Innovation and Privacy Protection: Managing Third-Party Risks in Data-Driven Health Care
Health care organizations increasingly rely on third-party digital solutions such as tracking pixels, analytics platforms and cloud-based services to enhance patient engagement, streamline operation, and expand telehealth capabilities. While these tools deliver substantial benefits, they also create significant risks related to HIPAA compliance, patient privacy and data security. Enforcement actions by the U.S. Department of Health, Human Services’ Office for Civil Rights (OCR) and Federal Trade Commission (FTC) have made it clear that unauthorized or poorly managed data sharing can violate federal privacy laws, even when unintentional. Health care providers have faced over $100 million dollars in fines in the past few years due to unauthorized data sharing by tracking pixels on websites alone. Violations included missing risk assessments, lack of patient consent and inadequate vendor oversight, which highlight the importance of HIPAA and other privacy regulations in the digital marketing space. Health care providers must therefore examine their digital ecosystems carefully to ensure compliance, mitigate data risks and maintain public trust.
The Compliance Risks of Tracking Technologies in Health Care
A major compliance challenge stems from the use of tracking pixels, which are small and often invisible code snippets embedded in websites or emails that monitor user activity. In health care contexts, such as patient portals or telehealth scheduling platforms, these pixels may inadvertently send protected health information (PHI) to third parties like analytics or social media companies. Several recent cases have shown that organizations deploying tracking tools without patient consent or transparency have faced multimillion-dollar fines and lawsuits. Regulators have emphasized that any patient data shared with outside vendors must be strictly limited to what is necessary, properly secured and compliant with HIPAA’s privacy and security requirements.
Business Associate Agreements: Essential but Not a Panacea
Business Associate Agreements (BAAs) are a key component of HIPAA compliance, outlining the responsibilities of vendors that handle PHI on behalf of health care providers. However, standard BAAs are often outdated and insufficient for today’s complex digital tools. Many fail to address new risks related to AI-driven analytics, behavioral tracking or secondary data use beyond the original purpose. They may also lack clear terms for breach notification, encryption standards and vendor accountability. To strengthen compliance, health care organizations should negotiate tailored BAAs that reflect the specific technologies and data flows involved. The BAAs should also include development of a comprehensive vendoroversight programs, including regular audits, compliance reviews and clear audit rights, to ensure vendors meet privacy obligations throughout the relationship.
Building a Proactive Compliance Framework
A proactive and layered compliance approach can help health care organizations manage third-party risks more effectively. Before implementing any digital tool — whether a cloud platform, analytics system or tracking pixel — organizations should conduct detailed vendor risk assessments to evaluate data handling practices, security protocols and HIPAA compliance readiness. BAAs should be customized rather than boilerplate, explicitly defining permitted uses of PHI, required safeguards and incident reporting procedures.
Equally important is continuous oversight. Health care entities must regularly monitor vendor performance, review security practices, and verify that data sharing remains compliant with agreed-upon purposes. Transparency with patients also plays a crucial role. Organizations should clearly disclose what data is collected, how it is used and when it may be shared with third parties. Where applicable, obtaining explicit patient consent enhances trust and reduces liability. Following data minimization principles — sharing only the minimum necessary information—and adopting privacy-enhancing technologies such as encryption or pseudonymization can further mitigate risk. Staying up to date on evolving OCR guidance and enforcement actions ensures compliance strategies remain current in a rapidly changing regulatory environment.
Evolving State Health Care Privacy Laws
Another wrinkle in managing third-party risks is the ever-evolving privacy laws each state continually enacts that require further attention. In New York, the New York’s Information Security Breach and Notification Act (NY GBL § 899‑aa and NY Tech Law § 208), effective earlier this year, expanded definitions to include both medical information and health insurance information as part of its definition of “private information.” This change broadens the types of protected data to include medical history, diagnoses, treatment details and health insurance identifiers such as policy or subscriber numbers. The amendment also imposes a strict 30-day breach notification deadline, replacing the previous standard of “without unreasonable delay.” This law affects both HIPAA-covered entities and non-HIPAA-regulated organizations, including life sciences companies, digital health startups and consumer wellness platforms that handle medical data. As a result, a broader range of organizations will be responsible for timely breach reporting and improved data safeguards.
In New Jersey, the New Jersey Data Privacy Act (NJDPA) (N.J.S.A. 56:8‑166.4 et seq.) has provisions that require insurers to obtain express consent for sensitive data, conduct impact assessments, and support opt-out mechanisms. Consumers have the right to access, correct, delete and opt out of data use for advertising for profiling purposes.
In Pennsylvania, the amended Breach of Personal Information Notification Act (73 Pa. Stat. § 2301 et seq.) included, in certain cases, for affected individuals to be offered credit monitoring services. Although the definition of “personal information” is somewhat narrower, which may in effect reduce the scope of what constitutes a breach, Pennsylvania did last year enact legislation that expands telemedicine coverage by requiring health insurers and managed care plans to cover health care services delivered via telemedicine. In essence, the expansion for use of digital health care has increased in Pennsylvania.
Preparing for Compliance and Mitigating Risk
To comply with both federal and state requirements, health care organizations should take several proactive steps. First, they should review their current data handling and storage practices to ensure proper security controls are in place for all health-related data. Updating incident response plans is essential to meet both state reporting timelines and HIPAA’s breach notification standards. Regular employee training on privacy policies and breach response procedures can reduce the likelihood of human error. Finally, engaging experienced legal counsel or compliance professionals helps organizations assess readiness and align policies with evolving privacy laws.
By implementing these strategies, health care entities can strengthen their data governance frameworks, reduce exposure to fines and litigation and demonstrate accountability to regulators and patients alike.
As health care continues to digitalize, balancing technological innovation with patient privacy becomes increasingly critical. Third-party digital tools have the potential to dramatically improve care delivery and patient engagement, but also create new compliance challenges that demand vigilance and transparency.
Through strong vendor oversight, clear patient communication and adherence to both HIPAA and state-level data privacy laws, health care organizations can embrace innovation responsibly as the legal and regulatory landscape governing health care data privacy continues to rapidly evolve.
Contact Our Health Care Law Team
Our attorneys regularly advise health care providers, digital health companies and life sciences organizations on HIPAA compliance, vendor management and data breach response. For organizations using third-party digital tools or handling compliance with various state laws, we help assess risks, strengthen compliance framework and ensure readiness.
