Business

HEALTHCARE DATA SECURITY

Tegan Blackburn

TODAY’S BIGGEST CHALLENGES

As recent news once again shows – no organization is safe from intrusion and healthcare has been a particular favorite for hackers. Huge amounts of personal, financial, health and other information was harvested in the Anthem breach with as many as 80 million personal and health records illegally harvested – and all without detection. As changes in federal and state healthcare legislation and new technologies abound, so does the threat of illegal intrusion and theft of vast repositories of personal patient information.

Internet lock

Not that long ago, medical records were stored in large, paper files typically free from intrusion unless thieves gained access to a medical provider’s facility. Not so today, as doctors and patients have many more ways of using and sharing information, including online patient portals (VPNs), large networked healthcare exchanges, digital medical records (e-PHI), meaningful use records (EMR) and cloud (Saas) technologies. Many of the newer technologies have been driven by Affordable Care Act (ACA) mandates and other regulatory directives to improve patient care and outcome.

Did you know?

1. Patient and consumer data are top targets for hackers.

Patient data is a valuable source of information for hackers – allowing quick sales of large pools of medical, personal and financial data to the highest bidder on the black market.

In the post-Target breach days consumers learned the lesson of judiciously reviewing credit card statements and credit reports to detect improper use of their credit. The same advice is prudent for consumers to periodically review their insurance billing statements and medical records for potential misuse. Credit cards often limit exposure to $50 or less, but identity theft is costly to fix and often takes years to correct. “Medical identity theft” the latest entrant – poses not only a significant financial risk to carriers and consumers, but more importantly can pose huge medical risks to patients in need of care. Imagine someone’s “medical identity – name, address, policy no., etc.” is stolen and someone posing as the patient receives medical care – unless quickly caught (and it often takes many months for it to be detected, if at all) this treatment and diagnosis becomes a part of the insured’s medical record posing potentially serious consequences to a patient.

2. Fraud and abuse has significant consequences on the quality and cost of care.

Fraudsters use patient medical identity to gain medical services, procure drugs, defraud insurers and benefit programs, as well as posing potentially life threatening outcomes for patients whose identity was stolen. The Medical Identity Fraud Alliance estimated the cost of medical identity theft at $20 billion last year (excluding the Anthem breach, which is largely conjecture at this time) and costs are expected to significantly rise. This figure doesn’t include physician fraud for improper billing practices under Medicare, Medicaid, False Claims Act or similar laws.

3. More HIPAA-related enforcement actions (with increased fines) are anticipated.

Federal and state agencies responsible for regulating healthcare from Health and Human Services (HHS) to Office for Civil Rights (OCR) Department of Justice (DOJ) and Federal Trade Commission (FTC) have announced aggressive audit plans to ensure patient data safety and limit fraud and abuse. And compliance audits won’t be limited to just “Covered Entities” – those with direct access to patients and patient data (hospitals, doctors and other direct providers), but also extend to “Business Associates” those with access to patient records, who provide services to Covered Entities. HIPAA-regulated entities not in compliance with the final omnibus rules implemented under the Privacy and Security Rules of the Health Insurance Portability Accountability Act (HIPAA) and Health Information Technology for Economic and Clinical Health Act (HITECH) will be faced with higher fines and sanctions for non-compliance.

Since HIPAA’s enactment in 1996, Covered Entities (direct providers) face rigorous requirements for protecting patient information (PHI, PII, ePHI, EMR) and must have appropriate security practices to protect patient data. There are multiple layers of security protocols, including technical, physical, administrative controls, as well as general organizational requirements designed to protect patient data. Since the implementation of the final omnibus rules, HIPAA compliance now extends governmental oversight and liability to all sorts of other individuals, businesses and vendors engaged by Covered Entities as their “Business Associates”. Appropriate privacy and security standards must be in place and enforced to limit the ever present risk of cyber attack.

4. More private litigation by patients is likely.

Although the HIPAA statute itself does not give patients the right to sue for violations, last year the Connecticut Supreme Court in Byrne v. Avery (as well as courts in several other states) ruled that HIPAA’s lack of a private right of action does not necessarily prevent an individual from bringing an action under state law. While the contractual provisions of most data security agreements between CEs and BAs (Business Associate Agreements) typically contain language limiting the rights of persons who can assert rights directly against them – the end result of recent court decisions seems to be opening the door for individuals affected by breach to pursue remedies against Covered Entities and Business Associates directly.

