Guide to Custom Healthcare Software Compliance: Key Rules and Standards

Healthcare compliance is a complex and often costly process, where even small mistakes can lead to millions of dollars in fines for organizations handling protected health information (PHI). As healthcare systems become more reliant on technology, custom healthcare software development plays a crucial role in ensuring compliance. Tailored software solutions can help organizations meet specific regulatory requirements, automate complex processes, and mitigate risks related to PHI handling. In this guide, we provide an overview of key healthcare regulations in the USA and Europe, explain important healthcare compliance standards that are often mistaken for official regulations

What Regulations Influence Healthcare Software?

Several major regulations shape the development and use of healthcare software. These include FDA regulations for Software as a Medical Device (SaMD), HIPAA rules, CMS quality reporting and payment reforms, and GDPR requirements for handling health data. Let’s take a closer look at each of them.

HIPAA Compliance in Healthcare Software

HIPAA compliance in healthcare software revolves around adhering to the Health Insurance Portability and Accountability Act’s Privacy Rule, Security Rule, and conducting thorough risk assessments to protect patient information.

HIPAA Privacy Rule

The Privacy Rule governs the use and sharing of protected health information (PHI). It allows access only to authorized individuals. Healthcare organizations must get patient permission before releasing PHI unless it’s for treatment, payment, or operations. It also enforces the “Minimum Necessary Rule”. It means only the needed amount of PHI should be used or shared. Patients have the right to access, copy, and direct the sharing of their electronic PHI (ePHI) under certain conditions. 

HIPAA Security Rule

The Security Rule protects electronic PHI (ePHI) by requiring physical, technical, and administrative safeguards. 

• Physical safeguards secure locations and devices storing ePHI. 
• Technical safeguards include cybersecurity measures like encryption, firewalls, and access controls. 
• Administrative safeguards cover policies, employee training, risk management, and incident response.

HIPAA Risk Assessment

Risk assessment is a key requirement under the Security Rule to identify and reduce risks to PHI. It reviews security policies, employee awareness, IT systems, and software handling PHI. A full risk assessment involves planning, executing, evaluating, and often using HIPAA risk assessment software. Failing to complete a proper risk assessment is the most common HIPAA violation penalized by the Office for Civil Rights (OCR).

Your next read: Understanding the HIPAA Compliance

Updates in 2025

HIPAA Privacy Rule Changes Proposed for 2025

• Patients will be allowed to inspect PHI in person and take notes or photographs.
• The maximum time to provide access to PHI will be reduced from 30 days to 15 days.
• Restrictions on transferring ePHI to third parties will apply only to ePHI maintained in electronic health records (EHRs).
• Covered entities must inform patients of their right to obtain or direct copies of PHI when summaries are provided instead.
• Expanded permissions for disclosure of PHI to uniformed services.
• Posting of estimated fee schedules for PHI access on websites will be mandatory, along with providing individualized fee estimates.

HIPAA Security Rule Update Proposed for 2025

This is the first major update since 2013, focusing on improving cybersecurity to protect against increasing cyberattacks. Key changes include:

• Removal of the “addressable” vs. “required” distinction, making all safeguards mandatory except for limited exceptions.
• New requirements for maintaining a technology asset inventory and network map, updated at least annually.
• More detailed and specific risk analysis requirements, including reviewing asset inventory and network maps, identifying threats and vulnerabilities, and assessing risk levels.
• Written contingency plans for data restoration within 72 hours after incidents.
• Mandatory annual Security Rule compliance audits and regular testing of security measures.
• Incorporation of cybersecurity best practices like multifactor authentication, encryption, and asset inventory as required safeguards.

The 2025 updates emphasize enhanced patient rights, stronger cybersecurity measures, and more rigorous risk management to better protect PHI in an evolving digital healthcare environment.

FDA Regulations for Software as a Medical Device (SaMD)

Software that functions as a medical device is regulated by the FDA. SaMD is standalone software that has a medical purpose, such as diagnosing, monitoring, or treating diseases.

• The FDA has introduced a new risk-based framework for software documentation in premarket submissions. It categorizes documentation levels as Basic or Enhanced based on risk.
• The FDA is developing tools like a Regulatory Development Kit (RDK) to facilitate compliance for SaMD developers. It includes secure submission and review processes.

