Theft Of Unencrypted Laptops Leads To Two HHS Settlements Totaling Nearly $2 Million

by Perkins Coie

On April 22, the U.S. Department of Health and Human Services (HHS) announced settlements with both Concentra Health Services (Concentra) and QCA Health Plan, Inc. (QCA).  Through these latest settlements, HHS is reiterating its message to covered entities and business associates that laptops and similar devices containing electronic protected health information (ePHI) should be encrypted.  HHS also put the industry on notice that any entity self-reporting a security breach should not expect much leniency.

Concentra Security Breach

In December 2011, Concentra self-reported to HHS’s Office of Civil Rights (OCR) that an unencrypted laptop containing names, Social Security numbers, and pre-employment work fitness test results for 870 patients was stolen from one of its physical therapy centers.

HHS determined that “Concentra identified in multiple risk analyses that a lack of encryption on its laptops, desktop computers, medical equipment, tablets and other devices containing electronic protected health information was a critical risk.”  The last Concentra project report in October 2008 indicated that about 73% of Concentra’s laptops were encrypted.  Unfortunately, Concentra took an inventory and began encrypting all remaining unencrypted devices seven months after the security breach.  Thus, the encryption process was viewed as being untimely.

Although it was not mentioned in the Resolution Agreement, HHS may have also considered the fact that this was the second unencrypted laptop containing ePHI that Concentra lost to theft.  The first was stolen in November 2009 and included ePHI for 900 patients.  So this theft also occurred after the risk was identified and after an earlier recommendation from the project to encrypt laptops.

As a result of its investigation, HHS determined that

Concentra failed to adequately remediate and manage its identified lack of encryption or, alternatively, document why encryption was not reasonable and appropriate and implement an equivalent alternative measure to encryption, if reasonable and appropriate, from October 27, 2008, until June 22, 2012 . . . (see 45 C.F.R. § 164.312(a)(2)(iv)) . . . [and] Concentra did not sufficiently implement policies and procedures to prevent, detect, contain, and correct security violations under the security management process standard when it failed to adequately execute risk management measures to reduce its identified lack of encryption to a reasonable and appropriate level from October 27, 2008 . . . until June 22, 2012 . . . (see 45 C.F.R. § 164.308(a)(1)(i)).

Concentra Resolution Agmt. 1.

QCA Security Breach

QCA self-reported on February 21, 2012 that an unencrypted laptop containing ePHI of 148 individuals was stolen from the car of a member of QCA’s workforce.  Unlike Concentra, there is no indication that QCA had previously identified its unencrypted laptops as a security risk. 

Perhaps this failure to identify the risk is the basis for the HHS investigation determining that

QCA did not implement policies and procedures to prevent, detect, contain, and correct security violations, including conducting an accurate and thorough assessment of the potential risks and vulnerabilities to the confidentiality, integrity, and availability of ePHI it held, and implementing security measures sufficient to reduce risks and vulnerabilities to a reasonable and appropriate level to comply with 45 C.F.R. § 164.306 from the compliance date of the Security Rule to June 18, 2012.

QCA Resolution Agmt. 1 (emphasis added).  In addition, the HHS investigation determined that QCA failed to implement physical safeguards for all workstations that access ePHI to restrict access to authorized users.

The Settlements

Without admitting liability, Concentra agreed to pay $1.7 million to settle the potential HIPAA violations, or about $1,954 per record affected by the breach.  QCA, also without admitting liability, agreed to pay $250,000 to settle the potential HIPAA violations, or about $1,689 per record affected by the breach. 

These penalties do not reflect the true cost of either settlement.  Both Concentra and QCA were required to agree to two-year corrective action plans.

The Concentra Corrective Action Plan (CAP) is the more onerous of the two and provides that

  1. Concentra must provide to HHS (within four months, and then at the one-year and two-year marks):
    • A risk analysis including a thorough assessment of the potential risks and vulnerabilities to the confidentiality, integrity, and availability of all Concentra ePHI.
    • A risk management plan that explains Concentra’s strategy for implementing security measures sufficient to reduce the risks and vulnerabilities to a reasonable and appropriate level, including the following:
      • Material evidence of all implemented and planned remedial actions associated with the risk management plan.
      • For all planned remediation, specific timelines for expected completion and identification of interim measures to safeguard Concentra’s ePHI.
  2. Concentra must also provide, when applicable, an updated risk analysis and risk management plan for any changes or updates to its organizational information technology (IT) infrastructure (security environment) that affects risk to its ePHI.
  3. HHS retains the right to specify required changes to such plans.
  4. Concentra is obligated to promptly implement the security management process, including any applicable training.
  5. In addition to the required risk analyses and risk management plans, Concentra must provide an update to HHS regarding the status of its encryption efforts, including:
    • The percentage of all devices and equipment (laptops, desktops, medical equipment, tablets, and other storage devices) that are encrypted.
    • Evidence that all new devices and equipment (laptops, desktops, medical equipment, tablets, and other storage devices) have been encrypted.
    • An explanation for why the remaining devices and equipment are not encrypted.
    • A breakdown of the percentage of encrypted devices and equipment for each specific Concentra facility and worksite.
  6. On the same schedule, Concentra must confirm that all workforce members have completed security awareness training and must include all materials used for the training, a summary of the topics covered, the length of the session(s), and a schedule of when the session(s) were held.
  7. On the same schedule, Concentra must summarize for HHS the status of its implementation of the obligations of the CAP, including an attestation by a Concentra officer as to the implementing report’s accuracy and that Concentra has complied with the CAP.
  8. Finally, Concentra must also submit attested annual reports with respect to the status of and findings regarding Concentra’s compliance with the CAP for each year of the CAP.

The QCA CAP contains similar but less burdensome requirements.  QCA needs to provide a risk analysis and risk management plan once, meet similar training requirements, and report any reportable events. There is no obligation to submit repeated risk analyses and risk mitigation plans and no obligation to submit encryption status reports or implementation plans.


The settlements in question suggest that the investment in time and resources to comply with the CAPs may significantly exceed the out-of-pocket monetary penalties.  Susan McAndrew, OCR’s deputy director of health information privacy, made the intended message behind these penalties clear in her statement released with the settlement announcement: “Covered entities and business associates must understand that mobile device security is their obligation.  Our message to these organizations is simple: encryption is your best defense against these incidents.”  This message is likely driven by the fact that theft of mobile devices (e.g., laptops) was the top cause of HIPAA security breaches in 2013 representing 45% of total reported incidents involving over 83% of unsecured ePHI improperly disclosed.  See Redspin, Inc., Breach Report 2013: Protected Health Information (Feb. 2014), available here.

It is less clear why HHS made the QCA CAP so much less burdensome than the Concentra CAP. Regardless, it is clear that HHS is keen on covered entities’ expending whatever resources are needed to encrypt mobile devices and will mete out substantial punishment for failure to do so—punishment that will combine cash and continuing, burdensome administrative obligations to protect ePHI (and mollify an unhappy agency).

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.

© Perkins Coie | Attorney Advertising

Written by:

Perkins Coie

Perkins Coie 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.