United States: Cybersecurity And Potential Healthcare Bankruptcy: The Continuing Intersection Of Data And Disaster

This article will identify the various means by which third parties can easily access data, what data theft can lead to, and how several organizations, including healthcare companies, have been adversely affected leading some to seek bankruptcy relief.

It almost seems that daily we receive news reports and/or warnings, about cyberattacks that have been perpetrated to steal personal and corporate data, effectively destroying any privacy barriers and wreaking havoc through "cyberspace." One thing is clear: cybersecurity attacks have increased around the globe on an extraordinary level.¹ What is equally alarming is that many of these attacks have specifically targeted the healthcare industry.² The reason for the focus on the healthcare industry is two-fold. Not only is the data and information that is available within the healthcare sector³ a digital treasure trove of sensitive and private information that can be exploited and marketed, but, unlike other industries, the healthcare industry generally lags behind the times and expends far less than it should on staying ahead, let alone even current, with the state of technological safeguards.

By way of a non-exhaustive list, healthcare organizations possess information on their patients (and at times, their patient's family and/or friends), their employees, and medical technology, which are all worth money to the right parties.⁵ These categories of information include such sensitive and private data as social security numbers, addresses, dates of birth, health insurance information, credit card information, drivers' licenses, and financial records.⁶ Addition- ally, these organizations also maintain valuable intellectual property such as clinical research on drug trials, medical devices and therapies, and statistical analyses.⁷ What a goldmine for someone who could obtain these assets and information. The question is can someone get access to and steal these assets? The answer is yes. The second question: How easy is this? Very. This article will identify the various means by which third parties can easily access this data, what data theft can lead to, and how several organizations, both within the healthcare sector and without, have been adversely affected leading some to seek bankruptcy relief.

PROTECTING INFORMATION

As a general matter, healthcare organizations have an affirmative obligation to take reasonable care to protect private customer information.⁸ Failure to implement appropriate safeguards can lead to fines of up to $50,000 per violation.⁹ It is the responsibility of the officers and directors to focus on these issues.¹⁰ Yet, healthcare organizations simply do not have the cybersecurity protections in place to effectively safeguard this information. While healthcare organizations are universally switching over to electronic data, the security of this information has not matched its growth.¹¹ Companies in the financial services industry devote in excess of 10 percent of their annual IT budgets to cybersecurity while healthcare organization devote less than five (5%) percent of their annual budget in contrast.¹² Given that healthcare organizations often have outdated information technology ("IT") systems and a wealth of confidential patient data, hospitals present a particularly tempting target.¹³ Further, as healthcare budgets shrink,¹⁴ healthcare organizations must focus on preparing and protecting against further attacks. As indicated below, the risk of bankruptcy filings as a result of potential claims arising from the failure to safeguard sensitive information far outweighs the cost of implementing the safeguards.

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^* Leslie A. Berkoff is the chair of the Bankruptcy Department at Moritt Hock & Hamroff LLP and a member of the Board of Editors of Pratt's Journal of Bankruptcy Law. Stephen Breidenbach, CIPP/US, is an associate in the firm's Cybersecurity Department. The authors may be reached at lberkoff@moritthock.com and Department. The authors may be reached at lberkoff@moritthock.com and sbreidenbach@moritthock.com, respectively. Additional research support was provided by Krista Kulp an associate in the Bankruptcy Department and Caitlyn Ryan an associate in the Corporate Department.

Footnotes

¹ Tara Seals, Cyber-attack Volume Doubled in First Half of 2017, INFO SECURITY (Aug. 11, 2017), https://www.infosecurity-magazine.com/news/cyberattack-volume-doubled-2017/; Ransomware Attacks Rise 250 Percent in 2017, Hitting U.S. Hardest, NEWSWEEK (May 23, 2017, 1:37 PM), http://www.newsweek.com/ransomware-attacks-rise-250-2017-us-wannacry-614034.

² Heather Landi, Report: Ransomware Attacks Against Health Care Orgs Increased 89 Percent in 2017, HEALTHCARE INFORMATICS (Jan. 8, 2018), https://www.healthcare-informatics.com/news-item/cybersecurity/report-ransomware-attacks-against-healthcare-orgs-increased-89-percent-2017.

³ Healthcare entities are defined under 45 CFR 160.103 and include health care providers who transmit any health information in electronic form, such as hospitals, health insurance companies, HMOs, doctors, clinics, psychologists, dentists, chiropractors, nursing homes, and pharmacies.

