The Role of Vendor Risk Assessments: Why Only 27 Percent of Healthcare Providers Evaluate All Vendors Annually

Healthcare organizations in the U.S. usually have about 1,320 vendors under contract. These vendors include suppliers of medical devices, equipment, software providers, and outsourced service companies. Managing so many vendors creates a complicated system that can be hard to keep track of.

The Ponemon Institute says healthcare providers know vendor risk assessments are important. However, many cannot do them all because the process uses a lot of resources. Only 27 percent of providers assess all their vendors every year. Others only assess some vendors based on how risky or important they think they are. This selective checking can cause problems if any vendor is missed.

Failing to manage vendor risks well costs a lot. The healthcare industry spends about $23.7 billion each year on risks linked to third parties. On average, each healthcare provider spends $3.8 million yearly on hidden costs for managing vendor risk. This is even more than the $2.9 million average cost of a data breach.

Data breaches caused by third-party vendors are a big problem. Recent studies showed 56 percent of healthcare organizations had at least one vendor-related breach in the last two years. These breaches often expose protected health information, affecting many patients and causing compliance and legal problems.

Barriers to Comprehensive Vendor Risk Assessments

Healthcare providers face many challenges that stop them from assessing all vendors yearly. Some main challenges are:

• Time and Resource Intensive Processes
  Managing vendor risk takes a lot of work. On average, about 5,000 hours per month are spent on vendor risk assessments by different departments. These include information security, supply chain teams, risk management, and clinical leaders. This large use of time takes away resources from patient care and improving operations.
• Cost and Complexity
  Risk assessments cost a lot and are complicated. About 55 percent of vendors say that it costs around $2.5 million each year industry-wide. The complex questions and changing digital tools and medical devices make the process harder and confusing for providers and vendors.
• Inefficiency of Traditional Methods
  Many healthcare groups still use manual or paper-based methods or disconnected digital tools to check risks. These tools quickly become outdated. Nearly 60 percent say their assessments are no longer useful within three months. This causes repeated work, repeated assessments, or gaps in risk data.
• Limited Scope of Vendor Reviews
  Around 59 percent of healthcare workers worry that top executives skip vendor assessments to speed up business deals. This creates holes in risk programs. Also, only 21 percent of assessments result in fixing issues before starting a business agreement, and about 11 percent lead to rejecting a vendor for security problems.
• Low Perceived Value and Effectiveness
  Only 36 percent of healthcare providers feel good at ranking vendor risks, even though 80 percent agree it is very important. Also, only 40 percent say vendor risk assessments give useful insights that help senior leaders or boards. This lowers the drive to keep assessments updated or complete.

Hidden Costs of Vendor Risk Management

The clear costs like staff time and salaries are just part of vendor risk management costs. There are also hidden costs such as:

• Cross-Departmental Workload: Many groups like clinicians, supply chain, IT, security, and compliance all have to work together. Their time could otherwise be used for patient care or making operations better.
• Redundant Workflows: Poorly connected processes cause repeating data entry, multiple assessments, and manual updates for many vendors.
• Lost Business Opportunities: Vendors with breaches or failed security checks may lose contracts or future business. This happens in 28 percent of vendors. It also makes vendors less willing to share clear information.

These costs add up fast. Vendor risk management becomes a big money and time expense for healthcare providers.

AI and Automation Transforming Vendor Risk Management

Automation and AI offer new ways to handle vendor risk management. Still, only 38 percent of healthcare groups use automation fully for these tasks.

• Reducing Time and Workload
  AI can cut down the many hours spent on manual checks. It standardizes steps, collects and analyzes vendor data automatically, and watches risks in real time. What used to take weeks can now take seconds or minutes.
• Continuous and Real-Time Risk Monitoring
  AI allows ongoing updates and checks that show changes in vendors or new dangers quickly. This keeps risk data current and useful.
• Improving Accuracy and Reducing Human Error
  AI systems use steady and clear rules to evaluate vendors. This lowers mistakes or bias from people.
• Providing Actionable Insights
  Automated platforms turn complex data into easy-to-read dashboards and reports. These help executives and boards make better decisions and stay responsible.
• Cutting Costs
  Sixty-one percent of vendors think automation can cut assessment costs by half. Healthcare providers can spend less and use resources better.
• Enhancing Compliance and Security Posture
  Automation helps check if vendors meet rules and flags problems quickly. It can trigger fixes or reject vendors when needed, making security stronger and risks lower.

The Specific Context for U.S. Medical Practice Administrators and IT Managers

Smaller and medium-sized medical groups in the U.S. often have tight budgets and few staff. Managing more than a thousand vendors can be too much for their teams. Practice administrators and IT managers need easy and reliable ways to reduce risks without hurting other work.

Cloud services, telehealth platforms, digital medical devices, and outsourced services keep growing in use. This makes vendor management more complex. Many connected medical devices have digital weaknesses that raise cybersecurity risks. Without good risk checks, medical practices and their patients face possible data loss and legal troubles.

Using AI and automation tools made just for healthcare vendor management helps administrators check vendors more often and in more detail. This lowers risks and saves time. Automated tools also help keep records for rules like HIPAA, which is very important for trusted healthcare.

Summary of Key Points

• The U.S. healthcare industry loses $23.7 billion every year due to vendor risks.
• Healthcare providers manage about 1,320 vendors on average, but only 27 percent check all vendors yearly.
• Data breaches from third-party vendors affected 56 percent of healthcare groups in the past two years.
• Many providers spend over 5,000 hours each month on vendor risk tasks, involving many departments.
• Old and manual methods cause wasted effort, errors, and high costs.
• Top executives sometimes skip risk checks, creating gaps in programs.
• AI and automation can lower time and costs up to 50 percent and provide continuous risk updates.
• Only 38 percent of healthcare groups currently use automation for vendor risk management.
• Medical practices need solutions that fit healthcare’s vendor complexity, including connected devices and digital services, while meeting rules and compliance.

This overview explains why few healthcare providers in the U.S. do full annual vendor checks. The current model takes too many resources. With more vendors and rising cybersecurity risks, manual assessments are not practical for many. Providers should think about using technology like AI and automation to work more efficiently, cut costs, and protect patient data as healthcare becomes more complex.