HIPAA Compliance News

May 2019 Healthcare Data Breach Report

In April, more healthcare data breaches were reported than in any other month to date. The high level of data breaches has continued in May, with 44 data breaches reported. Those breaches resulted in the exposure of almost 2 million individuals’ protected health information.

Healthcare data breaches by month 2014-2019

On average, 2018 saw 29.5 healthcare data breaches reported to the HHS’ Office for Civil Rights each month – a rate of more than one a day.

From January 2019 to May 2019, an average of 37.2 breaches have been reported each month. Up until May 31, 2019, 186 healthcare data breaches had been reported to OCR, which is more than half (52%) the number of breaches reported last year.

It remains to be seen whether the increase in data breaches is just a temporary blip or whether 40+ healthcare data breaches a month will become the new norm.

Healthcare records exposed by month 2017-2019

May saw a 186% increase in the number of exposed records compared to April. Across the 44 breaches, 1,988,376 healthcare records were exposed or compromised in May. So far this year, more than 6 million healthcare records have been exposed, which is more than half of the number of records exposed in 2018.

Healthcare records exposed by year 2014-2019

In terms of the number of records exposed, May would have been similar to April were it not for a massive data breach at the healthcare clearinghouse Inmediata Health Group. The breach was the largest of the year to date and resulted in the exposure of 1,565,338 records.

A web page which was supposed to only be accessible internally had been misconfigured and the page could be accessed by anyone over the internet.


Rank Name of Covered Entity Covered Entity Type Individuals Affected Type of Breach
1 Inmediata Health Group, Corp. Healthcare Clearing House 1,565,338 Unauthorized Access/Disclosure
2 Talley Medical Surgical Eyecare Associates, PC Healthcare Provider 106,000 Unauthorized Access/Disclosure
3 The Union Labor Life Insurance Company Health Plan 87,400 Hacking/IT Incident
4 Encompass Family and internal medicine group Healthcare Provider 26,000 Unauthorized Access/Disclosure
5 The Southeastern Council on Alcoholism and Drug Dependence Healthcare Provider 25,148 Hacking/IT Incident
6 Cancer Treatment Centers of America® (CTCA) at Southeastern Regional Medical Center Healthcare Provider 16,819 Hacking/IT Incident
7 Takai, Hoover, and Hsu, P.A. Healthcare Provider 16,542 Unauthorized Access/Disclosure
8 Hematology Oncology Associates, PC Healthcare Provider 16,073 Hacking/IT Incident
9 Acadia Montana Treatment Center Healthcare Provider 14,794 Hacking/IT Incident
10 American Baptist Homes of the Midwest Healthcare Provider 10,993 Hacking/IT Incident

Causes of May 2019 Healthcare Data Breaches

Hacking/IT incidents were the most numerous in May with 22 reported incidents. In total, 225,671 records were compromised in those breaches. The average breach size was 10,258 records with a median of 4,375 records.

There were 18 unauthorized access/disclosure incidents in May, which resulted in the exposure of 1,752,188 healthcare records. The average breach size was 97,344 records and the median size was 2,418 records.

8,624 records were stolen in three theft incidents. The average breach size 2,875 records and the median size was 3,578 records. There was one loss incident involving 1,893 records.

causes of May 2019 healthcare data breaches

Location of Breached PHI

Email continues to be the most common location of breached PHI. 50% of the month’s breaches involved at least some PHI stored in email accounts. The main cause of these types of breaches is phishing attacks.

Network servers were the second most common location of PHI. They were involved in 11 breaches, which included hacks, malware infections and ransomware attacks.  Electronic medical records were involved in 7 breaches, most of which were unauthorized access/disclosure breaches.

Location of breached PHi (may 2019)

May 2019 Healthcare Data Breaches by Covered Entity Type

Healthcare providers were the worst affected covered entity type in May with 34 breaches. 5 breaches were reported by health plans and 4 breaches were reported by business associates of HIPAA-covered entities. A further two breaches had some business associate involvement. One breach involved a healthcare clearinghouse.

