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Health Information Technology Strategic Framework Report

Attachment 1

Report from the Office of Personnel Management

Letter from Director, Kay Coles James

Interoperable Health
Information Technology

A Report for:
The Honorable George W. Bush
United States of America

Federal Employees Health Benefits Program
Initiatives to Promote the Use of Health
Information Technology

Kay Coles James
U.S. Office of Personnel Management



The Federal Employees Health Benefits (FEHB) Program began in 1960. It is the largest employer-sponsored group health insurance program in the world, covering more than 8 million Federal employees, retirees, former employees, family members, and former spouses.

Public Law 86-382, enacted September 28, 1959, created the FEHB Program. The law governing the Program is chapter 89 of title 5, United States Code. The law authorized the Civil Service Commission (now the Office of Personnel Management OPM) to write regulations necessary to carry out the Act. These regulations are in part 890 of title 5 and chapter 16 of title 48, Code of Federal Regulations.

Over 200 health plan choices currently are offered under the FEHB Program. There are twelve fee-for-service plans, of which seven are open to all enrollees, while the rest are available only to specific categories of employees. In addition, health maintenance organizations (managed care plans) are available in many specific local areas throughout the United States. Premiums and benefits are negotiated annually. Premiums and benefits vary among the plan offerings allowing Federal employees and retirees a wide choice to suit their individual circumstances.

This consumer-based choice is a key hallmark of the FEHB Program. The Government pays on average about 72% of the cost of the health benefits coverage, and enrollees pay the remainder, based on a formula set by law.

The FEHB law provides OPM wide authority to contract with various private health insurance plans. Annual contract negotiations are a bilateral process, and both OPM and the plan must agree on the final terms. Individual policies or contracts are not issued to FEHB Program enrollees. Each enrollee is given a detailed description of benefits so the consumer may use the open enrollment period to choose the best protection for his or her circumstances.


The negotiation process in the FEHB Program formally begins in the spring of each year. OPM sends all current and newly approved qualified health plans the annual Call Letter to advise them on goals and procedures for negotiation of contracts that will be effective the following January. In conjunction with the Call Letter, OPM issues instructions for premium rate negotiation for the upcoming contract year. There are two rating types, experience rating and community rating. All proposals are due by May 31.

The Office of the Inspector General audits health plans to make sure our costs are appropriate.


Experience Rating

Experience rating bases the FEHB Program premiums on its benefit costs and administrative expenses. OPM's actuaries also evaluate each plan's rate proposal in relation to past premiums and anticipated future premium requirements to ensure the plan's premiums will be reasonably stable, represent good value for the benefits provided, and remain competitive with other FEHB plans. Fee-for-service plans and some HMOs are experience rated. The goal of the experience-rate negotiation is to make sure premiums are set high enough to support the plan's expenses but low enough to be competitive. Rate negotiations reflect a dynamic between premiums and costs and covered expenses. OPM rate instructions for experience rated plans are detailed and feature protection for the Government, enrollees, and plans. Funds in excess of a plan's current needs are held in the Employees Health Benefits Fund in the U.S. Treasury. The reserves provide a protective cushion against unanticipated costs and help achieve rate stability.

Each year specific profit margins are negotiated. This is the only profit allowed for experience rated plans. If at the end of a contract period there are excess funds over expenses, the excesses are credited to the reserve, not kept by the plan.

Community Rating

The majority of FEHB plans are health maintenance organizations (HMOs) and use community rating. This rate-setting methodology is based on what the plan charges its other groups. OPM analyzes and reviews each plan's rate to ensure the FEHB rates are fair. Our community rates are based on the best rates the plan offers its two subscriber groups most similar to the FEHB group. Preferential rates granted to a group similar to the FEHB group must be granted to the Government.

Like experience-rated plans, the FEHB maintains reserves to mitigate rate instability, rate increases, and benefit changes.


Below are brief summaries of typical initiatives related to interoperable health information technology that are currently emerging.

WellPoint, a Blue Cross and Blue Shield local plan, recently began a program called Prescription Improvement Package. The program offers physicians, at no charge, a wireless, handheld electronic prescribing unit, a wireless access point, and a one-year subscription to an e-prescribing service. Initially, WellPoint will target 2,000 physicians who can support the technology. The WellPoint effort is aimed at reducing medication errors and saving costs by decreasing duplication of services. This allows physicians to discard their prescription pads in favor of electronic transmissions to any pharmacy. Well Point, with Microsoft's Healthcare and Life Sciences Group acting as technology consultant, provides Microsoft e-prescribing software to the 19,000 physicians in WellPoint's network in California, Georgia, Missouri, and Wisconsin.

