Modern healthcare heavily relies on third-party vendors for various services such as IT solutions, supply chain logistics, and more. As healthcare organizations increasingly collaborate with external entities as business associates, it creates several dependencies and risks. The risk of third-party involvement is a constant concern for healthcare organizations, with high stakes. Patient safety, data security, and regulatory compliance are all crucial factors that are at risk. Therefore, having an effective third-party risk management program is not just a matter of best practice but of utmost necessity.

This blog post is a complete guide to third-party risk management (TPRM) in healthcare. It includes a detailed analysis of the challenges, strategies, and best practices for ensuring the partnerships healthcare organizations engage in do not compromise their operational integrity, patient privacy, or legal obligations. Our goal is to provide healthcare professionals, IT security experts, and administrative personnel with the necessary tools and insights to navigate this critical aspect of healthcare management.

The Landscape of TPRM in the Healthcare Industry

The healthcare industry is constantly evolving, and one of its critical concerns is Third-Party Risk Management (TPRM). TPRM involves identifying, analyzing, and controlling risks associated with external entities that provide services or products to an organization. The TPRM landscape in healthcare includes the many roles third parties play and the regulations governing those relationships. Any healthcare entity needs to understand this landscape to safeguard its operations, reputation, and, most importantly, the well-being of its patients.

Third-Party Roles in Healthcare

Third-party partnerships are crucial in the healthcare industry. They offer essential services, including clinical support, data management, and supply chain logistics. However, such partnerships also come with inherent risks. Every third-party agreement adds to healthcare providers' operational, financial, and reputational risks.

For instance, a vendor handling electronic health records (EHR) must prioritize data security due to the sensitive nature of patient information. The interconnected ecosystem of these relationships means that a failure or breach in one area can have far-reaching consequences, underscoring the importance of effective risk management strategies in this sector.

Regulatory Compliance and Standards

Navigating the complex world of regulatory compliance and standards is a challenging yet necessary part of third-party risk management in healthcare. These regulations are in place to safeguard patient data, ensure solid information security, and uphold ethical practices. Healthcare organizations must comply with many regulations, such as the Health Insurance Portability and Accountability Act (HIPAA) in the United States and the General Data Protection Regulation (GDPR) in the European Union.

Compliance with these regulations ensures legal adherence and helps build trust with patients and partners. Additionally, organizations can utilize cybersecurity frameworks like NIST to increase their security posture. These regulations require strict data protection measures, frequent audits, and transparent reporting mechanisms. As a result, healthcare providers must ensure that their third-party partners comply with these regulations and stay up-to-date on evolving standards and regulations.

Recommended Reading: Top 8 Healthcare Cybersecurity Regulations and Frameworks

Notable TPRM Incidents in Healthcare

The healthcare industry has experienced significant incidents due to poor third-party risk management. Each of these incidents serves as a stark reminder of the risks involved in the industry and the need for robust risk management practices. As a result, it is crucial to have continuous monitoring, regular audits, and a comprehensive incident response plan that includes third-party vendors in the broader security architecture of the healthcare entity.

Some notable third-party incidents in healthcare include the following:

  • Quest Diagnostics Data Breach, 2019: Quest Diagnostics, a US blood testing provider, reported a potential compromise of the personal data of 11.9 million patients. The breach happened through a third-party billing firm, AMCA, which had unauthorized access to its payment system. Information exposed included personal, financial, and medical details.
  • Anthem Inc. Data Breach, 2015: In 2015, hackers infiltrated Anthem Inc., a major health insurance company, and exposed the personal information of nearly 78.8 million customers. The breach was traced back to a third-party service provider, where hackers used a phishing email to install malware.
  • Community Health Systems Data Breach, 2014: In 2014, Community Health Systems, one of the largest hospital networks in the United States, suffered a data breach that affected 4.5 million patients. Hackers exploited network vulnerabilities traced back to a third-party vendor's credentials. The exposed patient data included names, Social Security numbers, addresses, birthdates, and phone numbers.

Risk Identification and Assessment

Third-Party Risk Management is crucial in ensuring security in the healthcare industry. Identifying and assessing risks is the first step in developing a strong security strategy. Discovering, evaluating, and understanding the risk associated with third-party relationships is critical for maintaining operational integrity and safeguarding patient data, especially in a sensitive and heavily regulated field like healthcare. This includes the types of risks, the unique cybersecurity challenges faced by the healthcare industry, and the methods used to evaluate these risks effectively.

