Part 2

Money talks.

In other words, offering financial incentives is one way to effect behavior change.  It seems to have worked in getting providers to adopt and use health IT in everyday practice, both in New Jersey and nationally.

HITECH and Meaningful Use Incentive Payments

As explained by ONC in its October 2014 “Report to Congress”:

“Prior to the HITECH Act, adoption of EHRs among physicians and hospitals was quite low. In 2009, roughly one-half (48 percent) of office-based physicians had any type of EHR system. When examining the adoption of EHRs containing functionalities, such as the ability to generate a comprehensive list of patients’ medications and allergies and the ability to view laboratory or imaging results electronically, only 22 percent of office-based physicians had a basic EHR system. U.S. hospitals had similar adoption rates. In 2009, only 12 percent of hospitals had adopted a basic EHR system.”

Stethoscope and currency
Copyright: / 123RF Stock Photo

According to ONC, as of June of 2014, more than 75% of the nation’s eligible physicians had received incentive payments, while 92% of eligible hospitals (including critical access hospitals) had received incentive payments. The areas evaluated by CSHP covered key meaningful use criteria eligible physicians must meet in order to receive these payments.

For the NJ evaluation, CSHP conducted and analyzed a physician mail survey, clinical laboratory and pharmacy mail surveys with telephone follow-up, and physician follow-up telephone interviews with fax and mail follow-up.  In addition, Health Information Organization (HIO) use metrics from each of New Jersey’s six regional HIOs were collected from the New Jersey Department of Health and analyzed by CSHP researchers.

New Jersey Health IT Adoption

The CSHP Report findings identified several key themes.  Among physicians responding, older physicians, those in smaller practices, and specialists were less likely to adopt health IT and more likely to report barriers to adoption (particularly start-up and maintenance costs) and were also more likely to report implementation of health IT as having had a negative impact on their practices.

Most physicians who reported use of health IT felt that use of health IT had a positive impact.  However, they frequently cited start-up and maintenance costs cited as barriers to health IT use.  For labs and pharmacies, those not using health IT reported more perceived barriers to health IT use and anticipated a more negative impact on their workflow and productivity.  Among physicians, labs, and pharmacies, the lack of uniform standards within the industry was cited as resulting in poor system compatibility and was a major issue across all types of health IT.

CSHP weighted the physician mail survey data by specialty to be representative of New Jersey’s office-based physicians. Key findings regarding specific health IT use among the state’s physicians responding to the physician mail survey included the following:

  • Nearly three-fourths (72.5%) of physicians reported use of health IT to transmit prescriptions to pharmacies electronically.
  • Nearly two-thirds (62.6%) of physicians reported use of health IT to view test results from clinical labs electronically. However, only 37.1% reported use of health IT to send lab test requests electronically.
  • Nearly half (48.9%) of physicians reported that they maintained 100% of patient records in their EHR systems.
  • More than half of physicians (57.3%) provided a clinical visit summary to at least 50% of their patients. Less than half of physicians (42.9%) provided electronic patient care summaries to other providers. About one-quarter of physicians (23.0%) accessed electronic patient care summaries created by other providers.

In (very general) comparison, the ONC Report found that in 2013, 57% of prescriptions sent by physicians were sent electronically.  ONC also reported that more than two-thirds (69%) of physicians reported having the capability to order lab tests electronically, while more than three-quarters (77%) reported having the ability to view the lab results electronically.

Perhaps statewide health IT interoperability through expansion of and connection among regional NJ HIOs can be achieved in the next decade, but it will require creation of the necessary health IT infrastructure, awareness of its existence by the providers who will use it, and, perhaps, financial or other incentives to effect its adoption and use.