Empire Blue Cross and Blue Shield is in the last stages of a program that awards bonus payments to hospitals that meet certain Leapfrog standards. Payments are paid by participating employers and equal a percentage of the hospital claims for employees of the participating employers. The self-funded employers are IBM, Verizon Communications, PepsiCo, and the Xerox Corporation. The goal of this program is to reduce errors and improve health care quality through the increased use of Computer Physician Order Entry (CPOE) and other Leapfrog Group standards; reward technical innovation; and raise the standards for all hospitals in health information technology HIT adoption and health outcomes. A formal evaluation to assess the impact on improvements in quality of care and error avoidance is planned when the program concludes.

Blue Cross & Blue Shield of Massachusetts will start paying primary care physicians at Beth Israel Deaconess Medical Center, Caritas Christi Health Care, and Baystate Health System for "Web visits" with their patients beginning August, 2004. Harvard Vanguard Medical Associates, the large Eastern Massachusetts doctors' group, and the insurer Harvard Pilgrim Health Care, also are experimenting with doctor-patient e-mail programs. At Beth Israel Deaconess, patients can enroll in "PatientSite," an online system that allows them to schedule appointments, look up test results, and e-mail their doctors. Blue Cross only is paying doctors who use a standardized Web visit form developed to provide secure online communication.

Anthem Blue Cross and Blue Shield provides a member Website that provides members with an individually tailored online experience that offers quicker, easier, and more efficient access to self-service tools and member-specific health information.

Members use the Website for four reasons: to view their membership information, to choose or change health care providers, to learn about health and wellness, and to shop for health-related products and services at discounted prices. Members log in and then have one-click access to MyServices, MyProviders, MyHealth, and MySpecialOffers - all efficiently organized by tabs and links - for easy navigation.

MyAnthem offers members the opportunity to become more involved in their health care through online capabilities that allow greater clarity, simplicity, and management over their health care benefits. MyAnthem provides an easy way to help members gain more control over their health care benefits through secure access that's available at any time and from any place. The new Website satisfies many member needs in that it offers a personalized experience, customized content, simplified user interface and improved communication, and enhanced relationships that can translate into more information and tools at the member level allowing the member to make informed decisions about his or her health care.

Integrated Healthcare Association (IHA) has convened six large California health plans in a pay-for-performance program. The health plans award bonuses to physician groups based on an aggregate score that includes clinical measures, patient satisfaction, and IT investment. While each health plan sets its own dollar award, IHA suggests a bonus amount of 5-10% of the per-member capitation payment. The IT portion of the bonus is based on the physician groups' ability to match multiple clinical data sets at the patient level and to deliver electronic data at the point of care (electronic health records, electronic lab results, patient registries, etc.).

Bridges to Excellence (BTE), a Robert Wood Johnson-sponsored initiative, is focused on creating system-wide improvements in care delivery by linking physician payment and performance. This initiative, which includes a consortium of quality partners, health plans, and providers has two current projects underway - Physician Office Link (POL) and Diabetes Care Link (DCL). POL stresses the necessity and value of an HIT infrastructure in a physician's office to promote error reduction and quality improvements. Rewards are based on a physician's use of clinical information systems and evidence-based medicine; patient education and support; and care management. The intent is to establish a HIT infrastructure and link it to improvements in the providing of more efficient and higher quality care. The DCL's intent is to test the effectiveness and impact of the HIT infrastructure by using HEDIS measures for patients undergoing treatment of diabetes. These proven measures will help the program assess the success of the POL.

MVP and Taconic IPA (TIPA) have developed a partnership, MedAllies, to provide technical assistance, IT support, and other related services. The objective is to develop a community-oriented model through progressive improvements in the continuity of care and connectivity across all providers in the TIPA. Through a phased implementation of an electronic health record EHR, the ultimate goal is to have a highly integrated community data exchange to include physicians, labs, and hospitals. There is no planned, formal, quantitative evaluation, with success being measured by the level of participation. Participation is high and growing to include local community hospitals. MedAllies has discontinued payment for most of the technology upgrades in physician offices because TIPA and MVP expect financial incentive bonuses to offset the costs for hardware/software upgrades.

