United States: HIPAA Omnibus Final Rule Implements Tiered Penalty Structure For HIPAA Violations

This is the fourth in a series of articles regarding the HIPAA Omnibus Final Rule recently released by HHS. For a comprehensive list of other articles on HIPAA by McGuireWoods, click here.

On Jan. 17, 2013, the Department of Health and Human Services (HHS) released the Omnibus Final Rule (Final Rule), interpreting and implementing various provisions of the Health Information Technology for Economic and Clinical Health Act of 2009 (HITECH Act) and the Genetic Information Nondiscrimination Act of 2008 (GINA). The HITECH Act required HHS to modify HIPAA's Enforcement Rule and HHS's approach to imposing civil money penalties (CMPs) for violations. Specifically, the HITECH Act significantly increased the amount of CMPs, reduced the number of available affirmative defenses to CMPs, and required imposition of CMPs for all violations due to willful neglect. Additionally, the HITECH Act applied all the above directly to business associates. HHS issued an Interim Final Rule along with a request for comments on Oct. 30, 2009. The Final Rule responds to public comments regarding the Interim Final Rule and makes a variety of revisions to the Interim Final Rule. However, the core provisions regarding penalties remain substantially the same.

Determining the Amount of a CMP

The Final Rule implements the penalty structure mandated by the HITECH Act for violations occurring after Feb. 18, 2009, in which the amount of the penalty increases with the level of culpability, with maximum penalties for violations of the same HIPAA provision of $1.5 million per year. Prior to the enactment of the HITECH Act, the imposition of CMPs under HIPAA was limited to a maximum of $100 per violation and $25,000 for all violations of an identical requirement or prohibition occurring within the same calendar year. The prior penalty structure is still applicable to violations occurring on or before Feb. 18, 2009.

The tiered structure for imposition of CMPs under the HITECH Act and Final Rule distinguishes the level of culpability as follows:

  • Unknowing. The covered entity or business associate did not know and reasonably should not have known of the violation.
  • Reasonable Cause. The covered entity or business associate knew, or by exercising reasonable diligence would have known, that the act or omission was a violation, but the covered entity or business associate did not act with willful neglect.
  • Willful Neglect – Corrected. The violation was the result of conscious, intentional failure or reckless indifference to fulfill the obligation to comply with HIPAA. However, the covered entity or business associate corrected the violation within 30 days of discovery.
  • Willful Neglect – Uncorrected. The violation was the result of conscious, intentional failure or reckless indifference to fulfill the obligation to comply with HIPAA, and the covered entity or business associate did not correct the violation within 30 days of discovery.

The corresponding tiers of CMP relating to each level of culpability are as follows:

Violation Category

Each Violation

Total CMP for Violations
of an Identical Provision in a Calendar Year


$100 – $50,000


Reasonable Cause

$1,000 – $50,000


Willful Neglect – Corrected

$10,000 – $50,000


Willful Neglect – Not Corrected

At least $50,000


Under the Final Rule, HHS does not have the authority to automatically impose the maximum CMP for any given violation. Rather, in determining the amount of a CMP, HHS must consider the following:

  • The nature and extent of the violation, including the number of individuals affected and the time period during which the violation occurred;
  • The nature and extent of the harms resulting from the violation, including whether the violation caused physical harm, whether the violation resulted in financial harm, whether there was harm to an individual's reputation and whether the violation hindered an individual's ability to obtain healthcare;
  • The history of prior compliance, including previous violations; and
  • The financial condition of the covered entity or business associate, including whether financial difficulties affected the ability to comply and whether the imposition of the CMP would jeopardize the ability of the covered entity to continue to provide or pay for healthcare.

Defenses to CMPs

The Final Rule limits the ability of the Secretary to impose CMPs for certain violations of HIPAA occurring after Feb. 18, 2009. Specifically, the Secretary may not impose CMPs for a violation that is not due to willful neglect and that is corrected within 30 days of actual or constructive knowledge of the violation, or during an additional period, as determined by the Secretary to be appropriate based on the nature and extent of the failure to comply. This defense, however, is not available for violations due to willful neglect. Thus, to the extent possible, a covered entity or business associate that discovers a violation of HIPAA that is not due to willful neglect should endeavor to (i) correct the violation within 30 days of the discovery; (ii) document the date on which it discovered the violations; and (iii) document the date on which it implemented the correction in order to establish a basis for asserting the affirmative defense to the imposition of CMPs for the violation. The Final Rule also bars the imposition of CMPs for violations of HIPAA when a criminal penalty has previously been imposed for the same conduct.

Waiver and Discretion

While the Final Rule includes many provisions that amplify the penalties associated with a violation of HIPAA, as discussed above, there is some flexibility built into the Final Rule with respect to imposition of such penalties. The Final Rule gives HHS discretion to waive a CMP for violations that are not due to willful neglect, in whole or in part, to the extent that the penalty is excessive relative to the violation. The waiver power mirrors the tiered CMP structure by providing a mechanism to ensure that the amount of CMP reflects the level of culpability.

Further, CMPs are not the exclusive remedy for violations of HIPAA. Rather, HHS has discretion to use other measures to address HIPAA violations, such as providing direct technical assistance or resolving possible noncompliance through informal means. Prior to the Final Rule, HHS was required to seek resolution through these informal means for all violations, while the Final Rule provides that informal resolution "may" be attempted. Finally, the Final Rule does not allow violations due to willful neglect to be resolved through these informal means without also imposing a CMP.

Applicability of CMPs for Acts of Business Associate Agents

The Final Rule makes a covered entity liable for the violations of its business associates that are its agents, and adds a parallel provision providing for the liability of business associates for the acts of their agents. To avoid state-by-state variations in the law of agency, the Final Rule specifies that whether an agency relationship exists will be established under the federal law of agency. In general, an agency relationship will be found where the potential agent's actions can be directed or controlled during the course of performance of its duties, regardless of whether actual direction or control occurs. Prior to the HITECH Act, covered entities were not subject to CMPs for violations by an agent who was also a business associate acting under a compliant business associate agreement.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions