Financial risks are clear problems when healthcare organizations do not manage their third-party vendors well. If a healthcare group does not check, watch, and control risks from vendors, it can lose a lot of money.
Data breaches caused by third-party vendors happen often and cost a lot. Studies show that these breaches add more than $370,000 to the usual cost of a data breach, which is about $3.92 million on average. Fixing these problems and handling legal rules can be very expensive.
In the U.S., laws like HIPAA can fine organizations heavily if they do not keep patient data safe. Fines grow bigger if vendors mess up handling sensitive information. Besides fines, organizations spend money on lawsuits, notifying patients, fixing problems, and settlements.
An example is the OneTouchPoint breach. This vendor handled mailing and printing for over 30 healthcare groups and insurers. The breach exposed data of about 2.6 million patients. This shows how vendor weaknesses can cause financial problems for many healthcare providers at once.
Problems with vendors can stop healthcare work and hurt patient care. If a vendor that provides electronic health record (EHR) software has outages or fails suddenly, doctors and clinics can have delays in care, billing, and scheduling. This lowers productivity and revenue because of canceled or late services, and it can upset patients.
If a vendor has no good plan to keep working during problems, the healthcare group risks downtime. Vendor weaknesses in money or planning can affect patient care and operations seriously.
Money risks also come as hidden costs. After a vendor data breach or failure, healthcare groups often face higher insurance costs. Insurers see these problems as signs of more risk, so they charge more.
Damage to reputation can cause the loss of partners and patients, lowering market share and income. Fixing reputation harm often requires spending on public relations, marketing, or sometimes changing a company’s image. These costs put pressure on budgets.
Reputation is very important in healthcare. Patients trust their providers to keep information private, give good care, and act honestly. Since third-party vendors handle much of the data and services needed, their work affects the healthcare organization’s reputation.
If a vendor managing patient data has a breach or breaks rules like HIPAA or GDPR, the healthcare provider’s reputation suffers. Bad news about exposed data or fines can make patients lose trust. Many patients may go to other providers. The loss is hard to measure but lasts a long time.
Reputation damage relates closely to operational or cybersecurity problems. Vendor failures, like outages or breaches, attract public attention and media coverage. This lowers how people see the organization’s reliability and care for patient safety and privacy.
One problem for reputation is that vendors have their own subcontractors, called fourth-party vendors. Healthcare organizations have little control or knowledge about these subcontractors. This makes risk bigger because problems can start deeper in the supply chain and still affect the healthcare group.
To reduce these risks, healthcare managers must keep watching vendors and their subcontractors. They should make clear rules in contracts to hold everyone responsible.
Stopping reputation risks means many people in the healthcare group must work together. Leaders, legal, compliance, purchasing, and IT teams all play a role. Boards and executives should know about vendor risks as part of the group’s overall risks and watch carefully.
Contracts are important tools here. They should include rules on how vendors must tell about breaches, allow audits, fix problems, follow environmental and social rules, and control subcontractors. Strong contracts help protect the healthcare group and make vendors responsible if things go wrong.
Patient health data is often a target for hackers. Healthcare groups keep valuable information and use many third-party vendors who have access to it.
Studies show that 55% of healthcare organizations had a data breach from a third-party vendor in the last year. In 2022, seven of the top ten biggest healthcare data breaches were caused by third-party vendors. This shows how important vendor security is for healthcare cybersecurity.
Hackers now target key vendors like managed service providers (MSPs) to get into many healthcare clients at the same time, causing more damage.
The next challenge is fourth-party vendors, who are subcontractors working for the third-party vendors. These indirect vendors may cause risks that are hard to find and fix. Healthcare organizations often do not know enough about these chains, making it harder to stop security problems.
Federal laws like HIPAA require healthcare groups to make sure vendors protect patient data well. The American Hospital Association advises including strong cybersecurity and insurance rules in agreements with vendors, based on the risk they bring.
Healthcare organizations should regularly review policies, check for weaknesses, and use safeguards like multi-factor authentication for vendor accounts. Staff training on cybersecurity and clear communication about vendor risks are also needed.
Healthcare groups must prepare plans for cyber incidents involving vendors. These plans should include how to respond to incidents and keep services running during downtime.
Training staff with practice drills and including vendors in these tests helps reduce problems, coordinate responses, and recover faster.
Artificial intelligence (AI) and automation can help manage third-party risks in healthcare. These tools make risk management easier and better, especially as vendor numbers grow.
Old methods like questionnaires and occasional checks are often not enough. AI platforms can automate these tasks and monitor vendors’ security all the time in real-time.
For example, some platforms use machine learning to check vendor answers, find problems, and give risk scores. This helps healthcare groups find risks early and act fast.
AI tools also gather data from many sources like public records, cybersecurity reports, and vendor communications. This gives a fuller picture of vendor risks than manual checks.
Automation helps manage vendors throughout their whole relationship with the healthcare group. It manages onboarding, monitoring, incident tracking, and offboarding.
Automated systems alert healthcare groups when vendors’ risk changes or contracts need review. This keeps risk info up to date.
AI platforms also track if vendors follow security rules and warn healthcare managers if there are breaches or failures. This enables quicker action and less risk exposure.
Due diligence can be hard with many vendors. AI and automation help focus on vendors that pose more risk based on data access or key roles.
This way, healthcare groups spend time and resources wisely while still keeping an eye on all vendors.
Technology platforms keep vendor risk info in one place so teams like IT, purchasing, compliance, and legal can work together better. Automatic alerts and reports help make decisions faster and clearer.
These tools also help healthcare groups follow laws like HIPAA, GDPR, and other privacy rules in the U.S.
Healthcare practice administrators and IT managers in the U.S. play important roles in managing vendor risks. They must work together to keep the organization safe from avoidable problems.
Healthcare groups that follow these steps can lower financial losses, protect patient data, and keep their reputation. This is especially important as they depend more on third-party services.
By knowing the financial, reputation, and data security effects of ignoring third-party vendor risks—and using AI and automation tools—healthcare groups in the U.S. can protect themselves from growing threats. Practice administrators, owners, and IT managers must focus on these efforts to keep healthcare delivery safe, legal, and efficient.
The report addresses security challenges faced by Healthcare Delivery Organizations (HDOs) in managing third-party vendors and provides guidance on identifying, assessing, and mitigating associated risks.
Third-party risks in healthcare are heightened due to the industry’s reliance on sensitive data, regulatory requirements, slow vendor risk assessment processes, and the lack of fully deployed risk management controls.
The report identifies various risks, including cybersecurity, reputational, compliance, privacy, operational, strategic, and financial risks posed by third-party vendors in the healthcare sector.
The report outlines strategies for identifying, detecting, responding to, and mitigating third-party vendor risks effectively throughout healthcare organizations.
The reliance on third-party vendors expands the attack surface, allowing attackers potential access to sensitive data through breaches at the vendor.
Inadequate risk assessment and monitoring can lead to costly penalties, reputational damage, and compromise of sensitive healthcare data.
The report was authored by the CSA’s Health Information Management Working Group, with Dr. James Angle as the lead author.
The CSA promotes best practices for secure cloud computing and aims to influence secure health information services, enhancing security awareness across the healthcare sector.
HDOs are increasingly outsourcing services to focus on core objectives, making an effective third-party risk management program essential for safeguarding data.
Individuals interested in contributing to CSA’s ongoing research and initiatives in health information management are encouraged to join the Health Information Management Working Group.
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