BAA vs NDA: Understanding the Key Differences and When to Use Each Agreement
- Last Updated: Oct 28, 2025
- 15 min read
- Arpita Chakravorty
Imagine you’re working with a new business partner who will handle sensitive information essential to your company’s operations. You want to ensure that this information remains confidential, but you’re unsure whether to use a Business Associate Agreement (BAA) or a Non-Disclosure Agreement (NDA). Both agreements involve confidentiality but serve different purposes and apply in different legal contexts. Which one fits your needs?
This confusion is common across industries, not just in healthcare. Understanding the differences between BAAs and NDAs arms you with the clarity to protect your business relationships properly and comply with regulatory requirements where applicable. Let’s explore what these agreements are, how they differ, and when to use each one.
What Is a Business Associate Agreement (BAA)?
A Business Associate Agreement, or BAA, is a specific type of contract mandated by HIPAA in the United States. It governs the relationship between covered entities and their business associates who perform services involving protected health information (PHI).
In simple terms:
- A BAA legally binds the business associate to protect PHI in accordance with HIPAA requirements.
- It defines how PHI can be used, stored, and shared.
- It includes obligations like breach notification, security safeguards, and subcontractor compliance.
- Without a BAA, a business associate engagement involving PHI is non-compliant and may incur penalties.
BAAs are required when a vendor or partner “creates, receives, maintains, or transmits” PHI on behalf of a covered entity. Examples include cloud storage providers, billing companies, or consultants managing patient systems.
What Is a Non-Disclosure Agreement (NDA)?
A Non-Disclosure Agreement (NDA), sometimes called a confidentiality agreement, is a general contract used to protect confidential information shared between parties.
Key characteristics of an NDA include:
- It defines what information is confidential and sets terms for use and disclosure.
- It protects business secrets, proprietary information, and intellectual property.
- NDAs are not industry-specific and do not impose regulatory requirements like HIPAA.
- NDAs are used in vendor contracts, partnerships, contractor engagements, and joint ventures.
NDAs create a legal obligation against unauthorized disclosure but typically do not include regulatory controls related to PHI.
For a quick comparison you can apply immediately, explore our guide on NDA vs Confidentiality Agreement to understand when each is appropriate and how to use them effectively.
How Do BAAs and NDAs Differ?
BAAs and NDAs share the common purpose of protecting sensitive information but differ in their regulatory basis, scope, and legal obligations.
| Aspect | Business Associate Agreement (BAA) | Non-Disclosure Agreement (NDA) |
| Legal Basis | HIPAA mandate for PHI protection | General contract law |
| Purpose | Protecting PHI specifically in healthcare | Protecting confidential information broadly |
| Applicable Data | Only Protected Health Information (PHI) | Any confidential or proprietary information |
| Mandatory Use | Required by law whenever PHI is shared with a business associate | Optional, depending on business needs |
| Security Obligations | Includes detailed HIPAA security and breach notification rules | Usually limited to confidentiality terms; no mandated security standards |
| Subcontractor Flow-Downs | Requires business associates to ensure subcontractors comply | May include similar clauses but not explicit regulatory flow-downs |
| Scope of Enforcement | Subject to HIPAA penalties and enforcement | Enforceable by damages or injunction through civil lawsuits |
Understanding this comparison helps clarify why BAAs are not interchangeable with NDAs, especially in any context involving PHI.
When Should You Use a BAA vs. an NDA?
Deciding which agreement to use depends on the type of data involved and the regulatory environment of your industry.
Use a BAA when:
- You are a covered entity under HIPAA engaging a vendor or partner who will have access to or handle PHI.
- Your business associate will create, receive, maintain, or transmit PHI on your behalf.
- You need to comply with HIPAA regulations regarding data privacy and security.
- You want the legal assurances of HIPAA-aligned breach notification and safeguards.
Use an NDA when:
- You need to protect confidential business information that is not PHI, such as trade secrets, strategic plans, or proprietary software.
- Your engagement does not involve HIPAA-covered data or you are not subject to HIPAA compliance.
- You want a flexible confidentiality contract for partnerships, hiring, or vendor relationships outside healthcare or PHI contexts.
Some organizations require both agreements simultaneously, especially when vendors handle a combination of PHI and sensitive non-PHI information.
Real-World Examples Across Industries
- Healthcare Example: A hospital contracts a cloud service provider to store electronic health records. A BAA ensures HIPAA-compliant PHI protection, and an NDA may govern additional confidential business data.
- Technology Example: A software company shares source code and product roadmaps with a partner. An NDA protects trade secrets since no PHI is involved, so no BAA is required.
- Finance Example: A fintech firm working with a healthcare provider to process insurance claims accesses PHI and financial data. A BAA ensures HIPAA compliance, while an NDA protects broader commercial information.
These examples show that understanding the data and regulatory context is key to selecting the right agreement.
