Navigating Third-Party Risks in Healthcare: A Complete Guide

Navigating Third-Party Risks in Healthcare: A Comprehensive Guide

By: Beaconer, Apr 15, 2024

Navigating Third-Party Risks in Healthcare: A Comprehensive Guide

Healthcare institutions increasingly recognize the importance of managing vendor risks to prevent security breaches. In the contemporary healthcare landscape, reliance on third-party vendors for several services, including IT solutions and supply chain logistics, is paramount. As healthcare entities increasingly forge collaborations with external associates, it introduces a plethora of dependencies and potential risks.

The involvement of third parties poses a perennial concern for healthcare organizations, given the critical nature of the industry. Patient safety, data security, and adherence to regulatory requirements are all pivotal aspects susceptible to compromise. Consequently, establishing and maintaining an effective third-party risk management program is not merely advisable but imperative for healthcare organizations.

In recent news, third-party breaches in healthcare have gained attention due to exposing protected health information (PHI) and causing disruptions in patient care. A 2023 survey found that 54% of healthcare IT leaders reported experiencing third-party data breaches, leading to an average remediation cost of $3 million.


What Does Third-Party Risk Management Entail Within the Healthcare Sector?


Third-Party Risk Management (TPRM), also known as Vendor Risk Management, involves conducting thorough evaluations of suppliers, vendors, and business associates to ensure that partnering with them won’t pose an unacceptable level of risk to an organization. While this process typically applies to all vendors across the supply chain, this discussion will focus solely on assessing third-party cybersecurity risk.

From a compliance standpoint, HIPAA regulations mandate that covered entities conduct due diligence on third parties concerning ePHI. However, the Security Rule doesn’t prescribe specific methods for doing so. In addition to HIPAA, a comprehensive risk management program encompasses more than just systems that could expose PHI. For instance, an attack affecting the availability of a critical system could hinder the organization’s ability to deliver patient care effectively.

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What Makes Third Party Risk Management Crucial in the Healthcare Industry?


Given its profound significance to individuals, society, and the global community, the healthcare sector stands as one of the largest and most lucrative industries worldwide. However, it also houses some of the most sensitive and valuable information, including protected health information (PHI). PHI includes a range of information like patients’ medical backgrounds, personal information, and financial data.

third party risk management healthcare

These critical data elements can be exploited by cybercriminals to cause significant harm, both to healthcare providers’ operations and to the affected patients’ well-being. Cyber attackers may engage in outright theft or fraud or leverage sensitive information to extort ransom payments.

Collectively, these factors render healthcare providers and associated entities prime targets for cybercrime. Among the primary avenues of attack on healthcare organizations are vulnerabilities stemming from their relationships with third-party entities.

Adherence to Regulations and Standards


Navigating the complex landscape of regulatory compliance and standards is an essential aspect of managing third-party risks in healthcare. These regulations serve to protect patient data, ensure robust information security, and maintain ethical practices. Healthcare organizations are required to comply with different rules and regulations, like the Health Insurance Portability and Accountability Act (HIPAA) in the United States and the General Data Protection Regulation (GDPR) in the European Union.

Following these regulations not only guarantees legal adherence but also builds trust with patients and partners. Companies can utilize cybersecurity frameworks like NIST & ISO to strengthen their security stance. Meeting these regulations requires strict data protection protocols, frequent audits, and clear reporting systems. Consequently, healthcare providers must ensure that their third-party collaborators adhere to these regulations and stay abreast of evolving standards and requirements.

Addressing Challenges in Third-Party Risk Management in Healthcare


Despite the increasing reliance of healthcare organizations on third-party vendors for key functions, managing associated risks remains a significant challenge.

According to a 2022 report by Kiteworks, 60 percent of surveyed healthcare organizations acknowledged the need for improvements in their third-party risk management and compliance strategies.

There are several factors contributing to the difficulty of success in Third-Party Risk Management (TPRM) programs within healthcare:


Limited Automation

The reliance on manual risk management processes hinders the ability to keep pace with evolving cyber threats and the growing number of digital applications and medical devices in healthcare settings.


Time and Cost Constraints

Conducting thorough vendor risk assessment can be time-consuming and expensive, leading to a situation where only a few organizations can assess all their vendors for potential risks.

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Incomplete Deployment

Critical vendor management controls and processes are often only partially implemented or not implemented at all, leaving gaps in risk mitigation efforts.

These challenges highlight the need for healthcare organizations to invest in more automated and efficient TPRM strategies to effectively mitigate risks associated with third-party relationships. Beaconer’s cloud-native AI platform specifically designed for TPRM proves highly beneficial for healthcare enterprises. Explore its capabilities here.

Implementing Third-Party Risk Management in Healthcare


Managing third-party risk in healthcare encompasses foundational principles like those in other industries.

