Case study: Breach of PHI by a Business Associate

One of our medical practice clients contacted us regarding a breach of Protected Health Information (PHI) by their billing company. The client received a letter from the billing company’s attorney stating that 60 of the client’s patients had their information breached when the billing company’s file server was compromised. The PHI included treatment reports, name, address and social security numbers.

This situation offers some valuable lessons for both covered entities and business associates.

Responsibility

While it was the billing company that suffered the breach, ultimately it is the medical practice’s patients who had their information compromised. This brings up a huge point that the actions or inactions of a business associate can have a major impact and liability to a covered entity (medical practice). Signing a HIPAA business associate agreement is a requirement but does not guarantee that a covered entity is protected from business associate related breaches. It is very important to ensure that business associates are protecting PHI. While it is impossible to police the actions of all business associates, a good starting point would be to ask all business associates a few basic questions:

• Have you performed a security risk assessment and implemented additional security to protect PHI?
• Do you have policies and procedures on how to protect PHI?
• Have you trained your employees on protecting PHI?

The above questions won’t necessarily stop a breach but if the business associate answers no to any of the questions you should be concerned that there is a higher chance that the business associate might cause a breach of PHI.

It is important that any business associate agreement (BAA) provide protections in the event of a breach. The BAA should define responsibilities including financial responsibilities, reporting responsibilities, etc.

Notification to Patients

The letter that the client received regarding the breach stated that the breach was discovered 52 days ago. This information is very important and very troubling. The HIPAA Breach Notification Rule states that individuals affected by a breach must be notified within 60 days of discovery of the breach. This only provided the client with 8 days to notify the patients. This is not a lot of time to react, plan and respond to the breach notification requirements.

The Office of Civil Rights (OCR) gives guidance into the reporting responsibilities after the discovery of a breach of PHI.

Emphasis added

Notifying Individuals
Covered entities must notify affected individuals following the discovery of a breach of unsecured protected health information. Covered entities must provide this individual notice in written form by first-class mail, or alternatively, by e-mail if the affected individual has agreed to receive such notices electronically. If the covered entity has insufficient or out-of-date contact information for 10 or more individuals, the covered entity must provide substitute individual notice by either posting the notice on the home page of its web site for at least 90 days or by providing the notice in major print or broadcast media where the affected individuals likely reside. The covered entity must include a toll-free phone number that remains active for at least 90 days where individuals can learn if their information was involved in the breach. If the covered entity has insufficient or out-of-date contact information for fewer than 10 individuals, the covered entity may provide substitute notice by an alternative form of written notice, by telephone, or other means.

These individual notifications must be provided without unreasonable delay and in no case later than 60 days following the discovery of a breach and must include, to the extent possible, a brief description of the breach, a description of the types of information that were involved in the breach, the steps affected individuals should take to protect themselves from potential harm, a brief description of what the covered entity is doing to investigate the breach, mitigate the harm, and prevent further breaches, as well as contact information for the covered entity (or business associate, as applicable).

With respect to a breach at or by a business associate, while the covered entity is ultimately responsible for ensuring individuals are notified, the covered entity may delegate the responsibility of providing individual notices to the business associate. Covered entities and business associates should consider which entity is in the best position to provide notice to the individual, which may depend on various circumstances, such as the functions the business associate performs on behalf of the covered entity and which entity has the relationship with the individual.

It should be noted that the business associate did offer to notify the affected patients for the client. The question that you should ask yourself is this:

If you are delivering bad news (breach of their PHI) to a patient or customer do you want a 3rd party to tell them or should you tell them yourself?

Notification to OCR

Not only does a covered entity need to ensure that the affected patients are notified but they must also notify OCR of the breach.

Emphasis added

Notice to the Secretary
In addition to notifying affected individuals and the media (where appropriate), covered entities must notify the Secretary of breaches of unsecured protected health information. Covered entities will notify the Secretary by visiting the HHS web site (http://www.hhs.gov/ocr/privacy/hipaa/administrative/breachnotificationrule/brinstruction.html) and filling out and electronically submitting a breach report form. If a breach affects 500 or more individuals, covered entities must notify the Secretary without unreasonable delay and in no case later than 60 days following a breach. If, however, a breach affects fewer than 500 individuals, the covered entity may notify the Secretary of such breaches on an annual basis. Reports of breaches affecting fewer than 500 individuals are due to the Secretary no later than 60 days after the end of the calendar year in which the breaches are discovered.

In this case there were only 60 patient records breached so the client would need to report to OCR within 60 days after the calendar year.

Stressful Times

It goes without saying that both the client and the business associate are dealing with a very stressful event. Some of the potential outcomes of this breach include:

• Patients’ information being used for illegal activity that causes harm to the patient
• Patients being upset and leaving the practice (which results in lost revenue)
• Clients of the billing company leaving due to the breach (which results in lost revenue)
• The medical practice and or billing company having their reputation damaged because of the breach
• OCR investigating the breach and handing out HIPAA related fines that be financially damaging (keep in mind the 60 patients are only for this one client. This breach could be much larger and affect a lot more patients)

HIPAA/Cyber Insurance

This case is a text book example of why all organizations need to have some sort of insurance to protect against breaches. In this case the covered entity did nothing to cause the breach yet they will have to deal with breach related expenses (legal, postage, toll-free number, answering patient questions/concerns, credit monitoring services, etc.). Depending on the total amount of patient records breached, the business associate is looking at very large breach related expenses including possible HIPAA related fines.  Without insurance to pay or offset these expenses, the breach could be financially damaging to both organizations.

Ask yourself these questions:

• If you or one of your business associates caused a breach and the overall expense was $150,000 or $450,000 and you did not have insurance to cover the expenses, how would you pay for it?
• Could the breach related expenses put you out of business?

This example shows why it is critical to have enough insurance to cover or offset breach related expenses. Don’t assume your malpractice or general liability insurance will cover these expenses. Most policies do not cover breach related expenses. It is important to evaluate your insurance and make sure that you have the appropriate coverage to protect your organization. The good news is that HIPAA/Cyber insurance policies are generally very affordable.

Hopefully this example gives you more insight into what happens when PHI is breached. It should show you that PHI can be breached by both covered entities and business associates. It is critical to ensure that your organization and your business associates are properly protecting PHI.