CMS Quality Reporting and Payment Reforms

The Centers for Medicare & Medicaid Services (CMS) imposes reporting requirements tied to reimbursement:

• Hospitals must comply with expanded quality measures via programs such as Hospital Inpatient Quality Reporting (IQR) and Value-Based Purchasing.
• Failure to meet reporting requirements can lead to significant payment cuts (e.g., 25% reduction in annual payment updates).
• Increasing demands for electronic clinical quality measures require enhanced EHR resources and data analytics.

GDPR Compliance for Health Data

The General Data Protection Regulation (GDPR) imposes stringent requirements on healthcare software processing EU residents’ data, including genetic and biometric information. Key obligations include conducting Data Protection Impact Assessments (DPIAs) for high-risk processing and appointing a Data Protection Officer (DPO) for organizations handling large-scale health data. 

For small to medium-sized enterprises (SMEs), total GDPR compliance costs typically range from around $20,500 to over $100,000 annually, with some spending more than $1 million to maintain compliance. 

Healthcare software companies need to carefully follow HIPAA rules (especially the changing Security Rule), FDA rules for medical device software, CMS quality reporting requirements, and GDPR in Europe. Breaking these rules can lead to big fines, damage to their reputation, and problems running their business.

Discover more about custom healthcare software development and its benefits in our comprehensive Healthcare Software Development Guide.

Key Healthcare Software Standards

Key healthcare software standards are essential for ensuring interoperability, security, and efficient data exchange across healthcare systems. Here is an overview of the primary standards used in the U.S. healthcare system:

US Core / USCDI (United States Core Data for Interoperability)

• Defines a minimum dataset of standardized health data elements that must be shared between health IT systems.
• USCDI is mandated by the ONC Cures Act Final Rule to establish a baseline for interoperability.
• It includes data classes such as patient demographics, medications, allergies, lab results, imaging reports, and clinical notes.
• US Core Implementation Guides (IGs) provide technical specifications for how these data elements should be exchanged using FHIR.
• USCDI is evolving through versions that add new data classes and elements to support health equity and public health needs.

HL7 v2

Over 95% of U.S. healthcare organizations use HL7 v2 for electronic data exchange

It supports messages related to patient admissions, discharges, transfers, lab orders and results, clinical reports, billing, and scheduling. HL7 v2 messages are structured with specific profiles defining the order and types of data included.

FHIR (Fast Healthcare Interoperability Resources)

FHIR is a modern, web-based HL7 standard designed for easy implementation and rapid adoption. It is the foundation for US Core profiles and is integral to implementing USCDI data exchange 

FHIR uses RESTful APIs and standard web technologies to represent and exchange healthcare data in a consistent way.

This standard supports a wide range of clinical, administrative, and financial data exchange use cases and includes modules for clinical reasoning, decision support, quality measurement, and public health reporting.

DICOM (Digital Imaging and Communications in Medicine)

It is a comprehensive standard for the exchange and management of medical imaging information, such as X-rays, MRIs, and other biomedical images. It defines protocols for image storage, transmission, printing, and network management. This standard facilitates interoperability between imaging devices and healthcare information systems, and it also supports the management of patient and procedure information related to images.​

X12 (EDI – Electronic Data Interchange)

• ANSI X12 EDI standards are used primarily for administrative and financial healthcare transactions.
• Common transactions include patient eligibility verification (EDI 270/271), prior authorization (EDI 278), claims submission (EDI 837), claim status (EDI 277), payment processing (EDI 835), and member enrollment (EDI 834).
• These standards automate billing, insurance claims, and payment processes to improve accuracy and efficiency in healthcare administration.

This set of standards collectively supports clinical care, administrative processes, imaging, security, and interoperability in the U.S. healthcare ecosystem. They enable healthcare providers, payers, and patients to share and protect health information efficiently and securely.

How Often Should Healthcare Organizations Conduct Internal and External Software Compliance Audits?

Healthcare organizations generally conduct internal and external audits on a regular schedule tailored to their risk profile, regulatory requirements, and operational complexity. Here are the best practices and typical frequencies based on recent expert sources.

Internal Compliance Audits

Regular internal audits help healthcare organizations identify weaknesses and ensure ongoing compliance. This minimizes risks of penalties, legal actions, and reputational damage.