When I need to travel from the southern part of NJ to northern NJ, I often rely on my car or phone GPS and the relative ease and simplicity of the NJ Turnpike.  If I needed my southern NJ physician to share information with my northern NJ physician, I might be surprised to learn that it’s not as easy to get my health data from point A to point B.  My physicians might be using electronic health records (EHR) and health IT, but the communications infrastructure in NJ needs to be further developed.  We need greater awareness and adoption of regional health information organizations (HIOs), a way to fund their maintenance (an EZ Pass system for the transmission of health data?), and development of a connected, statewide system.

In January of 2011, the Office of the National Coordinator for Health Information Technology (ONC) awarded New Jersey $11.4 million to be used for developing a strategic and operational plan for health information exchange, and required the state to conduct an independent evaluation of the state’s health IT program.  The Rutgers University Center for State Health Policy (CSHP) conducted the evaluation and published a Report (Brownlee, et al) last year showing where New Jersey physicians stand (or stood, during a survey period that ran from late 2013 to early 2014) in terms of adoption and use of health IT.

NJ Physician Engagement with Regional HIOs - Pie ChartWhen I read the Report, I was surprised to see that while physician use of health IT is increasing, the road to regional health data sharing (let alone statewide sharing) seems to be a long way off.  The Report found that awareness of the existence of a regional HIO by physicians was low (12.5%), and physician participation in a regional HIO was even lower (6.8%). The New Jersey Turnpike is gloriously accessible and functional as compared with this glimpse of the New Jersey health IT highway.

Where Are We Now? to be continued…

My partner Elizabeth Litten and I were interviewed by Marla Durben Hirsch for her Medical Practice Compliance Alert article “HIPAA, ICD-10 Among 6 Compliance Trends That Will Affect You in 2014.” While the full text can be found in the January 6, 2014 issue of Medical Practice Compliance Alert, a synopsis is noted below. As we have earlier stated, it is always a pleasure for us to talk with Marla because she provokes our thinking in new areas.   We look forward to the opportunity of further encounter sessions with her.

The article discussed the fact that medical practices will face several compliance challenges in 2014. We expressed the view that HIPAA enforcement activities and litigation will increase because the Office for Civil Rights has stated that it will aggressively enforce HIPAA, especially since the rule implementing much of the HITECH Act went into effect September 23, 2013. This increase in enforcement coincides with the jump in mobile device use, electronic health record adoption and online scheduling, which will cause digital protected health information (PHI) to be less secure since providers may have less control over it.

Complying with HIPAA requirements can be expected to be used increasingly as a “best practice” in state courts, and patients are winning damages. The article states that “People [will] learn that they can sue [for privacy and security breaches]. This area is growing.”

We also believe that whistleblower activity will increase.  The article points out, “[Former National Security Agency contractor Edward] Snowden will encourage people to whistle blow. A trusted consultant can have an employee that decides whistleblowing is the right thing as a matter of public policy,”  

The Affordable Care Act (ACA) will create billing compliance difficulties.  Elizabeth warned, “The ACA loophole that allows for unpaid care for health exchange patients gives patients a three-month grace period before the insurance policy is canceled. It is still unclear when and how practices can bill patients directly once insurers determine the patients are no longer covered, putting practices at risk of not only revenue loss but violating debt-collection practice.”

Finally, the article observed that meaningful use audits respecting initiatives in electronic health records (EHR) will increase. The federal government has paid more than $1.7 billion in incentives regarding EHR to providers under the Medicare and Medicaid meaningful use program. The article concluded, “The government will start audits to get a lot of this money back.”


On February 7, 2013, our partner Keith McMurdy, Esq., posted an excellent entry on the Employee Benefits Blog of Fox Rothschild LLP that merits republishing for our readers as well. The post outlines some direct effects of the new HIPAA Omnibus Rule on employers and their health plans. 

Keith McMurdy writes as follows:


On January 25, the new (final?) rules about HIPAA Privacy under the HITECH Act were issued in the Federal Register.  While the effect of the new rules may not be to substantially change the way HIPAA privacy is viewed, there are a number of action items for employers as plan sponsors that have to be accomplished when these rules go into effect.


