HIPAA Violator Sentenced to Prison

A federal judge has sentenced a man to six years in prison for his role in a prescription fraud scheme that included crimes of healthcare fraud, aggravated identity theft and violations of HIPAA, the U.S. Attorney's office in Alabama announced Wednesday.

U.S. District Judge C. Lynwood Smith Jr. also ordered Isaac Earl Smith, 38, who pleaded guilty to the charges in November 2009, to serve three years of supervised release after completing his prison term.

According to the release from the Alabama attorney's office, between September 2008 and April 2009, Smith:

• Accessed the personal information of individuals who had Flexible Spending Accounts administered by United Healthcare Inc. and were also covered by a prescription drug plan sponsored by the Federal Employees Health Benefit Plan.
• Used the information to create counterfeit prescriptions that were presented to pharmacies in order to illegally obtain controlled substances; the drugs were illegally sold to third parties.
• Caused the federal employee's prescription drug plan to pay for the controlled substances, resulting in a loss of $72,746.

"Not only did the people involved in this scheme illegally obtain and sell prescription drugs, they used stolen identities to cause insurance plans to bear the cost of these drugs, as if they had been issued for a legitimate purpose," U.S. Attorney Joyce White Vance said in a statement.

Martin Phanco, inspector in charge of the U.S. Postal Inspection Service in Atlanta, said the healthcare industry relies on the postal service, and "when fraudsters undermine that trust, they hurt not only the healthcare industry, but also the people who really do need medical attention.

Under the terms announced Wednesday, Smith must also pay $72,746 in restitution to the federal drug plan and to forfeit the same amount to the government as proceeds of illegal activity.

This isn't the first time HIPAA violations have resulted in jail sentences.

United States Magistrate Judge Andrew J. Wistrich in April 2010 sentenced a former UCLA Healthcare System employee who admitted to snooping on patients' records to four months in prison.

Huping Zhou, 47, of Los Angeles, admitted to illegally reading private and confidential medical records, mostly from celebrities and other high-profile patients, the federal California attorney's office said in a release.

Wistrich condemned Zhou for his lack of respect for patient privacy.

Zhou was the first person in the nation to be convicted and incarcerated for misdemeanor HIPAA offenses for merely accessing confidential records without a valid reason or authorization, according to the attorney's office.

In January Zhou pleaded guilty to four misdemeanor counts of violating the HIPAA Privacy Rule. He is a licensed cardiothoracic surgeon in China who was employed in 2003 at UCLA Healthcare System as a researcher with the UCLA School of Medicine.