$100,000 Settlement Shows HIPAA Obligations Don’t End When a Business Closes

HIPAA covered entities and their business associates must abide by HIPAA Rules, yet when businesses closes the HIPAA obligations do not end. The HHS’ Office for Civil Rights (OCR) has made this clear with a $100,000 penalty for FileFax Inc., for violations that occurred after the business had ceased trading.

FileFax is a Northbrook, IL-based firm that offers medical record storage, maintenance, and delivery services for HIPAA covered entities. The firm ceased trading during the course of OCRs investigation into potential HIPAA violations.

An investigation was launched following an anonymous tip – received on February 10, 2015 – about an individual that had taken documents containing protected health information to a recycling facility and sold the paperwork.

That individual was a “dumpster diver”, not an employee of FileFax. OCR determined that the woman had taken files to the recycling facility on February 6 and 9 and sold the paperwork to the recycling firm for cash. The paperwork, which included patients’ medical records, was left unsecured at the recycling facility. In total, the records of 2,150 patients were included in the paperwork.

OCR determined that between January 28, 2015 and February 14, 2015, FileFax had impermissibly disclosed the PHI of 2,150 patients as a result of either: A) Leaving the records in an unlocked truck where they could be accessed by individuals unauthorized to view the information or; B) By granting permission to an individual to remove the PHI and leaving the unsecured paperwork outside its facility for the woman to collect.

Since FileFax is no longer in business – the firm was involuntarily dissolved by the Illinois Secretary of State on August 11, 2017 – the HIPAA penalty will be covered by the court appointed receiver, who liquidated the assets of FileFax and is holding the proceeds of that liquidation.

A corrective action plan has also been issued that requires the receiver to catalogue all remaining medical records and ensure the records are stored securely for the remainder of the retention period. Once that time period has elapsed, the receiver must ensure the records are securely and permanently destroyed in accordance with HIPAA Rules.

The settlement has been agreed with no admission of liability.

HIPAA Retention Requirements and Disposal of PHI

There are no HIPAA retention requirements – Covered entities and their business associates are not required to keep medical records after their business has ceased trading. However, that does not mean medical records and PHI can be disposed of immediately. Businesses are bound by state laws, which do require documents to be retained for a set period of time. For instance, in Florida, physicians must maintain medical records for 5 years after the last patient contact and in North Carolina hospitals must maintain records for 11 years following the last date of discharge.

During that time, HIPAA requires appropriate administrative, technical, and physical safeguards to be implemented to ensure those records are secure and remain confidential. After the retention period is over, all PHI must be disposed of in a compliant manner.

In the case of paper records, disposal typically means shredding, burning, pulping, or pulverization. Whatever method chosen must render the documents indecipherable and incapable of reconstruction.

This HIPAA breach is similar to several others that have occurred over the past few years. Businesses have ceased trading and paper records containing the protected health information of patients have been dumped, abandoned, or left unsecured. There have also been cases where businesses have moved location and left paperwork behind, only for contractors performing a cleanup or refurb of the property to find the paperwork and dispose of it with regular trash.

The failure to secure PHI during the retention period and the incorrect disposal of records after that retention period is over are violations of HIPAA Rules that can attract a significant financial penalty.

“The careless handling of PHI is never acceptable,” said OCR Director Roger Severino in a press release about the latest HIPAA settlement. “Covered entities and business associates need to be aware that OCR is committed to enforcing HIPAA regardless of whether a covered entity is opening its doors or closing them. HIPAA still applies.”

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Trump Administration Budget Proposal Slashes HHS, ONC, and OCR Funding

On Monday, the Trump Administration released its 2019 fiscal budget which includes major cuts to funding for the Department of Health and Human Services (HHS), Office of the National Coordinator for Health IT (ONC), and the Office for Civil Rights (OCR).

The HHS has had a 21% cut to its budget from 2017 levels which means the Medicare and Medicaid programs will lose billions of dollars in funding. The ONC will lose a third of its funding and will be forced to cut its staff by 22. OCR will have 20% less to fund its extensive activities and will be forced to lose 5 members of staff.

While HHS funding is being cut, additional funding has made available for the HHS to tackle the opioid crisis and improve services for individuals suffering from severe mental illness. $10 billion has been made available in discretionary funding for tackling the opioid crisis and to help individuals with serious mental illness.