May 2019 healthcare data breaches by covered entity type

May 2019 Healthcare Data Breaches by State

May saw healthcare data breaches reported by entities in 17 states.  Texas was the worst affected state in May with 7 reported breaches. There were 4 breaches reported by covered entities and business associates in California and 3 breaches were reported in each of Indiana and New York.

2 breaches were reported by entities base in Connecticut, Florida, Georgia, Maryland, Minnesota, North Carolina, Ohio, Oregon, Washington, and Puerto Rico. One breach was reported in each of Colorado, Illinois, Kentucky, Michigan, Missouri, Montana, and Pennsylvania.

HIPAA Enforcement Actions in May 2019

OCR agreed two settlements with HIPAA covered entities in May and closed the month with fines totaling $3,100,000.

Touchstone Medical Imaging agreed to settle its HIPAA violation case for $3,000,000. The Franklin, TN-based diagnostic medical imaging services company was investigated after it was discovered that an FTP server was accessible over the internet in 2014.

The settlement resolves 8 alleged HIPAA violations including the lack of a BAA, insufficient access rights, a risk analysis failure, the failure to respond to a security incident, a breach notification failure, a media notification failure, and the impermissible disclosure of the PHI of 307,839 individuals.

Medical Informatics Engineering settled its case with OCR and agreed to pay a financial penalty of $100,000 to resolve alleged HIPAA violations uncovered during the investigation of its 2015 breach of 3.5 million patient records. Hackers had gained access to MIE servers for 19 days in May 2015.

OCR determined there had been a failure to conduct a comprehensive risk analysis and, as a result of that failure, there was an impermissible disclosure of 3.5 million individuals’ PHI.

It did not end there for MIE. MIE also settled a multi-state lawsuit filed by 16 state attorneys general. A multi-state investigation uncovered several HIPAA violations. MIE agreed to pay a penalty of $900,000 to resolve the case.

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House Overturns Ban on HHS Funding HIPAA National Patient Identifier Development

One of the requirements of the HIPAA Administrative Simplification Rules was the development of a national identifier for all patients. Such an identifier would be used by all healthcare organizations to match patients with health records from multiple sources and would improve the reliability of health information and ensure it could be shared quickly and efficiently.

That national patient identifier has failed to materialize. For the past two decades, the Department of Health and Human Services has been prohibited from using funds to develop or promote a unique patient identifier system out of concerns over privacy and security of patient data.

Just as was the case in 1996, the benefits of using national patient identifiers remain and the need for such a system is greater than ever. Many hospitals, healthcare and health IT groups have been urging Congress to lift the HHS ban due to the benefits that would come from using a national identifier.

They argue it would make it much easier to match medical information from multiple sources with the correct patient and the potential for errors would be greatly reduced. Together with the cost savings, adoption of a national patient identifier would improve the quality of care provided to patients and patient safety.

Now, 20 years after the ban was put in place, it is closer to being lifted. The U.S. House of Representatives recently voted on several amendments to a $99.4 billion HHS appropriations bill. The amendment calling for the lifting of the ban was proposed by Rep. Bill Foster (D-Ill.) and was passed on Wednesday 12, June in a 246 to 178 vote. Until now, neither chamber in Congress has ever voted to lift the ban.

“For the last 21 years, this misguided policy has been in place, and thousands of Americans have died due to getting the wrong drug to the wrong patient or due to incorrect or incomplete electronic medical records, all arising from the inability to simply and correctly merge health records from different systems,” said Rep. Foster.

The passing of the amendment is the first step toward a national identifier being developed, but there are plenty of hurdles to overcome before the ban is finally lifted. The appropriations bill must first be passed, and the senate would need to give its approval, then the president would need to sign the bill into law.

Even though the benefits of a national patient identifier are clear, many privacy advocates believe the privacy and security risks are too great and that adoption of a national identifier would result in loss of control of patient data and more frequent, larger, and more damaging healthcare data breaches.

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Alabama Jury Awards Woman $300,000 Damages over HIPAA Breach

A woman in Alabama has been awarded $300,000 in damages after a doctor illegally accessed and disclosed her protected health information to a third party.

Plaintiff Amy Pertuit filed a lawsuit against Medical Center Enterprise (MCE) in Alabama, a former MCE physician, and an attorney over the violation of her privacy in January 2015.

