A Complete Guide to HIPAA and SOC2 Compliance in Healthcare

The BTC Team

The healthcare industry deals with large data assets, including sensitive patient health information (PHI) and personal data. With data privacy a significant concern, HIPAA (Health Insurance Portability and Accountability Act) and SOC2 (System and Organizations Controls) are federal standards for protecting and securing PHI.

Healthcare organizations must ensure that they adhere to these regulations and partner with HIPAA and SOC2 compliant technology service providers. This demonstrates that clear measures and protocols are maintained, helping build trust and transparency with patients. Without proper compliance, your patient data is at risk of breach and your organization can face major penalties and criminal charges in the event of a violation.

Here are a few key points of HIPAA, SOC2, and what it means to be HIPAA and SOC2 compliant.

The Evolving Threat Landscape in Healthcare

The healthcare industry is riding the wave of innovation today. However, amidst advances in technology, cyberattacks have increased, and secure data storage has become more difficult.

Threat actors find PHI lucrative to sell the information in black markets or use it for identity fraud. The Cost of a Data Breach Report 2020 by IBM shows that the average cost of a breach for healthcare is $7.13 million.

Image credit: IBM Cost of a Breach Report 2020

According to another report by Constella Intelligence, the healthcare industry experienced a 51% increase in data exposed in 2021 compared to 2019. Among other reasons, third-party access also accounts for a fair share of data breaches and is rising.

To prevent these malicious attacks, the government has introduced a number of data privacy regulations and policies. While there is no single federal law in the US to regulate how data is collected and used, there are several data security standards on federal and state levels.

Among these, HIPAA and SOC2 have become industry standards today. These regulations have set forth strict compliance requirements, and as a healthcare organization, it’s important to adhere to these rules and demonstrate your commitment to data protection.

HIPAA Compliance: Protecting Patient Health Information

Let’s begin with an overview of HIPAA. What is HIPAA, and what do you mean by compliance in healthcare? HIPAA, developed by HHS (the Department of Health and Human Services), is a set of national standards to protect patient’s medical records and health information in physical or electronic form.

HIPAA ensures that individual healthcare plans are portable and accessible and prevents fraud and abuse. It also incorporates provisions to simplify the administration of medical information to improve efficiency and reduce costs.

Who must comply with the HIPAA rules and regulations?

Covered entities: Healthcare providers, health plans, healthcare clearinghouses

Business associates: Software providers, cloud service providers, billing companies, legal agencies, consultants


The HIPAA Rules constitutes HIPAA Privacy Rule, HIPAA Security Rule, the HIPAA Breach Notification Rule, HIPAA Omnibus Rule, and the HIPAA Enforcement Rule along with HITECH Act (The Health Information Technology for Economic and Clinical Health)

We explain the three critical components of healthcare data information here:

HIPAA Privacy Rule: Establishes national standards to safeguard the privacy of patient’s health information, including medical records, insurance information, and other personal details. The rule also gives patients control over how their records are used and disclosed as it sets limits to the use without patient authorization. HIPAA Privacy Rule applies mainly to covered entities.

HIPAA Security Rule: While HIPAA Privacy Rule addresses PHI, the Security Rule focuses on the creation, maintenance, and use of its subset – electronic protected health information (ePHI). The rule sets administrative, physical, and technical safeguards for covered entities to ensure confidentiality, integrity, and availability of ePHI. It is to be noted that the Security Rule does not apply to PHI in verbal and print form.

HITECH Act and HIPAA Final Omnibus Rule: HITECH Act extends the HIPAA policies to business associates and mandates signing a BAA (business associate agreement) stating that they’re HIPAA compliant. HIPAA Final Omnibus Rule was introduced as an amendment to the existing HIPAA Rules and ensures that they apply directly to business associates and subcontractors. The Omnibus Rule also established new penalties for HIPAA violations.

What is HIPAA compliance?

The first thing to remember is that HIPAA compliance is not achieved by complying with one set of standards. This is an ongoing process, and every element of the HIPAA Rules must be complied with to be ensure adherance. The rule as such is flexible to include a broad range of covered entities and business associates with access to PHI.

Organizations must ensure rules-related procedures, policies, and documentation are in place, and safeguards are maintained. They should designate an individual or a team responsible for managing HIPAA compliance, training staff, tracking HIPAA regulations, conducting documentation, and reviewing the process of breach reporting. Service providers also have to conduct audits and risk assessments periodically and establish a system to maintain compliance.

