A NOTE ON THE 2025 UPDATES
The 2025 updates reflect recent regulatory adjustments, increasing penalties for HIPAA non-compliance and rising security technology costs. We’ve revised all financial estimates and compliance insights to align with these changes, ensuring you have the most accurate and timely information to evaluate your organization’s HIPAA readiness.

When it comes to HIPAA compliance, it can be challenging to determine if the costs are worth it.  Many healthcare organizations struggle with the costs of HIPAA compliance and the technology solutions required for data security.  In this blog post, we will break down the associated HIPAA compliance costs, including the cost of the technology solutions needed for compliance, the cost of non-compliance, and the cost of data breaches.  By the end, you will better understand the costs of becoming and staying compliant.

The Cost of HIPAA Compliance

According to the Department of Health and Human Services (HHS), the cost of complying with HIPAA can range from hundreds to thousands of dollars.  However, these costs are usually far less than the penalties associated with not being compliant.  We’ll discuss the potential cost of noncompliance later in this article.

There are a few factors that affect the cost of compliance with HIPAA.  These include the number of staff members involved in processing protected health information (PHI), the technical infrastructure needed to comply with data protection requirements, and employee training costs.  Additionally, organizations may need to purchase software or hardware solutions that provide adequate security features, such as data encryption and breach notification protocols. 

Many healthcare organizations lack the in-house expertise to implement properly the security features required for compliance.   Outsourcing the handling of HIPAA security is another cost associated with compliance.  It’s important to note that the cost of HIPAA compliance may be more than initially expected, as there are often hidden costs associated with implementing various measures.

HHS’ Estimate of HIPAA Compliance Costs

Shortly after the HIPAA Final Rule came out in 2013, HHS provided an estimation of how much HIPAA compliance may cost.  The estimates provided per organization were:

• Updated Notice of Privacy Practices: $80
• Breach Notification Requirement Updates: $763
• Business Associate Agreement Updates: $84
• Security Rule Compliance for Business Associates: $113
• GRAND TOTAL: $1,040

It’s important to note that these estimates are woefully inaccurate, not to mention out of date.  The estimated costs, which can be viewed in Table 1 of Federal Register Vol. 78, No. 17, fail to account for expenses associated with covered entities that have insufficient or no security measures in place as dictated by HIPAA.  Moreover, the estimates are ten years old; technology has become considerably more complex and, in some cases, more costly to implement and maintain.  More recent estimates put the annual cost of maintaining HIPAA compliance at $35,000.  In reality, it isn’t easy to provide an accurate estimate given the different variables involved in achieving & maintaining compliance.

Variables That Affect the Cost of HIPAA Compliance

There are direct and indirect costs to consider when considering the costs associated with HIPAA compliance.

Direct Costs of HIPAA Compliance

The direct costs associated with HIPAA compliance have increased notably due to evolving cybersecurity threats, complexity in data handling, and stricter regulatory requirements. For example, internal audits and risk assessments, mandated annually under the HIPAA Security Rule, typically range from $5,000 to over $20,000, depending on the organization’s size and complexity. These costs cover the time spent by compliance officers, IT staff, and external auditors who thoroughly review security protocols, policies, and IT infrastructure.

Employee costs specifically related to HIPAA compliance have also risen sharply. A mid-sized healthcare practice might spend approximately $20,000 to $50,000 annually to employ dedicated HIPAA compliance personnel or allocate portions of existing staff’s time to compliance duties, training, and management of regulatory documentation.

Technology infrastructure remains one of the largest direct expenses. According to the 2024 HIMSS Cybersecurity Survey, healthcare organizations reported average spending on cybersecurity and HIPAA-related technologies at roughly $80,000 per year, with larger hospitals exceeding several hundred thousand dollars annually. Such investments include encryption tools, secure communications platforms, firewalls, antivirus software, endpoint protection, and breach detection systems.

Subscriptions to advanced security solutions, such as managed security services, can further add between $2,000 and $10,000 monthly, depending on service scope and the size of the protected environment. Additionally, periodic security consulting, penetration testing, and vulnerability scanning services, critical for identifying and addressing security gaps, often range from $10,000 to $25,000 per engagement.

In total, recent estimates indicate that mid-sized healthcare entities spend an average of $100,000 to $150,000 annually on direct HIPAA compliance measures alone, a significant increase from previous estimates due to the rapid evolution of cybersecurity threats and corresponding regulatory demands. However, all-in-one HIPAA & cybersecurity platforms such as MediGuard360 Sentinel can significantly lower annual costs while increasing compliance and overall security.

Indirect Costs of HIPAA Compliance

As if trying to figure out the direct costs weren’t maddening enough, the indirect costs of HIPAA compliance are even more challenging to quantify.  These costs include the time and effort to implement and maintain compliance programs, productivity time that is shifted from day-to-day tasks to HIPAA awareness training, etc.

The Cost of Non-Compliance & Data Breaches

While the costs associated with HIPAA compliance may seem difficult to accept, the cost of non-compliance is staggering by comparison.  Like the costs of compliance, non-compliance has both direct and indirect costs.

Direct Costs of Non-Compliance

Perhaps the most significant direct cost of non-compliance is the heavy fines levied by the HHS Office for Civil Rights (OCR), the enforcement arm of HHS responsible for HIPAA.  Organizations found to be violating HIPAA can expect to face fines of up to $50,000 per violation, with a maximum of $1.9 million per year in 2025.  Additionally, they may be subject to criminal penalties ranging from up to one year imprisonment to a fine of up to $50,000 per violation, with a maximum penalty of $250,000 per year.

It’s not just OCR that can issue fines against an organization for noncompliance.  State attorneys general can fine organizations under state health privacy and other laws.  The potential penalties vary from state to state, but you can expect them to be in the tens of thousands of dollars at a minimum.

Additional direct costs include:

• Attorney’s fees
• Free credit & identity theft monitoring for individuals affected by the data breach
• Consultant fees for incident response, data recovery, forensic investigation, etc.
• New technologies required to meet compliance requirements

Indirect Costs of Non-Compliance

The indirect costs of being non-compliant and suffering a data breach are perhaps the most insidious of the costs discussed here.  Damage to reputation and patient loss due to a breach can (and has) completely shuttered medical providers’ practices.  There’s also the possibility of legal action (or even a class action lawsuit) from patients who have experienced harm due to a data breach.  It can take years for organizations to recover from the lingering effects of a data breach.

Pick Your Cost

When it comes to HIPAA compliance, you ultimately must decide to what extent you’re willing to invest in securing your organization and your patients’ data.  Compliance with the regulations will help protect PHI and ensure you remain in good standing with the HHS.  Non-compliance can result in hefty fines, not to mention reputation damage and lost business if a breach occurs.

At the end of the day, it’s crucial to weigh all of the costs against one another before deciding on implementing systems and solutions to be HIPAA compliant.  It’s possible to reduce the cost by investing in the right technology solutions and implementing appropriate policies and procedures.  However, no matter what, you must ensure you comply with HIPAA regulations or face the consequences.

HIPAA compliance is a daunting task and not one to be taken lightly.  At Axeleos, we are intimately familiar with guiding an organization through the complexities of implementing the right tools for compliance.  Our flagship HIPAA security service, MediGuard, is designed for covered entities & business associates of all sizes.  And the best part is that our enterprise-grade service comes at a fraction of the cost of our competitors.  Contact us today for a free initial consultation!