According to lawyers for the plaintiff, Amy Pertuit’s husband was experiencing visitation issues and was involved in a custody battle with his former wife, Deanna Mortenson.

Mortenson contacted Dr. Lyn Diefendfer, a physician at MCE, and convinced her to obtain health information about Amy Pertuit for use against her husband in the custody battle. The information was disclosed to Mortenson’s attorney, Gary Bradshaw.

Dr. Diefendfer accessed Pertuit’s records through the Alabama Prescription Drug Monitoring Program website. Since Dr. Diefendfer had no treatment relationship with Pertuit, she was not authorized to access her medical information. The access and disclosure were violations of hospital policies and HIPAA Rules.

After discovering that her health information had been disclosed, Pertuit lodged a complaint with the Department of Health and Human Services’ Office for Civil Rights which put the hospital on notice. However, the hospital failed to implement appropriate sanctions against Diefendfer. Dr. Diefendfer is alleged to have accessed further health information in 2016 and again disclosed that information to Bradshaw.

The plaintiff’s lawyers also said that the hospital’s privacy officer had investigated Dr. Diefendfer and discovered 22 separate violations of hospital policies and HIPAA Rules.

The lawsuits filed against Dr. Diefender, Deanna Mortensen, and Gary Bradshaw were all settled out of court. The case against MCE went to a jury trial.

The jury unanimously found that MCE had failed to take appropriate action against Dr. Diefender after the discovery of the privacy violation, and awarded the plaintiff $295,000 in punitive damages and a further $5,000 as compensation for pain, suffering, and humiliation.

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Vermont Supreme Court Ruled Patient Can Sue Hospital and Employee for Privacy Violation

The Supreme Court in Vermont has ruled that a patient can sue a hospital and one of its employees for a privacy violation, despite Vermont law and HIPAA not having a private cause of action for privacy violations.

The lawsuit alleges negligence over the disclosure of personal information that was obtained while the patient was being treated in the emergency room. The woman had visited the ER room to receive treatment for a laceration on her arm. The ER nurse who provided care to the patient notified law enforcement that the patient was intoxicated, had driven to the hospital, and intended to drive home after receiving treatment.

The nurse had detected an odor of alcohol on the patient’s breath. Using an alco-sensor, the nurse determined the patient had blood alcohol content of 0.215. In Vermont, that blood alcohol level is more than two and a half times the legal limit for driving. A police officer in the lobby of the hospital was notified and the patient was arrested, although charges were later dropped.

The women subsequently sued the hospital and the employee for violating her privacy by disclosing her health information to law enforcement.

The HIPAA Privacy Rule limits uses and disclosures of protected health information to treatment, payment, and healthcare operations, but there are exceptions. One of those exceptions is when a disclosure is made when there is a perceived serious threat to health or safety. The Privacy Rule permits such a disclosure if the disclosure is made to a person who could prevent or lessen a threat to either to the patient or the public.

Under the circumstances, the disclosure was reasonable and appropriate, which is what the Supreme Court ultimately concluded, affirming the Superior Court’s judgement. The disclosure was determined to have been made in order to mitigate an imminent threat to both the patient and the public. The Court rules “no reasonable factfinder could determine the disclosure was for any other purpose.” The plaintiff failed to prove that the disclosure had been made for any other purpose, such as in order for the patient to be arrested and charged.

The ruling is perfectly understandable; however, what is atypical is the case was given standing when state and HIPAA laws do not include a private cause of action. Patients do not have the right to sue their providers over violations of HIPAA laws and laws in Vermont also do not give patients that right. The case was ruled to have standing under a common-law private right of action for damages.

While the lawsuit was not successful, it could be cited in other lawsuits filed by patients who allege their privacy has been violated by their healthcare providers.

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HELP Committee Calls for HHS to Recognize Good Faith Efforts to Improve Cybersecurity in its HIPAA Enforcement Activities

Enforcement of HIPAA compliance by the HHS’ Office for Civil Rights is viewed by many as overly punitive.  Compliance investigations following complaints or data breaches often uncover violations of HIPAA Rules, which can lead to sizable financial penalties.