Identifying Potential Third-Party Risks

Identifying potential risks associated with third-party vendors is the first and most crucial step in third-party risk management. Identifying these risks is crucial for proactive management in the healthcare industry, where patient information and care are paramount.

The risks associated with third-party vendors in healthcare can be varied and diverse, ranging from high-risk data breaches and non-compliance with regulations to operational risks and damage to the organization's reputation. Key areas of risk include:

  • Data Security
  • Compliance with Healthcare Standards (resulting in financial risk for non-compliance)
  • Continuity of Critical Services

To identify and manage these risks, healthcare organizations must understand the nature of the vendor's services, the data they access, and the potential criticality of their actions or failures on the organization's operations and obligations.

Cybersecurity Challenges in Healthcare

The healthcare industry is highly susceptible to cybersecurity risks, making evaluating potential digital risks in third-party relationships crucial. Cybercriminals frequently target healthcare organizations due to the large amount of protected health information (PHI) they possess. Common cybersecurity challenges include:

Even if a hospital or healthcare facility has secure cybersecurity measures, third-party vendors can become vulnerable—providing attackers with an entry point into otherwise secure systems. The interconnectedness of digital healthcare services further complicates this issue. If one system is breached, it can have ripple effects across multiple platforms and services. Therefore, it is crucial to understand third-party security to maintain patient trust and comply with data protection regulations.

Risk Assessment Methods

Effective vendor risk assessment is crucial for identifying and quantifying the risks associated with third-party vendors in the healthcare industry. The risk assessment process occurs throughout the vendor lifecycle, from onboarding through offboarding, and involves a systematic approach, including identifying, analyzing, and evaluating risks. Organizations can also avoid emerging threats by keeping up with the latest cybersecurity trends and continuously updating risk assessment methodologies in their TPRM program.

Other third-party risk assessment methods include:

Managing Third-Party Risks

Effectively managing risks associated with third-party vendors helps maintain secure and efficient healthcare operations. There are various essential steps and industry standards to risk management processes in healthcare, outlined below. By meticulously navigating these areas, healthcare organizations can mitigate potential risks and strengthen their security posture.

Due Diligence in Onboarding Third Parties

Managing third-party risks in healthcare starts at the beginning of the vendor lifecycle, with a rigorous onboarding process that thoroughly evaluates the new vendor’s compliance records, financial health, security controls, and business practices. Conducting due diligence is the first line of defense against third-party risks. It should also include reviewing the vendor's history of data breaches or security incidents, assessing their data handling and storage practices, and understanding their incident response capabilities.

Additionally, evaluating their adherence to healthcare regulations, like HIPAA, indicates their regulatory and compliance risk level. The purpose of comprehensive due diligence during onboarding is to gain a broad understanding of the vendor’s potential risks and their ability to manage them effectively before entering into any agreement.

Vendor Risk Management Frameworks

Healthcare organizations can manage and mitigate third-party risks by implementing a Vendor Risk Management framework. This framework provides a structured approach to assessing, monitoring, and mitigating risks throughout the vendor relationship. The key components of this framework include conducting regular risk assessments, continuous monitoring for compliance and security posture, and clearly defining contractual terms like service level agreements (SLAs) that outline security and data management responsibilities.

Popular frameworks include:

Whichever framework you select should be adaptable to adjust as new risks arise or regulatory requirements change. Integrating technology solutions, such as automated risk assessment tools and questionnaires, can enhance the efficiency and effectiveness of the framework. Regular staff training involved in third-party management is also essential to ensure they know current best practices and regulatory requirements.

Explore our free Vendor Risk Management Framework template here >

Vendor Relationship Management

Effective Vendor Relationship Management is crucial for Third-Party Risk Management in healthcare. This goes beyond mere oversight and involves building collaborative and transparent relationships with vendors. The aim is to ensure mutual understanding and alignment with healthcare-specific requirements and standards.

Effective management includes regular communication, setting clear expectations regarding compliance and security, and fostering a partnership that encourages vendors to manage and report on risks proactively. It's about creating a dynamic where vendors are not just service providers but are also active participants in the healthcare organization's risk management ecosystem.

