We recently reported here that the Department of Health and Human Services (HHS) is issuing proposed regulations to implement statutory amendments under the Health Information Technology for Economic and Clinical Health Act (the “HITECH Act”). These proposed regulations contain a number of important points to think about for HIPAA covered entities (and business associates), even though these rules are in proposed form. One is avoiding HIPAA violations involving “willful neglect," which under the HITECH Act will require a formal investigation and civil penalties.

To date, the Secretary of HHS has attempted to resolve complaints and certain violations by informal means, as required by § 160.312 of the current regulations. A significant change to the HIPAA enforcement scheme in the HITECH Act requires that if a preliminary investigation of the facts of a complaint indicates a possible violation due to willful neglect, the Secretary is required to commence a formal investigation. If the formal investigation finds a HIPAA violation involving willful neglect, the Secretary must impose a civil money penalty.

What is “willful neglect”?

Willful neglect is defined at § 160.401 as the “conscious, intentional failure or reckless indifference to the obligation to comply with the administrative simplification provision violated.” The term not only presumes actual or constructive knowledge on the part of the covered entity that a violation is virtually certain to occur, but also encompasses a conscious intent or degree of recklessness with regard to the entity’s compliance obligations.

So what does that mean, what are some examples? The proposed regulations provide the following examples:

1. A covered entity disposed of several hard drives containing electronic protected health information in an unsecured dumpster, in violation of § 164.530(c) and § 164.310(d)(2)(i). HHS’s investigation reveals that the covered entity had failed to implement any policies and procedures to reasonably and appropriately safeguard protected health information during the disposal process.
2. A covered entity failed to respond to an individual’s request that it restrict its uses and disclosures of protected health information about the individual. HHS’s investigation reveals that the covered entity does not have any policies and procedures in place for consideration of the restriction requests it receives and refuses to accept any requests for restrictions from individual patients who inquire.
3. A covered entity’s employee lost an unencrypted laptop that contained unsecured protected health information. HHS’s investigation reveals the covered entity feared its reputation would be harmed if information about the incident became public and, therefore, decided not to provide notification as required by § 164.400 et seq.

In addition to having actual or constructive knowledge of one or more violations, the covered entities in the examples above, particularly Example 1, failed to develop or implement compliant policies and procedures and, thus, demonstrated either conscious intent or reckless disregard with respect to the compliance obligations under HIPAA.

Based on the proposed regulations, covered entities can no longer expect the velvet hand of the regulators to resolve a violation informally in all cases. Covered entities that fail to have policies and procedure and make a good faith compliance effort likely will find themselves subject to mandatory formal investigations and penalties.

Covered entities like the one in example 1 above might want to consider certain precautions, including:

• maintaining a record retention policy,
• maintaining media re-use policy,
• maintaining a data destruction policy,
• maintaining an e-discovery policy, and
• and engaging a good data destruction/shredding company.