HIPAA Non-Compliance: What Happens? (& Why You Should Comply)

If only it were easy to find the time and people needed to fully comply with Health Insurance Portability and Accountability Act (HIPAA) regulations.

As a managed IT service provider (MSP) in charge of managing multiple healthcare companies’ IT infrastructure, Intelligent Technical Solutions (ITS) knows how intensive the entire process can be. How, if improperly implemented, HIPAA takes away resources from your main hospital management concerns.  

Yet many healthcare operators underestimate the consequences of non-compliance with HIPAA.  

In this article, you’ll learn about: 

• The financial risks of non-compliance, 
• The legal risks of non-compliance, and
• The operational risks of non-compliance.  

Sean Harris, ITS’ VP for Cybersecurity, will also weigh in on the problems you may experience with non-compliance.  

By the end of the article, we’ll have laid out the HIPAA penalties and why you should take steps to be fully HIPAA compliant.  

3 Major Risks of HIPAA Non-Compliance

1. Financial Consequences of Non-HIPAA Compliance  

HIPAA violations come with hefty fines, which increase based on the level of negligence and repeat violations. CEOs should know the latest fines for each violation tier: 

• Tier 1 Violations – Minimal negligence with fines ranging from $100–$36,000 per incident 
• Tier 2 Violations – Moderate negligence with fines between $1,000–$72,000 
• Tier 3 & 4 Violations – Willful neglect or uncorrected issues with fines that can escalate up to $2.1 million annually 

Beyond fines, non-compliance leads to other auxiliary costs like increased insurance premiums, legal costs, and higher operational expenses for remediating data breaches. 

2. Legal Risks and Loss of Business Reputation  

Non-compliance doesn’t only bring financial penalties; it also exposes your company to legal action from patients, employees, and even third-party partners.  

"What you absolutely want to avoid is an incident that draws attention to your organization's vulnerabilities. Suddenly, your partners, employees, and patients are asking, 'How are you safeguarding our data?'—only to find out that your efforts fall far short of their expectations," Harris said.

Losing or mishandling protected health information (PHI) undermines trust and invites scrutiny, potentially driving away patients and partners. It damages your reputation in ways that go beyond monetary losses. 

There’s also a HIPAA breach report portal (affectionally known by cybersecurity professionals as HIPAA’s Wall of Shame) where anyone can find out if you’ve experienced a data breach.   

"You lose your client's confidence. Partners that work with you might go, 'Oh my gosh. Like any data that we have with them, is that under risk?' Is it a liability to work with this organization?" Harris said.  

3. Operational and Workflow Disruptions

A data breach or investigation can halt your operations, particularly if systems need to be temporarily shut down for audits.  

Not only does this interrupt patient care, but it strains your employee resources as your team scrambles to resolve security gaps and manage public relations fallout. Operational downtime affects your bottom line and can undermine your company’s reputation for reliability. 

How Do You Handle HIPAA Non-Compliance?  

While the consequences are serious, there are actionable solutions to ensure compliance. 

Here’s how: 

1. Conduct Regular Risk Assessments 

Before you have a breach, take a step towards better cybersecurity with a thorough risk assessment. Ideally, a risk assessment:  

• Will identify potential vulnerabilities in your system before they become problem and
• Is scheduled annually or any time new technology is introduced. 

Risk assessments are also a major requirement for any kind of cybersecurity insurance policy.  

"It's essential to show that your organization is proactive in conducting regular risk assessments," Harris said. "You don't want to find yourself in a situation where overlooked risks or missed evaluations come back to haunt you." 

2. Implement Comprehensive Data Security Policies  

Clear, actionable data policies will go a long way to prevent PHI breaches. These should cover everything from employee training to secure data storage and transmission.

READ: 3 Data Security Best Practices Your Business Must Implement 

3. Prioritize Employee Training  

Compliance doesn’t stop with technology. Training your team about the rules around PHI access and handling reduces the risk of accidental data exposure. 

4. Monitor and Respond to Security Incidents  

Establish a rapid-response protocol for potential data breaches to minimize damage and demonstrate to regulatory bodies that your organization takes HIPAA seriously. 

"What do we do after a breach happens? We're going to help the organization figure it out. Was there gross negligence? What's the cause? What's the impact? Then we contain the breach and fix the issue."

5. Report the Breach   

If the worst comes to the worst, and you experience a breach, you’ll have to act fast, fix the security issue, and report the breach.  

"In the case of PHI breaches, they [healthcare providers] have to let the Department of Health and Human Services know, and then they put it up on the HIPAA breach portal,” Harris said. 

Ready to be HIPAA Compliant?    

Failing to comply with HIPAA can have serious financial, legal, and operational consequences for healthcare organizations, ranging from staggering fines to reputational damage.  

By investing in proactive risk assessments, training, and strong data policies, CEOs can steer clear of these risks and ensure their organizations are safeguarded. 

At ITS, we specialize in helping organizations navigate complex compliance landscapes. With over two decades of experience in IT security and data protection, our team provides customized solutions that align with HIPAA requirements, giving CEOs peace of mind that their organization’s data is secure.  

Reach out to us for free, and let’s discuss how we can protect your business, reputation, and bottom line. You can also check out the following resources from our Learning Center:

• 10 Ways MSPs Help with HIPAA Compliance 
• 7 Best Security Practices for HIPAA Compliance
• How Much Does HIPAA Compliance Cost?