AUGUSTA – The Maine state government and the state’s health care industry will spend tens of millions of dollars over the next three years to comply with federal regulations aimed at simplifying health care information and improving accountability. But critics argue the money could be better spent on health care, not computers and software.

“To me it’s an example of overreach,” said Human Services Commissioner Kevin Concannon. “The HIPPA requirements are so burdensome on programs like our own and on private businesses. It is kind of a heavy ax by the federal government.”

The Health Insurance Portability and Accountability Act, HIPPA for short, is better known for provisions designed to protect health insurance coverage for workers and their families when they change or lose their jobs. But the 1996 law also mandates regulations in the areas of privacy and security as well as new standards for health care information. And the regulations, some already adopted and others proposed, take up volumes.

“These regulations are comprehensive,” said Patrick Morin, information technology manager at Baker, Newman and Noyes in Portland. He is cochairman of a statewide group that includes both government and private sector representatives. “These regulations will completely change how health care providers and organizations manage information, including patient records, coding and reimbursement.”

The goal, Morin said, is to eventually reduce the administrative costs of providing health care by making forms, codes and other administrative procedures uniform. For example, a particular surgical procedure will now have to be identified the same way by all those involved in the operation, from the doctor to the hospital to the insurance company.

“But to accomplish those goals is going to take a major investment in new technology, and the cost estimates are in the billions nationwide,” he said.

Concannon has no problem with the goal, but he said some of the changes, and the time frames required to make the changes, are not among his priorities for addressing health care needs. His department alone is projecting the cost of meeting the new regulations at about $9 million over the next three years. And not complying is not an option. The law provides for significant penalties for providers that do not implement the new rules.

“We will get federal reimbursement under Medicaid for most of the costs,” said Deputy Human Services Commissioner Rudy Naples. “I am estimating the state share of the cost will be about $1.5 million.”

But Harry Lamphear, the state’s chief information officer, said there are other state agencies that will have to comply with the regulations, and they cannot tap into Medicaid to help pay the bill.

“For example, the Department of Behavioral and Developmental Services [the new name of the Department of Mental Health and Retardation] operates hospitals like AMHI [the Augusta Mental Health Institute], and they will have substantial costs to comply,” he said.

Lamphear is chairman of the state government effort to comply with the new rules. He said a consulting firm has been hired to help make the transition and that early estimates indicate it will cost between $16 million and $17 million for all of state government.

“We would all be much better off if we could focus these resources, both time and money on what we can do to close the gap on access to health care,” Concannon said. “We could be using those resources much better than using them to comply with HIPPA.”

While often critical of Concannon, Gordon Smith of the Maine Medical Association agrees that HIPPA costs could be better spent addressing health care needs. He said it is hard to estimate what it will cost a doctor to comply, but depending on the degree of digital technology already in place in an office, it could range from $4,000 to $20,000 for a small practice of two or three doctors.

“Quite frankly, physicians have not really focused on this yet,” he said. “But they will a year from now when they are looking at the deadline to comply.”

Smith said the MMA is gearing up to provide training and assistance to doctors across the state to meet the April 2003 deadline to comply with the new regulations.

Mark Ishkanian, vice president of the Maine Hospital Association, said the association is assessing the cost and how best to meet the new requirements. He said it will be a burden on the state’s hospitals and will certainly exceed the $19 million cost of complying with the Y2K standards a year ago.

“The rule of thumb nationally is it will cost four to five times the Y2K costs and it will vary widely depending on the existing systems at each hospital,” said Morin.

And the rules affect other health care providers, such as nursing homes and home health care providers. Morin said no one has yet developed a good estimate of the total impact. He said insurers would also face significant costs.

“A lot of the costs are for the new software and upgrades,” he said, “but some providers will have to buy hardware as well. I think a major cost will be training to meet the new privacy rules as well as operating the new software.”

Last fall, Congress delayed the implementation deadlines for some of the rules by a year. But outside of Medicaid funding for some state costs, it is a major unfunded mandate. Health care providers, particularly nonprofit organizations, have asked for some federal help in meeting the new requirements.

“I certainly support some help,” said Democratic 2nd District U.S. Rep. John Baldacci, “but I do not agree with those who do not believe we should be implementing these new HIPPA standards.”

Baldacci said he supported HIPPA because it holds the promise of significantly holding down health care costs through the standardization and simplification of administrative procedures.

“There has been some significant fraud by some providers that have billed many times for the same procedure by manipulating the codes,” he said.

Lamphear said there are budget requests before Gov. Angus King to start paying for some of the implementation costs. He said he did not know what King has approved as part of the budget revision bill that will be unveiled this week.