment and not put people's lives at risk, 
and experiments on the whole health care system across the 
United States are simply not feasible, but if you can create a 
system in which you can control the inputs and the outputs and 
what you are studying, I truly believe that you could engage in 
the kind of disruptive innovation that Dr. Kenagy points to, 
and that is why I was nodding. I said yes, that is precisely 
what we could do, but these have to be very large-scale 
experiments, and they have to happen over a period of time.
    Much of federal funding for IT interventions is very short-
term. I did a telemedicine project that was 2, 2\1/2\ years. It 
was extremely difficult, and the results were not what we had 
hoped for because we could not get the numbers of cases. We 
could not create a randomized control trial the way we wanted 
to. We could not move as quickly as that money--the clock was 
ticking, and trying to come up with a study, do the study, 
assess the results, and do the reports was not feasible in the 
amount of time we had.
    So again, I believe that the solution is much more long-
term research and development ways that we can do this over 
time, and really do what we do with medical research. We do not 
expect bench researchers to return findings--well, we may 
expect it, but we know that it is going to take years in the 
laboratory for some things to be discovered, the cures for 
diseases. We should expect the same kind of investment in 
tedious research to be done with the information technology 
solutions that we believe have incredible potential.
    Senator Allen. That is good insight, and it is all 
understandable, and we want to make sure what we do is right, 
because this is not just a question of whether somebody has 5 
percent or 4 percent of the market share. This is someone's 
health, and the capability of getting quality health care 
provided to them.
    On the other hand, there does seem to be a need to start 
moving. Everyone recognizes there needs to be greater 
utilization of information technology, and listening to our 
previous testimony from Mr Scully, his view was that if you did 
not put a date certain that you have to do this, it would 
dawdle, and generally I have seen in bureaucracies if there is 
no measurement, if there is no accountability, if there is no 
performance standards, everything will get dumbed down to the 
lowest common denominator, and no one will ever do anything, 
because the mind set is one in which if it has been done this 
way for the last 20 years, that is complete justification.
    So that is the quandary I think we have here, is that 
inertia of bureaucracy, or people just liking to do things the 
same old way. There are plenty of jokes even in Virginia and in 
the U.S. Senate about things have been done this way. There is 
no electronic voting in the Senate. It is amazing to me. That 
is the way it is always done.
    I am sure they talk about how great the old light bulb was 
when you have to change a burned out light bulb, but 
nevertheless, with all of the inertia, to stay the same, there 
needs to be change, but it has to be careful in how it is done.
    I like, Dr. Kenagy, your concept. Now, you cite in your 
statement how current hospital investments are in areas--and I 
am writing these things down. They all focus where they can 
make the profit, supposedly in the cardiac-pulmonary, the 
orthopedics, the more procedures, and not in the bulk area of 
health care, the other 95 percent.
    Now, why is this that mentality, when the other 95 percent 
offers opportunities to reduce costs which will obviously 
ultimately improve profitability? Why is it that they focus 
just on that 5 percent?
    Dr. Kenagy. Because, Senator, they are good businessmen, 
and they have built organizations over the last 30 or 40 years 
to continually improve the functionality of health care, and we 
have done wonderful things.
    When I became a physician, cardiac surgery was a rare and 
highly dangerous procedure, and now it is commonplace. It is 
routine, and that is wonderful, but it was developed in the 
context of a very high-cost business model to build that 
functionality.
    We have reached a point in health care where we do not need 
to be so focused on improving the functionality of our products 
and services. Yes, we need to continue to push the edge. We 
need to continue to push and work on the sickest and sickest of 
patients, but now I believe the basis of competition has 
changed in health care. Instead of increasing functionality, we 
need systems that will be first of all reliable. We would just 
like to get the right medication to the right person at the 
right time in the right place, and we obviously have a 
tremendous difficulty in doing that.
    After reliability could come access, customization, the 
ability to fine tune the health care system to the needs of 
specific individuals and people, and then finally lower cost. 
It is not that our present organization and our present 
leadership does not want to do that. They do. It is the 
characteristic of disruptive innovation that leaders do best 
what their processes and values have built them for, and they 
continue to work in that area.
    They cannot do disruptive innovation. Clay Christensen has 
studied over 350 different industries and incidences of 
disruptive change, where a whole organization or a whole 
industry changed, and leadership was never able to lead that 
change within the confines of their mainstream organizations, 
simply because the business models drove them into that far 
upper right-hand corner.
