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Technical Due Diligence Through A Healthcare Lens

Healthcare technical due diligence

Technical due diligence has many considerations when assessing software solutions and tech-enabled companies in the healthcare industry. This blog explores the type of solutions/platforms commonly found in healthcare, the regulatory compliance landscape, and the challenges presented when conducting technical due diligence on companies building these solutions. This blog will also consider AI's impact on the healthcare industry and what this implies for technical due diligence.

Healthcare Software Solutions

The healthcare industry has witnessed a transformative shift by integrating software solutions, playing a pivotal role in improving patient care, streamlining operations, and advancing medical research. From electronic health records (EHR) to diagnostic tools and telemedicine platforms, healthcare software solutions have become integral to modern healthcare ecosystems.

Electronic Health Records (EHR)

Electronic Health Records (EHR) have revolutionized managing patient information. EHR systems enable healthcare providers to access comprehensive and real-time patient data, enhancing the continuity of care. The nuances of EHR lie in ensuring data security, privacy, and interoperability across various healthcare settings.

Telemedicine Platforms

The advent of telemedicine software has bridged geographical gaps, enabling remote consultations and monitoring. The nuances in telemedicine involve addressing regulatory challenges, ensuring the security of patient data during virtual interactions, and maintaining a high standard of care delivery in a digital environment.

Health Information Exchange (HIE)

Health Information Exchange platforms facilitate the secure sharing of patient data among different healthcare entities. The challenge lies in establishing interoperability standards that allow seamless data exchange while maintaining data integrity and complying with privacy regulations.

Clinical Decision Support Systems (CDSS)

Clinical Decision Support Systems assist healthcare professionals in making informed decisions by providing evidence-based insights. The nuances include integrating these systems into existing workflows, ensuring real-time relevance, and addressing the need for continuous updates based on evolving medical knowledge.

Medical Imaging Software

Medical imaging software has enhanced diagnostic capabilities, offering detailed insights through technologies like medical imaging analytics and computer-aided diagnosis. Challenges include ensuring the accuracy of algorithms, handling large datasets, and addressing concerns related to the interpretability of AI-driven diagnostic results.

Population Health Management Solutions

Population health management software helps healthcare organizations analyze and manage the health of specific patient populations. The nuances involve dealing with diverse datasets, addressing health disparities, and ensuring the ethical use of data for population health interventions.

Remote Patient Monitoring

Remote Patient Monitoring software enables healthcare providers to track patients' health outside traditional healthcare settings. Challenges include selecting appropriate monitoring devices, ensuring data accuracy, and addressing issues related to patient adherence to remote monitoring protocols.

Healthcare Software Through the Lens Of Technical Due Diligence

1. Regulatory Compliance

Non-Compliance With Healthcare Regulations Can Lead To Legal Consequences, Fines,
And Damage To The Company's Reputation

Healthcare is a highly regulated industry, and healthcare software must comply with strict regulations such as the Health Insurance Portability and Accountability Act (HIPAA) in the United States or similar regulations in other countries. Non-compliance with healthcare regulations can lead to legal consequences, fines, and damage to the company's reputation.

2. Data Security and Privacy

Healthcare software often deals with sensitive patient information. Ensuring robust data security measures and compliance with privacy laws is crucial. Data breaches or inadequate security measures can compromise patient information, leading to legal and reputational damage.

3. Interoperability and Integration

Healthcare software must seamlessly integrate with existing systems within healthcare organizations. Achieving interoperability can be complex due to diverse systems and standards. Lack of interoperability may hinder software adoption and limit its effectiveness in real-world healthcare environments.

4. Scalability and Performance

Healthcare software must handle large volumes of data and users. Ensuring scalability and optimal performance is critical for widespread adoption. Inadequate scalability or poor performance can lead to system failures, affecting patient care and user experience.

5. Usability and User Acceptance

Healthcare software should be user-friendly to gain acceptance from healthcare professionals. Understanding user needs and workflows is crucial. Poor usability may result in resistance to adoption by healthcare practitioners, impacting the software's effectiveness.

