United States: HIPAA One Year Later: Is Your Law Firm Complying?

Originally published in the New Hampshire Bar Journal

Since it was enacted in 1996, discussion and confusion concerning the Health Insurance Portability and Accountability Act ("HIPAA")1 has been ongoing, but as of late the conversation has shifted to the interpretation and application of the HIPAA final omnibus rule issued by the U.S. Department of Health and Human Services ("HHS") on January 17, 2013 (the "Final Rule").2 The Final Rule implemented changes to, and in some instances finalized, HHS rules previously issued pursuant to Subtitle F of Title II of HIPAA, known as the Administrative Simplification ("AS") provisions.3 The Final Rule reflects mandates under recent legislation including the Health Information Technology for Economic and Clinical Health ("HITECH") Act, enacted as part of the American Recovery and Reinvestment Act of 2009, and the Genetic Information Nondiscrimination Act of 2008,4 and it has been promoted as enhancing patient privacy protections, providing individuals new rights to their health information, and strengthening the government's authority to enforce HIPAA and HITECH.5

Since nearly a year has passed since the compliance date for most provisions of the Final Rule6, this article focuses on assisting lawyers and law firms looking to evaluate the sufficiency of their compliance efforts to date. This article also underscores the potential impact of the Final Rule on lawyers and law firms in light of recent enforcement activity by the Office of Civil Rights ("OCR") of the HHS, the federal agency charged with enforcement and administration of HIPAA.

To fully appreciate how or if the Final Rule applies to you or your law firm (or, for that matter, your clients), a general understanding of HIPAA and its regulatory regime is in order. As noted above, the regulatory regime arises from the AS provisions which required HHS to establish national standards for electronic healthcare transactions; national identifiers for providers, health insurance plans, and employers; national standards to protect the privacy and security of personal health information; and civil money penalties for violations of the AS.7 Accordingly, the HHS published The Federal Standards for the Privacy of Individually Identifiable Health Information (the "Privacy Rule")8 in December of 2000 (modified in 2002); the Security Standards for the Protection of Electronic Protected Health Information (the "Security Rule") in February 20039; the HIPAA Enforcement Rule (the "Enforcement Rule") in February 200610; and interim final regulations for Notification in the Case of Breach of Unsecured Protected Health Information11 in 2009 (the "Breach Notification Rule"; the Privacy Rule, the Security Rule, the Enforcement Rule, and the Breach Notification Rule, each as modified and/or finalized by the Final Rule, are referred to collectively as the "HIPAA Rules").

The AS provisions and the HIPAA Rules apply to three types of entities which are known as "covered entities:" healthcare providers who conduct covered transactions electronically, health plans, and health care clearinghouses. 12 A healthcare provider (e.g., physician, chiropractor, dentist, nursing home, pharmacy) is only a "covered entity", and thus required to comply with HIPAA, if it transmits information about covered transactions electronically. 13

Covered transactions include those in which so-called protected health information ("PHI") is transmitted to carry out financial or administrative activities related to healthcare (e.g., billing, confirmation of coverage).14 PHI is defined as individually identifiable health information transmitted or maintained in any form or medium (including electronically ("ePHI")), including demographic data, that relates to: (a) an individual's past, present or future physical or mental health or condition, (b) the provision of health care to the individual, or (c) the past, present, or future payment for the provision of health care to the individual, and that identifies the individual or for which there is a reasonable basis to believe it can be used to identify the individual. Individually identifiable health information includes many common identifiers (e.g., name, address, birth date, Social Security Number).15

The overarching objective of the AS provisions and the HIPAA Rules is to require covered entities (which could be an individual or a business entity) to protect the privacy and security of PHI and provide individuals with certain rights with respect to their health information. The Final Rule sought to strengthen these protections and rights by, in pertinent part, significantly expanding the accountability and obligations of certain entities that do business with covered entities – so-called "business associates" and their subcontractors.

Specifically, the HITECH Act and the Final Rule require business associates to comply with the Security Rule. The Final Rule broadened the definition of a "business associate" and implemented Section 13404 of HITECH which makes certain requirements of the Privacy Rule applicable to business associates and creates direct liability for noncompliance by business associates with regard to those requirements.16 In contrast, prior to the Final Rule, a business associate's obligations arose solely under the terms of its business associate agreement (a "BAA") with a covered entity and therefore the business associate was only potentially subject to contractual remedies for breach of the BAA.