    Senator Allen. How would you, Dr. Kenagy, handle with your 
disruptive innovation concept what Dr. Fuller was saying, which 
made a great deal of sense, that before we impose this on the 
whole industry, or even if you did it in the Southeast or the 
Northeast or the Midwest or Rocky Mountain West, or Pacific 
Coast, before you actually did something like that, how do you 
mesh that understandable view versus your desire for this 
change, and this change relatively quickly?
    Dr. Kenagy. I agree completely with Dr. Fuller and her 
view, and how really IT changes will occur in health care. They 
will start with small, understandable pieces that have the 
opportunity to iteratively improve and get better. They will 
start in small places.
    Senator Allen. So without standardization, then, because 
generally speaking I believe that whatever gets measured 
accurately gets better.
    Dr. Kenagy. You are exactly right, Senator, and we need to 
measure at a much lower level. We suffer from a myth in health 
care that we can put together data. Like the instrument panel 
on a 747, and I will be able to just drive this hospital right 
down the runway.
    It is much more complex than that, exactly to Dr. Fuller's 
points, and a major problem that I see working in health care 
in my interest is how do you get next to the patient, and build 
up systems from the patient and their needs? How do you buildup 
from the patient, matching patient needs, not a top-down 
solution but a bottom-up solution?
    What we find is, software and hardware pour bad processes 
in concrete. It is a tremendous problem. It is extremely 
difficult to make changes in computer systems. In our studies, 
we find hospital health systems are chaotic. If we computerize 
chaotic systems we will get turbochaos, and that is a problem.
    Senator Allen. All right. Now, what role can the Federal 
Government play, which is generally one of the things that the 
Chairman and I are trying to figure out? What role can the 
Federal Government play in promoting disruptive innovation? I 
am not sure if we would want to go out and run campaigns on, we 
want to be disruptive innovators of your health care system. 
You can do that as a doctor and an academic, but nevertheless, 
let us just say forward-thinking innovations, where can the 
Federal Government help move this process and this service 
along?
    Dr. Kenagy. I believe this is a leadership issue, and I 
believe leadership within the Federal Government, understanding 
the concepts, if you can put on the lens of disruptive 
innovation, our present situation not only becomes more 
understandable, it becomes completely predictable, and creating 
opportunities for leadership to learn and understand the 
concept of disruptive innovation, and then to take a lead in 
that area I think is very important.
    Harvard Business School and Harvard Medical School have 
combined together, I think for the first time ever--that is a 
disruptive innovation in and of itself--to offer to develop 
consortiums on disruptive innovation in health care. We have 
invited Senator Wyden and his staff to the first one in 
September, where we bring real companies and organizations who 
are actually trying to do disruptions together, five or six 
companies at a time, to try to understand how these ideas work 
and how they happen.
    Most importantly, from the governmental point of view, 
disruptions do not take root and grow in areas where they face 
organizational and regulatory barriers. They do not grow in 
large, established organizations, because established 
organizations have their own barriers to disruptive growth, so 
you must separate those ideas within your organization. You 
have to create a safe place within your organization to do 
this, and we can help, it has been done. It has been done by 
many companies, IBM, Hewlett-Packard. We have good data on how 
that can happen.
    From the regulatory point of view--and I do not know how 
this would happen, Senator, I would have to rely on your 
expertise. How can we create some safe havens, or some safe 
places to safely experiment? Dr. Fuller's point is much to the 
case. These disruptions do not just spring full-blown from the 
heads of a brilliant person. They develop iteratively, and 
improve through the system.
    How can we do that safely, and avoid regulatory barriers? 
How can we create some safety within the regulatory system for 
disruption to happen, and interestingly, I believe the changes 
will come out of the uninsured and the indigent population. 
That is the unattractive market segment, and that, is a 
fascinating area to explore.
    If you look at the history of disruptive innovation, they 
always grew out of unattractive, overlooked markets, to grow 
into the mainstream, and I think trying to develop disruptions 
in those areas would be exciting and interesting.
    Senator Allen. Well, I know you love that concept, or that 
phraseology, and you are conversant with it, but regardless of 
what words are used, what I think would help the Chairman and 
myself and other members of the Senate is to give examples of 
where those regulations--currently, if somebody has an idea--
and I do not know if you have any examples of where your 
concept of disruptive innovation has had a regulatory barrier, 
or there was a regulatory barrier the concept of disruptive 
innovation was put in. Do you have any examples of where this 
concept somehow faced a regulation, or this concept has been 
utilized, and we can say, ``Well, this is an example,'' rather 
than just talking in general theory. Any real-life examples?
