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These sections of the law are essentially stating that every organization that has access to PHI either directly as a business associate, or indirectly as a subcontractor of the business associate provides the necessary assurances that they understand and comply with HIPAA standards.
The HIPAA Privacy Rule requires covered entities to enter into written contracts or other arrangements with business associates which protect the privacy of protected health information; but covered entities are not required to monitor or oversee the means by which their business associates carry out privacy safeguards ...
Under HIPAA, employees within your organization are not considered business associates. However, some examples of individuals and technologies that are considered HIPAA business associates include lawyers, billing companies, web hosting services, and email encryption services, to name a few.
HIPAA compliant vendors must ensure the confidentiality, integrity, and availability of PHI. To do so, they must implement safeguards to prevent unauthorized access or disclosure of PHI.
The HIPAA Privacy Rule requires all Covered Entities to have a signed Business Associate Agreement (BAA) with any Business Associate (BA) they hire that may come in contact with PHI.