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Managing Third-Party Risk in the Healthcare Sector

he healthcare industry, with its vast amounts of sensitive data, is a prime target for cyber threats. In particular, third-party vendors that handle healthcare information can significantly amplify the risk. This article aims to provide a comprehensive guide on managing third-party risk in the healthcare industry.

Understanding the Significance of Third-Party Risk in Healthcare

The healthcare industry is a treasure trove of valuable data, including patients’ personal identifiable information (PII), protected health information (PHI), and financial details. This data, often deemed the “crown jewels” of personal data, is increasingly attractive to cybercriminals who can use it for fraud, identity theft, or ransomware attacks.

The increased adoption of third-party vendors in the healthcare sector further escalates this risk. These vendors, often responsible for crucial operational and support services, can inadvertently become security weak points, exposing healthcare institutions to cyber threats.

The Threat Landscape in the Healthcare Industry

Data breaches against healthcare organizations have been on the rise. For instance, in 2020, over 1 million people were affected by data breaches in the healthcare sector. The cost of these breaches is also significant, with the average total data breach cost in the healthcare industry reaching $7.13 million in 2020, and rising to $9.41 million in 2021.

The reliance on third-party vendors further exacerbates this threat. For instance, in 2019, a data breach of the American Medical Collection Agency (AMCA), a bill collection service provider, exposed the data of 20 million patients of Quest Diagnostics Inc., Laboratory Corporation of America Holdings, and OPKO Health, Inc.

The Regulatory Landscape in the Healthcare Industry

Healthcare organizations are not only facing cybersecurity threats but also regulatory challenges. Key regulations such as the Health Insurance Portability and Accountability Act (HIPAA), the Health Information Technology for Economic and Clinical Health Act (HITECH), and the Payment Card Industry Data Security Standard (PCI-DSS) mandate stringent data protection measures.

These regulations require healthcare providers and their business associates to implement robust security controls to protect patient data, failure of which can result in significant penalties. As such, it’s crucial for healthcare organizations to ensure that their third-party vendors comply with these regulations.

Steps to Effective Third-Party Risk Management in Healthcare

Effectively managing third-party risk in healthcare requires a systematic approach that includes the following steps:

1. Vendor Identification and Classification: Identifying all vendors and the products or services they provide is the first step. Vendors should be classified based on the level of risk they pose, with high-risk vendors prioritized for risk assessment.

2. Vendor Risk Assessment: Conduct thorough risk assessments for all vendors, focusing particularly on those classified as high-risk. The risk assessment should evaluate the vendor’s security practices, business recovery plans, and disaster recovery plans.

3. Vendor Due Diligence: Carry out comprehensive due diligence to validate the vendor’s risk controls. This typically involves reviewing documentation and information from the vendor, including their data security practices and compliance with relevant laws and industry standards.

4. Contract Negotiation: Ensure that the vendor contract includes specific requirements and provisions that legally obligate the vendor to manage risks. The contract should also include an exit strategy that outlines what should happen if the relationship is terminated.

5. Ongoing Vendor Monitoring: Regularly monitor vendor performance and risks to ensure that the vendor continues to meet the agreed-upon security standards and contract terms. This includes tracking service level agreements, conducting periodic risk reassessments, and staying aware of any identified issues.

6. Vendor Offboarding: If you decide to end a vendor relationship, follow a formal offboarding process that includes notifying the vendor of contract non-renewal, executing the exit plan, and wrapping up any final steps needed to formally end the relationship.

Key Elements of a Robust Third-Party Risk Management Program

A robust third-party risk management program should include:

1. Vendor Access Management: Implement strong security policies to control the access that vendors have to your systems and data.

2. Regular Software Updates and Patches: Ensure that all software used in your organization, including those on medical devices, are regularly updated and patched to minimize security vulnerabilities.

3. Third-Party Script and Plugin Management: Regularly conduct vulnerability scans to identify and mitigate risks associated with third-party scripts and plugins on your websites.

4. Access Control to Personally Identifiable Information (PII): Implement strong access controls and data classification mechanisms to protect PII.

5. Compliance with Regulatory Requirements: Ensure that your organization and its third-party vendors comply with all relevant regulatory requirements, including those stipulated by HIPAA, HITECH, and PCI-DSS.

Leveraging Technology for Third-Party Risk Management

With the growing complexity and scale of third-party risks, leveraging technology can greatly enhance the effectiveness of third-party risk management. Tools like ZenRisk and Venminder provide a comprehensive platform for managing third-party risks, offering features for risk assessment, due diligence, contract management, ongoing monitoring, and more.

These platforms provide a 360-degree view of third-party risks, helping healthcare organizations identify risks, assess vendors, and manage risks effectively. By automating manual processes and facilitating collaboration across the organization, they can significantly reduce the workload associated with third-party risk management, helping healthcare organizations better protect their data and comply with regulatory requirements.

Third Party Risk Management – Concluding thoughts

Managing third-party risk is crucial for healthcare organizations to protect their sensitive data and comply with regulatory requirements. By implementing a robust third-party risk management program, leveraging technology, and fostering a culture of security awareness, healthcare organizations can significantly enhance their cybersecurity posture and mitigate the risks associated with third-party vendors.

Peter Jonathan Wilcheck
Vendor and Supply Management
Tech News Contributor

Post Disclaimer

The information provided in our posts or blogs are for educational and informative purposes only. We do not guarantee the accuracy, completeness or suitability of the information. We do not provide financial or investment advice. Readers should always seek professional advice before making any financial or investment decisions based on the information provided in our content. We will not be held responsible for any losses, damages or consequences that may arise from relying on the information provided in our content.

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