    Dr. Kenagy. A few that I have just come across 
happenstantially in the course of doing this. A physician, 
actually in Virginia, a pediatrician who was very interested in 
developing home care products for patients, really an ultimate 
disruption. Disruptive innovations allow more accessible, 
appropriately skilled people to do things that were formerly 
done by expensive centralized specialists. His plan, and he 
started a business to do it, was to try to get more health 
products into the home, and teach families how to use them, and 
he had a great deal of difficulty involving other physicians in 
this product, because of the fear of the kick-back and referral 
laws, even though he carefully designed his endeavor to avoid 
those.
    The general fear among physicians was, I just cannot get 
involved. I just do not want to get involved. There is too much 
risk. I cannot take that step. I cannot do something different.
    I talked to a hospital administrator in Ronan, Montana, a 
little town, seeking to keep health care within his community, 
and developed a clinic associated with his hospital, followed 
every guideline perfectly, and ran into a gigantic hurdle from 
HCFA that it was very difficult for him to circumvent. It took 
a huge amount of time, effort, and money for him, even though 
they had really dotted the I's and crossed the T's completely, 
at least in his report to me.
    So the examples are out there. The examples are small, and 
that is the important thing, because these ideas, they do not 
start with a gigantic wave from the top. They bubble up from 
the bottom.
    Not all regulation is bad, certainly regulation is an 
essential part of our business, but it gets back to patient 
care. You do not have to regulate something that works, and we 
ourselves have to get this piece to work.
    Mr. Patterson. Mr. Allen, if I may.
    Senator Allen. I would think Mr. Scully would be one who, 
if you all came up with some probative ideas, whether it is in 
the Pacific Northwest or anywhere in the country, I think we 
would certainly want to allow you to do that, and it seems to 
me that Tom Scully would be very willing to do that as well. He 
just strikes me as someone who is innovative. He has not been 
in Government for the last 8 years. He has been in the private 
sector.
    Go ahead, Mr. Patterson.
    Mr. Patterson. I would like to bring up one example of 
where regulation has helped, and where the lack of it currently 
is hindering even the utility of what Dr. Fuller has talked 
about.
    You go back to the regulation that mandated the use of the 
national drug codes on pharmaceuticals, and that the pharmacy 
profession then created a standardization around that allows 
the tracking of pharmaceuticals by class and the grouping of 
those, and then the complete lack of standardization on the 
medical device and medical product side, where you have over 
400,000 items out there that cannot be characterized.
    You cannot go into a library in this country looking for a 
mystery and not go to a catalogue telling you every mystery 
book they have and where to find it. You cannot do that with 
health care products, other than pharmaceuticals.
    Senator Allen. Well, I guess one thing, Dr. May was talking 
about, besides stating the future, is now, which it is, and we 
wish it were sooner sometimes as well, but that is a good 
attitude that I think of a lot, but you stated, Dr. May, and 
this may get into the medical devices that, Mr. Patterson, I 
have some questions of you, too, following Dr. May's, but you 
stated in 1980--excuse me, 1998, the European directive on in 
vitro diagnostic medical devices, IVD's, should encourage 
greater NIST leadership in establishing a global reference 
system, and this just has to do with the United States and 
competitiveness.
    What would be the cost to the United States if we do not 
become involved in this process, which almost follows 
perfectly?
    Dr. May. I guess I have some numbers in my written 
statement and elsewhere, but I will say that 60 percent of the 
European market now is supplied by United States-based 
manufacturers.
    Senator Allen. So in the event we are not involved, we are 
going to lose that. We potentially could lose that.
    Dr. May. We could potentially lose that, and I guess the 
other concern that some IVD manufacturers have expressed is 
that, although, as stated, the EU directive should provide for 
an even playing field, and that it should provide for higher 
quality health care services for citizens of the European 
Union, they see the possibility of it being abused, and it 
being used as a technical barrier to trade, unless we in the 
United States are very aggressive and make sure those standards 
are in place.
    Senator Allen. That was my followup question, was whether 
or not the EU directive, if we are not involved, would be 
another excuse for the EU to deny that market, or use it as a 
trade barrier.
