The Department of Health and Human Services Office for Civil Rights (OCR) has shown once again that it is willing to enforce HIPAA against business associates, as seen in a recent settlement. The settlement highlights the importance of thorough risk analysis conducted by business associates and covered entities, as required by the HIPAA Security Rule, and serves as an indication that OCR remains ready to exercise its authority to enforce HIPAA’s requirements for business associates. Following the settlement, OCR released a fact sheet that provides guidance for HIPAA compliance and direct liability for business associates.

Recent Settlement

On May 23, 2019, OCR announced a settlement with a business associate relating to a 2015 data breach. The business associate provides software to healthcare providers that allows patients to access and manage their electronic health records through a patient portal. The company has agreed to pay OCR $100,000 to settle potential violations of HIPAA.

In July 2015, the company filed a breach report with OCR following discovery that hackers had used a compromised user ID and password to access the electronic protected health information (ePHI) of approximately 3.5 million individuals. The hackers gained access to a server containing names, addresses, usernames, passwords, and health insurance information. An investigation by OCR revealed that the company did not conduct a comprehensive risk analysis prior to the breach. In addition to a $100,000 settlement with OCR, the company will also undergo a two-year corrective action plan that includes a complete, enterprise-wide risk analysis. As part of the corrective action plan, the company has agreed to:

Continue Reading Recent Settlement with OCR and New OCR Fact Sheet Serve as Reminders That Business Associates Have Direct Liability under HIPAA

Despite the announcement made last week by the Department of Health and Human Services Office for Civil Rights (OCR) about certain reduced penalty caps under the Health Insurance Portability and Accountability Act (HIPAA), OCR has shown in this week’s settlement that it still plans to vigorously enforce HIPAA.

New Maximum Annual Penalty Caps

On April 30, 2019, OCR announced in a Notification of Enforcement Discretion new annual penalty caps for identical violations of a requirement or prohibition under HIPAA. Specifically, under HIPAA, the penalty tiers are based on four levels of culpability. Until the announcement, the annual cap for identical violations was $1.5 million for every level of culpability. Now, after the announcement, only the last tier (willful neglect-not corrected) is subject to that higher cap of $1.5 million. The lower three tiers of culpability have lesser annual caps for identical violations—specifically, willful neglect-corrected – $250,000; reasonable cause – $100,000, and no knowledge – $25,000. The settlement announced this week signals that OCR is still willing to pursue enforcement of HIPAA violations and to seek big settlements for those violations.

Continue Reading New Settlement with OCR Reminds Healthcare Companies of the Importance of a Timely and Thorough Investigation of Security Incidents

A private practice (Practice) comprising three physicians has agreed to pay the U.S. Department of Health and Human Services (HHS) Office for Civil Rights (OCR) $125,000 to settle potential violations of the Health Insurance Portability and Accountability Act (HIPAA). While the fine is small compared with OCR’s October announcement of the $16 million settlement with Anthem, it confirms OCR’s ongoing commitment to enforcing HIPAA compliance, regardless of an organization’s size or the number of impacted individuals. Additionally noteworthy is that this enforcement action originated with a civil rights complaint filed by the Connecticut Office of Protection and Advocacy for Persons with Disabilities with the U.S. Attorney’s Office for the District of Connecticut, which initiated a joint investigation into the matter with OCR.

In February 2015, a patient of the Practice contacted a local television station to inform a reporter of a dispute with one of the Practice’s physicians related to the patient’s service animal. When the reporter contacted the physician for comment, the physician responded to the inquiry and, in the process, released the patient’s PHI to the public, even though the Practice’s privacy officer counseled the physician not to respond to the reporter or to respond with “no comment.” OCR determined that the physician’s conversation with the media demonstrated reckless disregard for the patient’s privacy rights, and further found that the Practice failed to take corrective actions or sanction the physician following the impermissible disclosure.

Continue Reading Small Physician Practice Settles with OCR: Yet Another Reminder of the Perils of Responding to Patient Complaints in a Public Forum

After a relatively quiet start to 2018, the Office for Civil Rights within the U.S. Department of Health and Human Services (OCR) has had an incredibly busy week, with the announcement of a blockbuster settlement, an updated security risk assessment tool, and new priorities for the agency.