Non-compliance with HIPAA regulations results in penalties that range from fines to criminal prosecution. Under HIPAA, penalties for a single violation can reach $50,000 and cap out at $1.5 million annually.

Who is liable during a data breach?

When a data breach occurs, all entities involved in the process will be responsible. This means even if a business associate was responsible for a data breach, the covered entity is also liable. It is also an important reason why most healthcare providers seek business associates who are HIPAA compliant.

SOC2 Certification: Robust Security Measures for Health Information

SOC2 is a framework defined by AICPA (the American Institute of Certified Public Accountants), specifically applicable to all technology service providers that handle or store customer data in the cloud. This means that it applies to every SaaS company and ensures data security measures are aligned with today’s cloud requirements.

SOC2 is not a list of tools or processes; instead, it includes principles to protect data. These are the five trust services criteria (TCS) SOC2 is based on:

  • Security: Protection of system and data from unauthorized access
  • Availability: Ensuring accessibility of system, data, and products under agreement by both parties
  • Processing Integrity: Addresses whether system processing is complete, accurate, valid, timely, authorized
  • Confidentiality: Protecting confidential information through encryption and access control methods.
  • Privacy: maintaining how personal information is collected, used, retained, and disclosed according to set policies. While confidentiality applies to different types of sensitive information, privacy is solely applicable to personal information.

Types of SOC2 reports

  • Type 1: This gives a brief description of a company’s systems and controls for a specific date. Type 1 is often faster and carries less weight.
  • Type 2: These reports detail the effectiveness of systems and evaluate the company’s practice throughout a specific period. They are more comprehensive and trusted since it shows that the organization is able to handle sensitive information.

Who must comply with SOC2 certification?

SOC2 applies to any technology service provider or SaaS company that manages customer data in the cloud. Along with that, third-party vendors and support organizations you associate with should also maintain SOC2 compliance.

What is SOC2 compliance?

Unlike other security measures like PCI DSS, SOC2 is flexible and only outlines a basic structure for security measures. Based on this, organizations can create control protocols that comply with one or more trust criteria.

SOC2 certification is provided by external auditors. The auditor ranks the organization based on the critical points in SOC compliance by AICPA and issues an audit report called ‘SOC Attestation Report.’ These reports vary with each organization as they follow different security practices.

Healthcare organizations can request service partners to provide SOC2 reports when entering a business agreement This showcases their credibility and commitment to data security and privacy.

Similar to HIPAA, businesses should establish a system to stay compliant with SOC2. You should also regularly monitor unauthorized activities and access levels. Tools and processes should be available to take necessary action during threats and protect data. Further, organizations must ensure that relevant documentation is created and maintained on any security incident and solution to restore data.

Why HIPAA and SOC2 Compliance for Healthcare Organizations?

As discussed at the beginning of our blog, healthcare providers are more likely to partner with organizations that can ensure the protection of patient data. The compliance with HIPAA and SOC2 certification for robust security measures demonstrates this commitment and capability to potential and existing customers.

There are numerous benefits that come with HIPAA and SOC2 compliance for technology companies. Here are a few:

Cost savings

HIPAA violations and data breaches are extremely expensive. There are financial penalties and possible lawsuits that organizations have to face if they fail to comply with regulations. Further, if you suffer a data breach, you might lose future sales and existing customers, resulting in financial losses and impacting business growth. Ensuring compliance with HIPAA and SOC2 means that you can avoid risks and unnecessary expenses.

Enhance customer trust

No organization would partner with an at-risk service provider. If you suffer a data breach, it puts the patient in danger as well as makes the healthcare provider liable. Through HIPAA and SOC2 compliance, you can prove to prospects and customers that your company provides secure software and also takes a proactive approach to protecting PHI. This results in forging long-term partnerships and also attracting new customers.

Improve competitive advantage

HIPAA compliance and SOC2 attestation can be used as branding tools for organizations. This helps in gaining a valuable competitive advantage and stay ahead of the game.

Ensure patient care

The overarching goal of every regulation and safeguard drawn up comes down to one thing: protecting patients. Organizations can ensure that patients receive quality healthcare services and their PHI is protected through effective security and privacy measure. HIPAA regulations also empower patients with control over their data.

Where do HIPAA and SOC2 Meet?

If you are a technology provider or SaaS company working in the healthcare industry, you will have to abide by these regulations for protecting PHI and using data in the cloud. Complying with HIPAA demonstrates that your company meets legal requirements, and SOC2 attestation reassures your clients and builds trust in your relationship.

