The risks of not having a business associate agreement (BAA) with your business associates include significant HIPAA violations, which can result in hefty fines, legal liability, and data breaches that compromise patient privacy. Without a BAA, there is no assurance that business associates follow proper security protocols, increasing the risk of unauthorized disclosures. That can lead to a damaged reputation, loss of patient trust, operational disruptions, and scrutiny from regulators during audits or investigations.
The role of a business associate agreement (BAA) in protecting PHI
According to NCBI, "Protected health information breaches have impacted over 176 million patients in the United States from 2009 to 2020. Most of these breaches have occurred due to the carelessness of employees and failure to comply with HIPAA rules versus external hackers." HIPAA establishes national standards for the protection of PHI, which includes any information about health status, provision of healthcare, or payment for healthcare that can be linked to an individual. Covered entities and business associates must adhere to these regulations to ensure patient privacy and data security.
A BAA is a legally binding contract between a HIPAA covered entity, such as a healthcare provider, and a third-party vendor or business associate that handles PHI on their behalf. That includes vendors that provide services like billing, cloud storage, email hosting, and IT support. The BAA ensures that the business associate follows the HIPAA Privacy and Security Rules when managing PHI, managing risks for both parties.
Related: What is the purpose of a business associate agreement?
Legal and financial risks of non-compliance
The Department of Health and Human Services (HHS) Office for Civil Rights (OCR) requires covered entities to have BAAs with all business associates. Failing to do so can lead to severe penalties, with fines ranging from $100 to $50,000 per violation, depending on the level of negligence. In extreme cases, penalties can reach up to $1.5 million annually.
If PHI is mishandled by a business associate, the covered entity may be held responsible. As a result, they may face lawsuits, reputational damage, and financial loss. Without a BAA, there is no clear contractual recourse to hold the business associate accountable for any breaches or misuse of patient data.
Increased data breach vulnerability
A BAA establishes security protocols to protect PHI, ensuring business associates implement appropriate safeguards. There is no guarantee that the business associate is taking the necessary precautions to secure sensitive patient information without this agreement.
Data breaches can compromise patient privacy and lead to identity theft, fraud, or unauthorized disclosures. Additionally, covered entities must report breaches to affected patients and the OCR, which can result in further investigations, penalties, and damage to the organization's reputation.
Legal liability and accountability gaps
HIPAA requires business associates to be held accountable for how they manage PHI. There is no formal framework outlining the responsibilities and obligations of the business associate without a BAA. That creates a significant legal liability for the covered entity, as they are responsible for ensuring their vendors comply with HIPAA standards. In case of a breach, the covered entity may be held liable for the actions of their business associate if a BAA is not in place.
Damage to reputation and loss of patient trust
Mishandling PHI or failing to comply with HIPAA regulations can erode patient trust. When patients hear about a breach involving their personal health information, they may lose confidence in the organization’s ability to protect their privacy. According to a recent analysis of failures in protecting personal health data, "In addition to the potential harm to affected individuals, data breaches result in severe financial and organizational consequences, including regulatory penalties, and damage to the organization’s reputation.".
A BAA shows a commitment to safeguarding PHI by ensuring that third-party vendors follow strict security protocols. Without it, a covered entity risks its reputation, which could affect patient retention.
Increased audit and investigation risks
The absence of a BAA can increase the chances of non-compliance findings during an OCR audit or investigation. BAAs are one of the first documents auditors look for when evaluating HIPAA compliance. Not having a BAA when required is a red flag and can lead to more severe penalties or enforcement actions.
Related: Preparing for an OCR HIPAA compliance audit
FAQs
Can a business associate use subcontractors without a BAA?
No, business associates must have BAAs with any subcontractors that handle PHI on their behalf to ensure the subcontractors comply with the HIPAA privacy and security rules.
Read more: How to handle subcontractors under HIPAA
Does signing a BAA automatically make a vendor HIPAA compliant?
While a BAA is necessary, it doesn't guarantee HIPAA compliance. The business associate must implement appropriate security measures and follow HIPAA guidelines to protect PHI.
Can a BAA be verbal, or must it be in writing?
A BAA must be a written and signed agreement. Verbal agreements are not valid under HIPAA, and written contracts ensure both parties understand their obligations.
Liyanda Tembani
