“Third-Party Risk, First-Priority: Building Resilience in a Vendor-Driven World”
Post Summary
Healthcare organizations rely heavily on third-party vendors for critical services like managing patient records and maintaining medical devices. However, this reliance introduces serious cybersecurity and operational risks. In 2023 alone, 74% of healthcare cybersecurity issues were tied to third-party vendors, with breaches costing organizations millions and compromising patient care.
Key Highlights:
- Data Breaches: 44% of healthcare organizations faced breaches last year, with an average cost of $10.1 million per breach.
- Vendor Failures: Incidents like the Change Healthcare breach disrupted services for millions, highlighting the risks of unmanaged vendor relationships.
- Low Preparedness: Only 36% of healthcare IT professionals report having effective strategies for managing vendor access risks.
Solutions:
- Risk Assessment: Use structured frameworks like NIST CSF 2.0 or HITRUST CSF to identify vulnerabilities.
- Continuous Monitoring: Real-time tracking of vendor activities and automated tools improve oversight.
- Vendor Contracts: Strong agreements with clear security and compliance requirements are essential.
- Staff Training: Educate teams on identifying risks and responding effectively to incidents.
By prioritizing vendor risk management, healthcare organizations can protect patient data, ensure uninterrupted care, and meet regulatory standards.
HIMSS24 | Creating Cyber Resilience: Your Guide to Vendor Risk Management
How to Identify and Assess Third-Party Risks
Managing third-party risks effectively begins with understanding what to look for. Healthcare organizations face unique challenges in this area, as they must balance operational efficiency with robust security measures. A structured approach is essential to uncover vulnerabilities before they lead to breaches, ultimately strengthening vendor relationships.
Common Third-Party Risks in Healthcare
Healthcare organizations deal with several types of third-party risks, many of which can jeopardize patient data and disrupt daily operations. Cybersecurity threats top the list, with 78% of healthcare organizations reporting data breaches in the past year, more than half of which were linked to third-party vendors [3].
One major issue is unsecured remote access. When vendors connect to healthcare networks without proper authentication, the risks multiply. A stark example is the American Medical Collection Agency (AMCA) breach, which exposed nearly 25 million patient records due to inadequate security measures [3]. This incident demonstrated how vendor access points can serve as entryways for cybercriminals.
Another concern is uncontrolled data sharing. Healthcare data is reportedly 50 times more valuable on the dark web than financial data [3], making it a prime target. Vendors handling protected health information (PHI) without proper encryption or access controls create opportunities for data theft, which can cost healthcare organizations an average of $10.93 million per incident [3].
Supply chain attacks are also a growing threat. High-profile examples include the SolarWinds breach and the MOVEit file transfer vulnerability (CVE-2023-34362), where attackers exploited software updates to infiltrate systems [8].
Compliance failures add another layer of risk, exposing organizations to lawsuits, fines, and reputational harm. Non-compliance with standards like HIPAA or GDPR can have serious consequences, especially since 68% of patients say they would switch providers after a data breach [3].
Common cyber threats from third-party vendors include phishing, unpatched software, weak passwords, and a lack of network segmentation [3]. These vulnerabilities often stem from poor security practices, which can be mitigated with effective risk management.
Risk Assessment Frameworks and Standards
Using structured frameworks is key to evaluating third-party risks. Two widely recognized options are the NIST Cybersecurity Framework (CSF) 2.0 and the HITRUST CSF.
The NIST CSF 2.0 offers a flexible, risk-based approach tailored to an organization’s specific needs. Its primary goal is to extend cybersecurity risk management to third parties, supply chains, and acquired products or services, based on their criticality and risk level [5].
"The NIST cybersecurity framework (CSF) provides a cohesive approach to unify and proactively improve your TPRM program." [5]
The framework is built around five core functions - Identify, Protect, Detect, Respond, and Recover - which form a continuous cycle for managing vendor risks throughout their lifecycle [6].
On the other hand, the HITRUST CSF is particularly well-suited for healthcare organizations, aligning with HIPAA and integrating controls from multiple standards like PCI DSS and GDPR [6]. It evaluates control maturity across five levels: Policy, Procedure, Implemented, Measured, and Managed [6].
Organizations can choose between the broader flexibility of NIST CSF 2.0 and the healthcare-focused HITRUST CSF [6]. Notably, the HITRUST framework’s Version 11.4 includes NIST 2.0 as a selectable component for assessments [6].
Given that 60% of healthcare organizations acknowledge the need to improve their third-party risk management programs [5], adopting a structured framework is critical. With over 1,300 vendors connected to the average healthcare IT system [5], systematic approaches are essential for maintaining oversight.