Organizations that have adopted good cybersecurity best practices could still receive a financial penalty following a data breach, even though they have made reasonable efforts to improve their security posture.

There have been calls for the HHS to take good faith efforts to improve cybersecurity into consideration when investigating breaches and to use discretion when considering enforcement actions.

While the threat of financial penalties for should encourage healthcare organizations to invest more in cybersecurity defenses, some consider the HHS approach to be having the opposite effect. Why invest heavily in cybersecurity when the HHS could still issue a financial penalty over a data breach?

An alternative approach, which is favored by several industry groups, is to incentivize healthcare entities to adopt strong cybersecurity best practices by taking the steps that have been taken to improve cybersecurity into account, such as adoption of the NIST cybersecurity framework. In cases where the covered entity can demonstrate that it has adopted strong cybersecurity practices, the entity should be protected against financial penalties.

A safe harbor such as this has long been proposed by CHIME, which believes good faith efforts to improve cybersecurity should be recognized by OCR when investigating breaches.  Instead, at present, the HHS appears to be “victimizing the victim.”

Support for incentivizing healthcare organizations to improve cybersecurity rather than punishing them for failures is growing. The recently introduced Lower Health Care Cost Acts of 2019 includes such a requirement. The bill was proposed by Senate Committee on Health, Education, Labor, and Provisions (HELP) chairman Lamar Alexander (R-Tenn.) and Ranking Member Patty Murray (D-Wash.) and calls for the HHS Secretary to consider an organization’s security practices when investigating data breaches or potential HIPAA violations.

Privacy and security concerns have been raised about the proposed interoperability and data blocking rules introduced by the ONC and CMS in February. The rules call for the use of APIs to solve interoperability issues, reduce data blocking, and make it easier for patients to gain access to their health data.

Complying with patient requests for their data to be sent to health apps has potential to result in a HIPAA violation and possible financial penalty. Several healthcare organizations and industry groups have expressed concern about liability for unauthorized disclosures of PHI after it has been sent to third parties at the patient’s request. OCR has recently clarified, through a series of FAQs, that once ePHI has been transferred to a third-party app at the request of the patient, the covered entity is no longer liable for any further disclosures.

Since app developers are not typically business associates, HIPAA restrictions no longer apply once the information has been disclosed to the app and there have been several cases of health data being provided to third parties without the knowledge of the patient.

The Lower Health Care Cost Acts of 2019 will help to address privacy and security concerns by calling for the Government Accountability Office (GAO) to conduct a study to identify existing gaps in privacy and security protections when patients have their health information transferred to third parties such as mobile apps which are not covered by HIPAA Rules. The findings of that study could guide efforts to improve privacy and security protections for health information once it is transferred beyond the reach of HIPAA.

The HELP committee is seeking comments on the proposed bill up until June 5, 2019.

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Multi-State Action Results in $900,000 Financial Penalty for Medical Informatics Engineering

Medical Informatics Engineering (MIE) is required to pay a financial penalty of $900,000 to resolve a multi-state action over HIPAA violations related to a breach of 3.9 million records in 2015. The announcement comes just a few days after the HHS’ Office for Civil Rights settled its HIPAA violation case with MIE for $100,000.

MIE licenses a web-based electronic health record application called WebChart and its subsidiary, NoMoreClipboard (NMC), provides patient portal and personal health record services to healthcare providers that allow patients to access and manage their health information. By providing those services, MIE and NMC are business associates and are required to comply with HIPAA Rules.

Between May 7 and May 26 2015, hackers gained access to a server containing data related to its NMC service.  Names, addresses, usernames, passwords, and sensitive health information were potentially accessed and stolen.

A lawsuit was filed in December 2018 alleging MIE and NMC had violated state laws and several HIPAA provisions. 16 state attorneys general were named as plaintiffs in the lawsuit: Arizona, Arkansas, Connecticut, Florida, Indiana, Iowa, Kansas, Kentucky, Louisiana, Michigan, Minnesota, Nebraska, North Carolina, Tennessee, West Virginia, and Wisconsin.

The plaintiffs’ investigation into the breach revealed hackers had exploited several vulnerabilities, MIE had poor password policies in place, and security management protocols had not been followed.