There are two pieces of good news.  The first is that the general purpose of compliance remains the same.  Plan sponsors have to ensure PHI is properly protected, refrain from impermissible disclosures and provide notices of security breaches.  The second is that the earliest possible deadline for compliance with the new rules is September 23, 2013, so there is some time to prepare.  But it is not a bad idea to start preparing now.  So let’s consider the key changes.


1. Tougher Security Breach Notification Standard


Under the old rule, the standard for notification to participants of a security breach was only necessary if the release of information "posed a significant risk of financial, reputational or other harm" to a covered person.  Now, that standard is tightened to apply to ANY security breach unless the plan sponsor can prove "a low probability that the [PHI] has been compromised based on a risk assessment."  This should encourage plan sponsors to tighten their security breach protections because any release, even things like accidental e-mails, can potentially become reportable events.  So the first step in compliance would be to review security standards and document steps taken to avoid security breaches.


2. Tougher Standards for Business Associates Agreements


Because the new rule provides for penalties to a covered entity for breaches by business associates, the default position is that plan sponsors should be much more concerned about how compliant their business associates really are.  Where in the past, plan sponsors may have felt comfortable simply handing off certain protection functions to service providers, the new rule makes it pretty clear that plan sponsors have to actually know that their business associates are HIPAA compliant and diligently seek to confirm that compliance.


3.  New Privacy Notices for 2013 Open Enrollment


The new rule also requires that plan sponsors add or amend their privacy notices:

  1. The notice must specifically state that the covered health plans are required to obtain plan participants’ authorization to use or disclose psychotherapy notes, to use PHI for marketing purposes, to sell PHI, or to use or disclose PHI for any purpose not described in the notice as well as a statement explaining how plan participants may revoke an authorization.
  2. The notices must state that the plans (other than a long-term care plan) are prohibited from using PHI that is genetic information for underwriting purposes
  3. The notice must inform plan participants of their right to receive a notice when there is a breach of their unsecured PHI.

The new rules makes it clear that since this new language is a "material change," plan sponsors are required to distribute this revised notice, even if they had just recently sent the old notice. 


4. Genetic Information and the GINA Notice


The Genetic Information Non-Discrimination Act of 2008 (GINA) prohibits discrimination based on genetic information.  The HIPAA Privacy Rule now similarly prohibits HIPAA-covered plans from taking genetic information into consideration when offering incentives or discounts through a health risk assessment.  Because this modification of the Privacy Rule materially affects how a plan may use PHI, the HIPAA Privacy Rule requires that plan participants be informed in the plan’s privacy notice of the prohibition on the use of PHI for underwriting purposes.  See the second item under Part 3, above.


So in the midst of our struggles to comply with PPACA, plan sponsors should not forget about HIPAA medical privacy concerns.  Start pulling together privacy notices, business associates agreements and plan documents for review and amendment.  Review your security practices to avoid even accidental breaches.  And be prepared to issue new notices as necessary for your next open enrollment.  For more detailed information about HIPAA and HITECH Compliance, please make sure to check out our HIPAA Blog as well.  More information means better compliance, which is always a good thing.

The recent release of the HIPAA/HITECH “mega rule” or “omnibus rule” has given bloggers and lawyers like us plenty of topics for analysis and debate, as well as some tools with which to prod covered entities, business associates and subcontractors to put HIPAA/HITECH-compliant Business Associate Agreements (“BAAs”) in place. It’s also a reminder to read BAAs that are already in place, and to make sure the provisions accurately describe how and why protected health information (“PHI”) is to be created, received, maintained, and/or transmitted. 

