Alphabet Inc. (GOOGL) - Get Report shares slipped lower in pre-market trading Wednesday after the Wall Street Journal reported that federal regulators have started a probe into Google's 'Project Nightingale' cloud computing deal with Ascension Health.
The Journal said officials from the Office for Civil Rights in the Department of Health and Human Service will study the way Google collects data from the arrangement with Ascension, a healthcare provider with around 200 hospital and senior care facilities in the United States. The paper said the probe will focus on whether the partnership, which would given Google access to the personal heath-related information of millions of Ascension patients, complies with data protection safeguards laid out by the Health Insurance Portability and Accountability Act (HIPAA).
"We are happy to cooperate with any questions about the project," Google said in a blog post late Tuesday. "We believe Google's work with Ascension adheres to industry-wide regulations (including HIPAA) regarding patient data, and comes with strict guidance on data privacy, security, and usage."
Google shares were marked 0.32% higher in pre-market trading Wednesday to indicate an opening bell price of $1,293.00 each, a slip that would trim the stock's year-to-date gain to around 24%.
Google said yesterday that's its arrangement with Ascension would forbid it from using data for "any other purpose" outside its cloud deal, and insisted that the heathcare group's patient data "cannot and will not be combined with any Google consumer data", but the deal nonetheless raised significant questions of probity and security in light of a string of data and confidentiality breaches that have plagued the tech sector for much of the past two years.
However, an anonymous whistleblower posted a video on the Daily Motion website Tuesday that alluded to an alleged trove of documents that the person said contained hundreds of files related to the Nightingale project that indicate as many as 10 million files may have already been moved into Google's control.
"Did anyone at Google not figure out how nefarious this whole thing sounds?," TheStreet's founder, Jim Cramer, asked yesterday in his daily Real Money column. "Did Google not realize that its every move will be scrutinized and nothing as sensitive as public records would ever be the purview of a company that are under investigation all over the place for monopolistic practices?"
Google's drive into the healthcare space was also highlighted in part by its $2.1 billion purchase of Fitbit earlier this month, although the two companies were keen to note the fact that Fitbit's heath and wellness data would not be used for Google ads, and that users can review, edit or delete their personal data.
Still, Fitbit Heath Solutions is likely to earn $100 million in revenues this year, and powering it, as well as the group's wearable hardware, with Google's Pixel smartphones could provide a significant challenge to the fitness tracking and wellness data market currently being developed by Apple Inc. (AAPL) - Get Report .
"Wearables add functionality to the smartphone that can reinforce the core ecosystem, and Android was falling behind," said KeyBanc Capital Markets analyst Andy Hargreaves. "Apple
Watch, which initially struggled to find its place, is now driving excellent demand based largely on its health and wellness functionality."