Anthem Settlement

In a record-breaking settlement, Anthem, one of the nation’s largest health benefits companies, has agreed to pay OCR $16 million and take substantial corrective actions to settle potential violations of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) after self-reporting a series of cyberattacks that resulted in the largest health information data breach in U.S. history. Notably, the breach included electronic protected health information (ePHI) that Anthem maintained as a business associate acting on behalf of its affiliated health plans, making this week’s enforcement action by OCR one of the few involving a business associate.

In March of 2015, Anthem filed a breach report with OCR informing the agency of its discovery that cyberattackers had gained access to its information and technology (IT) systems through an undetected continuous and targeted cyberattack for the alleged purpose of extracting data. After filing the report, Anthem later discovered that the cyberattackers had infiltrated its IT systems through a phishing scam sent to one of its subsidiaries that was initiated by at least one employee responding to a malicious e-mail.

Continue Reading A Busy Week at OCR: The Anthem Settlement, an Updated Security Risk Assessment Tool, and New Priorities for OCR

Recently, the attorneys general of eleven states and the District of Columbia filed suit to challenge the Department of Labor’s (DOL) new association health plan (AHP) regulations (the “AG Litigation”). Although it is unclear at this time whether the AG Litigation will be successful in invalidating the regulations, it creates a potential impediment for a key aspect of the Trump administration’s effort to change the health insurance marketplace.

The AHP Regulations

An AHP is a group health plan that is sponsored by an association of employers and is treated as a single employee benefit plan for regulatory purposes. According to the DOL, AHPs offer small employers (and now self-employed individuals) the following key advantages over sponsoring a group health plan at the individual employer level (or procuring individual coverage):

  • Because AHPs can negotiate with insurers or healthcare providers on behalf of the entire group (instead of each employer negotiating individually), the AHP will theoretically obtain lower premium rates; and
  • Because AHPs typically have enough participants to qualify as a “large group” plan, an AHP is not subject to the more stringent Affordable Care Act (ACA) requirements imposed on plans in the “small group” and individual markets.

Although the concept of AHPs predates the DOL’s new regulations, associations had difficulty forming AHPs under prior law. Before the new regulations, an association could form an AHP only if it satisfied stringent “commonality of interest” standards. Those standards require that the association be formed for a purpose unrelated to the provision of benefits, and that it have a common economic or representational interest in a narrow sense. As a practical matter, few employers could satisfy these requirements, and AHPs have not been commonplace.

Continue Reading New Association Health Plan Rules and What the Recent Attorneys General Lawsuit Means for These New Rules

Last week, the Departments of Treasury, Labor, and Health and Human Services (the “Departments”) issued final regulations to redefine the meaning of “short-term, limited duration insurance” (“short-term insurance”). The controversial regulations are likely to expand the use of this limited form of health insurance among consumers who do not receive coverage through their employers.


The Affordable Care Act (“ACA”) imposes strict requirements on most individual health insurance coverage. Short-term insurance is exempt from most of those requirements. Significantly, short-term insurance (unlike other forms of individual insurance) is: (1) allowed to exclude or limit coverage for preexisting conditions; (2) not required to provide coverage for essential health benefits (such as coverage for emergency care, inpatient care, prescription drugs, and mental health services); and (3) permitted to impose annual and lifetime maximums to limit the amount that the insurance company pays.

Continue Reading Final Regulations on Short-Term, Limited Duration Insurance: What the Regulations Mean for the Individual Insurance Marketplace

A U.S. Department of Health and Human Services (“HHS”) administrative law judge (“ALJ”) ordered the University of Texas MD Anderson Cancer Center (“MD Anderson”) last month to pay a $4,348,000 civil monetary penalty because of violations of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”).  While the vast majority of enforcement actions taken against covered entities and business associates to date have been voluntary settlements, this action came in the form of summary judgment in favor of HHS.  MD Anderson has stated that it intends to appeal the ALJ’s decision.  If upheld, the civil monetary penalty would be the fourth-largest amount in HHS’s enforcement history.