5. ACA, Final Omnibus Rules and HIPAA Privacy and Security standards impact more than just healthcare providers.

Whether working within the healthcare community or another field entirely, every business must carefully evaluate the risks poses by a breach of its data – whether from outside threats (hackers), inside threats (employee human error) or risks posed by access to sensitive data arising from services by Business Associates (third party vendors). Under the final omnibus rules, many vendors and their subcontractors fall under the definition of “Business Associate” requiring the same rigorous compliance with HIPAA Privacy and Security standards required of direct healthcare providers. Knowing the rules and incorporating best practices to ensure data is secure must be a top priority for the healthcare industry and any downstream providers falling under the definition of Business Associate.

It’s incumbent on any individual or business having access to patient data (or any personal consumer data) to implement appropriate security practices and to investigate the practices of their subcontractors. All it takes is one mishap to be in the same position as Anthem and other healthcare providers who found themselves on the wrong side of this issue. In addition to conducting annual risk and compliance assessments, any individual or entity falling within the scope to the HIPAA/HITECH requirements should consider including or expanding cyber security coverage sufficient to protect against this increasing risk exposure – with many experts estimating the cost at $200/record for each record actually or potentially exposed to breach.

The healthcare industry and their downstream vendors can avoid trouble by:

1. Periodically assessing and addressing potential security risks;
2. Adequately training employees to understand the risks posed by the use of technology;
3. Adopting appropriate privacy and security practices;
4. Developing a Data Security Incident Response Plans with a team qualified to quickly respond if the worst should happen;
5. Adequately evaluating the risks and adding appropriate coverage for data security compromise/breach response costs; (or be prepared to self-insure);
6. Reviewing/updating all data security contracts to ensure they meet the new legal requirements;
7. Vetting all technologies and vendors to make sure they measure up; and
8. Appointing a qualified HIPAA Compliance Officer to ensure the required standards are met.

If you’re thinking you’re too small to be noticed, you’re not. There’s an abundance of reliable information available showing the true cost to those not in compliance or suffering a breach. The reputational harm posed by a breach or potential security incident can have devastating consequences for the ill-prepared. Our firm regularly provides compliance counseling, HIPAA assessments and training to help our clients avoid trouble. Having represented a number of companies hacked by off-shore organized crime, I can tell you a data breach, even a suspected data breach, is something you want to avoid. And all it takes is some careful analysis and planning.

We invite inquires on how we can assist with evaluating your needs in this critical area.

Succession Planning – Protecting Your Legacy

Tegan Blackburn

The Business Side of the Equation

A recent Forbes Magazine article highlights an important issue for all business owners – most don’t have adequate estate plans – in some instances not even a basic, current Will. Current stats on this show less than 50% of Americans have a Will and the business side the same trend with less than 50% of U.S. companies without adequate succession plans (sometimes no plan at all). Succession planning (and a personal estate plan consistent with it) is critical for businesses of all sizes. If the CEO or another key business leader in your organization became critically ill, suddenly departed or worse – then what?

This blog highlights how critical succession planning is to growth, sustainability and wealth preservation of any organization. My next blog will take a look at the personal side of the equation and the importance of completing personal estate planning tied to the goals of the succession plan.

Succession planning is basically the process of deciding who will lead an organization when a planned or emergency vacancy occurs in key leadership roles – someone becomes disabled, retires, passes on or suddenly departs under friendly or not so friendly circumstances. Over the past few decades as counsel to a number of closely-held entities, I’ve seen the good, the bad and the ugly on this issue. Business owners and those who rely on them suffer personally and financially if this important planning isn’t done. Businesses that fail to plan leave a lot to chance. A good succession plan will meet the needs of the organization, its key stakeholders, family members, employees, customers and others.

For closely-held and family-owned businesses, a business and the value of the business often represents the single biggest asset and most integral part of an owner’s wealth and financial security.

The Key Benefits of Succession Planning:

1. Preserving the value of the business by limiting (often eliminating) costly, disruptive disputes over who fills important roles and what direction the company takes in times of planned exits or unexpected exigencies. If the CEO or another key player is suddenly incapacitated or some other event forces an exit – then what happens? Are sufficient financial and human resources in place to be readily called upon to sustain business? No one wants to consider these issues, but it does happen and often without warning. In recounting just one instance of what can and does happen – a successful, closely-held business had misfortune strike without warning when company’s founding member & CEO passed away a short time after a stroke leaving grieving family members at an impasse over what to do. A key senior manager with more than 2 decades of experience at the company, the most ideal candidate to step in to lead the company, was “passed over” by the CEOs highly-political daughter, who appointed herself to “step into his shoes”. The fall out resulted in the senior manager and other employees leaving the company and customers concerned about the future. The end result of no planning was a lot of unnecessary damage to their business reputation and very public, costly lawsuits that ensued.

