California Health System Pays $2M to Settle State's Data Breach Lawsuit

Nov. 29, 2017
Santa Barbara, Calif.-based Cottage Health System has agreed to a $2 million settlement with the state attorney general resolving allegations that the health system failed to implement “basic, reasonable safeguards to protect patient medical information.”

Santa Barbara, Calif.-based Cottage Health System has agreed to a $2 million settlement with the state attorney general resolving allegations that the health system failed to implement “basic, reasonable safeguards to protect patient medical information.”

California Attorney General Xavier Becerra announced the $2 million settlement with Cottage Health System and its affiliated hospitals last week.

The settlement requires Cottage to maintain security practices and procedures to protect patients’ medical information from unauthorized access or disclosure. This settlement follows two separate data breach incidents by Cottage Health where more than 50,000 patients’ medical information was made publicly available online, according to a press release from the California attorney general’s office.

Cottage was notified in December 2013 that patients’ confidential medical information was viewable online. One of the company’s servers with medical records for more than 50,000 patients was connected to the internet without encryption, password protection, firewalls, or permissions that would have prevented unauthorized access, according to the state attorney general.

In 2015, during the Attorney General’s investigation of the first breach, Cottage Health experienced a second data breach in which the records for 4,596 patients became accessible online for nearly two weeks. The Attorney General’s Office alleged that Cottage’s security failures violated California’s Confidentiality of Medical Information Act and Unfair Competition Law, as well as the federal Health Insurance Portability and Accountability Act (HIPAA).

A spokesperson for Cottage Health provided the following statement, via email, to Healthcare Informatics: "This settlement involves unrelated data incidents that occurred in 2013 and 2015. Once we learned of the incidents, our information security team worked to provide resolutions. There is no indication that data was used in any malicious way."

The health system spokesperson also stated, "At Cottage Health, we have used this learning to strengthen our system security layers for improved detection and mitigation of vulnerabilities. Upgrades include new system monitoring, firewalls, network intrusion detection, and access management protocols to help protect private data. We value the trust of our community and are committed to continuous advances in technology that enable us to protect patient privacy while providing authorized care providers the timely and effective data needed for medical treatments."

Attorney General Becerra said in a prepared statement, "When patients go to a hospital to seek medical care, the last thing they should have to worry about is having their personal medical information exposed. The law requires health care providers to protect patients' privacy. On both of these counts, Cottage Health failed."

In addition to the $2 million fine, Cottage also is required to upgrade its data security practices. “Cottage Health is required to protect patients’ medical information from unauthorized access and disclosure and to maintain an information security program that meets reasonable security practices and procedures for the healthcare industry. It must designate an employee to serve in the capacity of a Chief Privacy Officer and to complete periodic risk assessments,” the attorney general press release states.

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