Cignet Proves That It Is Bad To Violate The HIPPA Privacy Rule, But Worse To Ignore HHS

by Proskauer - Privacy & Data Security

Cignet Health (Cignet), which operates four health centers in Maryland, is a little lighter in the wallet after the U.S. Department of Health and Human Services’ (HHS) Office of Civil Rights (OCR) found that Cignet violated the Privacy Rule of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) - $4.3 million lighter, to be exact.

This penalty marks the first civil money penalty imposed by HHS for violations by a “covered entity” of the HIPAA Privacy Rule. In the past, HHS has primarily worked with covered entities to settle the violations and obtain agreement to changes in practices. The civil monetary penalty imposed upon Cignet is based on the violation categories and increased penalty amounts authorized by Section 13410(d) of the Health Information Technology for Economic and Clinical Health (HITECH) Act, which modified HIPAA.

HHS news release, part of the penalty stems from Cignet’s denying 41 patients their right to access their medical records when requested between September 2008 and October 2009. Under HIPAA, a covered entity must provide access to a patient who requests such access to his or her medical record within 30 days of the request, subject to various exceptions and limited rights to extend such time period. (Numerous state laws include similar obligations that health care providers provide a patient with access to his or her own records, often within shorter time frames than is required by HIPAA.) Thirty-eight separate complaints of such denial of access had been filed with OCR, pursuant to which OCR began its investigation of Cignet. HHS has indicated that $1.3 million of the $4.3 million penalty is attributable to this denial of access to a patient’s records.  

Notably, out of the over 50,000 complaints of alleged HIPAA Privacy Rule violations that OCR has resolved, the denial of a patient’s access to his or her own records has been the third most cited reason for such a complaint every year since 2003, when compliance with the Privacy Rule was first legally required. But every other such complaint of denial of access was informally resolved with OCR. According to various news reports, Cignet never attempted to informally resolve the complaints with OCR.

In Cignet’s case, $3 million of the penalty is attributable to OCR finding that Cignet repeatedly failed to respond to various requests from OCR for more than a year (March 17, 2009 to April 4, 2010), resulting in per-day penalties, up to the maximum permissible penalties per year pursuant to applicable enforcement rules. Under HIPAA, covered entities are required to cooperate with HHS investigations. Even after Cignet finally produced the applicable patient records to HHS (in response to a federal court order), Cignet’s cooperation was limited in that it produced records relating to thousands of patients in addition to the 41 at issue. In various communications from OCR during the course of the investigation and the initial proposal of penalties, Cignet was notified of its rights to offer defenses and mitigating factors, and subsequently, of its rights of appeal. Cignet never exercised any of its rights.

The lesson to be learned from Cignet is that if you violate the HIPAA Privacy Rule, be prepared to pay, but if you fail to cooperate with OCR investigations into such violations, be prepared to pay even more (potentially 200% more). The question remains as to whether or not the extent of this fine is a true example of a new approach to enforcement of HIPAA, or whether Cignet’s ignoring official inquiries, failing to pursue informal resolution and not exercising its rights under HIPAA warranted unusual measures.


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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