Final answer:
The option for a single legal entity to apply the HIPAA Privacy Rule to only part of its operations is a hybrid entity. This is suitable for organizations like nonprofits, hospitals, or governmental agencies with both covered and non-covered functions.
Step-by-step explanation:
The organizational option that allows a covered entity that is a single legal entity to apply the HIPAA Privacy Rule to only part of its operation is known as a hybrid entity. This designation is used when an organization conducts both covered and non-covered functions and designates its health care components as the only parts of the organization that must comply with HIPAA.
Examples of entities that might choose to designate themselves as hybrid entities include a nonprofit health organization, a private hospital, or a governmental agency like Health and Social Services. Being a hybrid entity allows for a legal structure where the HIPAA requirements are strategically applied within certain divisions of an organization while others remain unaffected.