What is the penalty for a HIPAA violation?

  • By Morgan Brown
  • Published on January 9, 2014

HIPAA violations are expensive. The penalties for noncompliance are based on the level of negligence and can range from $100 to $50,000 per violation (or per record), with a maximum penalty of $1.5 million per year for violations of an identical provision. Violations can also carry criminal charges that can result in jail time.

Fines will increase with the number of patients and the amount of neglect. Starting with a breach where you didn’t know and, by exercising reasonable diligence, would not have known that you violated a provision. To the other end of the spectrum where a breach is due to negligence and not corrected in 30 days. In legalese, this is known as mens rea (state of mind). So fines increase in severity from no mens rea (didn’t know) to assumed mens rea (willful neglect).

The fines and charges are broken down into 2 major categories: “Reasonable Cause” and “Willful Neglect”. Reasonable Cause ranges from $100 to $50,000 per incident and does not involve any jail time. Willful Neglect ranges from $10,000 to $50,000 for each incident and can result in criminal charges.

HIPAA violation categories and their respective penalty amounts are outlined in the chart below:

Violation Amount per violation Violations of an identical provision in a calendar year
Did Not Know $100 - $50,000 $1,500,000
Reasonable Cause $1,000 - $50,000 $1,500,000
Willful Neglect — Corrected $10,000 - $50,000 $1,500,000
Willful Neglect — Not Corrected $50,000 $1,500,000

Source: HHS, Federal Register.gov

Unencrypted Data

Addressable does not mean optional. This is a point that we made in a previous post How do I become HIPAA compliant? (a checklist), but it cannot be stressed enough. The vast majority of data breaches are due to stolen or lost data that was unencrypted. When in doubt, you should implement the addressable implementation specifications. Most of them are best practices.

Employee Error

Breaches can occur when employees lose unencrypted portable devices, mistakenly send PHI to vendors who post that information online, and disclose personally identifiable, sensitive information on social networks. All examples from actual cases. Employee training and adherence to security policies and procedures is extremely important.

Data Stored on Devices

Almost half of all data breaches are the result of theft. When laptops, smartphones, etc. are unencrypted the risk of a breach increases considerably. With TrueVault, your data is safely stored off-premise; so that stolen laptop just has a token on it, and no PHI is compromised.

Business Associates

Almost two-thirds of data breaches involved a business associate. Meaning that you delegated a covered function or activity to someone, and that someone messed up. So pick your partners carefully. Some of the largest breaches reported to HHS have involved business associates. As a result, the final omnibus rule expanded many of the requirements to business associates and greatly enhanced the government’s ability to enforce the law.

What sort of penalties are we talking about? Check out this chart with fines levied in years past:

Entity Fined Fine Violation
CIGNET $4,300,000 Online database application error.
Alaska Department of Health and Human Services $1,700,000 Unencrypted USB hard drive stolen, poor policies and risk analysis.
WellPoint $1,700,000 Did not have technical safeguards in place to verify the person/entity seeking access to PHI in the database. Failed to conduct a tech eval in response to software upgrade.
Blue Cross Blue Shield of Tennessee $1,500,000 57 unencrypted hard drives stolen.
Massachusetts Eye and Ear Infirmary and Massachusetts Eye and Ear Associates $1,500,000 Unencrypted laptop stolen, poor risk analysis, policies.
Affinity Health Plan $1,215,780 Returned photocopiers without erasing the hard drives.
South Shore Hospital $750,000 Backup tapes went missing on the way to contractor.
Idaho State University $400,000 Breach of unsecured ePHI.
Shasta Regional Medical Center $275,000 Inadequate safeguarding of PHI from impermissible uses and disclosures.
Phoenix Cardiac Surgery $100,000 Internet calendar, poor policies, training.
The Hospice of Northern Idaho $50,000 Breach of unsecured ePHI. Unencrypted laptop stolen, no risk analysis.

Source: HHS, Case Examples and Resolution Agreements

Looking at this chart we can conclude that HHS does not like people storing unencrypted PHI on mobile devices. What we don’t see yet are fines levied against business associates. 2014 is the first year where business associates will be audited and fined. Smart money says that the first fines levied against business associates will be passed down toward the end of this year.

If this article makes you nervous, then this might be a good time to revisit your organization’s HIPAA compliance program. The good news is that not every PHI breach ends in a fine. If you can show that you have made a reasonable effort to comply with HIPAA then you may not be dinged.

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