HIPAA could mean big business

INPUT Health Insurance Portability and Accountability Act Update

As they try to meet federal deadlines for the way health information is

stored, processed and transmitted electronically, states likely will outsource

most of the work, creating a $3 billion market for information technology

companies.

Input, a Chantilly, Va.-based market analysis and research firm, based

the figure on a Department of Health and Human Services estimate for implementation

of the Health Insurance Portability and Accountability Act over five years.

"Actually $3.8 billion was their estimate, and then we kind of broke

that down considering what the states would try to do in-house vs. what

they would outsource," said Meredith Luttner, manager of state and local

databases at Input. "So we considered the states would probably try to outsource

as much as 80 percent of that number, so that's where we arrived at about

the $3 billion."

She added that the figure is a conservative estimate. The report, released

July 18, said states are issuing or planning to issue solicitations for

a variety of IT services, including analysis, planning, system design, implementation,

project oversight and maintenance. It said that overall, the HIPAA initiative

is about 20 percent to 30 percent IT-related.

Enacted in 1996, HIPAA is intended to better protect patient health

information and streamline business processes through standardized electronic

data interchange. The federal government has issued or will issue rules

on security, privacy, transaction and code sets and their compliance deadlines.

Enforcement regulations are also being drafted.

But state and local governments and other groups have complained that

deadlines are too stringent and the issue too complex. Many want more time

and guidance from the federal government. The federal government has offered

extensions in some cases.

But another major problem is funding. With most states projecting budget

revenue deficits, state officials are looking for more matching federal

funds.

States are "kind of griping to them saying, 'OK, you want us to make

this date, but there's no way we can do it without your assistance,' " she

said. "But I think the budgetary issues are the main thing that are presenting

the opportunity for IT vendors to do so much business because states just

can't afford to do this in-house as much as they thought they would have

at the initial session."

She said she didn't know how many vendors are providing HIPAA solutions

and services, but said that the group likely includes every large systems

integrator and all the big consulting firms. Many subcontracting opportunities

will be available for smaller firms, she added.