Healthtech software companies develop platforms for healthcare data management, clinical workflows, patient engagement, telehealth, and health data exchange. The technical challenges can include developing interoperability with healthcare systems, engineering architecture for performance and security, enabling data exchange across standards, and building complex workflow systems for clinical environments. This page explains what development work may look like in a healthtech software business and how it relates to qualified research under Section 41. It is educational and is not individualized advice. Nothing on this page should be read as a medical claim.
What R&D May Look Like in Healthtech Software
Healthtech software development involves interoperability development, architecture engineering, data exchange development, and workflow system design. Technical development may arise when a company develops new interoperability approaches, engineers architecture for performance, develops data exchange methods, or builds complex workflow systems. Work directed at resolving genuine technical uncertainty in these areas — through a structured evaluative process — may warrant review under the four-part test.
Industry-Specific Examples of Technical Development
- Developing interoperability with healthcare systems where the interoperability performance is uncertain.
- Engineering architecture for performance and security where the architecture performance is uncertain.
- Developing data exchange across standards where the exchange performance is uncertain.
- Building complex workflow systems where the workflow performance is uncertain.
- Developing technical integrations with external systems where the integration performance is uncertain.
None of these constitutes qualified research by itself. Each depends on whether the work satisfies all four elements of the four-part test.
Technical Uncertainty Examples
- Whether a new interoperability approach can achieve the specified data-exchange and reliability targets.
- Whether an alternative architecture can achieve the specified performance and security targets simultaneously.
- Whether a modified workflow system can achieve the specified reliability and usability targets.
For more, see our page on elimination of uncertainty.
Process-of-Experimentation Examples
- Implementing and testing alternative interoperability approaches, measuring data exchange and reliability, and comparing results.
- Building and testing alternative architectures, measuring performance and security, and evaluating results.
- Developing and testing alternative workflow systems, measuring reliability and usability, and comparing results.
For more, see our page on process of experimentation.
Potential Business Components
Potential business components may include a new or improved product (a healthtech platform with improved performance), a new or improved process (an interoperability or data exchange process), or a new or improved technique (a workflow or integration method).
Employee Work That May Warrant Analysis
Employees whose work may warrant analysis include software engineers developing interoperability, architects developing architecture, and quality engineers conducting performance and reliability testing tied to a development project. For more, see our page on R&D tax credit employee wages.
Contractor Work That May Warrant Analysis
Contractor work that may warrant analysis includes integration vendors, security consultants, and testing service providers — where the company bears the economic risk and retains substantial rights. For more, see our page on R&D tax credit contractor costs.
Supplies and Materials That May Become Relevant
Supplies in healthtech software are often limited because the work is primarily computational. Where tangible materials are consumed in specialized testing, they may become relevant. For more, see our page on R&D tax credit supplies.
Activities That Generally Require Caution or May Not Qualify
- Routine maintenance and bug fixes.
- Standard API integration using established methods.
- Ordinary configuration and deployment.
- Copying an existing interoperability approach for a new application.
- Normal quality control and testing following established procedures.
Documentation That May Help
Records that may help include project descriptions, interoperability and architecture test results, workflow evaluations, and records connecting personnel to specific development projects. For more, see our page on R&D tax credit documentation.
Example Hypothetical Project
The following is a hypothetical example for illustration only. It does not represent any actual company and does not state that the work qualifies.
A healthtech software company is developing a data exchange platform for healthcare systems where the standard interoperability approach does not achieve the specified reliability and data-completeness targets. The technical uncertainty is whether an alternative data-exchange architecture, a modified mapping approach, and a new validation method can together achieve the reliability, completeness, and performance targets. The team implements and tests three exchange architectures with two mapping approaches, measures reliability, data completeness, and performance, and evaluates the validation method. Based on the results, the team selects an architecture and mapping approach and refines the validation method. Records of the alternatives, test conditions, and results may help support analysis — but professional review is still needed.
Questions to Ask Internally
- What specific business component was being developed or improved?
- What technical uncertainty existed at the outset?
- What alternatives were evaluated, and how were they tested?
- Who performed or directly supported the work?
- What materials were consumed in the testing?
- How does this differ from routine healthtech development?
Relationship to the Four-Part Test
The four-part test applies the same way it does in any industry. The work must be directed at developing or improving a business component (permitted purpose), must fundamentally rely on principles of the physical sciences or engineering (technological in nature), must be intended to eliminate a technical uncertainty (elimination of uncertainty), and must be conducted through a structured evaluative process (process of experimentation). Meeting one element is not enough.
Key Takeaway
Healthtech software companies may perform activities that warrant analysis under IRC §41 — particularly work involving interoperability, data exchange, and workflow systems. Routine healthtech development does not automatically qualify. Professional review is appropriate. For related industries, see our pages on SaaS companies and cybersecurity companies.