If that’s the case, does SOC2 cover HIPAA? Is SOC2 HIPAA compliant?

No. HIPAA compliance and SOC 2 certification are not the same, and SOC2 cannot be used as a substitute.

While both rules help organizations put in place policies and procedures to achieve security goals and mitigate risks, HIPAA is a more holistic framework for protecting PHI and consists of additional requirements than SOC2. However, a proactive approach can ensure that you meet the requirements for both regulations. That means a robust security program to safeguard customer information at all times will enable you to help achieve successful compliance audits for both.

Why a Combined Audit? What does It Mean for You?

For MSPs, SaaS providers, and cloud hosting providers serving the healthcare industry, HIPAA and SOC2 compliance is important.

Numerous third-party service providers today provide combined HIPAA and SOC2 audits that encompass the requirements of each framework specific to the organization. And since both regulations have overlap in reports, they can handle the process together. Once the audit is finished, you will get two separate reports addressing HIPAA and SOC2 compliance.

By doing so, you can avoid the redundancy of repeating answers for separate audits and save more time to capitalize on other areas. A combined audit also means that organizations can reduce expenses while having an efficient process for compliance.

Combined HIPAA and SOC2 audit often consist of the following:

  • SOC2 HIPAA readiness assessment to define the scope of reporting and determine gaps in the structure.
  • SOC2 HIPAA remediation services to enhance controls and processes once gaps are identified.
  • SOC2 HIPAA type 1 audit to give an overview of an organization’s systems at a specific time.
  • SOC2 HIPAA type 2 audit to provide a detailed understanding of policies, processes, and documentation fulfilling HIPAA and SOC2 compliance.

Common FAQs

Here are few common questions out there regarding HIPAA compliance and SOC2 certification:

What are the factors to consider for HIPAA and SOC2 compliance?

The first thing you need to focus on is the scope of assessment which essentially means what it means for you as an organization and what controls you need. Further, you have to take other factors into accounts, such as the third parties you associate with, your applications and technology platforms, and physical locations.

How long is the SOC2 audit report valid?

A SOC2 report is valid for 12 months from the date the report was issued. Similar is the case for the HIPAA report.

How often does a SOC2 and HIPAA audit need to be performed?

Organizations should schedule an audit at least once a year or when any changes are made that can impact the control ecosystem. While HIPAA can be done internally or by an external organization, SOC2 certification audit should be performed by an outside auditor.

What does HIPAA certified mean? Is HIPAA certification and compliance the same?

‘HIPAA certified’ means that an individual has successfully completed a course to understand the HIPAA regulations and can apply this knowledge to achieve compliance for an organization.

This implies that HIPAA certifications and compliance are not the same. It is also important to note that no one can certify that a company is compliant. Organizations have to conduct evaluations periodically which can be performed by an internal team or an external organization.

What are some common HIPAA violations?

  • Lack of adequate controls
  • Loss/theft of devices
  • Hacking/Phishing any form of a data breach
  • Lack of comprehensive employee training
  • Inadequate BAAs
  • Disclosures of PHI (organizational level or third parties)
  • Ignorance of the minimum necessary rule
  • Failure to report breaches within the timeframe
  • Improper disposal of PHI

Security and Compliance Going Forward

HIPAA and SOC2 compliance is not a ‘check off the list’ item. Companies should have a proactive approach and continuous process to ensure user data remains secure. Here are a few long-term processes that can enhance your security and compliance efforts:

  • Ensure data security controls: Organizations should have administrative, physical, and technical safeguards in place for the control environment.
  • Continued risk management: Risk management should be made an ongoing process to review security measures in place, record security incidents, and evaluate potential risks.
  • Data breach policies: Pre-building policies to abide by in case of data breaches can help the loss of crucial time and reduce costs.
  • Real-time monitoring: Monitoring the flow of data can help detect anomalies and block exposure of patient data.
  • Encryption: Data encryption is paramount for HIPAA compliance. Ensure multi-factor authentication for data storage and transmission to avoid ePHI breaches in the event of loss/theft of devices.

BTC’s Commitment to Security Standards

At BTC, we are committed to safeguarding customer information and meeting the highest standards of security and privacy of data in the healthcare industry. We build secure healthcare applications compliant with HIPAA, SOC2, FISMA, HL7 standards, and other regulatory compliance and guidelines. To learn more, visit.


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