Standards for Privacy of Individually Identifiable Health Information. Final Privacy Rule Preamble.. Health care operations.

12/28/2000

Comment: Several commenters stated that the list of activities within the definition of health care operations was too broad and should be narrowed. They asserted that the definition should be limited to exclude activities that have little or no connection to the care of a particular patient or to only include emergency treatment situations or situations constituting a clear and present danger to oneself or others.

Response: We disagree. We believe that narrowing the definition in the manner requested will place serious burdens on covered entities and impair their ability to conduct legitimate business and management functions.

Comment: Many commenters, including physician groups, consumer groups, and privacy advocates, argued that we should limit the information that can be used for health care operations to de-identified data. They argued that if an activity could be done with de-identified data, it should not be incorporated in the definition of health care operations.

Response: We disagree. We believe that many activities necessary for the business and administrative operations of health plans and health care providers are not possible with de-identified information or are possible only under unduly burdensome circumstances. For example, identified information may be used or disclosed during an audit of claims, for a plan to contact a provider about alternative treatments for specific patients, and in reviewing the competence of health care professionals. Further, not all covered entities have the same ability to de-identify protected health information. Covered entities with highly automated information systems will be able to use de-identified data for many purposes. Other covered entities maintain most of their records on paper, so a requirement to de-identify information would place too great a burden on the legitimate and routine business functions included in the definition of health care operations. Small business, which are most likely to have largely paper records, would find such a blanket requirement particularly burdensome.

Protected health information that is de-identified pursuant to § 164.514(a) is not subject to this rule. We hope this provides covered entities capable of de-identifying information with the incentive to do so.

Comment: Some commenters requested that we permit the use of demographic data (geographic, location, age, gender, and race) separate from all other data for health care operations. They argued that demographic data was needed to establish provider networks and monitor providers to ensure that the needs of ethnic and minority populations were being addressed.

Response: The use of demographic data for the stated purposes is within the definition of health care operations; a special rule is not necessary.

Comment: Some commenters pointed out that the definition of health care operations is similar to, and at times overlaps with, the definition of research. In addition, a number of commenters questioned whether or not research conducted by the covered entity or its business partner must only be applicable to and used within the covered entity to be considered health care operations. Others questioned whether such studies or research performed internal to a covered entity are "health care operations" even if generalizable results may be produced.

Response: We agree that some health care operations have many of the characteristics of research studies and in the NPRM asked for comments on how to make this distinction. While a clear answer was not suggested in any of the comments, the comments generally together with our fact finding lead to the provisions in the final rule. The distinction between health care operations and research rests on whether the primary purpose of the study is to produce "generalizable knowledge." We have modified the definition of health care operations to include "quality assessment and improvement activities, including outcomes evaluation and development of clinical guidelines, provided that the obtaining of generalizable knowledge is not the primary purpose of any studies resulting from such activities." If the primary purpose of the activity is to produce generalizable knowledge, the activity fits within this rule's definition of "research" and the covered entity must comply with §§ 164.508 or 164.512, including obtaining an authorization or the approval of an institutional review board or privacy board. If not and the activity otherwise meets the definition of health care operations, the activity is not research and may be conducted under the health care operations provisions of this rule.

In some instances, the primary purpose of the activity may change as preliminary results are analyzed. An activity that was initiated as an internal outcomes evaluation may produce information that the covered entity wants to generalize. If the purpose of a study changes and the covered entity does intend to generalize the results, the covered entity should document the change in status of the activity to establish that they did not violate the requirements of this rule. (See definition of "research," below, for further information on the distinction between "research" and "health care operations.")

We note that the difficulty in determining when an activity is for the internal operations of an entity and when it is a research activity is a long-standing issue in the industry. The variation among commenters' views is one of many indications that, today, there is not consensus on how to draw this line. We do not resolve the larger issue here, but instead provide requirements specific to the information covered by this rule.

Comment: Several commenters asked that disease management and disability management activities be explicitly included in the definition of health care operations. Many health plans asserted that they would not be able to provide disease management, wellness, and health promotion activities if the activity were solely captured in the rule's definition of "treatment." They also expressed concern that "treatment" usually applies to an individual, not to a population, as is the practice for disease management.

Response: We were unable to find generally accepted definitions of the terms 'disease management' and 'disability management.' Rather than rely on this label, we include many of the functions often included in discussions of disease management in this definition or in the definition of treatment, and modify both definitions to address the commenters' concerns. For example, we have revised the definition of health care operations to include population-based activities related to improving health or reducing health care costs. This topic is discussed further in the comment responses regarding the definition of 'treatment,' below.

