OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

http://www.cga.ct.gov/ofa

sSB-812

AN ACT CONCERNING ELECTRONIC HEALTH RECORDS AND HEALTH INFORMATION EXCHANGE.


OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 16 $

FY 17 $

Public Health, Dept.

GF - Cost

400,020

831,428

UConn Health Ctr.

SF - Cost

See Below

See Below

Department of Revenue Services

GF - Cost

174,000

119,000

Comptroller Misc. Accounts (Fringe Benefits)1

GF - Cost

158,900

311,514

Treasurer, Debt Serv.

GF - Cost

None

1.5 million

Department of Revenue Services

GF - Revenue Loss

Potential Significant

Potential Significant

Note: GF=General Fund; SF=Special Fund (Non-appropriated)

Municipal Impact: None

Explanation

The bill establishes a State-wide Health Information Exchange (the Exchange) and requires the Department of Public Health (DPH) to issue a request for proposal (RFP) to eligible nonprofits for the development, management and operation of the Exchange. The bill authorizes a total of $50 million in General Obligation (GO) bonds over four years for the development and maintenance of the Exchange. The sections of the bill with fiscal impact are described below.

Section 2 requires DPH to issue an RFP to eligible nonprofits for the development, management and operation of the Exchange. The department does not currently have the staff or expertise to develop an RFP for the Exchange and provide managerial oversight of the selected vendor. DPH will require an IT Project Manager Consultant to work with state agency personnel to define technical requirements across a broad portfolio of public health applications and to work with the Department of Administrative Services' Bureau of Enterprise Systems and Technology technical staff. The agency requires four positions and one durational staff attorney, effective 10/1/2015, related to the development of the RFP. An additional three positions are required in FY 17 to review data standards and integration processes developed by the vendor. The following table details the necessary positions and the DPH and State Comptroller- Fringe Benefit costs.

DPH Staffing Requirements

Personal Services - Title

Effective

FY 16 $

FY 17 $

Administrative Assistant

10/1/2015

45,258

65,304

Epidemiologist

10/1/2015

64,196

92,628

Accountant

10/1/2015

56,268

81,118

Grants and Contract Specialists

10/1/2015

64,673

93,317

Durational Staff Attorney (2yrs)

10/1/2015

61,728

89,067

IT Analyst 3

7/1/2016

-

96,735

IT Analyst 2

7/1/2016

-

91,242

Quality Assurance Coordinator

7/1/2016

-

77,575

TOTAL

 

292,123

686,986

 

Other Expenses

Consultant - IT Project Manager

10/1/2015

102,970

141,412

Equipment

 

5,050

3,030

TOTAL

 

108,020

144,442

       

TOTAL DPH COST

 

400,143

831,428

 

State Comptroller- Fringe Benefits

 

112,906

265,520

Section 3 authorizes a total of $50 million in General Obligation (GO) bonds for the development and maintenance of a state-wide health information exchange. The table below summarizes the authorization schedule for the bonds between FY 16 and FY 19, and the debt service cost for each year. Assuming that the initial $15.0 million is allocated through the State Bond Commission during FY 16 and the Office of the State Treasurer issues the bonds before the end of FY 16, the debt service cost in FY 17 will be $1.5 million.

New GO Bond Authorizations and Estimated Debt Service Cost

(in millions)

Fiscal

Year

Authorization Amount $

Total Debt Service Cost1 $

Interest $

Principal $

2016

15.0

22.9

7.9

15.0

2017

15.0

22.9

7.9

15.0

2018

10.0

15.3

5.3

10.0

2019

10.0

15.3

5.3

10.0

TOTAL

50.0

76.4

26.4

50.0

1Figures assume that bonds are issued at 5.0% over a 20 year term.

Section 4 establishes a separate nonlapsing “State-wide Health Information Exchange account” to be used by DPH for the development and maintenance of the Exchange. However, it should be noted that the bill does not specify a funding source for the account so it is unclear how DPH will support the costs detailed in Section 3.

Section 5 will result in significant increased costs for the John Dempsey Hospital (JDH) at the University of Connecticut Health Center (UCHC). First, the bill requires, as a condition of licensure, hospitals to maintain a certified electronic health record (EHR) system. UCHC has recently explored the purchase of such a system for JDH. Based on a request-for-information from that process, the one-time cost to purchase and fully implement a new EHR system would be approximately $85 million.

Second, the bill requires hospitals to enable bidirectional connectivity between themselves and other providers with EHR systems. In addition to the costs to purchase an EHR system with this capability, noted above, it is estimated that at least four additional information technology positions will be necessary to develop, test and maintain the interoperability of the system with the various providers. These positions would have annual salary and fringe benefit costs of approximately $550,000.

Third, the bill prohibits hospitals from requiring providers to pay for items related to the hospital's EHR system or charging fees to access the system. It also allows hospitals to donate items necessary to interface with the new EHR system. The impact of these requirements is uncertain, as it is unknown what additional costs providers might incur to connect with the new system nor what JDH's ultimate responsibility to pay for these costs is under the language of the bill.

Section 6 results in a potential revenue loss by allowing a tax credit for hospitals that donate equipment to providers. The actual revenue loss will vary based upon the value of the donation and the number of hospitals providing donations.

For illustrative purposes, the initial start-up cost for hardware per provider at a small practice can range from $12,500 to $23,500. Ongoing costs related to hardware replacements can be up to $3,000.2

Section 7 results in a potentially significant revenue loss by authorizing tax credits for health care providers implementing and upgrading EHR systems. The credit may be taken against the corporate business tax, hospital tax, or the income tax. The actual revenue loss will depend upon the number of health care providers that implement or upgrade an EHR system.

For illustrative purposes, the total initial costs per provider at a small practice for all components of a system (e.g. software installation, hardware, and training) can range from $44,000 to $63,000.3

As mentioned above, the one-time cost to purchase and fully implement a new EHR system at John Dempsey Hospital would be approximately $85 million.

As an illustration of a large EHR system, the Yale-New Haven Hospital System, which includes Bridgeport Hospital, Greenwich Hospital, Yale-New Haven Hospital, Northeast Medical Group, Yale Medical Group, and various community physicians, initiated an EHR system at a cost of $290 million.4

Department of Revenue Services Costs

To administer the tax credits established under the bill, the Department of Revenue Services (DRS) would require one Tax Correction Examiner ($55,000 for salary and $21,258 for fringe) and one Revenue Examiner ($64,000 for salary and $24,736 for fringe costs) for initial review and on-going compliance, resulting in a total annualized cost of $164,994.

The DRS would also incur a one-time cost of approximately $55,000 to administer the new tax credits, including changes to the online Taxpayer Service Center, form alteration, printing costs, and programming changes to the Department's Integrated Tax Administration System.

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to inflation, except as identified as durational. The General Fund debt service impact identified above would continue over the 20 year term of issuance for the bonds.

1 The fringe benefit costs for most state employees are budgeted centrally in accounts administered by the Comptroller. The estimated active employee fringe benefit cost associated with most personnel changes is 38.65% of payroll in FY 16 and FY 17.

2 “The Value of Electronic Records in Solo or Small Group Practices,” Health Affairs – Volume 24, Number 5, September 2005.

3 “The Value of Electronic Records in Solo or Small Group Practices,” Health Affairs – Volume 24, Number 5, September 2005.

4 Yale New Haven Health 2013 Annual Report