Way back on February 17, 2009, Congress passed a stimulus bill that contained provisions referred to as the Health Information Technology for Economic and Clinical Health ("HITECH") Act.1 The HITECH Act was geared toward encouraging members of the healthcare industry to adopt and standardize health information technology, and included provisions augmenting the Health Insurance Portability and Accountability Act's ("HIPAA") privacy and security provisions by increasing penalties and expanding HIPAA’s reach to business associates, among other things. On July 14, 2010, the federal Department of Health and Human Services’ ("HHS") Office for Civil Rights ("OCR") issued a Notice of Proposed Rulemaking relating to certain sections of the HITECH Act.
Two and a half years after publication of those proposed rules, on January 17, 2013, the health industry got a huge dose of HIPAA upon OCR’s release of a 563-page pre-publication version of what have become known as the "omnibus" HITECH Act rules, or the "Megarule."2 The January 25, 2013 edition of the Federal Register contains the official version.3 The Megarule is actually a group of regulations finalizing four sets of proposed or interim final rules. OCR combined final versions of four separate sets of regulations in an effort to reduce the number of times regulated entities would need to undertake certain compliance activities. The four main topic areas covered are discussed below.
The Megarule implements changes to the HIPAA Privacy, Security and Enforcement Rules as mandated by the HITECH Act. It also changes and finalizes the interim final breach notification rules,4 makes certain modifications to the interim final enforcement rule,5 and makes changes to implement provisions of the Genetic Information Nondiscrimination Act of 2008 ("GINA").
I. Finalization of Breach Notification Rules for Unsecured Protected Health Information
Since publication of the August 24, 2009 interim final HITECH Act rules regarding breach notifications, members of the healthcare industry have debated vigorously the provisions of those rules allowing breach notifications to be avoided if there is not a sufficient risk of harm. The Megarule sets out a more objective and detailed standard, which may result in more breach notifications in the future. This is because situations involving impermissible access, acquisition, use or disclosure of protected health information are now presumed to be a breach unless the covered entity or business associate is able to demonstrate that there is a low probability that the information has been compromised. The interim final rule continues to apply until the enforcement deadline for the new provisions. The four factors that must now be considered in a risk assessment used to determine whether protected health information has been compromised are set forth in the definition of a "breach" found in the new version of 45 CFR 164.402 and include:
the nature and extent of the protected health information involved, including the types of identifiers and the likelihood of re-identification
the unauthorized person who used the protected health information or to whom the disclosure was made
whether the protected health information was actually acquired or viewed
the extent to which the risk to the protected health information has been mitigated
OCR still recognizes that there are situations where an unauthorized use, disclosure, access or acquisition is very inconsequential and may not warrant notification. Covered entities and business associates will have to consider each situation carefully.
II. HIPAA and HITECH Act Modifications
The Megarule contains few surprises, and, aside from a change to the breach notification requirements discussed above, do not depart substantially from the proposed rules. HHS received only about 300 comments on the proposed rules. The Megarule finalizes a number of changes that will be significant for the healthcare industry.
A. Business Associate Requirements
The Megarule implements the HITECH Act's expansion of HIPAA to business associates. Under the new Megarule, business associates are required to comply with specific HIPAA privacy and security provisions.
1. Business Associates vs. Subcontractors
The July 2010 proposed rules surprised some in the healthcare industry by extending HIPAA’s requirements, not just to business associates, but to subcontractors that handle protected health information on behalf of business associates. The Megarule defines a "business associate" to include subcontractors and agents that receive, create, maintain or transmit protected health information on behalf of the business associate. A business associate does not include a third party that receives protected health information from a business associate for the business associate’s own management and administration or legal responsibilities. The business associate does, however, have to obtain reasonable assurances from the recipient of the information that the information will be maintained confidentially and used or further disclosed only as required by law or for the purposes for which it was disclosed. Business associates do not include healthcare providers that receive protected health information from a covered entity for treatment purposes.
2. Clarification of Business Associate Status of Certain Entities
The Megarule clarifies whether certain entities are business associates, and the discussion in the preamble to the regulations provides useful insight on a number of questions related to these entities. For example, a bank would not normally be a business associate, but it would be if it is performing services that go beyond payment processing, such as providing accounts receivable functions to a healthcare provider. While a medical liability insurance company would not usually be characterized as a business associate, such a relationship could arise if the insurer is performing other services, such as risk management, assessment activities or legal services.