    Now, as far as these technological standards, do you think 
NIST should play a role in the adoption of those standards for 
the health care industry, such as Mr. Patterson's universal 
product number?
    Dr. May. NIST is involved in information technology 
standards through its information technology laboratory and 
through the advanced technology program. There are also 
measurement standards on the chemistry side that we are 
involved in. Obviously, my very biased opinion would be that 
certainly NIST should be involved, but other folks around the 
world seem to share that opinion that, in fact, this cannot 
happen unless NIST takes a leadership role for many reasons 
that I will not enumerate here for lack of time.
    Senator Allen. Let me go on to Mr. Patterson now. Thank 
you, Dr. May.
    I like what Dr. Kenagy said as far as customization, and I 
think the uniform product number is fine, but I always like to 
look at the advancements in technology and in the customization 
aspect, and I think the UPN is fine. I do not mean to be 
criticizing, just so you understand. My main interest in all of 
this, is in an nterest in technology; in the monitoring and the 
gauging and the transmitting of information of a patient who is 
at home and not in a hospital.
    Now, obviously, some people are going to have to be in a 
hospital with close monitoring, but I would like to see the 
day, and I do not think it is that far away, where you have a 
more customized--you are at home in a friendlier setting. They 
may have diabetes, or some allergy that is being tested or 
monitored accurately.
    That information is being transmitted wirelessly, or over 
the Internet to the doctor, wherever he or she may be, and then 
there is a reaction to it, and in fact you may not even need 
the physician involved. The dosage and the medicine is 
customized. Let us not take one pill. Somebody might need 8/
10ths of a pill, or .87 percent of a pill, and whatever the 
dosage is, is being monitored or given automatically, with the 
record going back to the physician who has the information that 
he or she needs to make sure everything is being monitored 
accurately, and the reaction is being accurately administered.
    Now, Dr. May, discussed some of the potential benefits from 
measurement standards and the role of increasing the 
reliability and accuracy of health care measurements. We talked 
about the financial benefits of management standards. Now, can 
we expect a similar type of return from the use of the UPN 
number, or uniform industry data standard? Would you see the 
same sort of returns?
    Mr. Patterson. I believe we could, and I also believe that 
it is a mechanism to enable the consumer to be at home and get 
health care. Take an example of one of the highest cost 
diseases in this country to treat, diabetes. The diabetic 
definitely can be treated at home, but most diabetics who are 
out of sight of their clinicians are not doing what they are 
supposed to be doing, and therefore it costs the health care of 
this country more money.
    Take a web site. We have some examples of one of our 
employees who has actually done this, and you plug in your 
information into that web site. It automatically goes to your 
doctor. If your insulin, if your syringes, if everything has a 
product number on it, you scan all of that in.
    All of the information is there for the doctor to look and 
see if, in fact, you have the right insulin, and if, in fact, 
you are doing the right thing with your blood testing, and the 
fact that you are using the standards that Dr. May talked 
about, and the clinician can look at that, or can have some 
triggers in the system, in his home page, if you would, to have 
some triggers in the software that said, this patient just put 
in their blood sugar, they just indicated that they have 
product number XYZ, which is linked to insulin, they should 
have regular insulin, no wonder they are out of control, that 
could have tremendous applicability to enable the consumer to 
better track their health care progress, and the physician, and 
the clinicians.
    Senator Allen. You actually applied the UPN in your 
customized approach. Thank you for making that--because the 
UPN's are great. It is great to have the bar codes and all of 
that, but thank you for fitting it into how it would work in a 
way that I would like to see technology benefiting the actual 
patients.
    Now, do you see, and if you do see any private sector or 
Federal Government barriers, regulatory barriers to greater 
adoption of information technology such as UPN in the health 
care industry, if you see any, please let us know right now.
    Mr. Patterson. I do not see any barriers, other than just 
essentially creating a tracking system for UPN, but you 
essentially already have it for NDC's. You already have a 
tracking system. I do not see any barriers at all to 
implementing something like this.
    Senator Allen. Well, how do you see the Federal Government 
playing a greater role in the adoption of information 
technology for products, in particular, UPN?
    Mr. Patterson. The Federal Government, in order for UPN to 
work, must get involved. The industry does not want UPN. My 
view of that is, because it allows the health care 
practitioners to, in fact, shop, if you would for the best 
value amongst products.
    Senator Allen. By industry, who do you mean?
    Mr. Patterson. Medical supply, medical device industry. 
