With most vendors offering and pushing cloud computing solutions and offsite data backup, or guaranteeing offsite backup of data they process for you, many HIPAA covered entities and business associates are questioning whether and how they can take advantage of cloud computing while complying with regulations protecting the privacy and security of electronic protected health information. At the same time, the rise of offshore IT services, including distributed storage, by cloud data providers creates issues that most healthcare providers have not yet realized. Even if some of the issues are realized, many covered entities and their business associates do not know where their data is currently being processed, stored, or backed up. In fact, storage or processing of personal health information (“PHI”) overseas may or may not be permitted or at least require additional resources, such as additional or more detailed risk assessments.

There currently are no federal regulations or statutes that prevent storing or processing PHI offshore or overseas; however, the Centers for Medicare and Medicaid Services (“CMS”), the U.S. Department of Health and Human Services (“HHS”), and the U.S. Office of Civil Rights (“OCR”) within the HHS, have all issued regulations or provided guidance that restrict storing or processing PHI offshore. In addition, there are four states that ban any Medicaid data from being stored or processed overseas (Arizona, Alaska, Ohio and Wisconsin), two more that only allow offshore contracts under extremely limited circumstances, and nine more that have specific requirements that must be met before any offshore processing or storage of Medicaid data is allowed. Even if a healthcare provider is not located in one of the above states, if the provider has treated a patient of those states, state regulators may argue that the healthcare provider must comply with their laws, regulations, and guidance, as applied to the resident of their state. Even more concerning is that even though Delaware does not have any laws or statutes banning offshore processing or data storage, Delaware recently started adding provisions to all of their contracts (similar to Wisconsin) that the State (Delaware) will not permit project work to be done offshore. There may be additional states adding these prohibitions to their contracts in the future.

If extra regulatory burden and potential state law bans were not enough by themselves, any PHI stored offshore likely will be subject to local law of the country in which it is stored. Furthermore, these local laws may allow for actions or even access to the data that directly conflicts with requirements on healthcare providers under HIPAA/HITECH, even if the vendor signed a BAA. Due to the issues in enforcing HIPAA and HITECH, and even a BAA against an overseas vendor, HHS has basically stated that it is the duty of the healthcare provider or vendor for deciding how to vet data services vendors and comply with expected additional requirements when conducting a risk assessment on overseas providers.

At this point, most healthcare providers question if any offshore or offsite data storage or processing is worth any potential cost savings, or if OCR has any further guidance. In the fall of 2016, OCR prepared guidance that explained how federal health information privacy and data security rules apply to cloud services. In summary, this guidance helped data service companies, but at the expense of covered entities by primarily placing the burden on the covered entities, specifically hospitals, insurers, doctors, and other healthcare providers. In looking at data service vendors, OCR decided that data service subcontractors of the covered entities’ business associates are actually business associations of the business associates. According to the OCR, covered entities must assess the cloud services providers’ or offshore providers’ data security efforts, but HIPAA does not require the cloud services providers to allow covered entities audit them. As such, covered entities are required to determine how well a cloud services provider handles system reliability, data security, and data backup and recovery, without the ability to perform an audit. While this is problematic when dealing with domestic cloud service providers, it creates additional issues when dealing with overseas cloud service providers.

While OCR allows use of overseas providers, as of right now the rules of HIPAA and HITECH fail to address any international aspects, leaving no requirements but also no protections for covered entities. If you select a domestic provider, the laws and regulations regarding PHI apply to both parties, but if an overseas provider is selected, HIPAA and HITECH will not apply, unless they contractually agreed to comply with such laws and regulations. If there is a breach and the overseas provider refuses to defend against or pay any fines or fees levied related to the breach, the covered entity may be liable for paying. It is also important to note that while an international provider may agree to sign a BAA, many international providers do not understand the requirements of HIPAA and HITECH, while most domestic providers have a greater understanding.

Even if you know where the company with whom you are contracting is located, do you know where they send the backup data? Do they send data for processing or backup to other agents, subcontractors, vendors, or other data providers overseas? You may not realize your data is regularly taking international trips, and may be better traveled than you are. In addition, if a relationship is terminated with an international provider, how will you ensure that the data is wiped from the system? Healthcare providers generally must require a certificate of destruction when terminating data services, and will you be able to comply with this provision with an offshore provider?

In contract with cloud service providers, including backup providers, e-mail providers, and other processing entities, covered entities and their BAAs must determine where their data is located, and if it is offshore, they must analyze if any of the information is prohibited from being exported by any state or local regulations. If not, next it must be determined if there is an extra compliance burden associated with the data being offshore, and if that extra compliance burden and the associated risk of being offshore are worth any cost savings by using the offshore provider. If an entity knows that some of its data may be banned from being exported overseas, or would raise too much risk or compliance burden, then language banning such exports should be placed in the agreements, including any BAAs.