Data breaches in the healthcare industry threaten the confidentiality and security of sensitive patient information. When patients become casualties of healthcare data breaches, they may find themselves with new concerns and issues, on top of their health needs. With an individual’s stolen protected health information (PHI), cybercriminals can cause much harm to patients. Cyber attackers can commit insurance fraud, destroy credit ratings and scores, and create new victims of ransom demands.
When healthcare organizations do not protect patient data, they can be held financially liable to patients through lawsuits. To enhance data confidentiality and mitigate the financial impact of breaches, healthcare organizations must prioritize HIPAA compliance by using strong security measures such as data encryption, employee training, and secure PHI disposal practices.
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The Health Insurance Portability and Accountability Act (HIPAA) sets out the rules and regulations surrounding access to and disclosure of PHI. All healthcare organizations and their business associates are subject to HIPAA’s rules and must be HIPAA compliant to prevent data breaches. The HIPAA Privacy Rule establishes the national standards to protect individuals' PHI. This rule, along with the Security Rule, sets the limits and conditions of PHI exposure without patient authorization.
HIPAA's regulations protect PHI from unnecessary exposure by insisting on increasing patient control and using strong physical, administrative, and technical safeguards. HIPAA compliance promotes strong security, especially as data breaches in the healthcare industry have increased recently. Common examples of breaches that result in exposed PHI include unauthorized employee access, lost or stolen devices, hacking incidents, and phishing/ransomware attacks.
Healthcare organizations must inform the impacted individuals and the Office for Civil Rights (OCR) under the Breach Notification Rule when a breach involves unprotected PHI. This notification process promotes accountability and transparency and guarantees that patients know of potential privacy violations.
Healthcare data breaches remain a major concern for healthcare organizations and their patients. So far in 2025, more than 29 million individuals have been affected by healthcare data breaches in some shape or form. For example, cyberattackers might:
An altered medical record may further lead to improper treatment, psychological issues, and other related medical problems.
Patients can have a lot of stress, questions, and problems related to stolen PHI. The value of healthcare data makes it an attractive target for cyberattackers. This high value, along with the increasing frequency and impact of healthcare data breaches, highlights the need for improved data confidentiality measures and HIPAA compliance in the healthcare industry.
Read about: What happens to my personal information after a data breach?
A HIPAA violation occurs when a healthcare organization does not maintain appropriate safeguards to prevent the intentional or unintentional use or disclosure of PHI. Whether deliberate or accidental, HIPAA violations can result in costly civil and criminal penalties for providers and their business associates.
Fees for HIPAA violations can be severe, ranging from fines of $127 to $63,973 per violation, with an annual maximum of $1.9 million for repeated violations. Certain breaches might entail significant financial and criminal consequences compared to violations. In cases of willful neglect or criminal intent, the penalties can be even more severe, including fines of up to $500,000 and/or imprisonment for up to 10 years.
Beyond the direct financial costs of a data breach, healthcare organizations face a variety of different issues, from service disruptions to lost revenue, increased insurance premiums, and the daunting task of rebuilding patient trust and organizational reputation. In fact, disrupted operations, postponed surgeries, and closed emergency departments have direct impacts on patient care and patient outcomes.
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After a breach, patients can submit complaints directly to OCR (an online Complaint Portal Assistant helps to speed up the process) or state attorneys general. In most cases, the complaints are investigated. Action may be taken against the organization if the complaint is substantiated and if HIPAA rules have been violated.
Patients can also take direct legal action against healthcare organizations, either individually or through a class-action lawsuit. Affected individuals can sue healthcare organizations for damages resulting from PHI breaches, including emotional distress, identity theft, and financial losses. Under the HIPAA Act, however, it is not possible for a patient to directly sue for a HIPAA violation.
Rather, damages need to be settled for state law violations. Healthcare organizations can be held legally liable under state laws for several reasons:
Patients need to prove that harm or damage has been suffered, which is why joining a class-action lawsuit strengthens the case against a healthcare organization. Class-action lawsuits can result in substantial settlements or judgments against the offending organization.
A well-known HIPAA violation occurred at Anthem, Inc., the second-largest insurer in the U.S. In 2015, a cyberattack resulted in the stolen personally identifiable information (PII) of 80 million individuals (at the time, Paubox calculated that about 25% of the country was hacked). According to reports, the healthcare organization did not encrypt its database, which meant that once the information was accessed by hackers, it was readable.
On top of OCR’s hefty $16 million fine and robust corrective action plan, Anthem was hit by several class-action lawsuits. In 2018, the company ended up settling a consolidated class-action lawsuit for $115 million. The fallout continued five years after the breach when the company settled an additional $40 million with 44 states in 2020 as a result of further investigations.
Anthem's failure to implement security controls and conduct an enterprise-wide risk analysis were the main factors contributing to the breach, along with its severe OCR penalties and the extensive lawsuit settlement.
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While the Anthem breach shows the extreme costs of HIPAA violations, data breaches obviously have significant financial implications for patients and healthcare organizations. In fact, statistics from 2019 show that the average cost of a data breach in the healthcare industry is $6.45 million, higher than the average cost in any other industry, which sits at $3.92 million.
While records also show that healthcare data breaches in the U.S. have decreased by 48%, they also show that data breaches cost an average of $408 per record. If 80 million records are breached again, as in the Anthem attack, the overall financial impact on a healthcare organization, patients, and the healthcare industry can be astronomical. Implementing a wide-ranging cybersecurity program can only encourage healthcare organizations to actively decrease these costs and avoid OCR fines, along with costly lawsuits.
HIPAA requires strict control over patients’ PHI with HIPAA compliance. A strong cybersecurity strategy helps healthcare organizations meet regulatory requirements and avoid legal consequences and significant fines. By implementing strong cybersecurity practices, healthcare organizations can prevent data breaches and keep patients safe while focusing on patient care.
Here's a list of what healthcare organizations can do to avoid costly penalties and focus on compliance.
By taking a proactive approach to cybersecurity, healthcare organizations can mitigate the risk of cyberattacks and protect sensitive patient data. Cybersecurity shields PHI from breaches and unauthorized access, which is central to maintaining patient privacy and confidentiality. Even if a breach occurs, strong cybersecurity protocols can detect an intrusion quickly, minimize the damage, and expedite recovery.
How can you identify a data breach?
Identifying a HIPAA breach involves recognizing any unauthorized acquisition, access, use, or disclosure of PHI that compromises its security or privacy. Monitoring access logs, conducting regular security assessments, and promptly investigating any suspicious incidents are essential steps in identifying potential breaches. Early detection enables prompt action to mitigate harm and fulfill reporting requirements under HIPAA regulations.
Healthcare organizations can reduce the risk of data breaches by implementing strong cybersecurity measures, conducting regular security training for employees, and using encryption to protect sensitive data.
Upon discovering a data breach, a healthcare organization should contain the breach, assess the scope of the impact, notify affected individuals and relevant authorities, and begin an investigation to understand how the breach occurred and how to prevent future incidents.
What rights do patients have regarding their PHI?
Patients' rights related to their PHI include the ability to access their health records, request corrections for inaccuracies, and ask for restrictions on the use and disclosure of their PHI. If their rights are violated, patients can file complaints to reinforce the importance of protecting their privacy.