A HIPAA violation can result in significant fines, penalties, and, in severe cases, even jail time. The consequences depend on the severity of the violation and how your organization manages protected health information (PHI).
To avoid HIPAA violations and protect your organization, it’s essential to follow compliance best practices. Request a consultation with our experts today to ensure your PHI stays secure.
Everything You Need to Know about HIPAA Violations
If your organization handles protected health information (PHI), you must comply with the Health Insurance Portability and Accountability Act (HIPAA). Failing to properly safeguard PHI can lead to a HIPAA violation, resulting in significant fines, penalties, or legal consequences enforced by the Department of Health and Human Services (HHS).
Here’s what you need to understand about HIPAA violations:
- What constitutes a violation and the different tiers of severity
- Potential penalties that can be assessed for violations
- How HIPAA penalties are enforced by the HHS
- Steps to avoid HIPAA violations and remain compliant
Concerned about your organization’s risk of a HIPAA violation? Contact a compliance advisor today to ensure your PHI is protected.
HIPAA Violation Tiers: Levels of Severity
A HIPAA violation is officially determined when the HHS’s Office of Civil Rights (OCR) investigates a potential incident. Any failure to follow HIPAA rules can constitute a violation, but the OCR assigns a tier based on the severity and nature of the breach. Understanding these tiers is critical because they determine the fines, penalties, and corrective actions your organization may face.
Here’s how HIPAA violation tiers break down:
- Tier 1 Violation: Occurs when a Covered Entity was unaware of the incident or could not have reasonably avoided it.
- Tier 2 Violation: Applies when a Covered Entity should have known about the circumstances but failed to exercise reasonable care.
- Tier 3 Violation: Involves “willful neglect” of HIPAA responsibilities, resulting in a PHI breach, but corrective action is taken.
- Tier 4 Violation: Represents willful neglect with no corrective action taken, leading to the most severe consequences.
Each tier is identified through the OCR’s Enforcement Process and dictates the level of monetary fines and other penalties assessed.
Covered Entities and Business Associates Under HIPAA
Understanding who can be held responsible for a HIPAA violation is critical for compliance. HIPAA rules apply primarily to Covered Entities, which are defined in the HIPAA Privacy Rule and include organizations both within and adjacent to the healthcare sector.
Covered Entities include:
- Healthcare providers: Doctors, clinics, hospitals, and other treatment facilities
- Health plan administrators: HMOs, insurance companies, and related organizations
- Healthcare clearinghouses: Community health information systems, payment processors, and other intermediaries
HIPAA rules also extend to Business Associates of Covered Entities. This includes attorneys, accountants, consultants, and other parties who handle protected health information (PHI). These organizations must safeguard PHI according to HIPAA requirements, typically formalized through Business Associate Contracts, which outline shared responsibilities with Covered Entities.
Failing to comply can result in a HIPAA violation, meaning that penalties and enforcement actions can affect organizations even outside traditional healthcare settings.
HIPAA Penalties: The Cost of a HIPAA Violation
When a HIPAA violation occurs, the Office for Civil Rights (OCR) assesses penalties using Civil Monetary Penalties (CMPs). CMPs vary depending on the violation tier, with both minimum and maximum fines established for each level.
All tiers have a maximum annual fine cap of $1,919,173, meaning that the total fines for a single resolution cannot exceed this amount. Minimum fines increase steadily from Tier 1 through Tier 3, while Tier 4 violations carry the highest per-violation fines:
- Tier 1 CMP: $127 to $63,973 per violation
- Tier 2 CMP: $1,280 to $63,973 per violation
- Tier 3 CMP: $12,794 to $63,973 per violation
- Tier 4 CMP: $63,973 to $1,919,173 per violation
A single Tier 4 violation can therefore result in the maximum annual fine. These amounts are updated for inflation and represent an increase from prior penalties (previously $50,000 maximum for Tiers 1–3 and minimum for Tier 4).
Beyond monetary fines, a HIPAA violation can also result in reputational damage, lost business opportunities, and criminal penalties for individuals involved. Understanding these risks highlights why proactive compliance is critical for all Covered Entities and Business Associates.
Criminal Penalties for the Most Severe Violations
In the most serious cases, the Office for Civil Rights (OCR) may coordinate with the Department of Justice (DOJ) to impose criminal penalties in addition to civil fines for a HIPAA violation. These penalties follow a separate but related tiered system:
- Tier 1 Criminal Penalties: Up to 1 year in jail for reasonable cause or lack of knowledge
- Tier 2 Criminal Penalties: Up to 5 years in jail for using PHI under false pretenses
- Tier 3 Criminal Penalties: Up to 10 years in jail for personal gain or malicious intent
These penalties represent the most severe consequences of a HIPAA violation for employees and can apply in addition to civil fines (CMPs), depending on the findings of the OCR and DOJ.
Enforcement: How HIPAA Violations are Resolved
The HIPAA Enforcement Process determines whether a HIPAA violation has occurred, identifies the violation’s tier, and outlines the remedies the OCR may pursue, with or without penalties.
When a violation is reported, the OCR begins an intake and review process. Some complaints may be resolved quickly if:
- The incident occurred more than six years ago
- The entity is not covered under HIPAA
- The complaint was not filed within 180 days of the incident
If these criteria are not met, the OCR may conduct a full investigation, potentially involving the Department of Justice (DOJ).
A final resolution can take several forms:
- No violation is found
- Technical assistance is provided
- A formal finding is issued
- Investigation is declined
- An agreement is reached with the entity
Agreements often include a voluntary compliance plan and any applicable penalties, ensuring that organizations address the violation and strengthen HIPAA compliance.
