Hospital pays $3.2M Resulting from HIPAA Security Rule Noncompliance

by Saul Ewing Arnstein & Lehr LLP

Saul Ewing LLP


In one of the last health care related acts of President Obama’s administration, the U.S. Department of Health and Human Services, Office for Civil Rights (OCR), imposed a multimillion-dollar HIPAA civil money penalty (CMP) against Children’s Medical Center of Dallas (Children’s). The penalty was publicly announced on February 1, 2017. The Children’s penalty was based upon multiple impermissible disclosures of unsecured electronic protected health information (ePHI) and multi-year non-compliance of several HIPAA Security Rule standards. According to OCR, Children’s is the 7th largest pediatric provider in the United States.

Children’s filed two separate HIPAA breach reports with OCR. In 2010, Children’s reported to OCR the loss of an unencrypted, non-password protected BlackBerry device at an airport (the “Blackberry Breach”). The device contained the ePHI of approximately 3,800 individuals. In 2013, Children’s reported to OCR the theft of an unencrypted laptop from Children’s premises that had the ePHI of approximately 2,500 individuals (the “Laptop Breach”).

During OCR’s investigation of the BlackBerry Breach, Children’s submitted to OCR a HIPAA Security Rule gap analysis performed by an outside vendor covering the period from December 2006 through February 2007. That vendor identified the absence of risk management protocols and recommended encryption of all Children’s devices. In August 2008, Children’s conducted a second independent vendor analysis for HIPAA Security Rule compliance. The second vendor also identified encryption as a high priority item and recommended that Children’s encrypt all devices by the end of 2008.

On September 30, 2016, OCR issued a Notice of Proposed Determination to Children’s, stating that the OCR intended to impose a CMP of approximately $3.2M on Children’s. The Notice of Proposed Determination included 20 findings of fact and noted that Children’s continued to issue unencrypted BlackBerrys and allowed its workforce teams to use unencrypted devices through April 2013, even after receiving these two independent vendor reports.

The OCR stated there was an additional impermissible disclosure of the ePHI of 22 people resulting from a resident’s lost and unencrypted iPod (the “iPod Incident”).

According to the Notice of Proposed Determination, the OCR’s bases for imposing the CMP included the following:

  • Children’s failed to implement access controls relating to encryption or decryption or equivalent alternative measures;
  • Children’s failed to implement sufficient policies and procedures regarding the receipt or removal of hardware and electronic media that contain ePHI into and out of its facilities; and
  • The impermissible disclosure of the PHI have approximately 2,500 occurrences through the iPod Incident and the Laptop Breach.

The following aggregating factors were considered by OCR in determining the amount of the CMP: the length of time that Children’s continued to use unencrypted devices, even after having knowledge that encryption should be used to ensure the security of the ePHI, and its prior history of noncompliance with the HIPAA Privacy and HIPAA Security Rules.

The OCR determined that Children’s liability for each of the three bases for the CMP was: $923,000 for access controls of encryption and decryption; $772,000 relating to device and media controls; and $1,522,000 for the impermissible disclosures.

Children’s had the opportunity to request a hearing after its receipt of the Notice of Proposed Determination and elected not to do so. At that juncture, the OCR issued a Notice of Final Determination and the proposed CMP became final.

The multimillion-dollar CMP reiterates the importance of all covered entities having robust compliance programs in place for the HIPAA Privacy Rule and the HIPAA Security Rule. In particular, covered entities, when using outside consultants for HIPAA advice, should abide by the consultants’ recommendations and document any compliance measures that are implemented pursuant to that advice.

The OCR Notice of Proposed Determination and Notice of Final Determination may be found here.

It is not yet clear what the Trump administration’s approach will be to HIPAA enforcement. In the interim, all parties affected by HIPAA should continue to maintain compliance with both the Privacy Rule and the Security Rule.


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.

© Saul Ewing Arnstein & Lehr LLP | Attorney Advertising

Written by:

Saul Ewing Arnstein & Lehr LLP

Saul Ewing Arnstein & Lehr LLP 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 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:

- 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.