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In mid-March, Mike Leavitt, the Health and Human Services secretary, flew to Philadelphia to meet with doctors, hospital administrators, health insurers, and other health providers. He had something to sell.

Leavitt was promoting a Medicare demonstration project that he hopes will spur adoption of new health information technology. If Philadelphia applies to take part and is accepted, participating physicians will receive bonuses for buying and using electronic medical records systems. Medicare will pay doctors more money to treat patients—potentially $58,000 to each doctor over a five-year period, or a total of $290,000 per physician group. The deadline for communities to apply is May 13, and Medicare will accept 12 localities that have each signed up about 100 small-to-medium-size practices to participate.

Leavitt hopes that the demonstration project, which he announced in February, will set the nation on a market-oriented path when it comes to health information technology. The idea is to bridge a philosophical divide that has prevented the medical community from proceeding in any large-scale way, and to do it before President Bush leaves the White House.

To be sure, selling the benefits of electronic health records hasn’t been a problem. The aim is to eliminate paper medical records so that doctors and hospitals can easily access any patient’s health history. Republicans and Democrats alike are enthusiastic about the potential for improved efficiency and quality. In 2004, Bush set a goal to create electronic health records for most Americans within 10 years. All three leading presidential candidates have proposals to promote electronic health records.

Still, progress has been slow, largely because the equipment and software involved costs $20,000 to $40,000 per doctor, according to HHS. “If this was easy, it would be done,” said Kerry Weems, acting administrator of the Centers for Medicare and Medicaid Services. He noted that fewer than 20 percent of individual physicians use electronic health records; for small practices of three to five doctors, the figure is closer to 10 percent.

“There is a great mismatch in the aspiration for all to have electronic records, where we ask physicians to buy a system yet most of the benefit goes to the consumer,” Leavitt told the Philadelphia group. “The physician is saying, ‘Does this make sense for me?’ ”

Weems got an earful from physicians at a similar meeting in Baltimore on April 10. Sally Seiler, CEO of the 18-doctor Neurology Center in Washington and Maryland, said that when she crunched the numbers, she found that moving to electronic health records would cost about $50,000 per doctor—and more if she factored in training. Moreover, she argued, her doctors are worried that their productivity would “slow down hugely” at the beginning and that they would spend a lot of money on hardware and software that could be outdated within a few years. “The thought of undoing and redoing keeps me up at night,” Seiler said.

In 2005, HHS awarded a contract to the nonprofit Certification Commission for Healthcare Information Technology, which industry associations formed in 2004 to develop criteria for electronic health records systems and to certify products that meet them. Weems said, however, that the certification gives doctors only a one-year guarantee that the product they buy will be able to communicate with systems in other physicians’ offices and in hospitals—that it will be “interoperable,” in the language of the trade.

Still, the leading deterrent for doctors has been cost, and Democrats and Republicans disagree about how to get physicians to move forward. Democrats in Congress and their party’s presidential candidates have pushed for direct federal subsidies to help doctors meet the initial purchase and setup costs. Barack Obama proposes spending $10 billion a year for five years to help defray costs, and Hillary Rodham Clinton wants to provide $3 billion a year for several years.

Republicans generally oppose financing the initial cost, arguing that other industries have vaulted into the electronic age without federal assistance. Instead, they have pushed for setting standards to ensure that as doctors and hospitals buy systems, they can communicate with one another. Presumptive GOP presidential nominee John McCain, for example, has proposed creating national standards for electronic health systems and data collection but no direct subsidy for doctors and hospitals.

The Medicare demonstration project doesn’t fit neatly into either approach. “This is not about adoption [of electronic health records]. The end is higher-quality care,” Weems told reporters before the Baltimore meeting. Medicare would pay participating doctors more for services in the first year just for buying and using an electronic health records system. In the second year, they would get additional payments only if they provided information on some measures of quality. And in the third, fourth, and fifth years, doctors would get the extra payments only if they demonstrated that they were delivering high-quality care.

Leavitt said he expects electronic record-keeping to improve health care—by reducing duplicate tests, medication errors, and unnecessary hospitalizations—enough to make the project revenue-neutral for the federal government within five years.

So, what about the initial cost of $20,000 to $40,000 per doctor? Leavitt acknowledges that the payoff for participating in the project probably won’t be enough to cover the full transition cost for a small medical practice. That’s why he is encouraging applicants to shoot for similar arrangements with other sources of payment.

For example, Leavitt said, community leaders in one area told him that they have asked local insurance companies to pay doctors more for services when they use electronic records systems and prove they are providing quality care. Officials at the Blue Cross and Blue Shield Association told Leavitt that their health plans are willing to make extra payments to doctors and hospitals using those criteria. The association’s health plans are already using medical claims data to monitor whether patients with chronic conditions are receiving the right tests and treatments.

Weems said that HHS would give preference to demonstration project applicants who seek help from insurance companies or other payers, or whose states promise to sweeten the pot through such incentives as higher Medicaid payments. “Louisiana has said it will have dollars to put on the table,” he said.

Collectively, Leavitt and Weems have participated in about 40 meetings across the country. While enthusiastically pitching the program, they often trot out someone to talk about real-life experiences with electronic health records.

In Philadelphia, Leavitt used Robert Williamson, a resident with high blood pressure and diabetes, to help make his case. “I never thought it would make that much of a difference in my health” to have electronic medical records, he said. “But it does.”

Williamson enters information about his blood-sugar levels into his electronic medical record daily; he gets lab results online the day after tests; and he finds it easy to order prescription refills electronically. Williamson’s only regret? He wishes he had gone electronic sooner. “If I had earlier prevention, [doctors] would have seen my cholesterol getting high and I might not have had a stroke.”

At each meeting, health care providers raise questions and offer support or criticism. One participant asked if bonus payments will disappear at the end of the five-year project. “The demonstration will teach us whether bonuses are necessary,” Weems replied. “Do we save enough to justify the bonuses?”

Whether or not the federal government extends the bonus system after five years, Leavitt said he was confident that doctors would not regret making the changeover, predicting that patients will soon demand electronic records.

Indeed, on a parallel track, several companies are developing and testing electronic health records that would be more personalized. Both Microsoft and Google are exploring such systems. Google is partnering with the Cleveland Clinic in Ohio to test a setup that gives patients full control over their health records.

Doctors’ and patients’ electronic health records can coexist, Weems said. He envisions a day when a patient will ask the doctor to enter the results of an office visit into the patient’s personal electronic medical record as well as the physician’s own.