Medical Clinic HIPAA Resolution Agreement Shows Need For Current Business Associate Agreements

Health care providers, health plans, health care clearinghouses and business associates must get and keep their business associate (BA) agreements (BAAs) in place, up- to-date, and readily available for inspection in accordance with the Health Insurance Portability & Accountability Act (HIPAA) Privacy Rule, 45 C.F.R. Part 160 and Subparts A and E of Part 164 (Privacy Rule).  That’s the clear message physician practices and other health care providers, health plans, health care clearinghouses (“covered entities”) and their business associates should learn about Privacy Rule compliance from an April 17, 2017 HIPAA Resolution Agreement just announced by the Department of Health & Human Services (HHS) Office of Civil Rights (OCR) with the Center for Children’s Digestive Health (CCDH).

While the Resolution Agreement relates to breaches of the BAA requirements of a small pediatric practice, the  Center for Children’s Digestive Health (CCDH), all health plans, health care providers and other covered entities and business associates should focus on the adequacy of their BAAs  and their BAA recordkeeping.  HIPAA compliance surveys reflect deficiencies with the BAA rules are common throughout the industry.  These findings and the involvement of BAs in data breaches or other OCR enforcement activities suggest a high probability that many other covered entities and business associates may be sitting ducks for similar sanctions.  See e.g., HIPAA Compliance Survey Churns Up Many Business Associate Problems (January 3, 2017).

The HIPAA Business Associate Agreement Requirements

OCR’s announcement of the CCDH Resolution Agreement is the latest in a growing series of HIPAA enforcement actions showing the growing risk covered entities and their business associates face for failing to take appropriate steps to comply with the BAA and other Privacy Rule requirements of HIPAA.

As compliance audits and surveys of covered entities and business associates suggest a high level of noncompliance with the business associate agreement requirements among covered entities and business associates, While the ever-growing list of Resolution Agreements and Civil Monetary Penalties announced by OCR cover a variety of categories of HIPAA violations, the CCDH Resolution Agreement highlights the importance of covered entities and their business associates ensuring that before the BA creates, accesses, receives, discloses, retains or destroys any PHI for the covered entity,  a BAA meeting the Privacy Rule requirements is signed and retained for at least the six year period the Privacy Rule requires in a manner easily producible when and if OCR or another agency asks for a copy as part of an investigation or other compliance audit.  See Privacy Rule §§ 164.502(e), 164.504(e), 164.532(d) and (e).

The Privacy Rule requires that covered entities and business associates enter into a written and signed business associate agreement that contains the elements specified in Privacy Rule § 164.504(e) before the business associate creates, uses, accesses or discloses PHI of the covered entity. Meanwhile, the Privacy Rule recordkeeping requirements require that covered entities and BAs maintain copies of these BAAs for a minimum of six years.

Violations of the Privacy Rule can carry stiff civil or even criminal penalties  Pursuant to amendments to HIPAA enacted as part of the HITECH Act, civil penalties typically do not apply to violations punished under the criminal penalty rules of HIPAA set forth in Social Security Act , 42 U.S.C § 1320d-6 (Section 1177).

Under Section 1177, the criminal enforcement provisions of HIPAA authorize the Justice Department to prosecute a person who knowingly in violation of the Privacy Rule (1) uses or causes to be used a unique health identifier; (2) obtains individually identifiable health information relating to an individual; or (3) discloses individually identifiable health information to another person, punishable by the following criminal sanctions and penalties:

  • A fine of up to $50,000, imprisoned not more than 1 year, or both;
  • If the offense is committed under false pretenses, a fine of up to $100,000, imprisonment of not more than 5 years, or both; and
  • If the offense is committed with intent to sell, transfer, or use individually identifiable health information for commercial advantage, personal gain, or malicious harm, a fine of up to $250,000, imprisoned not more than 10 years, or both.

