hipaa one year later:
Is Your Law Firm Complying?
By Charla Bizios Stevens and Hannah E. Zaitlin
Since it was enacted in 1996, discussion and confusion concerning
the Health Insurance Portability and Accountability Act (“HIPAA”)1 has
been ongoing, but as of late the conversation has shifted to the inter‑
pretation and application of the HIPAA final omnibus rule issued by the
U.S. Department of Health and Human Services (“HHS”) on January
17, 2013 (the “Final Rule”).2 The Final Rule implemented changes to,
and in some instances finalized, HHS rules previously issued pursuant
to Subtitle F of Title II of HIPAA, known as the Administrative Simplifica‑
tion (“AS”) provisions.3 The Final Rule reflects mandates under recent
legislation including the Health Information Technology for Economic
and Clinical Health (“HITECH”) Act, enacted as part of the American
Recovery and Reinvestment Act of 2009, and the Genetic Information
Nondiscrimination Act of 2008,4 and it has been promoted as enhanc‑
ing patient privacy protections, providing individuals new rights to their
health information, and strengthening the government’s authority to
enforce HIPAA and HITECH.5
Since nearly a year has passed since the compliance date for most
provisions of the Final Rule6, this article focuses on assisting lawyers and
law firms looking to evaluate the sufficiency of their compliance efforts
to date. This article also underscores the potential impact of the Final
Rule on lawyers and law firms in light of recent enforcement activity by
the Office of Civil Rights (“OCR”) of the HHS, the federal agency charged
with enforcement and administration of HIPAA.
To fully appreciate how or if the Final Rule applies to you or your
law firm (or, for that matter, your clients), a general understanding of
HIPAA and its regulatory regime is in order. As noted above, the regulatory
regime arises from the AS provisions which required HHS to establish
national standards for electronic healthcare transactions; national
identifiers for providers, health insurance plans, and employers; national
standards to protect the privacy and security of personal health informa‑
tion; and civil money penalties for violations of the AS.7 Accordingly,
the HHS published The Federal Standards for the Privacy of Individually
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6 
Identifiable Health Information (the “Privacy Rule”)8 in December of
2000 (modified in 2002); the Security Standards for the Protection of
Electronic Protected Health Information (the “Security Rule”) in Febru‑
ary 20039; the HIPAA Enforcement Rule (the “Enforcement Rule”) in
February 200610; and interim final regulations for Notification in the
Case of Breach of Unsecured Protected Health Information11 in 2009
(the “Breach Notification Rule”; the Privacy Rule, the Security Rule, the
Enforcement Rule, and the Breach Notification Rule, each as modified
and/or finalized by the Final Rule, are referred to collectively as the
“HIPAA Rules”).
The AS provisions and the HIPAA Rules apply to three types of enti‑
ties which are known as “covered entities:” healthcare providers who
conduct covered transactions electronically, health plans, and health care
clearinghouses. 12 A healthcare provider (e.g., physician, chiropractor,
dentist, nursing home, pharmacy) is only a “covered entity”, and thus
required to comply with HIPAA, if it transmits information about covered
transactions electronically. 13
Covered transactions include those in which so-called protected
health information (“PHI”) is transmitted to carry out financial or
administrative activities related to healthcare (e.g., billing, confirmation
of coverage).14 PHI is defined as individually identifiable health infor‑
mation transmitted or maintained in any form or medium (including
electronically (“ePHI”)), including demographic data, that relates to:
(a) an individual’s past, present or future physical or mental health
or condition, (b) the provision of health care to the individual, or (c)
the past, present, or future payment for the provision of health care to
the individual, and that identifies the individual or for which there is
a reasonable basis to believe it can be used to identify the individual.
Individually identifiable health information includes many common
identifiers (e.g., name, address, birth date, Social Security Number).15
The overarching objective of the AS provisions and the HIPAA Rules
is to require covered entities (which could be an individual or a business
entity) to protect the privacy and security of PHI and provide individuals
with certain rights with respect to their health information. The Final
Rule sought to strengthen these protections and rights by, in pertinent
part, significantly expanding the accountability and obligations of cer‑
New Hampshire Bar Journal
Spring/Summer 2014
tain entities that do business with covered entities – so-called “business
associates” and their subcontractors.
Specifically, the HITECH Act and the Final Rule require business as‑
sociates to comply with the Security Rule. The Final Rule broadened the
definition of a “business associate” and implemented Section 13404 of
HITECH which makes certain requirements of the Privacy Rule applicable
to business associates and creates direct liability for noncompliance by
business associates with regard to those requirements.16 In contrast, prior
to the Final Rule, a business associate’s obligations arose solely under
the terms of its business associate agreement (a “BAA”) with a covered
entity and therefore the business associate was only potentially subject
to contractual remedies for breach of the BAA.
