duce the involvement by the medical and other professional communities to move toward this CHIS is an open question.

Additionally, it is an open question as to whether we should pursue a purely legislative solution in the public sector alone or whether we employ some kind of voluntary public-private sector system.

It is these open questions that we intend to explore in the course of this hearing.

Our first witness will be Ms. Joanne Quan, director, data systems, health management system, New York State. She will be followed by a panel of experts from the private sector who will give us additional insights that they have achieved in areas of health information systems.

Now, we have a problem today, because there is a very important Democratic caucus. It will be commencing at about 10 minutes to 10. The subject of the caucus is on the Democratic position on President Reagan's tax program. Under the Democratic rules of the House, we cannot hold a hearing while the caucus is going on.

Now, we intend to take that admonition cum salis granum, with a large grain of salt, and we will be holding hearings, because that is going to be going on all morning. But Congressman Brown and I feel that we ought to show our faces over there.

So what we plan to do is hear Ms. Quan for about 15 minutes, until about 5 minutes to 10. Then we will recess until about 10:30. We should be back between 10:30 and 10:45. If you would be willing to wait until then, we will have some questions for Ms. Quan, I am sure, and then we can go ahead with the rest of the witnesses.

I regret we are imposing on the patience and good nature of the witnesses. But we just have been placed in a bind. When this scheduled hearing was set up, we had no knowledge that there would be a Democratic caucus this morning on such an important matter.

As I say, under the rules of the Democratic caucus, we cannot hold a hearing while the caucus is in session. We are going to shortcut that somewhat and come back and hope that no Democrat will file a formal objection.

So with those words, and our joint apologies and regrets on the imposition on the time of the witnesses and audience, too, who we are concerned about, if nobody has any violent objections, we will go ahead on that basis.

We will hear from Ms. Quan, her direct testimony, and then we will recess for about 30 or 40 minutes and come back here.

Before Ms. Quan begins, I would like to recognize my distinguished colleague, Congressman Brown, who has been an early supporter of the coordinated health information system.

Mr. BROWN. Thank you. I have no additional comments. Mr. SCHEUER. Also, we have now been joined by Congressman Doug Walgren, who is the joint chairman of this session, the chairman of our sister subcommittee.

Mr. SCHEUER. Ms. Quan, we are delighted to have you here today. Your testimony will be printed in full in the record, so in the next 12 or 15 minutes, why don't you chat with us informally, if you would like.

If you are familiar with the testimony that we had yesterday, if anybody has talked to you about it, you are more than welcome to address anything that transpired here yesterday, any thoughts that were expressed either by members or witnesses.

With that, let us repeat our welcome to you, and the floor is yours.

STATEMENT OF JOANNE QUAN, DIRECTOR, DATA SYSTEMS, HEALTH SYSTEMS MANAGEMENT, NEW YORK STATE

Ms. QUAN. Congressman Scheuer, Congressman Brown, Congressman Walgren, members of the Subcommittee on Natural Resources, Agriculture Research and Environment, and members of the Subcommittee on Science, Research, and Technology, I am Joanne Quan, deputy director of the New York State Office of Health Systems Management's Division of Health Care Financing. I am pleased to be here today to speak to you about the needs for a coordinated health information system.

Prior to assuming my duties in finance, I served as the director of the New York State data systems development project which has been funded by the Health Care Financing Administration of the Department of Health and Human Services under a State demonstration grant.

During my tenure as director, we developed and implemented just such a health information system which has been in full operation since 1980. I appreciate the opportunity to share my experiences on this project with you.

The development of mechanisms to contain and monitor hospital costs while assuring access to high quality care has been one of the primary goals of the New York State Office of Health Systems Management, OHSM, since its inception in 1977. To carry out this broad mandate, a set of basic yet vital facts must be available to that office.

As you know, one of the obstacles to more effective control of the spiraling costs of health care has been inadequate statistics. In many cases, the information is itself fragmented or not available or when available not comparable.

The New York statewide planning and research cooperative system, more commonly known by its acronym, SPARCS, is a State-developed and operated systematic investment in the future which will enable us to fulfill our statutory health care mandates. SPARCS receives, stores, and processes inpatient data from all hospitals in New York State. It is a unified, comprehensive health care information network which supports and links, through integrated data, the functions of resource planning, financing, and surveillance of hospital services in New York State.

Since SPARCS draws on both institutional and patient statistical, medical, and financial facts, hospital costs and activities can be matched against the types of patients a facility treats and the range of services provided there.

We consider SPARCS to be long overdue as a critically needed support system to assist in our efforts to improve the State health care system. The Federal Government has viewed the project as a national model for other States in the country in terms of uniform

hospital reporting, a comprehensive health care data base and an integrated management information system.

Thus, SPARCS has far-reaching ramifications both within and outside the State of New York.

The basic sources of data from SPARCS include annual hospital financial and statistical reports as well as inpatient billing and discharge information. All acute care hospitals in the State are required to submit data from four documents to OHSM: a uniform billing form; a uniform discharge data abstract; the Federal annual hospital report; and a State supplement to that report.

These four documents replace a myriad of forms formerly used by hospitals.

As a result of this program, New York is the first State in the Nation to have all major third-party payors utilizing a uniform hospital bill and the first to have a common statewide data set for the Professional Standards and Review Organizations.

These firsts highlight in my mind ways in which Federal and State health care information policies should converge and diverge. The uniform bill provides hospitals with a single billing document for medicare, medicaid, Blue Cross, commercial carriers, and workers compensation, thus eliminating dozens of claims forms hospitals once had to complete. SPARCS information is extracted from the UBF-1 after payment is made to the hospital and this procedure takes advantage of the edits, corrections, and computer tape transfer performed by the insurance companies, thus promoting accuracy of information and reducing the amount of automation that is required by SPARCS. And in addition, the postpayment data collection will not interfere with cash flow to hospitals by the insurers.

