SOC Healthcare Guide
SOC 2 Type 1 vs Type 2 — What Hospitals and Clinics Need to Know
System and Organization Controls (SOC) certifications are voluntary sets of standards and auditing frameworks used to evaluate how well organizations handle sensitive information. (SOC) reports help hospitals and clinics understand whether their technology partners have the right systems and processes in place to store, process, and transmit personally identifiable information (PII) and/or Protected Health Information (PHI).
The two types of SOC in healthcare, SOC 1 and SOC 2, come from the American Institute of Certified Public Accountants (AICPA) and The Chartered Institute of Management Accountants (CIMA), or AICPA & CIMA.
This SOC healthcare guide explains the difference between SOC 1 and SOC 2 and Type 1 and Type 2, and why SOC 2 Type 2 is the preferred standard for organizations in the healthcare industry.
Types of SOC Healthcare Certification
There are two types of SOC healthcare frameworks: SOC 1 and SOC 2.
- SOC 1 is about internal controls over financial reporting (ICFR). It’s relevant if services affect the accuracy and dependability of clients’ financial statements. It’s also used in patient billing, revenue cycle management, and claims processing in healthcare.
- SOC 2 focuses on availability, privacy, and security controls that protect sensitive patient data. It’s important for organizations, like hospitals and clinics, that handle sensitive information.
SOC 2 compliance isn’t a regulatory requirement for healthcare organizations, but it is increasingly important to organizations due to increased cybersecurity risks.
You might hear of SOC 2 + HIPAA (Health Insurance Portability and Accountability Act). It isn’t a single certification, but an optional combination of SOC 2 with HIPAA compliance mapping. In the case of SOC 2 + HIPAA, you can choose to use your SOC 2 controls for HIPAA compliance, but you still need a separate HIPAA assessment.
Healthcare providers, such as hospitals and clinics, are considered “covered entities” under HIPAA and are responsible for safeguarding patient data. “Business associates,” including technology vendors and service providers, also play a key role in protecting PHI and may be subject to SOC audits to ensure contractual and regulatory compliance.
If your hospital does claims processing, you may want SOC 1 Types 1 and or 2 as well as SOC 2. SOC 1 is commonly used by service organizations, such as cloud service providers, SaaS companies, data centers, etc. Hospitals and healthcare providers want their vendors to have SOC 2, especially if they outsource revenue cycle management or use an electronic health record (EHR) system.
Choosing an SOC 2-certified EHR system vendor ensures your facility meets rigorous data protection standards. It also builds trust with patients and partners.
SOC 1 and SOC 2 Type 1 vs Type 2 Reports
For SOC 1 and SOC 2 audits, there are two types of available reports: Type 1 and Type 2. So:
- SOC1 Type 1
- SOC 1 Type 2
- SOC 2 Type 1
- SOC 2 Type 2
After an audit is complete, an auditor will give an SOC 1 or SOC 2 Type 1 or 2 report that outlines:
- The system or process audited
- The controls tested
- Results, such as pass, fail, or exceptions
- Their opinion on the effectiveness of the controls tested (Note: the auditor may issue a qualified opinion if there are reservations, limitations, or issues identified during the audit process)
The key distinction between type 1 and type 2 reports is what’s assessed and the timeframe the assessment applies to. Both types of reports are valid for 12 months.
SOC 1 Type 1 and SOC 2 Type 1
SOC Type 1 certification is good if you’ve just established your control systems. It assesses controls at a set point in time.
SOC 1 Type 2 and SOC 2 Type 2
SOC Type 2 measures performance over time. It provides a higher level of assurance. That added assurance makes it the preferred certification for organizations that want to build long-term trust and accountability.
SOC 2 Type 1 vs Type 2
SOC 2 Type 1 | SOC 2 Type 2 | |
Evaluation | The design of controls at a specific point in time | The design and operating effectiveness of controls over a period of time (usually 6–12 months) |
Focus | If controls are properly designed and set up | Real-time testing to ensure controls function as intended over a period of time |
Question Answered | Do you have systems in place for security and compliance? | Do your systems work consistently and effectively in practice? |
Assurance | Design level only | Design and performance |
The Best SOC Healthcare Certification
SOC 2 Type 2 is the gold standard for healthcare organizations. It demonstrates trust, security, and regulatory compliance with HIPAA over time. It proves that your organization’s security measures and privacy controls are properly designed and consistently operating, and that they align with HIPAA requirements.
Make sure your EHR vendor has SOC 2 Type 2 certification.
SOC 2 Audits and Trust Services Criteria (TSC)
An SOC audit is an independent process done by a certified public accounting (CPA) firm. Organizations can have an audit done every 6 or 12 months. The CPA firm evaluates how well internal controls protect data and manage risk against the five Trust Services Criteria (TSC) for SOC 2. The SOC 2 TSC are set by the AICPA & CIMA.
The SOC 2 framework is organized into distinct control components. Each component supports specific TSC and encompasses multiple control activities to meet compliance and security objectives. They detail the standards for security, reliability, and privacy that a company must meet to be certified.
The security TSC is required for all companies. The other 4 criteria are used depending on business needs.
- Security is a required criteria that assesses the risk of unauthorized physical and digital access. It audits firewalls, intrusion detection, encryption, etc. It ensures protection of data stored on systems and devices to prevent unauthorized access and disclosure.
- Availability assesses if the system is available and operating per agreed criteria. It audits redundancy, disaster recovery, uptime, and capacity planning. It covers data backups, which are critical for disaster recovery and business continuity to ensure healthcare data stays accessible and protected.
