November 25, 2014

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November 24, 2014

HIPAA/HITECH Enforcement Action Alert

Health plan agrees to pay $1.5 million following HHS investigation of self-reported data breach.

If you report a significant data breach to the Department of Health and Human Services (HHS), you may face a follow-up investigation and possible enforcement action.

The Health Information Technology for Economic and Clinical Health (HITECH) Act requires entities covered by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) to report data breaches affecting 500 or more individuals to HHS and the media, in addition to notifying the affected individuals. HHS pays close attention to these breach reports and initiates investigations of those it deems significant, as evidenced by its recently announced settlement with BlueCross BlueShield of Tennessee (BlueCross).

In 2009, BlueCross reported the theft of 57 unencrypted computer hard drives containing the protected health information (PHI) of more than one million customers from a former BlueCross call center in Chattanooga. The hard drives had been stored in a network data closet that BlueCross continued to lease after it had otherwise vacated the office space. The closet was secured by biometric and keycard scan security with a magnetic lock and an additional door with a keyed lock. In addition, the property management company for the leased spaced provided security services.

In spite of these physical safeguards, HHS determined that the PHI contained on the hard drives was not protected well enough. In addition to paying a penalty of $1.5 million, BlueCross agreed to a corrective action plan that requires it to, among other things, submit its HIPAA privacy and security policies and procedures to HHS for review and approval, distribute the policies and procedures to all members of its workforce who have access to PHI, report violations of the policies and procedures by members of the workforce to HHS within 30 days, train all current workforce members on the approved policies and procedures and all new workforce members within 40 days of hire, and submit to unannounced site visits.

We encourage all HIPAA-covered entities (including health plans, healthcare providers, and healthcare clearinghouses) and their business associates to take a fresh look at the HIPAA privacy and security safeguards they have in place and to employ all reasonable means of securing PHI. It is worth noting that had the hard drives been encrypted (i.e., secured), BlueCross would not have been obligated to report the theft under HITECH. The less unsecured PHI that exists, the less opportunity there is for a reportable breach that may lead to an HHS investigation and penalties.

Copyright © 2014 by Morgan, Lewis & Bockius LLP. All Rights Reserved.

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About this Author

Of Counsel

Lauren B. Licastro is of counsel in Morgan Lewis's Employee Benefits and Executive Compensation Practice. Ms. Licastro counsels clients on matters related to the implementation, operation, and termination of retirement plans and health and welfare benefit plans in compliance with ERISA, the Internal Revenue Code, COBRA, HIPAA, Healthcare Reform, and other applicable law. She negotiates contracts on behalf of employers with plan service providers, such as insurers, recordkeepers, and third-party administrators, and also provides advice regarding employment agreements...

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