“The HIPAA Risk Blind Spot: Third-Party Vendors and the Rise of Shadow IT”
Post Summary
Healthcare organizations face mounting cybersecurity risks from two major blind spots: third-party vendors and shadow IT. These overlooked vulnerabilities are exposing sensitive patient data to breaches, with 74% of healthcare data breaches in 2023 involving third-party vendors. Shadow IT - when employees use unapproved tools - adds further risk, as 65% of SaaS apps used in healthcare lack IT approval. Combined, these challenges are complicating HIPAA compliance and increasing financial losses, with the average cost of a healthcare breach reaching $10.93 million.
Key Points:
- Third-Party Vendors: Essential but risky. Vendors often fail to meet security standards, leading to breaches. For example, incidents in 2025 exposed over 200,000 patient records due to vendor mismanagement.
- Shadow IT: Employees bypass IT protocols, using unapproved apps that lack encryption or access controls. This creates blind spots for cybercriminals to exploit.
- Financial Impact: Breaches tied to these risks cost millions, disrupt operations, and lead to HIPAA violations.
Solutions:
- Risk Assessments: Conduct regular audits for vendors and shadow IT tools.
- Continuous Monitoring: Use tools to track and secure data across systems.
- Zero-Trust Security: Implement strict access controls and real-time threat detection.
- AI-Driven Tools: Platforms like Censinet RiskOps™ automate vendor risk management and detect unauthorized tools.
Healthcare leaders need to act now to address these risks or face escalating breaches and penalties.
How to Comply with Third-Party Risk Management Requirements in HIPAA
How Third-Party Vendors and Shadow IT Create Security Risks
Third-party dependencies and the use of unauthorized technologies introduce vulnerabilities that are tough to manage. To safeguard patient data and ensure HIPAA compliance, it's essential to understand how these risks emerge. Let’s dive into how third-party vendors and Shadow IT create significant challenges for healthcare organizations.
Security Risks from Third-Party Vendors
Third-party vendors are a major weak point in healthcare cybersecurity. In fact, healthcare faces more third-party breaches than any other industry, accounting for 41.2% of all tracked incidents [1]. The risks grow when vendors access multiple systems or fail to meet healthcare security standards.
The most pressing threat tied to vendors is data breaches. Among publicly disclosed vendor-related breaches, 51.7% involved unauthorized network access. Ransomware attacks, which made up 66.7% of known attack methods, often exploit these third-party vulnerabilities [1]. For example, in May 2025, Harbin Clinic revealed a breach at its debt collection vendor that exposed the personal health information (PHI) of over 210,000 individuals. Shockingly, the breach went unreported for more than seven months [2]. Similarly, Radiology Chartered experienced a breach that affected over 12,600 individuals, exposing glaring issues in vendor oversight [2].
Supply chain weaknesses also create opportunities for attackers. In 2024, hackers exploited a flaw in HealthEC, and the Change Healthcare ransomware attack disrupted services nationwide, impacting nearly 190 million individuals [1]. Additionally, interconnected vendor systems caused outages at 142 hospitals and 40 nursing facilities in Texas and Kansas, highlighting the fragility of these ecosystems [1].
"Digital interconnectedness drives progress, but it also heightens risk. Because of our increasing reliance on software platforms and tools, the exploitation of a single vulnerability can have a catastrophic impact." – Ferhat Dikbiyik, Chief Research and Intelligence Officer at Black Kite [1]
Ineffective vendor management doesn’t just lead to breaches - it can also disrupt services and trigger costly compliance violations.
While vendor-related risks are significant, unauthorized technology use, or Shadow IT, adds another layer of complexity.
How Shadow IT Compromises Data Security
Shadow IT occurs when employees use unauthorized apps or tools, bypassing established security protocols. Over 80% of IT professionals report that employees rely on unsanctioned apps and services, creating blind spots that cybercriminals can easily exploit [4]. These tools often lack critical security features like encryption, role-based access controls, and audit trails. When sensitive data is uploaded to these unapproved platforms, it becomes an easy target for breaches.
