Settlement Emphasizes the Need for HIPAA Risk Management

by Saul Ewing LLP
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Summary

A HIPAA1 violation involving a health plan’s failure to erase protected health information from photocopier hard drives has resulted in a $1.2 million settlement. Your risk can be significantly reduced if you adopt and implement appropriate HIPAA policies and procedures. Remember – the compliance date for new rules imposed by the HITECH2 amendments to HIPAA is September 23, 2013.

A tax-exempt health plan serving economically disadvantaged populations was required to pay the federal government $1.2 million to settle HIPAA violations. The plan failed to erase protected health information (PHI) from the hard drives of photocopiers before returning the equipment to leasing agents. Electronic protected health information (ePHI) for more than 344,000 individuals was stored on the hard drives. The plan also failed to include protection of ePHI stored on the photocopiers in its risk analysis, as required by the HIPAA Security Rule, or have procedures in place to ensure that all ePHI had been erased from the hard drives before returning the photocopiers to leasing agents.

A CBS news program initially discovered the violation while doing an investigation about privacy risks and informed the health plan of the potential breach. The Department of Health and Human Services, Office for Civil Rights (OCR), investigated after the plan reported the HIPAA violation as required by law. The settlement highlights the significant consequences of potential HIPAA violations. It also demonstrates the risk of substantial financial penalties that can result from failing to comply with breach notification requirements under HIPAA.

Now, the stakes are even higher. Under the original 1996 HIPAA statute, the Privacy Rule protects PHI the Security Rule protects ePHI, and those rules applied to “covered entities.” Covered entities include (but are not limited to) health care providers and group health plans. Covered entities would then enter into contracts with “business associates.” In the group health plan context, a business associate would include, for example, a third-party administrator that might use or disclose PHI or ePHI. Under the original rules, a business associate was only liable to a covered entity under the terms of its “business associate agreement,” but was not subject to OCR enforcement. HITECH changed the game. While a business associate still has a contractual obligation to a covered entity, the OCR now has enforcement rights against business associates. HITECH also broadens the definition of business associate, imposes some HIPAA privacy requirements and all HIPAA security requirements on business associates, as well as subcontractors of business associates, if they have access to ePHI pursuant to their arrangements with the business associate in question. HITECH also provides for stricter penalties and adds new breach notification requirements.

Finally, all business associate agreements (BAA) must comply with final rules issued under HITECH. While some transition rules may apply for the actual “paperwork,” of amending your BAAs, substantive compliance with the new HITECH obligations is required by September 23, 2013.

Your HIPAA practices should be revised to comply with all HITECH requirements, and include written policies and procedures addressing electronically stored information on photocopiers and educational and operational processes to properly implement those policies and procedures. In addition, if you haven’t done so already, you need to identify all of your business associates, determine when your BAAs must be amended, and make sure you are in operational compliance with the new HITECH rules by September 23, 2013.

  1. Health Insurance Portability and Accountability Act of 1996.
  2. Health Information Technology for Economic and Clinical Health Act.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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