Under the terms of the consent judgement, in addition to the financial penalty, MIE must implement and maintain an information security program and deploy a security incident and event monitoring (SIEM) solution to allow it to detect and respond quickly to cyberattacks.

Data loss prevention technology must be deployed to prevent the unauthorized exfiltration of data, controls must be implemented to prevent SQL injection attacks, and activity logs must be maintained and regularly reviewed.

Password policies must be implemented that require the use of strong, complex passwords and multi-factor authentication and single sign-on must be used on all systems that store or are used to access ePHI.

Additional controls need to be implemented covering the creation of accounts that have access to ePHI. MIE must refrain from using generic accounts that can be accessed via the Internet and no generic accounts are allowed to have administrative privileges.

MIE is also required to comply with all the administrative and technical safeguards of the HIPAA Security Rule and states’ deceptive trade practices acts with respect to the collection, maintenance, and safeguarding of consumers’ protected health information. Reasonable security policies and procedures must be implemented and maintained to protect that information. MIE must also provide appropriate training to all employees regarding its information security policies and procedures at least annually.

In addition, MIE is required to engage a third-party professional to conduct an annual risk analysis to identify threats and vulnerabilities to ePHI each year for the next five years. A report of the findings of that risk analysis and the recommendations must be sent to the Indiana Attorney General within 180 days and annually thereafter.

The consent judgement has been agreed by all parties and resolves the alleged HIPAA violations and violations of state laws. The consent judgement now awaits court approval. The consent judgement can be found on the website of the Florida Office of the Attorney General – PDF.

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How Phone.com Started as a HIPAA Business Associate

Getting started as a business associate and entering into the healthcare sphere can be a major challenge, but the potential rewards are considerable, as Phone.com discovered.

Breaking into the Healthcare Industry

Companies that provide services and products to healthcare clients that require contact with protected health information (PHI) are considered business associates under Health Insurance Portability and Accountability Act (HIPAA) Rules. As such, they must implement policies and procedures to ensure they comply with HIPAA Rules, sign business associate agreements with HIPAA-covered entities, and need to ensure safeguards are implemented to ensure the confidentiality, integrity, and availability of any ePHI that they are provided with.

For many businesses, having to comply with HIPAA stops them from expanding into this potentially very lucrative market. Not only is it necessary to commit resources to compliance, any failures could result in a considerable financial penalty. The HHS’ Office for Civil Rights has recently confirmed that there are 10 aspects of HIPAA Rules which can, if violated by a business associate, result in a financial penalty.

Benefits of HIPAA Compliance for Vendors

While the healthcare industry is one of the fastest growing markets in the United States, and with so many medical specialties and sub-verticals, it is easy for companies to find a niche in which to operate and thrive.

One company that made the decision to develop a HIPAA compliance program to enable it to expand into the healthcare market is Phone.com, a provider of collaborative VOIP services for small businesses.

While the potential for growth in the healthcare sector was appreciated, when Phone.com started its HIPAA compliance program the extent to which the company would grow as a result was majorly underestimated.

Since becoming HIPAA compliant 18 month ago, the company has signed more than 700 business associate agreements with HIPAA covered entities and a large percentage of those clients are entirely new to Phone.com.

Not only has becoming HIPAA compliant allowed Phone.com to work directly with healthcare companies, it has also allowed the company to work with business associates of HIPAA-covered entities.

“Our success and responsiveness with health care vendors is well beyond what I expected. There is a real need for HIPAA compliant vendors in the market today – it’s a strong and concrete differentiator,” said Joel Maloff, SVP of Strategic Alliances and Chief Compliance Officer at Phone.com.

Assistance with HIPAA Compliance

Phone.com’s HIPAA compliance journey was aided by The Compliancy Group, offers compliance coaches to guide businesses through all requirements of HIPAA and provides solutions that include HIPAA policies and procedures, business associate agreements, risk analysis assistance, verification of compliance, and HIPAA audit support.

