How Vendor Risk Management Impacts Your Reputation in Healthcare

It's no secret that cyberattacks in the healthcare industry have become commonplace. According to the HIPAA Journal, during a single month (January 2022), 50 different data breaches compromised over 2.3 million healthcare records. Also, per current estimates, nearly one in three Americans have had their medical information exposed due to data breaches. It's not surprising that security breaches cost healthcare organizations an average of $9.42 million.

Investing in Patient Trust

Effective medicine requires a bit of psychology. Savvy healthcare providers know it's their job to deliver medical services, but they also understand that the business requires them to provide emotional support to patients and their families. Genuine care and concern for patient needs can help ease some of the most challenging and trying times in patients’ lives. Simply put, providing high-quality patient care requires an investment in patient trust. Healthcare organizations must realize that patient trust and their reputations go hand in hand. Caring for patients and earning their trust takes many forms, from providing an empathetic and supportive bedside manner to ensuring the existence of robust data privacy and protection measures.

Reputation Is Everything

Rightly or wrongly, when data breaches happen due to an organization's vendors, patients and other stakeholders often blame the healthcare provider. Sixty-six percent (66%) of Semafone survey respondents say they would leave a provider if their information was compromised in a data breach.

Reputational damage reverberates through the organization. As such, nine out of 10 S&P 500 companies cite reputation as a material risk in their public filings. Revenues can sink due to the failure to manage reputational risk. The problem can then be compounded by a higher cost of capital, loss of personnel, lost contracts, financial restructurings and a decline in the patients' experience.

According to the Ponemon Institute, it’s estimated that the average hospital has over 1,300 vendors and each of those vendors has the potential to impact a healthcare organization’s reputation positively or negatively.

This is why healthcare organizations should be actively embracing vendor risk management.

Protecting Against Complacency

Some organizations may have a false sense of security regarding vendor risk management, believing that their efforts to maintain HIPAA compliance are enough. However, in truth, HIPAA is only part of the picture. In actuality, vendor risk management practices strengthen your HIPAA compliance efforts, while also addressing the many vendors that don’t access patient data. Don't forget the influence those vendors could have on your reputation, which is significant if the product or service they provide negatively impacts your patients. Examples include medical equipment, medication, sanitary and protective clothing, testing supplies, assistive devices and fixtures, health and safety systems and even nutrition and food products.

A Prescription for Patient Trust

You can expect better reputational outcomes and improved patient trust when your healthcare organization expands its vendor risk identification, analysis and management beyond HIPAA compliance. This means committing to formalized vendor risk management for all your vendor relationships.

Thorough and effective vendor risk management practices should include the following:

• Inherent risk assessment: Evaluate the product or service and the vendor relationship to determine the types of risks and the amount of risk present.
• Criticality determination: Determine how critical the vendor relationship is your organization's ability to maintain its operations and service its patients. A critical vendor might be the company that maintains your backup generators.
• Risk-based due diligence: Perform appropriate due diligence based on the risk of the product or service. This process exposes any gaps or issues and ensures the vendor has the appropriate controls, licenses, supply chain practices, certifications, etc.
• Contract management: Ensure that vendor contracts, pricing agreements, purchase orders or other legal agreements are actively negotiated and managed. This means discouraging auto renewals or evergreen contracts and providing enough time to renegotiate or terminate existing contracts.
• Ongoing risk and performance monitoring: Periodically review the vendor's risk profile, controls, certifications, licenses and other relevant items to ensure you’re identifying any new or emerging risks. Regular performance monitoring should validate that the vendor performs within the contract requirements and address any declining or poor performance ASAP.
• Termination: Establish a process that ensures your organization considers any contractual requirements, including notice periods, return or destruction of data or assets and record keeping requirements. The process should also ensure that vendor access, whether electronic or physical, is terminated.

There are so many ways healthcare organizations must care for their patients. Vendor risk management isn’t always the most apparent component of patient safety and care, but that doesn't mean it isn't essential. An investment in vendor risk management is an investment in patient trust. And, strong patient trust can do a lot to keep your organization's reputation healthy in the long run.