2. Smooth business transition and continued growth. Well-constructed succession plans provide the necessary framework for avoiding a lot of unnecessary headaches that can negatively impact a company’s reputation and bottom line. Completing this important planning gives employees, customers and decision maker’s confidence about the future – a key element of any successful businesses.

3. Enhancing continuity, goodwill and reputation of the business. A great deal of the value of a company is tied to its goodwill and reputation. These types of disputes drain resources, harm relationships and often lead to very public disputes by disgruntled employees, unhappy family members and customers. A great deal of effort went into building a successful business why leave it to chance. Succession planning is one of the most critical determinants of maintaining the value of a business now and in the future.

4. Tax Implications. Creating a tax advantaged plan consistent with both short-term and long-term goals puts the company in the best position for a possible third-party sale, internal succession by family members or employees (ESOP) or other strategies to enhance the bottom line.

5. Those who don’t do this planning leave a lot to chance. The cost of completing this process is far less than what’s lost by failing to plan and well worth a good night’s sleep, keeping good customers, happy employees and a sustainable future.

How do you get started? Working with a qualified legal and financial advisor with succession planning expertise is a great way to ensure the best result.

Digital Assets – Not Just the Here and Now

Tegan Blackburn

The reality – digital assets are a part of everyday life. And the need to protect them has never been greater. Planning for both the protection and conveyance of digital assets is more important than ever. While I’ve written extensively about the importance of data protection and cybersecurity here on my blog (Archives on: Data Protection: What Every Business Needs to Know; Steps Consumers Can Take to Protect Their Data, related topics and articles published in the Hartford Business Journal, Hartford Courant, Connecticut Law Tribune and others), digital information also plays great importance (or can cause a lot of problems) for family members, executors, heirs, care-givers and others after the here-and-now. This blog post highlights – why typical estate planning documents may not be enough.

Estate planning attorneys have always used a variety of legal documents to help clients and their loved ones manage assets (during incapacity) or transfer assets (after death) through the use of Powers of Attorney, Wills and/or Trusts. Another “tool” estate planning attorneys use is an inventory (or questionnaire) where clients identify all of their assets – real estate, personal property, health information, bank accounts, retirement accounts, life policies, retirement accounts, veteran’s benefits, intended beneficiaries and other important information necessary to assess and accomplish important estate planning objectives.

All too often Powers of Attorney, Wills and Trusts don’t say anything about “digital assets” – things like online accounts, passwords, security questions, files stored on computers or in the cloud, email accounts, social media sites, domain names, online digital photo albums – the list goes on… While a few states have enacted legislation enabling executors to have access to digital accounts, it’s a much more cumbersome (and often uncertain) process than it needs to be. In some instances, it may be a client’s wish (during incapacity or after death) that this information remain private and accounts terminated. In other instances, digital assets may have value (financial or emotional) and be important to convey to beneficiaries or successors of business interests. What happens to the face book or twitter account? What’s the password for online bank accounts, business urls or websites?

Depending on the number and nature of digital assets (which can change as often as accounts are added, modified or terminated), it’s important to keep an up-to-date inventory of these assets whether printed, stored on computer, smart phone or other devise, CD, DVD, flash drive or cloud. (Keeping in mind, of course, the importance of updating this information and protecting access with sufficient passwords, reliable vendors…) The person(s) selected as caretakers during incapacity or after death – executors, conservators or others will need to know the location of Wills, Trusts and other important estate planning documents, including the inventory of assets identifying accounts and, of course, any digital assets – such as online accounts and passwords. Unfortunately, many of the traditional estate planning documents prepared by attorneys today don’t adequately address “digital assets”. Adding even more complexity to the issue is the fact that many online vendors, such as twitter, face book, EBay, Google have a wide variety of differing terms of service “TOS” that can prevent or hamper a non-owner’s access. If it has to go to a probate court to get resolved, the Computer Fraud and Abuse Act, internet law, probate law and numerous other laws are also likely to come into play.

