Last week HHS announced close to $2 Million dollars in HIPAA settlements with Concentra and QCA Health Plan due to the theft of unencrypted laptops. However, the message from HHS is not just the importance of data encryption, rather its performance and follow through with security risk analysis and implementation of security policies and procedures. Further, the close to $2 million in fines do not include the additional costs and time it will take both of these health care organizations to comply with the OCR corrective action plans.
The larger settlement and corrective action plan involved Concentra Health Services, a subsidiary of Humana, Inc., which operates more than 300 medical clinics nationally, including urgent care, occupational and physical therapy, and wellness services. Concentra agreed to a $1,725,220 settlement with HHS for potential violations resulting from the breach notification associated with a stolen unencrypted laptop. Specifically, the Resolution Agreement identified the following two deficiencies:
(1) Concentra failed to adequately remediate and manage its identified lack of encryption or, alternatively, document why encryption was not reasonable and appropriate and implement an equivalent alternative measure to encryption, if reasonable and appropriate, from October 27, 2008, until June 22, 2012 (date on which a complete inventory assessment was completed and Concentra immediately took action to begin encrypting all unencrypted devices) (see 45 C.F.R. § 164.312(a)(2)(iv)).
(2) Concentra did not sufficiently implement policies and procedures to prevent, detect, contain, and correct security violations under the security management process standard when it failed to adequately execute risk management measures to reduce its identified lack of encryption to a reasonable and appropriate level from October 27, 2008, (date of Concentra’s last project report indicating that 434 out of 597 laptops were encrypted) until June 22, 2012 (date on which a complete inventory assessment was completed and Concentra immediately took action to begin encrypting all unencrypted devices) (see 45 C.F.R. § 164.308(a)(1)(i)).
Interestingly, while the Security Rule allows for flexibility in implementation for certain measures, including data encryption under 45 CFR 164.312, this high settlement amount indicates that healthcare organizations (including now business associates) who choose not to implement encryption standards must be able to explain themselves. HHS, in the Resolution Agreement, faults Concentra not only for failing to encrypt the data, but in light of a decision not to encrypt, Concentra was faulted for failing to implement an alternative to encryption (though unclear what a reasonable alternative to encryption would be). Now, not only does Concentra have this large settlement payment due to HHS, but it has to comply with the corrective action plan, which includes the implementation of a security management plan (with a security risk analysis baked in), encryption obligations, security awareness training, and annual reports to HHS. And if Concentra fails to comply, HHS has reserved its right to impose civil monetary penalties (which were significantly increased under the HITECH Act).
QCA Health Plan of Arkansas
The smaller settlement of $250,000 was with QCA Health Plan of Arkansas, a healthcare insurance provider. The impetus for this settlement and corrective action plan was the theft of an unencrypted laptop from an employee’s car which contained PHI belonging to 148 individuals (note that this breach affected less than 500 individuals). The Resolution Agreement determined that:
A. QCA did not implement policies and procedures to prevent, detect, contain, and correct security violations, including conducting an accurate and thorough assessment of the potential risks and vulnerabilities to the confidentiality, integrity, and availability of ePHI it held, and implementing security measures sufficient to reduce risks and vulnerabilities to a reasonable and appropriate level to comply with 45 C.F.R. § 164.306 from the compliance date of the Security Rule to June 18, 2012.
B. QCA did not implement physical safeguards for all workstations that access ePHI to restrict access to authorized users on October 8, 2011.
C. QCA impermissibly disclosed the ePHI of 148 individuals on October 8, 2011.
Unlike Concentra, QCA was not directly faulted for failing to encrypt its laptops, or failing to implement a reasonable alternative. Rather, this settlement focused instead on the lack of sufficient HIPAA Security policies and procedures, inadequacy in conducting a security risk assessment, and the failure to implement security measures, most specifically physical safeguards. The corrective action plan is also noticeably different, with a focus instead on workforce training and reporting of workforce non-compliance, rather than on encryption requirements (the press release notes that QCA encrypted its laptops following the breach).
Though like most breach cases the simple solution is to encrypt the data to avoid an actual breach, these settlements expose the depth of compliance obligations and monetary consequences associated with the failure to securely protect the PHI. Concentra and QCA, like other health care organizations who have settled with HHS, will have years of compliance reporting obligations and security management requirements that will likely create significant cost burdens in addition to the monetary settlement obligations. HHS has made it quite clear in its press releases and corrective action plans, healthcare organizations and business associates must create and implement Security policies and procedures, and must engage in a security management process that ensures the security of patient data post the initial implementation.
For assistance on the HIPAA Security Rule requirements, drafting and implementing Security policies and procedures, or general HIPAA assistance please contact Elana Zana.