n engl j med 348;15 www.nejm.org april 10, 2003
The new england journal of medicine
The Cost of HIPAA Compliance
Peter Kilbridge, M.D.
The deadline for compliance with the regulations
for patient privacy in the Health Insurance Portability and Accountability Act of 1996 (HIPAA) is now
upon us, and hospitals and physician groups are in
the throes of working to meet it. This is an enormous chore, affecting numerous areas of hospital
operations and, ultimately, every employee.
Meeting the requirements of the extensive privacy regulations â€” the deadline for which is April 14,
2003 â€” has been consuming substantial time, resources, and energy from hospitals and physician
groups. For example, essentially all employees must
be trained in the protection of patientsâ€™ privacy, and
their completion of this training must be documented. The training focuses on practices for handling
protected health information: for example, avoiding
discussing patients within the hearing of others, locating fax machines and printers in secure areas,
and obtaining only the information about a patient
that is required for the job at hand. Some hospitals
have developed their own materials in the form of
scenario-based videos or computer-based productions. Others have brought in outside educators or
opted to conduct face-to-face classroom training.
A study commissioned by the American Hospital
Association in 2000 estimated the average cost of
training at $16 per employee.
HIPAA requires that a notice of privacy be given
to every patient, informing him or her of, among
other things, the organizationâ€™s usual uses of information about patients and patientsâ€™ rights with
regard to their records. The privacy notice, among
other aspects of the requirements, is discussed by
Annas in this issue of the Journal (pages 1486â€“1490).
The notice must be presented to every patient at his
or her first appearance for care after the April 14
deadline, and the patientâ€™s acknowledgment of
receipt of the notice must be recorded. Even for a
small hospital, just the cost of printing a multipage
form for every active patient, at a few cents apiece, is
substantial. Organizations with multiple locations
for care delivery must deal with the added costs of
duplication of materials and effort, since some patients will receive more than one notice if they visit
multiple locations. In addition, such organizations
face the challenge of keeping a consolidated record
of which patients have received the notice. Many organizations are investing in new information systems to manage this massive tracking effort.
Physiciansâ€™ offices and clinics must effect behavioral change in the practice setting. Physicians and
nurses may not talk with patients about diagnostic
and care information in public areas. Members of
the office staff must conduct telephone and other
conversations in a manner that reduces their use of
information that identifies particular patients. If
chart racks are located in hallways outside clinic
rooms, the charts should be placed with the patient
information facing the wall. Physicians must attend
to the details of office layout and logistics as well. It
may be necessary to move waiting-room seats some
distance from the administrative area to reduce the
likelihood that patients will overhear conversations;
it may be necessary to play music or run white-noise
machines in order to obscure the sound of conversations in clinic rooms. Computers may need to be relocated away from hallways or to be equipped with
screens that inhibit casual viewing by passersby.
Organizations are required under the privacy
regulations to track all disclosures of patient information for uses beyond treatment, payment, and
operations. In order to do so, they must first determine what constitutes a disclosure for a use beyond
normal operations (for example, is a particular request for a record being made for the purposes of
quality improvement â€” which is considered a normal operation â€” or for research purposes?). They
must establish policies and procedures for making
these determinations. And they must construct a
system for tracking every such release â€” whether of
paper records or electronic information. Tracking
the release of electronic information will most likely
require the purchase of a computer program designed for this purpose and the implementation of
the system in a fashion that ensures the capture of
all instances of disclosure, from any site where care
Other challenges in the implementation of com-
n engl j med 348;15 www.nejm.org april 10, 2003
The new england journal of medicine
pliance with the HIPAA regulations include the potential need to revise contracts with all â€œbusiness
associatesâ€ to bind these parties to HIPAA privacy
practices; the management of hospital directories
(patients have the right to determine whether and
how they wish to be listed in the patient directory
when they are admitted to the hospital); the management of amendments to patient records; the implications of the regulations for clinical research;
implications for hospital fundraising (physicians
have to obtain authorization from patients for the
release of information to development officers); and
resolution of issues regarding preemption by state
law. In addition, considerable resources are being
devoted to the implementation of standards for electronic transactions and to the implementation of
newly released electronic security requirements.
The magnitude of the overall challenge is reflected in the winter 2003 survey of HIPAA readiness
conducted by the Healthcare Information and Management Systems Society and Phoenix Health Systems. As of January 2003, only 9 percent of 467
provider organizations responding to the survey indicated that they believed they had achieved compliance with the privacy rules. The survey also showed
that there was broad agreement that the most difficult aspect of the process was understanding and
interpreting the regulations and that hospitals tend
to use outside consultants primarily for assessment
and planning activities, tackling the greatest portion
of the work â€” implementation â€” with internal resources. Estimated spending to comply with HIPAA
varies greatly among organizations (see Figure).
The results of the survey are in line with those
cited by the organizations that I interviewed, and
many organizations agreed that the financial outlay
required â€” although it is substantial â€” has been
somewhat smaller than they anticipated. The 2000
American Hospital Association study cited above estimated that the average cost of compliance per hospital ranged from about $670,000 to $3.7 million
â€” considerably more than the figures in the 2003
survey suggest. Modifications of the regulations in
the past year clearly contributed to the difference,
but perhaps the most important reason for the discrepancy is that although most hospitals and large
practices have had to hire or commit one or several
full-time employees (such as a privacy officer) to
heading up the compliance effort, the majority of
the work is being done with existing resources â€”
while other initiatives are put on hold.
What is being accomplished with all this effort?
The extensive privacy regulations enforce the adoption of privacy-conscious behavior by caregivers
and employees of hospitals and health care practices â€” an area in which medicine has historically been
rather lax; and greater attention should be paid to
safeguarding privacy in an era of universal electronic communication and increasing computerization
of confidential patient information. On the other
hand, some of the regulations seem excessively burdensome â€” such as requiring the tracking of every
disclosure of information for uses beyond treatment, payment, and operations and recording the
acknowledgment of receipt of an 8-to-20-page informational document that most patients will throw
away without reading. One thing is certain: many
organizations will breathe a sigh of relief when
HIPAA compliance is behind them.
From Kilbridge Associates, Cambridge, Mass.
2003 Budgets for HIPAA Compliance, According to Size of Hospital. Data are from the Healthcare Information and Management Systems Society and Phoenix Health Systems.
<$100,000 $100,000â€“$500,000 $500,000â€“$1,000,000 >$1,000,000
2003 HIPAA Budgets
<100 Beds 100â€“400 Beds >400 Beds
1% 4% 16% 20%
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
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