Business Associate Strategy and the HITECH Act

Expanded Scope and Enforcement of HIPAA

Whether you are a hospital, insurance company or a vendor to healthcare, recent federal legislation has dramatically changed the rules regarding privacy and security compliance.

On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 [PDF], which contained provisions comprising the Health Information Technology for Economic and Clinical Health Act, or HITECH Act (“Act”). The Act makes sweeping changes to the privacy and security regulations promulgated under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”).

The Act imposes additional privacy and security rules on business associates. For example, The Act provides for the business associate’s compliance with the terms of the business associate agreement a direct requirement of HIPAA. The Act also applies the administrative, physical and technical safeguard requirements of the security rule to business associates, including obligations related to policies, procedures and documentation.

Additionally, new data security breach notification requirements within the Act now apply to both covered entities and business associates, requiring patient notification of any unauthorized acquisition, access, use or disclosure of their unsecured protected health information. Moreover, increased civil and criminal penalties now apply to violations of HIPAA privacy and security requirements and authorize state attorneys general to bring civil actions on behalf of state residents adversely affected or threatened by such violations.

Healthcare organizations are faced with a growing trend of sharing confidential health information with vendors (business associates) in order to meet critical business needs, yet from a risk management perspective, little if any measurement of business associate compliance knowledge is evaluated, leaving little assurance of sound compliance practices by the business associate handling patient confidential health information.

Privacy violations and security data loss by business associates and their sub-contractors have also become a strategic liability issue for healthcare organizations. For example, new security breach notification rules of the require patients be notified of any unauthorized acquisition, access, use or disclosure of their unsecured protected health information. New security breach notification requirements apply to covered entities and require business associates to notify covered entities of any unauthorized acquisition, access, use or disclosure of their unsecured protected health information they hold on behalf of the covered entity, including the identity of each individual who is the subject of the unsecured protected health information.

According to the Ponemon Institute [PDF], a privacy and information management research firm, the data breach incident cost to U.S. companies is $202 per compromised customer record in 2008. Cost factors include, expensive outlays for detection, escalation, notification and response, along with legal, investigative and administrative expenses, customer defections, opportunity loss, reputation management, and costs associated with customer support such as information hotlines and credit monitoring subscriptions.

Bottom line. Make sure you have updated business associate agreements* in place by February 17, 2010.

*To view a sample HITECH Act Business Associate Agreement, view the RECENT ARTICLES section above entitled—February 9, 2010 — New Model BA Agreement, or simply click here to go directly to the site.

Grant Peterson, J.D. leads the HIPAA Analytics team. For questions or comments, please refer to Contact Us

Business Associates and HIPAA – The Basics

In the Business Associate Category, we will be discussing issues that surface as organizations develop business relationships with outside agents and vendors. Let’s start with some basics first -

The HIPAA Privacy Rule applies only to covered entities (health plans, healthcare clearinghouses, and certain healthcare organizations). However, most healthcare organizations and health plans do not carry out all of their healthcare activities and functions by themselves. Instead, they often use the services of a variety of other persons or businesses (Business Associates).

The Privacy Rule allows covered entities and health plans to disclose protected health information to these “business associates” if the providers or plans obtain satisfactory assurances that the business associate will use the information only for the purposes for which it was engaged by the covered entity, will safeguard the information from misuse, and will help the covered entity comply with some of the covered entity’s duties under the Privacy Rule. The satisfactory assurances must be in writing, whether in the form of a contract or other agreement between the covered entity and the business associate.

Aside from the obvious users of identifiable health information (hospitals, clinics, nursing homes etc.), others may be referred to as Business Associates (agents and vendors) that also come in contact with identifiable health information. For Business Associates, HIPAA requires hospitals, clinics, insurance companies and others that use agents and vendors to use a Business Associate Agreement. The regulation states –

(Business associate contracts or other arrangements)

§ 164.314 Organizational requirements.
(a)(1) Standard: Business associate contracts or other arrangements.(2) Implementation specifications (Required).

(i) Business associate contracts. The contract between a covered entity and a business associate must provide that the business associate will—

(A) Implement administrative, physical, and technical safeguards that reasonably and appropriately protect the confidentiality, integrity, and availability of the electronic protected health information that it creates, receives, maintains, or transmits on behalf of the covered entity as required by this subpart;

(B) Ensure that any agent, including a subcontractor, to whom it provides such information agrees to implement reasonable and appropriate safeguards to protect it;

(C) Report to the covered entity any security incident of which it becomes aware;

(D) Authorize termination of the contract by the covered entity, if the covered entity determines that the business associate has violated a material term of the contract… for complete regulation click here:

Watch for future posts on developing issues regarding Business Associates and the clients they serve.

Grant Peterson, J.D. leads the HIPAA Analytics team. For questions or comments, please refer to Contact Us