“Data residency refers to the physical or geographic location of an organization's data or information. Similar to data sovereignty, data residency also relates to the data laws or regulatory requirements imposed on data based on the data laws that govern a country or region in which it resides,” explains TechTarget.
On the other hand, the Center for Financial Inclusion explains, “Data localization refers to a requirement that any entity that processes the data of a given country’s citizens must store that data on servers within that country’s borders.”
The distinction is important because data residency is often preference-driven, while data localization is legally mandated. In healthcare, both concepts intersect with privacy regulations like HIPAA.
The global landscape of healthcare data requirements
United States: HIPAA
The Health Insurance Portability and Accountability Act (HIPAA) doesn't explicitly mandate data localization within U.S. borders. Instead, it focuses on safeguarding protected health information (PHI) through administrative, physical, and technical safeguards regardless of where data resides.
However, HIPAA does require covered entities and business associates to maintain oversight of PHI, including:
- Ensuring appropriate security measures are in place
- Implementing audit controls and access management
- Maintaining detailed business associate agreements when PHI crosses organizational boundaries
While HIPAA permits cross-border data transfers, healthcare organizations must make sure that equivalent protections follow the data wherever it travels. HIPAA compliant email solutions address these requirements by providing end-to-end encryption, access controls, and comprehensive audit logging that maintain protections regardless of message routing or storage location. These systems can be configured to store message data in specific geographic regions while still enabling global communication capabilities.
Read also: Can PHI be transferred outside of the United States?
European Union: GDPR
The General Data Protection Regulation (GDPR) takes a different approach, imposing strict requirements on data transfers outside the European Economic Area (EEA). Healthcare organizations handling EU patient data must establish legitimate transfer mechanisms such as:
- Standard Contractual Clauses (SCCs)
- Binding Corporate Rules
- Adequacy decisions for certain countries
- Explicit consent in specific circumstances
The Schrems II decision in 2020 further complicated these requirements, invalidating the EU-US Privacy Shield and requiring case-by-case risk assessments for transfers to countries without adequate protection levels.
Emerging markets: India's approach
India's new Digital Personal Data Protection Bill contains provisions specifically addressing healthcare data as "sensitive personal data," requiring mirroring (maintaining a copy within India) and potentially limiting cross-border transfers of critical healthcare information.
How data residency intersects with HIPAA
Though HIPAA doesn't explicitly address data residency, its requirements create a framework that shapes data residency decisions for U.S. healthcare organizations.
Risk analysis requirements
HIPAA's Security Rule requires covered entities to conduct thorough risk analyses. When patient data resides in different geographic locations, these assessments must evaluate location-specific risks, including:
- Physical security of data centers
- Local political stability
- Natural disaster probabilities
- Jurisdiction-specific legal risks
- Accessibility for appropriate business purposes
Business associate agreements
When PHI flows to third-party service providers like cloud vendors, HIPAA mandates business associate agreements (BAAs). These agreements must account for data residency considerations:
- Specifying permitted data locations
- Establishing notification procedures for data movement
- Ensuring subcontractors maintain equivalent protections
- Addressing jurisdictional challenges in enforcement
Audit and oversight challenges
Healthcare organizations must maintain audit capabilities and oversight regardless of where data resides. This becomes increasingly challenging when data crosses borders, potentially requiring:
- 24/7 monitoring across time zones
- Understanding of local regulatory environments
- Translation of audit logs and security information
- Coordination with local data protection authorities
Concerns about data localization
According to the OECD's Data Localization Trends and Challenges report, several concerns have been raised about data localization practices. While these requirements continue to gain traction globally, healthcare organizations should be aware of these potential drawbacks:
- Economic burden: Data localization imposes costs on organizations through local employment requirements, infrastructure investments, and operational inefficiencies. These expenses are typically passed on to consumers through higher service costs or reduced offerings.
- Efficiency losses: Organizations face disruptions to global consolidation plans and skill dilution when unable to leverage the most skilled staff regardless of location. For healthcare providers, this can mean compromised service quality and operational bottlenecks.
- Compliance complexity: The unpredictability in scope and application of data localization requirements creates legal uncertainty and increases compliance costs. Healthcare organizations already navigating regulatory frameworks like HIPAA face additional administrative burdens.
- Market concentration risk: High compliance costs favor dominant companies that can afford to meet multiple localization requirements. This may stifle innovation and limit competition, particularly affecting smaller healthcare providers and startups delivering novel patient care solutions.
- Privacy paradox: Despite being justified as privacy enhancements, localization requirements may actually undermine data privacy "by creating greater government access to user data, minimizing the efficacy of corporate privacy and security controls, and expanding the corporate network".
