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Protecting Healthcare Data with Vendor Risk Management

4 min read
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There’s no question that healthcare is a booming industry. According to the National Health Expenditure Accounts report, healthcare spending grew 9.7% in 2020, reaching $4.1 trillion or $12,530 per person. Overall, this spending accounted for 19.7% of the United State's gross domestic product.

New and innovative business models have helped healthcare organizations provide improved and expanded services. However, improvement and innovation often bring expanded risks as well. Electronic health records (EHRs), patient communications and automated billing are just a few products and services requiring access to sensitive patient information. Cybercriminals continue to exploit vendor vulnerabilities and weaknesses in information systems, system security procedures and internal controls. According to the U.S. Department of Health, in 2021, these vulnerabilities resulted in over 45 million patient records being compromised.

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Rising Costs of Healthcare Data Breaches

The IBM Security 2021 Cost of a Data Breach Report states that healthcare data breaches are the costliest of all cybersecurity incidents, with the average cost increasing by $2 million to $9.42 million per incident. Ransomware attacks cost an average of $4.62 million per incident. So, who’s bearing the costs of all these breaches? One might assume if the vendor has a data breach, the vendor is liable, right? Well, not exactly. As one can imagine, it's not that simple. If your contract is structured correctly and the vendor is adequately insured, the cost of mitigation may be covered. Still, insurance coverage often proves insufficient, resulting in shifting mitigation costs to the healthcare provider.

Cost is only part of the problem. Along with the financial costs, healthcare providers can suffer reputational damage and loss of patient trust. While HIPAA addresses the matters of patient privacy and data, other types of vendor risk can seriously impact your organization if left unchecked.

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Protecting Your Organization Through Vendor Risk Management

The question remains: How can healthcare providers reduce their potential exposure to cybercrime, financial penalties, lost patient trust, reputational damage and other harmful events resulting from their vendor relationships?”


The answer lies in effective vendor risk management. However, for many healthcare providers, managing vendor risk can be confusing and complicated. The lingo can be opaque, and the regulations seem to constantly change. Still, as the old saying goes, a journey of a thousand miles begins with a single step.

Let's talk about two important steps every healthcare organization can take to get started:
  1. Know who your vendors are and what they do. Before any organization dives headfirst into vendor risk management, it’s essential to identify all vendors with whom they do business and the products or services they provide. Accounts payable is often a good starting point. Ensure that you’ve captured all companies, entities and consultants billing your organization. Once you have that data, it’s vital to identify the vendor products or services provided to you or your patients. This can be accomplished by reviewing vendor agreements, contracts or purchase orders. If you can't locate this information, ask the vendor to supply it.
  2. Identify your high-risk vendors. Most importantly, your organization will need to identify vendors who require access to patient data as part of the product or service they provide. Those vendors, in particular, become "covered entities" or "business associates" under HIPAA rules, which adds complexity to the vendor risk management mix. While some vendors have access to patient information or other sensitive data, it may not be as apparent for other types of vendors. For example, think about that social media or marketing consultant who might have contact information for your patients. And, there may be others who don't seem to pose much risk at first glance. Remember, you may need to dig deep and consider all the job functions of consultants and other vendors.

It's worth noting that while vendors covered under HIPAA will get the lion's share of attention, you likely have other vendors that need your consideration too. For example, many healthcare practices depend on vendors for critical medical supplies, medication, sanitized equipment or other essential products and services that don't require access to patient information. If these products or services are not provided correctly, there could be dire consequences.

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Heading In the Right Direction

When you have your complete vendor inventory and have determined which of your vendors are covered under HIPAA rules, congratulations! You've completed those essential first steps of the vendor risk management journey.

Creating a complete vendor inventory is an important starting point in the process, but there are many more steps to take. Developing an effective and robust vendor risk management program takes time and effort but is definitely worthwhile. Effective vendor risk management can help prevent any number of costly and damaging situations from happening to your organization and its patients.

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