Bob,
The FBI 2001 Computer Crime and Security Survey says that over 40% of
organizational computer security incidences came from inside the
organization so it is probably not a good assumption that security
controls can be more lax on a internal network.  Plain vanilla email
does nothing to address the confidentially and integrity issues you've
pointed out so adopting some control for protecting PHI is a prudent
idea.  One simple way to protect confidentiality and integrity is
through encryption although the management of the encryption keys can be
extremely complex based on the size of the organization.  Other
approaches included the use of a PKI  such as a secure web-based email
system.

As I see it, the real issue is whether or not email can be used at all
with PHI.  Email follows a discretionary access control model which
means I can share any information I have access to at my discretion and
so there are really no controls in place to ensure confidentially.

I would be very interested to hear others opinions and approaches on
this topic.

--
Chris Riley, CISSP
Information Tool Designers Inc.
Secure Virtual Office Solutions
http://aegis.info-tools.com/



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