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Enhancing Privacy Protections for Substance Use Disorder Patient Records

Client Alert

On February 8, 2024, the U.S. Department of Health and Human Services (“HHS”) finalized updated rules to 42 CFR Part 2 (“Part 2”) for the protection of Substance Use Disorder (“SUD”) patient records. The updated rules reflect the requirement that the Part 2 rules be more closely aligned with the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) privacy, breach notification, and enforcement rules as mandated by the Coronavirus Aid, Relief, and Economic Security Act of 2020.

Part 2 protects the SUD treatment records of patients who are treated at a Part 2 program. Part 2 programs are those that are (1) federally assisted (they receive federal funding) and (2) hold themselves out as providing, and do provide, substance use disorder diagnosis, treatment, or referral for treatment. The final rules released by HHS this month reflect the inclusion of the public comments from providers, trade associations, health information exchanges, health plans and others.

The final rules make the following modifications to Part 2 regulations, effective February 16, 2026:

  • Patient Consent: One single Part 2 consent will be sufficient for all future disclosures for payment, treatment, and health care operations. All disclosures made with patient consent must include a copy of the consent or a clear explanation of the scope of consent. Previously, a separate consent was needed for each disclosure of Part 2 information. However, the final rules do retain a prohibition on the use of Part 2 records in legal proceedings and testimony in civil, criminal, administrative, and legislative proceedings against a patient without specific consent or a court order.
  • Counseling Notes: Like HIPAA psychotherapy records, a separate patient consent for the use and disclosure of SUD counseling notes is now required. SUD counseling notes include those analyzing the conversation in a SUD counseling session that the clinician voluntarily maintains separately from the rest of the patient’s SUD treatment and medical record.
  • Patient Notice: Part 2 patient notice requirements now align with the requirements of the HIPAA Notice of Privacy Practices.
  • Redisclosure: HIPAA covered entities and business associates that receive records under a Part 2 consent may redisclose those records according to HIPAA regulations. Previously, Part 2 regulations required a specific disclosure that was stricter than HIPAA redisclosure regulations.
  • Public Health: Part 2 records may now be disclosed to public health authorities without patient consent as long as the records are de-identified.
  • Breach Notification: The HIPAA Breach Notification Rule requirements will also apply to breaches of records under Part 2.
  • Segregation of Part 2 Data: Part 2 records are no longer required to be segregated or segmented from other medical records.
  • Fundraising: Patients will be able to opt out of receiving fundraising communications from Part 2 programs.
  • Complaints: Patients will have a right to file a complaint directly with the Secretary of HHS for an alleged violation of Part 2 in addition to filing a complaint with the Part 2 program.
  • Penalties: Part 2 penalties will be aligned with HIPAA by replacing criminal penalties currently in Part 2 with civil and criminal enforcement authorities that also apply to HIPAA violations.

The text of the final rule can be found on the Federal Register. All Part 2 programs must comply with the new requirements by February 16, 2026. The BMD healthcare team can help ensure that you are compliant. Please reach out to Daphne Kackloudis (dlkackloudis@bmdllc.com) or Jordan Burdick (jaburdick@bmdllc.com) for questions or assistance.


Corporate Transparency Act to be Re-evaluated

Recent federal rulings have impacted the enforceability of the Corporate Transparency Act (CTA), which took effect on January 1, 2024. While reporting requirements were briefly reinstated, FinCEN has now paused enforcement and is reevaluating the CTA. Businesses are no longer required to submit reports until further guidance is issued. For updates and legal counsel, contact BMD Member Blake Gerney.

Ohio Recovery Housing Operators Beware: House Bill 58 Seeks to Make Major Changes

Ohio House Bill 58 proposes significant changes to recovery housing oversight, granting ADAMH Boards authority to inspect and investigate recovery residences. The bill also introduces a Certificate of Need (CON) program, requiring state approval for major facility changes. OMHAS will assess applications based on cost, quality, accessibility, and financial feasibility. The bill also establishes a recovery housing residence fund to support inspections. For more information, contact BMD attorneys Daphne Kackloudis or Jordan Burdick.

January 2025 Notice of Proposed Rulemaking Brings Notable Changes to HIPAA Security Rule

In January 2025, the U.S. Department of Health and Human Services proposed amendments to the HIPAA Security Rule, aiming to enhance cybersecurity for covered entities (CEs) and business associates (BAs). Key changes include mandatory compliance audits, workforce training, vulnerability scans, and risk assessments. Comments on the proposed rule are due by March 7, 2025.

Corporate Transparency Act Effective Again

The federal judiciary has issued multiple rulings on the enforceability of the Corporate Transparency Act (CTA), which took effect on January 1, 2024. Previously, enforcement was halted nationwide due to litigation in Smith v. U.S. Department of the Treasury. However, on February 18th, the court lifted the stay, reinstating the CTA’s reporting requirements. Non-exempt entities now have until March 21, 2025, to comply. Businesses should act promptly to avoid civil penalties of $591 per day and potential criminal liability.

Status Update: Physician Noncompete Agreements in Ohio

Noncompete agreements remain enforceable in Ohio if they meet specific legal requirements. While the AMA and FTC have challenged these restrictions, courts continue to uphold reasonable noncompete provisions for physicians. Recent cases, like MetroHealth System v. Khandelwal, highlight how courts may modify overly restrictive agreements to balance employer interests with patient care. With ongoing legal challenges to the FTC’s proposed ban, Ohio physicians should consult a healthcare attorney before signing or challenging a noncompete agreement.