Paubox blog: HIPAA compliant email made easy

What is the HIPAA payment exception?

Written by Liyanda Tembani | August 05, 2024

The HIPAA payment exception allows covered entities—such as healthcare providers, health plans, and billing services—to use and disclose PHI without patient authorization specifically for payment-related activities. This provision is outlined in the HIPAA Privacy Rule, which stipulates "To avoid interfering with an individual’s access to quality health care or the efficient payment for such health care, the Privacy Rule permits a covered entity to use and disclose protected health information, with certain limits and protections, for treatment, payment, and health care operations activities.".

In simpler terms, this exception means that healthcare providers and insurance companies can handle and share patient health information to get paid for services they deliver, without needing to seek the patient’s explicit permission for every transaction. That includes submitting claims to insurance companies, processing payments, and managing collections.

 

Why is the HIPAA payment exception important?

The payment exception allows for the efficient processing of claims, billing, and reimbursements, which are necessary for the financial stability of healthcare providers. Without this exception, managing these administrative tasks could become excessively burdensome, potentially impacting the accessibility and efficiency of healthcare services. The exception helps ensure that healthcare providers are compensated for their services while protecting patient privacy by facilitating these processes.

 

Common applications of the HIPAA payment exception

  1. Healthcare providers: Doctors, hospitals, and clinics use the payment exception to handle the billing and reimbursement process. That includes managing claims, verifying patient eligibility, and collecting payments.
  2. Health plans: Insurance companies and health plans use PHI to process claims, determine coverage, and ensure appropriate payments for healthcare services provided to their members.
  3. Billing services: Third-party billing companies may use PHI to manage and process claims on behalf of healthcare providers, facilitating the billing and collection process.

Types of payment activities covered

The HHS clarifies that "Paymentencompasses the various activities of health care providers to obtain payment or be reimbursed for their services and of a health plan to obtain premiums, to fulfill their coverage responsibilities and provide benefits under the plan, and to obtain or provide reimbursement for the provision of health care.". 

  1. Claims processing: This involves using PHI to prepare, submit, and follow up on claims to ensure that healthcare providers receive payment from insurance companies.
  2. Billing: Generating and sending bills to patients or insurance companies for services rendered, including managing payment records.
  3. Collections: Handling overdue payments, which may involve working with collection agencies if necessary to recover outstanding balances.
  4. Eligibility and benefits verification: Checking and confirming a patient’s eligibility for insurance coverage and benefits with their health plan.

Best practices for compliance

Even though the HIPAA payment exception allows for the use and disclosure of PHI, covered entities must still comply with privacy and security standards. 

  1. Ensure minimum necessary disclosure: Only disclose the minimum amount of PHI needed to perform payment-related tasks. That helps to limit exposure and protect patient privacy.
  2. Implement robust security measures: Use encryption and secure systems to safeguard PHI during transmission and storage. That reduces the risk of unauthorized access and data breaches.
  3. Regular training: Provide ongoing staff training to ensure they understand and adhere to HIPAA requirements related to payment activities.
  4. Monitor and audit: Conduct regular audits of payment-related processes to ensure compliance with HIPAA rules and address any issues promptly.

FAQs

Can PHI be shared with third-party billing services under this exception?

Yes, PHI can be shared with third-party billing services as long as it is necessary for payment functions and the service provider complies with HIPAA regulations.

 

How does this exception impact patient privacy?

While it allows PHI to be used for payment purposes, covered entities must still follow the minimum necessary rule and implement appropriate security measures to protect patient privacy.

 

Are there limitations on the use of PHI for payment activities?

PHI used must be restricted to what is necessary for payment-related functions. It must also comply with HIPAA privacy and security standards.