In contrast, as amended by the HITECH Act, the civil enforcement provisions of HIPAA empower OCR to impose Civil Monetary Penalties on both covered entities and BAs for violations of any of the requirements of the Privacy or Security Rules.  The penalty ranges for civil violations depends upon the circumstances associated with the violations and are subject to upward adjustment for inflation.  As most recently adjusted here effective September 6, 2016,  the following currently are the progressively increasing Civil Monetary Penalty tiers:

  • A minimum penalty of $100 and a maximum penalty of $50,000 per violation, for violations which the CE or BA “did not know, and by exercising reasonable diligence would not have known” about using “the business care and prudence expected from a person seeking to satisfy a legal requirement under similar circumstances;”
  • A minimum penalty of $1,000 and a maximum penalty of $50,000 per violation, for violations for “reasonable cause” which do not rise to the level of “willful neglect” where “reasonable cause” means the “circumstances that would make it unreasonable for the covered entity, despite the exercise of ordinary business care and prudence, to comply with the violated Privacy Rule requirement;”
  • A minimum penalty of $10,000 and a maximum penalty of $50,000 per violation, for violations attributed to “willful neglect,” defined as “the conscious, intentional failure or reckless indifference to the obligation to comply” with the requirement or prohibition; and
  • A minimum penalty of $50,000 and a maximum penalty of $1.5 million per violation, for violations attributed to “willful neglect” not remedied within 30 days of the date that the covered entity or BA knew or should have known of the violation.

For continuing violations such as failing to implement a required BAA, OCR can treat each day  of noncompliance as a separate violation.  However, sanctions under each of these tiers generally are subject to a maximum penalty of $1,500,000 for violations of identical requirements or prohibitions during a calendar year.  For violations such as the failure to implement and maintain a required BAA where more than one covered entity bears responsibility for the violation, OCR an impose Civil Monetary Penalties against each culpable party. OCR considers a variety of mitigating and aggravating facts and circumstances when arriving at the amount of the penalty within each of these applicable tiers to impose.

While criminal enforcement of HIPAA remains relatively rare, a review of the OCR enforcement record in recent years makes clear that civil enforcement of HIPAA and the sanctions imposed is growing. See e.g.,  $400K HIPAA Settlement Shows Need To Conduct Timely & Appropriate Risk Assessments$5.5M Memorial HIPAA Resolution Agreement Shows Need To Audit.  For more examples, also see here.

CCDH Sanctions For Violation Of HIPAA Business Associate Agreement Rules

The CCDH Resolution Agreement arises from violations of this requirement that OCR says it discovered as a result of a compliance review conducted in response to an OCR investigation of a CCDH business associate, FileFax, Inc.  According to OCR, OCR found from the compliance review of CCDH triggered by OCR’s investigation of FileFax that while CCDH began disclosing PHI to Filefax in 2003 and that Filefax stored records containing protected health information (PHI) for CCDH, neither CCDH nor Filefax could produce a signed Business Associate Agreement (BAA) covering their relationship for any period before October 12, 2015.

Based on the resulting investigation,  OCR concluded:

  • CCDH failed to obtain a BAA providing written assurances from Filefax that it would appropriately safeguard the PHI in Filefax’s possession or control satisfactory assurances as required by Privacy Rule §164.502(e); and
  • Because CCDH failed to secure the required BAA, it violated the Privacy Rule by impermissibly disclosing the PHI of at least 10,728 individuals to Filefax when CCDH transferred the PHI to Filefax without obtaining the requisite BAA from Filefax (Covered Conduct).

In the Resolution Agreement, CCDH agrees to pay HHS $31,000.00 (Resolution Amount) and enter into and comply with a Corrective Action Plan (CAP) in return for OCR’s release of CCDH from liability for “any actions it may have against CCDH under the HIPAA Rules” for the Covered Conduct.  The Resolution Agreement only settles the civil monetary penalty and other OCR enforcement liabilities of CCDH with respect to the Covered Conduct.  Its provisions expressly state the Resolution Agreement does not affect any exposures of CCDH to CCDH to OCR civil monetary penalties or other enforcement for any HIPAA violations other than the Covered Conduct.

Perhaps even more noteworthy given the HITECH Act’s provisions coordinating the civil and criminal sanctions of HIPAA, while  the Resolution Agreement provides no clear indication that the Justice Department might be considering criminally prosecuting CCDH or any other party in relation to the Covered Conduct, the Resolution Agreement also expressly states that its provisions do not affect CCDH’s potential exposure, if any, to criminal prosecution by the Justice Department for a criminal violation of the Privacy Rules under Section 1177 of the Social Security Act.

Implications For Covered Entities & Business Associates

Covered entities and their business associates should heed the CCDH Resolution Agreement as a strong message from OCR to ensure their organizations are complying with HIPAA’s BAA and other requirements.  The Resolution Agreement makes clear that the starting point of this compliance effort must be obtaining and maintaining the requisite BAAs for each BA relationship.

