The Small Business Administration defines small entities in the health care sector as those organizations with less than $5 million in annual revenues. 1 Nonprofit organizations are also considered small entities; however, individuals and States are not included in the definition of a small entity. Similarly, small government jurisdictions with a population of less than 50,000 are considered small entities.
Small health entities affected include: nonprofit health plans, hospitals, and skilled nursing facilities (SNFs); small businesses providing health coverage; small physician practices; pharmacies; laboratories; and durable medical equipment (DME) suppliers; health care clearinghouses; billing companies; and vendors that supply software applications to health care entities.
The U.S. Small Business Administration reports that as of 1996, there were 1,078,020 small health care establishments 2 classified within the SIC codes we have designated (Table A).
These small businesses represent 83.8% of all health care entities we have examined 3. Small businesses represent a significant portion of the total number of health care entities but a small portion of the revenue stream for all health care entities. In 1996, the small businesses represented generated approximately $235 million in annual receipts, or 22.2% of the total revenue generated by small health care entities (Table B) 4. The following sections provide estimates of the number of small health care entities that will be required to comply with the rule. We should note, however, that the SBA’s published annual receipts of health care industries differs substantially from the National health expenditure data that the Health Care Finance Administration (HCFA) maintains. HCFA’s data are generally considered more accurate because the data are validated by several sources.
The Small Business Administration reports that approximately 80 percent of the 15,000 medical laboratories and dental laboratories in the U.S. are small entities 5. Furthermore, based on HCFA data, we estimate that 98 percent of the 160,000 durable medical equipment suppliers in the U.S. are small entities. Over 90 percent of health practitioner offices are small businesses 6. Doctor offices (91%), dentist offices (99%), osteopathy (98%) and other health practitioner offices (98%) are primarily considered small businesses.
There are also a small number of hospitals, home health agencies, non-profit nursing facilities, and skilled nursing facilities that will be affected by the proposed rule. According to the American Hospital Association, there are approximately 3,131 nonprofit hospitals nationwide. Additionally, there are 2,788 nonprofit home health agencies in the U.S. The Health Care Finance Administration reports that there are 591 nonprofit nursing facilities and 4,280 nonprofit skilled nursing facilities 7.
While it is difficult to calculate the number of clearinghouses that meet the definition of a small business, we believe that a significant portion of the 80 health care clearinghouses that process health care claims in the U.S. have annual revenues of less than $5 million annually 8. We believe that all of the 4,500 billing companies 9 that provide administrative and billing services for physicians’ offices have annual revenues below $5 million per year.
Some contractors that work with health care entities will be required to adopt policies and procedures to protect information. We do not expect that the additional burden placed on contractors will be significant. We have not estimated the effect of the proposed rule on these entities because we cannot reasonably anticipate the number or type of contracts affected by the proposed rule. We also do not know the extent to which contractors would be required to modify their policy practices as a result of the rule’s implementation.