When Congress passed the Health Insurance Portability and Accountability Act (HIPAA) in 1996, one of its major objectives was to reduce health care costs by simplifying administrative and financial transactions across the industry. At that time, national health spending was heading toward the $1 trillion mark annually, and studies proclaimed that "administrative simplification" could save anywhere from $40 billion to $70 billion per year.

Six years later, HIPAA is proving to be much more costly-and difficult-than the government initially expected. In December, health plans, providers and clearinghouses were granted the option of applying for a one-year extension to comply with the transaction and code set requirements of HIPAA-yet the industry is still scrambling to comply with all the provisions of the law.

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