A healthcare company is evaluating an AI vendor's product for processing patient records. The vendor's product is built on a closed-source foundation model API. What is the primary data privacy consideration?
Patient data will be transmitted to the foundation model provider's servers
Closed-source models automatically comply with HIPAA
The application layer encrypts data before it leaves the company
The foundation model will permanently memorize patient data
Explanation
When using a product built on a closed-source API, data typically travels to the model provider's infrastructure. Healthcare organizations must verify that their vendor's API usage is covered under appropriate Business Associate Agreements (BAAs) with the underlying model provider.