A practical guide to HIPAA compliance for startups

HIPAA is often seen as a burden for startups. In reality, it’s the fastest way to prove you’re trustworthy.

Without it, you risk fines, lost customers, and damage to your reputation. With 92% of healthcare organizations reporting a cyberattack in the last year, sensitive medical records are now prime targets.

For startups, a single breach can mean lost trust, regulatory fines, and lasting damage to your business.

HIPAA requirements are complex, and small mistakes can derail your compliance efforts. The good news is that automation tools can help you meet compliance effectively.

In this guide, we’ll break down what HIPAA compliance means for startups, share a practical checklist, and show you how automation keeps you audit-ready without draining time or resources.

Understanding HIPAA compliance for startups

If you’re a startup or a small to medium-sized business  working in the healthcare domain, you’ve likely asked: “Does HIPAA apply to us?”

There is a high chance it does, especially if your business handles what HIPAA defines as protected health information (PHI).

HIPAA applies mainly to two groups: covered entities and business associates.

Covered entities (CEs)

This category of organization includes healthcare providers, health plans, and health clearinghouses that process patient data in electronic or physical form.

Examples of CEs:

• Healthcare providers: Physicians, clinics, psychiatrists, dentists, chiropractors, nursing homes, and pharmacies.
• Health plans: Health insurance companies, Health Maintenance Organizations (HMOs), and government programs that pay for healthcare (e.g., Medicare, Medicaid).
• Healthcare clearinghouses: Medical billing services (if they perform the functions of a clearinghouse), repricing companies, health information exchanges (HIEs), and claim processing platforms.

Business associates (BAs)

This group includes entities that perform HIPAA-regulated functions or activities on behalf of a covered entity or another business associate, which involve the creation, receipt, processing, or transmission of PHI.

Examples of BAs:

• Healthtech services: Telehealth platforms, health/wellness apps, EHR platforms, and SaaS companies.
• Administrative and financial services: Third-party billing services, claim processors, accountants, and lawyers, if they deal with PHI.
• IT services: Cloud providers, IT experts, and cybersecurity firms that handle electronic PHI.

It’s also important to know the authorities that enforce the law, as you may need to engage with them. HIPAA is primarily enforced by:

• The US Department of Health and Human Services Office for Civil Rights (HHS OCR) for Privacy and Security Rules.
• The Centers for Medicare and Medicaid Services (CMS) for Administrative Simplification Rules.
• The Federal Trade Commission (FTC) for the Health Breach Notification Rule.
• State Attorneys General (AGs) for the HIPAA and HITECH Acts at the state level.

Once you confirm that HIPAA applies to your business, the next step is understanding how to comply. That’s where the real work begins.

Think of HIPAA compliance as a three-legged stool. If any one leg breaks, the entire structure collapses. To keep your business steady, you need to master these three core rules: the Privacy Rule, the Security Rule, and the Breach Notification Rule.

The Privacy Rule

This is the big one. It dictates how you use and disclose PHI, focusing on minimizing exposure, maintaining confidentiality, and respecting patient rights.

What it requires:

• Only use or share the minimum necessary PHI required for a specific task.
• Get a patient’s explicit, written permission before sharing their data.
• Respect patients’ rights, such as access to their records, the right to request corrections, and the right to know who you’ve shared their information with.

The Security Rule

This rule is your technical roadmap for protecting electronic PHI (ePHI) from hackers, system failures, and human error.

What it requires:

• Proactively identify vulnerabilities where ePHI is handled.
• Implement layered security controls:
  
  • Administrative safeguards: Policies, procedures, and employee training.
  • Physical safeguards: Locking down servers, securing your offices, and properly disposing of hardware.
  • Technical safeguards: Implementing encryption, access controls, and audit trails.
• Maintain up-to-date security policies, risk analyses, procedures, and access logs.

The Breach Notification Rule

This rule outlines the mandatory steps to take when unsecured PHI has been compromised. It’s your emergency plan for getting ahead of the fallout.

It’s noteworthy that while OCR enforces this rule for HIPAA-covered entities and their BAs, the Federal Trade Commission (FTC) enforces it for businesses not covered by HIPAA. For instance, if you’re a health app developer or a personal health record (PHR) vendor to which HIPAA does not apply, you still need to notify a breach to your customers, the FTC, and in some cases, the media.

What it requires:

• Notifications must be sent without unreasonable delay and no later than 60 days after you discover a breach.
• You must notify affected individuals, and for larger breaches (affecting 500+ people), the government and media.
• Document and report all breaches to the HHS OCR or FTC, regardless of size.

HIPAA compliance isn’t just about staying on the right side of the law. Done right, it shields your business from penalties, safeguards your reputation, and builds lasting trust with clients and users. For startups in healthcare, HIPAA is the highway to sustainable growth.