They have the capability of using UPN right now. All the 
standards are there. They just have to implement them, and what 
that will do is enable all the purchasers of health care 
products in the country to do exactly what they do with 
pharmaceuticals today, and that is to group them in classes and 
look at the best product for the application at that time.
    You take an example of gauze sponges, or 4 x 4's, whatever 
you want to call them. There are 400 to 500 of those marketed 
today. There is no place you can go and look to see which ones 
are the same, which ones can you use, what is the best value 
for the customer, because there are no standard numbering 
systems that would allow a body, if you would, to create a 
cross-reference of those products.
    Senator Allen. So, are you then suggesting there should be 
one mandated?
    Mr. Patterson. Yes. What I am suggesting is that the use of 
a standard numbering system for medical products and medical 
devices should, in fact, be mandated.
    Senator Allen. Thank you. I have no further questions, but 
I want to thank each and every one of you for your time and 
your expertise and your insight.
    Thank you, Mr. Chairman.
    Senator Wyden. Well, I thank my colleague. Those are very 
good questions, and I have just a few in addition.
    Dr. Kenagy, I think what Senator Allen was grappling with 
was along the lines of what you and I talked about on the 
phone. We are going to need real case studies of examples where 
the Federal Government impeded innovation.
    That is why I asked the questions I did of Mr. Scully 
concerning the kick-back and referral statutes. To some extent 
those laws, which are clearly important in terms of blocking 
egregious conflicts, are chilling the sharing of information 
through electronic health programs. We would appreciate some 
examples--and by the way, just in the area that you are talking 
about, the uninsured, Senator Smith and I were able to get $28 
billion in the budget in order to jump-start the effort for the 
uninsured, and so nothing could be more timely in that area.
    I have noted, for example, some comments you and others 
have made about an expanded role for physician assistants, who 
would simply have at their hip what amounts to microprocessor 
control diagnostic tools, and high-speed data links. With this 
information, they could in effect keep people out of hospitals, 
and various other services. I am not sure the Federal 
Government is blocking that at this point. If it is, we need to 
have you walk us through that.
    I wanted you to come to the U.S. Senate today, because I 
think what you are talking about is one of the most exciting 
things out there in the debate over health care in this 
country. If you could give us a handful of examples, especially 
in the area of the uninsured, because we are on the cusp of 
going for it in the Senate Finance Committee, trying to figure 
out how to utilize that $28 billion.
    It is not something that is going to happen in 6 months. It 
may start next week, conceivably, and so that would be very 
helpful, and Senator Allen and I could work on that in a 
bipartisan way.
    Dr. Fuller, I was struck by something you said at the 
beginning of your testimony which to some extent was something 
I raised earlier today. That is that many of the biggest 
challenges in front of e-health are not any different than the 
challenges in front of health care as a whole. You mentioned 
the fact that you get notices about your pets' immunizations 
and you do not get them for yourself.
    You do not need some fancy integrated e-health medical 
information program for that. That is something that could have 
taken place with a phone call, or putting something in snail 
mail and getting it to you that way. Why do you think we have 
gotten to the point where so many obvious solutions to better 
assist people have not been utilized? What is the lesson out of 
that so that we do not repeat it, as we look to design these e-
health systems?
    Dr. Fuller. Clearly, that is the crux of the issue, and I 
wish I had an easy answer to your question. I do not, but it 
does relate to the inertia in our current health care system 
where people in it--well-meaning people who work very hard to 
introduce improvements--are simply overwhelmed by the 
complexity they face in creating solutions that will scale, and 
by the way, I did not mention this at the beginning, but I am a 
librarian by background.
    I was trained as a librarian, and I fell into bad company 
early on of computer scientists. People have said that about 
me, and that somehow very early on in my career I became a 
transformed person in terms of my interests, and the interest 
in information technology as a way of solving many of these 
kinds of problems.
    How do we introduce solutions that overcome the inertia and 
the fact that people are so overwhelmed in our health care 
system today that they simply do not have additional minutes in 
the day to learn a new computer program, to learn a new 
software package, to look at data that is presented to them in 
not very good formats, I must say. But those are the kinds of 
questions that I think are conducive to research, and that we 
really can fine-tune and use the technology to save people's 
time, but that has not been the focus of much of the work we 
have done.
    Instead, we have said, you are going to love this, and 
handed them a new computer program, or handed them an order 
entry system, and never asked them what they thought of order 
entry, of online order entry, or how is it really done today? 
