HHS Enforces New Business Associates Rules

On Jan. 19, 2012, in the wake of the theft of an unencrypted laptop computer containing approximately 23,500 patients’ records, the Minnesota attorney general brought the first formal enforcement action against a business associate, Accretive Health, Inc., for an alleged violation under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), using her authority under the Health Information Technology for Economic and Clinical Health (“HITECH”) Act. Additionally, the attorney general appears deeply unsettled by the amount of information that Accretive Health collected about patients without the patients’ knowledge, alleging that this lack of transparency represents deceptive and fraudulent practices under Minnesota law.

Although the U.S. Department of Health and Human Services (“HHS”) has indicated that it will not enforce the HITECH Act (such as with respect to the application of HIPAA against business associates) until the final omnibus regulation becomes effective, the Minnesota suit against Accretive Health is a reminder that the HITECH Act’s statutory provisions with respect to business associates currently are in effect and that state attorneys general (as well as the U.S. Department of Justice) are not bound by HHS’ enforcement discretion when considering the exercise of their authority to enforce HIPAA.

Business associates may want to review whether they currently are complying with the statutory privacy and security requirements of the HITECH Act, such as requirements to:

• Limit uses and disclosures of protected health information
• Perform and document risk analysis and risk management processes
• Implement reasonable and appropriate administrative, physical, and technical safeguards, particularly with respect to electronic protected health information
• Formalize privacy and security efforts through policies and procedures
• Appoint a security officer (and perhaps a privacy officer)
• Verify compliance with existing business associate contracts – failure to comply may result in increased liability beyond breach of contract.

Additionally, business associates should monitor this suit because the Minnesota attorney general’s request for Accretive Health to affirmatively disclose to patients its collection of health information could represent a fundamental shift in the relationship between business associates and patients and may create substantial additional notification obligations and costs.

Background

According to the Minnesota attorney general’s complaint, Accretive has a controversial history in Minnesota with respect to its arbitration and collection of consumer debts. Accretive Health is a “portfolio company” of Accretive, LLC, which allegedly tried to create a “comprehensive, alternative legal system” for debt collection by taking a governing interest in the National Arbitration Forum (the nation’s largest arbitration firm for consumer credit card collections), forming Axiant (a large national debt collection agency for the credit card industry), and acquiring the assets and collections of Mann Bracken law firm (the nation’s largest collection law firm). The Minnesota attorney general filed a lawsuit against the National Arbitration Forum in 2009 for allegedly misleading consumers, and it is through this lens that the attorney general apparently viewed the activities of Accretive Health.

According to the complaint, on July 25, 2011, an Accretive Health employee allegedly left a password-protected, unencrypted laptop containing the patient information regarding two hospitals in the back seat of a rental car, where the laptop was stolen. Accretive Health provided revenue cycle management activities to the two hospitals, ranging from “front office” (scheduling, registration, and admissions), “middle office” (billing), to “back office” (collections). Additionally, with respect to one of the hospitals, Accretive Health provided “quality and total cost of care” activities, in which Accretive helped the hospital negotiate contracts with certain insurance companies in which the hospital would receive incentive payments for cutting health care costs, with Accretive receiving a portion of any incentive payments in exchange for “managing the care coordination process”. Based on these activities, the stolen laptop allegedly contained names, addresses, dates of birth, social security numbers, Accretive-derived scores to predict the “complexity” and likelihood of inpatient admission of patients, and information regarding whether patients had any of 19 conditions (e.g., HIV, diabetes, schizophrenia, and depression).

Security Allegations

The attorney general’s complaint alleges eight security violations of HIPAA, such as a failure to implement policies and procedures to prevent, detect, contain, and correct security violations, to effectively train employees, and to implement policies regarding the receipt and removal of hardware and electronic media containing electronic protected health information. Since the HITECH Act authorizes state attorneys general to obtain statutory damages in the amount of up to $100 per violation, limited to up to $25,000 per calendar year for multiple violations of an identical provision, the alleged continuing violation of eight provisions (potentially over multiple years) could represent hundreds of thousands in statutory damages. Additionally, the attorney general seeks injunctive relief and attorneys’ fees pursuant to the HITECH Act and Minnesota law.

Deceptive Practices Allegations

While the importance of the first HIPAA enforcement action against a business associate should not be understated, what may make this case particularly significant is the attorney general’s allegation that Accretive Health participated in deceptive and fraudulent practices by failing to affirmatively disclose to patients the amount of health information it was collecting. The attorney general claims that:

In sharp contrast to the lack of information provided by Accretive to Minnesota patients, it provides much more detailed information to Wall Street investors about its role in the health and lives of patients. Minnesota patients are entitled to know the information that Accretive amasses about them and its extensive role in their health care so that they can make informed choices about their health care and medical records.

The attorney general claims that this alleged lack of transparency violated the Minnesota Prevention of Consumer Fraud Act and Uniform Deceptive Trade Practices Act.

The allegations of deceptive and fraudulent trade practices raise the question as to whether other entities collecting health information while operating on behalf of health care providers must affirmatively disclose such collection practices to patients to comply with Minnesota law (and similar laws in other states). It is unclear from the suit, for example, whether there is a particular threshold in which third parties must affirmatively disclose the collection of health information.

While the goal of increased transparency with respect to health information may be a noble one, this lawsuit has the potential to set some dangerous precedent, resulting in health care consumers being inundated with hundreds of notices of the collection of health information by third party vendors, at great expense to the vendors. The complaint seeks Accretive Health’s affirmative disclosure to patients regarding the information Accretive Health collects, suggesting that this information is necessary to enable patients to make informed choices about their health care and medical records. But, if the attorney general obtains such relief and other business associates follow suit and affirmatively disclose to patients any time the patient’s information is collected, then health care consumers may find themselves drowning in a sea of notices by entities who likely are unknown to the consumer but who receive the consumer’s health information on behalf of the consumer’s health care providers. These additional notices may raise the costs of business associates and, in turn, the costs consumers must pay for health care.

By Adam H. Greene and Rebecca L. Williams