I don't see how it's any different than using any hosting provider. It's probably worth encrypting your databases, but if you don't trust your hosting provider you're hosed -- managed service or not.
If your paranoia is justified (which it may be, depending on your needs), you need to host the machines in your own datacenter
If your paranoia is justified (which it may be, depending on your needs), you need to host the machines in your own datacenter