Do we really know, in a complex health care system, how orders 
are entered today, who enters them?
    It happens in many cases not to be the physician, and so we 
have some very difficult change management problems, and I 
guess my single tune has to be that if we do not know the 
questions, we cannot possibly come up with the right answers, 
and I do not think we even are asking the right questions, and 
so we are not coming up with the right answers to many of these 
issues.
    Senator Wyden. How much of the problem, in terms of really 
speeding up these innovations that are technology driven, stems 
from the fact that in many ways you get penalized for doing it?
    Dr. Fuller. Yes, you do.
    Senator Wyden. Fifty percent of the problem, 75 percent of 
the problem?
    Dr. Fuller. I think that the people who have attempted to 
be innovative in information systems have very often suffered 
as a result of those innovations, either personally or 
organizationally.
    Senator Wyden. So you would not disagree with the theory 
that I advanced earlier that if you told everybody to submit, 
capture, adjudicate, and reimburse claims in a hurry, that 
would force some system-wide changes? It would not penalize 
people.
    Dr. Fuller. Yes, I think that is true, but I think we have 
to separate innovations in the administrative aspect of health 
care which I think need to go on, and can be driven by edicts 
like that, from the fact that in health care the Federal 
Government has not invested in the basic IT research in support 
of health care. Instead, we have lived off of the inventions of 
the Department of Defense, the Department of Energy, the 
National Science Foundation and so forth, and those solutions, 
as good as they are for security, for networking, for other 
kinds of technical issues, the Internet itself, simply are not 
responsive to the kinds of problems we are talking about.
    Senator Wyden. Well, then let us ask about public 
investments. What should the Federal Government do in terms of 
investing in the next generation of supercomputers so that the 
information from the human genome can be quickly transformed 
into individualized drugs that assist people?
    Dr. Fuller. I think the investments must be made in a way 
that includes health, biomedical informatics researchers as 
part of the research teams, and without a federal investment in 
computing that includes health care information technology 
researchers as part of the solution, we are not going to get 
the solutions that we need, and we may get them eventually, but 
we will not get them as quickly as we need to get them.
    Most companies do invest in information technology 
development and research, and there are percentages that are 
quoted between 3 and 6 percent of the budgets of corporations. 
I believe that in the Federal Government's health care budget 
across the board, and I am speaking for myself, although we 
have made aa similar recommendation, but not a number, that 
some percentage, 3 percent, some percentage should come off the 
top and be used by all of the federal health care agencies to 
fund the kinds of innovations and research and development that 
will address the kinds of problems that we have been talking 
about this afternoon.
    Senator Wyden. Dr. May.
    Dr. May. Just one comment regarding the human genome 
project. We are talking about ways of disseminating this 
information, and this is truly revolutionary information that 
will transform the way that we all live, but we also need to 
invest some resources in looking at the quality of that data.
    Dr. Fuller. Absolutely.
    Senator Wyden. Dr. Kenagy.
    Dr. Kenagy. I think along the same line, I mean, because it 
strikes home so true, and all the way across the board, for the 
genome to work and to--you know, before we invest in gigantic 
supercomputers, let us understand the processes of care. Let us 
understand how things really work.
    The example of the veterinarian who can get information to 
the owner of the dog, and the fact that we cannot get that 
information to our patients, it is not a technical problem. We 
have got bucketloads of technology that can do that. Those are 
organizational issues, and until we confront those issues and 
deal with them at the very point of care, we will continue to 
have these problems.
    Senator Wyden. Well, that has essentially been one of the 
key points that I have been trying to make over the last 3 
hours. I think there are problems in the IT area, and the e-
health care area, that are not very different than other 
problems that we face, and that is why I made the proposal I 
did today with respect to medical claims. I think we also ought 
to be dealing with the fact that innovators are being 
penalized. They are being penalized again and again.
    The health system in the State of Oregon, Dr. Kenagy knows, 
went out and was in the vanguard of managed care and a variety 
of other innovations, brought competition, and the Federal 
Government said, ``Good for you, we are going to send you 
smaller checks.'' Now it is going to be a lot tougher to 
attract the top-flight health care providers as a result of the 
fact that you did all this heavy lifting before everybody else. 
The message to the converse is that if you did not really care, 
and you really wanted to just keep jacking up costs, do not 
sweat it, because the Federal Government will just send you a 
bigger check for your labors. Those are good points.