Today the PSRO data collection activities and SPARCS are working together so that there is only one reporting mechanism for both programs in all hospitals.

For approximately 85 percent of all cases in New York State hospitals already automate that discharge data and rather than introduce a new form, OHSM accepts computer tapes of this information wherever available. As a result, each institution need only collect medical discharge information once, for its own purposes, for the PSRO, and for SPARCS.

With these events in mind, I would urge the committee to carefully weigh the factors of systemwide uniformity versus State flexiblilty in the following manner.

A Federal minimum hospital data set should be met by all States. This information is vital to establishing a comparable and comprehensive national data base for Federal and State planning, analysis, and monitoring of hospital services. In addition, this core data can be used as a foundation for a State to build upon for its own information system.

States should be allowed to submit federally mandated information in a specified computer tape format rather than be tied to a specific document form. This type of technological flexibility frees a State from a Federal hard copy form so that it may develop its own statewide forms which not only meet the Federal Government's requirements but also the data needs of multiple health organizations in that particular region.

States should be allowed to develop their own data collection system to meet the Federal requirements as well as their own informational needs. Thus States may identify collection mechanisms which best meet and/or take advantage of processing systems already in place in their own area.

I think it is important to expand upon this last point in terms of States opting for voluntary versus mandatory data collection systems.

While some States have met with success in utilizing a voluntary approach to consolidated health information systems, I do not think accomplishments of the New York mandatory system should be minimized or discounted.

The success of SPARCS, of course, depends on the accuracy and completeness of the data gathered. To insure that all hospitals in the State are included in this system, participation in SPARCS is mandatory in New York.

I believe the sheer size of the hospital industry in New York, with widely diverse reporting practices and capabilities, necessitated this approach. There are approximately 300 hospitals in our State. There are 6 Blue Cross plans in New York, 57 medicaid county offices, 8 medicare fiscal intermediaries, and dozens of commercial carriers, not to mention self-pay and charity cases. These payors range from basic to sophisticated in their reporting procedures and operations. And in the case of the discharge abstract, there are hospitals with in-house computer capability, some with contracted services and some with only manual operations.

The bills and abstracts, although linked, will be submitted to SPARCS on separate forms. We will be processing almost 7 million individuals' records per year. It is our intention to assure that the discharge abstracts be matched to the billing records and that all patient files be linked to the 300 institutional files.

Within the framework of this diverse and enormous system and industry, we felt that mandatory participation would be essential for SPARCS.

New York's experience has been that it is extremely difficult to obtain cooperation of all the involved groups without a State mandate.

A mandatory system is the only way that complete data could be obtained since a significant number of hospitals would be unlikely to cooperate without the regulatory requirement.

The State's regulatory authority allows the definition of a uniform data set with uniform data definitions. Without such a mandate, hospitals would use their own sets of data elements with their own definitions.

The State can require a data submission schedule for all hospitals. Without such a time limit, it is likely there would be very great problems with the timeliness of data submission.

Last, a State data system has numerous advantages in the areas of privacy and confidentiality. The State authority of such a system provides for the promulgation of regulations that include penalties for violations. State regulations allow for a process that is more open to public accountability. And many institutions and organizations would not cooperate with the voluntary system because of the

lack of official regulations for the protection of privacy and confidentiality.

This last objective concerning confidentiality proved to be one of the most difficult issues in New York and became a major point of contention between the State and Federal Government.

From the beginning of the SPARCS program, the State sought to design regulations which would protect patient privacy. Although patients' names are not collected, OHSM recognizes that other data elements are also sensitive. At the same time, we did not want to employ methods which would result in SPARCS data being inaccessible, and therefore of little or no value to all concerned.

Therein lay the dilemma. We had to find a balance between preserving confidentiality of individual records and the legitimate need to know about hospital activities.

Accordingly, New York has taken several precedent-setting steps. The State has developed SPARCS privacy regulations which are not only regarded as quite stringent by many but are also the first set of specific confidentiality procedures in the country to govern a hospital data system. These regulations define two classes of data requests-deniable and nondeniable. Access to nondeniable matter will be processed and disclosed consistent with the State freedom of information law.

Deniable data requests are those asking for specific data elements which by themselves or in combination might enable one to identify an individual or institution. All requests for deniable information must be carefully reviewed by the Data Protection Review Board. This public review body is broadly representative of the community, industry, and government, and is appointed by the Commissioner of Health. The board makes recommendations to the Commissioner on the release of information. While the Commissioner may reverse the decision of the board, the board retains the authority to overturn the Commissioner's decision by a two-thirds vote.

We believe that this system of checks and balances guards the rights of individuals while providing access to needed information. The Health Care Financing Administration of HHS took issue with this approach in 1979. HCFA indicated to us that its interpretation of Federal statute gives the Secretary of HHS unfettered access to all data on patients covered by titles V, XVII, and XIX of the Social Security Act. These Federal beneficiaries represent almost 70 percent of the patients covered in New York. HCFA also maintained that its significant financial support of SPARCS should result in a system which provided HHS with immediate and automatic retrieval of this data.

For these reasons, HCFA requested a change in the New York State privacy and confidentiality regulations which would allow HCFA to bypass the Data Protection Review Board for these data. OHSM upheld its position and months of negotiations followed. I should mention that the entire grant also was in jeopardy at this point.

Finally a compromise was reached whereby HCFA is given access to data when Federal law requires disclosure of SPARCS data from providers, fiscal intermediaries, the State, and others.