Not that virtual machines are compatible with HIPAA; rather, a BAA may be offered for virtual machine applications. The application itself must still pass any compliance.
If you look at the Azure Trust Center , you will see detailed information about the HIPAA BAA, as well as a link to the Azure HIPAA Implementation Guide .
I am not a lawyer and cannot advise you on the subtle details of HIPAA and your application. However, I read the compliance guide , and it only calls Windows Azure SQL as if not in scope . For virtual machines, the responsibility lies with you to deal with certain things. From the doc:
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