Internal audits are typically conducted at least annually, but many organizations perform them quarterly or biannually depending on risk assessments, regulatory changes, and organizational needs. These audits cover various areas that includes clinical practices, coding and documentation, financial compliance, privacy and security (e.g., HIPAA), and operational efficiency.

External Compliance Audits

External compliance audits provide an independent perspective and can help uncover issues not detected internally. External audits may be performed by government agencies (e.g., Office of Inspector General), insurance payors, or third-party experts to verify compliance with regulations and contractual obligations.

HIPAA Compliance Audits

Healthcare organizations typically conduct HIPAA compliance audits annually or biennially, depending on factors such as changes in regulations, technological updates, risk assessments, and organizational size. The audit cycle should be customized based on the organization’s history of breaches, patient volume, and evolving security threats.

In conclusion, healthcare organizations, including telehealth and pharma companies, should conduct internal audits at least annually, increasing frequency based on risk and organizational changes. External audits are generally annual and mandated by regulators or payers. For telehealth companies, to maintaine compliance with HIPAA and other regulations is critical, given the sensitive nature of remote healthcare data. Similarly, pharma companies must ensure adherence to strict regulatory guidelines for data security and patient privacy. HIPAA compliance audits typically occur annually or every two years, tailored to the organization’s specific circumstances. The goal is to ensure that all aspects of compliance are thoroughly reviewed.

We covered this aspect in our guide How to Develop HIPAA-Compliant Telemedicine Platform.

TOP 5 Healthcare Compliance Software

Healthcare software companies should also consider using specialized compliance software solutions to manage these complex requirements, perform guided risk assessments, and maintain corrective action plans to address compliance gaps.

HealthStream

HealthStream is a comprehensive compliance management solution for healthcare organizations of all sizes. Its features include an extensive, up-to-date compliance content library, training management, and integration with EHR and HR systems. HealthStream known for improving compliance management and patient safety with a user-friendly interface.

Compliancy Group

Compliance Group offers a cloud-based platform focused primarily on HIPAA compliance, risk assessments, incident management, and business associate management.

It includes templated policies, training, breach notification tools, and ongoing regulatory updates. The platform is highly rated for simplifying HIPAA compliance, especially suited for small to medium healthcare providers.

MedTrainer

MedTraincer is all-in-one compliance and credentialing software tailored to healthcare providers.

It includes compliance training (more than 1,000+ courses), credentialing, provider enrollment, safety plan management, and accreditation tracking. Mobile-friendly and customizable to organizational needs of different sizes, it enables robust reporting and automates manual tasks such as certificate issuing, reminders, and notifications.

Healthicity

Healthicity is a suite of compliance tools with a focus on audit management, risk assessment, and compliance analytics. The tool incorporates AI technology to enhance audit and risk management processes. List of notable clients consists of Norton Healthcare, DukeHealth, Equitas Health. 

symplr 

symplr is an enterprise-grade cloud-based compliance software designed specifically for healthcare organizations. It features custom survey tools for documenting compliance evidence, conflict of interest management, employee attestations, and corrective action tracking. Symplr offer AI governance by monitoring alignment of AI-made decisions with organizational values. List of notable clients include Baystate Health, the University of Tennessee Medical Centre, Great River Health.

These off-the-shelf solutions provide ready-to-use compliance management capabilities, including policy management, training, risk assessments, incident reporting, and audit preparation, helping healthcare organizations maintain regulatory adherence efficiently without the need for custom software development.

When selecting a solution, consider your organization’s size, specific regulatory requirements, integration needs with existing systems (like EHR or HR software), and the scope of compliance coverage you require.

Conclusion

Healthcare companies should build regulatory compliance into the software development process right from the beginning. This approach makes sure that features and workflows naturally support privacy, security, and audit requirements like HIPAA, GDPR, and HITECH. Regular internal and external audits are also important to catch compliance issues early and find ways to improve.

To add, software can be a powerful tool to promote transparency, accountability, and clear communication about compliance responsibilities across the entire organization. If you are looking for a development partner to help embed compliance into your software from day one, reach out to Empeek. Our team of analysts, software engineers, and healthcare consultants is ready to make the healthcare software development process smoother and more efficient.