United States: HIPAA Update, Spring 2007

Although it has been 11 years since the passage of the Health Insurance Portability and Accountability Act Of 1996 ("HIPAA") and four years since compliance with HIPAA’s first set of administrative simplification requirements was due, those HIPAA requirements continue to impact the day-to-day operations of health care providers, health plans and other health care entities. This article provides a brief update of regulatory, caselaw and enforcement developments on the HIPAA administrative simplification front.

CMS Security Guidance on Portable Devices and Remote Access

The Centers for Medicare & Medicaid Services ("CMS") recently published additional guidance for compliance with the HIPAA Security Rule ("Security Guidance") in order to reinforce some of the ways in which a covered entity may protect electronic protected health information ("EPHI") when it is accessed or used off-site or remotely. Because of the growing number of reported security incidents and increased vulnerability associated with the use of certain portable, remote access, or off-site devices and tools ("off-site devices"), CMS targeted the Security Guidance to a covered entity’s use of off-site devices that store, contain, or are used to access EPHI. The Security Guidance lists the following off-site devices as particularly vulnerable to security incidents: laptops; home-based personal computers; PDAs and Smart Phones; hotel, library or other public workstations and Wireless Access Points (WAPs); USB Flash Drives and Memory Cards; floppy disks; CDs; DVDs; backup media; Email; Smart cards; and Remote Access Devices (including security hardware).

Although CMS acknowledged that many situations warrant the off-site use of or access to EPHI, CMS cautioned that such use or access is appropriate only after a covered entity has conducted a risk analysis that (1) examines its business activities to determine the necessity of the off-site use or access; and (2) determines whether its policies, procedures, workforce training, and permitted access to EPHI are consistent with the requirements of HIPAA’s privacy and security rules. After a covered entity conducts its risk analysis, the Security Guidance states that the security policies and procedures required by HIPAA should be revised to include appropriate authorization for remote access to EPHI, security requirements for storing EPHI beyond the covered entity’s physical control, and transmission processes that ensure the integrity and safety of EPHI that is exchanged both directly and remotely accessed over applications hosted by the covered entity. CMS indicated in the Security Guidance that a covered entity’s workforce training should, at a minimum, include clear and concise instructions for accessing, storing, and transmitting EPHI. CMS further indicated that, if applicable, training programs should include password management procedures, prohibitions against leaving devices in unattended cars or public thoroughfares, and prohibitions against transmitting EPHI over open networks or downloading EPHI to public or remote computers.

Security incident procedures must specify the actions workforce members must take in the event that EPHI is lost via portable media; such actions may include securing and preserving evidence, managing the harmful effects of improper use or disclosure of the EPHI, and providing notice to affected parties. In developing sanction policies so that workforce members understand the consequences for non-compliance with policies on remote access to and off-site use of EPHI, CMS urged covered entities to consider requiring employees, as a pre-requisite to employment, to sign a statement of adherence to security policies and procedures.

CMS reminded us in the Security Guidance of its delegated authority to enforce HIPAA’s security standards; CMS further stated that it may rely on the Security Guidance to determine whether the actions of a covered entity are reasonable and appropriate for safeguarding the confidentiality, integrity and availability of EPHI, and that the Security Guidance may be given deference in an enforcement hearing.

State Courts Look to HIPAA as Standard

While HIPAA does not provide a private right of action, compliance with HIPAA is being noted by courts in assessing state privacy claims. Two recent examples:

• In a recent Illinois case, compliance with HIPAA standards helped to defeat respondeat superior claims against Illini Hospital. The plaintiff patient in Bagent v. Blessing Care Corporation, 244 Ill.2d 154 (2007), asserted that subsequent to her undergoing a blood test at the hospital, a phlebotomist employee revealed in a social setting that the patient was pregnant. The patient’s allegations of breach of patient confidentiality, invasion of privacy and infliction of emotional distress were made against the phlebotomist, and also against the hospital on the theory of respondeat superior. In a reversal of the appellate court’s denial of the hospital’s motion for summary judgment, the Illinois Supreme Court reviewed evidence that the hospital provided HIPAA privacy training to its employees, including the phlebotomist, and that the phlebotomist understood from the training that patient information should not be disclosed. The court’s conclusion that the phlebotomist’s disclosure of the patient’s information was not the kind of conduct she was hired to perform was, in large part, based on the evidence that Illini Hospital had provided HIPAA training to its employees.

