We proposed to define the term "business partner" to mean, with respect to a covered entity, a person to whom the covered entity discloses protected health information so that the person can carry out, assist with the performance of, or perform on behalf of, a function or activity for the covered entity. "Business partner" would have included contractors or other persons who receive protected health information from the covered entity (or from another business partner of the covered entity) for the purposes described in the previous sentence, including lawyers, auditors, consultants, third-party administrators, health care clearinghouses, data processing firms, billing firms, and other covered entities. "Business partner" would have excluded persons who are within the covered entity's workforce, as defined in this section.
This rule reflects the change in the name from "business partner" to "business associate," included in the Transactions Rule.
In the final rule, we change the definition of "business associate" to clarify the circumstances in which a person is acting as a business associate of a covered entity. The changes clarify that the business association occurs when the right to use or disclose the protected health information belongs to the covered entity, and another person is using or disclosing the protected health information (or creating, obtaining and using the protected health information) to perform a function or activity on behalf of the covered entity. We also clarify that providing specified services to a covered entity creates a business associate relationship if the provision of the service involves the disclosure of protected health information to the service provider. In the proposed rule, we had included a list of persons that were considered to be business partners of the covered entity. However, it is not always clear whether the provision of certain services to a covered entity is "for" the covered entity or whether the service provider is acting "on behalf of" the covered entity. For example, a person providing management consulting services may need protected health information to perform those services, but may not be acting "on behalf of" the covered entity. This we believe led to some general confusion among the commenters as to whether certain arrangements fell within the definition of a business partner under the proposed rule. The construction of the final rule clarifies that the provision of the specified services gives rise to a business associate relationship if the performance of the service involves disclosure of protected health information by the covered entity to the business associate. The specified services are legal, actuarial, accounting, consulting, management, administrative accreditation, data aggregation, and financial services. The list is intended to include the types of services commonly provided to covered entities where the disclosure of protected health information is routine to the performance of the service, but when the person providing the service may not always be acting "on behalf of" the covered entity.
In the final rule, we reorganize the list of examples of the functions or activities that may be conducted by business associates. We place a part of the proposed list in the portion of the definition that addresses when a person is providing functions or activities for or on behalf of a covered entity. We place other parts of the list in the portion of the definition that specifies the services that give rise to a business associate relationship, as discussed above. We also have expanded the examples to provide additional guidance and in response to questions from commenters.
We have added data aggregation to the list of services that give rise to a business associate relationship. Data aggregation, as discussed below, is where a business associate in its capacity as the business associate of one covered entity combines the protected health information of such covered entity with protected health information received by the business associate in its capacity as a business associate of another covered entity in order to permit the creation of data for analyses that relate to the health care operations of the respective covered entities. Adding this service to the business associate definition clarifies the ability of covered entities to contract with business associates to undertake quality assurance and comparative analyses that involve the protected health information of more than one contracting covered entity. For example, a state hospital association could act as a business associate of its member hospitals and could combine data provided to it to assist the hospitals in evaluating their relative performance in areas such as quality, efficiency and other patient care issues. As discussed below, however, the business associate contracts of each of the hospitals would have to permit the activity, and the protected health information of one hospital could not be disclosed to another hospital unless the disclosure is otherwise permitted by the rule.
The definition also states that a business associate may be a covered entity, and that business associate excludes a person who is part of the covered entity's workforce.
We also clarify in the final rule that a business association arises with respect to a covered entity when a person performs functions or activities on behalf of, or provides the specified services to or for, an organized health care health care arrangement in which the covered entity participates. This change recognizes that where covered entities participate in certain joint arrangements for the financing or delivery of health care, they often contract with persons to perform functions or to provide services for the joint arrangement. This change is consistent with changes made in the final rule to the definition of health care operations, which permits covered entities to use or disclose protected health information not only for their own health care operations, but also for the operations of an organized health care arrangement in which the covered entity participates. By making these changes, we avoid the confusion that could arise in trying to determine whether a function or activity is being provided on behalf of (or if a specified service is being provided to or for) a covered entity or on behalf of or for a joint enterprise involving the covered entity. The change clarifies that in either instance the person performing the function or activity (or providing the specified service) is a business associate.