The Final Rule also requires updated provisions in BAAs and now
requires business associates to have BAAs with its subcontractors. BAAs
must provide that the business associate (or subcontractor, as applicable):
(1) shall abide by the Security Rule concerning ePHI and applicable
provisions of the Privacy Rule; (2) shall report breaches of unsecured PHI
to the covered entity (or business associate, as applicable) as required by
the Privacy Rule and Breach Notification Rule, (3) certify that, if used, a
subcontractor will agree to the same requirements that apply to the busi‑
ness associate regarding the handling of protected health information;
(4) will terminate a business associate contract with a subcontractor if
the business associate knows of a pattern of activity or practice of the
subcontractor that constitutes a material breach of the subcontractor’s
obligations, and reasonable steps to cure the breach or end the violation
are unsuccessful. 17
The Final Rule should have been a wake-up call for lawyers and
law firms which have access to PHI to ask whether they are considered
business associates of covered entities and, if so, to take the steps neces‑
sary to comply with their duties and obligations as business associates by
September 23, 2013. A lawyer or firm falls into the HIPAA definition of a
“business associate” if the lawyer “provides, other than in the capacity
of a member of the workforce of such covered entity, legal . . . services
to or for such covered entity, or to or for an organized health care ar‑
rangement in which the covered entity participates, where the provision
of the service involves the disclosure of PHI from such covered entity or
arrangement, or from another business associate of such covered entity
or arrangement, to the person.”18
Therefore, if a firm represents a covered entity or a business
associate of one and accesses PHI to do its job, it must comply with the
HIPAA Rules. The types of representation which could cause a firm to
be a business associate of their client include defending a malpractice
claim, representing a physician before a licensing board, or advising a
physician practice regarding quality assurance or risk management. It is
significant that business associate status attaches under the HIPAA Rules
regardless of whether the firm has signed a business associate agreement.
As noted in commentary to the Final Rule, “a person becomes a business
associate by definition, not by the act of contracting with a covered entity
or otherwise. Therefore, liability for impermissible uses and disclosures
attaches immediately when a person creates, receives, maintains, or
transmits protected health information on behalf of a covered entity
or business associate and otherwise meets the definition of a business
Spring/Summer 2014
associate.”19 Accordingly to the extent law firms work with independent
contractor consultants or others who have access to PHI as part of the
representation, they will be required to make sure that these subcontrac‑
tors adhere to the HIPAA privacy and security requirements as well and
enter into business associate agreements with these subcontractors.
With the revisions to HIPAA Rules made by HITECH and the Final
Rule, business associates are now directly liable: (1) for impermissible
uses and disclosures of PHI; (2) for failure to provide breach notifica‑
tion to the covered entity when unsecured PHI is lost or inappropriately
accessed or disclosed; (3) for failure to provide access to a copy of ePHI
to either the covered entity, the individual, or the individual’s designee
(as specified in the business associate agreement) as necessary to satisfy
a covered entity’s obligations with respect to an individual’s request for
an electronic copy of their PHI; (4) for failure to disclose PHI to gov‑
ernmental regulators when requested to investigate or determine the
business associate’s compliance with HIPAA; (5) for the failure to provide
an accounting of disclosures of PHI when requested by an individual;
(6) for failing to make reasonable efforts to limit PHI to the minimum
necessary to accomplish the intended purpose of the use, disclosure, or
request; (7) for failing to enter into business associate agreements with
subcontractors that create or receive PHI on their behalf; and (8) last,
but far from least, failure to comply with the requirements of the Security
Rule.20
The balance of this article focuses on an overview of the primary
compliance issues for business associates under the HIPAA Rules and in
light of recent OCR enforcement activities.
The Security Rule is intended to protect the privacy of individuals’
health information while allowing covered entities and business associ‑
ates to adopt new technologies to improve the quality and efficiency of
patient care. Given that the health care marketplace is diverse, the Secu‑
rity Rule is designed to be flexible and scalable so regulated entities can
implement policies, procedures, and technologies that are appropriate
for their particular size, organizational structure, and risks to consum‑
ers’ ePHI.21 A central compliance component of the Security Rule is the
requirement that business associates conduct an accurate and thorough
assessment of the potential risks and vulnerabilities to the confidentiality,
integrity, and availability of ePHI held by the entity.22 This risk assessment
must be documented, and it must support the entity’s determination of
the types of safeguards that are needed, given the scale and scope of the
business associate’s operations. The Security Rule also requires, among
other things, the identification of a “security official” who is responsible
for the development and implementation of the policies and procedures
required under the Security Rule and providing security training to
workforce members;23 appropriate screening processes for personnel
with access to ePHI;24 the identification of data backup requirements
and methods25; and the proper use of encryption26. Accordingly, imple‑
mentation of a compliant security risk management program requires
addressing what administrative, physical, and technical safeguards are
in place to protect the confidentiality, integrity, and availability of ePHI,
and who is responsible for assuring that the safeguards are adequate.