6. Business Continuity and Disaster Recovery

Healthcare software must ensure business continuity, especially in critical healthcare settings where system downtime is unacceptable. Lack of robust disaster recovery measures can lead to disruptions in healthcare services and compromise patient care.

7. Vendor and Third-Party Relationships

Healthcare software often relies on third-party components or services. Understanding and assessing these relationships is important. Dependencies on third-party vendors without proper risk assessment may lead to vulnerabilities, contractual issues, or service disruptions.

8. Intellectual Property and Licensing

Understanding the intellectual property landscape associated with the software and ensuring proper licensing agreements are in place. Legal challenges related to intellectual property infringement or licensing disputes can impact the software's continued development and deployment.

9. Change Management and Training

Implementing healthcare software often involves changes to established workflows. Proper change management and training are essential. Inadequate training and change management may result in resistance from healthcare professionals and hinder the adoption of the software.

10. Long Sales Cycles and Adoption Challenges

Healthcare organizations often have extended sales cycles, and adopting new software solutions can be slow and intricate. Conducting technical due diligence requires understanding the potential challenges in navigating complex procurement procedures, gaining buy-in from various stakeholders, and addressing the concerns of healthcare professionals resistant to change. The due diligence process must assess the software's readiness to overcome adoption hurdles and facilitate a smooth integration into the existing healthcare workflow.

Risks RingStone Has Observed During Technical Due Diligence In Healthcare

Risks Include A Lack Of Cybersecurity Rigor And Limited Data Security Maturity,
Posing Threats To Patient Information Confidentiality And Integrity

RingStone’s practitioners have conducted many diligences across the healthcare landscape, and here are some examples of the category of software/solutions assessed:

  • urology services

  • lab automation solutions

  • mission-critical molecular intelligence

  • genomic and clinical knowledge, analysis, and bioinformatics tools & services

  • microscopes and non-destructive testing equipment (NDT) for life sciences

  • rehab & physical therapy solutions


Conducting technical due diligence on healthcare companies reveals common challenges and risks integral to the industry. Here are some examples of issues found during technical due diligences by RingStone’s practitioners:

  • Challenge of ensuring the secure storage and proper handling of customer data, particularly Personally Identifiable Information (PII).

  • Lack of cybersecurity rigor and limited data security maturity, posing threats to patient information confidentiality and integrity.

  • Scalability and integration challenges, emphasizing the need for adaptable solutions to accommodate growing user bases.

  • Dependencies on key individuals and low R&D spending, raising concerns about potential operational impacts and a diminished capacity for innovation.

  • Outdated technology stacks, highlighting the importance of maintaining competitiveness and adapting to industry advancements.

  • Weak internal security and understaffed IT teams, as robust security measures are crucial to safeguard sensitive data in the healthcare sector.

  • The absence of a dedicated security specialist. Failure to have a dedicated security specialist increases the risk of non-compliance, potentially leading to legal consequences, fines, and damage to a company's reputation.

  • Shortcomings in Disaster Recovery (DR) readiness and secure development practices, underscoring vulnerabilities that could compromise system availability and data security.

These instances underscore the complex landscape of technical due diligence, emphasizing the critical importance of cybersecurity, data integrity, scalability, integration capabilities, and adherence to industry best practices. Addressing these challenges is paramount to ensuring healthcare software’s resilience, security, and competitiveness in a rapidly evolving healthcare landscape.

Implications Of PII In The Healthcare Industry

Personal Identifiable Information (PII) in healthcare systems is particularly sensitive due to the nature of the information involved and the potential consequences of unauthorized access or disclosure. Here are key aspects that make PII in healthcare highly sensitive:

Health-Related Data

PII in healthcare often includes health-related data, such as medical history, diagnoses, treatments, and prescriptions. This information is highly personal and can reveal intimate details about an individual's health conditions.

Protected Health Information (PHI)

In the United States, health-related PII falls under the category of Protected Health Information (PHI) and is protected by laws such as the Health Insurance Portability and Accountability Act (HIPAA). Similar data protection regulations exist in other regions, emphasizing the legal sensitivity of health-related PII.

Risk of Identity Theft and Fraud

PII in healthcare systems often includes elements like full names, addresses, social security numbers, and insurance details. This comprehensive set of information increases the risk of identity theft and financial fraud if it falls into the wrong hands.