⁴ Heather Landi, Only 27 Percent of Healthcare Security Execs Confident About Safeguarding Patient Data, HEALTHCARE INFORMATICS (Nov. 20, 2017), https://www.healthcare-informatics.com/news-item/cybersecurity/only-27-percent-healthcare-security-execs-confident-about-safeguarding .

⁵ William Maruca, Hacked Health Records Prized for Their Black Market Value, FOX ROTHSCHILD LLP (Mar. 16, 2015), https://hipaahealthlaw.foxrothschild.com/2015/03/articles/articles/hacked-health-records-prized-for-their-black-market-value/.

⁶ See id.

⁷ Gordon Rees Scully Mansukhani, The Five Ws of Intellectual Property Assets in Healthcare Business Transactions, LEXOLOGY (Jan. 24, 2018), https://www.lexology.com/library/detail.aspx?g=2a654917-4ace-4dd4-9a28-dbb415190136; Intangible Assets, HEALTH CARE APPRAISERS, https:// www.healthcareappraisers.com/insights/intangible-assets-in-healthcare (last visitedMar. 26, 2018).

⁸ See Office for Civil Rights, Summary of the HIPAA Security Rule, U.S. DEP'T OF HEALTH & HUM. SERVS., https://www.hhs.gov/hipaa/for-professionals/security/laws-regulations/index.html (last updated July 26, 2013).

⁹ 45 C.F.R. § 160.404 (2018). Civil money penalties for HIPAA violations are determined based upon a tiered structure. The Secretary of Department of Health and Human Services ("HHS") has discretion to determine the amount of the penalty based upon the nature and extent of the violation and the resulting harm from the same. For example, the penalties can range from $100 per violation for an unknowing violation to $50,000 per violation for willful neglect which is not corrected within the required time period. In addition, violations of HIPAA can also result in criminal penalties for example for individuals who knowingly obtain or disclose individually identifiable health information. See American Medical Association, "HIPAA Violations and Enforcement," AMA-ASSN.org, American Medical Association, "HIPAA Violations and Enforcement," AMA-ASSN.org, https://www.ama-assn.org/practice- management/hipaa-violations-enforcement (last accessed Mar. 26, 2018).

¹⁰ Michelle A. Reed et al., Federal Judge Dismisses Target Directors from Data Breached Related Derivative Suit After Special Litigation Committee Recommends Not Pursuing Claims, AKIN GUMP STRAUSS HAUER & FELD LLP (July 11, 2016), https://www.akingump.com/en/experience/practices/corporate/ag-deal-diary/federal-judge-dismisses-target-directors-from-data-breached.html; see generally Lawrence J. Trautman & Peter C. Ormerod, Corporate Directors' and Officers' Cybersecurity Standard of Care: The Yahoo Data Breach, 66 AM. U. L. REV. 1231 (2017) (discussing duties of directors and officers in the context of cybersecurity).

¹¹ See Switching to EHRs Becoming Norm in Healthcare,MODERNMEDICINE NETWORK (Oct. 25, 2017), http://medicaleconomics.modernmedicine.com/medical-economics/news/switching-ehrs-becoming-norm-healthcare; Frank Gluck, 21st Century Oncology Data Breach Prompts Multiple Lawsuits, NEWS-PRESS (July 22, 2016, 10:35 AM), https://www.news-press.com/story/news/2016/07/22/21st-century-oncology-data-breach-prompts-multiple-lawsuits/87386068/.

¹² Cybersecurity in Healthcare: Why it's Not Enough, Why it Can't Wait, SYMANTEC (Feb. 18, 2016), https://www.symantec.com/content/dam/symantec/docs/infographics/symantec-healthcare- it-security-risk-management-study-en.pdf; Heather Landi, Survey: 71 Percent of Healthcare Organizations Allocate a Specific Budget to Cybersecurity, HEALTHCARE INFORMATICS (Aug. 9, 2017), https://www.healthcare-informatics.com/news-item/cybersecurity/survey-71-percent-healthcare-organizations-allocate-specific-budget.

¹³ Heather Landi, Report: 15 Percent of Healthcare Organizations Running Outdated Operating Systems, HEALTHCARE INFORMATICS (June 8, 2017), https://www.healthcare-informatics.com/news-item/cybersecurity/report-15-percent-healthcare-organizations-run-computers-outdated-operating.

¹⁴ Paul H. Keckley, 2018: A Make or Break Year for Hospitals, KECKLEY (Jan. 2, 2018), http://www.paulkeckley.com/report/2018/1/2/2018-a-make-or-break-year-for-hospitals.

Originally published in Pratt's Journal of Bankruptcy Law

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