HIPAA Non-Compliance: What Happens? (& Why You Should Comply)

Disclaimer: This article was originally published in Januaryry 2025 and has since been updated for clarity and comprehensiveness. 

If you fall out of HIPAA compliance, you face financial penalties, legal exposure, and operational disruption. You can reduce that risk by running regular risk assessments, enforcing data policies, training your team, and responding quickly to incidents.

You already juggle people, time, and money, and HIPAA can feel like another unnecessary requirement pulling you away from patient care.  

Intelligent Technical Solutions (ITS) is a managed IT and cybersecurity partner that helps healthcare organizations and business associates operationalize HIPAA with risk analysis, remediation, staff training, and audit-ready evidence. 

In this guide, you will learn the major risks of non-compliance and the practical steps you can take to get back on track.  

Sean Harris, ITS’ Chief Security Risk Officer, will also weigh in on the problems you may experience with non-compliance.  

3 Major Risks of HIPAA Non-Compliance

1. Financial Consequences of Non-HIPAA Compliance  

HIPAA violations come with hefty fines, which increase based on the level of negligence and repeat violations. CEOs should know the latest fines for each violation tier: 

• Tier 1 Violations – Minimal negligence with fines ranging from $100–$36,000 per incident 
• Tier 2 Violations – Moderate negligence with fines between $1,000–$72,000 
• Tier 3 & 4 Violations – Willful neglect or uncorrected issues with fines that can escalate up to $2.1 million annually 

Tiered fines are only part of the bill; investigation, forensics, notifications, credit monitoring, and overtime can dwarf the penalty itself. 

You may also see higher cyber insurance premiums, legal fees, and costly remediation after a breach. 

Quick takeaway: A single incident can trigger penalties and long tail expenses that strain your budget for years. 

2. Legal Risks and Loss of Business Reputation  

Regulators, patients, employees, and partners can take action if PHI is mishandled.  

As Sean Harris warns: "What you absolutely want to avoid is an incident that draws attention to your organization's vulnerabilities. Suddenly, your partners, employees, and patients are asking, 'How are you safeguarding our data?'—only to find out that your efforts fall far short of their expectations." 

There’s also a HIPAA breach report portal (affectionally known by cybersecurity professionals as HIPAA’s Wall of Shame) where anyone can find out if you’ve experienced a data breach.  

Harris adds: "You lose your client's confidence. Partners that work with you might go, 'Oh my gosh. Like any data that we have with them, is that under risk?' Is it a liability to work with this organization?" 

Quick takeaway: Loss of trust can outlast any fine and make growth harder. 

3. Operational and Workflow Disruptions

A data breach or investigation can halt your operations, particularly if systems need to be temporarily shut down for audits.   

Not only does this interrupt patient care, but it strains your employee resources as your team scrambles to resolve security gaps and manage public relations fallout. Operational downtime affects your bottom line and can undermine your company’s reputation for reliability.  

Quick takeaway: Even short outages can ripple across care delivery and your cash flow. 

How do you handle HIPAA non-compliance and reduce risk?

1. Conduct Regular Risk Assessments 

Before you have a breach, take a step towards better cybersecurity with a thorough risk assessment. Ideally, a risk assessment:  

• Will identify potential vulnerabilities in your system before they become problem and
• Is scheduled annually or any time new technology is introduced. 

Risk assessments are also a major requirement for any kind of cybersecurity insurance policy.  

"It's essential to show that your organization is proactive in conducting regular risk assessments," Harris said. "You don't want to find yourself in a situation where overlooked risks or missed evaluations come back to haunt you." 

Action step: Pair the assessment with vulnerability scanning and prioritize remediation by risk. 

2. Implement Comprehensive Data Security Policies  

Write clear, actionable policies for access control, authentication, transmission security, device and media control, incident response, breach notification, and vendor management.

Make sure staff attest to reading them and your leaders approve updates. 

Action step: Align practice to policy with job-specific procedures and checklists. 

READ: 3 Data Security Best Practices Your Business Must Implement 

3. Prioritize Employee Training  

Deliver annual HIPAA training for all workforce members, plus role-based training for privileged users. Add phishing simulations and tabletop exercises so your team knows how to escalate issues and preserve evidence. 

Action step: Track completion and test knowledge so you can show effectiveness. 

4. Monitor and Respond to Security Incidents  

Create a rapid-response playbook that defines roles, decision paths, communications, and evidence handling.  

As Harris explains: "What do we do after a breach happens? We're going to help the organization figure it out. Was there gross negligence? What's the cause? What's the impact? Then we contain the breach and fix the issue." 

Action step: Test your plan with periodic exercises and capture lessons learned. 

5. Report the Breach   

If the worst comes to the worst, and you experience a breach, you’ll have to act fast, fix the security issue, and report the breach.  

"In the case of PHI breaches, they [healthcare providers] have to let the Department of Health and Human Services know, and then they put it up on the HIPAA breach portal,” Harris said. 

Action step: Keep templates ready for regulator, patient, and partner notifications. 

Ready to be HIPAA Compliant?    

Failing to comply with HIPAA can have serious financial, legal, and operational consequences for healthcare organizations, ranging from staggering fines to reputational damage.  

By investing in proactive risk assessments, training, and strong data policies, CEOs can steer clear of these risks and ensure their organizations are safeguarded. 

At ITS, we specialize in helping organizations navigate complex compliance landscapes. With over two decades of experience in IT security and data protection, our team provides customized solutions that align with HIPAA requirements, giving CEOs peace of mind that their organization’s data is secure.  

Reach out to us for free, and let’s discuss how we can protect your business, reputation, and bottom line. You can also check out the following resources from our Learning Center:

• 10 Ways MSPs Help with HIPAA Compliance 
• 7 Best Security Practices for HIPAA Compliance
• How Much Does HIPAA Compliance Cost? 

FAQs (Frequently Asked Questions)

Q: Do small practices need HIPAA compliance? 

 A: Yes. If you handle PHI as a covered entity or business associate, you must comply regardless of size. 

Q: What triggers HIPAA penalties? 

A: Improper use or disclosure of PHI, lack of safeguards, missing risk analysis, delayed breach notifications, or willful neglect. 

Q: How often should you reassess risk? 

A: At least annually and after major changes such as system migrations, mergers, or incidents. 

Q: Do you need BAAs with all vendors that touch PHI? 

 A: Yes. Execute and maintain BAAs with vendors that create, receive, maintain, or transmit PHI for you. 

Q: Can training measurably reduce incidents? 

A: Yes. Ongoing role-based training and phishing simulations reduce mistakes and breach likelihood.