Health and Human Services, Centers for Medicare and Medicaid Services (CMS), is in the process of implementing a three-year demonstration project, the Doctor Office Quality-Information Technology (DOQ-IT) project. Medicare Advantage plans will be providing financial incentives to physician offices to adopt HIT and meet certain performance measures. Physicians must treat a certain number of Medicare beneficiaries and meet specific systems and process requirements that include adoption of IT and care management. The physicians also must agree to phase in, over the three-year timeframe, the use of HIT to manage clinical care and electronic reporting of clinical quality and outcomes measures data. Several goals of this project are to adopt HIT in small- to medium-sized physician offices to promote continuity of care and stabilization of medical conditions, and to reduce adverse health outcomes of those beneficiaries with chronic illnesses.

CMS currently is conducting a Medicare demonstration project that uses financial incentives to encourage hospitals to provide high quality inpatient care. Hospitals that deliver the best quality of care will be rewarded with higher Medicare payments. Bonuses will be awarded based on a hospital's performance on evidence-based quality measures for a variety of medical conditions. Only top performing hospitals will receive monetary bonuses. While there is not a specific HIT component, information on each hospital's performance will be made available to health care providers and consumers that will contribute to a wider availability of information and informed choice.


OPM recognizes that in order to achieve shared goals and broaden the health care spectrum, there must be a collaborative effort from all organizations involved in the process. As the largest purchaser of employee health care benefits, OPM has undertaken and affiliated itself with a variety of organizations working toward common goals such as quality and affordable health care, positive medical outcomes, reduction of medical errors, wider availability of health information, and the creation of a competitive marketplace that provides choice to the consumer.


National Quality Forum (NQF)

NQF is a membership organization that is developing and implementing a national strategy for health care quality measurement and reporting. OPM currently serves as the Quality Interagency Coordination Task Force (QuIC) representative to NQF's Board of Directors.

Quality Interagency Coordination Task Force (QuIC)

The QuIC is an interagency task force charged with ensuring all Federal agencies involved in purchasing, providing, studying, or regulating health care services are coordinating their work on improving health care quality. OPM chairs the Patient and Consumer Information Workgroup, one of five workgroups carrying out the QuIC's mission.

Leapfrog Group (LFG)

Sponsored by the Business Roundtable, the LFG's goal is to mobilize employer purchasing power to initiate breakthrough improvements in the safety and overall value of health care to American consumers. OPM participates as an LFG liaison member of the Board.

National Committee on Quality Assurance (NCQA)

NCQA's mission is to improve the quality of health care delivered to people everywhere. NCQA is active in quality oversight and improvement initiatives at all levels of the health care system. NCQA is best known for its activity of assessing and reporting on the quality of the nation's managed care plans through its accreditation and performance measures program. NCQA currently is supporting HIT by its new standards that support the Bridges to Excellence. OPM has a long standing association with NCQA.

National Business Group on Health

Formerly the Washington Business Group on Health, representing over 200 large employers, health care companies, benefits' consultants, and vendors, it is the nation's only nonprofit organization devoted exclusively to finding innovative and forward thinking solutions to the nation's most important health care and related benefits issues.

Joint Commission Business Advisory Group

Created by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO), the Business Advisory Group provides counsel on employer priorities in the evaluation of health care quality and assists the Joint Commission in identifying quality and safety issues important to employers. OPM is a member of the Board. The group meets several times each year and includes a cross section of individuals and coalitions representing businesses of varying sizes and different types of purchasing arrangements across the country. The Joint Commission relies on a variety of advisory groups in its continuous effort to improve the safety and quality of care provided to the public. These groups provide feedback to help JCAHO develop and revise standards, policies, and procedures that support performance improvement in health care organizations.

Center for Health Transformation

OPM has become actively engaged with the Center for Health Transformation through discussion and attendance at conferences sponsored by the Center. The Center for Health Transformation's vision is to accelerate the transformation of health and health care into a dynamic 21st century intelligent health system that results in better health, more choices, and lower costs to all. We share the Center's idea that the key drivers to health transformation are:

  • patient safety and patient outcomes;
  • information and communication technology;
  • a system and culture of quality; and,
  • individual knowledge, responsibility and power to choose.

eHealth Initiative

OPM has just been invited to join the Employer and Purchaser Advisory Board of the eHealth Initiative. The eHealth Initiative is moving forward aggressively to create national and local collaborative efforts with employers to support a common goal of higher quality, safer and more efficient healthcare enabled by information technology. The eHealth Initiative supports the improvement of measurement ability, data integrity and efficiency of collection and transmission of data.