• In Acosta v. Byrum, 638 S.E.2d 246 (N.C. Ct. App. 2006), a psychiatric patient brought claims of invasion of privacy and infliction of emotional distress against a psychiatrist and office manager who allegedly improperly accessed and disseminated the patient’s health information. The plaintiff alleged that the psychiatrist improperly permitted the office manager to use the psychiatrist’s medical records access code in violation of hospital rules and regulations, and in violation of HIPAA. The trial court had dismissed the case, in part on the grounds that HIPAA does not provide a private right of action. In reversing the trial court’s dismissal of the claims against the psychiatrist, the North Carolina Court of Appeals found that the plaintiff had not made a HIPAA claim, but found instead that HIPAA provided a standard of care in determining whether the physician defendant properly maintained the privacy of a patient’s confidential medical records.

Both the Bagent and Acosta cases demonstrate that HIPAA compliance is not simply a federal regulatory matter. In assessing state privacy claims, courts are now looking to HIPAA as a standard of care for protecting the privacy of health information.

After May 23, 2007, HIPAA requires covered entities—most health plans, health care clearinghouses and most health care providers—to use the National Provider Identifier ("NPI") on all standard transactions where a health care provider’s identifier is required. The NPI rule requires health care providers to obtain an NPI from the National Provider System; health care providers may apply for the NPI through a web-based application process at https://nppes.cms.hhs.gov.

In Guidance issued April 2, 2007 ("NPI Guidance"), CMS announced that it will allow covered entities that are unable to fully comply with the NPI requirements by the compliance date to implement contingency plans in order to allow additional time to carry out testing and other activities without payment disruption. CMS stated in the NPI Guidance that for 12 months after the compliance date, CMS will not impose penalties if covered entities have deployed contingency plans and have made reasonable and diligent efforts to become compliant. In a recent response to a frequently asked question ("FAQ") on its website, CMS urged providers that have not yet obtained NPIs to do so immediately, and stated that failure to obtain an NPI may be viewed as a violation of the good faith provisions of the NPI Guidance. Other FAQs and CMS responses regarding implementation of the NPI can be found at http://www.hhs.gov/faq/medicaremedicaid/ 2009.html.

First HIPAA Conviction at Trial

In the first HIPAA violation case to go to trial, a Fort Lauderdale jury convicted Fernando Ferrer, Jr. on Jan. 24, 2007 of computer fraud, conspiracy to defraud the United States, aggravated identity theft, and the wrongful disclosure of protected health information under HIPAA. The case involved the theft and transfer of Medicare patient information from the Cleveland Clinic in Weston, Fla. Ferrer purchased the patient information from a former Cleveland Clinic employee, who pleaded guilty to similar charges and testified against Ferrer. The theft resulted in the submission of more than $7 million in fraudulent Medicare claims. In addition to a maximum sentence of 20 years for the non-HIPAA counts, Ferrer faces up to 10 additional years in prison for wrongfully disclosing protected health information.

According to the Department of Health and Human Services, as of Dec. 31, 2006, the Office for Civil Rights ("OCR") received a total of 24,000 HIPAA privacy complaints. Of those complaints, more than half were not investigated because (1) the complaints were untimely filed, (2) OCR did not have jurisdiction over the covered entity named in the complaints, or (3) the allegations did not constitute violations of the Privacy Rule. OCR has investigated and closed approximately 6,000 complaints, and took informal enforcement action in 4,025 of those cases. As of the end of 2006, OCR had referred more than 300 cases to the Department of Justice.

This article is presented for informational purposes only and is not intended to constitute legal advice.