Information technology's use in healthcare could save the system billions of dollars and improve patient care, but misaligned financial incentives, the cost of the technology and a lack of agreement on IT standards are holding back adoption, witnesses said Thursday during a Senate hearing.

The government should offer financial rewards to help healthcare providers purchase technology and encourage adoption of standards for healthcare IT systems, John Glasser, CIO of Partners Healthcare System in Boston, told senators during a Senate Commerce subcommittee hearing.

Subcommittee members repeatedly asked government officials and industry representatives on the panel what Congress could do to make it easier for healthcare providers to adopt technology. Glasser and MedStar Health's Peter Basch, MD, said Congress should help change healthcare's payment system, which often rewards volume over quality care.

"We actually net up if we make an error," Glasser said.

To help resolve some of those issues surrounding payment, Senate Finance Committee Chairman Charles Grassley (R-Iowa) and ranking member Max Baucus (D-Mont.) on Thursday introduced legislation that would reward physicians who report quality data by making them eligible to receive the full update to Medicare reimbursements. Those physicians who do not report the data would see their Medicare payments reduced. Providers would later be rewarded for meeting certain standards of care.

In tandem, Sens. Mike Enzi (R-Wyo.) and Edward Kennedy (D-Mass.) of the Senate Health, Education, Labor and Pensions Committee introduced a bill Thursday to provide matching grants for health IT use and to establish interoperability and privacy standards for health IT systems. Among other things, the bill would codify the Office of the National Coordinator for Health Information Technology and the American Health Information Community, a federal advisory group that will tackle standards issues. Lawmakers in recent weeks have introduced several bills that call for financial rewards for IT adoption and interoperability standards in healthcare.

National Coordinator for Health Information Technology David J. Brailer, MD, told lawmakers Thursday the administration welcomes congressional interest in healthcare IT, but cautioned against any action that could slow the government's efforts. Last month, the government announced it would award several contracts to help test a nationwide system for exchanging health data electronically, certify healthcare IT products and evaluate state or federal laws that could hamper healthcare IT adoption.

"We want to make sure that we don't have events that could slow us down," Brailer said. "We are moving forward. It's very important for us to have these standards in place quickly."

Brailer would not comment on specific legislation.

Several witnesses called on Congress to create exemptions to Stark and Anti-Kickback laws that are often seen as a hindrance to providers' sharing IT tools. Several bills before Congress, including the two bills introduced Thursday, revise the current laws to ease healthcare providers' IT adoption. However, Karen Ignagni, president and CEO of America's Health Insurance Plans, warned against revisions to such laws. "We believe it would be a mistake to relax federal fraud and abuse laws because of consolidation in the healthcare industry," she said.

Other witnesses spoke about the potential for IT to save money in the healthcare system. Susan Bostrom, senior vice president of Cisco Systems, estimated that up to $280 billion annually could be saved if providers adopted several key IT applications. Electronic ICU technology, which allows specialists to remotely monitor patients, could save $10 billion per year, she said. Brailer estimated it could cost anywhere between $30 billion and $250 billion to get the healthcare system wired.

Meanwhile, Sen. John Kerry (D-Mass.) suggested he would call on fellow senators to support the White House's $125 million fiscal year 2006 request for healthcare IT-related spending. The House passed an appropriations bill earlier this month that includes $58 million in funding for the Office of the National Coordinator for Health Information Technology and grants to spur healthcare IT adoption. Kerry said he was concerned that healthcare IT funding in a Senate appropriations bill could be less than in the House version.