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The cost of HIPAA non-compliance – $17 million – UPDATE

Posted in Data Breach, Data Breach Notification, Data Compliance & Security, HIPAA/HITECH

Written by Kevin McGinty


If it wasn’t clear before, a recent settlement of HIPAA claims brought by the Department of Health and Human Services against BlueCross BlueShield of Tennessee (“BCBST”) underscores the high regulatory cost of non-compliance with privacy requirements.  HHS announced on March 13, 2012  that BCBST has agreed to pay $1.5 million to settle claims that BCBST violated HIPAA in connection with the theft in 2009 of 57 unencrypted hard drives containing protected health information of over 1 million individuals.   The payment to HHS, however, is the tip of the iceberg.   According to the Nashville Business Journal, BCBST reported that it has spent nearly $17 million in investigation, notification and protection efforts.   Thus, even though privacy class actions typically falter for inability to prove recoverable damages, the BCBST case demonstrates that data breaches can still result in substantial administrative fines and remediation costs.

The  clear takeaway:  Businesses should be mindful of the potential cost of non-compliance when evaluating the sufficiency of their privacy-related policies, procedures and infrastructure.

UPDATE:   And, further analysis from our colleagues over at the Mintz Health Law Policy blog — here