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What Healthcare Startups Should Know About Compliance

The prevalence of health apps, electronically transfer of data and health gadgets has increased tremendously over the last decade. In fact, the global digital healthcare market is anticipated to be worth $504.4 billion by 2025. Startups are increasingly launching new ideas to find a spot in this profitable marketplace.


Every single day, businesses are forming partnerships with insurance companies, healthcare firms, and doctors to streamline the delivery of health services. While this increases the amount of sensitive data that can be handled by these startups, it also increases the responsibility that such businesses need to commit to in protecting this data. As a startup, maintaining regulatory compliance should be a priority, especially if you want to poise your startup for success.

Here is what your startup leadership should know about compliance:

Why Compliance Is a Necessity

Whether deliberate or unintentional, the ignorance of compliance regulations could hurt the viability of your startup’s idea. It can be frustrating to approach a client, only for them to point out compliance aspects that your idea ignores. In most cases, you might need to tweak multiple facets of your business model to achieve compliance.


The worst cases scenario is having to completely do away with your idea since security-conscious clients do not buy into it. In case you manage to sell your idea to your customers despite the disregard of vital regulatory requirements, your business might not run for long before getting into trouble. The bodies that deal with the governance and regulation of the healthcare industries are always on the lookout for businesses that ignore the requirements. If caught, the chances are that you might need to pay hefty fines, not to mention, focus on weaving compliance controls into an already established business model.

Regulations to Pay Attention To

The regulations that you should focus on depends on the specific areas that your business touches in the healthcare industry. While there is a diversity of regulations to follow, the most discussed regulations are the HIPAA, the Anti-Kickback Statute, or the Stark Law.


This regulation deals with the security and privacy of healthcare information. For startups working as third-party service providers, the regulation considers them as business associates. Under HIPAA, business associates are supposed to uphold data security and privacy laws through implementing the ad hoc security controls.


However, compliance goes beyond just using security tools. Your startup will need to formulate and implement security and privacy policies. You also need to continuously monitor the implementation of the policies as well as update them when the need arises.

The Anti-Kickback Statute and Stark Law

Kickback is a simple term for bribery, where a person receives a valuable item in exchange for a favorable outcome in a decision. For instance, a doctor might refer a patient to a pharmacy, whereas the pharmacy had paid the doctor to incentivize them to refer people to their business. When caught, the healthcare provider could be charged with violating the Anti-Kickback Statute.

The law looks to eliminate fraud and abuse cases towards patients by healthcare officials and businesses. As a startup, you need to set up the right policies and stick to ethical practices that are in line with the regulation. The regulation is closely intertwined with the Stark law.


Under the Stark Law, healthcare providers are prohibited from referring patients to any entity that they have a ‘financial relationship’ with for healthcare services that are to be paid for by Medicare. The “financial relationship’ can range from a business owned by the healthcare provider to one owned by a sibling.

Achieving Compliance

Once your startup has all the nitty-gritty details of your business idea figured out on paper, seek help before implementing the ideas. It might be quite costly to be in the final stages of launching your startup only to have to revisit the whole concept of your business. The trick is to vet the different decisions that your business makes and look for ways to utilize scarce resources to achieve compliance.


Most regulations come with programs that help startups implement them fast. Other than focusing on these programs, it might pay off to work with businesses that offer compliance consulting services to ensure that you cater to all the requirements.

Work With Compliance Software

Regulatory compliance can be quite time-intensive, and it requires a lot of documentation. Whenever your business needs to be audited, auditors will be out of your hair as fast as you can present the right documentation. While spreadsheets might seem like the right way to document your compliance moves, they may not always be effective enough.


The better move would be to pick compliance software to help with your needs. Not only will the right software offer you more visibility into your compliance landscape, but it also makes it easy to track progress. Offering the necessary documents to auditors also becomes quite easy when using the software.


The digitization of healthcare brings a lot of business ideas with it, but only compliant companies can truly survive in this heavily regulated industry. As long as you implement your ideas with compliance at heart, you will be a few steps closer to success. Learn about the different regulations and commit to compliance to create a sustainable business.


Guest Author Bio
Ken Lynch is an enterprise software startup veteran, who has always been fascinated about what drives workers to work and how to make work more engaging. Ken founded Reciprocity to pursue just that. He has propelled Reciprocity’s success with this mission-based goal of engaging employees with the governance, risk, and compliance goals of their company in order to create more socially minded corporate citizens. Ken earned his BS in Computer Science and Electrical Engineering from MIT. Learn more at ReciprocityLabs.com
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