We also add language to the final rule that clarifies that the mere fact that two covered entities participate in an organized health care arrangement does not make either of the covered entities a business associate of the other covered entity. The fact that the entities participate in joint health care operations or other joint activities, or pursue common goals through a joint activity, does not mean that one party is performing a function or activity on behalf of the other party (or is providing a specified services to or for the other party).
In general under this provision, actions relating to the protected health information of an individual undertaken by a business associate are considered, for the purposes of this rule, to be actions of the covered entity, although the covered entity is subject to sanctions under this rule only if it has knowledge of the wrongful activity and fails to take the required actions to address the wrongdoing. For example, if a business associate maintains the medical records or manages the claims system of a covered entity, the covered entity is considered to have protected health information and the covered entity must ensure that individuals who are the subject of the information can have access to it pursuant to § 164.524.
The business associate relationship does not describe all relationships between covered entities and other persons or organizations. While we permit uses or disclosures of protected health information for a variety of purposes, business associate contracts or other arrangements are only required for those cases in which the covered entity is disclosing information to someone or some organization that will use the information on behalf of the covered entity, when the other person will be creating or obtaining protected health information on behalf of the covered entity, or when the business associate is providing the specified services to the covered entity and the provision of those services involves the disclosure of protected health information by the covered entity to the business associate. For example, when a health care provider discloses protected health information to health plans for payment purposes, no business associate relationship is established. While the covered provider may have an agreement to accept discounted fees as reimbursement for services provided to health plan members, neither entity is acting on behalf of or providing a service to the other.
Similarly, where a physician or other provider has staff privileges at an institution, neither party to the relationship is a business associate based solely on the staff privileges because neither party is providing functions or activities on behalf of the other. However, if a party provides services to or for the other, such as where a hospital provides billing services for physicians with staff privileges, a business associate relationship may arise with respect to those services. Likewise, where a group health plan purchases insurance or coverage from a health insurance issuer or HMO, the provision of insurance by the health insurance issuer or HMO to the group health plan does not make the issuer a business associate. In such case, the activities of the health insurance issuer or HMO are on their own behalf and not on the behalf of the group health plan. We note that where a group health plan contracts with a health insurance issuer or HMO to perform functions or activities or to provide services that are in addition to or not directly related to the provision of insurance, the health insurance issuer or HMO may be a business associate with respect to those additional functions, activities or services. We also note that covered entities are permitted to disclose protected health information to oversight agencies that act to provide oversight of federal programs and the health care system. These oversight agencies are not performing services for or on behalf of the covered entities and so are not business associates of the covered entities. Therefore HCFA, the federal agency that administers Medicare, is not required to enter into a business associate contract in order to disclose protected health information to the Department's Office of Inspector General.
We do not require a covered entity to enter into a business associate contract with a person or organization that acts merely as a conduit for protected health information (e.g., the US Postal Service, certain private couriers and their electronic equivalents). A conduit transports information but does not access it other than on a random or infrequent basis as may be necessary for the performance of the transportation service, or as required by law. Since no disclosure is intended by the covered entity and the probability of exposure of any particular protected health information to a conduit is very small, we do not consider a conduit to be a business associate of the covered entity.
We do not consider a financial institution to be acting on behalf of a covered entity, and therefore no business associate contract is required, when it processes consumer-conducted financial transactions by debit, credit or other payment card, clears checks, initiates or processes electronic funds transfers, or conducts any other activity that directly facilitates or effects the transfer of funds for compensation for health care. A typical consumer-conducted payment transaction is when a consumer pays for health care or health insurance premiums using a check or credit card. In these cases the identity of the consumer is always included and some health information (e.g., diagnosis or procedure) may be implied through the name of the health care provider or health plan being paid. Covered entities that initiate such payment activities must meet the minimum necessary disclosure requirements described in the preamble to § 164.514.