Encinitas optometrist Dr. Tony Hutchinson believes he’s adhering to the growing list of federal, state and local regulations faced by most businesses his size.
As a both a small-businessman and a health care provider, Hutchinson is up to his ears in acronyms , particularly HIPAA, the Health Insurance Portability and Accountability Act. While he believes the regulations benefit patients and consumers, it nonetheless puts the survival of his small office in peril.
“I think for many small businesses it is overkill,” said Hutchinson, who operates Pacific View Eyecare Center. “There is more regulations than really is needed. I am not sure that they are practical for a small practice such as mine.”
HIPAA mandates a strict adherence to securing the databases of patient files when transmitting or maintaining people’s private information. It’s caused Hutchinson and many of his colleagues a lot of money to comply.
In order to meet HIPAA’s April 21 deadline to meet security mandates, Hutchinson, who maintains a staff of six, hired a legislation compliance company to update his computers and make sure they comply with legislative standards.
The compliance services when completed in the next month will cost him $12,000, he said. According to the U.S. Small Business Administration’s Office of Advocacy, the typical small business with fewer than 20 employees spends more than $1,200 per employee to comply with tax paperwork, recordkeeping and reporting requirements mandated by the federal government.
Thomas Sullivan, the SBA’s chief counsel for advocacy, said small businesses face a larger burden compared to their bigger brothers.
“Small businesses, as defined by the SBA size standard, make up over 99 percent of all U.S. businesses and employ over one-half of the American work force,” Sullivan said during testimony April 27 before the House of Representatives Committee on Small Businesses. “Perhaps even more importantly, small firms create more than two-thirds of the net new jobs annually, and recently led the American economy out of a recession.
“Yet, small business accomplishes this even while facing a regulatory compliance burden that is roughly 60 percent greater per employee than that faced by larger firms, and a tax compliance burden more than twice as large.”
This, while coping with the cost of complying with the likes of HIPAA, as well as the Gramm-Leach Bliley Act and the California Data Privacy Acts, which small-business owners such as Hutchison agree are meant to protect consumers.
“It costs money to have to implement all the rules and regulations,” said Fiona Dempsey, vice president of operations for Pacific Beach-based Presidio Medical Group. “There’s good and bad to it. Any time there are new rules you have to spend more money to implement that, but at the same time you are prohibiting patient information from leaking.”
The medical group, which consists of four sites countywide, employs 23 people. Dempsey said compliance training was a drain on employees’ time.
“Initially, there was a lot of time (learning the rules), but now everyone keeps up to date,” she said.
As the onslaught of rules and regulations continues to descend on small businesses, other businesses are finding opportunities to provide correlating services.
Gregory Harris, a principal of Legislation Compliance Professionals, is one of several companies locally providing services specific to legislation compliance.
Harris previously operated under the name Local Computer Pros and provided standard information technology consulting and computer upgrade services.
But for the last three months, Harris has focused the majority of his business on legislation compliance.
Harris said the company, which has one employee besides Harris, estimates revenues will reach $250,000 by the end of the year , 70 percent of which will come from legislation compliance.
“There is a huge need for it,” Harris said. “In California these days, people sue over (disclosure of personal information).”
The penalties assessed to companies can be quite significant, with civil fines starting at $100 per violation and criminal fines ranging from $5,000 to $250,000 and one year to 10 years imprisonment, according to Elspeth Delaney, an attorney at the San Diego law office of Hooper, Lundy, Bookman, Inc., a Los Angeles-based law firm specializing in health.
San Diego-based Networks Plus Technology Group, a national provider of technology solutions, has been providing legislation compliance for nearly two years.
“As a technical consultant company we saw an opportunity driven by government compliances as the government is pushing businesses into different verticals,” said company President James Kernan. “Unfortunately for businesses, there’s thousands of different regulations out there that unfortunately businesses aren’t aware of. We wanted to become experts in that field and offer a helping hand,” he said.
Legislation compliance makes up 35 percent of the company’s $16 million annual business and is one of the fastest growing services within the 11-year-old company.
“Of the six core competencies of my business, this is clearly the fastest growing one,” Kernan said.
In January, Networks Plus, which has 55 employees, partnered with HipaaManager Inc., a San Diego-based provider of HIPAA privacy and security solutions, to distribute HipaaManager’s two software product lines , HIPAA Compliance Tool and Risk Control Analysis Tool, a sign that the legislation compliance business is steadily growing.
“This is the TurboTax of the industry,” he said. “HIPAA compliance is just so confusing. We are offering this compliance assessment tool that allows any individual big or small to plug in the information.”
Kernan said the company is expecting to reach $5 million to $6 million in sales for legislation compliance services.
Scott Kessler, the chief executive officer of the Business Improvement District Council, a non-profit small business advocacy group, said regulations continued to be added on small businesses each year, increasing the cost to do business in an already costly business climate.
“It is a heavy regulated environment for small businesses from city to state regulations,” Kessler said. “It is an impediment to growth to small businesses and to their bottom line. Each year, unfortunately more and more regulations get put on the books.”