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A business associate agreement (BAA) is a mandatory requirement of HIPAA legislation to protect protected health information. It can be between a business associate and covered entity or between a covered entity's business associate and subcontractor. The BAA outlines how health information is used, maintained, and transmitted, creating shared responsibilities and liability among parties. It is a binding agreement between a covered entity and a third party, including guarantees on service levels, incident response times, disaster recovery, permitted uses and disclosures of PHI.