$4.3 Million HIPAA Penalty Shows OCR Serious About HIPAA Enforcement

Updated: February 22, 2011

The first CMP ever assessed by OCR under the HIPAA Privacy Rule, the Cignet CMP assessment announced February 22, 2011 is the latest in a series of developments documenting the rising risks that health care providers, health plans, health care clearinghouses and their business associates ("covered entities") face for violations of HIPAA. Covered entities and their business associates should tighten privacy policies, breach and other monitoring, training and other practices to mitigate against exposures in light of recently tightened requirements and new enforcement risks.

HIPAA Privacy Rule restricts the use, access and disclosure by covered entities of PHI and other individually identifiable health care information to those outlined within the Rules. Under HIPAA covered entities also are responsible for establishing and enforcing policies and procedures that safeguard PHI against improper use, access or disclosure by employees, business associates, and other third parties. Noncompliance with the Privacy and Security Rules exposes a covered entity to criminal prosecution and penalties, civil penalties or both. The Privacy Rule requires health plans, health care clearinghouses and most health care providers (covered entities), including most pharmacies, to safeguard the privacy of patient information, including such information during its disposal.

In an Oct. 20, 2010 Notice of Proposed Determination, OCR found Cignet violated 41 patients' HIPAA rights and committed other HIPAA violations. The Notice of Final Determination (Final Determination) assessing the $4.3 million CMP against Cignet announced February 22, 2011 applies the expanded HIPAA violation categories and increased HIPAA civil monetary penalty amounts authorized by HIPAA amendments made by Section 13410(d) of the Health Information Technology for Economic and Clinical Health (HITECH) Act. Read more details.

Even before the announcement of the Cignet CMP, the HIPAA Privacy exposures of covered entities for failing to comply with HIPAA already had risen significantly. As of January 1, 2011, OCR reports that 12,781 of the cases it has investigated have been resolved by requiring changes in privacy practices and other corrective actions by the covered entities and has referred more than 484 Privacy Rule breach investigations to the Department of Justice for consideration for potential criminal prosecution. The Department of Justice has secured several criminal convictions or pleas under HIPAA's criminal provisions. OCR data confirms that the covered entities involved in these actions included health care providers, health plans, and others.

While OCR had not assessed any civil monetary penalties against any covered entity for violation of HIPAA before Cignet, OCR's collection of $2.25 million from CVS Pharmacy, Inc. under a 2009 Resolution Agreement and $100,000 from Providence Health & Services under a 2008 Resolution Agreement demonstrated the willingness of OCR to pursue significant civil remedies against covered entities that it determined willfully violated the Privacy Rules. A subsequent settlement with Rite Aid in 2010 showed OCR's continued efforts to uses Resolution Agreements when possible to remedy breaches.

OCR's February 18, 2009 announcement of the CVS Resolution Agreement came just one day after President Obama signed into law the HITECH Act amendments to HIPAA. Among other things, the HITECH Act amended HIPAA to modify and expand the HIPAA audit obligations of OCR, amend and expand the potential penalties, make business associates liable for violation of the privacy rules like covered entities, to require covered entities and business associates to provide notification of breaches of unsecured PHI and to tighten other HIPAA obligations. The HITECH Act amendments also impose new obligations on OCR to audit and enforce HIPAA compliance and empower state attorneys' general to bring civil lawsuits against covered entities and business associates that commit HIPAA violations that injure citizens in their state under certain circumstances.

Featured Research
  • 15 Tools for Managing Remote Call Center Agents

    Together, technology and the connective power of the internet are making drastic changes in what a typical work setting looks like today, and many companies are beginning to rely more upon a remote workforce. In fact, according to Global Workplace Analytics, “regular work-at-home, among the non-self-employed population, has grown by 105% since 2005.” more

  • The Business Case for Updating an Aging Phone System

    You may think your business phone system is functional, but is it fully modern? In recent years, telecommunications technology has made major strides. A system that was perfectly serviceable ten years ago—or even five years ago—is now very out-of-date. more

  • 2017 ERP Buyer's Guide

    Among all of the business software applications necessary for business operations, ERP is undoubtedly one of the most important. Making the wrong selection can have a disastrous impact on your accounting, manufacturing, and supply chain. With so much at stake, it is crucial to make a well-informed decision. more

  • 2017 Contact Center Software Trends

    Did you know that, according to Forbes, 86 percent of customers will pay more for a better customer experience? Customer satisfaction is always a worthy business pursuit, but to identify customer preferences and exceed expectations, you must keep pace with innovations in the technology your customers are using. more

  • The Social Intranet: A guide to getting better business results

    This whitepaper describes why the shift from a traditional to a social intranet is imperative to staying competitive, and analyzes the costs and benefits associated with implementing one. You will also find useful KPIs to measure performance and further leverage your intranet's success, raising employee engagement and boosting your competitive advantage. more