A 2023 report from HealthTech Magazine revealed that nearly 70% of healthcare workers admitted to using personal or unauthorized apps for work-related tasks [4]. Many of these apps lack multi-factor authentication, providing hackers with simple entry points. Additionally, these tools often fail to integrate properly with core hospital systems, leading to incomplete or outdated patient records - a risk to both security and patient safety.
ClearDATA has identified Shadow IT as a leading threat to healthcare data security, with over 30% of healthcare breaches involving unauthorized third-party apps [4]. Regulatory audits frequently uncover these unapproved tools, leading to steep fines ranging from $100 to $50,000 per violation, with annual penalties potentially reaching $1.5 million [4]. The resources required to audit and fix vulnerabilities in Shadow IT further strain an organization’s security efforts.
"The key is visibility, and the more you see, the more protected you are." – Chase Doelling, Principal Strategist at JumpCloud [3]
When Vendor and Shadow IT Risks Combine
The combination of third-party vendor vulnerabilities and Shadow IT creates a perfect storm for security risks, complicating HIPAA compliance. In 2023, 78% of healthcare organizations experienced a data breach, with over half linked to third-party vendors [7]. When employees use unauthorized apps to interact with vendor systems, the risks multiply.
Cybercriminals increasingly target third-party vendors as a gateway to access multiple healthcare organizations. This "hub-and-spoke" approach makes vendor risks and Shadow IT especially dangerous [6][9]. In 2023 alone, 58% of the 77.3 million individuals affected by breaches were victims of attacks on healthcare business associates - a staggering 287% increase from 2022 [6]. This overlap of risks reduces visibility into how data is accessed, stored, and transmitted.
"More than half of all data breaches on health systems are through business associates; many ransomware attacks similarly find their way into enterprise networks through third parties. Many medical devices continue to be delivered to the customer with security vulnerabilities, with uneven attention to the security imperative among device manufacturers." – Greg Garcia, Executive Director, Cybersecurity Working Group for the Healthcare Sector Coordinating Council [8]
The financial impact is equally alarming. The average cost of a healthcare breach in 2023 reached $10.93 million per incident [7]. Shadow IT, being unmanaged, also leaves organizations non-compliant with HIPAA regulations [5]. This tangled mix of vendor vulnerabilities and unauthorized technology creates a web of liability, complicating both incident response and regulatory investigations.
"Regarding breaches due to third parties, the fundamental thing that needs to be done is setting up a robust third-party risk management program. There are no shortcuts." – Lee Kim, Senior Principal of Cybersecurity and Privacy at HIMSS [2]
How to Find and Reduce These Risks
Healthcare organizations face a dual challenge: managing vendor vulnerabilities and addressing unauthorized shadow IT. To safeguard patient data without disrupting clinical workflows, it’s essential to build clear governance frameworks and maintain comprehensive visibility into the technology ecosystem.
Vendor Risk Assessment and Monitoring
Performing HIPAA risk assessments for all covered entities, including business associates, is a must [10]. These assessments should identify vulnerabilities and guide remediation efforts [10].
Regularly updating and reviewing Business Associate Agreements (BAAs) ensures compliance with current HIPAA standards [12]. Organizations must also verify that business associates adhere to these standards. Covered entities can be held accountable for breaches if they "knew, or by exercising reasonable diligence, should have known" about recurring issues [10].
Ongoing monitoring is equally critical. Healthcare organizations should evaluate the cybersecurity measures of their business associates annually through Security Rule audits, system-wide reviews, and penetration testing. Vulnerability scans every six months add another layer of protection [11]. Real-time monitoring is essential for detecting deviations and maintaining HIPAA compliance. Key practices include multi-factor authentication (MFA), network segmentation, and anti-malware solutions to protect PHI. Additionally, having contingency plans in place to restore impacted data within 72 hours strengthens overall security [11].
While vendor oversight is essential, controlling unauthorized technology use is just as important.
