The recent Office for Civil Rights (OCR) enforcement action against Alaska’s Medicaid program provides insight into OCR’s enforcement approach and timely reminders for covered entities hoping to avoid a similar fate.  In the first settlement of its kind against a state Medicaid agency, Alaska has agreed to pay the U.S. Department of Health and Human Services (HHS) $1,700,000 under a Resolution Agreement to settle alleged violations of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Security Rule.  The settlement stems from an investigation by OCR following a breach report by DHSS as required under the Health Information Technology for Economic and Clinical Health (HITECH) Act.

The breach report, submitted by DHSS in 2009, disclosed that a USB hard drive, which may have contained electronic protected health information (ePHI) of Alaska Medicaid beneficiaries, was stolen from a DHSS employee’s car.  The resulting OCR investigation uncovered evidence of inadequate DHHS policies and procedures to safeguard ePHI.  OCR found that DHHS  failed to complete a risk analysis, implement adequate risk management measures, conduct employee security training, implement device and media controls, and address device and media encryption.

What may HIPAA covered entities learn from the Alaska settlement?

• Seven-figure settlements are becoming more the rule than the exception when OCR finds serious violations.
• OCR continues to require corrective action plans, which add significantly to a covered entity’s costs resulting from a violation.  The Alaska corrective action plan requires DHSS to properly safeguard the ePHI of its Medicaid beneficiaries, and to designate an independent monitor to regularly report to OCR on the state’s efforts to ensure compliance.
• OCR is not afraid to go after a state agency.  In a press release, OCR Director Leon Rodriguez stated: “This is OCR’s first HIPAA enforcement action against a state agency and we expect organizations to comply with their obligations under these rules regardless of whether they are private or public entities.”
• The settlement also illustrates the priority that OCR is placing on enforcement of HIPAA violations involving stolen devices.  Mr. Rodriguez noted that “[c]overed entities must perform a full and comprehensive risk assessment and have in place meaningful access controls to safeguard hardware and portable devices.”