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California could ban foreign outsourcing of patient files

Five other states are considering restrictions on handling private data by offshore contractors.

By Tyler Chin — Posted March 15, 2004

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The California Legislature is considering at least three bills to bar or restrain physicians and health care entities from outsourcing work that would involve sending and handling of confidential medical information internationally.

On Feb. 19, state Sen. Joseph Dunn introduced a bill prohibiting overseas outsourcing of medical and financial information outside the United States.

Separately on the same date, Sen. Liz Figueroa filed a "spot" bill to protect the privacy of medical and financial information handled abroad.

The Legislature also will consider a bill from California Assemblyman Tim Leslie requiring contractors to inform their clients if they transcribe or process medical information abroad. Leslie's bill also requires that doctors and other health care professionals obtain a patient's consent before information is sent offshore.

At press time, six states -- Arizona California, Colorado, New Jersey, South Carolina and Washington -- were considering outsourcing bills related to the privacy of medical, financial or personal information, said Justin Marks, a policy associate at the National Conference of State Legislatures. Although most would require employees of call centers to disclose their physical location to consumers, the three California bills specifically address medical privacy.

Legislation in California was prompted by a widely publicized incident last year in which a woman in Pakistan threatened to post patient records on the Internet unless the University of California San Francisco Medical Center paid her money she claimed a third party owed her. The woman -- who had been hired to transcribe medical files through a series of subcontractors -- returned the records after being paid.

"We chose to introduce this bill because if the handling of private medical information is outsourced [abroad], then the U.S. courts have no ability to reach folks there ... if they, for example, threaten to publicly release that information," Dunn said. "To ensure the already existing legal protection for confidential information stays in place, the bill will prohibit the outsourcing of already protected confidential information [offshore]."

Dunn acknowledged that if his bill becomes law, doctors and hospitals will incur higher labor costs. "However, we're dealing [here] with a much higher priority. ... I believe it's more important to protect the confidentiality of medical information than simply to find the cheapest place to get the processing related to that medical information done."

The fate of the proposed legislation probably won't be known until late spring or summer, Dunn said.

The California Medical Assn. has not yet taken a position on the outsourcing bills, a spokeswoman said.

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