“When we first considered if we should become HIPAA compliant, one of the first things we did was a simple search through our existing clients who could potentially be in health care or touch health care data. We found 600 in our database alone, and that became a huge driver for seeking out Compliancy Group’s help,” explained Maloff. “Compliancy Group gives us the flexibility to execute BAAs that competitors simply don’t have the time or capacity to complete. We’ve been able to directly attribute substantial growth in monthly recurring revenue (MRR) to just Compliancy Group’s BAAs alone.”

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HHS Confirms When HIPAA Fines Can be Issued to Business Associates

Since the Department of Health and Human Services implemented the requirements of the Health Information Technology for Economic and Clinical Health (HITECH) Act of 2009 in the 2013 Omnibus Final Rule, business associates of HIPAA covered entities can be directly fined for violations of HIPAA Rules.

On May 24, 2019, to clear up confusion about business associate liability for HIPAA violations, the HHS’ Office for Civil Rights clarified exactly what HIPAA violations could result in a financial penalty for a business associate.

Business associates of HIPAA Covered entities can only be held directly liable for the requirements and prohibitions of the HIPAA Rules detailed below. OCR does not have the authority to issue financial penalties to business associates for any aspect of HIPAA noncompliance not detailed on the list.


You can download the HHS Fact Sheet on direct liability of business associates on this link.

business associate liability for HIPAA violations

Penalties for HIPAA Violations by Business Associates

The HITECH Act called for an increase in financial penalties for noncompliance with HIPAA Rules. In 2009, the HHS determined that the language of the HITECH Act called for a maximum financial penalty of $1.5 million for violations of an identical provision in a single year. That maximum penalty amount was applied across the four penalty tiers, regardless of the level of culpability.

A re-examination of the text of the HITECH Act in 2019 saw the HHS interpret the penalty requirements differently. The $1.5 million maximum penalty was kept for the highest penalty tier, but each of the other penalty tiers had the maximum possible fine reduced to reflect the level of culpability.

Subject to further rulemaking, the HHS will be using the penalty structure detailed in the infographic below.


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Medical Informatics Engineering Settles HIPAA Breach Case for $100,000

Medical Informatics Engineering, Inc (MIE) has settled its HIPAA violation case with the HHS’ Office for Civil Rights for $100,000.

MIE, an Indiana-based provider of electronic medical record software and services, experienced a major data breach in 2015 at its NoMoreClipboard subsidiary.

Hackers used a compromised username and password to gain access to a server that contained the protected health information (PHI) of 3.5 million individuals. The hackers had access to the server for 19 days between May 7 and May 26, 2015. 239 of its healthcare clients were impacted by the breach.

OCR was notified about the breach on July 23, 2015 and launched an investigation to determine whether it was the result of non-compliance with HIPAA Rules.

OCR discovered MIE had failed to conduct an accurate and through risk analysis to identify all potential risks to the confidentiality, integrity, and availability of PHI prior to the breach – A violation of the HIPAA Security Rule 45 C.F.R. § 164.308(a)(l)(ii)(A).

As a result of that failure, there was an impermissible disclosure of 3.5 million individual’s PHI, in violation of 45 C.F.R. § 164.502(a).

MIE chose to settle the case with OCR with no admission of liability. In addition to paying a financial penalty, MIE has agreed to adopt a corrective action plan that requires a comprehensive, organization-wide risk analysis to be conducted and a risk management plan to be developed to address all identified risks and reduce them to a reasonable and acceptable level.

“Entities entrusted with medical records must be on guard against hackers,” said OCR Director Roger Severino. “The failure to identify potential risks and vulnerabilities to ePHI opens the door to breaches and violates HIPAA.”

While the settlement releases MIE from further actions by OCR over the above violations of HIPAA Rules, MIE is not out of the woods yet. In December 2018, a multi-state lawsuit was filed against MIE by 12 state attorneys general over the breach.

The lawsuit alleged there was a failure to implement adequate security controls, that known vulnerabilities had not been corrected, encryption had not been used, security awareness training had not been provided to staff, and there were post-breach failures at MIE. That lawsuit has yet to be resolved. It could well result in a further financial penalty for MIE.

This is OCR’s second financial penalty of 2019. Earlier this month, a $3,000,000 settlement was agreed with Touchstone Medical Imaging to resolve multiple HIPAA violations, several of which were related to the delayed response to a data breach.

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