The Employer and Purchaser Advisory Board of the eHealth Initiative and its Foundation is a vehicle for high-level discussions of issues important to the employer community and members of the eHealth Initiative. The group was formed to support the further development of the eHealth Initiative's strategy and the successful execution of its mission, which is to improve the quality, safety and efficiency of healthcare through information and information technology.

Below are summaries of OPM's initiatives already underway that can help leverage its purchasing power to support HIT.

Pharmacy Benefit Management Arrangements

Many FEHB plans have had contractual arrangements with pharmacy benefit managers (PBMs). Prescription drug costs represent a high percentage of total FEHB costs. PBMs provide real time online access to member enrollment records to facilitate point-of-sale transactions. This technology can be leveraged to promote patient safety and connectivity. The interconnectivity that PBMs have with retail pharmacies can serve a vital role to link providers and pharmacies.

Care Management

FEHB plans generally provide care management services for members with chronic conditions, including flexible benefit options and diagnosis-based programs. Care management programs help educate affected members about their chronic conditions and help ensure they are getting appropriate services. It is generally accepted that a relatively small percentage of members, primarily those with chronic conditions, use the greatest percentage of benefits. By addressing the needs of this chronically ill population, health plans help improve the quality of care and promote the effective use of benefit dollars. Online decision support tools available to members help facilitate their access to information and educational materials.

Further, OPM has asked plans to begin the process of establishing a link between their care management programs and Long Term Care Partners, the administrators of the Federal Long Term Care insurance Program (FLTCIP), so enrollees with FLTCIP coverage can experience a smooth transition to long term care when necessary.


OPM's HealthierFeds campaign places emphasis on educating Federal employees and retirees on healthy living and best-treatment strategies to reduce demand on the health care system. This OPM initiative is featured at on OPM's Web site. It supports the President's HealthierUS initiative which follows a simple formula: every little bit of effort counts. The Administration's initiative has identified four keys for a healthier America: be physically active every day, follow a nutritious diet, get preventive screenings, and make healthy choices. OPM has reinforced with FEHB plans that educating their members may lead to more patient involvement in health care decision making and, subsequently, more consumer responsibility.

Quality Initiatives

Quality is a very important aspect of managing health care programs. Quality is how well health plans keep their members healthy, or treat them when they are sick. Good quality doesn't always mean receiving more care. Good quality health care means doing the right thing at the right time, in the right way, for the right person, to achieve the best possible results.

OPM is continuing to provide FEHB members with resources that will help them choose high-quality health plans. OPM provides FEHB members with the accreditation status of participating health plans in our annual Guide to FEHB Plans. Accreditation demonstrates an organization's commitment to providing quality, cost-effective health care. Providing FEHB members with accreditation information allows consumers to choose a high quality health plan.

OPM also provides Federal employees and retirees with individual health plan ratings based on the results of our annual Consumers' Assessment of Health Plans Survey. This consumer survey allows current plan members to rate their health plans and providers in several key areas, including overall satisfaction, satisfaction with their providers, access to care, customer service, and claims processing. Providing FEHB members with this consumer survey information allows them to consider the feedback of other consumers when choosing a health plan.

E- Initiatives

OPM is continuing to expand the use of the Internet as a valuable communications and resource tool. During the annual open season events, OPM provides in various ways, comprehensive program information, including health plan brochures, FEHB guides, premiums and other useful information our customers need to choose a quality health plan. The FEHB Website, linked from the OPM website, links to a report card designed by the National Committee for Quality Assurance (NCQA). This report card helps users learn more about the quality of care and service provided by HMOs. FEHB consumers also have access to an OPM health plan comparison tool. Most plan consumer information can be linked through OPM's portal.

Patient Safety

During the past few years, the health care community has stressed the importance of a culture of patient safety. We are continuing our work with FEHB plans adding information on their patient safety initiatives and programs to the FEHB Website.

Health Insurance Portability and Accountability Act of 1996 (HIPAA) The Health Insurance Portability and Accountability Act of 1996 (HIPAA), subtitle, Administrative Simplification, requires the Secretary of Health and Human Services (HHS) to adopt standards for: ten electronic administrative and financial health care transactions; unique identifiers for individuals, employers, health plans, and health care providers; protecting the privacy of individually identifiable health information; and providing security for individually identifiable health information and electronic signatures. HHS has now published several final HIPAA regulations. The compliance deadline for electronic transactions was October 2003. OPM successfully migrated from its proprietary enrollment transaction format to the HIPAA standard format. The final HIPAA privacy regulations were effective April 2003. The security regulations will become effective April 2005 for most plans and April 2006 for small plans. The national provider identifier regulations will become effective May 2007 for most plans and May 2008 for small plans. All OPM contracts require HIPAA compliance. OPM is working closely with FEHB plans to ensure a smooth transition in meeting these important requirements.