Potential for Discrimination

Health-related PII may include details about stigmatizing conditions or genetic predispositions. Unauthorized access to this information can lead to discrimination in various aspects of life, including employment, insurance, and social relationships.

Privacy Concerns

Individuals expect a high level of privacy concerning their health information. Unauthorized access or disclosure can violate this privacy, eroding trust in healthcare systems and providers.

Medical History and Behavioral Health Data

PII often encompasses an individual's medical history, including behavioral health data. This information may be delicate and requires careful handling to prevent potential harm or misuse.

Legal and Ethical Considerations

The use and sharing of health-related PII are subject to legal and ethical considerations. Individuals typically provide informed consent for collecting, using, and sharing their health information, emphasizing the need for secure handling.

Comprehensive Patient Profiles

Healthcare systems compile comprehensive patient profiles that include current health status and historical data. This holistic view increases the sensitivity of the information, especially when considering the potential implications of unauthorized access.

Vulnerability to Cybersecurity Threats

Healthcare systems are frequent targets for cyberattacks due to the valuable PII they store. Cybersecurity breaches can lead to unauthorized access, data exfiltration, and potential individual harm.

Healthcare Provider Trust

Patients trust healthcare providers and organizations to safeguard sensitive information. Breaches or mishandling of PII erodes this trust, impacting the provider-patient relationship and the overall credibility of the healthcare system.

Regulatory Consequences

Violations of data protection regulations, such as HIPAA, in the U.S. can result in severe legal consequences, including fines and legal actions. The regulatory framework underscores the sensitivity and importance of protecting health-related PII.

HIPAA In The United States

The Health Insurance Portability and Accountability Act (HIPAA) is a comprehensive federal law enacted in 1996 in the United States. Its primary objectives are to enhance the portability and continuity of health insurance coverage for individuals and establish standards for the secure and confidential handling of protected health information (PHI). HIPAA consists of multiple rules, the two main ones being the Privacy and Security Rule.

Privacy Rule: This rule governs the use and disclosure of individuals' health information, establishing safeguards to protect patient privacy.

Security Rule: The Security Rule focuses on protecting electronic protected health information (ePHI) and sets standards for healthcare data security

HIPAA is of paramount importance to companies developing healthcare software for several reasons:

Legal Compliance

Companies handling health information are legally obligated to comply with HIPAA regulations. Non-compliance can result in severe penalties, fines, and legal actions.

Patient Privacy Protection

HIPAA ensures the protection of patients' sensitive health information. Mishandling or unauthorized disclosure of PHI can lead to violations and damage a company's reputation.

Data Security Standards

HIPAA establishes rigorous standards for securing electronic health information. Failure to implement adequate security measures may result in data breaches, leading to regulatory consequences and loss of trust.

Business Associate Compliance

Companies developing healthcare software that interacts with covered entities (healthcare providers, insurers, etc.) must comply with HIPAA as business associates. Failure to comply as a business associate can impact partnerships and limit market opportunities.

Risk Management

HIPAA mandates regular risk assessments to identify and mitigate vulnerabilities. Neglecting risk management can expose software systems to security threats, potentially compromising patient data.

Standardization of Processes

HIPAA sets standards for healthcare transactions, code sets, and unique identifiers. Adhering to these standards facilitates interoperability and seamless data exchange in the healthcare ecosystem.

Increased Trust and Credibility

Compliance with HIPAA enhances a company's credibility and instills trust among healthcare providers, organizations, and end-users. Lack of compliance may lead to skepticism and reluctance to adopt software solutions.

Data Breach Response

HIPAA mandates a response plan for addressing and mitigating the impact of data breaches. Inadequate response to data breaches may result in increased damage and regulatory scrutiny.

Regulations In Other Parts Of The World

Various Data Protection And Healthcare Compliance Regulations Are Similar To HIPAA
In Their Focus On Safeguarding Health Information

In Europe and other parts of the world, various data protection and healthcare compliance regulations are similar to HIPAA in their focus on safeguarding health information. Some key healthcare compliance regulations include:

General Data Protection Regulation (GDPR) - European Union

GDPR is a comprehensive data protection regulation applicable across all industries, including healthcare. GDPR recognizes health data as a special category of personal data, imposing strict safeguards for its processing.