HIPAA compliance for startups: your ultimate checklist

Meeting HIPAA standards means tracking dozens of requirements. Miss one, and your compliance effort falls apart.

That’s where a checklist is your actionable blueprint for compliance, turning a hesitant “maybe we’re compliant” into a definitive “yes, we’ve done this.”

Here’s a HIPAA compliance for startups checklist designed to help you hit every crucial milestone:

Risk assessment

This is a foundational, non-negotiable step for any HIPAA-regulated business. It’s a continuous process, meaning you can’t just do it once and forget about it. You must periodically reassess your risks to stay ahead of new threats and updates in technology, healthcare practices, and regulations.

What you must do:

• Identify where all PHI is created, received, and shared, including data handled by your vendors and BAs.
• Identify potential threats to PHI, from human error and malicious activity to natural disasters.
• Evaluate your existing safeguards for their effectiveness and identify security vulnerabilities and compliance gaps.
• Prioritize risk mitigation strategies by assigning a risk score to every threat based on its likelihood and impact.
• Record all findings and plan the necessary measures to fix identified gaps and vulnerabilities.
• Keep all risk assessment documentation for a minimum of six years.

Security measures

Now that you've found your vulnerabilities, it's time to build your defenses. HIPAA’s Security Rule is your answer to how to comply and protect ePHI. By meeting its requirements, you ensure the confidentiality, integrity, and availability of your sensitive patient data.

What you must do:

Administrative safeguards:

• Designate a Security Officer to be responsible for all your security policies and procedures.
• Update and implement effective security policies to protect ePHI from cyber threats, covering everything from passwords to access protocols.
• Train staff regularly on how to comply with HIPAA rules and enact policies to address infractions.

Physical safeguards:

• Implement physical security measures (e.g., locks, keycard access, surveillance) that only allow authorized access to your data centers, servers, and devices that hold ePHI.
• Instruct your team to securely use their workstations and mobile devices and ensure automatic logoff when not in use.
• Establish a safe method to dispose of old hardware and electronic media that contain ePHI.

Technical safeguards:

• Encrypt all ePHI both when it’s at rest and when in transit.
• Implement role-based access controls to limit access to ePHI and track who is accessing what data.
• Use software tools that automatically record and log all activity on your systems, enabling monitoring of suspicious actions.
• Regularly upgrade your IT infrastructure to protect ePHI from evolving threats.
• Put a formal contingency plan in place for data backups and disaster recovery.

Employee training

Employees play a critical role in protecting PHI. Even with strong technical safeguards, gaps in awareness can create security and compliance risks. HIPAA requires that every team member receive security training.

What you must do:

• Provide staff with basic awareness of identifying and protecting PHI, including the potential consequences of non-compliance.
• Train them to spot red flags like phishing and social engineering attacks.
• Keep records of all training activities—dates, content, and attendees—to demonstrate compliance.
• Conduct regular training sessions for all staff to keep up with evolving security threats and the regulatory landscape.

Documentation

A lack of compliance evidence can jeopardize your HIPAA audit. Clear, detailed records of every security and compliance effort are essential for a successful inspection. If it isn’t in writing, it didn’t happen.

What you must do:

• Formalize all your policies and procedures, from InfoSec and privacy policies to contingency plans.
• Keep updated records of your risk assessment and the remediation measures.
• Ensure you have a signed Business Associate Agreement (BAA) with every vendor who can access your PHI.
• Record all security incidents, however small, along with the steps you took to address them.

Incident response plans

Breaches occur without warning, and it’s not a matter of if, but when. With the average healthcare breach costing $7.42 million, this industry faces some of the highest financial stakes.

In the first six months of 2025 alone, over 31.3 million individuals were affected by healthcare data breaches, with more than 80% of June incidents linked to hacking and IT incidents.

What you must do:

• Build an incident response team with clearly defined roles and responsibilities.
• Create a step-by-step plan for detecting, responding to, and containing a breach with minimal or no damage.
• Include procedures for restoring systems and data to get your business online quickly in the event of a disruption.
• Include the steps for notifying individuals, the government, and the media of the breach, as applicable.
• Record incident details and the actions taken for compliance and analysis post the incident.

HIPAA compliance for startups: challenges

This is where things get tricky. HIPAA can feel like a massive burden for startups and first-timers. The challenge isn’t just one thing. It’s a combination of factors that can hamper businesses from achieving compliance while growing quickly.

A complex and evolving regulation

HIPAA isn’t a prescriptive checklist; it’s a set of broad regulations, with specifics often falling on the company’s shoulders.

The law often uses ambiguous phrases like “reasonable and appropriate safeguards” and “flexible approach.” Startups must interpret what that means for their business model, technology, and size.

