On October 30, 2009, the Secretary of the HHS adopted an Interim Final Rule amending HIPAA’s enforcement regulations relating to the imposition of civil monetary penalties (“CMP”). Most significantly, the Interim Final Rule distinguishes between violations occurring before February 18, 2009 and violations occurring on or after that date with regard to the penalty amount and available affirmative defenses. For violations occurring prior to February 18, 2009, the range of CMP amounts will not change (i.e., maximum penalty amount for each violation is not more than $100 and maximum penalty amount for all violations of an identical requirement or prohibition during a calendar year is not to exceed $25,000). The amendments focus on a Covered Entity’s culpability, and provide the following categories of violations and penalties per violation:
- Category 1 – Covered Entity did not know of the violation and would not have known through the exercise of reasonable diligence (each violation: $100-$50,000);
- Category 2 – Violation was due to a reasonable cause (each violation: $1,000 to $ 50,000);
- Category 3 – Covered Entity demonstrated willful neglect but corrected the violation ($10,000 to $50,000); and
- Category 4 – Covered Entity demonstrated willful neglect and did not correct the violation ($50,000).
HHS will not impose the maximum penalty in all cases, but rather, will base the penalty on the nature and extent of the violation and resulting harm, as well as other factors including the Covered Entity’s compliance history and financial condition. Regarding affirmative defenses, on or after February 18, 2009, a Covered Entity may not assert an affirmative defense that it did not know and reasonably should not have known of a violation unless it also corrects the violation during the 30-day period beginning on the first date it learned of the violation or during another period of time determined by HHS (except in the case of violations due to willful neglect—uncorrected category, which are ineligible for an extension of the 30-day period and for which a timely correction cannot serve as an affirmative defense).
The Interim Final Rule specifies that HHS may continue to provide waivers for violations due to reasonable cause and not willful neglect if the violations are timely corrected. Finally, the amendments relocate the terms “reasonable cause”, “reasonable diligence”, and “willful neglect” to signal the terms’ applicability to the entire subpart D, and require HHS to identify the applicable violation category upon which a proposed penalty is based.
HHS invited public comments on: (1) the calculation of the start of the 30-day cure period for purposes of determining the penalty tier for a violation due to willful neglect; (2) whether the reorganization of the definitions of “reasonable cause”, “reasonable diligence”, and “willful neglect” will lead to any unintended consequences; and (3) HHS’ interpretation of certain ambiguous language. Comments are due by December 29, 2009.