If you are an entity that participates in the Medicare Shared Savings Program as a Medicare Accountable Care Organization (“ACO”), your ability to access patient data from Medicare depends on your having signed the CMS Data Use Agreement (the “Data Use Agreement”). Just as covered entities, business associates, and subcontractors should read and fully understand their BAAs, Medicare ACOs should make sure they are aware of several Data Use Agreement provisions that are more stringent than provisions typically included in a BAA and that may come as a surprise. Here are ten provisions from the Data Use Agreement worth reviewing, whether you are a Medicare ACO or any other business associate or subcontractor, as these may very well resurface in some form in the “Super BAA” of the future:


1.         CMS (the covered entity) retains ownership rights in the patient data furnished to the ACO.


2.         The ACO may only use the patient data for the purposes enumerated in the Data Use Agreement.


3.         The ACO may not grant access to the patient data except as authorized by CMS.


4.         The ACO agrees that, within the ACO and its agents, access to patient data will be limited to the minimum amount of data and minimum number of individuals necessary to achieve the stated purposes.


5.         The ACO will only retain the patient data (and any derivative data) for one year or until 30 days after the purpose specified in the Data Use Agreement is completed, whichever is earlier, and the ACO must destroy the data and send written certification of the destruction to CMS within 30 days.


6.         The ACO must establish administrative, technical, and physical safeguards that meet or exceed standards established by the Office of Management and Budget and the National Institute of Standards and Technology.


7.         The ACO acknowledges that it is prohibited from using unsecured telecommunications, including the Internet, to transmit individually identifiable, bidder identifiable or deducible information derived from the patient files. 


8.         The ACO agrees not to disclose any information derived from the patient data, even if the information does not include direct identifiers, if the information can, by itself or in combination with other data, be used to deduce an individual’s identity.


9.         The ACO agrees to abide by CMS’s cell size suppression policy (which stipulates that no cell of 10 or less may be displayed).


And last, but certainly not least:


10.       The ACO agrees to report to CMS any breach of personally identifiable information from the CMS data file(s), loss of these data, or disclosure to an unauthorized person by telephone or email within one hour.


While the undertakings of a Medicare ACO and the terminology in the Data Use Agreement for protection of patient data may differ from those of covered entities, business associates and subcontractors and their BAAs under the HIPAA/HITECH regulations, they have many striking similarities and purposes. 


CMS should improve its oversight of its electronic health record incentive program, according to a report by the Office of Inspector General released this month.   The government watchdog agency faults CMS for both inadequate prepayment safeguards and insufficient postpayment monitoring of recipients of federal funding intended to help cover the costs of adoption and implementation of EHR.

As this blog noted earlier this month, some concerns have been raised in a Congressional hearing about how the approximately $7.7 billion in taxpayer funds have been spent to date under the HITECH Act’s incentive program.  In its report, the OIG recommended that CMS:

Obtain and review supporting documentation from selected professionals and hospitals prior to payment to verify the accuracy of their self-reported information;

Issue guidance with specific examples of documentation that professionals and hospitals should maintain to support their compliance; and

Conduct prepayment reviews to improve program oversight.

OIG reported resistance from CMS regarding its recommendation to implement prepayment reviews, which CMS believes would increase the burden on practitioners and hospitals and could delay incentive payments. CMS agreed to take steps to improve program oversight. CMS’s response appears as an exhibit to the OIG report at page 30.

Next, the OIG turned to the Office of the National Coordinator for Health Information Technology (ONC), the government agency that establishes EHR standards and certifies EHR technology. OIG recommended that the ONC:

Require that certified EHR technology be capable of producing reports for yes/no meaningful use measures where possible; and

Improve the certification process for EHR technology to ensure accurate EHR reports.

ONC concurred with both recommendations, as noted in the letter from Dr. Farhad Mostashari appearing at page 32.

The report noted that CMS currently conducts prepayment validation of professionals’ and hospitals’ self-reported meaningful use information to ensure that it meets program requirements, mostly by checking the math in the reports and verifying EHR certification codes.   OIG also noted that CMS plans to audit selected professionals and hospitals after payment using a similar method to select audit targets based on inconsistencies in their reported data. At the time of the OIG review, CMS had not yet completed any postpayment audits.

