Standards for Privacy of Individually Identifiable Health Information. Final Privacy Rule Preamble.. Total Costs and Costs per Establishment for Small Business

12/28/2000

Based on the methodology described above, the total cost of complying with the final rule in the initial year of 2003 is $1.9 billion. The ongoing costs to small business from 2004 to 2012 is $9.3 billion. Table C presents the initial and ongoing costs to small business by each SIC code. According to this table, small doctors offices, small dentists offices and small hospitals will face the highest cost of complying with the final rule. However, much of the reason for the higher costs faced by these three groups of small health care providers is explained by the fact that there are a significant number of health care providers in these categories.

Table C. - Annual Cost to Small Business of Implementing Provisions of the Proposed Privacy Regulation1
SIC Industry Initial Cost (Year 1)1 Ongoing Cost (Year 2-10) Total Costs
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.
2The initial costs include all costs in the first year, including costs that recur in subsequent years.
3 We have included self-insured/self-administered health 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 $153,976,159 $780,573,862 $934,550,021
6320 Accident & Health Insurance & Medical Service Plans2 $41,348,527 $169,540,638 $210,889,164
7353 Medical Equipment Rental & Leasing $7,171,728 $36,356,688 $43,528,416
8010 Offices & Clinics of Doctors of Medicine $633,033,192 $3,209,127,747 $3,842,160,938
8120 Offices & Clinics of Dentists $283,774,344 $1,438,578,786 $1,722,353,130
8030 Offices & Clinics of Doctors of Osteopathy $24,278,673 $123,079,430 $147,358,103
8040 Offices & Clinics of Other Health Practitioners $139,251,750 $705,929,263 $845,181,013
8050 Nursing & Personal Care Facilities $147,143,775 $745,937,461 $893,081,236
8060 Hospitals $355,459,094 $1,199,498,063 $1,554,957,157
8070 Medical & Dental Laboratories $41,242,809 $209,078,203 $250,321,012
8080 Home Health Care Services $72,632,601 $368,207,067 $440,839,668
8090 Misc Health & And Allied Services $40,938,582 $207,535,943 $248,474,525
n/a Fully Insured/ERISA $7,137,028 $0 $7,137,028
n/a IRBs $88,813 $84,162,446 $84,251,259
n/a Total Cost For Small Business $1,947,477,073 $9,277,605,598 $11,225,082,671

On a per-establishment basis, Table D demonstrates that the average cost for small business of complying with the proposed rule in the first year is $4,188 per-establishment. The ongoing costs of privacy compliance are approximately $2,217 each year thereafter. We estimate that the average cost of compliance in the first year for each small non-hospital health care provider is approximately 0.6 percent of per-establishment revenues. In subsequent years, per-establishment costs about 0.3 percent of per-establishment revenues. For small hospitals and health plans, the per-establishment cost of compliance in the first year is 0.2 percent and 6.3 percent of per-establishment revenues respectively. For subsequent years, the cost is only 0.1 percent and 2.9 percent of pre-establishment revenues respectively. These costs may be offset in many firms by the savings realized through requirements of the Transactions Rule.

Table D. - Average Annual per Establishment Privacy Costs1
SIC Industry Year 1 Privacy Costs Per Establishment Average Year 2-10 Privacy Costs per Establishment
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 health 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.
3We have not included the number of fully insured ERISA health plans or institutional review boards (IRB) in the total number of health care entities or the number of entities that meet SMA 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.
5910 Drug Stores & Proprietary Stores $6,436 $3,625
6320 Accident & Health Insurance & Medical Service Plans2 $62,162 $28,320
7353 Medical Equipment Rental & Leasing $3,906 $2,200
8010 Offices & Clinics of Doctors of Medicine $3,703 $2,086
8120 Offices & Clinics of Dentists $2,492 $1,404
8030 Offices & Clinics of Doctors of Osteopathy $2,743 $1,545
8040 Offices & Clinics of Other Health $1,608 $906
8050 Nursing & Personal Care Facilities $8,301 $4,676
8060 Hospitals $101,999 $38,244
8070 Medical & Dental Laboratories $3,169 $1,785
8080 Home Health Care Services $5,656 $3,186
8090 Misc Health & And Allied Services $3,649 $2,055
n/a Fully Insured/ERISA3 N/A N/A
n/a IRB3 N/A N/A
n/a Average for All Small Business $4,188 $2,217

Table E shows the cost to each SIC code of the major cost items of the final rule. Listed are the top-five most costly provisions of the rule (to small business) and then the cost of all other remaining provisions. The costs of the most expensive five provisions represent 90 percent of the cost of the ongoing costs to small business, while the remaining provisions only represent 7 percent.

Table E. - Average Annual Ongoing Cost to Small Business of Implementing Provisions of the Privacy Regulation, After the First Year1
Industry Average Annual Ongoing Cost for Privacy Official, per Industry Sector Average Annual Ongoing Cost for Minimum Necessary, per Industry Sector Average Annual Ongoing Cost for Disclosure Tracking, per Industry Sector Average Annual Ongoing Cost for De-Identification, per Industry Sector Average Annual Ongoing Cost for Training, per Industry Sector Average Annual Ongoing Cost for All Other Provisions, per Industry Sector
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. 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
2 We have included self-insured, self-administered health 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.
Drug Stores & Proprietary Stores $37,997,168 $30,008,085 $3,597,262 $3,751,011 $4,083,677 $7,293,227
Accident & Health Insurance & Medical Service plans (including Self Insured/ Self Administered Health plans, & TPAs)2 $5,920,267 $5,395,070 $985,072 $3,614,697 $59,086 $2,863,657
Medical Equipment Rental & Leasing $1,769,789 $1,397,683 $167,549 $174,710 $190,205 $339,696
Offices & clinics of Doctors of Medicine $156,215,538 $123,370,486 $14,789,213 $15,421,311 $16,788,984 $29,984,217
Offices & clinics of Doctors of Dentists $70,027,863 $55,304,176 $6,629,667 $6,913,022 $7,526,119 $13,441,241
Offices & clinics of Doctors of Osteopathy $5,991,323 $4,731,619 $567,210 $591,452 $643,907 $1,149,982
Offices & clinics of Other Health Practitioners $34,363,581 $27,138,476 $3,253,264 $3,392,310 $3,693,164 $6,595,791
Nursing & Personal care Facilities $36,311,120 $28,676,536 $3,437,641 $3,584,567 $3,902,472 $6,969,604
Hospitals $25,475,393 $56,613,285 $19,558,912 $14,153,321 $309,555 $17,167,095
Medical & Dental Laboratories $10,177,614 $8,037,723 $963,534 $1,004,715 $1,093,821 $1,953,505
Home Health care Services $17,923,769 $14,155,212 $1,696,876 $1,769,402 $1,926,325 $3,440,312
Misc Health & Allied Health Services $10,102,539 $7,978,433 $956,426 $997,304 $1,085,752 $1,939,095
Fully Insured/ERISA N/A N/A N/A N/A N/A $9,351,383
IRB N/A N/A N/A N/A N/A $0
Total $412,275,964 $362,806,784 $56,602,625 $55,367,822 $41,303,067 $102,488,804