Balancing Cost-Savings and Compliance in US Healthcare Data Offshoring

US Healthcare Offshoring: Challenges and Solutions

The US healthcare sector confronts unique challenges in applying cost-saving strategies, such as offshoring administrative functions, due to strict compliance obligations, particularly around patient data privacy.

Healthcare Offshoring and Compliance

Many US healthcare businesses are leveraging global labour markets to reduce administrative costs. However, these efforts present legal and regulatory difficulties due to US state restrictions on accessing or storing patient data overseas.

The Role of HIPAA

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) is the main federal law protecting patients’ health information, or PHI. HIPAA sets standards to safeguard PHI by healthcare entities and their subcontractors, or “business associates”. Despite potential risks, HIPAA allows PHI to be accessed or stored outside the US, but consequences for breaches can be limited.

Data Localisation and Legal Prohibitions

To control risk, many US states have implemented data localisation provisions within contracts with state agencies and Medicaid regulatory restrictions. Several states have legislation prohibiting offshoring. For example, Florida’s Electronic Health Records Exchange Act ensures that patient information in offsite records is physically maintained in the US or Canada. If Texas’s Senate Bill 1188 is enacted, certain healthcare entities will be required to store electronic health record information of Texas residents in the US.

Impact of Consumer Privacy Laws

A number of US states are enacting consumer privacy laws that could potentially restrict offshoring of patient data. Healthcare companies should therefore consider the applicability of state privacy regimes to the potential offshoring of patient information.

Federal Guidance and Contractual Barriers

The Centers for Medicare & Medicaid Services (CMS) has not banned offshoring, but its guidance raises compliance expectations for federal healthcare contractors and Medicare Advantage Plans. CMS may penalise organisations for inadequate offshore risk management. Meanwhile, many healthcare providers and health plans include inhibitive clauses in their contracts.

Best Practices for Offshoring Patient Data

Healthcare companies can mitigate risks and maximise value from offshore operations by adopting best practices such as adopting an offshore policy, entering into offshore Business Associate Agreements, establishing minimum access and encryption policies, preparing for data breaches, complying with all applicable laws, and conducting annual audits.

Considerations for Non-US Vendors

Non-US vendors servicing US healthcare companies must navigate a fragmented and evolving landscape. Vendors should demonstrate their HIPAA compliance, robust security, and experience working within multi-jurisdictional legal environments. In higher-risk jurisdictions, vendors might consider establishing US-based operations or collaborating with domestic intermediaries to minimise risk.