Risk Assessment Tools and Techniques
Structured methodologies combined with scalable tools are essential for assessing vendor risks. Risk scoring systems provide a quantitative way to rank vendors based on factors like certifications, audit reports, and risk management practices [7].
Pre-assessment questionnaires are another valuable tool, gathering detailed information about a vendor’s security controls, compliance status, and incident history. These questionnaires should address areas like data protection, encryption standards, access controls, and business continuity planning [7].
"The best time to ensure a vendor meets security and compliance requirements is prior to purchase by reviewing the vendor's processes and controls available and alignment with the practice expectations and needs." - Dustin Hutchison, Chief Information Security Officer and Vice President of Services at Pondurance [4]
Security certifications, audit reports, and regular reviews are crucial for maintaining up-to-date risk profiles. However, these should be independently verified rather than relying solely on vendor self-reporting. With 98% of organizations connected to at least one vendor that has experienced a breach [5], continuous assessment is non-negotiable.
Incident response evaluations are also essential, focusing on vendors’ ability to detect, respond to, and recover from security incidents. This includes reviewing incident response plans, testing protocols, and past performance during real-world incidents [7].
Automating vendor monitoring through API data collection can streamline collaboration across IT, compliance, and clinical teams [7]. Despite this, 79% of internal audit teams still rely on manual data collection, which hampers efficiency [7]. Automation can map vendor connections, detect anomalies early, and enhance proactive risk management [2].
"Healthcare organizations should have higher expectations of their vendors and third-party providers, especially when patient data is in scope...not all risk can be transferred to a third party, especially considering reputation damage and the loss of customer confidence." - Dustin Hutchison, Chief Information Security Officer and Vice President of Services at Pondurance [4]
Finally, clear service level agreements (SLAs) with vendors are vital. These should define timelines for addressing vulnerabilities and include penalties for non-compliance [8]. Regular security audits further ensure that vendor systems remain secure and help identify emerging risks before they lead to breaches [8].
How to Mitigate and Manage Third-Party Risks
Once you've identified and assessed vendor risks, the next step is implementing strategies to address vulnerabilities effectively. With a staggering 133 million health records exposed in data breaches during 2023 alone [1], taking proactive measures to manage these risks is more important than ever.
Creating Strong Vendor Agreements
Vendor agreements are a critical line of defense against third-party risks. These contracts should go beyond outlining services - they must set clear security expectations, define responsibilities, and specify consequences for non-compliance.
Start by clearly defining terms, responsibilities, and timelines [10]. Agreements should include measurable metrics for quality, delivery, and service standards. In healthcare, data protection provisions are especially crucial. Contracts need to specify the vendor’s role in safeguarding protected health information (PHI) and include requirements for breach notifications, risk assessments, and regular audits [1]. Both parties’ rights and responsibilities should be explicitly outlined.
Risk allocation is another key element. Consider factors like supply chain disruptions, intellectual property rights, and force majeure events when negotiating terms [10]. Financial accountability should be addressed by including penalties for non-performance and clear steps for early termination if risks become unacceptable [11]. Pay close attention to hidden costs and termination clauses, ensuring every detail - especially sections on fees and change orders - is thoroughly reviewed [10].
Business continuity measures should also be baked into these agreements. Provisions for data protection, incident response protocols, and continuity planning ensure vendors can maintain operations during disruptions and recover quickly if issues arise [9].
Finally, establish an incident response plan that integrates vendor-specific procedures to ensure seamless coordination during crises.
Incident Response Planning for Vendor Events
When vendor-related incidents occur, they often bring unique challenges, such as coordinating across multiple organizations and managing potential communication delays. A solid incident response plan tailored to vendor events is essential.
Start by setting up clear communication protocols. Identify designated points of contact at each vendor, establish escalation procedures for various severity levels, and define reliable communication channels that remain functional during emergencies. The plan should specify who to notify first, what information to share immediately, and how updates will be communicated throughout the incident.
Legal and regulatory requirements further complicate vendor incident responses. Plans should include timelines for determining whether patient data was involved, processes for gathering information from vendors, and steps for meeting regulatory deadlines.
Documentation is equally important. Maintain detailed records of evidence, vendor communications, and incident timelines. These records are crucial for compliance, insurance claims, and potential legal actions.
Tailor the response plan to address different types of incidents. For example, cybersecurity breaches may require a different approach than service outages or data corruption. Predefined steps, escalation criteria, and decision trees should be in place for each scenario to ensure quick and effective action.