By nurturing these relationships, healthcare organizations can create a more responsive and adaptable TPRM process, ensuring that both parties work cohesively towards safeguarding patient data and maintaining service excellence.

Best Practices for Data Security and Privacy

Data security and privacy are crucial for any organization that deals with third-party risk, but even more so for the healthcare industry. The sheer amount of sensitive data and protected health information in even the smallest healthcare organization makes data security and privacy a top concern. To ensure data security and privacy in third-party relationships, healthcare organizations can utilize the following strategies:

Monitoring and Responding to Third-Party Risks

Effective monitoring and incident response mechanisms are vital in managing Third-Party Risk Management in healthcare. Remaining vigilant and adopting proactive strategies to manage third-party risks is extremely important for any healthcare organization. Practices such as continuous monitoring and developing robust incident response and breach management strategies help organizations feel more secure should they encounter a third-party incident.

Ultimately, these practices are essential for promptly detecting, responding to, and mitigating the impact of any security incidents or breaches, thereby protecting healthcare operations and patient data.

Risks and Vulnerability Management

Healthcare organizations are taking proactive steps to mitigate third-party risks. They are identifying risks and vulnerabilities and implementing strategies to remediate them before they turn into threats. This multi-faceted approach involves regular and rigorous patch management to address software vulnerabilities and enforce robust compliance and security standards for third-party vendors.

Healthcare organizations are also leveraging advanced technologies, such as automated monitoring systems and AI-driven anomaly detection tools, to stay ahead of potential risks. Ongoing staff training and emergency preparedness drills ensure readiness and resilience. These measures help to patch existing vulnerabilities and build a more secure and responsive infrastructure capable of preemptively addressing risks in the evolving healthcare landscape.

Continuous Monitoring

Continuous monitoring ensures the ongoing security and compliance of third-party vendors in the healthcare sector. The cybersecurity landscape of healthcare can shift day to day, and risks can evolve rapidly. Therefore, continuous monitoring of third-party vendors is essential.

This involves regularly assessing the vendor's compliance with agreed-upon security standards and contractual obligations. Monitoring can include automation streamlining tools, periodic security audits, review of compliance reports, and real-time surveillance of network activities. It's also important to stay aware of changes in the vendor's business environment, such as mergers, acquisitions, or leadership changes, which could impact their risk profile. Regular communication with vendors and stakeholders to discuss any concerns or changes in risk status is equally important.

Incident Response and Breach Management Strategies

The most effective way to prevent data breaches is through proper preparation. However, even the most prepared organizations must be equipped to handle third-party data breaches and other security incidents.

A well-defined incident response and breach management strategy can help effectively address any security incidents involving third-party vendors in the healthcare industry. An effective incident response strategy should include the following:

  • Roles, responsibilities, and actions that need to be taken in the event of a security breach
  • Immediate steps for containment
  • Assessment of the incident’s impact
  • Notification procedures (internal and external)
  • Remediation measures
  • Communication channels with third-party vendors for quick information exchange

The strategy should also include post-incident analysis to identify lessons learned and opportunities for improving security practices. Regular drills and simulations involving internal teams and third-party vendors can help ensure readiness and refine the response strategy. Additionally, having a breach management plan that complies with legal and regulatory requirements, such as HIPAA's breach notification rules, is critical for maintaining legal compliance and patient trust.

How UpGuard Helps Healthcare Organizations Meet TPRM Requirements

UpGuard offers healthcare organizations comprehensive risk assessment tools to identify and mitigate potential cybersecurity vulnerabilities and support for third-party risk management programs. The platform provides two options, BreachSight and Vendor Risk, to evaluate the security performance of users or their vendors. Based on the assessment results, practical workflows can be developed to reduce the attack surfaces and enhance security.

For healthcare providers specifically, UpGuard is an excellent option that also emphasizes the following:

  • Continuous Monitoring: Conduct continuous cyber and business monitoring to reveal potential vendor risks and inform prioritization and risk awareness
  • Healthcare Regulatory Compliance: Protect confidential clinical and patient data from modern cyber threats and ransomware
  • Patient Data Protection: Healthcare organizations are responsible for safeguarding valuable patient data, making it a target for cyber attackers
  • Vendor Risk Management: UpGuard helps you assess, remediate, and manage third-party risks across your healthcare vendors

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