The Small Business Administration defines small businesses in the health care sector as those organizations with less than $5 million in annual revenues. Nonprofit organizations are also considered small entities; 75 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. 76
Small businesses in the health care sector affected by this rule may include such businesses as: nonprofit health plans, hospitals, and skilled nursing facilities (SNFs); small businesses providing health coverage; small physician practices; pharmacies; laboratories; 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 1997, there were 562,916 small health care entities 77 classified within the SIC codes we have identified as being covered establishments (Table A).
|Standard Industrial Code (SIC)||Industry||Total Number of Health Care Establishments||Number of Establishments that Meet SBA Size Standards2 or RFA non- profit standard||% of Establishments that Meet SBA Size Standards2 or RFA non-profit standard|
|1 Source: Office of Advocacy, U.S. Small Business Administration, from data provided by the Bureau of the Census, Statistics of U.S. Businesses, 1997. Establishments that have less than $5,000,000 in annual revenue are considered small businesses here, as are non-profit establishments (regardless of revenue). We have non-profit data for the following SICs: 8050, 8060, and 8080 and have included the number of non-profits in each category into the table.|
|2 We have not included the number of fully insured ERISA plans or institutional review boards (IRB) in the total number of health care establishments or the number of establishments that meet SBA standards for small entities, since these are not separate businesses with SIC codes and we do not have sufficient data to impute revenues to them.|
|3 We have included self-insured, self-administered plans and third party administrators in the total number of health plans, even though neither has individual SIC codes because we have the ability to impute revenues to them. Therefore, the number of health plans in SIC 6320 is greater than the figure usually reported in the Statistics of U.S. Businesses.|
|5910||Drug Stores & Proprietary Stores||48,147||23,923||49.7%|
|6320||Accident & Health Insurance &||8,083||665||8.2%|
|7352||Medical Equipment Rental and||3,346||1,836||54.9%|
|8010||Offices & Clinics Of Doctors Of||190,233||170,962||89.9%|
|8020||Offices & Clinics Of Dentists||115,020||113,864||99.0%|
|8030||Offices & Clinics Of Doctors Of||9,143||8,850||96.8%|
|8040||Offices & Clinics Of Other Health||89,482||86,596||96.8%|
|8050||Nursing & Personal Care||33,178||17,727||53.4%|
|8070||Medical & Dental Laboratories||17,586||13,015||74.0%|
|8080||Home Health Care Services||19,562||12,841||65.6%|
|8090||Miscellaneous Health & Allied||22,145||11,219||50.7%|
|n/a||Fully Insured ERISA2||2,125,000||0||NA|
|n/a||Institutional Review Boards||450,000||0||NA|
These small businesses represent 82.6% of all health care establishments examined. 78 Small businesses represent a significant portion of the total number of health care establishments but a small portion of the revenue stream for all health care establishments. In 1997, the small health care businesses represented generated approximately $430 billion in annual receipts, or 30.2% of the total revenue generated by health care establishments (Table B). 79 The following sections provide estimates of the number of small health care establishments that will be required to comply with the rule. Note, however, that the SBA's published annual receipts of health care industries differ from the National Health Expenditure data that the Health Care Financing Administration (HCFA) maintains. These data do not provide the specific revenue data required for a RFA; only the SBA data has the requisite establishment and revenue data for this analysis.
|Standard Industrial Code (SIC)||Industry||Total Revenue||Revenue Generated by Small Entities||% of Total Revenue Generated by Small Entities|
|1 Source: Office of Advocacy, U.S. Small Business Administration, from data provided by the Bureau of the Census, Statistics of U.S. Businesses, 1997. Entities that have less than $5,000,000 in annual revenue are considered small businesses here, as are non-profit entities (regardless of revenue). We have non-profit data for the following SICs: 8050, 8080, and 8060 and have included the number of non-profits in each category into the table.|
|2 We have included self-insured/self-administered plans and third party administrators in the total number of health plans, even though neither has individual SIC codes because we have the ability to impute revenues to them.|
|5910||Drug Stores & Proprietary Stores||$100,302,441,000||$25,620,978,000||25.5%|
|6320||Accident & Health Insurance & Medical Service Plans (SIC 6320), Self-Insured/ Self Administered (no SIC), Third Party Administrators (no SIC)2||$512,111,493,027||$657,074,000||0.1%|
|7352||Medical Equipment Rental & Leasing||$4,040,646,000||$1,193,345,000||29.5%|
|8010||Offices & Clinics Of Doctors Of Medicine||$182,148,148,000||$105,334,031,000||57.8%|
|8020||Offices & Clinics Of Dentists||$48,766,434,000||$47,218,844,000||96.8%|
|8030||Offices & Clinics Of Doctors Of Osteopathy||$4,613,192,000||$4,039,868,000||87.6%|
|8040||Offices & Clinics Of Other Health Practitioners||$28,110,189,000||$23,170,899,000||82.4%|
|8050||Nursing & Personal Care Facilities||$77,166,537,000||$24,484,098,431||31.7%|
|8070||Medical & Dental Laboratories||$19,872,150,000||$6,862,628,000||34.5%|
|8080||Home Health Care Services||$31,061,036,000||$12,085,755,906||38.9%|
|8090||Miscellaneous Health & Allied Services||$35,034,774,000||$6,812,006,000||19.4%|
The Small Business Administration reports that approximately 74 percent of the 18,000 medical laboratories and dental laboratories in the U.S. are small entities. 80 Furthermore, based on SBA data, 55 percent of the 3,300 durable medical equipment suppliers that are not part of drug and proprietary stores in the U.S. are small entities. Over 90 percent of health practitioner offices are small businesses. 81 Doctor offices (90%), dentist offices (99%), osteopathy (97%) and other health practitioner offices (97%) are primarily considered small businesses.
There are also a 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. and the Health Care Financing Administration reports that there are 591 nonprofit nursing facilities and 4,280 nonprofit skilled nursing facilities. 82
Some contractors that are not covered entities but that work with covered 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.