Minnesotans may not realize it, but as of July 1 they became part of a pioneering statewide health care project that could show the nation how to harness information technology to bring skyrocketing medical costs under control.

Dubbed the "Patient Encounter Project,'' the effort is a timely, much-needed experiment in mining health data, one that underscores why Minnesota is considered a leading-edge laboratory for health reform. On Capitol Hill, federal measures to overhaul the system are foundering as sticker shock sets in from trillion-dollar proposals to expand coverage. In Minnesota, lawmakers and the state's medical community got an early start in tackling the growing problem of the uninsured. The Encounter Project is the result of the historic reforms passed by the 2008 Legislature aimed at making health care more affordable.

"To me, this is the most important thing that was passed last year,'' said David Wessner, chief executive officer of Park Nicollet Health Services in St. Louis Park.

Understanding how the project works is critical to grasping its importance. Although insurers have long collected and analyzed billing information to track costs and quality, Minnesota has become one of a handful of places doing so on a large-scale and standardized basis.

At the direction of legislators, the Minnesota Health Department has put in place a privately run system to pool what is essentially claims data -- not actual patient medical records -- from most of the people in the state who seek medical care. As of July 1, the encrypted information, which is cleaned of identifying information to protect confidentiality, is sent by insurers via secured online channels to a nonprofit data holding organization known as the Maine Health Information Center.

This fall or winter, the state is expected to announce the name of another private organization that will analyze the data. The result of this analysis -- something known in medical jargon as "provider peer grouping" -- is what really sets the Minnesota project apart. It's a fancy way to say that there's going to be a public report card on providers evaluating their relative cost and quality.

The first such report card is expected by the fall of 2010. It's a welcome development with national implications. Cost control must be the linchpin of any health reform effort. This shouldn't be left to bureaucrats. Instead, it's going to be accomplished most effectively and fairly if these groups act in concert: consumers, providers, insurers and employers that buy insurance for their employees.

There is surprisingly little data available that allows these groups to see variations in provider costs and outcomes. The Minnesota project will help fill that void, providing valuable information to consumers who are increasingly stewards of their health care dollars, as well as employers and insurers who want quality care yet need to keep premiums affordable. It should also spur providers to evaluate their practices and find ways to deliver care more efficiently. Another benefit is that this project could help lay the foundation for payment reform, fixing a fee-for-service system so that it no longer penalizes those who deliver quality care efficiently.

Critics have raised unfair fears about this project. The reality is that the state will not own patient medical records, as some claim, and abundant safeguards have been taken to protect patient confidentiality. The project has the buy-in of the state's medical community, and it deserves the public's confidence as well. It is not a cure for our broken health care system, but it is an important and innovative steppingstone toward affordable reform.