$2.5 Million Settlement Reached as HIPAA Crackdown Continues on Unsecured Portable Devices

by Jones Day

Jones Day

In Short

The Situation: The U.S. Department of Health and Human Services has announced a $2.5 million settlement relating to a health care provider's alleged HIPAA violations in connection with an employee's stolen laptop.

The Implication: The settlement indicates that the federal government will continue aggressive enforcement actions against providers failing to comply with HIPAA when using digital media and portable devices.

Looking Ahead: Digital health vendors and their health care providers should review their current policies regarding portable devices and run regular risk analyses to ensure compliance.

A recent settlement of $2.5 million for alleged violations of the Health Insurance Portability and Accountability Act ("HIPAA") continues a trend of government enforcement targeting health care providers and vendors that fail to comply with HIPAA when using digital media and devices. The settlement should be seen as a warning for digital health companies in particular to review their policies and procedures regarding HIPAA security compliance for mobile applications, devices, and platforms.


On April 24, 2017, the U.S. Department of Health and Human Services, Office of Civil Rights ("OCR") announced a $2.5 million settlement for alleged HIPAA violations in connection with a laptop stolen from a parked vehicle outside an employee's home. The settlement was reached with CardioNet, Inc., a provider of remote mobile monitoring services, following CardioNet's disclosure of multiple breaches in 2012 of unsecured electronic protected health information ("ePHI") affecting more than 1,300 and 2,200 people, respectively, both of which appear to involve stolen laptops.

OCR's Findings

While initiating an investigation in response to CardioNet's disclosure of the breaches, OCR discovered more systemic violations of HIPAA's security rules. The settlement agreement alleges that CardioNet had failed to: (i) implement processes to prevent, detect, contain, and correct security violations; (ii) implement policies and procedures governing the receipt and removal of hardware and electronic media containing ePHI into and out of its facilities, the encryption of such media, and the movement of these items within its facilities until years after initially reporting the breaches; and (iii) safeguard against impermissible disclosures of PHI by its employees or take sufficient steps to immediately correct the disclosure. OCR's announcement accompanying the settlement clarified that CardioNet's HIPAA security policies and procedures were only in draft form and had not been implemented, including policies for safeguarding ePHI and mobile devices.

Terms of CardioNet's Corrective Action Plan

As part of the settlement agreement, CardioNet agreed to a corrective action plan that requires CardioNet to:

  • Conduct a risk analysis of the security risks and vulnerabilities that incorporates its current facilities and electronic equipment, data systems, and applications. CardioNet is required to review and update the analysis annually and more frequently, if appropriate.
  • Develop and implement an organization-wide risk management plan to address and mitigate any security risks and vulnerabilities found in the risk analysis.
  • Review and revise its HIPAA security rule policies and procedures, with a specific focus on device and media controls.
  • Review and revise its HIPAA security rule training program, including ensuring it includes a focus on security, encryption, and handling of mobile devices and out-of-office transmissions.

Should CardioNet fail to comply with the corrective action plan, the settlement agreement allows OCR potentially to proceed with the imposition of civil monetary penalties for violations discovered through OCR's investigation of the breaches and for any other violations of HIPAA it may find.

Impact of Settlement on Digital Health Providers and Vendors

While CardioNet is identified as a covered entity, this settlement should be a warning to business associates as well, including in particular vendors operating in the growing digital health market. Just last year, OCR targeted a business associate for the first time, reaching a $650,000 settlement based on similar facts where a lost mobile device with unsecured ePHI led OCR to discover the company lacked policies on the removal of mobile devices containing PHI from its facility or for handling security incidents.

In OCR's announcement of the CardioNet settlement, it specifically noted that "[m]obile devices in the health care sector remain particularly vulnerable to theft and loss." It warned that a failure to implement mobile device security puts individuals' sensitive health information at risk, potentially leaving individuals unprotected. Therefore, these settlements represent an ongoing trend of the type of HIPAA violations that are getting OCR's attention.

Digital health vendors and their client health care providers should ensure that they are conducting periodic risk analyses and implementing policies and training programs that address their specific digital health privacy and security risks, particularly with respect to their mobile devices and platforms.

Three Key Takeaways

Beyond the incidents involving the stolen laptops, an investigation uncovered CardioNet's systemic violations of HIPAA security regulations.

In addition to the $2.5 million payment, the company is required to engage in a specific Corrective Action Plan.

Digital health vendors and their health care providers should take note that these types of violations will continue to attract the attention of enforcement agencies.

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.

© Jones Day | Attorney Advertising

Written by:

Jones Day

Jones Day on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.