The HHS is required to expand existing activities to combat the opioid crisis and new initiatives should be launched to help individuals addicted to opioids have better access to treatment and support services. The budget requests an additional $5 billion for the HHS to combat the opioid epidemic and prevent abuse, including $1 billion in 2019, with the remainder spread over the next five years.

In the budget, the Trump Administration proposes the HHS secretary should work closely with the Drug Enforcement Agency (DEA) to bar providers from billing Medicare when they have been found to have abusive prescribing patterns. The budget says, “Cutting off Medicare funding for abusive prescription practices not only helps bring premiums down for seniors, it promotes sound public health policy.”

HHS Secretary Alex Azar praised the proposed budget, in spite of the cuts to his department’s funding saying, “The president’s budget makes investments and reforms that are vital to making our health and human services programs work for Americans and to sustaining them for future generations.”

When Azar took up the position, one of his main priorities was to take steps to reduce the high prices of many prescription medications. The budget proposes several new strategies to address the problem, including “addressing perverse payment incentives and exposing drug companies to more aggressive competition.”

Cuts have also been made to funding for graduate medical education spending. The budget consolidates GME spending in Medicare, Medicaid, and the Children’s Hospital GME Payment Program into a new mandatory GME capped grant program, while $451 million currently being spent on other health professions and training programs will be lost, as they “lack evidence that they significantly improve the nation’s health workforce.” Kenneth Raske, president of the New York Hospital Association, says the budget changes would result in a $48 billion reduction in GME funding over the next 10 years, and that would seriously affect the ability of teaching hospitals in New York to train the next generation of world class doctors.

The Centers for Disease Control and Prevention will have its budget cut by approximately $900 million, although two winners in the budget are the Food and Drug Administration (FDA) and National institutes of Health (NIH) which have been penned to have increases to their operational budgets. NIH has been allocated a $1.4 billion increase in funding, although $750 million of that will come from the $10 billion discretionary funding for the HHS.  The FDA will get an additional $190 million for new user fee funding and a further $10 million out of the HHS discretionary budget for the opioid crisis.

The Trump Administration is also committed to repealing and replacing the Affordable Care Act (ACA), including “enactment of legislation modeled closely after the Graham-Cassidy-Heller-Johnson (GCHJ) bill as soon as possible, followed by enactment of additional reforms to help set Government healthcare spending on a sustainable fiscal path that leads to higher value spending.” The proposed budget explains, “The president is committed to rescuing states, consumers, and taxpayers from the failures of Obamacare, and supporting states as they transition to more sustainable healthcare programs that provide appropriate choices for their citizens.”

While the 2019 fiscal budget has been proposed, it must still be passed by Congress and that looks unlikely given last week’s 2-year budget deal.

Image source: Sarah Stierch (CC BY 4.0)

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Timothy Noonan Becomes OCR’s Top HIPAA Enforcer, Replacing Deputy Director Iliana Peters

After just 4 months in the position of deputy director for health information privacy at the Department of Health and Human Services’ Office for Civil Rights, Iliana Peters has departed for the private sector.

Peters took over as deputy director following the departure of acting deputy director Deven McGraw in November, only to leave the post on February 2 to join the healthcare team at law firm Polsinelli.

This is the third major change of staff at the Department of Health and Human Services in a little over four months. First, there was the departure of HHS Secretary Tom Price in late September, McGraw left in October to join health tech startup Citizen, and now Iliana Peters has similarly quit for the private sector.

Peters has been working at the Office for Civil Rights for the past 12 years, including 5 years as a senior advisor. During her time at OCR Peters has worked closely with regional offices helping them enforce HIPAA Rules and has been instrumental in building up OCR’s HIPAA enforcement program.

Peters has trained regional OCR staff on HIPAA enforcement and the handling of cases and played a key role in OCR’s latest enforcement actions – the $3.5 million settlement with Fresenius Medical Care North America over five data breaches reported to OCR in 2012 and the $2.3 million settlement with 21st Century Oncology over its 2015 cyberattack.

Peters has also trained state attorneys general on HIPAA policies and played a key role in the development of OCR’s second phase of HIPAA compliance audits, as well helping with the development of guidance for HIPAA covered entities on HIPAA Privacy and Security Rules.

Now, instead of helping OCR punish organizations for HIPAA violations, Peters will be working on the other side and will be helping healthcare organizations avoid HIPAA violations and OCR penalties.