Entities commenting on the proposed rules asked for clarification regarding the types of service providers that would not be business associates. The final Megarule includes in the definition of "business associate" health information organizations, e-prescribing gateways, and other persons providing data transmission services and that require "routine access" to such information, as well as a person who offers a personal health record to patients on behalf of a covered entity. In the preamble of the Megarule, OCR indicated that the exception for conduits like the U.S. Postal Service, other couriers and their electronic equivalents, such as Internet service providers, is very narrow. A conduit is an entity that transports information but does not access it other than on a random or infrequent basis. On the other hand, if a data storage company stores or maintains protected health information on behalf of a covered entity on more than a temporary basis incident to a data transmission, that entity is a business associate, "even if the entity does not actually view the information."6
B. Limits on Fundraising and Marketing
Under the Megarule, covered entities and business associates have specific new parameters on uses and disclosures of protected health information for fundraising and marketing. Fundraising communications must include a clear and conspicuous opportunity to opt out of receiving further communications. Treatment or payment may not be conditioned on the individual's agreement to receive fundraising communications. A broader range of information may be used for fundraising purposes,7 however. Specifically, in addition to the information listed in the existing rules, the omnibus rules allow covered entities to use the treating physician's name, department of service information, health insurance status and outcome information in crafting their fundraising documents.
The Megarule contains additional specificity regarding HIPAA's marketing restrictions. The Megarule still allows covered entities to receive financial remuneration to provide refill reminders or to send out other communications about a drug or biologic currently prescribed for the patient. The financial remuneration received by the covered entity must be reasonably related to the covered entity's costs associated with making the communication. Additionally, a number of other communications are not considered "marketing," including communications for treatment, case management, care coordination or describing health-related products or services provided by the covered entity, as long as the covered entity does not receive financial remuneration in exchange for making the communication. "Financial remuneration" means direct or indirect payment from or on behalf of a third party whose product or service is being described.
C. Notices of Privacy Practices
The Megarule requires modifications to and redistribution of a covered entity’s notice of privacy practices. Notices of privacy practices must be updated to include a description of the types of uses and disclosures that require an authorization. The notices must also explain, if applicable, that the individual has a right to opt out of fundraising communications. If the covered entity is a health plan that uses protected health information for underwriting purposes, in accordance with GINA, the notice must state that genetic information may not be used for that purpose. Notices must also state that the covered entity is required to notify affected individuals following a breach of unsecured protected health information.
Not all health plans have to provide the notice to covered individuals within 60 days of a material revision. Instead, if the health plan has a website, the plan may post the notice prominently on that site, and then provide information about the material change and how to obtain the revised notice in its next annual mailing to covered individuals. A health plan that does not post its notice on its website must still provide the notice, or information about the change and how to obtain the revised notice, to individuals within 60 days of the material revisions.
Researchers may find some useful changes in the new Megarule. HHS's National Institutes of Health published guidance on HIPAA's impact on research repositories and databases.8 This guidance indicated that a single authorization may cover uses and disclosures for two different research studies, such as where one study collects information and also stores tissues for future research. If provision of research-related treatment, payment or benefits eligibility was conditioned on the patient signing only one of the authorizations and not the other, however, the guidance stated that the documents could not be combined. The Megarule clarifies that an authorization for the use or disclosure of protected health information for a research study may be combined with another authorization to create or maintain a research database or repository. Research authorizations may be combined even if one of the authorizations must be signed as a condition of obtaining treatment, as long as that portion of the authorization is clearly differentiated from the rest of the document.
E. Immunization Records
The Megarule allows covered entities to make certain disclosures to schools where the individual is a student or prospective student. Specifically, immunization records may be disclosed to a school if the school is required by law to have the information, and the covered entity obtains and documents that the individual, or the individual's parent or guardian, agreed to the disclosure.
The Megarule changes the definition of "protected health information" to indicate that the HIPAA Privacy and Security Rules do not apply to the information of individuals who have been dead for more than 50 years. The Megarule also makes it clear that, when a patient dies, a covered entity may disclose protected health information to a family member or close personal friend to the extent the information is relevant to the family member or friend's involvement in the patient's healthcare prior to death and the disclosure is consistent with any prior expressed preference of the individual.
