Business Associates Beware: First HIPAA Enforcement Action Against a Business Associate (And the Plot Thickens with Transparency Demands)

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On Jan. 19, 2012, in the wake of the theft of an unencrypted laptop computer containing approximately 23,500 patients' records, the Minnesota attorney general brought the first formal enforcement action against a business associate, Accretive Health, Inc., for an alleged violation under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), using her authority under the Health Information Technology for Economic and Clinical Health (“HITECH”) Act. Additionally, the attorney general appears deeply unsettled by the amount of information that Accretive Health collected about patients without the patients’ knowledge, alleging that this lack of transparency represents deceptive and fraudulent practices under Minnesota law.

Although the U.S. Department of Health and Human Services (“HHS”) has indicated that it will not enforce the HITECH Act (such as with respect to the application of HIPAA against business associates) until the final omnibus regulation becomes effective, the Minnesota suit against Accretive Health is a reminder that the HITECH Act’s statutory provisions with respect to business associates currently are in effect and that state attorneys general (as well as the U.S. Department of Justice) are not bound by HHS’ enforcement discretion when considering the exercise of their authority to enforce HIPAA.

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