Peters has become a shareholder at Polsinelli and will be based at its Health Care Operations practice in Washington D.C. According to a February 7 Polsinelli press release. Peters will be helping to develop the law firm’s healthcare presence in DC.

“Iliana brings key insights into the government’s investigation, enforcement, and settlement processes and will enhance our ability to guide our clients in responding to ever-changing threats and risks,” said Polsinelli Health Care Department Chair Matt Murer. “We know that our clients look forward to having Iliana as a strategic member of their privacy and security teams.”

OCR’s southeast regional manager Timothy Noonan was appointed as acting deputy director for health information privacy at OCR on January 29, 2018. Noonan has spent the past four years working as the Southeast regional manager and has served as acting associate deputy director for regional operations and OCR’s acting director for centralized case management operations.

While the loss of Peters will certainly be felt at OCR, there is unlikely to be any easing of OCR’s HIPAA enforcement efforts. OCR’s regional offices have been well trained and will continue to ensure that HIPAA Rules are being followed and action is taken over serious violations of HIPAA Rules.

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How Many HIPAA Violations in 2017 Resulted in Financial Penalties?

We are often asked about healthcare data breaches and HIPAA violations and two of the most recent questions are how many HIPAA violations in 2017 resulted in data breaches and how many HIPAA violations occurred in 2017.

How Many HIPAA Violations Occurred in 2017?

The problem with determining how many HIPAA violations occurred in 2017 is many violations are not reported, and out of those that are, it is only the HIPAA breaches that impact more than 500 individuals that are published by the Department of Health and Human Services’ Office for Civil Rights on its breach portal – often incorrectly referred to as the “Wall of Shame”.

To call it a ‘Wall of Shame’ is not fair on healthcare organizations because the breach reports show organizations that have experienced data breaches, NOT organizations that have violated HIPAA Rules. Even organizations with multi-million-dollar cybersecurity budgets, mature security defenses, and advanced employee security awareness training programs can experience data breaches. All it takes if for a patch not to be applied immediately or an employee to accidently click on a phishing link for a data breach to occur. The breach reports are therefore not an accurate guide to the number of HIPAA violations that have occurred.

Some attorneys general publish details of data breaches, and many of those breaches are the result of HIPAA violations; however, only a small number of states publish that data breach summaries and as with OCR’s breach portal, there are many breaches that have occurred at organizations that are fully compliant with HIPAA Rules. It is also not possible to say how many of those breaches were the result of HIPAA violations. That can only be determined with a detailed investigation.

Complaints about potential HIPAA violations are frequently submitted to OCR. These tend to be smaller incidents involving relatively few individuals, such as a patient who believes HIPAA Rules have been violated or employees who believe colleagues have violated HIPAA Rules. OCR occasionally releases figures on the number of complaints that it receives, but many of those complaints turn out to be unfounded and, in many cases, OCR cannot prove beyond reasonable doubt that a HIPAA violation has occurred.

It is also not possible to gauge the level of serious HIPAA violations that have occurred based on settlements and civil monetary penalties. Even when there is evidence to suggest HIPAA Rules have been violated, financial settlements are typically only pursued when a case against a HIPAA-covered entity is particularly strong and likely to be won.

It is therefore not possible to determine how many HIPAA violations in 2017 resulted in data breaches nor how many violations occurred last year.

How Many HIPAA Violations in 2017 Resulted in Financial Settlements?

It is also not possible to determine how many HIPAA violations in 2017 have resulted in financial penalties being issued, at least not yet. OCR and state attorneys general open investigations when data breaches are experienced or complaints are received about potential HIPAA violations. However, it takes time to conduct investigations and gather evidence. Even when there is evidence of HIPAA violations, cases can take years before settlements are reached or civil monetary penalties are issued.

The latest HIPAA settlement is a good example. Fresenius Medical Care North America settled its case with OCR for $3,500,000 in 2018, yet the data breaches that triggered the investigation occurred in 2012. The list below shows the settlements and civil monetary penalties issued in 2017 and the years in which the violations occurred.

