Margot James, a minister in the Department for Digital, Culture, Media and Sport announced the Government’s intention to suspend the memorandum of understanding between NHS Digital and the Home Office with immediate effect.
From now on, the Home Office will only be allowed to use the MOU to trace people considered for deportation because they have committed a serious crime.
NHS Digital is thought to have handed over the details of 3,000 patients to the Home Office last year under the terms of the MOU, after patients gave their personal details during GP and hospital appointments.
The committee said it had serious concerns about the MOU because it was incompatible with assumptions of confidentiality when visiting a health professional.
Health professionals were worried that the measures were leading to a situation in which seriously ill people were not accessing NHS care.
However the Windrush scandal, concerning the treatment of thousands of people who came to the UK legally from the 1950s, is thought to have played a major part in the rethink.
The Home Office said last week: "After careful consideration of the concerns raised by the Health and Social Care Select Committee, the circumstances in which the Home Office will request data from the NHS has changed with immediate effect.
"The changes mean that data will be requested to locate foreign national offenders we intend to deport who have been given a prison sentence of 12 months or more and others who present a risk to the public."
NHS Digital said it would only process Home Office requests that meet the new criteria with immediate effect and that it would adapt and publish a new MOU with the Home Office as soon as possible.
Sarah Wilkinson, chief executive at NHS Digital, said: "We welcome the Home Office’s response to the concerns expressed by the Health Select Committee and its willingness to adapt its tracing requests to better align with established codes of practice within the clinical community.
"The narrowing of the tracing service to only those individuals convicted of more serious criminal offences, or who represent a risk to public security, circumvents the difficulties which have arisen as a result of conflicts between existing legislation and case law and the long-established Codes of Confidentiality of the GMC and various colleges."