Living in today’s “digital age” means keeping track of this information and making decisions on how you want it to be conveyed, used or terminated (and by whom) with the right legal instruments in place to accomplish these important goals. Powers of Attorney, Wills, Trusts and other conveyance documents should be reviewed (and updated) every few years by a qualified estate planning attorney. If estate planning documents haven’t been updated in a while, you might also run the risk of having banks or others reject them as outdated or not covering a particular subject – such as online accounts. Many banks now require Powers of Attorney to be updated every year (some require every 2 years). I’ve seen many instances where banks, insurance companies and others rejected documents (often because they’re outdated or were prepared by clients themselves or other firms), because they didn’t specifically provide for access to online accounts (the same problem often comes up with safe deposit boxes and other depositories, because they weren’t specifically mentioned). In the past, there was an assumption that checking the box on the Power of Attorney giving authority for “all other matters” would be enough. Clearly, this catch-all phrase of the past has little to no legal significance today. While probate courts can and often do accomplish important things – they’re not known for acting quickly and anything coming before them is a public proceeding. Without clear, legally sufficient documents stating clear intentions about digital assets (and other property) – the door will be open to delays, uncertainty and the possibility of lingering entanglements with online vendors, banks, business partners and family members.

To make sure your intentions are carried out in the here-in-now and after-life will require a little more planning and the right documents in place. Digital assets are here to stay and need to be included in your planning decisions for now and the future. (Preventing identity theft when it’s been more present than ever and privacy considerations must, of course, be considered to keep the information properly protected.) We welcome inquiries on our estate planning, data protection and businesses succession services, as well as requests for our articles and guidelines on these important topics available to the public on request.

A NEW BREED OF SOCIAL ENTREPRENEUR

Tegan Blackburn

CONNECTICUT WELCOMES “BENEFIT CORPORATIONS”

If you haven’t seen it yet, there’s a new choice for socially-minded entrepreneurs – Benefit Corporations. This new form of entity gives socially-minded businesses a better opportunity to pursue and promote both more traditional, “for-profit” ideologies along with other important “non-profit”, philanthropic, social and environmental missions. Connecticut along with a growing number of other states recently adopted legislation permitting this new form of legal structure.

The idea isn’t really that new. Many companies, in addition to having clear for-profit objectives, support any number of important local, national and international missions. A growing number of companies across the U.S. (like Patagonia – one of the first U.S. companies to convert to a benefit corporation) wanted to do more by closely examining and improving the impact their products and services had on their employees, communities and the environment. The key difference between this new concept and more traditional corporations is a deliberate move from purely, profit-driven decision-making to taking into account environmental impacts, employee well-being, service to under-served populations, human health, economic opportunity for less-privileged, or promoting the arts, sciences or education. Benefit corporations are essentially “for-profit” companies committed to adopting measurable ways of improving their impacts on society. And there’s accountability for how well they do in meeting these objectives.

The new Connecticut law allows companies (like C-corps., S-corps, LLCs and other types of business entities) to convert to or create a newly formed “Benefit Corporation”. A main feature of the Benefit Corporation is the requirement for it to exercise a new and different type of “business judgment” that includes a statement of its “social” or “environmental” goals with some transparency in measuring whether those goals are met. In addition, Benefit Corporations must appoint a “Benefit Director” responsible for an annual report on whether the “public benefit” stated by the company has been met and, if not, how the directors failed to meet their stated goals. This new legal structure carries a higher burden than its more traditional counter-parts by imposing additional, transparency and reporting requirements. For organizations with important missions to carry out ranging from philanthropy to environmental sustainability (in addition to making a profit), benefit corporations may be the right choice.

(Additional Note: Companies choosing this form of new business structure may also want to consider obtaining the additional “B-corporation certification” offered by B-lab, an international, non-profit company based in the U.S. that certifies compliance. The author has no relationship with B-lab and offers this note to point out that the certification by this lab is not required, but may be beneficial for some entities.)

A Business Lawyer’s Inside Perspective on Avoiding Lawsuits

Tegan Blackburn

You can’t start or run a business without facing some risks. One of the main reasons businesses choose to incorporate (or create some other form of business entity) is to limit their personal liability – so shareholders (owners) won’t have their own personal assets at risk for the corporation’s debts and liabilities. Having advised a diverse group business and industry clients over the past 20 years, there are a few things (often avoidable things) that get companies into trouble – sometimes big trouble. With businesses facing many more, “modern” risks today (as well as the old, more traditional ones), the saying “an ounce of prevention is worth a pound of cure” applies now more than ever.

Here’s my Top Ten for staying out of trouble:

1. Forming the business entity correctly. Choosing the right entity, making the necessary public “organizational filings” and attending to all of the other required regulatory and corporate governance documents is often one of most under-appreciated, misunderstood parts of starting and running a business. Businesses that don’t do it correctly can (and often are) faced with claims against their personal assets – only discovering when it’s too late that personal assets are now at risk. Not following the rules set out by state statutes where businesses are incorporated and doing business can result in what lawyers call “piercing the corporate veil” putting personal assets at great risk. These risks can be avoided if companies are set up correctly and follow the legal requirements needed to enjoy the protections afforded by them.