Recognizing the often changing risks associated with the use of
technology related to the use of PHI, it is recommended that a gap
New Hampshire Bar Journal
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analysis be conducted on a periodic basis after the initial risk assessment.
Conducting a risk assessment (or having one conducted by an objective
third party) almost necessarily involves the expenditure of significant
resources. With that said, it is very apparent from OCR enforcement
activities and publications that a risk assessment is the cornerstone of
Security Rule compliance.27 Importantly, if a business associate desires
to have a third party vendor conduct the risk assessment, it is highly
recommended that this vendor be engaged through legal counsel so as to
maintain attorney-client privilege with regard to discussions and findings
associated with the drafting of the final assessment (which assessment,
however, would still have to be provided to OCR upon its request).
The Privacy Rule mandates that those entrusted with PHI take ap‑
propriate safeguards to protect the privacy of personal health information,
and sets limits and conditions on the uses and disclosures that may be
made of such information without patient authorization. The rule also
gives patients rights with respect to their PHI, including rights to examine
and obtain a copy of their health records, request corrections to their
health records, and request an accounting of disclosures of PHI made
by the covered entity.28 Covered entities that engage business associates
to work on their behalf must have contracts or other arrangements in
place with their business associates to ensure that the business associates
safeguard PHI, and use and disclose the information only as permitted
or required by the Privacy Rule.29
The Breach Notification Rule requires covered entities and busi‑
ness associates to provide notification following a breach of unsecured
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protected health information. A breach is, generally, an impermissible
use or disclosure under the Privacy Rule that compromises the security
or privacy of the PHI.30 An acquisition, access, use, or disclosure of PHI
in a manner not permitted under the Privacy Rule is presumed to be a
breach unless the covered entity or business associate demonstrates that
there is a low probability that the PHI has been compromised based on
a risk assessment of at least the following factors:
1. The nature and extent of the protected health information
involved, including the types of identifiers and the likelihood of reidentification;
2. The unauthorized person who used the protected health infor‑
mation or to whom the disclosure was made;
3. Whether the protected health information was actually acquired
or viewed; and
4. The extent to which the risk to the protected health information
has been mitigated.31
If it is determined that a breach has occurred, the covered entity
must provide notice of the breach to affected individuals, the secretary
of Health and Human Services and, in certain circumstances, to the
media.32 If the breach occurred at the hands of a business associate, the
business associate must notify the covered entity as well.33 The nature
and form of the notification is controlled in large part by the outcome
of the risk analysis mentioned above. 34
While a significant aspect of HIPAA compliance is the maintenance
of policies and procedures related to the obligations under the Privacy,
Security, and Breach Notification Rules, the extent to which the employ‑
ees of a covered entity or business associate adhere to these policies and
procedures and understand what is expected of them is, in many regards,
the most critical component of compliance efforts. The Privacy Rule
specifically requires training of all workforce members on the policies
and procedures with respect to PHI as necessary and appropriate for
the members of the workforce to carry out their function within the
employer’s business. Significantly, the content of workforce training is
left within the employer’s discretion, but it is advisable to provide spe‑
cific training with regard to the privacy and security requirements and
considerations unique to the particular practice or business. Though
an “off the shelf” training is likely to include all the required elements,
if the training is not specifically tailored to the particulars of a business,
the OCR would be unlikely to view this as non-compliant.
Since the release of the Final Rule, OCR investigation and enforce‑
ment activities have served to highlight the unfortunate consequences
that can arise from failure to comply with the Final Rule. Moreover, the
extension of certain covered entity responsibilities to business associates
now makes civil and criminal liability possible for lawyers and law firms.
HIPAA civil fines for noncompliance can be up to $50,000 per violation
(or a maximum of $1.5 million for repeated violations) depending on
the degree of culpability, and criminal penalties may result in up to ten
years in prison.35
Last December the OCR announced that it had entered into a settle‑
ment agreement with Adult & Pediatric Dermatology, P.C. (“APDerm”),
a medical practice group providing dermatology services from offices
located in Massachusetts and New Hampshire, to resolve APDerm’s al‑
New Hampshire Bar Journal
Spring/Summer 2014
leged violations of the Privacy Rule, Security Rule, and Breach Notifica‑
tion Rule, marking the first settlement for failure to have policies and
procedures in place to address the breach notification provisions of the
HITECH Act.36 The settlement required APDerm to pay $150,000.00 to
OCR and implement a corrective action plan to correct deficiencies in
its HIPAA compliance program. The OCR investigation that led to the
settlement stemmed from a self-report by APDerm that an unencrypted
thumb drive containing the ePHI of approximately 2,200 individuals was
stolen from a vehicle of one of the practice staff members. The investiga‑
tion revealed that APDerm had not conducted an accurate and thorough
analysis of the potential risks and vulnerabilities to the confidentiality of
ePHI as part of its security management process. Further, the practice
did not fully comply with the requirements of the Breach Notification
Rule to have in place written policies and procedures and train workforce
members. Consequently, the practice was not penalized for the breach
itself, but for failure to implement and maintain a compliance program
and risk assessment measures as required under the HIPAA Rules.