The Final Rule also requires updated provisions in BAAs and now requires business associates to have BAAs with its subcontractors. BAAs must provide that the business associate (or subcontractor, as applicable):

(1) shall abide by the Security Rule concerning ePHI and applicable provisions of the Privacy Rule; (2) shall report breaches of unsecured PHI to the covered entity (or business associate, as applicable) as required by the Privacy Rule and Breach Notification Rule, (3) certify that, if used, a subcontractor will agree to the same requirements that apply to the business associate regarding the handling of protected health information; (4) will terminate a business associate contract with a subcontractor if the business associate knows of a pattern of activity or practice of the subcontractor that constitutes a material breach of the subcontractor's obligations, and reasonable steps to cure the breach or end the violation are unsuccessful. 17

The Final Rule should have been a wake-up call for lawyers and law firms which have access to PHI to ask whether they are considered business associates of covered entities and, if so, to take the steps necessary to comply with their duties and obligations as business associates by September 23, 2013. A lawyer or firm falls into the HIPAA definition of a "business associate" if the lawyer "provides, other than in the capacity of a member of the workforce of such covered entity, legal . . . services to or for such covered entity, or to or for an organized health care arrangement in which the covered entity participates, where the provision of the service involves the disclosure of PHI from such covered entity or arrangement, or from another business associate of such covered entity or arrangement, to the person."18

Therefore, if a firm represents a covered entity or a business associate of one and accesses PHI to do its job, it must comply with the HIPAA Rules. The types of representation which could cause a firm to be a business associate of their client include defending a malpractice claim, representing a physician before a licensing board, or advising a physician practice regarding quality assurance or risk management. It is significant that business associate status attaches under the HIPAA Rules regardless of whether the firm has signed a business associate agreement. As noted in commentary to the Final Rule, "a person becomes a business associate by definition, not by the act of contracting with a covered entity or otherwise. Therefore, liability for impermissible uses and disclosures attaches immediately when a person creates, receives, maintains, or transmits protected health information on behalf of a covered entity or business associate and otherwise meets the definition of a business associate."19 Accordingly to the extent law firms work with independent contractor consultants or others who have access to PHI as part of the representation, they will be required to make sure that these subcontractors adhere to the HIPAA privacy and security requirements as well and enter into business associate agreements with these subcontractors.

With the revisions to HIPAA Rules made by HITECH and the Final Rule, business associates are now directly liable: (1) for impermissible uses and disclosures of PHI; (2) for failure to provide breach notification to the covered entity when unsecured PHI is lost or inappropriately accessed or disclosed; (3) for failure to provide access to a copy of ePHI to either the covered entity, the individual, or the individual's designee (as specified in the business associate agreement) as necessary to satisfy a covered entity's obligations with respect to an individual's request for an electronic copy of their PHI; (4) for failure to disclose PHI to governmental regulators when requested to investigate or determine the business associate's compliance with HIPAA; (5) for the failure to provide an accounting of disclosures of PHI when requested by an individual; (6) for failing to make reasonable efforts to limit PHI to the minimum necessary to accomplish the intended purpose of the use, disclosure, or request; (7) for failing to enter into business associate agreements with subcontractors that create or receive PHI on their behalf; and (8) last, but far from least, failure to comply with the requirements of the Security Rule.20

The balance of this article focuses on an overview of the primary compliance issues for business associates under the HIPAA Rules and in light of recent OCR enforcement activities.

The Security Rule is intended to protect the privacy of individuals' health information while allowing covered entities and business associates to adopt new technologies to improve the quality and efficiency of patient care. Given that the health care marketplace is diverse, the Security Rule is designed to be flexible and scalable so regulated entities can implement policies, procedures, and technologies that are appropriate for their particular size, organizational structure, and risks to consumers' ePHI.21 A central compliance component of the Security Rule is the requirement that business associates conduct an accurate and thorough assessment of the potential risks and vulnerabilities to the confidentiality, integrity, and availability of ePHI held by the entity.22 This risk assessment must be documented, and it must support the entity's determination of the types of safeguards that are needed, given the scale and scope of the business associate's operations. The Security Rule also requires, among other things, the identification of a "security official" who is responsible for the development and implementation of the policies and procedures required under the Security Rule and providing security training to workforce members;23 appropriate screening processes for personnel with access to ePHI;24 the identification of data backup requirements and methods25; and the proper use of encryption26. Accordingly, implementation of a compliant security risk management program requires addressing what administrative, physical, and technical safeguards are in place to protect the confidentiality, integrity, and availability of ePHI, and who is responsible for assuring that the safeguards are adequate.