So unfortunately, it is not possible to say how many HIPAA violations in 2017 resulted in financial penalties, as that will not be known for many years to come

HIPAA Settlements and Civil Monetary Penalties in 2017


Covered Entity Penalty Amount Penalty Type Reason for Penalty Date of Violation(s)
21st Century Oncology $2,300,000 Settlement Multiple HIPAA Violations 2015
Memorial Hermann Health System $2,400,000 Settlement Careless Handling of PHI 2015
St. Luke’s-Roosevelt Hospital Center Inc. $387,000 Settlement Unauthorized Disclosure of PHI 2014
The Center for Children’s Digestive Health $31,000 Settlement Lack of a Business Associate Agreement 2003-2015
Cardionet $2,500,000 Settlement Impermissible Disclosure of PHI 2011
Metro Community Provider Network $400,000 Settlement Lack of Security Management Process 2011
Memorial Healthcare System $5,500,000 Settlement Insufficient ePHI Access Controls 2007-2012
Children’s Medical Center of Dallas $3,200,000 Civil Monetary Penalty Impermissible Disclosure of ePHI 2006-2013
MAPFRE Life Insurance Company of Puerto Rico $2,200,000 Settlement Impermissible Disclosure of ePHI 2011
Presense Health $475,000 Settlement Delayed Breach Notifications 2013


What we can say is HIPAA violations have occurred at most healthcare organizations, although oftentimes the violations are minor and inconsequential. We can go further and say that a majority of healthcare organizations have failed to follow HIPAA Rules to the letter all of the time.

The evidence comes from the second round of HIPAA compliance audits conducted by OCR in late 2016 and 2017. A final report on the findings of the audits has yet to be published, but last September preliminary results were released. They showed that healthcare organizations are still not getting to grips with HIPAA Rules and noncompliance is commonplace.

Findings of the 2017 HIPAA Compliance Audits

Listed below are the preliminary findings of the second round of HIPAA compliance audits. The audits consisted of ‘Desk Audits’ conducted on 166 covered entities on the HIPAA Privacy, Security, and Breach Notification Rules and 41 business associates of HIPAA covered entities on the Security and Breach Notification Rules.

OCR gave each audited entity a rating from 1-5 based on the level of compliance. A rating of 1 means the organization was in compliance with the goals and objectives of the audited standards and implementation specifications. A rating of 5 was given to entities that did not provide OCR with evidence to show that a serious attempt had been made to comply with HIPAA Rules.

HIPAA Rule Aspect of HIPAA Rule 1 Rating 2 Rating 3 Rating 4 Rating 5 Rating N/A
Breach Notification Rule Timeliness of Notification 65% 6% 2% 9% 11% 7%
Breach Notification Rule Content of Notification 14% 14% 23% 37% 7% 5%
Privacy Rule Patient Right to Access 1% 10% 27% 54% 11% N/A
Privacy Rule Notice of Privacy Practices 2% 33% 39% 11% 15% 2%
Privacy Rule Provision of eNotice 57% 15% 4% 6% 15% 3%
Security Rule Risk Analysis 0% 2% 19% 23% 13% N/A
Security Rule Risk Management 1% 3% 13% 29% 17% N/A

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Nebraska Personal Information Bill Advances After 34-0 First Round Vote

On January 3, 2018, Senator Adam Morfield introduced a bill that aims to improve protections for Nebraska residents whose personal information is exposed as a result of a data breach. The first round of voting has seen the bill unanimously passed by Nebraska lawmakers.

The bill was introduced in the wake of the massive data breach at Equifax in 2017 that saw the personal information of more than 145 Americans – and almost 700,000 Nebraskans – compromised as a result of a cyberattack.

The bill – Legislative Bill 757 – seeks to make changes to the Credit Report Protection Act and the Financial Data Protection and Consumer Notification of Data Security Breach Act of 2006 to improve protections for state residents, both by helping to prevent data breaches and ensuring appropriate action is taken by the breached entity when a breach is experienced.

According to Sen. Morfield, his bill “ensures that the hard-earned dollars and credit of every Nebraskan is put before crediting reporting agencies like Equifax.” Sen. Morfield has made the bill his number one priority.

It was not only the scale of the Equifax breach that was galling for Se. Morfield, but the actions of Equifax following the breach. The company only provided 12 months of free credit monitoring services to breach victims, after which consumers would be charged to protect themselves. Many consumers were also forced to pay out of pocket to freeze their accounts, as those services were not provided free of charge. While free credit monitoring services were offered, chargeable credit freezes were advertised on the same site.

Nebraska Attorney General Doug Peterson also spoke out about the actions of Equifax, claiming the firm was “seemingly using its own data breach as an opportunity to sell services to breach victims.”

