Last week, New Jersey Attorney General Gurbir S. Grewal and the New Jersey Division of Consumer Affairs (“Division”) announced that a physician group affiliated with more than 50 South Jersey medical and surgical practices agreed to pay $417,816 and improve data security practices to settle allegations it failed to properly protect the privacy of more than 1,650 patients whose medical records were made viewable on the internet as a result of a server misconfiguration by a private vendor.

Sharon M. Joyce, Acting Director of the Division, warns HIPAA covered entities:

[Y]our own cybersecurity is not enough.  You must fully vet your vendors for their security as well.

One of the significant changes made by the Health Information Technology for Economic and Clinical Health (HITECH) Act is that state Attorneys General were given authority to enforce the privacy and security regulations under the Health Insurance Portability and Accountability Act (HIPAA). Accordingly, covered entities and business associates should remember that the federal Office for Civil Rights is not the only game in town when it comes to investigating data breaches and imposing fines when HIPAA violations are found. New Jersey is not the only state that has used this authority.

In this case, according to the NJ Office of Attorney General, the physician practice used a third party vendor to transcribe dictations of medical notes, letters, and reports by doctors, a popular service provided to many physical practices and other medical providers across the country. When the vendor, a HIPAA business associate, attempted to update software on a password-protected File Transfer Protocol website (“FTP Site”) where the transcribed documents were kept, it unintentionally misconfigured the web server, allowing the FTP Site to be accessed without a password. As a result, anyone who searched Google using search terms that happened to be contained within the dictation information would have been able to access and download the documents located on the FTP Site. These documents would have included doctor names, patient names, and treatment information concerning patients.

Following notification of the breach, the Division investigated and found HIPAA violations beyond the vendor’s security incident. The Division identified violations of HIPAA’s privacy and security regulations by the physician practice, including:

  • Failing to have a security awareness and training program for its workforce members, including management.
  • Delayed response to the incident and mitigation.
  • Failing to create and maintain retrievable exact copies of ePHI maintained on the FTP site.
  • Failing to maintain a written or electronic log of the number of times the FTP Site was accessed.

There are at least three important lessons from this case for physical practices in New Jersey and in other states:

  1. The New Jersey Office of Attorney General and the Division of Consumer Affairs, and Attorneys General in other states, are ready, willing and able to enforce the HIPAA privacy and security regulations.
  2. While investigating data breaches, federal and state officials are concerned about more than the breaches themselves. They will investigate the state of the covered entity’s privacy and security compliance prior to the breach. Accordingly, covered entities should not wait to experience a data breach before tightening up their privacy and security compliance programs.
  3. HIPAA covered entities need to identify their business associates and take steps to be sure they are complying with the HIPAA security regulations. Business associates can be the weakest link in a covered entity’s compliance efforts.
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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.