Attorneys who represent healthcare clients are keenly aware of
HIPAA compliance issues and routinely work with these clients to ensure
compliance. These lawyers, however, are not always mindful of the fact
that the Final Rule makes the same standards allegedly violated by
APDerm applicable to the lawyers and law firms which receive PHI from
covered entities. The recent case of Affinity Health Plan, Inc. illustrates
two important points: the significant financial risk of noncompliance
and the scope of inquiry which needs to be made in order to ensure
compliance. Affinity Health Plan settled violations of HIPAA with HHS for
$1,215,780.00 because of the failure to erase PHI contained on the hard
drives of least photocopiers before returning them. An HHS investigation
revealed that the PHI of 344,579 patients was improperly disclosed. Affin‑
ity had not included the electronic PHI stored on its photocopiers in its
risk analysis and failed to implement policies and procedures to follow
when returning a photocopiers.37
The foregoing makes clear that business associates must look well
beyond laptops and smart phones when conducting a risk analysis. In
addition to these obvious places where PHI is stored, business associates
should evaluate the security of other digital office equipment such as
photocopiers, scanners, and fax machines, which can retain PHI for
indefinite periods of time. Business associates should also look to the
vendors which provide business services to them. For example, outside
cleaning companies, electronic data storage and shredding businesses,
and outsourced IT providers can all come under the rubric of a business
associate subcontractor from which compliance is expected.
In sum, every lawyer and law firm needs to determine first, whether
they are a business associate under HIPAA, and if so, to take affirmative
action to assure their compliance with the HIPAA regulatory regime.
6
Compliance for most provisions of the Final Rule was required as of September 23,
2013. 78 Fed. Reg. 5566 (January 25, 2013).
7
See, HIPAA General Information, Centers for Medicare & Medicaid Services, CMS.gov.
8
45 CFR Part 160, and Part 164, Subparts A and E.
9
45 CFR Part 160, and Part 164, Subparts A and C.
10
45 CFR Part 160, Subparts C-E.
11
74 FR 42740; 45 CFR Part 160, and Part 164, Subpart D.
12
45 CFR §160.102.
13
Id.
14
Id.
15
45 CFR §160.103.
16
Id.; 78 Fed. Reg. 5591(January 25, 2013).
17
45 CFR §164.308(e); §164.314(a); §164.504(e).
18
45 CFR §160.103.
19
78 Fed. Reg. 5598.
20 See 78 Fed. Reg. 5591 (January 25, 2013).
21 See 45 CFR §164.306.
22
45 CFR §164.308(a)
23
45 CFR §164.308(a)(1(ii)(2)
24
45 CFR §164.308(a)(3)(ii)(B)
25
45 CFR § 164.308(a)(7)(ii)(A)
26
45 CFR §§163.312(a)(2)(iv) and (e)(2)(ii).
27 See Guidance on Risk Analysis, www.hhs.gov.
28
45 CFR §§164.524, 164.526, and 164.528.
29
45 CFR §164.504(e).
30
US Department of Health & Human Services, Breach Notification Rule, HHS.gov.
31
45 CFR §164.402(2).
32
45 CFR §§164.404, 164.406, 164.408.
33
45 CFR §164.410.
34
Id.
35
45 CFR Part 160, Subpart D.
36 Dermatology Practice Settles Potential HIPAA Violations, HHS press release, December
26, 2013.
37 HHS settles with health plan in photocopier breach case, HHS press release, August
14, 2013.
Endnotes
1
Pub.L.104-191, 110 Stat. 1936.
2
78 Fed, Reg, 5566 (January 25, 2013).
3
See, HIPAA Administrative Simplification Statute and Rules, www.hhs.gov.
4
78 Fed. Reg. 5566 (January 25, 2013).
5 New Rule Protects Patient Privacy, Secures Health Information, HHS press release,
January 17, 2013.
Spring/Summer 2014
New Hampshire Bar Journal
Charla Bizios Stevens is a Director in the
Litigation Department of McLane, Graf,
Raulerson & Middleton, PA practicing in
the employment, education and health care
practice groups. She has a diverse health
care practice representing physician practice
groups, health centers and health care providers regarding a variety of issues including compliance, licensing, regulation and
discipline.
Hannah is an associate in the Corporate
Department at McLane, Graf, Raulerson
and Middleton, PA. and a member of the
firm’s health care practice group. She assists
clients with HIPAA compliance and other
health care regulatory and transactional
matters.
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