Comment: Several commenters urged that the definition of health care operations be illustrative and flexible, rather than structured in the form of a list as in the proposed rule. They believed it would be impossible to identify all the activities that constitute health care operations. Commenters representing health plans were concerned that the "static" nature of the definition would stifle innovation and could not reflect the new functions that health plans may develop in the future that benefit consumers, improve quality, and reduce costs. Other commenters, expressed support for the approach taken in the proposed rule, but felt the list was too broad.

Response: In the final rule, we revise the proposed definition of health care operations to broaden the list of activities included, but we do not agree with the comments asking for an illustrative definition rather than an inclusive list. Instead, we describe the activities that constitute health care operations in broad terms and categories, such as "quality assessment" and "business planning and development." We believe the use of broadly stated categories will allow industry innovation, but without the privacy risks entailed in an illustrative approach.

Comment: Several commenters noted that utilization review and internal quality review should be included in the definition. They pointed out that both of these activities were discussed in the preamble to the proposed rule but were not incorporated into the regulation text.

Response: We agree and have modified the regulation text to incorporate quality assessment and improvement activities, including the development of clinical guidelines and protocol development.

Comment: Several commenters stated that the proposal did not provide sufficient guidance regarding compiling and analyzing information in anticipation of or for use in legal proceedings. In particular, they raised concerns about the lack of specificity as to when "anticipation" would be triggered.

Response: We agree that this provision was confusing and have replaced it with a broader reference to conducting or arranging for legal services generally.

Comment: Hospital representatives pointed out the pressure on health care facilities to improve cost efficiencies, make cost-effectiveness studies, and benchmark essential health care operations. They emphasized that such activities often use identifiable patient information, although the products of the analyses usually do not contain identifiable health information. Commenters representing state hospital associations pointed out that they routinely receive protected health information from hospitals for analyses that are used by member hospitals for such things as quality of care benchmark comparisons, market share analysis, determining physician utilization of hospital resources, and charge comparisons.

Response: We have expanded the definition of health care operations to include use and disclosure of protected health information for the important functions noted by these commenters. We also allow a covered entity to engage a business associate to provide data aggregation services. See § 164.504(e).

Comment: Several commenters argued that many activities that are integral to the day-to-day operations of a health plan have not been included in the definition. Examples provided by the commenters include: issuing plan identification cards, customer service, computer maintenance, storage and back-up of radiologic images, and the installation and servicing of medical equipment or computer systems.

Response: We agree with the commenters that there are activities not directly part of treatment or payment that are more closely associated with the administrative or clerical functions of the plan or provider that need to be included in the definition. To include such activities in the definition of health care operations, we eliminate the requirement that health care operations be directly related to treatment and payment, and we add to this definition the new categories of business management (including general administrative activities) and business planning activities.

Comment: One commenter asked for clarification on whether cost-related analyses could also be done by providers as well as health plans.

Response: Health care operations, including business management functions, are not limited to health plans. Any covered entity can perform health care operations.

Comment: One commenter stated that the proposed rule did not address what happens to records when a covered entity is sold or merged with another entity.

Response: We agree and add to the definition of health care operations disclosures of protected health information for due diligence to a covered entity that is a potential successor in interest. This provision includes disclosures pursuant to the sale of a covered entity's business as a going concern, mergers, acquisitions, consolidations, and other similar types of corporate restructuring between covered entities, including a division of a covered entity, and to an entity that is not a covered entity but will become a covered entity if the reorganization or sale is completed. Other types of sales of assets, or disclosures to organizations that are not and would not become covered entities, are not included in the definition of health care operations and could only occur if the covered entity obtained valid authorization for such disclosure in accordance with § 164.508 or if the disclosure is otherwise permitted under this rule.

Once a covered entity is sold or merged with another covered entity, the successor in interest becomes responsible for complying with this regulation with respect to the transferred information.

Comment: Several commenters expressed concern that the definition of health care operations failed to include the use of protected health information for the underwriting of new health care policies and took issue with the exclusion of uses and disclosures of protected health information of prospective enrollees. They expressed the concern that limiting health care operations to the underwriting and rating of existing members places a health plan in the position of not being able to evaluate prudently and underwrite a consumer's health care risk.

Response: We agree that covered entities should be able to use the protected health information of prospective enrollees to underwrite and rate new business and change the definition of health care operations accordingly. The definition of health care operations below includes underwriting, premium rating, and other activities related to the creation of a contract of health insurance.