    Let me turn to you, if I might, Dr. May, and I was glad you 
mentioned the in vitro area. One of the issues that I follow 
over the years, I wrote the fertility clinic success rate 
statute a number of years ago, so I have been interested in 
this area, and I would be curious--you know, we have got 
national standards for 12 health status markers. Do you think 
that there is a need for standards for additional health status 
markers, and if so, what would they be?
    Dr. May. Well, certainly, to set the record straight, I 
guess, we have national standards for a bit more than 12. We 
have 12 that are listed there, that are what we call 
definitive, but we have others that we have realized using 
other approaches, but certainly what about the other 300 minus 
whatever that X is that people measure every day, and there are 
medical decisions being made based on that data, and they are 
not all linked to any universal truth. This certainly has some 
implications on patient care.
    But the IVD directive in Europe is saying that to the 
extent possible, all data used in the European Union will be 
truth-based, and certainly that is going to have a large impact 
on us in the United States, whether we like it or not, and the 
IVD industry has accepted that they are going to have to spend 
more money on this activity, and they have also identified a 
role for NIST.
    Senator Wyden. And you have a lot of work to do between now 
and December of 2003.
    Dr. May. First of all, there is no way we can get all that 
done by that date, and it is going to require a sustained 
effort over time, and it is not only going to be the United 
States, and it is not only going to be NIST. It is going to 
require the involvement of standards laboratories around the 
world to get this done.
    Senator Wyden. Now, the manufacturers are also making 
products for home diagnostics market, and there is great 
interest in this. I think Senator Allen is absolutely right 
that this, of course, is something that the American public 
will want to see as more of these home diagnostic tests enter 
the marketplace. Are there going to be measurement standards in 
place to ensure the accuracy of the tests?
    Dr. May. The short answer is no. They are not in place, and 
one of the reasons they are not in place is that in many ways 
we will have to look at a new paradigm for delivering standards 
to address the point of care home-testing market.
    Senator Wyden. Before we go making new paradigms, the 
American people are going to want to know if they are at risk 
in certain areas. Are there areas where they are at risk at 
this point, as a result of these products?
    Dr. May. I think appropriately used, many of these home 
care testing devices do not necessarily have to be accurate--
they have to be precise--as long as there is a linkage between 
these very precise and reproducible measurements with truth at 
some point, perhaps back in the clinical laboratory.
    For example, you can easily determine whether or not a 
medication is working by whether the value goes up or down, it 
does not necessarily have to be absolutely accurate, and you 
can also determine if there is some change in your 
physiological condition.
    So I guess I am not saying that there is a great panic, but 
as these things proliferate there is the possibility that 
people will tend to self-medicate using these devices, without 
linking back to the physician. I guess one of the statements 
made here indicated that perhaps through appropriate use of IT, 
that will not happen.
    I do not know whether I answered your question.
    Senator Wyden. Well, I think as part of your work you have 
got to be careful about not panicking people. I understand 
that, and there is a difference between accuracy and risk, but 
I would like to hold the record open and have you all get back 
to us with respect to whether or not there are some of these 
home diagnostic products at t his point here there is a 
significant risk to the public, OK?
    Dr. May. Sure.
    Senator Wyden. The only other question I had for you, Dr. 
May, and my staff really kind of jumped on me as I was thinking 
about this is, you all obviously work with private industry in 
developing information technology standards. That is the 
central focus of your work.
    But do you also do some work in conjunction with the 
Department of Health and Human Services, because clearly, as 
they go forward with their work in terms of outcomes and price, 
and getting all of this on the web, it is going to be important 
to have these linkages. How does your agency interact with 
Health and Human Services on this?
    Dr. May. Well, we are trying to improve our interaction. We 
recently had a meeting with the science advisor at FDA to start 
talking about more effective collaborations. In the past, we 
have had a number of scientist-to-scientist interactions. We 
have not had the interactions at the highest levels that 
perhaps we should, and that is something we are fixing now.
    Senator Wyden. OK, very good. Let me just ask one other 
question for you, Mr. Patterson. You are in the unenviable 
position of calling for regulation, and my friend Senator Allen 
certainly raises legitimate questions there, and to some extent 
I am more sympathetic to his position than one might normally 
think. This is Ron Wyden, director of the Gray Panthers, 
probably a vending machine for Government regulations. If there 
is a problem out there, put your quarter in and out spits a 
regulation.
