Risk Management in Healthcare: Definition & It’s Importance

The healthcare industry is no exception to the rapid levels of transformation we’re seeing across multiple industries right now. As more facilities begin to leverage electronic health records (EHRs) and internet-connected medical devices for patient care, organizations are becoming more reliant on advanced technologies.

While these changes have helped advance patient care in many ways, they have also introduced the healthcare sector to greater levels of risk.

As a result, cybersecurity is more important than ever for effective healthcare risk management. Let’s take a deeper look at key considerations today’s healthcare organizations should keep in mind as they build out a risk management system.

What is healthcare risk management?

Healthcare risk management refers to the process of identifying, analyzing, and implementing systems and processes to protect critical assets from a range of potential risks. Due to the confidential nature of healthcare data, effective risk management in the industry can be the difference between life and death, thus, healthcare organizations cannot afford to overlook this critical process.

What is the importance of risk management in healthcare?

Healthcare risk management is crucial as the industry undergoes a rapid transformation as a result of emerging medical technologies and mounting patient data privacy concerns. Of the many reasons for implementing cybersecurity risk management systems, the three overarching objectives for risk management in healthcare are:

• Safeguard patient data and records: Healthcare organizations have access to sensitive data, which if mishandled, could be potentially life-threatening to a patient. The Health Insurance Portability and Accountability Act (HIPAA) lays out requirements and guidelines for organizations in the industry to follow to ensure that patient data is not being put at risk.

• Identify network vulnerabilities: Cybersecurity is a growing concern for healthcare organizations and should be considered a key component of any risk management system. Especially as many are increasingly adopting new technologies and undergoing digital transformation, having a plan in place to identify and monitor network vulnerabilities is a must.

• Ensuring business continuity and patient safety: In the event of an attack, healthcare risk management helps organizations return to business as usual as quickly as possible. By taking the time now to prepare the various scenarios, you can help ensure that your organization is prepared for what may come tomorrow.

5 considerations for an effective healthcare risk management system

As healthcare organizations work to build out their cybersecurity risk management systems, there are key components for the industry to consider such as risk assessments, vendor risk management, and regulatory compliance.

Let’s explore the 5 things to consider when getting started:

1. Identify potential risks

The first step to building a healthcare risk management system is to identify all potential risks or vulnerabilities within your organization’s network. This allows you to gain a more complete view of your potential attack surface so you can begin determining your organizational risk tolerance and risk appetite.

Another way that security teams can gain insight into potential threats is through cybersecurity threat intelligence. Threat intelligence refers to data that can be used to inform security teams about cyber threats from the past, present, and future. By leveraging this information, organizations can gain insight into threat actors’ motivations or techniques, allowing them to proactively prepare for both emerging and advancing threats.

2. Analyze and classify the risk

As previously mentioned, it’s important to define your organization’s risk tolerance and risk appetite levels, since this is what will be used as the basis of criteria when evaluating risks. After your organization has identified any possible threats or vulnerabilities, the next step is to analyze and classify risks based on the likelihood that they will occur as well as the potential impact of a breach on your business operations.

Your organization will be faced with many threats, meaning it’s likely that you will not be able to take on them all. For this reason, risk prioritization is critical. Once you have determined the relevancy of each threat, your team can begin to prioritize risks and determine the best course of action for addressing the largest issues that would cause the greatest disruption first.

3. Assess and establish security controls

After your team has prioritized risks, the next step is to assess your organization’s existing security controls in order to identify any gaps that need to be closed. With access to sensitive patient data and other critical assets, healthcare organizations need to be able to prove that they are taking the necessary steps to protect it.

By evaluating existing controls, and establishing new ones to address weak spots, your organization can prove that you are doing the work needed to keep confidential patient security data safe. At this point in the process, it is also important to begin building incident response plans that clearly outline each person’s responsibilities should a data breach or attack occur.

4. Third-party risk management

Healthcare organizations are increasingly employing the assistance of third-party vendors to streamline patient care and optimize operational efficiencies. While these vendors are likely to have access to confidential protected health information (PHI), they may not be following the same stringent security controls that your organization has put in place for its network.

This is why it’s imperative that your team has comprehensive visibility into the cybersecurity posture of your healthcare organization’s third-party vendors. With the impact of a third-party data breach growing, it’s more important than ever to have a complete, outside-in look at your entire IT ecosystem.

5. Continuously monitor risks and compliance

The cyber threat landscape is constantly evolving, growing both in number and severity. The only way to effectively maintain strong cyber hygiene is to continuously monitor your entire ecosystem’s network. This allows your organization to identify and respond to threats as they arise, which in turn helps your security team stay one step ahead of cybercriminals.

Industry-specific compliance regulations such as HIPAA, HHS, and PCI are also important considerations for an effective healthcare risk management system. To avoid falling out of compliance, your organization should continuously demonstrate the practices and controls that have been implemented to maintain compliance and keep patient data protected.