- Processing integrity assesses if system processing is complete, accurate, timely, and valid. It covers data validation, error handling, and transaction monitoring. Also focuses on making sure that data processing is complete, valid, accurate, timely, and authorized. For healthcare providers, this means that electronic health records, lab results, and billing information are always up-to-date, and error-free.
- Confidentially assesses if confidential information is protected per the organization’s standards. It covers encryption, data masking, and access to sensitive information.
- Privacy assesses if personal information is collected, used, stored, and shared per the organization’s privacy policy. It covers consent management, data rights, and data disposal. It covers breach notification procedures as a part of privacy management and compliance with HIPAA Privacy Rule standards.
The TSC are the end goal while the controls are how you or your vendor achieves those goals. For example if the goal is to restrict access to data to only the right people, the control might be the multifactor authentication or permission controls used to do that along with regular internal audits of who has access and a process for turning off access when needed.
Why You May Want SOC-2 Certification and Should Use an SOC 2-Certified EHR
SOC 2 certification isn’t legally required, but it’s important in today’s healthcare and cybersecurity environment. If your hospital is considering becoming SOC 2-certified, selecting an EHR platform, like Azalea Health, that already has SOC 2 certification is ideal.
Even if your organization isn’t SOC certified or considering certification, your technology vendors should be certified. Technology vendors are often considered business associates under HIPAA. Choosing an SOC 2-certified EHR helps you reduce third-party risk, supports compliance efforts, safeguard PHI, supporting contractual and regulatory compliance, and build trust with patients, partners, and payers.
Here’s what SOC 2 certification and an SOC 2 certified EHR offers:
Enhanced data security and privacy: SOC 2-certified EHR platforms meet stringent security requirements. They help you keep sensitive patient data safe from breaches and unauthorized access. Hospitals that handle larger volumes of PHI and their patients need assurance and protection to avoid breaches.
An EHR with SOC Type 1 confirms the system is securely designed. An EHR with SOC Type 2 validates that the design works effectively over time.
Streamlined regulatory compliance: Using a SOC 2-certified EHR helps your facility meet regulatory requirements, like HIPAA, by ensuring that strong data protection safeguards are in place. Certification also simplifies audits and reduces the risk of costly noncompliance penalties.
Increased trust with patients and partners: Having SOC 2 certification — and/or using an SOC 2-certified EHR — shows patients and business partners that your facility prioritizes security and operational integrity. This builds confidence in your ability to protect sensitive data and strengthens relationships with patients, providers, and payers.
When you choose an SOC 2 certified EHR vendor, the vendor gives you either a copy of their own audit report or a summary of the report known as a bridge letter or attestation letter that confirms their certification. These reports aren’t publicly available.
How to Get SOC Healthcare Certified — The Basics
SOC certification is a multistep process. As you start the process, think long-term. You can start with SOC 2 Type 1 or Type 2. Most organizations start with Type 1 in order to get controls in place and validated.
Starting with Type 1 is faster and easier. It can also help you find gaps in your controls before you undertake the longer Type 2 audit. If you’re confident in your controls, though, there’s no reason you can’t start with SOC Type 2.
Wherever you start, here’s an overview of the steps to follow when pursuing SOC certification.
1. Select Trust Service Criteria for Your Certification
Decide which trust service criteria apply to your organization. All five criteria — security, availability, processing integrity, confidentiality, and privacy — are key priorities for most healthcare providers.
As part of choosing your criteria:
- Conduct a risk assessment and gap analysis to identify information security risks and evaluate current controls, policies, and procedures.
- Identify which points of focus apply to your organization and ensure the relevant control components are addressed
2. Define Your Controls
Develop clear internal controls to manage and maintain your selected trust principles. Controls might include staff training, data encryption protocols, and vendor oversight processes. If you’re using a cloud-based EHR or external billing service, make sure their controls align with what you would choose internally.
3. Assess Your Security Processes
Evaluate the current state of your processes or your vendors’ processes. Are there gaps in compliance or areas that need improvement? This step is vital for building a system that stands up to an auditor’s scrutiny.
4. Bring In External Auditors
Hire a licensed CPA firm or another qualified auditor authorized by AICPA & CIMA to do your audit. They’ll assess and test your controls and issue a type 1 or type 2 report once the audit is done.
5. Review and Optimize Regularly
SOC certification isn’t a one-time process. It’s an ongoing effort. Regular internal audits and process optimization ensure your organization— and your technology vendors — stay compliant over time. If you’re using an external EHR or billing service, find out what their process for reviews and optimization are.
Choose Azalea Health as Your SOC 2 Certified EHR
Azalea Health is committed to being the simplified EHR that rural hospitals, rural health clinics, and specialty clinics love. Azalea Health’s SOC 2 Type 1 certification and SOC 2 Type 2 certification is part of that commitment. It shows a deep, ongoing commitment to your organization’s data security, compliance, and reliability.
By choosing Azalea, hospitals and clinics the cloud-based, maintenance free access to:
- Trusted data protection — Patient information is safeguarded by rigorously tested controls that meet the highest standards.
- Effortless compliance — SOC 2 Type 2 aligns with HIPAA and other healthcare regulations for reduced administrative complexity.
- Reliability and transparency — Continuous auditing ensures secure, consistent EHR performance every day. Azalea chooses to do audits every 6 months.
- A proven and trusted partner — Azalea’s certification lets you gain increased confidence from your patients, providers, and partners.
In short, Azalea Health’s SOC 2 Type 2‑certified EHR offers hospitals a secure, compliant, and dependable foundation that empowers them to deliver exceptional patient care.
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