Recent HIPAA Violation Examples and Settlements
HIPAA enforcement is designed not only to penalize individual employees or stakeholders but also to prevent large organizations from exposing protected health information (PHI) at scale. Recent cases illustrate the range and severity of HIPAA violations:
- Banner Health (2016 hack): Affected three million individuals’ PHI. In 2023, Banner Health agreed to pay $1.25M and implement a corrective action plan (CAP).
- Oklahoma State University (2016–2017 disclosures): Reached a 2022 agreement with the OCR, including a CAP and payment of $875,000 for improper PHI handling.
- New England dermatology organization (2021): Improper disposal of PHI led to a 2022 settlement, including a CAP and payment of $300,640.
These examples demonstrate that HIPAA violations can occur in diverse ways and across multiple industries. The best way to avoid fines, corrective action plans, and reputational damage is to maintain seamless HIPAA compliance across all organizational processes.
HIPAA Compliance: How to Avoid HIPAA Violations
Any failure to follow HIPAA’s rules can result in a HIPAA violation under the Enforcement Rule. Unlike some other compliance frameworks, HIPAA does not mandate regular audits or certification. Instead, Covered Entities are presumed compliant unless an incident occurs that prompts the OCR to investigate.
While this may seem like a lenient system, the Enforcement Process and associated fines demonstrate that noncompliance carries serious risks. Avoiding a HIPAA violation requires strict adherence to all regulatory requirements.
To maintain HIPAA compliance, organizations must follow the Privacy Rule, Security Rule, and Breach Notification Rule consistently across all operations involving protected health information (PHI).
How to Uphold the HIPAA Privacy Rule
The HIPAA Privacy Rule defines protected health information (PHI), Covered Entities, and the core elements of HIPAA compliance. It is the foundation for all other HIPAA rules and requirements, providing guidance on how PHI must be handled.
The main responsibility under the Privacy Rule is restricting access to PHI. PHI should only be used or disclosed for authorized purposes, including:
- Disclosures to the individual or their authorized representatives
- Uses related to healthcare treatment, payment, or operations
- Disclosures that the individual has the opportunity to accept or reject
- Incidental uses or disclosures that are minimal and unavoidable
- Uses in the public interest or for approved public benefit projects
- Uses of limited data sets for approved scientific research
In addition, organizations must follow the “minimum necessary” principle, ensuring the least amount of PHI is exposed to the fewest people, and only in the most restricted way allowed under authorized uses.
Failure to comply with these requirements can result in a HIPAA violation, triggering penalties, corrective action plans, or enforcement by the OCR.
How to Uphold the HIPAA Security Rule
The Security Rule spells out specific controls organizations should implement to meet Privacy Rule requirements. The initial purpose of the Security Rule was to extend these protections to electronic PHI (ePHI), but it has evolved to apply all of its requirements to all PHI environments.
The Security Rule ensures the confidentiality, integrity, and availability of PHI by requiring covered entities to identify and prevent threats and install three kinds of safeguards:
- Administrative Safeguards – Managerial-level controls, including:
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- Security management processes for managing risk
- Clearly defined security personnel and responsibilities
- Identity and access management (IAM) protocols
- Staff cybersecurity training and awareness programs
- Periodic evaluation of security governance
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- Physical Safeguards – Environmental restrictions to access, like:
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- Entry restrictions and control over entire facilities
- Security measures instituted on individual devices
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- Technical Safeguards – Software and application solutions, such as:
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- Software and application-level IAM protections
- Regular auditing of the IT environment
- Monitoring for integrity across all PHI
- Secure transmissions across networks
As with the Privacy Rule, failure to implement the controls and risk monitoring requirements of the Security Rule could constitute a HIPAA violation—whether it impacts ePHI or other PHI.
Understanding HIPAA Breach Notification
A data breach can occur whenever the HIPAA Privacy or Security Rule is violated. When this happens, Covered Entities are required to notify multiple parties, detailing the circumstances of the breach, its nature, and the corrective actions taken.
There are three types of breach notifications that organizations may need to provide:
- Individual Notice: Impacted individuals must be notified in writing (mail or email) within 60 days of discovering the breach.
- Secretary Notice: Covered Entities must inform the HHS Secretary of all breaches within 60 days if fewer than 500 people are affected. For breaches affecting more than 500 individuals, notifications are submitted annually.
- Media Notice: If more than 500 individuals in a single jurisdiction are impacted, the Covered Entity must notify a prominent local media outlet.
Failure to provide any of these required notifications can result in a HIPAA violation, triggering civil or criminal penalties, and potentially corrective action plans from the OCR.
HITRUST Certification and HIPAA Compliance
For organizations operating in healthcare and other regulated industries, or managing location-based compliance, HITRUST CSF certification offers a streamlined approach to HIPAA compliance. The HITRUST Common Security Framework (CSF) integrates rules and assessment protocols from HIPAA and other regulations into a single framework.
Organizations work with a HITRUST advisor to:
- Scope and implement necessary controls
- Conduct a HITRUST assessment
- Achieve HITRUST Certification
This “assess once, report many” approach allows organizations to meet compliance requirements for HIPAA, PCI, NIST, and other frameworks simultaneously. While HITRUST controls cannot guarantee that a HIPAA violation will never occur, they provide a robust system to prevent violations and quickly recover if one does happen.
Optimize Your HIPAA Compliance Today!
If your organization handles Protected Health Information (PHI), strict adherence to the HIPAA Privacy, Security, and Breach Notification Rules is essential. Any lapse could lead to a HIPAA violation, triggering costly penalties and reputational damage.
The most effective way to prevent violations is by partnering with a trusted compliance advisor. RSI Security helps organizations identify risks, implement safeguards, and maintain continuous compliance. Our proactive approach ensures PHI is always protected, reducing the chance of breaches and penalties
For further guidance on avoiding HIPAA violations, contact RSI Security today!
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