The bill proposes credit reporting agencies should not be permitted to charge consumers fees for placing and removing credit freezes on accounts” after a credit reporting agency experiences a security breach that exposes consumer data.

The bill originally called for such breaches to require a lifetime of free credit reporting services to be provided to breach victims, although that attracted considerable criticism from the industry and the bill was amended.

In addition to free credit reporting and credit freezes, the bill would require credit agencies to maintain “reasonable security procedures and practices,” to ensure the confidentiality of any consumer data held, and also for any third-party companies that are provided with consumer data by the agencies to also ensure they have reasonable security measures in place. The bill would give the state attorney general greater powers to pursue legal action against companies and collect damages on behalf of consumers.

While the bill is primarily concerned with protecting consumers from data breaches experienced by credit monitoring and reporting agencies, the bill requires any “individual or a commercial entity that conducts business in Nebraska and owns, licenses, or maintains data that includes personal information about a resident of Nebraska,” to implement and maintain reasonable security measures to protect the data of state residents.

If a company or organization complies with federal legislation that provides the same or greater levels of protection for consumers, it would be deemed to be in compliance with the requirements of Legislative Bill 757 – For example, organizations that comply with the Gramm-Leach-Bliley Act or HIPAA.

While there was a unanimous vote in favor of the bill, some Senators were concerned about the impact such a bill would have on consumers and the credit monitoring and reporting industry. Some senators have requested further information on the bill, with Sen. Paul Schumacher of Columbus concerned that the bill may result in significant cost increases for consumers. However, despite concerns, the bill was passed 34-0.

Before the bill is written into the state legislature it is required to pass two further votes.

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$3.5 Million Settlement to Resolve HIPAA Violations That Contributed to Five Data Breaches

The first HIPAA settlement of 2018 has been announced by the Department of Health and Human Services’ Office for Civil Rights (OCR). Fresenius Medical Care North America (FMCNA) has agreed to pay OCR $3.5 million to resolve multiple potential HIPAA violations that contributed to five separate data breaches in 2012.

The breaches were experienced at five separate covered entities, each of which was owned by FMCNA. Those breached entities were:

  • Bio-Medical Applications of Florida, Inc. d/b/a Fresenius Medical Care Duval Facility in Jacksonville, Florida (FMC Duval)
  • Bio-Medical Applications of Alabama, Inc. d/b/a Fresenius Medical Care Magnolia Grove in Semmes, Alabama (FMC Magnolia Grove)
  • Renal Dimensions, LLC d/b/a Fresenius Medical Care Ak-Chin in Maricopa, Arizona (FMC Ak-Chin)
  • Fresenius Vascular Care Augusta, LLC (FVC Augusta)
  • WSKC Dialysis Services, Inc. d/b/a Fresenius Medical Care Blue Island Dialysis (FMC Blue Island)

Breaches Experienced by FMCNA HIPAA Covered Entities

The five security breaches were experienced by the FMCNA covered entities over a period of four months between February 23, 2012 and July 18, 2012:

  • The theft of two desktop computers from FMC Duval during a February 23, 2012 break-in. The computers contained the ePHI – including Social Security numbers – of 200 individuals
  • The theft of an unencrypted USB drive from FMC Magnolia Grove on April 3, 2012. The device contained the PHI – including insurance account numbers – of 245 individuals
  • On April 6, 2012 FMC Ak-Chin discovered a hard drive was missing. The hard drive had been removed from a computer that had been taken out of service and the drive could not be located. The hard drive contained the PHI – including Social Security numbers – of 35 individuals
  • An unencrypted laptop computer containing the ePHI of 10 patients – including insurance details – was stolen from the vehicle of an employee on June 16, 2012. The laptop had been left in the vehicle overnight. The bag containing the laptop also contained the employee’s list of passwords
  • Three desktop computers and one encrypted laptop were stolen from FMC Blue Island on or around June 17-18, 2012. One of the computers contained the PHI – including Social Security numbers – of 35 patients

Multiple HIPAA Failures Identified

OCR launched an investigation into the breaches to establish whether they were the result of failures to comply with HIPAA Rules. The investigation revealed a catalogue of HIPAA failures.

OCR established that the FMCNA covered entities had failed to conduct a comprehensive and accurate risk analysis to identify all potential risks to the confidentiality, integrity, and availability of ePHI: One of the most common areas of non-compliance with HIPAA Rules. If an accurate risk assessment is not performed, risks are likely to be missed and will therefore not be managed and reduced to an acceptable level.