- Security vulnerabilities: Centralized data storage mandated by localization laws can "increase privacy risks by requiring data to be stored in single centralized locations that are more vulnerable to intrusion" and create "issues for the resilience and security of data by making it susceptible to a single point of failure".
- Digital protectionism: Mandatory data localization can function as a form of data protectionism that impedes cross-border trade, potentially inviting reciprocal protectionist measures from other jurisdictions and "ultimately create smaller, less robust markets across the globe".
- Internet fragmentation: Data localization drives the "balkanization" of the internet, creating what some call a "splinternet" where the fundamental architecture of the global internet is altered. For healthcare organizations relying on seamless global data exchange, this fragmentation complicates interoperability.
- Technical incompatibility: Modern data storage technologies like "sharding" (distributing database rows across global servers for enhanced privacy) become impossible under strict localization requirements, forcing organizations to choose between privacy-enhancing technologies and regulatory compliance.
- Cloud computing challenges: Multiple physical locations are typically involved in cloud services, including processing operations, backups, performance optimization, and metadata management. Localization requirements fundamentally clash with these distributed architectures that many healthcare systems rely upon.
- Emerging technology barriers: Decentralized technologies like blockchain inherently conflict with localization principles. Additionally, the projected shift toward edge computing (where data is processed closer to where it's generated) may make localization increasingly impractical.
- Jurisdictional conflicts: The uncoordinated international approach to data localization creates impossible compliance scenarios where meeting one country's requirements may violate another's law. This is particularly challenging for healthcare organizations operating across multiple jurisdictions.
- Scalability problems: If all countries implement localization requirements, most organizations will find universal compliance prohibitively expensive. This creates digital divides where businesses prioritize wealthier markets, potentially limiting healthcare technology adoption in developing regions.
- Service disruption risk: Data exclusively stored in a particular country becomes inaccessible worldwide during internet shutdowns in that country.
Technical challenges of healthcare data localization
Cloud infrastructure
Modern healthcare relies on cloud services, which often distribute data across multiple regions. Enforcing strict localization requirements may require:
- Region-specific cloud deployments
- Private cloud implementations with geographic constraints
- Hybrid architectures separating different data types
- Custom configurations limiting data replication
HIPAA compliant email solutions have evolved to address these challenges through configurable deployment models, including:
- Multi-region options with country-specific data storage
- Private cloud deployments that keep all data within an organization's geographic boundaries
- Hybrid models that separate message content from metadata based on sensitivity
- Granular controls allow different policies for different types of communications
Telehealth and cross-border care
Healthcare providers must reconcile:
- Patient location during virtual visits
- Provider location and licensing
- Data transmission paths across regions
- Competing jurisdictional requirements
Secure email communications in telehealth provide a reliable, compliant channel for exchanging patient information before, during, and after virtual visits. HIPAA compliant email systems with configurable data residency help organizations manage the compliance requirements that arise when patients and providers are in different jurisdictions.
The role of HIPAA compliant email in managing data residency
HIPAA compliant email solutions are important systems for healthcare organizations navigating data residency and localization requirements. These communication systems are designed to:
- Enforce geographic controls on where PHI is processed and stored
- Maintain audit trails for data transfers across jurisdictional boundaries
- Implement encryption that protects data regardless of storage location
- Provide configurable settings to accommodate different regional requirements
Related: HIPAA Compliant Email: The Definitive Guide (2025 Update)
Solutions for healthcare data compliance
Paubox offers HIPAA compliant email solutions that address these concerns:
- U.S.-based data storage: All email data is stored exclusively within the United States, ensuring compliance with regional data residency mandates.
- Encryption in transit: Emails are protected with encryption while being sent, keeping protected health information (PHI) secure.
- Mail logs and optional archiving: Paubox provides mail logs to track email activity and offers optional email archiving for long-term storage, though emails are typically stored in customers' email accounts, like Google Workspace.
- Business associate agreements (BAA): Paubox offers BAAs to healthcare organizations, reinforcing its commitment to safeguarding PHI and complying with HIPAA regulations.
FAQs
Why does data residency matter for healthcare organizations?
It affects compliance with privacy laws, security measures, and access controls for patient information.
Does HIPAA require data to stay in the U.S.?
No, HIPAA focuses on protecting data wherever it resides, rather than restricting its location.
How do BAAs address data residency concerns?
They outline security measures, specify data locations, and ensure third parties comply with HIPAA.
Is Paubox suitable for healthcare providers of all sizes?
Yes. Paubox offers scalable solutions tailored to small clinics, large hospitals, and multi-location healthcare organizations.
How does Paubox ensure data protection beyond encryption?
Paubox combines encryption with access controls, threat detection, and continuous monitoring to protect sensitive data throughout its lifecycle.
