Table of contents
Understanding HIPAAHIPAA rulesSteps to HIPAA complianceChallengesWhat to expectFAQsNext stepsAdditional resources
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HIPAA → Small Business

HIPAA compliance for small businesses

Small healthcare businesses face a double challenge—delivering quality care or innovation while navigating complex regulations that can make or break their future. Among the most critical is HIPAA compliance. Fail to meet its standards, and you risk more than fines; you jeopardize your reputation and patient trust.

The good news is that HIPAA compliance isn’t just for big hospitals with legal teams. Private practices, healthcare tech startups, and other small healthcare-focused companies can build compliant processes without breaking their budgets. The key is understanding what HIPAA really demands and building it into your operations from day one.

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Understanding HIPAA

The Health Insurance Portability and Accountability Act (HIPAA) sets national standards for protecting patient health information in the United States. If your small business handles any form of protected health information (PHI)—whether paper records, phone conversations, or digital files—you’re responsible for meeting HIPAA’s strict security and privacy requirements.

Being HIPAA compliant means your organization has implemented technical, administrative, and physical safeguards to ensure PHI is only accessed, used, and disclosed in lawful and appropriate ways. It also means you have policies in place to detect, respond to, and report breaches or unauthorized disclosures.

HIPAA rules

Each HIPAA rule addresses a different part of how PHI must be handled. Understanding these rules is the first step toward compliance.

The privacy rule

This rule governs who can access PHI and under what circumstances. It gives patients control over their health information and sets limits on how it can be used or disclosed without their consent.

The security rule

This rule focuses on safeguarding electronic PHI (ePHI). It requires administrative, technical, and physical safeguards—such as access controls, encryption, and secure workstations—to protect ePHI from unauthorized access, alteration, or loss.

The breach notification rule

This rule requires covered entities and business associates to notify affected individuals, the Department of Health and Human Services (HHS), and sometimes the media in the event of a breach involving unsecured PHI. Timely and transparent communication is key.

The transaction rule

This rule standardizes the electronic exchange of healthcare data for billing, insurance claims, and related activities. Compliance helps ensure compatibility between systems and reduces administrative errors.

The identifiers rule

This rule defines unique identifiers for healthcare providers, health plans, and employers, such as the National Provider Identifier (NPI). Standardizing these identifiers streamlines data exchange and reduces confusion.

Steps to HIPAA compliance for small businesses

HIPAA compliance is an ongoing process, not a one-time project. Here are the foundational steps:

  1. Conduct a risk assessment to identify where PHI is stored, transmitted, and accessed, and evaluate potential vulnerabilities.
  2. Develop written HIPAA policies and procedures covering privacy, security, and breach response.
  3. Implement safeguards such as encryption, strong passwords, and secure file storage to protect ePHI.
  4. Train employees on HIPAA rules and your internal policies to ensure consistent compliance.
  5. Establish a breach response plan detailing how incidents will be investigated, documented, and reported.
  6. Sign Business Associate Agreements (BAAs) with vendors who handle PHI on your behalf.
  7. Regularly review and update security measures as technology and regulations evolve.

HIPAA compliance challenges for SMBs

While the principles are clear, small businesses often face unique obstacles in becoming and staying HIPAA compliant.

  • Limited budgets – SMBs may lack the resources for dedicated compliance staff. Solution: Leverage affordable compliance software or work with managed HIPAA hosting providers.
  • Technology gaps – Outdated systems can’t always support encryption or secure access controls. Solution: Gradually replace high-risk systems with HIPAA-ready alternatives.
  • Vendor management – Ensuring third-party partners are compliant can be tricky. Solution: Require BAAs and vet vendors before sharing PHI.
  • Training consistency – With small teams, training often happens informally. Solution: Create a standard training schedule and documented onboarding process.
  • Keeping up with updates – HIPAA requirements evolve, and SMBs can miss key changes. Solution: Subscribe to HHS updates and designate a compliance lead.

What to expect from your hosting provider

While no host can make you completely HIPAA complaint, there are a number of things a quality provider with experience hosting businesses covered by HIPAA can do to help.

As a special class of Business Associate known as a Cloud Service Provider (CSP), your host must provide some things, like restricting access to your servers and providing up-to-date antivirus and malware protection, in order to keep you in compliance with HIPAA. Others, like helpful documentation, are possible to do without, but doing so makes an important process unnecessarily difficult for most SMBs.

Administrative Safeguards: In addition to the employee access controls and cybersecurity protections noted above, your hosting provider should help with backup and recovery of ePHI and keep detailed logs.

Physical Safeguards: Your CSP should be able to assure you that they have strong building security in place, that only certain employees can physically access your systems, and should have a plan for how to keep your systems up or restore them in the event of a natural disaster.

Technical Safeguards: A HIPAA hosting provider should offer a range of technologies for protecting ePHI. Some of those are security tools such as solutions for data and network encryption, while others are tracking systems for logging interactions like system access and file changes.

In addition to protecting the systems they host with these capabilities, a quality HIPAA hosting provider also provides customer service that is responsive and proactive. It should also be staffed by professionals who have a real understanding of the challenges faced by SMBs as they go through the process of implementing a HIPAA compliant environment. That means live support that is reachable through multiple channels and available when it is needed.

A host with valuable experience helping healthcare industry SMBs can also empower businesses to make themselves compliant by providing educational HIPAA documentation. Offering businesses resources that can be shared among affected staff is really an extension of customer service.

HIPAA compliance FAQs for small businesses

Yes. HIPAA applies to all covered entities and business associates, regardless of size, if they handle PHI.

Limit PHI access to only those who need it, restrict PHI disclosures to what’s necessary for the task, and regularly review access levels to ensure compliance.

HIPAA allows PHI disclosure without patient authorization for treatment, payment, healthcare operations, public health activities, and certain law enforcement purposes.

If you handle PHI in connection with providing healthcare services, billing, insurance claims, or as a vendor to a covered entity, you must comply.

The privacy rule, the security rule, the breach notification rule, and the enforcement rule (the latter governs investigations and penalties).

Jerry Vasquez brings decades of leadership experience to his role as Product Manager at Liquid Web, focusing on networking and security products. When not working or sleeping, Jerry can usually be found eating and having a good conversation with good people.

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