G. Sale of Protected Health Information
The HITECH Act prohibits the sale of protected health information, with certain exceptions. The new Megarule provides specific guidance regarding circumstances that would constitute a prohibited sale. The receipt of remuneration from or on behalf of the recipient of protected health information is prohibited, with very limited exceptions. Information can be sold for certain purposes related to public health; research (where the remuneration is limited to a reasonable cost-based fee); treatment and payment purposes; or the sale, transfer, merger or consolidation of all or part of a covered entity. Business associates may also be paid for activities that the business associate undertakes on behalf of a covered entity as long as the only remuneration provided is by the covered entity to the business associate. Similar transactions between business associates and subcontractors are also permitted. Remuneration is also permitted in connection with certain other transactions, including providing health information to the individual who is the subject of the information, provision of protected health information as required by law, and other exchanges consistent with HIPAA where the only remuneration received by the covered entity or business associate is reasonable and covers the cost of preparing and transmitting the protected health information, or if information is transferred for a fee expressly permitted by another law.
H. Requests for Restrictions
Normally, covered entities do not have to agree if an individual requests restrictions related to a use or disclosure of his or her protected health information that is otherwise allowed under HIPAA. However, HITECH created an exception for certain healthcare services for which the patient pays out-of-pocket in full. The Megarule contains language implementing this requirement. Specifically, covered entities must agree to restrict disclosures of protected health information about the individual if the disclosure is for payment or healthcare operations purposes, is not required by law, and the protected health information pertains solely to a healthcare item or service for which the individual, or someone on the individual's behalf other than the health plan, has paid the covered entity in full.
I. Access to Protected Health Information
If an individual requests protected health information that is maintained electronically in a designated record set, the Megarule provides that the covered entity must provide the individual with electronic access in a form and format requested by the individual, if the information is readily producible in such format. If the information is not readily producible in that format, it must be given to the individual in a readable electronic form and format as mutually agreed by the covered entity and individual. The Megarule indicates that, if an individual requests that the covered entity send protected health information directly to a third party, the covered entity must send the information to that third party. To accomplish this, the individual must sign a written request that clearly identifies the third party.
III. Adoption of HIPAA Enforcement Rule Changes
Changes to HIPAA enforcement provisions were published as an interim final rule on October 30, 2009.9 The Megarule adopts changes to the HIPAA Enforcement rule to implement the HITECH Act’s civil money penalty structure that increased financial penalties for violations.
IV. Final HIPAA Changes related to GINA
The Megarule prohibits most health plans from using or disclosing genetic information for underwriting. Underwriting purposes include a number of activities, including determining eligibility, computation of premiums, application of preexisting condition exclusions and other activities related to the creation, renewal or replacement of a health insurance or health benefit contract.
Remaining Questions and Next Steps
The Megarule does not address all of the proposed rules implementing the HITECH Act provisions. For example, the industry is still waiting for final accounting rules, which were published in proposed form in May of 2011.10
The Megarule will be effective on March 26, 2013. Covered entities and business associates will still have an additional 180 days beyond that to achieve compliance with most of the regulatory provisions. Certain existing business associate agreements can remain in force for an additional year. Virtually all members of the healthcare industry will need to examine their privacy and security policies immediately to determine what changes will be needed to address the new requirements.
This alert originally appeared as an article in the January 2013 HIPAA Megarule Special Edition of the ABA e-newsletter ABA Health eSource.
1 See American Recovery and Reinvestment Act of 2009, Pub. Law 111-5.
2 Available at https://s3.amazonaws.com/public-inspection.federalregister.gov/2013-01073.pdf.
3 HHS, Modifications to the HIPAA Privacy, Security, Enforcement, and Breach Notification Rules under the Health Information Technology for Economic and Clinical Health Act and the Genetic Information Nondiscrimination Act; Other Modifications to the HIPAA Rules, 78 Fed. Reg. 5566 (Jan. 25, 2013).
4 OCR, HHS, Interim Final Rule With Request for Comments, Breach Notification for Unsecured Protected Health Information, 74 Fed. Reg. 42740 (Aug. 24, 2009).
5 HHS, Interim Final Rule, HIPAA Administrative Simplification: Enforcement, 74 Fed. Reg. 56123 (Oct. 30, 2009).
6 See 78 Fed. Reg. at 5572.
7 See 45 C.F.R. §164.514(f).
8 Available at http://privacyruleandresearch.nih.gov/research_repositories.asp (visited Jan. 23, 2013).
9 HHS, Interim Final Rule, HIPAA Administrative Simplification: Enforcement, 74 Fed. Reg. 56123 (Oct. 30, 2009).
10 OCR. HHS, Notice of Proposed Rulemaking, HIPAA Privacy Rule Accounting of Disclosures Under the Health Information Technology for Economic and Clinical Health Act, 76 Fed. Reg. 31426 (May 31, 2011).