The alleged HIPAA violations arose from three separate breaches reported by MD Anderson in 2012 and 2013, involving:  (1) the theft of an unencrypted laptop from the home of an MD Anderson physician and (2) the loss of two unencrypted thumb drives by MD Anderson personnel.  The lost devices in total contained the protected health information (“PHI”) of 34,883 patients, including information such as patient names, Social Security numbers, medical record numbers, and clinical and research information.

The ALJ’s sharp-tongued opinion provides several important reminders to covered entities and business associates with respect to HIPAA.

First, encryption is a strong mechanism for protecting organizations from breaches involving theft or loss of portable electronic devices.  Breach reports involving the loss or theft of portable electronic devices have triggered many of the HHS inquiries resulting in enforcement actions for HIPAA violations.  While the ALJ noted in his opinion that encryption is not specifically required by the HIPAA Security Rule, it is one way to help prevent reportable breaches involving the loss or theft of a portable electronic device containing PHI.

Second, the failure to implement approved security controls for the protection of PHI in a timely manner exposes organizations to significant risk.  The ALJ noted that MD Anderson first identified the need to encrypt its data in 2006—six years before the first breach reported in connection with the recent enforcement action occurred.  The ALJ stated that MD Anderson “delayed encryption of laptop devices for years, and then, proceeded with encryption at a snail’s pace.”  Indeed, MD Anderson had not encrypted all of its computers by January 2014.  Once MD Anderson decided to adopt encryption as its determined control for the protection of PHI on portable devices, according to the ALJ, “it was obligated to make it work.”  MD Anderson’s delay in fully implementing its encryption solution was ultimately found to be an aggravating factor supporting the reasonableness of the civil monetary penalty.

Third, establishing a HIPAA compliance program that exists solely on paper is not enough.  The 2006 edition of MD Anderson’s Information Resources Security Operations Manual required that data stored on laptops and other portable media be encrypted or protected with access controls.  In 2007, MD Anderson directed that confidential data should not be stored on portable devices, but that if it was, it must be encrypted using approved methods.  The ALJ was not persuaded by MD Anderson’s written commitments to encryption without follow-through on implementation and enforcement.

Fourth, organizations must consider how to sufficiently control PHI on portable electronic media purchased with technology stipends (sometimes called “Bring Your Own Devices” or “BYOD”).  One of the reported breaches that led to the recent enforcement action involved the theft of a laptop purchased by a physician with MD Anderson’s funds.  Because MD Anderson had not yet fully implemented its encryption plan in 2012 when the theft occurred, the laptop was not encrypted.  The laptop was not even password-protected.  Organization-issued laptops and other devices come standard with the organization’s access controls, including password protections, encryption, and other administrative controls preventing users from circumventing security efforts.  Organizations that offer technology stipends for the purchase of devices of the employees’ choosing should consider the mechanisms through which they should protect the security of the data accessed by such BYOD devices.  These could include, for example, mobile device management software or remote access controls that disallow storage of PHI on those devices, in addition to the policies and procedures governing the use of such devices.

Fifth, research data maintained by a covered entity must be protected in accordance with the HIPAA Privacy Rule and Security Rule.  MD Anderson argued that HIPAA did not apply to the data maintained on the lost and stolen devices because it was used in research, relying on preamble language that HIPAA does not apply to research records obtained by a researcher in its role as a researcher.  While MD Anderson attempted to read the pertinent preamble language broadly, the ALJ focused on the role of the institution conducting the research.  If the research was being conducted by a non-covered entity or non-business associate, that information would be subject to that narrow exception.  The ALJ suggested that a covered entity may be able to segregate its clinical functions from its research functions, which could be accomplished by a hybrid entity designation.  MD Anderson, however, did not argue that it segregated its clinical and research functions in this manner, resulting in the continued application of HIPAA to the data used for research.

HHS’s press release, the Notice of Proposed Determination, and the ALJ’s opinion are available here.

Commissioner Scott Gottlieb of the U.S. Food and Drug Administration (“FDA”) stole the spotlight this past month when he delivered a speech discussing big promises from the agency regarding artificial intelligence (“AI”) in healthcare. “One of the most promising digital health tools is artificial intelligence, particularly efforts that use machine learning,” said Gottlieb when explaining that the FDA was “actively developing a new regulatory framework to promote innovation in this space.”