2. Get it in writing. Is there a binding contract or was it just an offer? Are the terms complete and accurate? Does the Uniform Commercial Code (UCC), statute of frauds or other special rules apply? If there isn’t a “sufficient legal writing” evidencing clear contract terms accepted by the parties, you might be leaving it up to a court of law to sort it out and then be stuck with the results. Good relationships, hand-shakes and emails are great ways to do business, but without the right documentation, it can quickly become a big disputed “he said – she said” situation where nobody really wins.

3. Using clear, concise language is a great way to avoid misunderstandings that lead to disputes or lawsuits. All too often busy professionals use contract templates and “boiler plate” language they’ve “borrowed” from some other transaction. These “templates” may (nor may not) have some good basic provisions, but if they aren’t carefully read or adequately modified to reflect the deal you’re doing; that can spell trouble. The best contracts contain a clear statement of the parties intentions, including who the parties are (yes, even this is sometimes incorrectly stated or overlooked), specifics outlining the transaction, the business terms, payment obligations, default provisions and legal rights and remedies of the parties. Having clear language is one of the best ways to avoid problems and get issues quickly resolved.

4. Know the rules. Every business is governed by some kind of federal, state, foreign or local regulation. Getting all the necessary approvals, licenses or permits before starting operations (and maintaining them) is critical. Organizations that don’t know or play by the rules are often faced with fines and enforcement actions by regulators, law enforcement, attorney generals and others; and along with fines, be subjected to license suspensions, business closures or other very public actions sometimes with crippling results.

5. Know the risks posed by technology. Protecting data is one of the biggest risks faced by businesses today. Not surprisingly, data theft and cyber security continue to be at the top of the list of concerns identified by businesses and consumers locally and globally. As the number of devices and ways of communicating grows so will the risk. No business or industry is immune from the need to protect its data. It’s not just big, heavily-regulated industries (like healthcare, financial, retail and IT sector clients) who have a growing number of federal, state, international and other industry specific regulations impacting their operations. The need to protect data security impacts the even the smallest Mom & Pop shops. For big business and small business alike, knowing and following the rules is crucial. Recent insurance industry data shows 60% of small businesses impacted by data breach out of business within a year of attack and cyber criminals have learned they’re often easy targets. The costs of responding to a data breach are significant and greatly outweighed by the modest time and resources needed to develop adequate data protection policies to help protect again this all too present problem.

6. Protecting hard-earned “proprietary” information from theft or misuse by others is critical. Every organization needs to identify and take steps to monitor and protect its trade secrets, inventions, business formulas and other proprietary information. Using properly drafted agreements (Non-Disclosure, Confidentiality and Non-Competes, etc.) along with appropriate proprietary filings (patents, trademarks, online registrations, etc.) can provide some good protection, but care must be taken to ensure they’ll be enforced if subjected to legal challenge.

7. Insufficient funding continues to be one of the big reasons new businesses fail. Without adequate financing, paying the landlord, suppliers and employees may be impossible leaving the door open to lawsuits, judgments a lot of other un-pleasantries. Starting out with sufficient capital along with good financial planning and accounting practices is one of the best ways to ensure the on-going success of a company and avoid lawsuits.

8. Having the right team of advisers at the outset and along the way (before any big problems surface) is one of the best investments you can make in the success of your business. A well-qualified business attorney – one with years of experience and proven successes – can do a lot more than just set up a company and draft a contact. The best business attorneys will come equipped with strong business acumen, broad legal capabilities and the deep, industry-specific knowledge needed to advice clients on wide variety of issues impacting their business and industry.

9. Adequate insurance coverage. With the growing number risks businesses face today, sufficient coverage to protect against the most likely, potential risks associated with a particular industry is critical. When choosing coverage, it’s important to have a clear understanding of what’s covered and what’s not to avoid unpleasant surprises. Too often policies aren’t read or understood until there’s a possible claim – sometimes resulting in too little, too late.

10. And my last bit of advice, “always follow your gut”. On more occasions than I’d care to re-count, prospective new business clients contacted me and began the conversation with “Something just didn’t seem right” and, of course, they proceeded anyway – now needing the services of legal counsel (sometimes at significant expense) to clean up the aftermath. I believe this rule is as important in life as it is in the law that is to say – trust your instincts. Because if it walks like a duck and talks like a duck – well, you know the rest of the saying…

As the year comes to a close, we wish you a wonderful holiday and new year!

As always, we invite your requests for topics here on our blog & information about our services.