SCENARIO
Please use the following to answer the next QUESTION:
You are the chief privacy officer at HealthCo, a major hospital in a large U.S. city in state A. HealthCo is a
HIPAA-covered entity that provides healthcare services to more than 100,000 patients. A third-party cloud
computing service provider, CloudHealth, stores and manages the electronic protected health information
(ePHI) of these individuals on behalf of HealthCo. CloudHealth stores the data in state B. As part of
HealthCo’s business associate agreement (BAA) with CloudHealth, HealthCo requires CloudHealth to
implement security
measures, including industry standard encryption practices, to adequately protect the data. However, HealthCo
did not perform due diligence on CloudHealth before entering the contract, and has not conducted audits of
CloudHealth’s security measures.
A CloudHealth employee has recently become the victim of a phishing attack. When the employee
unintentionally clicked on a link from a suspicious email, the PHI of more than 10,000 HealthCo patients was
compromised. It has since been published online. The HealthCo cybersecurity team quickly identifies the
perpetrator as a known hacker who has launched similar attacks on other hospitals – ones that exposed the PHI
of public figures including celebrities and politicians.
During the course of its investigation, HealthCo discovers that CloudHealth has not encrypted the PHI in
accordance with the terms of its contract. In addition, CloudHealth has not provided privacy or security
training to its employees. Law enforcement has requested that HealthCo provide its investigative report of the
breach and a copy of the PHI of the individuals affected.
A patient affected by the breach then sues HealthCo, claiming that the company did not adequately protect the
individual’s ePHI, and that he has suffered substantial harm as a result of the exposed data. The patient’s
attorney has submitted a discovery request for the ePHI exposed in the breach.
What is the most significant reason that the U.S. Department of Health and Human Services (HHS) might
impose a penalty on HealthCo?