Indeed, this year the FDA has shown a lot of support for AI in healthcare by authorizing the marketing of several cutting-edge AI technologies—one of which was even permitted to be marketed without the requirement for additional clinician oversight.

In February, the FDA permitted marketing of clinical decision support software that uses algorithms to help neurovascular specialists arrive at answers more quickly and speed time to treatment for potential stroke patients.

Then in April, the FDA permitted marketing of the first device to use AI to detect a medical condition. Called IDx-DR, the device utilizes an AI algorithm to screen for diabetic retinopathy. This device is unique in that its results do not require additional review by a specialized clinician, which allows the test to be performed in a primary care setting. Like many devices in the digital health space, IDx-DR was reviewed through the FDA’s De Novo premarket review pathway, which is a way for new medical devices that present “a low to moderate risk to patients” and have no legally marketed predicate device on which to base a determination of substantial equivalence to be reclassified into Class I or Class II and avoid the need for a full Premarket Approval (“PMA”) application.

IDx-DR was also granted Breakthrough Device designation, which expedites the review of medical devices that provide for more effective treatment or diagnosis of life-threatening or irreversibly debilitating diseases or conditions. The FDA has consistently shared its intention to be flexible with digital health product developers whose software and devices do not fall neatly into the FDA’s well-established “product types.” Most recently, in May, the FDA permitted the marketing of OsteoDetect, an AI algorithm for aiding providers in the detection of wrist fractures by analysis of two-dimensional X-ray images.

These examples of successful utilization of the De Novo pathway and Breakthrough Devices program are likely to continue to encourage AI innovation by medical device and digital health companies by using these pathways to market as an FDA roadmap for marketing authorization of their own products.

The U.S. Food and Drug Administration’s (FDA’s) Center for Devices and Radiological Health (CDRH) recently issued its Medical Device Safety Action Plan:  Protecting Patients, Promoting Public Health (Action Plan), an aspirational set of goals concerning the agency’s approach to medical device safety.  This Action Plan can be considered the FDA’s attempt to reorganize its toolbox to make its regulatory efforts more efficient, effective, and responsive.  The Action Plan describes the FDA’s intentions to:

  1. Integrate CDRH’s premarket and postmarket offices and activities to advance the use of a Total Product Life Cycle (TPLC) approach to device safety;
  2. Establish a robust medical device patient safety net in the United States;
  3. Explore regulatory options to streamline and modernize timely implementation of postmarket mitigations;
  4. Spur innovation towards safer medical devices; and,
  5. Advance medical device cybersecurity.

Radically Restructuring CDRH

The cornerstone of the Action Plan is a TPLC approach intended to enable nimble and comprehensive medical device regulation, especially as it concerns postmarket medical device surveillance and response, balancing patient benefit, device safety, and innovation.  Perhaps the clearest indicator of the FDA’s embrace of the TPLC approach is the proposed radical restructuring of CDRH, which has been talked about for some time.  The Action Plan sets out the FDA’s rationale for the restructuring:

Rather than assessing a device only at one point in time – for instance, to evaluate whether a device meets the standard for approval, or to evaluate post-market data involving a device safety signal – reviewers, compliance officers, and other experts would work in teams with responsibility for device oversight throughout the product’s development and commercialization.

Therefore, instead of the current structure that focuses on stages of a product’s life cycle, CDRH would be reorganized into one office and seven smaller “device-specific offices that would each be responsible for premarket review, postmarket surveillance, manufacturing and device quality, and enforcement.”  A separate office focused on clinical evidence and analysis is being considered, and it would comprise teams working on “clinical evidence policy, evidence synthesis and analysis, biostatistics, bioresearch compliance, and collaboration and outreach to clinical researchers outside of the FDA.”  With this kind of structure, it is clear that the FDA expects CDRH to adopt a “universal” view of and an integrated approach to medical device regulation, with the goal of eliminating regulatory silos.  The proposed reorganization should also enhance information sharing and analysis.