Flexibility is useful, but it also creates room for misinterpretation. For example, what’s “reasonable” for a large hospital with a multi-million-dollar budget is very different from a 10-person healthcare startup.

Frequent updates add another layer of complexity, often diverting resources away from growth and innovation.

The manual trap

Another challenge HIPAA compliance brings for startups is the tedious and time-consuming compliance tasks, from policy management and risk assessments to compliance monitoring. When done manually, this can cause several issues:

• Inefficiency: Manual processes are slow, inefficient, and unscalable. They create operational bottlenecks and delay audit readiness, impacting your business growth.
• High error rates: Manually performing repetitive tasks increases the risk of human error. Even small mistakes can lead to unnoticed compliance gaps and expensive audit failures.
• Lack of real-time visibility: Manual methods leave teams in the dark, without continuous insights into their security and compliance status.

The resource and expertise crunch

HIPAA compliance for startups can mean a huge drain on resources, especially when they are scarce. Startups often operate with lean teams and tight budgets. The upfront investment in security tools and external consultants can be a significant financial burden.

What’s more, early-stage companies can’t afford a dedicated compliance team. The weight of compliance then falls on the already-swamped founder or the CTO. It becomes challenging to analyze risks, implement controls, and maintain records. And a lack of expertise leads to misreading the rules and succumbing to common pitfalls.

The high-stakes law

HIPAA is a “strict liability” regulation, meaning there is no room for error. If any of your systems handle PHI, compliance is mandatory. 

Penalties don’t discriminate based on business size. Even a single, small violation—intentional or not—can trigger investigations, fines, and reputational damage. For a startup, the impact can be catastrophic.

In 2024, a researcher discovered a 5.3-terabyte Confidant Health database with PHI and private therapy sessions left unsecured and without a password. While they weren’t penalized by HIPAA, if enforcers had come knocking, the company would have faced serious consequences.

Given the nature of the incident, it would likely fall under the most severe violation category: willful neglect. This applies when a company knew or should have known about a security issue but failed to act. Even if it was categorized as a Tier-3 violation, the company could have been fined $14,232 to $71,162 per violation. Keep in mind that for a breach of this size, violations are often counted on a per-person basis, which means the company could have faced a multi-million dollar fine with a maximum cap of $2,134,831 per year.

In addition to the civil monetary penalties, the OCR would have mandated a Corrective Action Plan (CAP) and a mandatory public announcement would cause significant reputational harm to the company.

HIPAA enforcement involves multiple federal agencies—the OCR, FTC, state AGs, and others—creating several avenues for penalties and underscoring the importance of rigorous compliance.

The growth-blocking hurdle

HIPAA compliance is mandatory for startups and businesses working with hospitals, clinics, or insurance companies. These larger organizations will not sign a BAA with your company if you can’t prove your HIPAA-readiness. If you handle PHI on behalf of a covered entity, you must have a BAA. No BAA means you’re non-compliant and eligible for enforcement actions.

This includes everything from telehealth platforms and secure messaging apps for doctors to AI tools that analyze patient data to cloud storage services that hold ePHI.

This makes HIPAA compliance for startups an essential business component. If not cleared, it can become a sales blocker and prevent your company from moving upmarket or even entering the healthcare space at all.

Automating HIPAA compliance

Manual HIPAA compliance for startups is a massive time sink. It means spending hundreds of hours running a risk analysis, drafting policies and contracts, monitoring controls, and organizing evidence—all while tracking progress in spreadsheets.

This is not only inefficient. It also demands a full-time compliance team or costly consultants.

The solution? Compliance automation. It takes the busywork off your plate, cutting time and effort spent on documentation, risk assessments, vendor management, and more.

Here’s how automation helps with HIPAA compliance for startups:

• Continuous security monitoring: Risk assessments are no longer one-off tasks. Auditors require ongoing threat analysis and mitigation. Automation platforms connect to your tech stack, scanning for vulnerabilities, mapping gaps, and enabling streamlined remediation.
• Automated policy management: A compliance automation platform provides pre-built templates and a centralized system to create, update, and deploy policies, eliminating the need for manual writing and tracking.
• Streamlined vendor management: Automation handles the entire process of sending, tracking, and renewing BAAs, saving countless hours of administrative work.
• On-demand audit readiness: When audit season comes, a compliance platform can pull all your evidence and reports with a single click, eliminating the last-minute document hunt.

Case study: How Scrut accelerated compliance for Cortico 

Cortico, a Canadian patient engagement platform, faced a tight deadline: just one year to meet Ontario’s updated compliance requirements.

How Scrut helped: Scrut guided Cortico in choosing the right standards—HIPAA, SOC 2, and ISO 27001. The platform then automated policy management and employee training, making them fast and efficient. By streamlining continuous monitoring and evidence collection, Scrut gave Cortico a clear view of compliance gaps, leading to accelerated audit readiness.

