There is no doubt that companies face unprecedented volume and variation in both disruptive and intrusive cyberattacks on their networks. Among the different attack methodologies today, ransomware is quickly becoming a major concern for CISOs and security professionals. According to Interagency Guidance from the U.S. Government, there are currently over 4,000 daily ransomware attacks – up over 300% from the 1,000 daily ransomware attacks experienced in 2015.
Ransomware can potentially hold hostage critical corporate, customer and employee data, but in-house legal and communications teams are also concerned about whether these attacks trigger notification rules. The Department of Health and Human Services Office of Civil Rights (“HHS OCR”), which enforces the HIPAA Security and Breach Notification Rules, stated in recently issued guidance that ransomware incidents may be considered a breach that require notification. The guidance is a poignant reminder to all companies, whether regulated by HIPAA or not, to carefully consider how evolving attack methodologies can directly implicate incident response strategies and compliance obligations.
In a much anticipated move, on March 2, 2016, the Consumer Financial Protection Bureau (CFPB) entered the cybersecurity foray with its first enforcement action against Dwolla, Inc., an online payment processing start-up. Pursuant to its authority under Sections 1031(a) and 1036(a)(1) of the Consumer Financial Protection Act of 2010, the CFPB fined Dwolla $100,000 and secured a five-year consent order imposing strict requirements on management and the Board of Directors. This CFPB enforcement action offers important insights into the contours of “reasonable cybersecurity” for certain financial services entities, and important lessons for conducting cybersecurity risk assessments. These issues dovetail with significant activity we recently reported on in the cybersecurity arena by the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), the Federal Trade Commission (FTC), the Department of Health and Human Services’ Office of Civil Rights (HHS-OCR), and a host of other state and federal regulators.
Officials at the U.S. Department of Health and Human Services Office of Civil Rights (HHS OCR) have recently selected a vendor to conduct the second wave of HIPAA audits. These so-called “Phase 2 Audits” are set to commence on the heels of two important HHS OCR enforcement proceedings alleging violations of the HIPAA Security Rule:
- St. Elizabeth’s Medical Center, a tertiary care hospital in Massachusetts, allegedly failed to conduct a risk assessment before its employees used a cloud document-sharing application and failed to respond to a security incident in a timely manner, leading to a $218,400 fine and Corrective Action Plan (CAP). Orrick reported on this case in a previous alert.
- Cancer Care Group (CCG), one of the largest privately owned radiation oncology groups in the country, recently signed a $750,000 settlement and CAP stemming from the theft of PHI belonging to approximately 55,000 patients stored on a stolen laptop and unencrypted backup media. According to OCR, the investigation uncovered that prior to the security incident, CCG failed to conduct an enterprise-wide risk assessment, and failed to implement a policy addressing the removal of unencrypted devices containing ePHI from company facilities – two issues that OCR identified as key contributing factors to the data breach. The CAP requires CCG to conduct risk analysis regarding its handling of ePHI, to develop and implement a risk mitigation plan addressing certain identified risks, and to review and update security policies, procedures and employee training.
Last month, the U.S. Department of Health and Human Services Office for Civil Rights announced that it had entered into a settlement agreement with St. Elizabeth’s Medical Center (SEMC) in Brighton, Massachusetts. Pursuant to the nonadmission settlement, SEMC agreed to pay $218,400 and enter into a one-year corrective action plan (CAP) to settle allegations that its employees violated the HIPAA Security Rule by, among other things, storing electronic protected health information in a cloud document-sharing application.