NRPM: Standard Health Care Provider Identifier. I. Regulatory Flexibility Analysis


The Regulatory Flexibility Act (RFA) of 1980, Public Law 96- 354, requires us to prepare a regulatory flexibility analysis if the Secretary certifies that a proposed regulation would have a significant economic impact on a substantial number of small entities. In the health care sector, a small entity is one with less than $5 million in annual revenues. Nonprofit organizations are considered small entities; however, individuals and States are not included in the definition of a small entity. We have attempted to estimate the number of small entities and provide a general discussion of the effects of the statute. We request comments and additional information about our estimates and discussion.

All nonprofit Blue Cross-Blue Shield Plans are considered small entities. Two percent of the approximately 3.9 million employer health plans are considered small businesses. All doctors of osteopathy, dentists, podiatrists, chiropractors, and solo and group physicians’ offices with fewer than three physicians are considered small entities. Forty percent of group practices with 3 or more physicians and 90 percent of optometrist practices are considered small entities. Seventy-five percent of all pharmacies, medical laboratories, dental laboratories and durable medical equipment suppliers are assumed to be small entities.

We found the best source for information about the health data information industry to be Faulkner & Gray’s Health Data Dictionary. This publication is the most comprehensive we found of its kind. The information in this directory is gathered by Faulkner & Gray editors and researchers who called all of the more than 3,000 organizations that are listed in the book to elicit information about their operations. It is important to note that some businesses are listed as more than one type of business entity. That is because in reporting the information, companies could list themselves as up to three different types of entities. For example, some businesses listed themselves as both practice management vendors as well as claims software vendors because their practice management software was “EDI enabled.”

All the statistics referencing Faulkner & Gray’s come from the 1996 edition of its Health Data Dictionary. It lists 100 third party claims processors, which includes health care clearinghouses (5-33). Faulkner & Gray define third party claims processors as entities under contract that take electronic and paper health care claims data from health care providers and billing companies that prepare bills on a health care provider’s behalf. The third party claims processor acts as a conduit to health plans; it batches claims and routes transactions to the appropriate health plan in a form that expedites payment.

Of the 100 third party processors/clearinghouses listed in this publication, seven processed more that 20 million electronic transactions per month. Another 14 handled 2 million or more transactions per month and another 29 handled over a million electronic transactions per month. The remaining 50 entities listed processed less than a million electronic transactions per month. We believe that almost all of these entities have annual revenues of under $5 million and would therefore be considered small entities by our definition.

Another entity that is involved in the electronic transmission of health care transactions is the value added network. Value added networks are involved in the electronic transmission of data over telecommunication lines. We include value added networks in the definition of a health care clearinghouse. Faulkner & Gray list 23 value added networks that handle health care transactions (5, p. 544). After further discussion, the editors clarified that only 8 of the 23 would be considered “pure” value added networks. We believe that all of these companies have annual revenues of over $5 million.

A billing company is another entity involved in the electronic routing of health care transactions. It works primarily with physicians either in office or hospital-based settings. Billing companies, in effect, take over the office administrative functions for a physician; they take information such as copies of medical notes and records and prepare claim forms that are then forwarded to an insurer for payment. Billing companies may also handle the receipt of payments, including posting payment to the patient’s record on behalf of the health care provider. They can be located within or outside of the physician’s practice setting.

The International Billing Association is a trade association representing billing companies. The International Billing Association estimated that there are approximately 4500 billing companies currently in business in the United States. The International Billing Association’s estimates are based on the name and address of actual billing companies that it compiled in developing its mailing list. We believe all of the 4500 billing companies known to be in business have revenues under $5 million annually.

Software system vendors provide computer software applications support to health care clearinghouses, billing companies, and health care providers. They particularly work with health care providers’ practice management and health information systems. These businesses provide integrated software applications for such services as accounts receivable management, electronic claims submission (patient billing), record keeping, patient charting, practice analysis and patient scheduling. Some software vendors are also involved in providing applications for translating paper and nonstandard computer documents into standardized formats that are acceptable to health plans.

Faulkner & Gray list 104 physician practice management vendors and suppliers (5, p. 520), 105 hospital information systems vendors and suppliers (5, p. 444), 134 software vendors and suppliers for claims-related transactions (5, p. 486), and 28 translation vendors (5, p. 534). We were unable to determine the number of these entities with revenues over $5 million, but we assume most of these businesses would be considered small entities under our definition.

As discussed earlier in this analysis, the cost of implementing the standards specified in the statute are primarily one-time or short-term costs related to conversion. They were characterized as follows: software conversion, cost of automation, training, implementation problems, and cost of documentation and implementation guides. Rather than repeat that information here, we refer you to the beginning of this impact analysis.