Directive 95/46/EC (Repealed by GDPR) - European Union

The predecessor to GDPR established data protection principles and requirements within the European Union.

Data Protection Act 2018 (DPA 2018) - United Kingdom

DPA 2018 complements GDPR and applies to processing personal data, including health data, in the UK.

This UK legislation outlines standards for the protection of patient data and the responsibilities of healthcare organizations.

Personal Information Protection and Electronic Documents Act (PIPEDA) - Canada

PIPEDA governs private-sector organizations' collection, use, and disclosure of personal information, including healthcare entities.

Digital Health Data Act (DiGAV) - Germany

DiGAV aims to regulate the processing of digital health data and ensure data protection in the healthcare sector in Germany.

Australian Privacy Principles (APPs) - Australia

APPs, part of the Privacy Act, regulate the handling of personal information by Australian government agencies and businesses, including healthcare providers.

Personal Data Protection Act (PDPA) - Singapore

PDPA protects personal data in Singapore, including health-related data collected by healthcare organizations.

Personal Information Protection Law (PIPL) - China

PIPL is China's comprehensive privacy law regulating the processing of personal information, including health data.

Personal Data Protection Act (PDPA) - South Korea

PDPA in South Korea governs the processing of personal information, including health information.

The Future Of AI In Healthcare

1. Introduction to AI in Healthcare: Integrating Artificial Intelligence (AI) in the healthcare industry holds the promise of transformative changes. AI has the potential to enhance diagnostics, streamline treatment processes, and improve patient outcomes. However, the adoption of AI in healthcare necessitates a thorough assessment of its capabilities through technical due diligence.

2. Diagnostic Accuracy and Imaging: AI-powered algorithms demonstrate the ability to analyze medical images with remarkable precision. AI contributes to diagnostic accuracy, from detecting anomalies in X-rays to identifying potential issues in pathology slides. In technical due diligence, evaluating the performance and reliability of these algorithms is crucial to ensure their alignment with clinical standards and guidelines.

3. Predictive Analytics and Early Intervention: AI enables predictive analytics by analyzing large datasets to identify patterns and trends. This capability can be leveraged in healthcare for early intervention and preventive measures. Technical due diligence should scrutinize the predictive models, assessing their accuracy and robustness.

4. Personalized Medicine and Treatment Plans: AI facilitates the development of personalized treatment plans by analyzing patient data and tailoring interventions based on individual characteristics. Technical due diligence should assess the algorithms' ability to provide accurate predictions and the extent to which they align with established medical protocols.

5. Virtual Health Assistants and Telemedicine: Virtual health assistants powered by AI contribute to telemedicine and remote patient monitoring. These tools offer personalized health insights and facilitate communication between patients and healthcare providers. In technical due diligence, assessing the security measures, data privacy protocols, and the overall reliability of these virtual assistants is imperative.

6. Drug Discovery and Development: AI accelerates drug discovery and development by analyzing vast datasets to identify potential drug candidates. Technical due diligence should evaluate the algorithms' efficacy in predicting drug interactions, side effects, and their alignment with regulatory requirements.

7. Natural Language Processing in Healthcare Documentation: Natural Language Processing (NLP) enables the extraction of valuable insights from unstructured healthcare data, such as clinical notes and medical records. Assessing the accuracy and efficiency of NLP algorithms during technical due diligence ensures the reliability of information extracted for decision-making.

8. Cybersecurity in AI-Enabled Healthcare Systems: With the increasing reliance on AI, healthcare systems become more susceptible to cybersecurity threats. Technical due diligence should thoroughly assess the cybersecurity measures implemented in AI-enabled healthcare systems to safeguard patient data and maintain system integrity.

9. Ethical Considerations and Bias Mitigation: AI algorithms in healthcare must be evaluated for potential biases and ethical considerations. Technical due diligence should include an examination of the algorithms' fairness, transparency, and efforts to mitigate biases, ensuring equitable healthcare outcomes.

