HIPAA Penalties: Understanding the Consequences of Non-Compliance
Posted on: September 12th, 2024 01:23 pm
The Health Insurance Portability and Accountability Act (HIPAA) is a critical part of any healthcare organization’s compliance program. From annual security risk assessments (SRAs) to ongoing remediation efforts, healthcare cybersecurity teams are heavily occupied with these regulations.
However, many organizations are still not sure exactly what the risks of non-compliance are and, therefore, cannot be confident that they will avoid it.
This article provides everything you need to know about the penalties for HIPAA non-compliance, helping you to:
- Have a deep understanding of HIPAA requirements
- Understand the specific penalties for HIPAA violations
- Proactively improve your HIPAA program
What is HIPAA and Its Purpose?
The Health Insurance Portability and Accountability (HIPAA) Act is a U.S. federal law designed to protect the personal data of healthcare patients and establish clear rights around privacy and information security. It is supported by three main rules:
- The HIPAA Privacy Rule: A set of standards that dictate how covered entities should and should not use and disclose protected health information (PHI)
- The HIPAA Security Rule: A set of three “safeguards designed specifically to protect PHI in its electronic form (ePHI)
- The Breach Notification Rule: A series of requirements that dictate how covered entities must inform patients when their PHI or ePHI is breached
What Are the Consequences of HIPAA Non-Compliance?
Given the sensitivity of healthcare data, it should be unsurprising that a failure to protect it has severe consequences. HIPAA non-compliance can lead to:
1. Reputational Fallout
Non-compliance with HIPAA regulations can have a dramatic impact on an organization’s public image. Organizations that are found to neglect their responsibility to protect PHI often lose patients, struggle to acquire new ones, and even experience hiring problems.
This is reflected by the Department of Health and Human Services (HHS) ‘s “Wall of Shame,” which lists all organizations that have been found in violation of the regulations, as well as those that are under investigation for potential breaches. Equally, the media routinely reports on organizations that experience particularly large or egregious violations – leaving a lasting stain on their public image.
2. Lawsuits and Fines
Organizations that breach HIPAA rules can suffer financial fallout in two ways:
- OCR fines: The Office of Civil Rights (OCR) regularly fines organizations for HIPAA violations, with more than $4 million of fines issued in 2023 alone.
- Patient lawsuits: Recent years have seen a growing trend of patients suing covered entities for allowing data breaches to occur. The HIPAA rules often serve as a legal benchmark for the level of protection patients can expect, which means HIPAA non-compliance could significantly increase your legal liability.
3. Indirect Financial Costs
HIPAA non-compliance creates a range of extra costs beyond OCR fines, including:
- Cybersecurity insurance: Your insurance premiums are likely to increase significantly in the wake of a HIPAA violation, creating a large recurring cost for your organization.
- Legal fees: Even if you are not successfully sued by patients, the legal fees required to defend your organization are likely to be very high.
- Remediation costs: HIPAA violations inevitably require extensive remediation to ensure future compliance, which tends to involve a heavy time and financial investment.
4. Individual Jail Time
HIPAA violations can also lead to criminal charges, with the most severe cases leading to a maximum of 10 years of jail time.
HIPAA Violation Classifications
HIPAA violations are split into four different tiers:
- Tier 1: The covered entity was unaware of the violation, and standard due diligence would not have revealed that the HIPAA rules had been violated.
- Tier 2: The covered entity was unaware of the violation but could reasonably have been expected to discover the violation through due diligence.
- Tier 3: The covered entity is deemed to have willfully neglected the HIPAA Rules, but the problem was corrected, and the consequences were dealt with within 30 days of discovery.
- Tier 4: The covered entity not only neglected the HIPAA Rules but also made no effort to resolve or mitigate the consequences for at least 30 days.
Civil Penalties for HIPAA Non-Compliance
When HIPAA violations lead to fines from the Office of Civil Rights (OCR), the severity of the charge is based on the tier a breach falls into:
| HIPAA Violation Category | Expected Fine |
| Tier 1 | Minimum $100 per violation, up to a maximum of $50,000 total |
| Tier 2 | Minimum $1,000 per violation, up to a maximum of $50,000 total |
| Tier 3 | Minimum $10,000 per violation, up to a maximum of $50,000 total |
| Tier 4 | Minimum $50,000 per violation, with no official upper limit |
Criminal Penalties for HIPAA Non-Compliance
While HIPAA violations can lead to serious legal repercussions for individuals, prison sentences are usually reserved for intentional violations. In these cases, the individual’s motive plays a large role in the severity of the sentence.
One recent case saw individuals jailed for consciously conspiring to gain authorized access to information about patients involved in motor vehicle accidents – and sell it to an insurance firm. This led to five years’ probation for the main defendant.
Specific Penalties for HIPAA Violations: An Overview of Potential Fines and Settlements
Given the complexity of the regulations, there are several different ways an individual or covered entity can breach the HIPAA rules – and there are different penalties for each specific violation.
HIPAA violations can be broken down into five distinct categories:
1. Unauthorized Access or Disclosure of PHI
The HIPAA Privacy and Security Rules dictate that organizations must have strict measures in place to ensure only authorized individuals can access or disclose PHI. If any individual without official authorization comes into contact with patient data, this is deemed a breach.