Identifying and Managing Shadow IT
Shadow IT refers to technologies, apps, or systems employees use without IT department approval [13]. A significant number of IT professionals report the widespread use of unauthorized apps [4].
To address this, layered monitoring strategies are vital. Regular network scans, access log reviews, and SaaS audits help uncover unauthorized software and devices [13]. Tools for monitoring network traffic, application discovery, and procurement log reviews can reveal unauthorized tools that may expose PHI [4].
Given the sheer volume of SaaS applications in use - many of which are added without IT's knowledge - asset inventory tools are critical for tracking both authorized and unauthorized devices [13]. Alerts for new applications accessing PHI or EHR systems, coupled with domain filtering to block high-risk tools, can further mitigate threats [4].
Establishing a governance policy ensures a structured process for evaluating, approving, and monitoring SaaS tools that handle PHI [4]. This includes workflows involving compliance, IT, and clinical leadership, as well as requiring HIPAA-compliant BAAs for relevant vendors. Instead of banning unauthorized tools outright, offering secure alternatives that meet workflow needs can reduce "workaround" behavior. A centralized request hub for new app submissions, with automated routing to security and compliance teams, keeps an updated inventory of approved, restricted, and pending tools [4].
Access control is another crucial measure. Role-Based Access Control (RBAC) can limit access based on roles, while time-based and location-based restrictions add extra safeguards. Quarterly access audits help remove outdated permissions [4]. Employee education, through workshops and newsletters on SaaS security, can also transform risky behaviors into proactive practices [4].
Building a Zero-Trust Security Framework
A Zero-Trust security model adds another layer of defense by requiring strict verification for every user and device accessing resources, regardless of location [14]. This approach relies on principles like continuous verification, least privilege access, and automated context-based responses. With insider threats and credential misuse now accounting for over 50% of healthcare data breaches, these measures are more critical than ever [16].
Start by mapping assets and users to define access levels [16]. Enforcing least privilege access through RBAC and Just-In-Time (JIT) access, combined with MFA and Identity and Access Management (IAM) tools, boosts security [16].
Network segmentation is another key strategy. Dividing systems based on sensitivity and applying strict firewall rules can contain breaches and minimize their impact [15][16].
Continuous monitoring and response capabilities are essential for a robust Zero-Trust framework. Deploy tools like endpoint detection and response (EDR), aggregate logs, and use SIEM solutions to analyze data from user credentials, endpoints, and network traffic [14][16]. Promptly patching vulnerabilities and restricting access to devices with known issues also reduces risks [15].
A Zero-Trust approach also helps combat unauthorized cloud-based services. By continuously assessing factors such as user identity, credential privileges, behavior patterns, and endpoint security, organizations can better protect PHI [14]. Adopting a mindset that assumes threats could originate both inside and outside the network is vital, especially with the rise of cloud adoption, remote work, and connected medical devices.
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Using Technology Tools for Risk Management
Effectively managing vendor risks and shadow IT requires specialized tools that can adapt to the complex demands of HIPAA compliance. Building on earlier strategies, modern technology platforms now offer more dynamic solutions to address these evolving threats. These platforms automate workflows and integrate AI to simplify healthcare cybersecurity processes. One standout example is the Censinet RiskOps™ platform, which demonstrates how automation can tackle these challenges head-on.
Censinet RiskOps™ Platform Features
Platforms like Censinet RiskOps™ have emerged to address the multifaceted risks in healthcare. This cloud-based risk exchange securely facilitates the sharing of cybersecurity and risk data across the healthcare industry [17]. It covers a wide range of risk areas, including vendors, third parties, patient data, research, medical devices, and supply chains. With a network of over 50,000 vendors and products, it fosters collaboration across the healthcare sector [17].
For HIPAA compliance, Censinet RiskOps™ enables healthcare organizations to conduct Security and Privacy Rule risk assessments, track their progress, close compliance gaps, and generate clear risk reports [18]. The platform uses questionnaires tailored to Security and Privacy Rule safeguards, while automated action plans delegate tasks to subject matter experts, ensuring gaps are addressed efficiently [18].
