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Huge data breach at health system leads to biggest ever settlement

One of the nation's biggest health-care systems has agreed to pay the largest settlement ever by a single entity for potential violations of federal patient privacy law, related to breaches that compromised the electronic data of 4 million patients.

Advocate Health Care Network, which operates 12 hospitals and more than 200 other treatment locations in Illinois, will pay $5.55 million to the U.S. Health and Human Services Department as part of the settlement announced by HHS on Thursday.

Advocate Health Care, which remains under investigation for the data breaches at a subsidiary by the Illinois Attorney General's office, also will be required to adopt a corrective action plan for its data security. The breaches, two of which involved thefts of computers, occurred at a physicians' group that is the largest in the Chicago area.

The patient records compromised included people's names, addresses, dates of birth, credit card numbers with expiration dates, as well as demographic information, clinical information and health insurance information, according to HHS. Advocate Health Care said there "continues to be no indication that the information was misused."

HHS said the settlement is a result of "the extent and duration of the alleged noncompliance" by Advocate Health Care with the law requiring health providers to adequately safeguard electronic protected health information. Other factors that contributed to the size of the settlement was the large number of patient records involved, and the AG's ongoing probe, according to HHS.

A spokeswoman for Illinois AG Lisa Madigan, when asked about the status of that probe, said, "We are close to resolving it."

The settlement's disclosure came two days after U.S. News and World Report revealed that six Advocate Health hospitals had placed among that publication's rankings of the best 30 hospitals in Illinois for 2016-17.

"We hope this settlement sends a strong message to covered entities that they must engage in a comprehensive risk analysis and risk management to ensure that individuals' ePHI is secure," said Jocelyn Samuels, director of HHS's Office for Civil Rights. OCR is responsible for enforcing compliance with HIPAA, the Health Insurance Portability and Accountability Act, the law at play in the case.

According to a resolution agreement signed as part of the settlement, Advocate Health Care reported three separate data breaches that occurred between July and November 2013, involving Advocate Medical Group, a physicians' group with more than 1,000 doctors.

The first breach occurred early July 15 when four desktop computers containing records of nearly 4 million patients were stolen from an AMG administrative office in Park Ridge, Illinois.

The second breach involved an unauthorized third party getting access to the network of a company that provides billing services to AMG between June 30 and August 15, 2013, which potentially compromised the health records of more than 2,000 AMG patients, according to the agreement.

Then, on Nov. 1, 2013, an unencrypted laptop containing patient records of more than 2,230 people was stolen from a car belonging to an AMG staffer, the agreement said.

Advocate Health Care did not admit to any wrongdoing in the resolution agreement. But HHS's Office of Civil Rights said that its investigations of the breaches "revealed that Advocate failed" to take a number of steps to safeguard patient data.

Among other things, OCR said Advocate Health Care failed to "conduct an accurate and thorough assessment of the potential risks and vulnerabilities of all of its" electronic patient health information records.

Advocate Health Care also failed to put into place "policies and procedures and facility access controls to limit physical access to the electronic information systems housed within a large data support center," according to OCR.

OCR also faulted Advocate Health Care for not getting satisfactory assurances, in a written contact, that its billing services provider would appropriately safeguard electronic patient records in its possession.

In an emailed statement to CNBC, Advocate Health Care said, "Protecting the privacy and confidentiality of our patients while delivering the highest level of care and service are our top priorities."

"As all industries deal with the ever-evolving digital landscape and the impact it has on security, we've enhanced our data encryption measures to prevent this type of incident from reoccurring," Advocate Health Care said.

"While there continues to be no indication that the information was misused, we deeply regret any inconvenience this incident has caused our patients. We continue to cooperate fully with the government to advance our patient privacy protection efforts."