Final Regulations Address Privacy and Security of Health Information

by Ballard Spahr LLP

The U.S. Department of Health and Human Services (HHS) issued final regulations last week that modify many aspects of the privacy and security rules under the Health Insurance Portability and Accountability Act (HIPAA) and the Health Information Technology for Economic and Clinical Health Act (HITECH). This highly anticipated guidance follows up on proposed regulations issued in 2010.

The final rules not only change requirements for covered entities under HIPAA (affecting health plans, health care clearinghouses, and most health care providers), but also establish rules that will now apply directly to their vendors that handle protected health information (PHI) and qualify as business associates under HIPAA. Covered entities and business associates will need to take systematic measures to comply with the new rules by September 23, 2013, when the final regulations take effect.

The scope of topics and degree of detail addressed in the 563-page set of regulations, explanations, and comments is impressive. Highlights include:

Business Associates

HITECH subjects business associates to most of HIPAA's security rules and a number of its privacy rules. The new regulations specify certain types of vendors, such as patient safety organizations and personal health record providers, which will be business associates when performing services for a covered entity. The new rules describe when certain data transmission vendors will be treated as business associates and when they will be mere conduits of information.

A business associate’s subcontractor will often be a business associate itself if it handles PHI in performing relevant functions for the business associate. As a result, a business associate may need to enter into business associate agreements with certain of its subcontractors. Those subcontractors will need to analyze their security risks, implement security policies and procedures, and take other compliance measures now required of business associates under HITECH.

Breach Notification Requirements

HITECH introduced rules that require covered entities to notify individuals, HHS, and in some cases, local media outlets, of breaches of PHI. This requirement has been the subject of separate pieces of guidance, including a definition of unsecured PHI and interim final regulations. The new regulations integrate the breach rules into the more comprehensive guidance. They revise the definition of "breach," placing the burden on the covered entity or business associate to demonstrate that there is only a low probability that PHI has been compromised and requiring that each investigation into a possible breach take these factors, at a minimum, into account:

  • The nature and extent of the PHI involved, including the types of identifiers and the likelihood that information could be re-identified to an individual
  • The unauthorized person who used the PHI or to whom the disclosure was made
  • Whether the PHI was actually acquired or viewed
  • The extent to which the risk to the PHI has been mitigated

The introduction of these factors aims to establish a more objective process for determining whether a HIPAA violation constitutes an actual breach.

The new rules address various other subjects, including measures that might prevent PHI from being subject to the breach notification rules, requirements that apply to breach notices, and the obligation to establish policies and procedures, train personnel, and document investigation and notification efforts as they are conducted.

Sales of PHI

The regulations establish rules applicable to the sale of PHI by a covered entity or business associate. For these purposes, the sale of PHI includes an agreement where the covered entity or business associate receives remuneration in exchange for ownership of PHI, a license or leasing of PHI, or the right to access PHI. Such sales may not proceed without the authorization of each affected individual in a form that discloses the payment of remuneration. The rules address various exceptions to the authorization requirement. For example, disclosure to a third-party researcher who pays a reasonable amount for the costs involved in preparing and producing the data – but no amount for profit – would not require individual authorization. The rules for sales of PHI augment separate rules in the regulations about the use and disclosure of PHI for marketing.


The Genetic Information Nondiscrimination Act (GINA) prohibits health plans and health insurers (including HMOs) from using or disclosing genetic information (including family medical histories) for underwriting purposes. The regulations coordinate HIPAA's provisions with this requirement, stating that health plans, with the sole exception of long-term care insurers, may not use or disclose PHI that is genetic information for underwriting purposes.


The regulations seek to integrate various consent and authorization requirements applicable to human subject research. They expand HIPAA's existing rules relating to authorizations for the use and disclosure of PHI for research purposes and describe circumstances in which a single form may authorize the use and disclosure of an individual's PHI for both conditioned research (where participation in a trial is conditioned on participation in the study) and unconditioned research (where no such condition exists). The regulations also address when an authorization form (and in some cases a consent form approved by an Institutional Review Board) may permit the use and disclosure of an individual's PHI in future research without further authorization.


The new rules specify when a covered entity or business associate may use or disclose PHI for fundraising purposes. For example, the notice of privacy practices that covered entities are required to issue must clearly inform individuals that PHI may be used for this purpose, and that these individuals may opt out of receiving fundraising communications. The process for opting out may not be unduly burdensome (opting out through a toll-free call, e-mail, or the return of a pre-paid postcard is acceptable). Treatment may not be conditioned on acceptance of the use of PHI for this purpose.