Regular testing, such as tabletop exercises, is vital to identify gaps in the plan and improve readiness. These exercises help refine communication and procedures, ensuring smoother responses during real incidents.
Staff Training and Preparedness
Human error often plays a significant role in third-party risks, making staff training a cornerstone of risk management. Teams must understand how vendor relationships can introduce vulnerabilities and learn how to respond effectively when issues arise.
Training programs should focus on the unique challenges of managing third-party risks. Regular cybersecurity awareness training helps staff recognize suspicious activities and respond appropriately [13]. This includes understanding legal compliance, such as HIPAA, and emphasizing the importance of securing patient data at every step [13].
Key topics to cover include strong password management, spotting phishing attempts, secure data handling, and device security [12]. In environments with numerous vendor relationships, it’s crucial to highlight that connected devices, including IoT devices, can serve as access points for threats [12].
Tailor training to the diverse needs of your workforce, from clinicians to IT staff. Use real-life scenarios and case studies to illustrate the consequences of security breaches and the importance of preventive measures [12]. Simulation exercises can also be effective, especially for identifying hidden vulnerabilities and resonating with clinical staff [12].
Develop training programs with input from IT professionals, administrators, and clinicians to ensure they’re relevant and well-resourced [12]. Flexible delivery methods, like asynchronous learning, allow staff to complete training on their own schedules while maintaining consistent messaging. Regular refresher courses help keep teams updated on emerging threats and revised protocols.
To measure the effectiveness of training, use assessments, simulated phishing tests, and incident response drills. These tools provide valuable insights into whether the training is improving security practices and reducing exposure to third-party risks.
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Continuous Monitoring and Vendor Oversight
Initial vendor risk assessments offer a snapshot of a vendor's security posture at a specific point in time. However, a vendor's risk profile can shift quickly, making continuous monitoring a critical component for maintaining security and compliance [14]. Without consistent oversight, healthcare organizations risk missing key changes that could compromise patient data or disrupt essential operations. To address this, organizations must adopt ongoing monitoring strategies, as outlined below.
Why Continuous Monitoring Matters
Traditional risk assessments, often conducted annually or at scheduled intervals, can leave healthcare organizations blind to changes occurring between reviews. Vendors may face cybersecurity incidents, financial instability, or operational changes during these gaps, potentially jeopardizing patient safety and data integrity.
Real-time monitoring provides the visibility needed to catch potential issues before they escalate. This approach allows organizations to proactively detect cybersecurity threats, compliance violations, or operational disruptions. It also ensures vendors consistently meet regulatory standards. Beyond risk mitigation, continuous monitoring offers actionable insights for vendor management, such as guiding decisions on contract renewals, resource allocation, and overall risk strategy. Additionally, it demonstrates due diligence to auditors and regulators.
Healthcare systems are highly interconnected, and a single vendor issue can ripple across multiple systems, affecting everything from electronic health records to medical devices. Continuous monitoring helps organizations understand these interdependencies and prepare for potential disruptions more effectively.
Tools for Continuous Vendor Risk Management
To meet these monitoring demands, healthcare organizations are increasingly relying on automated tools. These tools track compliance deviations in real time and immediately alert stakeholders to violations or regulatory updates [15]. Key features of such platforms include:
- Real-time compliance tracking to monitor adherence to regulations.
- Audit management to streamline the vendor audit process.
- Data analysis capabilities for identifying compliance risks and gaps.
Automated tools also include remediation workflows that address issues as they arise, reducing the risk of prolonged vulnerabilities.
Manual compliance processes, while still used by some organizations, often lack the accuracy and immediacy provided by automation. Automated systems enhance efficiency by offering consistent monitoring and reducing human error [16]. Organizations can choose from various strategies, including in-house monitoring for more control, third-party solutions for specialized expertise, or hybrid models that combine both [15]. When selecting a platform, healthcare organizations should prioritize solutions with strong encryption, advanced security features, and seamless integration with existing systems and legacy infrastructure.
Responding to Changes in Vendor Risk Profiles
Continuous monitoring is only effective when paired with a proactive response to evolving vendor risk profiles. As monitoring tools flag changes - whether due to mergers, financial troubles, or security incidents - healthcare organizations must act quickly to address potential risks. Waiting until a problem escalates can have serious consequences, especially in critical areas like patient care and data security [17].
Organizations should classify vendors based on the sensitivity of the data they handle and their operational impact. Vendors managing highly sensitive information or critical services should receive closer scrutiny. When risks are identified, clear remediation plans should be in place, outlining steps such as:
- Requiring third-party cybersecurity certifications.