To position their organizations to withstand potential investigation by OCR, covered entities and BAs should start by conducting a well-documented audit within the scope of attorney-client privilege both to verify that an appropriate, signed BAA is in place for each BA relationship as well as adequacy of processes for identifying business associate relationships, ensuring that signed BAAs are in effect before BAs access any PHI, and for investigating, reporting and resolving any breaches of the HIPAA Privacy or Security Rules that may arise in the course of operations.

Conducting this audit as soon as possible is particularly important in light of reported findings of widespread compliance concerns. See HIPAA Compliance Survey Churns Up Many Business Associate Problems (January 3, 2017).  As the audit process could identify potential violations or other legally sensitive concerns,  covered entities and business associates generally will want to arrange for this audit and evaluation to be conducted under the supervision of legal counsel experienced with HIPAA within or pursuant to processes structured with the assistance of legal counsel within the scope of attorney-client privilege.

Beyond confirming all necessary BAAs are in place, covered entities and business associates also generally will want to evaluate the adequacy of BAs’ processes and procedures for maintaining compliance with the Privacy and Security Rules as well as processes and procedures for responding to audits, investigations and complaints, reporting and addressing breaches of electronic and other PHI and other possible compliance concerns under HIPAA and other related laws.  In many instances, parties may n wish to revise and strengthen existing BAAs to more specifically define these policies and procedures more specifically as well as indemnification, cyber or other liability coverage requirements and other contractual provisions for allocating potential costs and liabilities arising from breaches, audits, investigations and other expenses associated with the administration of these provisions.

About The Author

Recognized by LexisNexis® Martindale-Hubbell® as a “AV-Preeminent” (Top 1%/ the highest) and “Top Rated Lawyer,” with special recognition as “LEGAL LEADER™ Texas Top Rated Lawyer” in Health Care Law and Labor and Employment Law; as among the “Best Lawyers In Dallas” for her work in the fields of “Health Care,” “Labor & Employment,” “Tax: Erisa & Employee Benefits” and “Business and Commercial Law” by D Magazine, the author of this update is widely known for her 29 plus years’ of work in health care, health benefit, health policy and regulatory affairs and other health industry concerns as a practicing attorney and management consultant, thought leader, author, public policy advocate and lecturer.

Throughout her adult life and nearly 30-year legal career, Ms. Stamer’s legal, management and governmental affairs work has focused on helping health industry, health benefit and other organizations and their management use the law, performance and risk management tools and process to manage people, performance, quality, compliance, operations and risk. Highly valued for her rare ability to find pragmatic client-centric solutions by combining her detailed legal and operational knowledge and experience with her talent for creative problem-solving, Ms. Stamer supports these organizations and their leaders on both a real-time, “on demand” basis as well as outsourced operations or special counsel on an interim, special project, or ongoing basis with strategic planning and product and services development and innovation; workforce and operations management, crisis preparedness and response as well as to prevent, stabilize and cleanup legal and operational crises large and small that arise in the course of operations.

As a core component of her work, Ms. Stamer has worked extensively throughout her career with health care providers, health plans and insurers, managed care organizations, health care clearinghouses, their business associates, employers, banks and other financial institutions, management services organizations, professional associations, medical staffs, accreditation agencies, auditors, technology and other vendors and service providers, and others on legal and operational compliance, risk management and compliance, public policies and regulatory affairs, contracting, payer-provider, provider-provider, vendor, patient, governmental and community relations and matters including extensive involvement advising, representing and defending public and private hospitals and health care systems; physicians, physician organizations and medical staffs; specialty clinics and pharmacies; skilled nursing, home health, rehabilitation and other health care providers and facilities; medical staff, accreditation, peer review and quality committees and organizations; billing and management services organizations; consultants; investors; technology, billing and reimbursement and other services and product vendors; products and solutions consultants and developers; investors; managed care organizations, insurers, self-insured health plans and other payers; and other health industry clients to manage and defend compliance, public policy, regulatory, staffing and other operations and risk management concerns. A core focus of this work includes work to establish and administer compliance and risk management policies; comply with requirements, investigate and respond to Board of Medicine, Health, Nursing, Pharmacy, Chiropractic, and other licensing agencies, Department of Aging & Disability, FDA, Drug Enforcement Agency, OCR Privacy and Civil Rights, Department of Labor, IRS, HHS, DOD, FTC, SEC, CDC and other public health, Department of Justice and state attorneys’ general and other federal and state agencies; dealings with JCHO and other accreditation and quality organizations; investigation and defense of private litigation and other federal and state health care industry investigations and enforcement; insurance or other liability management and allocation; process and product development; managed care, physician and other staffing, business associate and other contracting; evaluation, commenting or seeking modification of regulatory guidance, and other regulatory and public policy advocacy; training and discipline; and a host of other related concerns for public and private health care providers, health insurers, health plans, technology and other vendors, employers, and others.