    I will tell you that if you can make the case that there is 
a role for Government that makes markets work better, then it 
seems to me, at least from my standpoint, that is what is most 
compelling, but I think Senator Allen makes a concern that I 
also share, that historically what happens with a lot of these 
regulations is, you freeze innovation, and you get a kind of 
one-size-fits-all kind of concoction, and you create as many 
problems as you solve, so I am not going to at this point grill 
you about the kind of regulation that you are interested in.
    I think you have certainly raised the question 
appropriately that this could conceivably allow people to make 
choices more efficiently, make markets work better, but as you 
work with us on the Committee and in the Congress, keep in mind 
that there is some sympathy for what Senator Allen is talking 
about, even in unlikely quarters like mine, and I think 
probably some other Democrats as well.
    All right. This has been an excellent panel, and you all 
have been hardy, waiting for 3 hours. Is there anything any of 
the four of you would like to add further at this time?
    Dr. Fuller.
    Dr. Fuller. I just would like to make a clarifying comment, 
because I am afraid that my remarks about investing in research 
and health care may have been interpreted as solely related to 
the technology and the software.
    I am a firm advocate of research in the sociopolitical as 
well as technical issues, and understanding how health care 
teams work before you introduce information technology is vital 
to the kind of solutions we have all been talking about today, 
and that is a great unknown. There simply is not funding out 
there, with a few exceptions, particularly National Library of 
Medicine funding, that will support that kind of research.
    So that was just a clarifying comment. Thank you very much.
    Senator Wyden. Fair enough. Any other clarifying comments?
    [No response.]
    Senator Wyden. The Subcommittee is adjourned.
    [Whereupon, at 3:50 p.m., the Subcommittee adjourned.]


                            A P P E N D I X

                                                    August 3, 2001.
Hon. Ron Wyden, Chairman,
Subcommittee on Science, Technology, and Space,
Senate Committee on Commerce, Science, and Transportation,
Washington, DC.
    Dear Chairman Wyden: On behalf of Premier, Inc., an alliance of 
more than 1,800 of the nation's leading not-for-profit hospitals and 
health systems, I wish to thank you for having convened the July 23 
Subcommittee hearing on e-health and consumer empowerment. As Bert 
Patterson, our vice president for contracting, maintained in his 
written and oral testimony, the uncharted e-health frontier holds vast 
potential for the sustained quality improvement of healthcare, itself, 
as well as its supply chain and delivery mechanisms. We deeply 
appreciate having had the opportunity to contribute to the hearing and 
assist the subcommittee as it explores the promise of e-health.
    In this regard, I wish to clarify one of the issues Premier raised 
with respect to the widespread support for health industry adoption of 
an electronically readable, uniform industry data standard. We believe 
that such a standard is embodied in the Universal Product Number (UPN), 
and recommend that these unique identifiers be displayed at every level 
of packaging, for transmission via bar code technology into hospital 
vendor and information systems.
    The adoption of this technology, as noted in our testimony, 
provides an e-health `trifecta,' if you will----
     enhanced patient safety and reduced medical errors,
     improved healthcare efficiency and savings through better 
supply chain management,
     heightened knowledge transfer and clinical performance 
improvement through comparative data.
    In this way, UPN represents a critical building block in the 
emerging e-health infrastructure.
    As Premier noted, when a manufacturer of a specific pharmaceutical 
submits an application for approval with the Food and Drug 
Administration (FDA), the assignment of a National Drug Code (NDC) 
number is required. In fact, the NDC enjoys regulatory standing with 
the FDA, and is employed by the pharmaceutical industry and numerous 
healthcare organizations for automated tracking of products.
    In contrast, there is no industry-wide, standardized identification 
system for medical and surgical supplies that receive FDA approval. The 
UPN is uniquely positioned to provide that standard. As Mr. Patterson 
noted in his statement before the committee, Premier believes a 
parallel system is in order--one in which FDA requires that medical and 
surgical supply manufacturers, in addition to pharmaceutical companies, 
obtain a UPN prior to submission for item approval.
    As the Subcommittee moves forward with its review, and ultimately 
develops initiatives to bolster e-health adoption, we believe that the 
implementation of this critical building block--the assignment of a 
unique identifier for FDA-approved medical and surgical supplies--would 
set the stage for significant healthcare improvement.
            Sincerely,
                                                 Herb Kuhn,
                                Corporate Vice President, Advocacy.
  
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