10. Regulatory Compliance and Standards: The healthcare industry operates within a stringent regulatory framework. Technical due diligence should assess the compliance of AI solutions with healthcare regulations, such as HIPAA, and evaluate adherence to industry standards to ensure the responsible and legal deployment of these technologies.


The Healthcare Industry Must Balance Innovation With Ethical And Regulatory

Conducting thorough technical due diligence in the healthcare space requires a multidimensional approach that considers not only technological aspects but also the unique regulatory, privacy, and security considerations inherent in the healthcare industry.

Critical areas to assess include regulatory compliance, focusing on regulation adherence. Given the sensitivity of patient information, ensuring robust data security and privacy measures is paramount. Interoperability and integration capabilities are crucial, considering the complex landscape of diverse systems within healthcare organizations. Scalability and performance are essential for handling large data volumes and users, while usability and user acceptance are key for effective adoption by healthcare professionals. Assessing business continuity and disaster recovery measures is vital to prevent disruptions in critical healthcare settings.

Understanding and managing vendor and third-party relationships is important to mitigate vulnerabilities and contractual issues. Intellectual property and licensing considerations must be thoroughly examined to avoid legal challenges. Change management and training are essential for implementing healthcare software without disrupting established workflows. Additionally, addressing the challenges of long sales cycles and adoption complexities is crucial, requiring an assessment of the software's readiness to navigate complex procurement procedures and gain acceptance from diverse stakeholders in the healthcare industry.

In the United States, HIPAA is a critical framework that not only ensures legal compliance but also upholds the privacy and security of healthcare data. Companies developing healthcare software (for the US market) must prioritize HIPAA compliance to mitigate legal risks, protect patient information, and establish a foundation of trust within the healthcare industry. Across Europe and other global regions, numerous data protection and healthcare compliance regulations share a common emphasis, with HIPAA on the paramount goal of safeguarding health information.

Software solutions have become indispensable in the healthcare industry, driving improvements in patient outcomes, operational efficiency, and healthcare delivery. However, the nuances of healthcare software involve navigating regulatory complexities, ensuring data security and privacy, and addressing the unique challenges posed by the dynamic healthcare environment. As technology evolves, the healthcare industry must balance innovation with the ethical and regulatory considerations inherent in delivering quality healthcare through software solutions.

Integrating AI in the healthcare industry presents transformative opportunities but requires diligent technical due diligence. Evaluating AI capabilities' performance, reliability, and security is essential to ensure seamless integration into healthcare practices and uphold the highest patient care and data protection standards.

About The Authors

Neil Penny has spent the last 20+ years as a career Product Owner, Product Manager, and Product Marketeer, leading product teams in their quest to maximize product value and smooth the launch of new products, services, and capabilities.

As a practitioner at RingStone, he works with private equity firms globally in an advisory capacity, with an obvious slant toward scalable product management processes and strategic product development. Before RingStone, Neil worked in a variety of different markets, including eInvoicing within the healthcare market and B2B supply chain Integration, IT Service Management, document management, governance, risk and compliance, and more latterly, transport and logistics, where he was responsible for multi-million-pound transport planning and execution platform for manufacturers, hauliers, and retailers.

Neil has predominantly worked with small to medium-sized UK-based companies, with both cloud and on-premise products, using traditional waterfall and Agile/Scrum development methodologies. Neil holds a degree in Building Management from Coventry University. Contact Neil at 

Jon White is an experienced technology leader with over 34 years of international experience in the software industry, having worked in the UK, Malaysia, Bulgaria, and Estonia. He holds a BSc (Hons) in Systems Design. He led the Skype for Windows development teams for many years (with 280 million monthly connected users), playing a pivotal role in the team's transition to Agile.

Jon has held multiple leadership positions throughout his career across various sectors, including loyalty management, internet telecoms (Skype), IT service management, real estate, and banking/financial services.

Jon is recognized for his expertise in Agile software development, particularly helping organizations transform to Agile ways of working (esp. Scrum), and is a specialist in technical due diligence. He is also an experienced mentor, coach, and onboarding specialist.

Over the last few years, he has completed over a hundred due diligence and assessment projects for clients, including private equity, portfolio companies, and technology companies, spanning multiple sectors. Contact Jon at


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