In the course of this work, Ms. Stamer has accumulated extensive experience helping health industry clients manage workforce, medical staff, vendors and suppliers, medical billing, reimbursement, claims and other provider-payer relations, business partners, and their recruitment, performance, discipline, compliance, safety, compensation, benefits, and training, board, medical staff and other governance; compliance and internal controls; strategic planning, process and quality improvement; change management; assess, deter, investigate and address staffing, quality, compliance and other performance; meaningful use, EMR, HIPAA and other data security and breach and other health IT and data; crisis preparedness and response; internal, government and third-party reporting, audits, investigations and enforcement; government affairs and public policy; and other compliance and risk management, government and regulatory affairs and operations concerns.

Author of leading works on HIPAA and other privacy and data security works and the scribe leading the American Bar Association Joint Committee on Employee Benefits Annual Agency Meeting with OCR, her experience includes extensive compliance, risk management and data breach and other crisis event investigation, response and remediation under HIPAA and other laws.

The American Bar Association (ABA) International Section Life Sciences Committee Vice Chair, a Scribe for the ABA Joint Committee on Employee Benefits (JCEB) Annual OCR Agency Meeting, former Vice President of the North Texas Health Care Compliance Professionals Association, past Chair of the ABA Health Law Section Managed Care & Insurance Section, past ABA JCEB Council Representative, past Board President of Richardson Development Center (now Warren Center) for Children Early Childhood Intervention Agency, past North Texas United Way Long Range Planning Committee Member, and past Board Member and Compliance Chair of the National Kidney Foundation of North Texas, Ms. Stamer has worked closely with a diverse range of physicians, hospitals and healthcare systems, DME, Pharma, clinics, health care providers, managed care, insurance and other health care payers, quality assurance, credentialing, technical, research, public and private social and community organizations, and other health industry organizations and their management deal with governance; credentialing, patient relations and care; staffing, peer review, human resources and workforce performance management; outsourcing; internal controls and regulatory compliance; billing and reimbursement; physician, employment, vendor, managed care, government and other contracting; business transactions; grants; tax-exemption and not-for-profit; licensure and accreditation; vendor selection and management; privacy and data security; training; risk and change management; regulatory affairs and public policy and other concerns.

Past Chair of the ABA Managed Care & Insurance Interest Group and, a Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also has extensive health care reimbursement and insurance experience advising and defending health care providers, payers, and others about Medicare, Medicaid, Medicare and Medicaid Advantage, Tri-Care, self-insured group, association, individual and group and other health benefit programs and coverages including but not limited to advising public and private payers about coverage and program design and documentation, advising and defending providers, payers and systems and billing services entities about systems and process design, audits, and other processes; provider credentialing, and contracting; providers and payer billing, reimbursement, claims audits, denials and appeals, coverage coordination, reporting, direct contracting, False Claims Act, Medicare & Medicaid, ERISA, state Prompt Pay, out-of-network and other nonpar, insured, and other health care claims, prepayment, post-payment and other coverage, claims denials, appeals, billing and fraud investigations and actions and other reimbursement and payment related investigation, enforcement, litigation and actions.

Heavily involved in health care and health information technology, data and related process and systems development, policy and operations innovation and a Scribe for ABA JCEB annual agency meeting with OCR for many years who has authored numerous highly-regarded works and training programs on HIPAA and other data security, privacy and use, Ms. Stamer also is widely recognized for her extensive work and leadership on leading edge health care and benefit policy and operational issues including meaningful use and EMR, billing and reimbursement, quality measurement and reimbursement, HIPAA, FACTA, PCI, trade secret, physician and other medical confidentiality and privacy, federal and state data security and data breach and other information privacy and data security rules and many other concerns.

In connection with this work, Ms. Stamer has worked extensively with health care providers, health plans, health care clearinghouses, their business associates, employers and other plan sponsors, banks and other financial institutions, and others on risk management and compliance with HIPAA, FACTA, trade secret and other information privacy and data security rules, including the establishment, documentation, implementation, audit and enforcement of policies, procedures, systems and safeguards, investigating and responding to known or suspected breaches, defending investigations or other actions by plaintiffs, OCR and other federal or state agencies, reporting known or suspected violations, business associate and other contracting, commenting or obtaining other clarification of guidance, training and and enforcement, and a host of other related concerns. Her clients include public and private health care providers, health insurers, health plans, technology and other vendors, and others.

