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Health care providers will have greater incentive to improve their record-keeping — and could face penalties if they do not — under a bill signed this week by Gov. Martin O'Malley.

Health officials say the transition to electronic record-keeping will make sharing medical information more efficient, reducing errors in prescribing medicines and diagnosing patients based on their medical history.

Yet, many medical practices have been reluctant to take on the thousands of dollars in startup costs to upgrade from paper records.

"The bottom line is oftentimes you go to the doctor, and you have to give your information 100 times," said Del. Joseline Peña-Melnyk, who sponsored the legislation. "It'll be great to have a disk and take that disk to the next doctor, where you have all your X-rays, your medical records."

The legislation makes Maryland the first state in the union to require private insurers to offer doctors increased Medicaid reimbursements and payments for startup costs, state officials said.

Maryland is the first state to build on the federal stimulus plan, which sets aside $17.2 billion nationwide in incentives for providers to move to electronic record-keeping.

Maryland stands to receive about $400 million in federal dollars to help in its efforts, said Peña-Melnyk (D-Dist. 21) of College Park.

The law will allow Maryland "to reduce medical errors and control costs for everyone," health Secretary John M. Colmers said in a statement. "The development and use of this technology holds the greatest promise when it's done in a coordinated fashion with everyone in health care moving in the same direction."

Providers have until 2015 to begin using a nationally certified electronic health records system that can link to the state health information exchange network or face reduced reimbursements.