The Convergence of Health Care and Banking


      On January 25, 2013, the Office of Civil Rights (OCR) within the Department of Health and Human Services published guidance on whether banks and other financial institutions must comply with the Health Insurance Portability and Accountability Act (“HIPAA”) when they receive, transmit, use or disclose Protected Health Information (“PHI”) - patient-specific health information created by health care providers, health plans, health care clearinghouses, and other specified entities. 

      The OCR clarified that financial institutions are not required to comply with HIPAA when they conduct certain payment processing activities.  These activities include cashing a check, conducting a funds transfer, and authorizing, processing, clearing, settling, billing, transferring, reconciling, or collecting payments for health care or health plan premiums.

      However, OCR instructed that a financial institution may be a “business associate,” which must comply with HIPAA, where the institution performs functions “above and beyond” payment processing activities “on behalf of a covered entity,” such as accounts receivable functions on behalf of a physician, hospital, or other health care provider.  OCR did not describe what is “above and beyond payment processing” or define “accounts receivable functions.”  For health care providers, “accounts receivable functions” include payment processing activities and billing, but they may also include mailing letters to patients who are behind on payment, reviewing the terms of coverage agreements and provider contracts with health plans and other payers and applying them in dealing with patients, setting up payment schedules, and tracing changes to patient addresses.  Presumably, financial institutions performing these kinds of activities on behalf of providers are business associates.

      Thus, unlike other entities, whether financial institutions must comply with HIPAA does not turn on their receipt, disclosure, or use of PHI.  If this were the test, all banks would be business associates according to experts who have estimated that 40% of the information contained in most bank lockbox accounts meets the definition of PHI.  However, OCR instructs that the focus is on the nature of the information but on what financial institutions are doing with the information.

      If you are a bank or other financial institution that is performing an activity beyond processing payment, such as an accounts receivables function, you need:

  • Internal audits of current practices and a risk assessment;
  • Written HIPAA policies and procedures based on the results of the audits and risk assessment;
  • Workforce training on HIPAA designed around the activities and the results of the audits and risk assessment;
  • Contract review, development, and negotiation;
  • Assurance that existing methodologies render PHI “secure” within the meaning of HIPAA and take advantage of “safe harbors”;
  • Information about compliance deadlines and fast-paced modifications to HIPAA law;
  • Experienced legal analysts equipped to perform compliance audits and risk analyses, make compliance recommendations, deal with covered entities and other business associates, and offer informed and educated mitigation advice;
  • Support in responding to any potential breaches of PHI;
  • Representation when a breach occurs; and
  • General guidance from qualified health care attorneys on HIPAA, HITECH, and other federal and state privacy regulations.


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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