What Covered Entities and Business Associates Need to Do to Prepare for the New HIPAA/HITECH Requirements (Part I)

by BakerHostetler

The Department of Health and Human Services (HHS) issued, on January 17, 2013, its Final Omnibus Rule modifying the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) Privacy and Security Rules as well as the breach notification rules of the Health Information Technology for Economic and Clinical Health Act (“HITECH”). Our initial discussion can be found here. The healthcare industry has been waiting for the final rule for more than two and half years--now that it is here, what do Covered Entities (CEs) and Business Associates (BAs) need to do to prepare for compliance? We will cover recommendations for CEs in this post, Part I, and BAs will be addressed in Part II.


Incident Response Plans: To the extent you are a CE who has been waiting for the final rule to implement an incident response plan (IRP), now is the time. An IRP helps the breach response team respond to privacy events by providing them with a roadmap so that a determination can be made as to whether or not a breach has occurred. At a minimum, new and existing plans should incorporate the factors outlined by HHS to be considered: (1) the nature and extent of PHI involved; (2) the unauthorized person who used the PHI or to whom the disclosure was made; (3) whether PHI was actually acquired or viewed; (4) the extent to which the risk to PHI has been mitigated (e.g. assurances from trusted third-parties that the information was destroyed).


Policies and Procedures: CEs policies and procedures, including the Notice of Privacy Policy, must be updated and amended to reflect the new requirements. For example, there are new requirements regarding the timeliness of responding to requests for a copy of PHI.


Breach Analysis Forms: CEs have been utilizing forms that reflect the language of the interim final rule where the focus is on the potential harm to the patient. Many CEs have also utilized breach analysis forms that depend on a risk rating developed by third parties to assess whether there is a significant risk of harm due to the impermissible use or disclosure. The standard has changed and so will the required analysis. A breach is presumed unless the CE can show that there is a low possibility of a compromise. Moreover, HHS has outlined at least four (4) factors that must be considered. (The four factors are listed under Incident Response Plans, supra.)


Education: HHS and OCR expect that healthcare organizations will create a culture of compliance. Raising awareness about the importance of privacy issues through education is just one way to achieve this goal. CEs should consider other opportunities to keep privacy at the top of their employees' minds (e.g., posters, newsletters, committee calls). Just as the Federal Trade Commission (FTC) is promoting Privacy by Design, CEs need to consider ways that privacy awareness can be incorporated into every aspect of patient care and healthcare operations.


Vendor Lists and Vendor Contracts: Vendors remain the cause of a large percentage of breaches that occur; more than a third of all breaches are caused by vendors. Even though BAs are now directly liable, the final rule makes it clear that CEs have an obligation related to appropriately selecting and retaining vendors. Review your vendor lists to see if any vendors should be removed because of issues relating to data security and privacy. Review your contracts to see if language needs to be updated to reflect the final rule.


Risk Assessments and Risk Management Plans: HIPAA requires healthcare organizations to conduct periodic risk assessments and then to address the risks identified in a risk management plan. Now is a good time to review and assess your risks to determine if changes can be made to help avoid breaches. Privacy counsel can be a critical member of this exercise. For example, in some instances, outside counsel can retain the vendor and oversee the project to help maintain the attorney-client privilege. The experience of the privacy counsel, however, is also crucial. Organizations should retain counsel who has been involved in dozens of OCR investigations and who can provide guidance around what OCR is asking for during those investigations. That experience translates into the organization's ability to better identify risk mitigation strategies in response to the vulnerabilities found during the risk assessment.


Cyber Insurance: There are many types of cyber policies being sold to healthcare organizations. Whether or not you have purchased cyber insurance for breach notification, consider seriously the scope of your coverage for regulatory violations and defense of class actions. We predict that OCR and State Attorneys General (SAGs) are going to be far more aggressive than in the past. Additionally, due to the changed threshold for breach notification, we may see more class action lawsuits which are expensive to defend.


Legal: Experienced outside privacy counsel is critical for full compliance with the breach notification requirements of the final rule. A breach is now presumed which means that outside counsel is going to need to help document the reasons why an organization concludes a breach did not occur.


Forensics: I am not a big proponent of retaining forensics companies prior to a breach occurring. This is because, like lawyers, the strengths amongst forensics firms varies. Therefore, if I am dealing with an issue involving a new malware variant, I may find a forensics vendor who has experience with the variant and is better positioned to assist my client. The final rule, however, is a bit of a game changer and I am now encouraging my clients who do not have insurance to interview a few forensics firms as the new breach notification rules make it clear that a technically sound and understandable forensics report is critical for supporting determinations that a breach did not occur. For those that have insurance, talk to your broker or carrier about the forensics options and seek recommendations from them as to how the coverage will support you with the changes in the regulations.


The final rule becomes effective on March 26, 2013, but enforcement will not commence until September 23, 2013. This does not mean that mean that organizations do not need to be compliant. The Office for Civil Rights (OCR) has made it clear that civil monetary penalties (CMPs) will be on the rise for HIPAA violations.  A culture of compliance is expected and not encouraged.


On Wednesday, January 23, 2013 at Noon EST, we will be hosting a webinar to discuss some of the big changes in the final rule. You may register here.


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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