How do third-party vendors interact with HIPAA-covered entities?

by | Aug 20, 2023 | HIPAA News and Advice

Third-party vendors interact with HIPAA-covered entities by providing services, products, or support that involve the use, access, or disclosure of PHI, necessitating the establishment of business associate agreements to ensure compliance with HIPAA’s privacy and security regulations, thereby obligating these vendors to safeguard PHI, implement necessary safeguards, and report any breaches or unauthorized disclosures. These vendors can include entities, such as cloud service providers, electronic health record (EHR) software vendors, medical equipment suppliers, billing and coding services, and more.

Terms Related to Third-Party Vendors and HIPAA-Covered EntitiesDescription
Role of Third-Party VendorsThird-party vendors offer services, products, and support to HIPAA-covered entities.
Vendors include cloud services, EHR software, medical equipment suppliers, billing services, and more.
Protected Health Information (PHI) HandlingVendors often require access to PHI for the services they provide.
PHI encompasses individually identifiable health information in various formats.
Business Associate RelationshipVendors handling PHI are considered “business associates” under HIPAA.
Business associates perform functions involving the use or disclosure of PHI on behalf of covered entities.
Business Associate Agreement (BAA)Covered entities establish BAAs outlining responsibilities for PHI protection.
BAAs formalize relationships and ensure HIPAA compliance.
HIPAA Privacy Rule and Business AssociatesHIPAA Privacy Rule governs the use, disclosure, and access of PHI by covered entities.
Business associates must adhere to the HIPAA Privacy Rule provisions for PHI protection.
HIPAA Security Rule and ePHIHIPAA Security Rule mandates safeguards for electronic PHI (ePHI) confidentiality, integrity, and availability.
Vendors handling ePHI implement security measures in compliance with the rule.
Vendor Assessment ProcessCovered entities assess vendor policies, procedures, and security measures.
Assessment includes data encryption, access controls, disaster recovery, and more.
Establishment of BAABAA outlines the obligations of covered entities and business associates.
Specifies permitted uses, safeguards, breach reporting requirements, and more.
Ongoing Monitoring and OversightCovered entities continuously monitor vendor compliance and review security practices.
Regular reviews ensure ongoing adherence to agreements and regulations.
Vendor’s HIPAA Compliance ProgramVendors have their own compliance programs, including designated officers, risk assessments, and employee training.
Incident response plans are essential for handling PHI breaches.
Shared AccountabilityCovered entities and business associates share responsibility for breaches and violations.
Office for Civil Rights (OCR) enforces HIPAA and holds both parties accountable.
Communication and CollaborationEffective communication and collaboration between entities and vendors is essential.
Regular updates, addressing concerns, and managing changes promote compliance.
Data Breaches and Incident ResponseVendors must have incident response plans for the timely handling of PHI breaches.
Prompt reporting and mitigation minimize breach impact.
Patient Privacy and Data SecurityProper management of vendor relationships ensures patient privacy and data security.
Compliance efforts safeguard PHI integrity and adherence to HIPAA.
Table: Definition of Terms Related to Third-Party Vendors and HIPAA-Covered Entities

The HIPAA Privacy Rule and Security Rule are particularly relevant to the interactions between third-party vendors and HIPAA-covered entities. The HIPAA Privacy Rule establishes the conditions under which PHI can be used, disclosed, and accessed. It mandates that covered entities must have appropriate safeguards in place to protect PHI and outlines the permissible uses and disclosures of PHI without patient authorization. However, when third-party vendors come into the picture, they are usually considered “business associates” under HIPAA. A business associate is any entity that performs certain functions or activities on behalf of a covered entity that involves the use or disclosure of PHI. This includes not only companies that directly handle PHI but also those that provide support services that may entail incidental exposure to PHI. To formalize the relationship between HIPAA-covered entities and their business associates, a written agreement known as a business associate agreement (BAA) is required.

A BAA is a legally binding document that outlines the responsibilities and requirements of the business associate in ensuring the protection of PHI. This agreement establishes the obligations of the third-party vendor to comply with HIPAA’s regulations. Business associates are required to implement appropriate safeguards to protect PHI, report any breaches or unauthorized disclosures, and ensure that their subcontractors, if applicable, adhere to HIPAA rules.

The HIPAA Security Rule focuses on the technical and administrative safeguards that must be in place to secure electronic PHI (ePHI). It mandates the implementation of measures to ensure the confidentiality, integrity, and availability of ePHI. When third-party vendors handle ePHI, they must adhere to these security requirements and work in conjunction with HIPAA-covered entities to prevent data breaches and unauthorized access. HIPAA-covered entities need to engage in a thorough vendor assessment process before establishing a relationship with a third-party vendor. This assessment involves evaluating the vendor’s policies, procedures, and security measures to ensure they align with HIPAA requirements. The assessment typically covers areas such as data encryption, access controls, audit logging, disaster recovery plans, employee training, and more.

Once a suitable third-party vendor has been identified, a BAA must be established. This agreement specifies the responsibilities of both the HIPAA-covered entity and the business associate in relation to PHI. It outlines the permitted uses and disclosures of PHI by the business associate, the safeguards they must implement, and the reporting obligations in case of a breach. The Office for Civil Rights (OCR), the agency responsible for enforcing HIPAA, can hold both the covered entity and the business associate accountable for breaches and HIPAA violations.

Aside from the initial assessment and BAA, ongoing monitoring and oversight of third-party vendors are required. This involves periodic reviews of the vendor’s security practices, compliance with the BAA, and any changes in their services that could impact PHI. Regular communication and collaboration between the covered entity and the vendor help to address any concerns, updates, or changes in the regulatory landscape. Third-party vendors must also have their own HIPAA compliance programs in place. This includes appointing a designated HIPAA compliance officer, conducting regular risk assessments, implementing security measures, providing employee HIPAA training, and maintaining documentation of their compliance efforts. Vendors should also have a well-defined incident response plan to effectively handle data breaches or security incidents involving PHI.


The interaction between third-party vendors and HIPAA-covered entities involves a complex framework of regulations, assessments, agreements, and ongoing oversight. Both parties have distinct responsibilities to ensure the protection of PHI and compliance with HIPAA’s requirements. As the healthcare industry continues to rely on external services and solutions, the proper management of these vendor relationships becomes increasingly important to maintaining patient privacy and data security.

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