- Implementing security upgrades.
- Adding extra monitoring controls.
Dynamic risk profiles should be updated regularly to reflect changes in contracts, incidents, or audit findings. This keeps risk assessments accurate and actionable [17]. Employee training is another key component - staff must be equipped to recognize vendor risks early and follow escalation procedures effectively.
Finally, integrating vendor oversight into broader risk management frameworks ensures alignment with organizational goals and regulatory requirements [18]. This comprehensive approach helps healthcare organizations address vendor risks in the context of other business challenges and build stronger, more effective mitigation strategies.
Building a Secure Vendor Ecosystem
Healthcare organizations that prioritize third-party risk management can create robust ecosystems that safeguard patient data, ensure smooth operations, and support long-term growth. With the average healthcare organization working with over 3,000 third-party vendors [24], the importance of managing these relationships effectively cannot be overstated. Let’s delve into the key benefits and strategies for building a secure vendor ecosystem.
Benefits of Effective Third-Party Risk Management
A well-structured third-party risk management (TPRM) program offers clear, measurable advantages across healthcare operations. One of the most immediate benefits is improved compliance. By ensuring vendors meet legal and regulatory standards like HIPAA [1], healthcare organizations can avoid penalties and maintain trust as regulatory scrutiny intensifies.
Protecting patient data is another critical outcome. A strong TPRM program helps prevent the loss or misuse of sensitive information [1], which not only protects patients but also reinforces the organization's reputation. Beyond data, operational resilience is a key focus. As Erik Decker, CISO of Intermountain Health, points out:
"In healthcare, organizations still focus on data as the primary purpose for conducting a third-party assessment. But if your third-party scheduling system goes down, that's not an issue with protected health information. It's a business operations issue. We need to look through that lens too when we're thinking about third-party risk." [20]
Effective TPRM programs also reduce risks by assessing the threat level of each vendor, ensuring consistent standards while minimizing vulnerabilities [21]. This approach enhances visibility through formal assessments, streamlines operations with automation, and strengthens cybersecurity defenses. Additionally, using external risk management services can help lower costs [19]. Together, these benefits create a resilient vendor ecosystem that aligns with broader organizational risk strategies.
Manual vs. Automated Risk Management Comparison
The method an organization uses to manage third-party risks - manual or automated - can significantly impact its ability to scale and secure its vendor network. Surprisingly, half of all companies, especially smaller ones, still rely on spreadsheets for risk management [24]. This manual approach often limits them to managing only a fraction of their vendors due to inefficiencies [24].
| Parameter | Manual Process | Automated Process |
|---|---|---|
| Collect Data | Manual data gathering | Automated collection and aggregation |
| Organize Data | Fragmented across multiple systems | Centralized platform for data consolidation |
| Indicate Risk Levels | Subjective and error-prone | Consistent, automated risk scoring |
| Visualize Risk Data | Requires manual charting | Built-in visualization tools |
| Display Relations | Relies on manual analysis | Automated identification of relationships |
| Build Risk Scenarios | Manually constructed | Automated scenario modeling |
| Add Reference Data | Prone to oversight | Comprehensive automated integration |
| Generate Metrics/Reports | Slow manual compilation | Real-time automated reporting |
| Follow-ups | Dependent on manual reminders | Automated notifications ensure timeliness |
| Audit Trail | Limited tracking | Comprehensive automated logging |
Automated systems simplify workflows, improve accuracy, and provide real-time insights [23]. They reduce reliance on human judgment, minimizing errors, and adapt more effectively to new threats and regulatory changes [22]. In contrast, manual methods often lead to inefficiencies and delays [22].
Platforms like Censinet RiskOps™ highlight the advantages of automation in TPRM. These systems streamline risk assessments, benchmark cybersecurity performance, and enable collaborative risk management through a centralized platform. Additionally, tools like Censinet AITM speed up the assessment process by automating security questionnaires and summarizing vendor documentation.
Meeting US Compliance Requirements
Navigating the complex web of federal regulations and industry standards is a crucial part of building a secure vendor ecosystem. HIPAA compliance remains the cornerstone, requiring safeguards to protect sensitive health information.
Beyond HIPAA, emerging frameworks like the National Telecommunications and Information Administration (NTIA) initiative are shaping the landscape. The NTIA is working on voluntary guidance for standardized formats, use cases, and tools for software bill of materials (SBOM) [25]. An SBOM, essentially a detailed list of software components, helps organizations manage risks tied to third-party software in healthcare technologies [25].
