Safe and agile experimentation spaces are essential for developing AI-enabled medical devices and digital health innovations. "Living Labs" offer a collaborative environment for testing technologies in near-real-world settings, capturing user perspectives and outcomes, often missed in traditional testing. However, the flexibility of Living Labs often clashes with the European Union's rigid regulatory frameworks for medical devices that were not designed for digital technologies. We examine this intersection, showing how flexibility in evaluation and patient interaction can coexist with safety guardrails. Our approach integrates technology readiness, preemptive planning, and iterative modifications to bridge innovation and regulation, fostering adaptive health care technology development.