Among OIG’s findings were:

  • CMS’s prepayment validation functions correctly but does not verify the accuracy of self-reported information.
  • Sufficient data are not available to verify self-reported information through automated system edits.
  • CMS does not collect supporting documentation to verify self-reported information prior to payment.
  • CMS’s planned postpayment audits may not conclusively verify the accuracy of professionals’ and hospitals’ self-reported meaningful use information.
  • Reports from certified EHR technology are not sufficient for CMS to verify self-reported information and may not always be accurate.
  • CMS may not be able to obtain sufficient supporting documentation to verify self-reported information during audits.

Given budgetary pressure and ongoing Congressional oversight, it is likely that CMS and ONC will be looking more closely at how HITECH incentive funds are being applied in the coming year.

A previous post to this blog by Patricia McManus pointed out that individuals whose protected health information (“PHI”) is stolen, lost, or otherwise inappropriately used, accessed, or left unsecured have no private right of action against the person or entity responsible for the breach under the HIPAA/HITECH laws. That may change for victims of identity theft who can show the theft was caused by a HIPAA breach, at least if the action is brought in the 11th Circuit.

The 11th Circuit District Court (Southern District of Florida) decision that came out  on September 5, 2012 involved stolen unencrypted laptops containing PHI of approximately 1.2 million AvMed (health plan) patients. The lower court had dismissed the originally-filed class action because plaintiffs sought "to predicate recovery upon a mere specter of injury: a heightened likelihood of identity theft."  The case was re-filed, naming as plaintiffs a subset of patients whose identities had been actually stolen since the laptop theft, alleging negligence by AvMed in protecting the sensitive information, breach of contract, unjust enrichment, breach of the implied covenant of good faith and fair dealing, and breach of fiduciary duty. 


The District Court’s decision to deny AvMed’s motion to dismiss plaintiffs’ claim that AvMed’s data breach caused plaintiffs’ identity theft was based on its finding that plaintiffs "sufficiently alleged a nexus between the data theft and the identify theft and therefore meet the federal pleading standards…  ," even though the computers were stolen 10 and 14 months prior to the identity thefts of the two specific plaintiffs named in the action. The court pointed out that both individuals were very protective of their personal data and did not transmit sensitive data electronically or store it on computers. One plaintiff’s sensitive information was used to open a Bank of America account and change her address with the US Post Office, while the other plaintiff’s sensitive information was used to open an E*Trade Financial account. Neither had experienced identify theft before the theft of the AvMed laptops. 


The court also refused to dismiss the plaintiffs’ unjust enrichment claim, which was based on the fact that AvMed received premiums that were payments, at least in part, to protect sensitive information with "data management and security measures that are mandated by industry standards." Plaintiffs alleged AvMed failed to implement or inadequately implemented these policies. 


If plaintiffs are ultimately successful in obtaining refunds of premiums and/or payments from AvMed for damages incurred as a result of the identity thefts, it could set an interesting precedent for future HIPAA breach victims, particularly if the court’s decision relies (as it seemed to rely in this decision) on the fact that the victims could show they were extremely careful not to store or transmit personal information via electronic means.  In this age of intensive use of computers and the Internet for financial transactions, such plaintiffs are probably highly unusual. An individual who makes frequent or even occasional on-line purchases or pays bills electronically and who becomes the victim of  a HIPAA breach might have difficulty demonstrating that a subsequent identity theft was the direct result of the breach. 

A recent posting by our partner Christina Stoneburner, Esq., on the Fox Rothschild Employment Discrimination blog discussed the need by employers to limit protected health information (“PHI”) that they provide with respect to medical examinations of employees and job applicants to the least amount of medical information necessary for evaluation.  Interestingly, the focus of her posting was not disclosure under HIPAA/HITECH, or even state statutes regulating the use of PHI; it dealt with allegations that employees and job applicants had been sent for unnecessary medical examinations in violation of the Americans with Disabilities Act and the Genetic Information Nondisclosure Act. 