OCR also discovered the FMCNA covered entities had impermissibly disclosed the ePHI of many of its patients by providing access to PHI that is prohibited under the HIPAA Privacy Rule.

Several other potential HIPAA violations were discovered at some of the FMCNA covered entities.

FMC Magnolia Grove did not implement policies and procedures governing the receipt and removal of computer hardware and electronic storage devices containing ePHI from its facility, and neither the movement of those devices within its facility.

FMC Magnolia Grove and FVC Augusta had not implemented encryption, or an equivalent, alternative control in its place, when such a measure was reasonable and appropriate given the risk of exposure of ePHI.

FMC Duval and FMC Blue were discovered not to have sufficiently safeguarded their facilities and computers, which could potentially lead to unauthorized access, tampering, or theft of equipment.

FMC Ak-Chin had no policies and procedures in place to address security breaches.

Financial Penalty Reflects the Seriousness and Extent of HIPAA Violations

The $3.5 million settlement is one of the largest issued to date by OCR to resolve violations of HIPAA Rules. In addition to paying the sizeable financial penalty, FMCNA has agreed to adopt a robust corrective actin plan to address all HIPAA failures and bring its policies and procedures up to the standard demanded by HIPAA.

The FMCNA covered entities must conduct comprehensive, organization wide risk analyses to identify all risks to the confidentiality, integrity, and availability of PHI and develop a risk management plan to address all identified risks and reduce them to a reasonable and acceptable level.

Policies and procedures must also be developed and implemented covering device, media, and access controls and all staff must receive training on current and new HIPAA policies and procedures.

“The number of breaches, involving a variety of locations and vulnerabilities, highlights why there is no substitute for an enterprise-wide risk analysis for a covered entity,” said OCR Director Roger Severino. “Covered entities must take a thorough look at their internal policies and procedures to ensure they are protecting their patients’ health information in accordance with the law.”

Settlement Shows it is Not the Size of the Breach that Matters

All of the five breaches resulted in the exposure of relatively few patients’ PHI. No breach involved more than 235 records, and three of the breaches exposed fewer than 50 records.

The settlement shows that while the scale of the breach is considered when deciding on an appropriate financial penalty, it is the severity and the extent of non-compliance that is likely to see financial penalties pursued.

The settlement also clearly shows that OCR does investigate smaller breaches and will do so when breaches suggest HIPAA Rules have been violated.

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Alex Azar Confirmed as New HHS Secretary

The Department of Health and Human Services has a new permanent leader. The Senate has confirmed Alex M. Azar II as the replacement for Tom Price, who resigned from the position in September over his use of private jets paid for out of government funds.

Azar has experience working in the HHS, having previously served as deputy secretary for two years during the George W. Bush administration. Azar was also president of Eli Lilly and Co., for 5 years and served as a senior executive for a further five. Azar is the first HHS Secretary to be appointed that has a background in the pharmaceutical industry, something many Democrats had a problem with, hence the close vote of 55-43 in favor of his appointment.

One of the main tasks Azar has been charged with, and what he says is his main priority, is to reduce the prices drug companies are charging for medications. President Trump has previously stated drug firms are “getting away with murder” by charging exorbitant prices and Azar is expected to oversee changes that will make prescription medications more affordable.

Azar has recently spoken out about the high prices being charged but blamed the price hikes on a system that encourages price increases, rather than blaming the pharmaceutical firms.

During his time at Eli Lilly, prices of its drugs skyrocketed with some drugs – the osteoporosis drug Forteo for instance – doubling in price. The price of Insulin similarly soared.

While Democrats think Azar’s pharmaceutical background is a big negative, many Republicans believe his experience is an asset. It remains to be seen what will be done to correct that system, but there are fears that little will change with Azar at the helm. When previously asked how he plans to reduce prices, Azar said he favored encouraging the development of more generic drugs and tackling abuse of the patent system.

President Trump certainly has confidence in Azar, having tweeted “He will be a star for better healthcare and lower drug prices!” when Azar was nominated for the position in November.

Azar told the Senate Health, Education, Labor and Pensions Committee. “I don’t have Pharma’s policy agenda,” and “This is the most important job I will have in a lifetime, and my commitment is to the American people.”