Notice of Privacy Practices

Covered entities will be required to modify their notices of privacy practices to meet new specifications regarding, for example:

  • Certain circumstances when individual authorization will be required for the use or disclosure of PHI
  • The obligation to provide notice of certain breaches
  • For a covered entity engaged in fundraising, certain fundraising rules
  • For most health plans, the prohibition against the use or disclosure of PHI that is genetic information for underwriting purposes

These and other modifications to the notice requirements will require covered entities to prepare new notices (or amendments to the notices) and to post and distribute them appropriately.

Individual Rights

The rules address changes that HITECH made to various individual rights. For example, although covered entities may typically decide whether or not to agree to an individual's request to restrict the use or disclosure of PHI, a covered entity must agree to a request to restrict certain disclosures of PHI to a health plan, where the PHI relates to an item or service for which the individual paid entirely out-of-pocket. It is expected that this rule will, in practice, apply only to health care providers. By contrast, HITECH's requirement that covered entities provide an individual an electronic copy of the individual's electronic health records on request has been expanded to apply more broadly to all information in an individual's designated record set. As a result, this requirement will apply to health plans as well as health care providers.

Enforcement and Penalties

The regulations reflect HITECH's strengthening of enforcement activities and the restructured penalty rules. HHS will investigate all complaints where there is a possible violation due to willful neglect. A preliminary review will determine whether a more comprehensive compliance review is warranted.

Penalties have been divided into four levels. The minimum amount payable per violation rises with the seriousness of the compliance failure. It may be as low as $100, where a covered entity or business associate did not know (and with the exercise of reasonable diligence, would not have known) about a violation, or $50,000, where the violation was due to willful neglect and has not been corrected. The regulations address a number of details, including factors that will affect the amount of the assessment and the number of violations that will be deemed to have occurred on account of a compliance failure. The maximum annual penalty for all violations of the same provision is $1.5 million. HHS maintains discretion, however, to resolve matters informally.

Other Matters

The new regulations address a variety of other matters, including the following:

  • Unless contrary to preferences expressed by an individual before his or her death, relevant PHI about the deceased individual may be disclosed to family members and others involved in the individual's care (or payment for that care). Health information about an individual will cease to be PHI 50 years after his or her death.
  • Where a school is legally required to obtain proof of an individual's immunizations before admitting the individual as a student, a covered entity or business associate may provide that information with the parent's (or, if the student is old enough, the student's) consent. A formal HIPAA-compliant authorization is not required, but the consent must be documented.

Subjects Not Addressed

Although sweeping in their scope, the regulations do not address a number of subjects of particular interest.

  • Although specifying that the minimum necessary rules will apply to business associates in their use, disclosure, and request of PHI, the regulations do not address the standards for determining the minimum amount of information that will be considered necessary in the ordinary course of operations or in specific circumstances.
  • The regulations do not address the rules relating to the accounting of disclosures, which require covered entities to inform individuals upon request that certain disclosures of PHI have been made. HITECH modified these rules as they relate to the disclosure of electronic health records. Health plan sponsors are particularly interested in whether these rules will be expanded to apply to all electronic records in the designated record set, as suggested by proposed regulations.
  • The regulations also do not address discussion of certain matters related to the distribution of penalties.

All of these matters will need to be addressed in future guidance.

Action Needed

Although covered entities and business associates have almost eight months to address the new regulations, the measures they need to take are significant and will take time to implement. Virtually all covered entities should:

  • Review and modify their HIPAA policies and procedures, particularly the sections relating to breach assessment and notification requirements
  • Revise and distribute new notices of privacy practices (or amendments to the existing notice)
  • Make appropriate changes to business associate agreements and other HIPAA forms
  • Update their training of appropriate personnel

Even covered entities that have addressed HITECH changes should assess the extent to which further revisions and training are necessary. Business associates are not subject to all of the rules that apply to covered entities, but in many cases they will be subject to HIPAA obligations for the first time and need to allow enough time to take appropriate compliance measures. In addressing the new rules, covered entities and business associates should keep in mind the governmental audit program that began operating last year under the new enforcement rules.

We will be continuing our education efforts concerning HIPAA and are prepared to assist you with any issues that you might have.

In addition to advising clients on HIPAA, Ballard Spahr attorneys are helping health care entities and employers understand legislative changes under the federal health care reform effort through the firm’s Health Care Reform Initiative. The team has launched the Health Care Reform Dashboard, an online resource center for news and analysis on developments under the Affordable Care Act.

If you have questions about the new HIPAA regulations, contact Edward I. Leeds at 215.864.8419 or, or Jean C. Hemphill at 215.864.8539 or

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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