It’s important to note that unauthorized access can range from accidental errors to willful theft – in both cases, the covered entity is likely to be held liable and potentially fined.
2. Failure to Provide Patient Access to PHI
HIPAA not only protects individuals’ PHI – it also grants them a legal right to access it. Covered entities must allow patients to inspect or obtain a copy of their PHI in a timely manner. Failure to do so will lead to a violation and possible financial penalties, with recent cases leading to 6-figure fines.
However, it is important to note that this right does not extend to all PHI. For example, a patient may be barred from access to PHI that is not used to inform decisions about their treatment. This includes notes from a psychotherapist or psychiatrist or information gathered in support of impending legal action.
3. Failure to Conduct a Risk Analysis
Regular risk analysis is essential not only to maintain HIPAA compliance but also to demonstrate due diligence and ensure that a covered entity cannot be accused of willful negligence. Risk analysis is a required measure under the HIPAA Security Rule, and failure to conduct such assessments has led to fines upwards of $5 million.
4. Failure to Notify Individuals of a Breach
The HIPAA Breach Notification Rule dictates that covered entities must notify any individual whose PHI is breached within unreasonable delay and no later than 60 days after the breach takes place. Further, if the breach affects 500 or more individuals within a given state, the organization must issue a statement to the media.
5. Failure to Safeguard PHI
The HIPAA Privacy and Security Rules require organizations to have strict safeguards in place to ensure PHI is not misused or disposed of improperly. However, if an organization’s safeguards are not adequate, they will be found liable for a breach – even if the breach was the result of a hack.
3 Tips to Avoid HIPAA Violations
The HIPAA rules are complex, and organizations spend up to $120,000 each year on compliance measures. But the following steps will help simplify and enhance your HIPAA compliance program:
1. Conduct Regular Training
A recent survey found that over half of all healthcare employees don’t understand the HIPAA rules – which explains why employee error is the leading cause of breaches. But this can be quickly and cost-effectively resolved with:
- On-demand training: Provide employees with educational resources online, making training easier to fit around their general workflow.
- Implement tests: Announce that your staff will be required to pass a simple HIPAA knowledge test at a specific interval.
- Improve technical safeguards: Introduce stronger protections, such as Multi-Factor Authentication (MFA), to make it harder for employees to cause accidental breaches.
2. Improve Audit and Assessment Processes
The average healthcare organization does not run HIPAA security risk assessments (SRAs) frequently enough, which leaves them at increased risk of non-compliance. But this is rarely because they don’t want to assess their risks – they just can’t afford the time and resources an SRA demands, let alone multiple SRAs in a single year.
Monitoring and assessing HIPAA compliance could be dramatically easier with:
- Established teams: Many smaller organizations don’t have internal cybersecurity teams. However, they should still designate a “HIPAA team” or select an individual who will be responsible for running regular assessments.
- Centralized data: Security teams can save endless hours of manual effort and gain a clearer view of organization-wide HIPAA compliance if they consolidate their fragmented data systems.
Automated software: Products like HIPAA One™ enable organizations to reuse previous assessments and apply relevant responses for a single assessment across multiple sub-entities – dramatically reducing the level of effort involved in an SRA. 
3. Establish Incident Response Plans
A recent study found that 37% of healthcare organizations have no plan in place to deal with cybersecurity breaches. But, given that the HIPAA Breach Notification Rule requires them to inform individuals about a breach or risk penalties, a lack of established processes presents a major regulatory risk.
One of the quickest ways covered entities can improve their HIPAA compliance program is to create an incident response plan that establishes the following:
- Identification: Clearmeasures to quickly identify when a data breach has taken place.
- Communication: Plans for how and when individuals, media or the OCR will be notified of the breach
- Remediation: Measures to ensure the consequences of the breach are mitigated as quickly as possible
Maintaining HIPAA Compliance
While many organizations place a heavy emphasis on annual SRAs, HIPAA compliance should be an ongoing process. This should be reflected in continued efforts to proactively improve your cybersecurity posture, but there are a few further steps leaders can take:
1. Stay Current with Changes and Updates
While the core principles of HIPAA remain stable, new requirements or guidance are regularly introduced. However, these changes are typically promoted ahead of time, enabling organizations to adapt their programs comfortably – as long as they stay up-to-date with these announcements.
2. Partner with External Experts
The burden HIPAA places on internal teams varies between organizations. Small entities typically lack the expertise and knowledge to handle regular assessments, while larger enterprises struggle with the sheer scale of tasks involved in organization-wide compliance.
In both cases, finding an external partner will help:
- Reduce the burden: You can outsource key compliance tasks to expert assessors.
- Identify blind spots: You can gain an “outsider’s eye” that is likely to see compliance risks your full-time employees miss.
- Improve processes: External partners can help you develop more robust processes to complete your SRAs faster and with greater confidence.
Conclusion: The True Importance of HIPAA Compliance
HIPAA non-compliance is a serious threat to any covered entity, but the legal and reputational threats should not distract from the true purpose of these regulations – which is to protect your patients’ data.
If you are concerned about unknowing violations or simply want to reduce the burden on your team, Intraprise Health is a trusted partner to over 16,000 providers. With innovative software and expert-guided services, we will help you streamline, accelerate, and enhance your HIPAA program.
Book a free consultation today
Scott Mattila, CSO, Intraprise Health