Those in favor of Obamacare are also not keen on Azar’s appointment. Azar was opposed to the Affordable Care Act and has previously called it “a fundamentally broken system.” Azar is now personally responsible for administrating it so he is in the perfect position to fix the problems. Whether he will manage to do so and stabilize the insurance markets remains to be seen, although many fear Azar’s appointment will see ACA further undermined.

Azar has made it clear his main priorities are curbing the high cost of prescription medications, making health insurance more affordable and more widely available, focusing Medicare payments on quality, and tackling the current opioid epidemic.

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Analysis of Healthcare Data Breaches in 2017

A summary and analysis of healthcare data breaches in 2017 has been published by Protenus. Data for the report is obtained from Databreaches.net, which tracks healthcare data breaches reported to OCR, the media, and other sources. The 2017 breach report gives an indication of the state of healthcare cybersecurity.  So how has 2017 been?

There Were at Least 477 Healthcare Data Breaches in 2017

In some respects, 2017 was a good year. The super-massive data breaches of 2015 were not repeated, and even the large-scale breaches of 2016 were avoided. However, healthcare data breaches in 2017 occurred at rate of more than one per day.

There were at least 477 healthcare data breaches in 2017 according to the report. While all those breaches have been reported via one source or another, details of the nature of all the breaches is not known. It is also unclear at this stage exactly how many healthcare records were exposed. Numbers have only been obtained for 407 of the breaches.

There was a slight increase (6%) in reported breaches in 2017, up from 450 incidents in 2016. However, there was a massive reduction in the number of breached records. In 2016, there were 27,314,647 records exposed/stolen. The 407 healthcare data breaches in 2017 resulted in the exposure/theft of 5,579,438 records.

In 2017, there were no million-record+ breaches. The largest security incident was a breach of 697,800 records. That breach was an insider incident where a healthcare employee downloaded PHI onto a USB drive and CD.

Main Causes of Healthcare Data Breaches in 2017

There were two causes of healthcare data breaches in 2017 that dominated the breach reports – Hacking/IT incidents and insider breaches, both of which were behind 37% of the year’s breaches. 178 incidents were attributed to hacking/IT incidents. There were 176 breaches caused by insider wrongdoing or insider errors.

Hacking/IT incidents resulted in the exposure/theft of 3,436,742 records, although detailed data is only available for 144 of those breaches. In 2016, 86% of breaches were attributed to hacking/IT incidents. In 2016, 120 hacking incidents were reported which resulted in the exposure/theft of 23,695,069 records. The severity of hacks/insider incidents was therefore far lower in 2017, even though hacking incidents were more numerous.

What is clear from the breach reports is a major increase in malware/ransomware attacks, which were at more than twice the level seen in 2016. This could be explained, in part, by the issuing of new guidance from OCR on ransomware attacks. OCR confirmed that ransomware attacks are usually reportable security incidents under HIPAA Rules. Until the issuing of that guidance, many healthcare organizations did not report ransomware attacks unless it was clear that data had been stolen or viewed prior to or during the attack.

Insider breaches continue to plague the healthcare industry. Data is available for 143 of the 176 data breaches attributed to insiders. 1,682,836 records were exposed/stolen in those incidents. While the totals are still high, there were fewer insider incidents in 2017 than 2016, and the incidents resulted in fewer exposed records. There were 192 insider-related incidents in 2016 and those incidents resulted in the exposure/theft of 2,000,262 records.

Protenus broke down the incidents into insider error – mistakes made by healthcare employees – and insider wrongdoing, which included theft and snooping. The breakdown was 102 insider errors and 70 cases of insider wrongdoing. Four incidents could not be classified as either. One of the cases of snooping lasted for an astonishing 14 years before it was discovered.

While theft of PHI by employees is difficult to eradicate, arguably the easiest cause of healthcare data breaches to prevent is theft of electronic devices containing unencrypted PHI. If devices are encrypted, if they are stolen the incidents do not need to be reported. There has been a steady reduction in theft breaches over the past few years as encryption has been more widely adopted. Even so, 58 breaches (16%) were due to theft. Data is available for 53 of those incidents, which resulted in the exposure of 217,942 records. The cause of 47 healthcare data breaches in 2017 could not be determined from the data available.

Breached Entities and Geographic Spread

The breaches affected 379 healthcare providers (80%), 56 health plans (12%), and 4% involved other types of covered entity. Business associate reported 23 incidents (5%) although a further 66 breaches (14%) reported by covered entities had some business associate involvement. Figures are known for 53 of those breaches, which resulted in the exposure/theft of 647,198 records.  Business associate breaches were lower than in 2016, as was the number of records exposed by those breaches.

