HHS Announces First HIPAA Settlement Based on Lack of Breach Notification Policies and Procedures

The Department of Health and Human Services (HHS) recently announced the first settlement under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) based on violations of the law's privacy, security, enforcement and breach notification rules. Adult & Pediatric Dermatology, P.C. (APDerm) failed to maintain policies and procedures addressing the breach notification requirements of the Health Information Technology for Economic and Clinical Health (HITECH) Act, HHS alleged. To settle the action, APDerm agreed to pay HHS $150,000 and implement a corrective action plan, under which it must take measures to come into full compliance with the HIPAA requirements and report its progress to HHS.

HHS initiated the investigation after APDerm — a private dermatology practice with four locations in Massachusetts and two offices in New Hampshire — reported the theft of a thumb drive containing the unencrypted electronic protected health information (ePHI) of approximately 2,200 individuals. HHS found that, despite the fact that the thumb drive was never recovered, APDerm waited a year to perform the proper risk assessment. Further, APDerm did not have the proper written policies and procedures in place for breach notification, nor did it train its employees on such policies and procedures as required by the HIPAA breach notification rule. As a result, APDerm allowed unauthorized access to confidential information contained on the stolen thumb drive, leading to an impermissible disclosure of personal health information.

This settlement may indicate increasing enforcement efforts by HHS. APDerm's case highlights the importance of implementing a compliance program that satisfies the HIPAA requirements. Covered entities and their associates must have written policies and procedures in place for protecting health information and addressing issues when they arise. Employees need training on those policies and procedures for them to be effective.