HIPAA compliance for MSPs

According to a news story by HealthTech, “Healthcare is no stranger to managed service providers, as many health systems depend on temporary clinical staff, legal advisers, and third-party partners for waste management, cleaning, and food services. These professionals help organizations run smoothly without requiring them to hire and retain full-time staff.” Furthermore, the article states, “Amid the increasing complexity of technology environments and growing resource constraints, the industry is turning its attention to managed service providers for IT. MSPs, in simple terms, offer personnel and resources to complement healthcare organizations’ internal IT teams.”

This reliance on MSPs for IT infrastructure and support introduces new compliance and cybersecurity challenges, particularly around the handling of protected health information (PHI) under the Health Insurance Portability and Accountability Act (HIPAA). Unlike traditional support services (e.g., food or cleaning), IT MSPs are often directly involved in managing systems that store, transmit, or process ePHI, such as electronic health records (EHRs), patient portals, networked medical devices, and cloud-based communication systems. This makes MSPs business associates, which HIPAA defines as “a person or entity, other than a member of the workforce of a covered entity, who performs functions or activities on behalf of, or provides certain services to, a covered entity that involve access by the business associate to protected health information.”

Why HIPAA compliance matters for MSPs

HIPAA was enacted to protect the privacy and security of individuals’ health information, especially as healthcare data systems became digital. The legislation includes three core rules:

• Privacy Rule: The Privacy Rule governs the use and disclosure of PHI.

• Security Rule: The HIPAA Security Rule establishes standards for protecting electronic protected health information (ePHI).

• Breach Notification Rule: HIPAA’s Breach Notification Rule mandates timely notification following a breach.

For MSPs, especially those handling infrastructure, communications, or data storage, compliance with the Security Rule is particularly important because it governs the technical and administrative safeguards required to protect ePHI. Any gaps or lapses in data handling could lead to a HIPAA violation, and the consequences are serious. Fines can reach up to $2,067,813 per year for each violation category, reputational damage, and with legal consequences.

However, MSPs may still believe that HIPAA doesn’t apply to them because they don't directly work with patients or clinical teams. This is a dangerous misconception. Here are several examples of routine MSP services that may involve PHI exposure:

• Email hosting: Patient communication, appointment reminders

• Backup solutions: Stored medical records, billing information

• Help desk support: Screensharing or remote access into PHI systems

• Network monitoring: Traffic monitoring could reveal sensitive content

• Cloud services: Data syncing or access to EMRs or billing platforms

Any of these services can make an MSP a business associate and subject to HIPAA compliance obligations.

Best practices for ensuring HIPAA compliance

To meet regulatory requirements and build trust with healthcare clients, MSPs must implement a structured, proactive HIPAA compliance strategy:

Thorough HIPAA risk assessments

A risk assessment is the foundation of any security strategy. It allows MSPs and their healthcare partners to identify vulnerabilities that could expose ePHI. Areas typically reviewed include:

• Access control policies

• Firewall and intrusion detection systems

• Data encryption at rest and in transit

• Device and media controls

• Breach detection and response protocols

Under HIPAA’s Security Rule, covered entities and business associates alike are required to assess "potential risks and vulnerabilities to the confidentiality, integrity, and availability of ePHI." MSPs must be able to produce documentation that shows they’ve completed this analysis and taken steps to mitigate identified risks.

Execution of business associate agreements (BAAs)

MSPs providing services that involve PHI must sign a business associate agreement with the healthcare organization. This legal document “serves to clarify and limit, as appropriate, the permissible uses and disclosures of protected health information by the business associate, based on the relationship between the parties and the activities or services being performed by the business associate.” The BAA must:

• Define permitted and required uses/disclosures of PHI by the business associate.

• Prohibit unauthorized use/disclosure beyond what’s outlined in the contract or required by law.

• Mandate safeguards (including Security Rule requirements) to protect ePHI.

• Require breach and incident reporting to the covered entity.

• Ensure PHI access and amendment to support individual rights (e.g., access, amendment, accounting).

• Mandate compliance with the Privacy Rule when carrying out covered entity obligations.

• Allow HHS access to internal records for compliance investigations.

• Require the return or destruction of PHI upon contract termination, if feasible.

• Ensure subcontractors follow the same rules, with equivalent restrictions and conditions.

• Allow contract termination if the business associate violates material terms.

Implementation of technical safeguards

HIPAA’s Security Rule outlines several technical safeguards that MSPs must implement, including:

• Unique user identification: Each user must have a unique ID to track access.

• Audit controls: Systems must log activity and support security incident investigations.

• Access controls: Only authorized personnel should have access to PHI systems.

• Encryption and decryption: Data must be encrypted during transmission and storage.

• Automatic Logoff: Systems should automatically terminate sessions after inactivity.

MSPs must also configure secure remote access for staff and ensure any endpoint devices are encrypted and protected with anti-malware tools.

Continuous security monitoring and incident response planning

MSPs must offer 24/7 threat detection, anomaly detection, and incident response planning. These services include:

• Monitoring for ransomware and phishing attacks

• Alerting hospital IT teams to unusual login patterns or access requests

• Isolating compromised systems

• Supporting forensic investigations after a breach

• Assisting with breach notification reporting

Proactive monitoring not only helps detect threats early but also shows regulators that the MSP is taking its HIPAA obligations seriously.

Staff training and HIPAA awareness

All MSP personnel who interact with PHI must receive HIPAA training, and their understanding of healthcare-specific data security standards must be regularly updated. A single misstep by an untrained contractor can trigger a data breach with serious legal and financial consequences. An example of this occurred in March 2025, when Compumedics, a third-party software provider for sleep, brain, and ultrasonic monitoring used by the Women's and Children's Hospital in Adelaide, suffered a ransomware attack. The breach likely resulted in the theft of files containing patient names, addresses, contact details, sleep study results, and some clinical notes.

Vendor and subcontractor management

Healthcare organizations must vet their MSPs thoroughly, not just for technical expertise, but for regulatory awareness and a demonstrated commitment to data privacy and security. In turn, HIPAA compliant MSPs can position themselves as trusted partners in healthcare’s digital transformation, offering both technical value and regulatory peace of mind.

What healthcare organizations should look for in an MSP

Here are traits to look for in a HIPAA compliant MSP:

• Demonstrated knowledge of HIPAA and HITECH

• Completion of annual risk assessments

• Willingness to sign BAAs

• Proven experience in healthcare IT security

• Documentation of compliance policies and training

• Availability of breach response services

• Partnerships with HIPAA-certified subcontractors

The competitive advantage of HIPAA compliance

For MSPs, achieving and demonstrating HIPAA compliance can be a strategic differentiator. With healthcare organizations under pressure to secure systems, reduce costs, and maintain compliance, MSPs that can tick all three boxes have a competitive edge.

By marketing themselves as HIPAA compliant, privacy-first providers, MSPs can:

• Win more healthcare contracts

• Expand service offerings in regulated markets

• Reduce the risk of legal action and penalties

See also: HIPAA Compliant Email: The Definitive Guide (2025 Update)

FAQS

Are all MSPs subject to HIPAA regulations?

Not necessarily. Only MSPs that store, transmit, access, or process PHI on behalf of a covered entity are considered business associates and therefore subject to HIPAA.

How often should an MSP conduct HIPAA risk assessments?

MSPs should conduct a risk assessment annually or whenever there are significant changes to their systems, services, or infrastructure.