Distributed database technology based systems can integrate healthcare information located in multiple sites and formats while allowing users to access heterogeneous databases to carry out distributed queries and user defined data processing. Development and evaluation of strategies for designing the architecture of such systems poses many challenges especially in the absence of approved standards. Here, we have reviewed the possible architectures of various types of distributed databases, discussed the issues and challenges faced during their development, with special reference to the healthcare organizations. Our analysis of the distributed database design issues shows that standards are needed for resolving problems with query processing, concurrency control, transaction processing, reliability, consistency, data security, data integrity, currency, data organization, and queuing. Issues with system design, directory management and scalability need guidelines and cannot be resolved by standards.