Every company needs to engage in comprehensive planning for TPRM, whether done internally or through external collaborations. While each entity must tailor its approach to suit its unique needs, there are fundamental aspects common to all TPRM practices.

Successful management of third-party risks includes two crucial components:

1) Evaluation 

This entails collecting and examining information related to the risks linked with your third-party connections. It allows you to create and implement a strategy to effectively reduce these risks.

2) Mitigation

This stage focuses on implementing both short-term and long-term measures to promptly address existing vulnerabilities and prevent future exposures.

Let’s delve further into each aspect, providing comprehensive insights for better understanding.


Third-Party Risk Evaluation

Let’s start the groundwork here. During this phase, a company must gather data about its vendors and their access to digital assets and networks. This includes:

  • Identifying all vendors, suppliers, and third parties with resource access.
  • Categorizing third parties based on internal governance and relationship.
  • Evaluating the cybersecurity infrastructure of all third parties.
  • Recognizing strengths and weaknesses.
  • Identifying current and potential vulnerabilities.
  • Monitoring changes in third-party cybersecurity practices, such as new additions or removals of resources, training, and regulatory compliance.

A thorough TPRM Questionnaire proves crucial in efficient data collection and is often done by creating and distributing it to all potential vendors.


TPRM Questionnaire for Healthcare Organizations

This stage is critical as it involves gathering pertinent information from vendors. It’s important to verify all self-reported data for accuracy, as vendors may inadvertently or deliberately provide inaccurate information.

Ensuring that the data collected through your questionnaire is well-structured for analysis and planning is crucial. This involves making sure the information is consistent and can be organized easily. One approach is to align your question language with established standards like compliance guidelines or security protocols set by organizations such as NIST or ISO.

Beaconer has created a comprehensive TPRM questionnaire. Get it here.

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Third-Party Risk Management Remediation

This is where the real action begins. The initial step in a successful TPRM strategy is the assessment phase, which is vital for effectively addressing identified risks.

It is essential to tailor a TPRM strategy to meet the unique needs of each company. There are fundamental practices that form the basis of all TPRM approaches. During the Remediation phase, companies can:

  • Establish new partnerships with clear expectations.
  • Take immediate actions to minimize exposure to risks.
  • Retrieve and secure compromised resources.
  • Address identified weaknesses with vendors.
  • Strategize for future vendor relationships to prevent future risks.

These fundamental practices are applicable across various industries and company sizes, including healthcare, which may necessitate additional customized measures.


Developing a Comprehensive Approach to TPRM in Healthcare


As highlighted earlier, healthcare institutions face unique challenges regarding third-party risk management due to the sensitive nature of patient information. Hence, tailoring your TPRM strategy to your specific needs becomes imperative.

At the forefront is the onboarding process, which gains heightened importance in the healthcare sector. Given the criticality of safeguarding Protected Health Information (PHI), meticulous upfront screening of clients is essential to mitigate potential risks proactively.

During the assessment and remediation phases, regulatory compliance becomes paramount for healthcare professionals overseeing TPRM.


How Beaconer Assists Healthcare Organizations in Meeting TPRM Necessities


Beaconer provides extensive AI tool for assessing Cyber risks to healthcare organizations, aiding in the identification and mitigation of cybersecurity vulnerabilities while supporting programs for managing third-party risks. The system offers Managed Third-Party Risk Management to assess the security effectiveness of either users or their suppliers. Utilizing the assessment reports, practical workflows can be developed to minimize attack surfaces and bolster security measures.

Specifically tailored for healthcare providers, Beaconer underscores the following aspects:

  • Tailored Assessment: The scope of the third-party risk assessments can be modified according to the requirements of the healthcare organizations.
  • Comprehensive TPRM Questionnaire: Beaconer has developed an extensive questionnaire for Third-Party Risk Management (TPRM) tailored to address all potential risks specific to healthcare companies.
  • Compliance with Healthcare Regulations: Ensure the protection of confidential clinical and patient data against contemporary cyber threats and ransomware attacks.
  • Managed Third Party Risk Management: Beaconer’s solution delivers a tailored TPRM program through its automated assessment platform, easing compliance responsibilities and ensuring vendors meet security, privacy, and other standards

Author Bio

Nagaraj Kuppuswamy

Nagaraj Kuppuswamy is the Co-founder and CEO of Beaconer, an esteemed enterprise specializing in managed third-party risk using the cloud native AI based solution. With an extensive portfolio of accolades and industry certifications, Nagaraj stands out as a seasoned expert, boasting over 16 years of dedicated involvement in the field of Cybersecurity. Throughout the course of their career, he has predominantly focused on elevating the realm of third-party risk assessment.


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