To effectively manage third-party risks, healthcare organizations should establish strong vendor relationships and ensure compliance with HIPAA and other regulations [1]. A comprehensive vendor management program must address not only data security but also operational resilience and regulatory requirements. Adopting a lifecycle approach - covering planning, due diligence, contracting, continuous monitoring, and termination - ensures compliance is integrated throughout the vendor relationship [19].
Conclusion: Making Third-Party Risk a Priority for Healthcare
The healthcare industry must put third-party risk management front and center to safeguard its future. With 74% of cybersecurity issues in healthcare tied to third-party vendors [27], ignoring vendor risks is no longer an option. Alarmingly, 54% of third-party respondents reported at least one data breach involving Protected Health Information (PHI) in the last two years, with each stolen health record costing approximately $408 [27].
The financial fallout extends far beyond the immediate costs of a breach. Moody's has highlighted how clinical quality directly affects financial performance and brand reputation [26]. This makes robust third-party risk management not just a security measure but a business imperative.
Compliance pressures further underscore the urgency. About 30% of organizations report compliance violations related to third-party oversight, and nearly 60% struggle with TPRM audit findings [27]. These statistics signal a critical need for healthcare organizations to act decisively and holistically, as reflected in the following key takeaways.
Key Takeaways for Healthcare Leaders
Healthcare leaders must turn these challenges into actionable strategies:
- Set clear vendor standards and audit protocols: Before entering into vendor relationships, establish firm expectations for cybersecurity practices, data management, and operational resilience [27].
- Embed risk management across the organization: Managing third-party risks isn’t just an IT responsibility. It demands collaboration across departments, from procurement to clinical operations to executive leadership [27].
Continuous monitoring of vendors is equally vital. Vendor risk profiles are always changing due to new threats, regulatory shifts, and evolving business needs. Annual assessments are no longer sufficient - healthcare organizations need systems that provide ongoing oversight and adaptability.
Treating third-party risk management as a strategic priority can transform it into a competitive advantage. By building secure vendor ecosystems, organizations can enhance patient safety, ensure operational stability, and position themselves for sustainable growth in an increasingly complex environment. The real question isn’t whether to prioritize third-party risk management - it’s how quickly healthcare organizations can implement comprehensive programs to protect patients and secure their future.
FAQs
How can healthcare organizations maintain operational efficiency while ensuring strong security when working with third-party vendors?
Healthcare organizations can strike a balance between efficient operations and robust security by establishing a Third-Party Risk Management (TPRM) program. This involves performing detailed vendor assessments, incorporating clear security expectations into contracts, and leveraging tools to continuously monitor vendor risks.
To keep an eye on risks and vendor performance without hindering daily operations, organizations can define Key Risk Indicators (KRIs) and Key Performance Indicators (KPIs). Aligning security measures with operational objectives not only minimizes cyber threats but also ensures compliance and supports a strong, dependable vendor network.
What’s the difference between the NIST Cybersecurity Framework (CSF) 2.0 and the HITRUST CSF, and how can healthcare organizations choose the right one?
The NIST Cybersecurity Framework (CSF) 2.0 is a voluntary tool designed to help organizations manage and reduce cybersecurity risks. It's flexible enough to adapt to different industries and business environments, making it a solid choice for organizations that want a customizable approach to risk management.
Meanwhile, the HITRUST CSF is specifically aimed at healthcare organizations. It blends NIST principles with other standards to address healthcare-specific risks, compliance requirements, and regulations like HIPAA. One key feature of HITRUST is its certification option, which can showcase a higher level of security and compliance to regulators and business partners.
For healthcare organizations that need a structured and certifiable framework tailored to their industry, HITRUST is a strong option. However, for those seeking a more flexible, non-certifiable framework that works across various sectors, NIST CSF might be a better fit. The choice depends on the organization’s specific goals, regulatory obligations, and available resources.
What are the advantages of automating third-party risk management in healthcare, and how does it improve security and compliance?
Automating third-party risk management in healthcare brings several distinct advantages when compared to traditional manual processes. It boosts efficiency, minimizes human errors, and makes scaling vendor assessments and compliance efforts far simpler. By automating tasks like vendor onboarding, due diligence, and ongoing monitoring, healthcare organizations can save valuable time and redirect their focus to more critical priorities.
Another major benefit is the centralization of risk data. Automation allows for continuous monitoring, making it easier to identify and respond to potential threats quickly. This approach not only enhances security but also ensures that policies and regulatory standards are applied consistently. With automated workflows in place, healthcare providers can better protect sensitive information, reduce the risk of data breaches, and stay compliant in a vendor landscape that’s growing more complex by the day.