Comment: Several commenters stated that group health plans needed to be able to use and disclose protected health information for purposes of soliciting a contract with a new carrier and rate setting.

Response: We agree and add "activities relating to the ... replacement of a contract of insurance" to cover such disclosures. See § 164.504 for the rules for plan sponsors of group health plans to obtain such information.

Comment: Commenters from the business community supported our recognition of the importance of financial risk transfer mechanisms in the health care marketplace by including "reinsurance" in the definition of health care operations. However, they stated that the term "reinsurance" alone was not adequate to capture "stop-loss insurance" (also referred to as excess of loss insurance), another type of risk transfer insurance.

Response: We agree with the commenters that stop-loss and excess of loss insurance are functionally equivalent to reinsurance and add these to the definition of health care operations.

Comment: Commenters from the employer community explained that there is a trend among employers to contract with a single insurer for all their insurance needs (health, disability, workers' compensation). They stated that in these integrated systems, employee health information is shared among the various programs in the system. The commenters believed the existing definition poses obstacles for those employers utilizing an integrated health system because of the need to obtain authorizations before being permitted to use protected health information from the health plan to administer or audit their disability or workers' compensation plan.

Other commenters representing employers stated that some employers wanted to combine health information from different insurers and health plans providing employee benefits to their workforces, including its group health plan, workers' compensation insurers, and disability insurers, so that they could have more information in order to better manage the occurrences of disability and illness among their workforces. They expressed concern that the proposed rule would not permit such sharing of information.

Response: While we agree that integrating health information from different benefit programs may produce efficiencies as well as benefits for individuals, the integration also raises significant privacy concerns, particularly if there are no safeguards on uses and disclosures from the integrated data. Under HIPAA, we do not have jurisdiction over many types of insurers that use health information, such as workers' compensation insurers or insurers providing disability income benefits, and we cannot address the extent to which they provide individually identifiable health information to a health plan, nor do we prohibit a health plan from receiving such information. Once a health plan receives identifiable health information, however, the information becomes protected and may only be used and disclosed as otherwise permitted by this rule.

We clarify, however, that a covered entity may provide data and statistical analyses for its customers as a health care operation, provided that it does not disclose protected health information in a way that would otherwise violate this rule. A group health plan or health insurance issuer or HMO, or their business associate on their behalf, may perform such analyses for an employer customer and provide the results in de-identified form to the customer, using integrated data received from other insurers, as long as protected health information is not disclosed in violation of this rule. See the definition of "health care operations," § 164.501. If the employer sponsors more than one group health plan, or if its group health plan provides coverage through more than one health insurance issuer or HMO, the different covered entities may be an organized health care arrangement and be able to jointly participate in such an analysis as part of the health care operations of such organized health care arrangement. See the definitions of "health care operations" and "organized health care arrangement," § 164.501. We further clarify that a plan sponsor providing plan administration to a group health plan may participate in such an analysis, provided that the requirements of § 164.504(f) and other parts of this rule are met.

The results described above are the same whether the health information that is being combined is from separate insurers or from one entity that has a health component and also provides excepted benefits. See the discussion relating to health care components, § 164.504.

We note that under the arrangements described above, the final rule provides substantial flexibility to covered entities to provide general data and statistical analyses, resulting in the disclosure of de-identified information, to employers and other customers. An employer also may receive protected health information from a covered entity for any purpose, including those described in comment above, with the authorization of the individual. See § 164.508.

Comment: A number of commenters asserted that the proposed definition appeared to limit training and educational activities to that of health care professionals, students, and trainees. They asked that we expand the definition to include other education-related activities, such as continuing education for providers and training of non-health care professionals as needed for supporting treatment or payment.

Response: We agree with the commenters that the definition of health care operations was unnecessarily limiting with respect to educational activities and expand the definition of health care operations to include "conducting training programs in which students, trainees, or practitioners in areas of health care learn under supervision to practice or improve their skills as health care providers." We clarify that medical rounds are considered treatment, not health care operations.

Comment: A few commenters outlined the need to include the training of non-health care professionals, such as health data analysts, administrators, and computer programmers within the definition of health care operations. It was argued that, in many cases, these professionals perform functions which support treatment and payment and will need access to protected health information in order to carry out their responsibilities.

Response: We agree and expand the definition of health care operations to include training of non-health care professionals.

Comment: One commenter stated that the definition did not explicitly include physician credentialing and peer review.

Response: We have revised the definition to specifically include "licensing or credentialing activities." In addition, peer review activities are captured in the definition as reviewing the competence or qualifications of health care professionals and evaluating practitioner and provider performance.