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The Importance of Third-Party Risk Management in Healthcare

Posted on September 8th, 2020

Whether it be to bolster protected health information (PHI) security or to streamline patient care, healthcare providers are increasingly relying on third-party vendors to carry out their day-to-day operations. While working with vendors has undoubted benefits for medical facilities, it can also introduce information security and vendor compliance risks. This is why it is essential that healthcare providers have systems in place that allow them to monitor and manage third-party risk.

With an established risk management system, healthcare organizations are better able to identify and remediate threats within their vendor ecosystem. This helps healthcare facilities maximize their relationships with vendors and ensure that valuable patient information is protected at all times.

Why is third-party risk management important 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 Institutes’ 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 time frame.

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 percent 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 helps healthcare providers prioritize vendor security risk

In order to effectively manage third-party risk, you must monitor third-party vendors on an ongoing basis. With SecurityScorecard’s healthcare solutions, you can accurately assess vendor risk as it relates to healthcare industry standards and regulations. Our security ratings enhance your vendor risk management capabilities by allowing you to monitor vendor cyberhealth across ten risk factor groups. The visibility gained helps you verify the legitimacy of vendor responses, expediting the risk remediation process and strengthening your PHI security.

As cyberthreats evolve and the healthcare networks become more complex, continuous third-party risk monitoring is essential to the security of sensitive patient information. With SecurityScorecard, medical facilities have access to the tools and resources they need to accurately identify and manage vendor risk as it arises.

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