For years, many questioned whether the HIPAA privacy and security rules would be enforced. The agency responsible for enforcement, Health and Human Services’ Office for Civil Rights (OCR), promised it would enforce the rules, but just after a period “soft” enforcement and compliance assistance. That period appears to be ending. During the first seven months of 2016, OCR has announced nearly $15,000,000 in settlement payments to the agency relating to a wide range of compliance failures alleged against covered entities and business associates. At the same time, OCR is conducting audits of covered entities around the country, and plans similar audits of business associates later this year. If you have been waiting to tackle HIPAA compliance, it is probably a good time to get it done.

Below is a summary of the circumstances that led to some of the settlements and civil monetary penalties:

  • Stolen laptop, vulnerable wireless access. Following notification to OCR of a breach involving a stolen laptop (not an uncommon occurrence!), OCR investigated and reported discovering that electronic protected health information (ePHI) on the covered entity’s network drive was vulnerable to unauthorized access via its wireless network – users could access 67,000 files after entering a generic username and password. OCR also cited among other things failures to implement policies and procedures to prevent, detect, contain, and correct security violations, to implement certain physical safeguards. Settlement $2.75M
  • Vulnerabilities identified must be timely addressed. In another case, a covered entity had conducted a number of risk analyses since 2003, but the OCR claimed these analyses did not cover all ePHI at the entity. OCR also reported that the covered entity did not act timely to implement measures to address documented risks and vulnerabilities, nor did it implement a mechanism to encrypt and decrypt ePHI or an equivalent alternative measure, despite having identified this lack of encryption as a risk. Settlement $2.7M.
  • Not-for-profits serving underserved communities not immune. A data breach affecting just over 400 persons caused by the theft of a company-issued iPhone triggered an OCR investigation. The iPhone was unencrypted and was not password protected, and contained extensive ePHI including SSNs, medical diagnosis, and names of family members and legal guardians. According to OCR, among other things, the covered entity had no policies addressing the removal of mobile devices containing PHI from its facility or what to do in the event of a security incident. In its public announcement, OCR acknowledged that the $650,000 settlement was after considering that the covered entity provides unique and much-needed services to elderly, developmentally disabled individuals, young adults aging out of foster care, and individuals living with HIV/AIDS.
  • No business associate agreement. When a covered entity’s business associate experienced a breach affecting over 17,000 patients, OCR again investigated. It claimed no business associate agreement was in place, leaving PHI without safeguards and vulnerable to misuse or improper disclosure. Settlement $750,000.
  • Civil monetary penalties against home care provider. In only the second time OCR has sought civil penalties under HIPAA, a judge awarded $239,800 in penalties due to privacy and security compliance failures. In this case, a patient complaint led to an OCR investigation – the patient complained that an employee of the covered entity left PHI in places where an unauthorized persons had access and in some cases abandoned the information altogether. Other compliance issues included covered entity’s maintaining inadequate policies and procedures to safeguard PHI taken offsite, and storing PHI in employee vehicles for extended periods of time.

It is true that these are only a handful of cases with large settlement amounts. But the agency does seem to be sending a message – that is, it wants to see compliance and it is not afraid to seek significant settlement amounts from covered entities or business associates, large or small. In some cases, relatively simple steps such as making sure to have business associate agreements in place, can help avoid these kinds of enforcement actions.

Tags: business associate, civil monetary penalties, covered entity, Health Insurance Portability and Accountability Act, HIPAA, OCR, Office for Civil Rights, settlement
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Photo of Joseph J. Lazzarotti Joseph J. Lazzarotti

Joseph J. Lazzarotti is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. He founded and currently co-leads the firm’s Privacy, Data and Cybersecurity practice group, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP)…

Joseph J. Lazzarotti is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. He founded and currently co-leads the firm’s Privacy, Data and Cybersecurity practice group, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with the International Association of Privacy Professionals. Trained as an employee benefits lawyer, focused on compliance, Joe also is a member of the firm’s Employee Benefits practice group.

In short, his practice focuses on the matrix of laws governing the privacy, security, and management of data, as well as the impact and regulation of social media. He also counsels companies on compliance, fiduciary, taxation, and administrative matters with respect to employee benefit plans.

Privacy and cybersecurity experience – Joe counsels multinational, national and regional companies in all industries on the broad array of laws, regulations, best practices, and preventive safeguards. The following are examples of areas of focus in his practice:

  • Advising health care providers, business associates, and group health plan sponsors concerning HIPAA/HITECH compliance, including risk assessments, policies and procedures, incident response plan development, vendor assessment and management programs, and training.
  • Coached hundreds of companies through the investigation, remediation, notification, and overall response to data breaches of all kinds – PHI, PII, payment card, etc.
  • Helping organizations address questions about the application, implementation, and overall compliance with European Union’s General Data Protection Regulation (GDPR) and, in particular, its implications in the U.S., together with preparing for the California Consumer Privacy Act.
  • Working with organizations to develop and implement video, audio, and data-driven monitoring and surveillance programs. For instance, in the transportation and related industries, Joe has worked with numerous clients on fleet management programs involving the use of telematics, dash-cams, event data recorders (EDR), and related technologies. He also has advised many clients in the use of biometrics including with regard to consent, data security, and retention issues under BIPA and other laws.
  • Assisting clients with growing state data security mandates to safeguard personal information, including steering clients through detailed risk assessments and converting those assessments into practical “best practice” risk management solutions, including written information security programs (WISPs). Related work includes compliance advice concerning FTC Act, Regulation S-P, GLBA, and New York Reg. 500.
  • Advising clients about best practices for electronic communications, including in social media, as well as when communicating under a “bring your own device” (BYOD) or “company owned personally enabled device” (COPE) environment.
  • Conducting various levels of privacy and data security training for executives and employees
  • Supports organizations through mergers, acquisitions, and reorganizations with regard to the handling of employee and customer data, and the safeguarding of that data during the transaction.
  • Representing organizations in matters involving inquiries into privacy and data security compliance before federal and state agencies including the HHS Office of Civil Rights, Federal Trade Commission, and various state Attorneys General.

Benefits counseling experience – Joe’s work in the benefits counseling area covers many areas of employee benefits law. Below are some examples of that work:

  • As part of the Firm’s Health Care Reform Team, he advises employers and plan sponsors regarding the establishment, administration and operation of fully insured and self-funded health and welfare plans to comply with ERISA, IRC, ACA/PPACA, HIPAA, COBRA, ADA, GINA, and other related laws.
  • Guiding clients through the selection of plan service providers, along with negotiating service agreements with vendors to address plan compliance and operations, while leveraging data security experience to ensure plan data is safeguarded.
  • Counsels plan sponsors on day-to-day compliance and administrative issues affecting plans.
  • Assists in the design and drafting of benefit plan documents, including severance and fringe benefit plans.
  • Advises plan sponsors concerning employee benefit plan operation, administration and correcting errors in operation.

Joe speaks and writes regularly on current employee benefits and data privacy and cybersecurity topics and his work has been published in leading business and legal journals and media outlets, such as The Washington Post, Inside Counsel, Bloomberg, The National Law Journal, Financial Times, Business Insurance, HR Magazine and NPR, as well as the ABA Journal, The American Lawyer, Law360, Bender’s Labor and Employment Bulletin, the Australian Privacy Law Bulletin and the Privacy, and Data Security Law Journal.

Joe served as a judicial law clerk for the Honorable Laura Denvir Stith on the Missouri Court of Appeals.

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