The platform also enhances operational efficiency. As Terry Grogan, CISO at Tower Health, shared:
"Censinet RiskOps allowed 3 FTEs to go back to their real jobs! Now we do a lot more risk assessments with only 2 FTEs required." [17]
Brian Sterud, CIO at Faith Regional Health, highlighted the importance of benchmarking:
"Benchmarking against industry standards helps us advocate for the right resources and ensures we are leading where it matters." [17]
Faster Risk Assessments with Censinet AITM
Artificial intelligence plays a crucial role in speeding up vendor risk assessments. Censinet AITM streamlines the entire third-party risk assessment process, allowing vendors to complete security questionnaires in seconds rather than weeks. The AI summarizes vendor evidence, captures integration details, identifies fourth-party risks, and produces concise reports.
For example, AI can quickly analyze vendor SOC II reports, penetration tests, and compliance documents - tasks that traditionally take much longer when done manually [19]. When regulations change, AI adjusts assessment controls up to 30 times faster than traditional methods [19]. This capability is vital, particularly given that nearly half of all data breaches in 2017 were linked to third-party vendors or contractors [19].
Organizations using AI report significantly better outcomes: breach rates drop to 22.5% compared to 60% for non-AI adopters, while breach costs are reduced by $2.84 million. Additionally, detection times improve by 24.47 days, and containment times shrink by 20.62 days [20].
For managing shadow IT, AI-assisted tools provide early warnings by detecting threats like leaked credentials, botnet scans, and mentions on the dark web. These tools continuously monitor cloud environments, flagging issues such as exposed databases, misconfigured IAM policies, or public S3 buckets. This proactive approach allows organizations to address risks before they escalate [21].
Censinet AITM also incorporates a "human-in-the-loop" approach, ensuring that automation complements rather than replaces human decision-making. Risk teams maintain control through configurable rules and review processes, striking a balance between automation and human oversight. This combination of AI-driven efficiency and human judgment strengthens risk mitigation strategies.
Example: How One Organization Managed Vendor and Shadow IT Risks
Recent incidents underscore the critical need for continuous monitoring and robust third-party risk management in healthcare. In February 2025, a misconfigured AWS S3 bucket led to a major data breach. Attackers injected malicious JavaScript into the bucket, altering transaction data during the signing process and resulting in a $1.5 billion cryptocurrency theft [21].
In another case, cybersecurity researcher Jeremiah Fowler discovered an unprotected AWS S3 bucket belonging to ESHYFT, a health tech company in New Jersey. The exposed 108.8 GB database contained over 800,000 records, including personal and professional details of nurses [21].
These examples highlight how shadow IT and poor vendor oversight can create significant vulnerabilities. Platforms like Censinet RiskOps™ help healthcare organizations mitigate such risks through continuous monitoring, real-time alerts, and a collaborative risk network that enables swift sharing of threat intelligence. Automated workflows and benchmarking features ensure that remediation tasks are completed promptly and that security practices align with industry standards. By leveraging these tools, healthcare organizations can better protect sensitive data and reduce their exposure to potential threats.
Conclusion: Protecting Healthcare Data
The healthcare sector is grappling with cybersecurity challenges that are more pressing than ever. With data breaches projected to cost an average of $10.93 million and over 311 breaches anticipated to affect more than 23 million individuals in 2025, the stakes could not be higher[25][26]. These alarming figures highlight the urgent need to revisit and strengthen data protection strategies.
Key Takeaways
Healthcare organizations must understand that HIPAA compliance extends beyond their walls - it also applies to third-party vendors, known as "business associates", who have access to protected health information (PHI)[22]. Effective data protection revolves around three pillars: identifying risks through continuous monitoring, applying proven mitigation strategies, and adopting advanced technological solutions.
- Continuous Monitoring: Regular audits and real-time threat detection are essential. With the use of AI by physicians nearly doubling in 2024, new vulnerabilities are emerging, creating opportunities for cybercriminals to exploit[23].