For a quick side-by-side reference you can use during vendor or partnership evaluations, see our guide on CDA vs NDA to understand how confidentiality terms shift when research, IP, or proprietary data are involved.
Common Misconceptions About BAAs and NDAs
- Misconception: All vendors touching data need a BAA.
Reality: Only vendors handling PHI on behalf of covered entities require BAAs under HIPAA. Others may simply need NDAs.
- Misconception: BAAs are just specialized NDAs.
Reality: BAAs have legally mandated provisions and regulatory enforcement that go beyond general confidentiality terms.
- Misconception: BAAs apply only to healthcare providers.
Reality: Any entity classified as a covered entity or business associate under HIPAA must comply, which can include contractors, billing services, legal counsel, and cloud providers.
How Do BAAs Interact with Other Data Agreements?
BAAs often coexist with NDAs and Data Use Agreements (DUAs) as part of a broader framework to govern data sharing and confidentiality. For example, in complex vendor ecosystems with subcontractors handling PHI, BAAs with flow-down obligations ensure everyone complies with HIPAA rules. Meanwhile, NDAs protect proprietary business information not covered by HIPAA.
Proper integrations between these agreements reduce contractual gaps and enhance governance over data protection responsibilities.
What Should You Include in a BAA?
A typical BAA includes:
- Definition of PHI covered
- Permitted uses and disclosures of PHI
- Obligations to safeguard PHI with appropriate administrative, physical, and technical controls
- Reporting breaches within specified timelines
- Requirements for subcontractors to sign flow-down BAAs
- Termination clauses and return or destruction of PHI
NDAs, by contrast, focus on:
- Definition of confidential information
- Obligations to maintain secrecy and limit use
- Exclusions such as publicly available information
- Term of confidentiality duty
- Remedies for unauthorized disclosures
Next Steps: How to Implement Effective Contract Governance
- Identify Data Types: Map the kinds of sensitive data exchanged with vendors or partners.
- Assess Regulatory Context: Determine if HIPAA applies or if general confidentiality protections suffice.
- Use the Right Agreements: Execute BAAs for PHI-related relationships and NDAs for other confidential information.
- Leverage Templates: Start with customizable BAA and NDA templates to ensure your contracts cover essential provisions.
- Integrate Contract Management: Implement workflows to track, audit, and update agreements regularly for compliance.
For a deeper exploration of BAAs and sample templates, read Sirion’s detailed Business Associate Agreement (BAA) resource and comprehensive guides on Non-Disclosure Agreements (NDAs).
Conclusion: Choosing the Right Agreement for Compliance and Confidence
Selecting between a Business Associate Agreement (BAA) and a Non-Disclosure Agreement (NDA) isn’t just a legal formality — it’s about protecting data, ensuring compliance, and building trust with your partners.
A BAA is non-negotiable wherever protected health information (PHI) is involved, enforcing HIPAA-mandated safeguards and breach protocols. An NDA, on the other hand, offers broader confidentiality protection across industries and use cases — from technology partnerships to vendor contracts.
For streamlined governance and easier oversight of BAAs, NDAs, and related agreements, explore how CLM Software centralizes versioning, obligations, and renewals across your contract portfolio.
Organizations often need both, using BAAs to satisfy regulatory requirements and NDAs to secure proprietary information. What matters most is clarity — defining what data is protected, under which framework, and how responsibilities flow down to subcontractors or vendors.
With AI-native contract lifecycle management platforms like Sirion, businesses can automate BAA and NDA tracking, manage renewals, and monitor compliance obligations in real time. This not only strengthens governance but also reduces manual oversight, helping enterprises stay compliant while maintaining operational speed.
Frequently Asked Questions (FAQs)
Can an NDA replace a BAA if PHI is involved?
No. NDAs are insufficient for HIPAA compliance and lack the required provisions for PHI protection. A BAA is legally mandated for PHI-sharing relationships.
Are BAAs only relevant in the United States?
BAAs are specific to HIPAA, which is U.S. legislation. However, similar principles of data protection contracts apply globally under regulations like GDPR, though contract names and requirements differ.
Should subcontractors also sign BAAs?
Yes. BAAs require business associates to obtain flow-down BAAs with any subcontractors handling PHI to maintain compliance throughout the data chain.
What happens if a business associate violates a BAA?
Can BAAs be used in industries outside healthcare?
While BAAs are HIPAA-specific, organizations outside healthcare that handle PHI-like sensitive data may adopt similar contractual frameworks modeled on BAAs to ensure data protection.
How long should confidentiality obligations last in an NDA?
The duration varies but typically lasts between two to five years after the agreement ends, depending on business sensitivity.
Are there standard templates I can use for BAAs and NDAs?
Yes. Many organizations provide free or paid templates. It’s important to customize them based on your specific data types, regulatory obligations, and relationship.
