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Small Healthcare Provider Pays $31,000 for Failing to Have a Business Associate Agreement With File Storage Vendor

Disclosing protected health information (PHI) to a business associate without a compliant business associate agreement (BAA) is an improper disclosure under the HIPAA privacy and security regulations. According to the HHS Office for Civil Rights (OCR), an error like that can cost a small healthcare provider $31,000.

OCR recently announced a resolution agreement (pdf) with the Center for Children’s Digestive Health, S.C. (CCDH), a “small, for-profit health care provider with a pediatric subspecialty practice that operates its practice in seven clinic locations in Illinois.” According to the resolution agreement, OCR apparently learned of the missing BAA while investigating CCDH’s file storage vendor, FileFax, Inc., which stored CCDH’s PHI. Responsible for enforcing the privacy and security rules under HIPAA, OCR then commenced a compliance review of CCDH. It reported finding that neither CCDH nor FileFax could produce a signed BAA applicable to periods that CCDH had shared PHI with FileFax.  Without an admission of liability, CCDH agreed to resolve the matter by paying $31,000 and agreeing to comply with a comprehensive Corrective Action Plan (CAP).

The Health Information Technology for Economic and Clinical Health (HITECH) Act made a number of changes to HIPAA, including to the rules concerning “business associates.” Among those changes were updates to BAAs that the HIPAA rules require covered entities to maintain with their business associates. A covered entity’s business associates include third-party service providers, such as: claims administrators, accounting firms, law firms, consultants, cloud and other data storage providers.

The regulations make clear that even though business associates are directly subject to many of the HIPAA privacy and security requirements, BAAs remain necessary for compliance. A starting point for BAA compliance is the set of sample provisions posted by the OCR. However, there are other issues that parties to a BAA will want to address, such as: specificity concerning the safeguards that should be in place, data breach coordination and response, indemnity, cybersecurity insurance, and agency status. More information about business associates and BAAs can be accessed here.

Covered entities also should remember that the HIPAA regulations are not the only rules that require written assurances from third-party service providers concerning security of personal information. A number of state laws (e.g., California, Massachusetts, Maryland, New Mexico, New York, Oregon) require businesses to have contracts with third-party service providers to safeguard personal information. Of course, even in the absence of a federal or state law, taking steps to ensure vendors secure the confidential information they are provided, such as through a detailed data security agreement, is a prudent practice.

Jackson Lewis P.C. © 2017

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About this Author

Principal

Joseph J. Lazzarotti is a Principal in the Morristown, New Jersey, office of Jackson Lewis P.C. He founded and currently helps to co-lead the firm's Privacy, e-Communication and Data Security Practice, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with the International Association of Privacy Professionals.

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...

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