The HIPAA Administrative Simplification (HIPAA-AS) was developed to minimize the cost and administrative burdens of healthcare and to protect patient "Protected Health Information" (PHI).  This is achieved by conducting standardized electronic transmission of certain administrative and financial transactions carried out manually on paper.  HIPAA-AS is intended to improve the overall efficiency and effectiveness of healthcare systems.  It also includes specific provisions to ensure the security of electronic health information and the privacy of all individual identifiable health information.

As with most Federal Regulations addressing vital national needs, the HIPAA Administrative Simplification Rules are complex and require extensive interpretation to ensure proper implementation.  The Department of Health and Human Services (HHS) recognized the need for a "scaled" and "flexible" approach to accommodate appropriate implementation by all "covered entities" - large health providers and small physician/dental offices.