Her work includes both regulatory and public policy advocacy and thought leadership, as well as advising and representing a broad range of health industry and other clients about policy design, drafting, administration, business associate and other contracting, risk assessments, audits and other risk prevention and mitigation, investigation, reporting, mitigation and resolution of known or suspected violations or other incidents and responding to and defending investigations or other actions by plaintiffs, DOJ, OCR, FTC, state attorneys’ general and other federal or state agencies, other business partners, patients and others.

In addition to representing and advising these organizations, she also has conducted training on Privacy & The Pandemic for the Association of State & Territorial Health Plans, as well as HIPAA, FACTA, PCI, medical confidentiality, insurance confidentiality and other privacy and data security compliance and risk management for Los Angeles County Health Department, MGMA, ISSA, HIMMS, the ABA, SHRM, schools, medical societies, government and private health care and health plan organizations, their business associates, trade associations and others.

A former lead consultant to the Government of Bolivia on its Pension Privatization Project with extensive domestic and international public policy concerns in Pensions, healthcare, workforce, immigration, tax, education and other areas.

A popular lecturer and widely published author on health industry concerns, Ms. Stamer continuously advises health industry clients about compliance and internal controls, workforce and medical staff performance, quality, governance, reimbursement, privacy and data security, and other risk management and operational matters. Ms. Stamer also publishes and speaks extensively on health and managed care industry regulatory, staffing and human resources, compensation and benefits, technology, public policy, reimbursement and other operations and risk management concerns.

A Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also shares her thought leadership, experience and advocacy on these and other related concerns by her service in the leadership of the Solutions Law Press, Inc. Coalition for Responsible Health Policy, its PROJECT COPE: Coalition on Patient Empowerment, and a broad range of other professional and civic organizations including North Texas Healthcare Compliance Association, a founding Board Member and past President of the Alliance for Healthcare Excellence, past Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; former Board President of the early childhood development intervention agency, The Richardson Development Center for Children (now Warren Center For Children); current Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, current Vice Chair of Policy for the Life Sciences Committee of the ABA International Section, Past Chair of the ABA Health Law Section Managed Care & Insurance Section, a current Defined Contribution Plan Committee Co-Chair, former Group Chair and Co-Chair of the ABA RPTE Section Employee Benefits Group, past Representative and chair of various committees of ABA Joint Committee on Employee Benefits; a ABA Health Law Coordinating Council representative, former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division, past Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee, a former member of the Board of Directors of the Southwest Benefits Association and others.

Ms. Stamer also is a highly popular lecturer, symposium and chair, faculty member and author, who publishes and speaks extensively on health and managed care industry, human resources, employment and other privacy, data security and other technology, regulatory and operational risk management. Examples of her many highly regarded publications on these matters include “Protecting & Using Patient Data In Disease Management: Opportunities, Liabilities And Prescriptions,” “Privacy Invasions of Medical Care-An Emerging Perspective,” “Cybercrime and Identity Theft: Health Information Security: Beyond HIPAA,” as well as thousands of other publications, programs and workshops these and other concerns for the American Bar Association, ALI-ABA, American Health Lawyers, Society of Human Resources Professionals, the Southwest Benefits Association, the Society of Employee Benefits Administrators, the American Law Institute, Lexis-Nexis, Atlantic Information Services, The Bureau of National Affairs (BNA),, Benefits Magazine, Employee Benefit News, Texas CEO Magazine, HealthLeaders, the HCCA, ISSA, HIMSS, Modern Healthcare, Managed Healthcare, Institute of Internal Auditors, Society of CPAs, Business Insurance, Employee Benefits News, World At Work, Benefits Magazine, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, the Houston Business Journal, and many other symposia and publications. She also has served as an Editorial Advisory Board Member for human resources, employee benefit and other management focused publications of BNA,, Employee Benefit News, Insurance Thought Leadership and many other prominent publications and speaks and conducts training for a broad range of professional organizations.

For more information about Ms. Stamer or her health industry and other experience and involvements, see here or contact Ms. Stamer via telephone at (469) 767-8872 or via e-mail here.

About Solutions Law Press, Inc.™

Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press, Inc.™ resources here.

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information including your preferred e-mail by creating your profile here.

©2017 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press, Inc.™ All other rights reserved. For information about republication or other use, please contact Ms. Stamer here.

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