Establishing a Robust Medical Device Safety Net and Streamlining Implementation of Postmarket Mitigations

Another important theme of the Action Plan is to address some of the limitations of current postmarket surveillance tools (e.g., that Medical Device Reports (MDRs) rely on a clinician to recognize a problem and its relationship to the device rather than some other factor, or that there are few incentives for patients to participate in postmarket surveillance studies of a device).  To that end, the Action Plan seeks to position CDRH to have access to the vast and growing amount of available digital health data.  By focusing attention on developing a robust medical device safety net and the impact that will have on improving the timeliness and effectiveness of postmarket mitigations, the FDA is positioning itself squarely at the crossroads of Big Data and complex data analysis.  CDRH already has programs in place to track medical devices – the Global Unique Device Identification Database (GUDID) – and to understand and use real world evidence (RWE).  Unique device identifiers (UDIs) now appear on most medical device labels, and labelers are required to submit information about each medical device bearing a UDI to the FDA; this information is stored in the GUDID.  According to the FDA, UDIs provide a way to document device use (e.g., electronic health records and registries can include UDI information) so that there can be, among other things, “more accurate reporting, reviewing, and analyzing of adverse event reports” because “healthcare professionals and others [will be able] to more rapidly and precisely identify a device and obtain important information concerning the device’s characteristics.”  RWE (comprised of raw patient health information) typically originates from non-clinical research sources, such as health monitoring devices and claims and billing activities.  RWE can be aggregated and analyzed to assess and identify trends, though special attention must be paid to data quality and privacy issues.

According to the Action Plan, the FDA plans to use this data collection in two critical data evaluation programs:  The National Evaluation System for Health Technology (NEST) and CDRH’s Signal Management Program (SMP).  The SMP uses signals (defined by the FDA as “a new potentially causal association or a new aspect of a known association between a medical device and an adverse event or set of adverse events”) to connect postmarket surveillance with the premarket review process by informing the design and use of similar devices that are in the premarket review phase.  By integrating postmarket surveillance information into pre-market review, the FDA intends for similar devices seeking entry into the market to have already accounted for known safety risks.

It appears that the FDA will make NEST, a public-private partnership (or PPP), the central hub for data evaluation and management that, according to the FDA, will enable improved safety risk identification and postmarket mitigation activity and strategy.  NEST is intended to “facilitate detection of potential safety risks that would not otherwise have been identified as quickly, or at all, as well as facilitate more timely capture of potential safety signals.”  However, by the FDA’s own admission, NEST is currently underfunded; realizing its full potential in the way the FDA envisions remains an open and unaddressed issue.

A critical part of this robust patient safety net, according to the FDA, is attention to women’s health.  The FDA stated that, over the last several years, there have been “several significant medical device safety issues [involving] devices intended for women’s health uses.”  To that end, the Action Plan contemplates building out, for example, the Women’s Health Technologies Strategically Coordinated Registry Network (CRN) to improve its functionality and utility for providing the evidence needed to improve women’s medical device safety evaluation.

The Action Plan also contemplates the FDA using these data collection and analyses portals to improve postmarket mitigations (e.g., labeling or user training).  The FDA plans to examine its current statutory authority to determine whether it can develop a so-called “umbrella regulation” to enable quicker implementation of certain postmarket mitigations.  Because issues related to medical device safety may not be known until the device is used in a clinical setting or among a diverse population, the FDA frequently identifies necessary improvements for medical device safety after a medical device is on the market.  To implement postmarket mitigations, however, the FDA typically must engage in rulemaking, which is a lengthy process involving notice and comment.  Though the FDA is often able to work with manufacturers to voluntarily implement postmarket mitigations, the agency is clearly unhappy with having to resort to this option.  The “umbrella regulation” mentioned in the Action Plan is a way for the FDA to have a more rapid and direct response to postmarket safety incidents.

Facilitating Medical Device Innovation and Safety

As the FDA identifies postmarket mitigations necessary to improve medical safety, so too do manufacturers, on their own, modify and improve the safety of medical devices (e.g., by adding new features).  According to the FDA, however, this kind of innovation is not readily incentivized by the marketplace unless there is a known safety concern.  The FDA is concerned with the effect on the quality of medical devices on the market.  Within the bounds of the FDA’s statutory authority and to encourage innovation – as has been done, for example, with the Breakthrough Devices Program – the Action Plan mentions several things that the FDA intends to do to support and facilitate medical device innovation as it concerns safety.  Among the options the FDA will explore are encouraging greater collaboration between the FDA’s staff and medical device developers, developing a discrete program like the Breakthrough Devices Program, focusing regulatory science resources on safety innovation, and developing scientific toolkits for developers to use to integrate safety risk management into medical device design and development.