Christina summarizes her posting with the following:


In short, the least amount of medical information necessary to evaluate an employee is what should be provided to examiners.  For example, if you have an employee being evaluated to see if he can perform the essential functions of his job after a shoulder injury, the examining doctor should not be given the medical records relating to his planter’s wart being removed.

In her discussion, Christina noted our blog series respecting large breaches and a particular recent posting by Elizabeth Litten, Esq.  Christina also mentioned that the complaint on which her posting focused had alleged, "the employer often turned over Workers’ Compensation records . . . , even where those records were not relevant to the examination.”


Workers’ compensation is an area where Christina’s posting comes full circle to our blog’s focus on HIPAA;  as HIPAA directly confronts such area by making it clear that only the “minimum necessary” disclosure of PHI is permitted by covered entities without patient authorization pursuant to 45 CFR 164.512(l):


A covered entity may disclose protected health information as authorized by and to the extent necessary to comply with laws relating to workers’ compensation or other similar programs, established by law, that provide benefits for work-related injuries or illness without regard to fault.


The Office of Civil Rights of the U.S. Department of Health and Human Services (“HHS”) has published further advice on how the workers’ compensation Regulation works:


Covered entities are required reasonably to limit the amount of protected health information disclosed . . . to the minimum necessary to accomplish the worker’s compensation purpose. Under this requirement, protected health information may be shared for such purposes to the full extent authorized by State or other law. 


In summary, to avoid needless and costly violations, employers and other covered entities must be constantly aware of the need to comply with multiple regulatory schemes that may govern PHI, beyond those of HIPAA and State laws governing PHI;  there is not unlimited flexibility to disclose PHI even within the context of State-governed workers’ compensation matters. When the long-anticipated “mega-regulation” regarding HIPAA/HITECH is finally published by HHS, special attention must be given to potential changes that may further tighten the “minimum necessary" standards.

Attorney General Lori Swanson of Minnesota (“AG”) issued a press release reporting that Accretive Health, Inc. (“Accretive”), the defendant in an action filed by the AG in U.S. District Court alleging violations of HIPAA, HITECH, the Minnesota Health Records Act, and the Minnesota consumer protection laws, signed a Settlement Agreement, Release and Order on July 30, 2012 (“Settlement Agreement”). The Settlement Agreement recites:

[R]ecognizing that unique circumstances exist in Minnesota in light of the Attorney General’s Agreement with Minnesota charitable hospitals … Accretive Health … has decided to wind down its remaining work for Minnesota Clients …


(other than its continuation of prior technology licensing agreements). The Settlement Agreement also requires Accretive  to pay the AG nearly $2.5 million within 15 days of the Settlement Agreement’s effective date. The funds may be distributed to patients at the discretion of the AG, used for settlement administration, and/or remitted to the State Treasury.


Previous posts to this blog have reported on the AG’s action against Accretive, and on the need for entities or individuals sharing Protected Health Information (‘PHI”) to identify the roles, rights, and obligations of the parties. Michael Kline’s recent blog reported on a breach involving more than 500 individuals included on the list maintained by the U.S. Department of Health and Human Services (the “HHS List”), highlighting the summary provided by the Office of Civil Rights (“OCR”). Michael noted that the OCR summary implies that OCR expects a covered entity (“CE”) contracting with a business associate (“BA”) to verify that the BA is “not an independent” CE.  


Identifying the roles of the parties and the context in which PHI is disclosed is critical because different information-sharing standards apply depending on these roles and circumstances. For example, a business associate agreement (“BAA”) is not required for disclosures made within a CE for treatment, payment, or health care operations, nor is a BAA required for PHI to be disclosed from one CE to another CE where the recipient CE is a health care provider and the PHI is being disclosed for treatment purposes.