The outcome: Automated workflows saved Cortico 800 hours of compliance effort. The platform’s efficiency helped them achieve compliance certifications quickly, opening doors to larger deals and new markets.

Steps to get started with automated HIPAA compliance for startups

HIPAA compliance is all about building a continuous culture of security across your organization. If you aren’t following a structured process, you’re just shooting in the dark.

Here’s a systematic, step-by-step process to get you started:

Step 1: Identify your scope

Before you even begin risk assessment or implementing controls, knowing which category your organization belongs to—covered entity or business associate—is crucial. Since different HIPAA rules apply to different businesses in the healthcare domain, be clear on which rules you must follow.

For instance, CEs must protect all PHI, electronic or otherwise, to comply with HIPAA’s Privacy Rule. Or if you’re a business associate processing PHI for a CE, you must notify the CE of any breach so they can report it to the HIPAA enforcement authorities.

Step 2: Choose the right automation tool

Next, you must pick a compliance automation platform that meets your needs and addresses any resource crunches. Start by comparing top HIPAA compliance software to find the best fit for your automation needs.

Look for automation features that can accelerate your HIPAA readiness reliably and efficiently. These include policy management with pre-built templates, continuous compliance monitoring, automated evidence collection, and integrated risk management, among others.

Consider factors such as affordability, implementation time, integrations, scalability, expert guidance, and provider reputation. Take a product tour of each tool to dive deeper into the platform’s capabilities and make an informed choice.

Step 3: Assemble your HIPAA compliance team

Finding the right HIPAA experts is tough. The reality is, 51% of companies that consider specialist knowledge in the compliance domain a critical skill believe they will face a skill shortage in the coming year. Add to it the rising demands and tight budgets, and you will find that your “dream team” of specialized lawyers and consultants is out of reach for your startup.

Fortunately, there’s a solution. As a growing business, you can get creative by assigning compliance duties to your existing teams. You can delegate the implementation of security controls to engineers and risk management to your operations team.

A compliance platform like Scrut can complement your lean teams. It offers customizable policy templates, automated workflows, and expert support needed to bridge the gap until you make a strategic hire—or to completely replace the need for an expensive consultant.

Step 4: Continuously monitor compliance

Most standards and regulations require ongoing compliance. HIPAA is no exception. In a world where new cyberattack tactics evolve at an alarming pace and regulations keep changing, you must perform frequent risk assessments and monitor compliance regularly.

Use an automation platform that connects to your systems to track vulnerabilities and compliance gaps in real-time. This always-on compliance helps you stay ahead of evolving threats and maintain continuous compliance with HIPAA’s mandates.

How Scrut simplifies HIPAA compliance for startups

Scrut is a compliance automation platform designed to simplify HIPAA compliance for businesses of all sizes. Its automation-first approach streamlines the entire compliance process, minimizing manual effort and costs.

The platform also gives you access to an extensive library of pre-vetted policies and pre-mapped controls across multiple frameworks, saving you from starting from scratch every time you need to meet a new regulation.

Policy management

Scrut simplifies HIPAA policy management with expert-vetted policies, giving you a strong foundation from day one. You can also upload and tailor your own policies using Scrut’s built-in editor, with full version control. For added assurance, our in-house HIPAA experts review your policies, saving you from relying on expensive consultants.

Continuous compliance monitoring

Scrut automates control testing by constantly monitoring your compliance posture. It conducts daily checks on policy enforcement, tracks security training completion, and flags outdated or ineffective controls. The platform also continuously scans your cloud environment for misconfigurations and vulnerabilities, giving you a clear, real-time view of your compliance status.

Streamlined risk management

Easily perform comprehensive risk assessments and third-party vendor assessments. By identifying potential threats and compliance gaps early, you can promptly apply remediation measures, ensuring your PHI systems and vendors remain aligned with HIPAA rules.

Automated evidence collection

Manual evidence collection slows you down. Scrut handles about 80% automatically by connecting to your business apps and security tools, while tracking and logging the remaining evidence in real time.

This gives you complete visibility and ensures your audit reports and documentation are always ready.

Scalability and business growth

Scrut is built for scaling, supporting multiple frameworks beyond HIPAA. Whether you need to close more deals, enter new markets, or add new standards, Scrut adapts to your needs without adding complexity. This frees up your teams from tedious compliance tasks, allowing them to focus on strategic growth and innovation.

Expert guidance

Beyond automated features, Scrut provides you access to a network of compliance specialists, including HIPAA experts. Our team, with a combined experience of over 50 years, offers hands-on support for end-to-end compliance implementation, making your journey smooth and stress-free.

Don’t let compliance catch you off guard. Schedule a demo with Scrut and see how it can streamline HIPAA compliance for startups.