Recognizing the often changing risks associated with the use of technology related to the use of PHI, it is recommended that a gap analysis be conducted on a periodic basis after the initial risk assessment. Conducting a risk assessment (or having one conducted by an objective third party) almost necessarily involves the expenditure of significant resources. With that said, it is very apparent from OCR enforcement activities and publications that a risk assessment is the cornerstone of Security Rule compliance.27 Importantly, if a business associate desires to have a third party vendor conduct the risk assessment, it is highly recommended that this vendor be engaged through legal counsel so as to maintain attorney-client privilege with regard to discussions and findings associated with the drafting of the final assessment (which assessment, however, would still have to be provided to OCR upon its request).

The Privacy Rule mandates that those entrusted with PHI take appropriate safeguards to protect the privacy of personal health information, and sets limits and conditions on the uses and disclosures that may be made of such information without patient authorization. The rule also gives patients rights with respect to their PHI, including rights to examine and obtain a copy of their health records, request corrections to their health records, and request an accounting of disclosures of PHI made by the covered entity.28 Covered entities that engage business associates to work on their behalf must have contracts or other arrangements in place with their business associates to ensure that the business associates safeguard PHI, and use and disclose the information only as permitted or required by the Privacy Rule.29
The Breach Notification Rule requires covered entities and business associates to provide notification following a breach of unsecured protected health information. A breach is, generally, an impermissible use or disclosure under the Privacy Rule that compromises the security or privacy of the PHI.30 An acquisition, access, use, or disclosure of PHI in a manner not permitted under the Privacy Rule is presumed to be a breach unless the covered entity or business associate demonstrates that there is a low probability that the PHI has been compromised based on a risk assessment of at least the following factors:

1. The nature and extent of the protected health information involved, including the types of identifiers and the likelihood of reidentification;

2. The unauthorized person who used the protected health information or to whom the disclosure was made;

3. Whether the protected health information was actually acquired or viewed; and

4. The extent to which the risk to the protected health information has been mitigated.31

If it is determined that a breach has occurred, the covered entity must provide notice of the breach to affected individuals, the secretary of Health and Human Services and, in certain circumstances, to the media.32 If the breach occurred at the hands of a business associate, the business associate must notify the covered entity as well.33 The nature and form of the notification is controlled in large part by the outcome of the risk analysis mentioned above. 34

While a significant aspect of HIPAA compliance is the maintenance of policies and procedures related to the obligations under the Privacy, Security, and Breach Notification Rules, the extent to which the employees of a covered entity or business associate adhere to these policies and procedures and understand what is expected of them is, in many regards, the most critical component of compliance efforts. The Privacy Rule specifically requires training of all workforce members on the policies and procedures with respect to PHI as necessary and appropriate for the members of the workforce to carry out their function within the employer's business. Significantly, the content of workforce training is left within the employer's discretion, but it is advisable to provide specific training with regard to the privacy and security requirements and considerations unique to the particular practice or business. Though an "off the shelf" training is likely to include all the required elements, if the training is not specifically tailored to the particulars of a business, the OCR would be unlikely to view this as non-compliant.

Since the release of the Final Rule, OCR investigation and enforcement activities have served to highlight the unfortunate consequences that can arise from failure to comply with the Final Rule. Moreover, the extension of certain covered entity responsibilities to business associates now makes civil and criminal liability possible for lawyers and law firms. HIPAA civil fines for noncompliance can be up to $50,000 per violation (or a maximum of $1.5 million for repeated violations) depending on the degree of culpability, and criminal penalties may result in up to ten years in prison. 35
Last December the OCR announced that it had entered into a settlement agreement with Adult & Pediatric Dermatology, P.C. ("APDerm"), a medical practice group providing dermatology services from offices located in Massachusetts and New Hampshire, to resolve APDerm's alleged violations of the Privacy Rule, Security Rule, and Breach Notification Rule, marking the first settlement for failure to have policies and procedures in place to address the breach notification provisions of the HITECH Act. 36 The settlement required APDerm to pay $150,000.00 to OCR and implement a corrective action plan to correct deficiencies in its HIPAA compliance program. The OCR investigation that led to the settlement stemmed from a self-report by APDerm that an unencrypted thumb drive containing the ePHI of approximately 2,200 individuals was stolen from a vehicle of one of the practice staff members. The investigation revealed that APDerm had not conducted an accurate and thorough analysis of the potential risks and vulnerabilities to the confidentiality of ePHI as part of its security management process. Further, the practice did not fully comply with the requirements of the Breach Notification Rule to have in place written policies and procedures and train workforce members. Consequently, the practice was not penalized for the breach itself, but for failure to implement and maintain a compliance program and risk assessment measures as required under the HIPAA Rules.