Medical Device Cybersecurity as a Patient Safety Issue

Finally, but importantly, medical devices are like every other connected device in today’s world:  They are not immune to the dangers posed by cyber threats.  As interconnectivity increases, so too does exposure to cyber risk, and the Action Plan recognizes this by including a focus on medical device cybersecurity as a patient safety issue.  During the pre-market review process, the FDA will consider requiring firms to embed cybersecurity capabilities (e.g., the capacity to patch a software vulnerability) into the design of the medical device.  Such an approach should emphasize for manufacturers that cybersecurity considerations cannot be an afterthought in medical device design.  Another way the FDA plans to emphasize its commitment to managing cybersecurity issues is by considering postmarket authority that would “require that firms adopt policies and procedures for coordinated disclosure of vulnerabilities as they are identified.”  Consistent with its use of PPPs in other data collection and analysis areas, the FDA is also considering developing a team of experts across several disciplines to be a resource for device makers and the FDA staff.  This CyberMed Safety (Expert) Analysis Board (CYMSAB) would, among other things, assess vulnerabilities, evaluate patient safety risks, consult with organizations, and be a rapid-response field team that investigates the circumstances surrounding a compromised medical device (at the manufacturer’s or the FDA’s request).

The Action Plan:  Looking Ahead

Though aspirational, the Action Plan implicates a number of legal issues, including the traditional (e.g., medical device marketing applications and postmarket surveillance, intellectual property protection) and the novel, emerging, and rapidly-evolving (e.g., cybersecurity threat and risk management, medical device software development, digital health data access, privacy, and protection).  In only a short five item list, the FDA presents a dense, ambitious plan to build on its existing resources and to shift its regulatory approach to one that considers the TPLC of a medical device and that continues to refine the patient benefit-risk framework currently in use.  Only time will tell if this Action Plan will meet the FDA’s quest to be more comprehensive and nimble.  Funding for existing programs and for the expansions contemplated by this Action Plan was not specifically addressed, but the FDA has indicated that it is ready to embrace fresh thinking in medical device regulation.

Venable’s team of attorneys is ready and able to help you plan for the multi- and inter-disciplinary issues presented by this Action Plan, and for the many changes it could introduce into the medical device regulatory space and for your business.  In addition, the FDA is accepting comments on the Medical Device Action Plan: Protecting Patients, Promoting Public Health, and our attorneys are prepared to assist with the drafting and submission of comments.

On April 24, the Center for Medicare and Medicaid Services (“CMS”) made major changes to the electronic health record (“EHR”) Meaningful Use Program.  Issued as part of a proposed rule updating the Medicare Inpatient Prospective Payment System and Long-Term Care Hospital Prospective Payment System requirements, these changes will significantly shift an important program that helped drive the widespread adoption of EHR tools in the U.S. healthcare industry.

CMS’s stated goals are to transform the Meaningful Use Program to make it more flexible and less burdensome, emphasize measures that require the exchange of health information between providers and patients, and incentivize providers to make it easier for patients to obtain their medical records electronically.  Reflecting a changed focus, the new program will no longer be called “Meaningful Use.”  Instead, it will now be known as the “Promoting Interoperability” program.  The proposed rule includes requirements that providers use the 2015 edition of certified EHR technology in 2019 in order to demonstrate meaningful use, avoid penalties, and qualify for incentive payments.  Importantly, this set of requirements mandates the integration of Application Programming Interfaces (“APIs”) to streamline the flow of information between providers and patients.

These proposed changes could facilitate patients’ collection of their EHR information from multiple providers and incorporation of such information into a combined portal or personal health record. They could also improve access to a patient’s EHR data by the patient’s providers and reduce the administrative burden to transfer records between non-interoperable IT systems.  The “Promoting Interoperability” program is a part of a larger effort by CMS to create a patient-driven healthcare system that provides high quality care and eliminates outdated and redundant regulatory requirements.