Who’s Handling Your Data?: Vendor Risk Management
Access cannot be freely granted to data. Such is the reality of the world today. If a vendor is allowed to freely access, use or otherwise interact with data, unnecessary risk has been created. Why go down the risk-filled road, when issues can be identified and addressed? This question is central for healthcare entities, whether covered entities contracting with business associates or business associates contracting with subcontractors. The direct liability all of the way up and down the chain of access now firmly entrenched in HIPAA means no entity on any level can escape notice.
If risk exists on all levels, what can be done? Asking questions prior to full engagement of a vendor is the first step. Do not assume that a vendor is providing all necessary information, or even any of the relevant information when pitching services. Instead, having a questionnaire ready to go that can pull in baseline data. For example, ask a vendor whether it has HIPAA policies and procedures in place, when it conducted its last risk analysis, how the results of the risk analysis were used and whether a breach has ever occurred. Obtaining responses to these and similar questions can begin providing comfort as to the actual status of a vendor’s security and/or privacy preparedness.
If a vendor makes it past the initial road of vetting, the terms of the service agreement are the next important step. What requirements should be baked into the agreement and how specific or granular should those requirements go. The answer likely depends upon the nature of the services being provided. If a vendor is hosting protected health information or regularly transmitting protected health information, then the agreement may get quite specific as to types of encryption to utilize, means of transmission or other requirements. However, if the vendor provides a service where they only get a minor subset of protected health information, then a little more leniency may be possible. In addition to the scope of requirements for protection specified, consideration should be given to the consequences of non-compliance. Is there a monetary penalty, immediate termination or some other outcome? Again, the scope of remedies will depend upon the nature of the services, but all of these issues should be considered.
The business associate agreement is the next essential element. As should be widely known, if there is a business associate relationship, no protected health information can be exchanged until the BAA is in place. If parties were somehow unaware of the necessity of a BAA, a recent HIPAA breach settlement through the Office for Civil Rights made the requirement crystal clear. Acknowledging that a BAA is needed is only the first step though. The next step is determining whether the BAA will stop at the baseline of the regulatory requirements, or include “extracurricular” terms such as mandating insurance coverage, calling for indemnification or reimbursement, and granting the upstream entity audit rights. Some elements are easier to identify as desirable than others, i.e. indemnification or reimbursement. A term such as audit rights is not as clear cut. Arguably this provides good insight, but the upstream entity will actually need to utilize those rights. Failure to do so could backfire and end up in negative consequences for the upstream entity.
The process of vendor management does not end with the execution of an agreement either. Constant vigilance and dialogue are needed. Threats are evolving, so entities cannot remain static. If any aspect of privacy or security protection sits for too long, an issue will almost certainly arise. Accordingly, parties should work together to manage risks and not assume that the other is the only one responsible. A go it alone approach will only come back to harm both entities.
Managing privacy and security risks is not easy. However, understanding baseline regulatory requirements provides a firm foundation from which to build. Ignoring or misconstruing that foundation will weaken the structure above and create enforcement exposure. Do not overlook these initial steps and create unnecessary risk.
About the author: Matthew Fisher is the chair of the Health Law Group at Mirick, O’Connell, DeMallie & Lougee, LLP, in Worcester, MA. Matt advises his clients in all aspects of healthcare regulatory compliance, including HIPAA, the Stark Law and the Anti-Kickback Statute. This article was originally published on Mirick O’Connell’s Health Law Blog and is republished here with permission.