Attorneys who represent healthcare clients are keenly aware of HIPAA compliance issues and routinely work with these clients to ensure compliance. These lawyers, however, are not always mindful of the fact that the Final Rule makes the same standards allegedly violated by APDerm applicable to the lawyers and law firms which receive PHI from covered entities. The recent case of Affinity Health Plan, Inc. illustrates two important points: the significant financial risk of noncompliance and the scope of inquiry which needs to be made in order to ensure compliance. Affinity Health Plan settled violations of HIPAA with HHS for $1,215,780.00 because of the failure to erase PHI contained on the hard drives of least photocopiers before returning them. An HHS investigation revealed that the PHI of 344,579 patients was improperly disclosed. Affinity had not included the electronic PHI stored on its photocopiers in its risk analysis and failed to implement policies and procedures to follow when returning a photocopiers. 37

The foregoing makes clear that business associates must look well beyond laptops and smart phones when conducting a risk analysis. In addition to these obvious places where PHI is stored, business associates should evaluate the security of other digital office equipment such as photocopiers, scanners, and fax machines, which can retain PHI for indefinite periods of time. Business associates should also look to the vendors which provide business services to them. For example, outside cleaning companies, electronic data storage and shredding businesses, and outsourced IT providers can all come under the rubric of a business associate subcontractor from which compliance is expected.

In sum, every lawyer and law firm needs to determine first, whether they are a business associate under HIPAA, and if so, to take affirmative action to assure their compliance with the HIPAA regulatory regime.


1 Pub.L.104-191, 110 Stat. 1936.

2 78 Fed, Reg, 5566 (January 25, 2013).

3 See, HIPAA Administrative Simplification Statute and Rules, www.hhs.gov.

4 78 Fed. Reg. 5566 (January 25, 2013).

5 New Rule Protects Patient Privacy, Secures Health Information, HHS press release, January 17, 2013.

6 Compliance for most provisions of the Final Rule was required as of September 23,2013. 78 Fed. Reg. 5566 (January 25, 2013).

7 See, HIPAA General Information, Centers for Medicare & Medicaid Services, CMS.gov.

8 45 CFR Part 160, and Part 164, Subparts A and E.

9 45 CFR Part 160, and Part 164, Subparts A and C.

10 45 CFR Part 160, Subparts C-E.

11 74 FR 42740; 45 CFR Part 160, and Part 164, Subpart D.

12 45 CFR §160.102.

13 Id.

14 Id.

15 45 CFR §160.103.

16 Id.; 78 Fed. Reg. 5591(January 25, 2013).

17 45 CFR §164.308(e); §164.314(a); §164.504(e).

18 45 CFR §160.103.

19 78 Fed. Reg. 5598.

20 See 78 Fed. Reg. 5591 (January 25, 2013).

21 See 45 CFR §164.306.

22 45 CFR §164.308(a)

23 45 CFR §164.308(a)(1(ii)(2)

24 45 CFR §164.308(a)(3)(ii)(B)

25 45 CFR § 164.308(a)(7)(ii)(A)

26 45 CFR §§163.312(a)(2)(iv) and (e)(2)(ii).

27 See Guidance on Risk Analysis, www.hhs.gov.

28 45 CFR §§164.524, 164.526, and 164.528.

29 45 CFR §164.504(e).

30 US Department of Health & Human Services, Breach Notification Rule, HHS.gov.

31 45 CFR §164.402(2).

32 45 CFR §§164.404, 164.406, 164.408.

33 45 CFR §164.410.

34 Id.

35 45 CFR Part 160, Subpart D.

36 Dermatology Practice Settles Potential HIPAA Violations, HHS press release, December 26, 2013.

37 HHS settles with health plan in photocopier breach case, HHS press release, August 14, 2013.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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