Healthcare Case on Cutting Corners

A settlement with Raleigh Orthopaedic is just the latest in a growing series of high-dollar resolution agreements about privacy standards.

Healthcare providers, health plans, healthcare clearinghouses (covered entities) and business associates that provide services that deal with protected health information received another reminder to be prepared to prove they are properly handling and administering electronic and other protected health information. This came after the Department of Health & Human Services Office of Civil Rights (OCR) announced its latest in a growing series of high-dollar resolution agreements with a covered entity that was charged with violating the privacy and security standards of the Health Insurance Portability and Accountability Act (HIPAA). Raleigh Orthopaedic Charges and Resolution Agreement The Resolution Agreement and Corrective Action Plan announced by OCR on April 20 requires the Raleigh Orthopaedic Clinic, P.A. to pay $750,000 to settle charges that it violated the privacy rule. The clinic handed over the protected health information of approximately 17,300 patients to a potential business partner without first executing a business-associate agreement. Raleigh Orthopaedic is a provider group practice that operates clinics and a surgery center in the Raleigh, NC, area. OCR’s investigation indicated that Raleigh Orthopaedic violated privacy rules by releasing X-ray films and related protected health information of patients to an entity that promised to transfer the images to electronic media in exchange for harvesting the silver from the X-ray films. Raleigh Orthopaedic failed to execute a business associate agreement with this entity before turning over the X-rays and protected health information (PHI). Although the resolution only addresses charges OCR brought against the covered entity (Raleigh Orthopaedic), business associates need to keep in mind that both covered entities and business associates are now responsible for ensuring compliance with the business associate agreement requirements of the privacy rules — ever since the stimulus bill amended HIPAA to make most provisions of the privacy rule directly applicable to business associates, as well as covered entities. Takeaways for Covered Entities and Their Business Associates The resolution agreement includes a strong message for other covered entities and business associates: It's important for an entity to take seriously its responsibility under the privacy rule to ensure the business associate agreement requirements of the privacy rule are met before business associates are allowed to receive, access or use protected health information. Jocelyn Samuels, the director of the U.S. Department of Health and Human Services (HHS) Office for Civil Rights (OCR), said, “It is critical for entities to know to whom they are handing PHI and to obtain assurances that the information will be protected,” and “HIPAA’s obligation on covered entities to obtain business associate agreements is more than a mere check-the-box paperwork exercise.” In many cases, the process of evaluating the adequacy of current arrangement and of considering the advisability of changes to tighten existing practices will result in the discovery and discussion of potentially sensitive information. For example, it is possible that, in the course of review, parties may be unable to locate a signed business associate agreement that governs a relationship, or, in the course of review, information indicates breaches of protected health information or other privacy rule violations may have occurred. For this reason, most covered entities and their business associates will want to consider arranging it so this review and analysis is conducted within the scope of attorney-client privilege or under the direction of qualified legal counsel with HIPAA experience who has entered into a business associate agreement.

Cynthia Marcotte Stamer

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Cynthia Marcotte Stamer

Cynthia Marcotte Stamer is board-certified in labor and employment law by the Texas Board of Legal Specialization, recognized as a top healthcare, labor and employment and ERISA/employee benefits lawyer for her decades of experience.


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