However, if the recipient CE is a health care provider, but is receiving the PHI as a BA (generally defined as a person or entity that performs functions or activities on behalf of another person that is a CE, which involves the use or disclosure of PHI), a BAA is required and it must, among other things, “establish the permitted and required uses and disclosures” of the PHI (though failure to execute a BAA will not absolve the BA of its responsibilities and liabilities under HIPAA and HITECH). In addition, while most uses and disclosures of PHI must be limited to the “minimum necessary,” current regulations do not restrict disclosures to or requests by a CE that is a health care provider to the “minimum necessary” when the disclosure or request is for treatment of a patient. A CE can use or disclose PHI for “payment” activities, but must comply with the “minimum necessary” standard.  If the “payment” activity involves disclosure to a consumer reporting agency, the CE may only disclose specified information (name/address, date of birth, social security number, payment history, account number, and the name and address of the CE). 


The Accretive case was triggered by an alleged PHI breach (the all-too-frequent loss of a laptop containing sensitive information about 23,500 patients treated at two hospitals that had contracted with Accretive), but the AG’s allegations were most scathing where they painted a picture of insidious and inappropriate sharing and use of PHI between hospitals and Accretive.  The AG alleged that Accretive’s “Quality and Total Cost of Care” services used “data mining,” “consumer behavior modeling,” and “propensity to pay” algorithms.  Accretive allegedly “amasse[d] and ha[d] access to a high volume of sensitive and personal information,” which it used, among other things, to create “per patient risk score” calculations, yet the hospitals’ patient authorization forms allegedly failed to disclose the scope or breadth of the PHI that the hospitals would share with Accretive.


In addition to this questionable and seemingly surreptitious “behind the scenes” PHI-sharing, Accretive staff allegedly interfaced directly with patients seeking treatment at the hospitals, often appearing to be members of the hospital’s staff.  Jessica Silver-Greenberg, reporting on the Settlement Agreement in the New York Times, describes allegations of aggressive collection tactics taken by Accretive that involved requesting payment from patients seeking emergency care. 

Whether a clear delineation of the role of Accretive as a BA and/or restriction of PHI disclosed to Accretive to the “minimum necessary” would have prevented the AG’s action is unclear. However, the Accretive case provides a good example of how the blurring of the CE and BA roles can backfire on parties that fail to sufficiently analyze and define such roles, not only at the outset of a relationship but throughout its duration and evolution.



 Contributed by David Restaino, Esq.

 Last month a posting was made on this blog series regarding action being taken by the Office for Civil Rights (“OCR”) of the U.S. Department of Health and Human Services (“HHS”) relating to the fact that government audits for HIPAA compliance with privacy and security standards are finally beginning.  In this regard, OCR recently released a “sample” letter (the “Sample Letter”) that will be used as the template for the actual letters that OCR will issue to those covered entities that are selected for audit in 2012.  As OCR noted in the Sample Letter, recipients of actual letters will find that the audit process will begin within 30 to 90 calendar days from the date of the letter. 


OCR has hired KPMG LLP (“KPMG”), one of the “Big Four” certified public accounting firms, to conduct the audits in accordance with government auditing standards.  OCR’s release of the Sample Letter likely represents its way of communicating to all regulated facilities that KPMG’s actions will have the same force and effect as actions by OCR itself.  As a result, when KPMG requests detailed information at the beginning of and during the audit process, the covered entity under audit should assume that the KPMG request carries with it the full weight of the United States government. 


Release of the Sample Letter can also be viewed as OCR’s effort to prepare the regulated community for the seriousness of the upcoming audits.  Perhaps more importantly, recipients of actual letters should use the 30 to 90 calendar day period to get prepared — although facilities would be well advised to take appropriate steps to ensure compliance now rather than risk the adverse results that can occur from last-minute efforts to organize for an audit.  Those facilities that are unprepared will have a difficult time getting ready if KPMG comes knocking. 


(David Restaino, a partner at Fox Rothschild LLP in its Princeton, NJ office, has more than 20 years of experience representing clients in regulatory compliance and complex commercial litigation matters, including environmental and health care disputes, before multiple federal and state courts and agencies.)