>According to the complaint the data wasn't "released" it was illegally seized under threat.
>
>IT personnel at the scene, a HIPPA [sic: recte HIPAA] facility warning on the building and the IT portion of the searched premises, and the company executives each warned the IRS agents of these privileged records. The IRS agents ignored and discarded each of these warnings, ignored their own published and public-reliant rules and governing ethical requirements, and ignored the limitations of the court's search warrant authorization, seizing the records under threat of destroying company property.
>...
>Despite knowing that these medical records were not within the scope of the warrant, defendants threatened to 'rip' the servers containing the medical data out of the building if IT personnel would not voluntarily hand them over. Moreover, even though defendants knew that the records they were seizing were not included within the scope of the search warrant, the defendants nonetheless searched and seized the records without making any attempt to segregate the files from those that could possibly be related to the search warrant. In fact, no effort was made at all to even try maintaining the illusion of legitimacy and legality.
>

Governments are addicted to other people's money, and in the US the IRS is their supplier. That de facto trumps all other considerations, if not de jure.

Still, it raises some interesting questions and scenarios. Increasingly these days multiple servers and a lot of data are consolidated onto one physical box. If HIPAA trumps the IRS a miscreant could put data on the same box as HIPAA data knowing it is protected against physical seizure.

Now expand that concept to the "cloud". Would IRS agents physically seize an entire data center whilst investigating a single suspect?

Another question going begging is why is this an issue at all? If HIPAA data are to be well protected, does that not mean they should be encrypted at all times so they are not vulnerable to theft of server computers? Then collateral damage of seizing the data would have no impact; they could not be read.

Finally, for your reading pleasure, yet another example of what happens when government doesn't get its fix: http://www.nydailynews.com/news/national/lawsuit-robin-hoods-pay-strangers-expired-meters-article-1.1344798