Compliance meltdown coming.

Many health care organizations will not be ready for the October 16, 2003, HIPAA deadline for the transaction and code set mandates, predicts John L. Phelan, HIPAA expert and health care consultant from Milliman USA.

"It's a procedural meltdown," he says. The government has not backed off on its deadline but a great number of payers and providers are still trying to find their way through the thicket of technical requirements, code sets and other regulatory challenges. Many are seriously behind on their implementation processes and there will be consequences.

In theory, the HIPAA transaction requirements will enable health plan payers and physician and hospital providers to communicate cost-effectively and securely using electronic transactions, similar to the way transactions are handled today in the banking industry.

However, a number of potential stumbling blocks are ahead. For example, selfinsured employers generally depend on vendors to handle claims processing. But the employers carry the legal burden and risk fines if their vendors fail to meet deadlines.

Phelan warns that due to confusion over technical details, health plans can expect to hear from angry providers who have submitted electronic claims but failed to receive timely payments.

In the short run, rather than being a model of electronic efficiency, health plans may find themselves mired in an avalanche of paperwork and phone calls. Providers may well want to take steps to enhance their cash position in case there is a liquidity crunch when payers and providers are trying to implement new systems to comply with HIPAA.

James A. Hawkins is a health care writer based in Aiken, S.C. He can be reached by phone at [phone] or by e-mail at [e-mail].