U.S. health data czar sees role for govt hand

* E-health records have not progressed much

* Blumenthal says govt does not want to regulate too much

* HHS to issues details on IT policies soon

By Susan Heavey

WASHINGTON, April 30 (Reuters) - Electronic health records need a nudge from the government if the technology is to become widespread, the nation's new health information technology czar said on Thursday.

"It is clear that this field has not advanced (enough) ... when left exclusively to the private sector so there is a public role," said Dr. David Blumenthal, head of the Department of Health and Human Services' Office of the National Coordinator for Health Information Technology.

Backers of electronic records say they can protect patients by preventing medical errors and save money by avoiding duplicated tests and better managing chronic conditions that can be costly to treat.

The government did not want to regulate too much or be too intrusive but it did need to take steps to improve the public good, Blumenthal told an event hosted by the Markle Foundation, a nonprofit technology group.

A former professor at Harvard Medical School, Blumenthal took charge of the health IT office last week and must now help direct roughly $19 billion in federal funds aimed at encouraging doctors and hospitals to convert mounds of paper medical records into digital records.

The money was part of the economic stimulus package passed by Congress earlier this year.

The potential for billions in spending initially boosted the health IT sector, which includes companies such as McKesson Corp (MCK.N) and Allscripts-Misys Healthcare Solutions Inc (MDRX.O) as well as larger players such as Microsoft Corp (MSFT.O), Google Inc (GOOG.O), Siemens AG (SIEGn.DE) and General Electric Co (GE.N).

Since then, investors and others have been waiting for guidance from the U.S. health IT office.

Blumenthal's office must determine just how practitioners would qualify for payments as well as potential standards for medical record software.

Much of the U.S. economy is steeped in electronics, but studies have repeatedly shown that many health care providers -- mostly at smaller practices -- rely on paper.

Consumer advocates want safeguards on electronic records that ensure patient privacy and allow them access to their data.

Blumenthal said his office would work quickly to set policies and direct the stimulus funding. "We are going to be very soon... making some decisions on how to use some of the funds that are available to us."

Under the previous Bush administration, the health department heavily relied on the private sector to drive the electronic records effort.

Marc Overhage, who oversees medical information research at the Regenstrief Institute, said that has not worked.

"We can't keep doing what we're doing because what we're doing is nothing," he said. "There's not a lot that's changed in the last five years that's really meaningful," he said at the foundation event. (Editing by Tim Dobbyn)