The Importance of Third-Party Risk Management in Healthcare

As the healthcare industry continues to undergo digital transformation, medical facilities with inadequate or non-existent risk management systems become subject to third-party liabilities. This is highlighted in the Ponemon Institute’s Are Risk Assessments Failing to Secure the Third-Party Healthcare Ecosystem report, which found that 54 percent of third-party respondents had at least one data breach involving PHI over the last two years. The same report also found that 41 percent of third-party respondents reported having six or more data breaches during the same two-year period.

Due to the value of patient information, the healthcare industry is a consistent target for cybercriminals. In 2019, the healthcare sector saw the highest number of incidents by industry, with 41% of healthcare facilities reporting a breach. Vendors often have access to PHI and other valuable data but follow less stringent security and compliance standards when compared to healthcare facilities, meaning that without proper risk management, they are vulnerable to compromise.

How does a third-party vendor risk management program work for healthcare organizations?

The goal of a third-party risk management program is to provide organizations with a system that allows them to perform effective due diligence across their entire vendor ecosystem. This is typically done through the use of vendor questionnaires. Standard assessment questionnaires assess different areas of vendor security with regard to industry regulations and trends. These help healthcare providers gauge individual vendor risk by providing insight into their security posture.

To avoid recycled answers, you can create custom questionnaires that assess vendors on an individual basis. Doing so will allow you to perform more in-depth vendor evaluations, but also requires additional resources and time.

When designing vendor risk management programs, make sure that the systems you implement to monitor risk align with your organization’s maturity level. If a risk management program is too complex, it can hamper assessments and create evaluation bottlenecks.

The questions asked during assessments should provide information about vendors’ data security practices as well as their business continuity and disaster recovery plans. In addition, you will want to ask about vendor compliance regulations such as HIPAA and PCI DSS to ensure that relevant regulations are being followed. Some examples of questions you can ask include:

• How often does your organization conduct an internal risk analysis?
• Do you have a process for authorizing access to PHI?
• Do you have mandatory security awareness employee training?
• Do you have a system in place for managing and monitoring passwords?

How to conduct a third-party risk assessment and protect PHI

For a third-party risk management program to provide value to your healthcare organization, it is important that you build-in effective risk assessments. Below are four steps you can follow to develop comprehensive risk assessments:

1. Determine your risk criteria

Before you can conduct a risk assessment, you first need to define the criteria on which you will evaluate risk. Determining your organization’s risk appetite and risk tolerance levels will help you create criteria for evaluation. Risk appetite is the measure of how much risk your organization is willing to take on in order to achieve your goals. Conversely, risk tolerance is the measure of how much risk your organization can take on before becoming unsustainable. For healthcare providers, these two measurements will primarily focus on PHI and compliance risk.

2. Classify your vendors

The next step in the assessment process is to classify vendors. Each vendor you work with poses different levels of risk to your organization, so it is important that you classify them based on your risk criteria. Doing so will streamline the assessment process by helping you determine how often individual vendors need to be evaluated.

In addition to the type of risk they pose, vendors can also be classified based on the data they handle. If a vendor only provides support on network operations and handles no PHI, then they are of lower risk. On the other hand, if a vendor assists with application management, they will likely have access to patient information, meaning they pose a higher risk to your organization.

3. Administer the assessment

Once you have classified your vendors, you can then administer the assessment. These can be done on-site or remotely through the use of questionnaires. On-site assessments yield the most accurate results but are resource-intensive. If you have a limited budget, it is recommended that you only perform on-site assessments for high-risk vendors. Questionnaires are easier to administer, but it can be difficult to verify the legitimacy of answers. This is why it is important to spend time creating clear and specific questions in order to improve the quality of vendor responses.

4. Address the vendor risk

The final step in the assessment process is to address identified vendor risks. Once risks have been determined, work with your vendors to create a remediation plan. This should include a list of steps vendors can take to address identified risks as well as a timeline for remediation. These plans will vary depending on the severity of the risk and the number of issues identified. You should also create a system to track vendor progress as they work to address risks. This can be done by conducting weekly calls where vendors update you on the status of their remediation efforts.

How SecurityScorecard enables comprehensive healthcare risk management

SecurityScorecard enables organizations in the healthcare sector to gain a comprehensive view across their IT ecosystem, including third- and fourth-party vendors. With the ability to see what a hacker sees, security teams can discover, monitor, and report on cyber health. This combined with advanced cybersecurity threat intelligence and our industry-standard security ratings enables the proactive protection of critical data and assets within a network.

The impact of a data breach or attack on a healthcare organization goes beyond financial or reputational harm, as human lives may be at stake. SecurityScorecard enables risk management for the healthcare sector, helping to ensure that patient health and wellness are always kept top of mind.