Standards for Privacy of Individually Identifiable Health Information. Final Privacy Rule Preamble.. Policy and Procedures Development


The final regulation imposes a variety of requirements which collectively will necessitate entities to develop policies and procedures (henceforth in this section to be referred to as policies) to establish and maintain compliance with the regulation. These include policies such as those for inspection and copying, amending records, and receiving complaints.50 In developing the final regulations, simplifying the administrative burden was a significant consideration. To the extent practical, consistent with maintaining adequate protection of protected health information, the final rule is designed to encourage the development of policies by professional associations and others, that will reduce costs and facilitate greater consistency across providers and other covered entities.

The development of policies will occur at two levels: first, at the association or other large scale levels; and second, at the entity level. Because of the generic nature of many of the final rule's provisions, the Department anticipates that trade, professional associations, and other groups serving large numbers of members or clients will develop materials that can be used broadly. These will likely include the model privacy practice notice that all covered entities will have to provide patients; general descriptions of the regulation's requirements appropriate for various types of health care providers; checklists of steps entities will have to take to comply; training materials; and recommended procedures or guidelines. The Department spoke with a number of professional associations, and they confirmed that they would expect to provide such materials for their members at either the federal or state level.

Using Faulkner and Gray's Health Data Directory 2000, we identified 216 associations that would be likely to provide guidance to members. In addition, we assume three organizations (i.e., one for hospitals, health plans, and other health care providers) in each state would also provide some additional services to help covered entities coordinate the requirements of this rule with state laws and requirements. The Department assumed that these associations would each provide 320 hours of legal analysis at $150 per hour, and 640 hours of senior analysts time at $50 per hour. This equals $17.3 million. Hourly rates for legal council are the average billing rate for a staff attorney. 51 The senior analysts rates are based on a salary of $75,000 per year, plus benefits, which was provided by a major professional association.

For larger health care entities such as hospitals and health plans, the Department assumed that the complexity of their operations would require them to seek more customized assistance from outside council or consultants. Therefore, the Department assumes that each hospital and health plan (including self-administered, self-insured health plans) will, on average, require 40 hours of outside assistance. The resulting cost for external policy development is estimated to be $112 million.

All covered entities are expected to require some time for internal policy development beyond what is provided by associations or outside consultants. For most non-hospital providers, the external assistance will provide most of the necessary information. Therefore, we expect these health care providers will need only eight hours to adapt these policies for their specific use (training cost is estimated separately in the impact analysis). Hospitals and health plans, which employ more individuals and are involved in a wider array of endeavors, are likely to require more specific policies tailored to their operations to comply with the final rule. For these entities, we assume an average of 320 hours of policy development per institution. The total cost for internal policy development is estimated to be $468 million.

The total cost for policy, plan, and procedures development for the final regulation is estimated to be $598 million. All of these costs are initial costs.