There were breaches by covered entities and business associates based in 47 states, Puerto Rico and the District of Columbia. Interestingly, three states were free from healthcare data breaches in 2017 – Hawaii, Idaho, and New Mexico. California was the worst hit with 57, followed by Texas on 40, and Florida with 31.

Slower Detection, Faster Notification

Reports of healthcare data breaches in 2017 show that in many cases, breaches are not detected until many months after the breach occurred. The average time to discover a breach, based on the 144 incidents for which the information is known, was 308 days. Last year the average time to discover a breach was 233 days. It should be noted that the data were skewed by some breaches that occurred more than a decade before discovery.

The Breach Notification Rule of the Health Insurance Portability and Accountability Act (HIPAA) allows up to 60 days from the discovery of a breach to report the incident. The average time to report a breach, based on the 220 breaches for which information was available, was 73 days. Last year the average was 344 days.

The faster reporting may have been helped by the OCR settlement with Presense Health in January for delaying breach notifications – The first HIPAA penalty solely for late breach notifications.

Overall there were several areas where the healthcare industry performed better in 2017, although the report shows there is still considerable room for improvement, especially in breach prevention, detection and reporting.

The post Analysis of Healthcare Data Breaches in 2017 appeared first on HIPAA Journal.

Deadline for Reporting 2017 HIPAA Data Breaches Approaches

The deadline for reporting 2017 HIPAA data breaches to the Department of Health and Human Services’ Office for Civil Rights is fast approaching.

HIPAA-covered entities have a maximum of 60 days from the discovery of a data breach to report security incidents to OCR and notify affected patients. Smaller breaches of PHI do not need to be reported to OCR within this time frame, instead covered entities can delay reporting those breaches to OCR until the end of the calendar year.

The maximum allowable time for reporting breaches impacting fewer than 500 individuals is 60 days from the end of the year in which the breach was experienced. The final day for reporting 2017 HIPAA data breaches to OCR is therefore March 1, 2018.

A HIPAA data breach is defined as an “acquisition, access, use, or disclosure” of unsecured protected health information (PHI) that is not permitted by the HIPAA Privacy Rule. Unsecured PHI is defined as PHI that is “not rendered unusable, unreadable, or indecipherable to unauthorized persons through the use of a technology or methodology,” such as encryption. A breach of encrypted PHI is not reportable unless the key to unlock the encryption is also reasonably believed to have also been compromised.

Covered entities should be aware that ransomware incidents are usually reportable HIPAA data breaches, even if PHI has not been stolen in the attack. To avoid reporting a ransomware incident, a covered entity must be able to demonstrate a low probability of PHI being compromised in the attack. That determination must be based on a risk assessment (See 45 CFR § 164.402)

While covered entities can submit details of all ‘small’ PHI breaches at the same time, each breach must be reported as a separate event. They can not all be uploaded to the breach portal together.

While the HIPAA Breach Notification Rule allows covered entities additional time to report data breaches impacting fewer than 500 individuals, notifications for individuals impacted by those data breaches cannot be delayed. They must be issued within 60 days of the discovery of the breach, and without unnecessary delay, regardless how many individuals have been impacted by the breach.

It is a good best practice to report all breaches of PHI within 60 days of discovery. Oftentimes, full information about the breach is not available at the time of reporting, but it is possible to add further information to the OCR data breach reports when further information becomes available. If the number of individuals affected by the breach has not been confirmed, estimates should be provided. The final total can then be submitted to OCR as an update to the breach report when the number of individuals impacting has been determined.

The penalties for the late reporting of data breaches can be severe, and OCR made it clear in January 2017 that ignoring the deadline for reporting breaches, or unnecessarily delaying breach reports, is a HIPAA violation that will not be ignored. Presense Health became the first covered entity to be fined solely for delaying breach notifications and settled the HIPAA violation with OCR for $475,000.

OCR has yet to issue a financial penalty to a covered entity for the late reporting of small data breaches, but since OCR tends to set examples with its breach settlements, 2018 could well see the first penalty issued.

To avoid a HIPAA penalty, ensure all small breaches of PHI are reported to OCR between now and the end of February 2018 and no later than midnight on March 1.

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