Large For-Profit Medical Records Copying Company Files Federal Lawsuit Seeking To Protect Its Profits

On January 8, 2018, CIOX Health, LLC (CIOX) filed a federal lawsuit in the United States District Court for the District of Columbia seeking to protect its profits obtained from charging for patients’ medical records requested from hospitals, physicians offices, and other health care providers. CIOX admits in its lawsuit that “the overwhelming majority of CIOX’s revenues historically have come from fulfilling patient-authorized requests for PHI [protected health information] from commercial third parties (such as life insurance companies and law firms) at state-regulated or independently contracted rates.”

CIOX states in its federal lawsuit that the HITECH Act provides that “any fee that the [provider] may impose for providing such individual with a copy of such information … in an electronic form … shall not be greater than the entity’s labor costs in responding to the request for the copy.” HITECH Act § 13405(e)(3) (codified at 42 U.S.C. § 17935(e)(3). CIOX admits that “[t]his limitation was fully rational since, by definition, the electronic transmission of an EHR [electronic health record] to an individual patient (as opposed to the physical mailing of records in paper form or a digitized version of non-EHRs on, for instance, a compact disc or flash drive) requires no ancillary supply or postage costs.”

CIOX complains in its federal lawsuit that on January 25, 2013, HHS promulgated a new set of regulations “that dramatically—and unlawfully—expanded the Third Party Directive beyond the HITECH Act’s EHR-delimited confines.” CIOX alleges that the new regulations required healthcare providers and their affiliates, such as CIOX, to fulfill patient requests to transfer their PHI directly to a third party regardless of whether the underlying PHI was or was not contained in an EHR (“If an individual’s request for access directs the covered entity to transmit the copy of protected health information directly to another person designated by the individual, the covered entity must provide the copy to the person designated by the individual.” 45 C.F.R. § 164.524(c)(3)(ii)). The new regulations also required providers to deliver those records in any format the patient requested.

While CIOX admits that “labor costs included in a reasonable cost-based fee could include skilled technical staff time spent to create and copy the electronic file, such as compiling, extracting, scanning and burning protected health information to media, and distributing the media. This could also include the time spent preparing an explanation or summary of the protected health information, if appropriate,” it complains about a guidance document published by HHS in 2016 (“2016 Mandates”) that stated, in part: “This limitation applies regardless of whether the individual has requested that the copy of the PHI be sent to herself, or has directed that the covered entity send the copy directly to a third party designated by the individual (and it doesn’t matter who the third party is).”

In short, CIOX complains that it must extend to third-parties the rate it was required to charge when EHR were requested by the patients themselves. CIOX boldly charges in its federal lawsuit: “Thus, when a for-profit law firm or life insurance company submits a request that is framed as a regulatory third party directive, the 2016 Mandates now obligate providers—under threat of administrative prosecution—to gather and produce any volume of records sought at the loss-generating Patient Rate, effectively forcing healthcare providers and dedicated medical-records providers like CIOX to subsidize those businesses’ profits and threatening to impose massive costs on the American healthcare system.”

While CIOX acknowledges that the 2016 Mandates allow providers to choose from one of three new options for calculating the permissible fees for producing PHI under the Patient Rate: (a) an “actual cost” method; (b) an “average cost” method; or (c) a $6.50 flat fee, CIOX criticizes all three options as unfair to it.

CIOX Health, LLC v. Eric D. Hargan, Case 1:18-cv-00040-APM

What the CIOX federal lawsuit does not state is how much profit CIOX earned before the regulatory changes it complains about, and how much profit it has earned since the changes. Nonetheless, it has been reported that CIOX’s revenues jumped from $484 million in 2014 to $551 million in 2015 to $620 million in 2016. Source

An important underlying issue is whether providing copies of medical records to patients, their attorneys, or other third-parties should be a profit-making business, and, if so, how much profit should these companies reap on the backs of patients.

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This entry was posted on Tuesday, January 30th, 2018 at 5:25 am. Both comments and pings are currently closed.

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