- Vendor Security: Choose partners who prioritize data security and ensure employees are trained to recognize risks, including those posed by artificial intelligence and shadow IT[23].
- Advanced Technology: Platforms like Censinet RiskOps™ streamline risk management by automating assessments, enabling continuous monitoring, and fostering collaboration across healthcare networks. When paired with Censinet AITM, these tools can reduce the time spent on vendor security assessments from weeks to seconds, significantly improving the ability to manage third-party risks.
"The healthcare industry practices proactive care. This same concept can be done for managing its third-party risks."
These strategies provide a solid foundation, but the next step is for organizations to act decisively.
Immediate Actions for Healthcare Organizations
The era of reactive cybersecurity measures is over. Healthcare organizations must take proactive steps to address vulnerabilities in their third-party relationships and shadow IT environments. With nearly 80% of healthcare data breaches attributed to hacking and IT-related attacks - many of which are preventable - the need for action is clear[26].
- Conduct Comprehensive Risk Assessments: Start with a HIPAA Security Rule risk assessment to identify and address vulnerabilities in how electronic protected health information (ePHI) is stored, accessed, and protected. This process must be ongoing, as HIPAA requires a continuous evaluation of risks to the confidentiality, integrity, and availability of ePHI[22][26].
- Reevaluate Cybersecurity Budgets: Despite the average healthcare organization allocating only 4–7% of its IT budget to cybersecurity, the cost of prevention is far less than the $4.88 million average cost of a breach[28][27]. Prioritize investments in robust risk management tools and platforms.
- Adopt Flexible Frameworks: Implement systems that can quickly adapt to evolving threats. This includes using SaaS management tools to detect unauthorized software and integrating these tools into IT governance. Employee education is equally critical to mitigate risks associated with unsanctioned tools[27].
FAQs
What risks do third-party vendors and shadow IT pose to healthcare organizations, and how can they affect HIPAA compliance?
Third-party vendors and shadow IT pose serious risks to healthcare organizations. These risks include data breaches, unauthorized sharing of sensitive information, malware infections, and violations of HIPAA regulations. The consequences? Hefty fines, potential legal battles, and, perhaps most damaging, a loss of trust from patients.
Shadow IT and third-party tools often bypass approved security measures, leaving them exposed to cyberattacks. This lack of oversight increases the chances of protected health information (PHI) being compromised. Such vulnerabilities can lead to breaches of HIPAA's privacy and security rules, putting confidential patient data at risk.
To address these challenges, healthcare providers need to adopt strong vendor risk management practices. By using effective tools to identify and manage shadow IT, organizations can ensure all systems meet HIPAA requirements and safeguard patient information.
How can healthcare organizations identify and control shadow IT to protect sensitive patient information?
Healthcare organizations can tackle shadow IT by keeping a close eye on their networks for any unauthorized software or suspicious activity. Conducting regular software usage audits is a practical way to spot unapproved tools. At the same time, having clear policies in place helps ensure staff are aware of the risks and understand the proper guidelines for using technology securely.
To minimize risks even further, organizations should work with employees to address their technology needs in a secure way. Offering approved alternatives and educating staff about the importance of safeguarding patient data can encourage a sense of responsibility and reduce the temptation to rely on unauthorized tools.
How can healthcare organizations strengthen third-party risk management to prevent data breaches?
Healthcare organizations can improve third-party risk management by adopting a proactive and organized strategy. A good starting point is conducting thorough vendor assessments to evaluate their security measures and ensure they meet HIPAA requirements. It's also essential to outline clear security and compliance expectations in vendor contracts to maintain accountability.
Using continuous monitoring tools is another key step, as these systems help keep track of vendor activities and quickly flag potential risks. Automating parts of the process can streamline operations and minimize human error. Additionally, it's important to regularly review vendor policies and update them to address new and evolving threats. By focusing on these measures, organizations can better safeguard sensitive protected health information (PHI) and lower the risk of costly data breaches.