OPM purchases health benefits coverage for over 8 million employees, annuitants, and dependents. OPM's significant purchasing power is powerful leverage to contract for a comprehensive set of health benefits at affordable prices. Through this leverage, OPM continues to capitalize on the great efficiencies and economies that can be achieved. OPM fully supports initiatives to further an effective and competitive marketplace as it explores ways to adopt HIT in the FEHB Program that will bring knowledge-based tools to the hands that deliver health care.

The end result of any such program is to raise the bar so that everyone is performing at a higher level. It should be a program that fosters an environment of winners, not winners and losers. In this era of budget consciousness, investment and return on investment are pivotal to purchasers and providers. Therefore, to use purchasing leverage to gain a meaningful and lasting move toward the adoption and full implementation of HIT, OPM needs to move forward in a way that is shared by all stakeholder groups. Incentives should be properly aligned and meaningful to ensure that both costs and returns are shared by all.

As OPM exerts its purchasing power, it will support the adoption of common standards of performance, outcome, and incentives. The use of accepted standards developed by recognized quality and accreditation organizations lends itself to greater leverage and earlier adoption. OPM will leverage its purchasing power to move forward, not to reinvent the wheel.

OPM's goals in the marketplace will be to:

  • Reduce health care costs by increasing efficiency and reducing medical errors, inappropriate care and incomplete care;
  • Improve health care quality;
  • Ensure appropriate information is available to guide medical decisions at the and place of care;
  • Improve care coordination; and
  • Partner with ONCHIT and collaborate with Federal partners and other public and private stakeholders.

Incentives may be provided several ways in the FEHB Program. OPM can explore regulatory changes to help encourage profit incentives for plans to foster HIT adoption and implementation. Experience-rated plans can be rewarded for progress toward adopting or adapting incentives for HIT. Using plans' profit motive should help OPM leverage its market position to help HIT adoption.

Community rated plans incorporate both their administrative expenses and any profit amount into their rates. Community rated plans are subject to performance goals and incentives. OM can explore regulatory changes to align current plan performance elements to include HIT adoption.


OPM will explore adoption of a variety of options, such as those below, to speed the nationwide phase-in adoption of HIT as soon as practicable.

  1. Strongly encourage FEHB Program participating health plans to adopt systems that are based on the Federal Health Architecture standards.

  2. Strongly encourage health plans to highlight their provider directories to indicate individual provider HIT capabilities.

  3. Strongly encourage health plans to link disease management and quality initiatives to HIT systems for measurable improvements.

  4. Strongly encourage health plans to provide incentives for the adoption of interoperable health information technology systems by key providers under FEHB contracts.

  5. Base part of the service charge, or profit, for fee-for-service and other experience- rated plans on their developing incentives for:

    • Doctors and pharmacies to use paperless systems to fill prescriptions (ePrescribing);
    • Contracting with hospitals that use electronic registries, electronic records, and/or ePrescribing; and
    • Increasing the number of enrollees whose providers use electronic registries, electronic records, and/or ePrescribing.
  6. Introduce performance goals for HMOs (community rated plans) that are linked to their developing incentives for:

    • Doctors and pharmacies to use paperless systems to fill prescriptions (ePrescribing);
    • Contracting with hospitals that use electronic registries, electronic records and/or ePrescribing;
    • Increasing the number of enrollees whose providers use electronic registries, electronic records and/or ePrescribing.
  7. Introduce incentives and performance goals for plans that contract with networks of providers to make records accessible through secure and HIPAA compliant interoperable HIT systems.

  8. Introduce incentives and performance goals for plans that integrate their provider networks with local and national health information infrastructure initiatives.

  9. Encourage and reward pharmacy benefit managers for providing incentives for ePrescribing and health information technology linkage.

OPM has great respect for the power and creativity of the private sector to determine solutions. We will continue to collaborate with our private sector partners as well as our public sector partners to achieve the goals set by President George W. Bush in his Executive Order. We believe these goals can be achieved without violating the key principle that desired outcomes can be achieved through negotiation rather than imposed through mandates.

Last revised: August 16, 2004

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