Published on: Jun 24, 2021
How to Manage Third-Party Risk in Healthcare Effectively
For many industries, it has become common place for services to be outsourced to external organizations, and healthcare is no exception. While this process can be significantly more efficient, this support mechanism entails additional third-party risks which even the most vigilant company cannot always account for. Whether tasked with managing third-party risk in smaller healthcare facilities or expansive hospitals and research centers, IT and security professionals worldwide face similar challenges when equipped with insufficient tools and processes. In a continuously evolving landscape of security frameworks and risks, effective third-party risk management is quickly becoming a priority.
Third-Party Risks
Over the last decade, there has been roughly 2550 healthcare data breaches targeting millions of records. Of these, 30% of all large data breaches target hospitals, with 34% of all data breaches occurring from unauthorized access or disclosure.
Let's look into this more closely.
Even when security measures are implemented by healthcare institutions, there are still many third parties with access to users' data. 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.
There's more. A research report conducted by Ponemon Institute indicated vendor risks cost $23.7 billion annually. The research also shows that about 72% of the respondents believe that relying on third-party internet-based medical devices is risky. While these statistics may come as a surprise to some, it is evident that third-party risk management can be improved across the industry.
Recent studies further highlight the scale and complexity of third-party risk in healthcare:
55% of healthcare organizations experienced a third-party data breach in the previous 12 months.
70% of leaders at organizations with third-party breaches attributed the incident to giving too much privileged access to outside parties.
65% of healthcare leaders say their IT systems are not making third-party security and access a top priority.
59% of organizations fail to revoke third-party access credentials when appropriate, leaving the door open to potential threats.
49% maintain a comprehensive inventory of all third parties with access to their network, indicating that more than half operate without a complete picture of their risk landscape.
45% can identify all third parties with access to their most sensitive data.
50% of respondents across all industries describe managing third-party security as “overwhelming” and a drain on internal resources.
There are many ways vendors render themselves vulnerable to data breaches, potentially exposing personally identifiable information. Some scenarios are given below:
Poor access control across vendors
Failure to assess risk
Weak data protection controls such as encryption, hashing, etc.
Lack of awareness regarding system activity leading to delayed breach notifications
Lack of training
Failure for managing change
Failure to implement vulnerability patches
Now as an Information Security officer responsible for the security and integrity of your organization, how can you go about managing third-party risk as a healthcare provider?
Consequences of Failing to Revoke Third-Party Access
But what happens if third-party access credentials aren't promptly revoked when they're no longer needed? Unfortunately, neglecting this essential step leaves organizations strikingly vulnerable.
For starters, if a vendor's access remains active after their relationship ends or their role changes, the organization is essentially propping open a door for unauthorized entry. This lingering access can lead to significant consequences, including unintentional data exposure or misuse by former vendors, contractors, or even disgruntled employees. Not surprisingly, this oversight is a frequent factor in healthcare data breaches—many facilities discover too late that a third party's credentials provided a pathway for sensitive information to be compromised.
In fact, more than half of healthcare organizations have reported suffering a breach linked to a third party within a single year. It's a cautionary tale: failing to revoke credentials in a timely manner doesn't just risk regulatory headaches; it can have real financial and reputational repercussions. This underscores the importance of continuous monitoring and proactive credential management in reducing third-party risk.
Operational Impacts of Third-Party Service Disruptions
So, beyond just the data, what happens if a critical third-party vendor falters? Quite a lot, actually. Many vendors are intricately connected to hospital networks—sometimes through VPN connections, remote desktop tools, or direct application integrations. If a vendor’s security is breached, attackers may be able to use those connections as a launching pad to access internal systems, potentially bypassing a hospital’s defensive walls altogether.
But it's not just about data loss. Take, for example, a third-party laundry service or a vendor managing medical scheduling software. If these providers experience a cyberattack or even a service outage unrelated to hacking, the fallout can go far beyond patient information exposure:
Disrupted Scheduling: If a third-party appointment or surgery scheduling system goes offline, it could lead to major delays, confusion, and even canceled procedures—affecting not just administrative staff, but patients in need of urgent care.
Supply Chain Stoppages: Services like laundry, equipment sterilization, or food delivery may seem tangential, but a hiccup in these outsourced operations can quickly ripple outwards, leaving critical functions, operating rooms, or patient meals in limbo.
Operational Paralysis: In some cases, clinical workflows or essential business processes grind to a halt, all because a third-party system is unavailable—even if no protected health information (PHI) is directly compromised.
In short, when evaluating third-party risk, it's important to look beyond just the risk to data. Operational continuity must be a top concern, since a seemingly minor disruption from a vendor can easily escalate into a widespread crisis for the organization.
Unique Third-Party Risks in Virtual Care and Telehealth Solutions
The surge in virtual care and telehealth services has introduced a new set of third-party risk challenges that go well beyond traditional hospital walls. As healthcare providers extend care into patients’ homes using remote monitoring devices, video consults, and cloud-based platforms, they increasingly rely on vendors and service providers to deliver these essential services.
This expanded ecosystem brings several unique risks:
Increase in Connected Devices and Platforms: Remote monitoring tools and telehealth platforms require constant data exchange between patients, providers, and vendors. Each new integration or device expands the attack surface, often without full visibility into how these third parties handle data security.
Rapid Vendor Adoption: Pressures from the COVID-19 pandemic and workforce shortages saw many organizations quickly onboard new vendors to keep pace with virtual care needs. This swift adoption sometimes outpaces robust due diligence or security assessment processes, leaving gaps in risk management.
Continuous Compliance Concerns: Third-party telehealth solutions must comply with healthcare regulations such as HIPAA, but rapid evolution of these platforms can make it difficult to ensure all parties are aligned with current standards and best practices.
Contract and Assessment Complexities: As organizations juggle dozens of vendor relationships, negotiating contracts to enforce high security standards and maintaining detailed assessments can become overwhelming—especially as technology and requirements frequently change.
Monitoring and Incident Response Challenges: With more remote care comes greater difficulty in monitoring third-party systems for breaches, delayed detection of suspicious activity, and complications with breach notification protocols—further underscoring the need for mature, proactive vendor management programs.
Managing these risks often means investing in continuous monitoring solutions, thorough assessment routines, and clear contractual obligations. Ultimately, as healthcare becomes increasingly digital and distributed, organizations must stay vigilant about third-party risks—not just to protect data, but also to safeguard patient health and wellbeing.
Third-Party Risk Management
Third-Party Risk Management (TPRM) is defined by the Information Systems Audit and Control Association (ISACA) as "The process of analyzing and controlling risks presented to your company, your data, your operations and your finances by parties OTHER than your own company.
The goal of TPRM is to provide healthcare organizations with a system to perform effective due diligence across their complete vendor ecosystem. A successful TPRM strategy accounts for all current and potential weaknesses in your vendors, suppliers and any additional third party with access to your systems. For developing or improving an existing TPRM, below are some steps you can follow:
Onboarding: TPRM does not only apply to existing third-party vendors but also to any prospective business relationships. This is usually done with third-party questionnaires to help set expectations and smooth operations going forward.
Determine Risk Criteria: Determine the risk appetite and risk tolerance of your healthcare institution. Risk appetite is the level of risk your institute is willing to accept. Risk tolerance is the acceptable variations in the performance measures outcome. This is usually measured with PHI security and compliance risks.
Vendor Classification: Vendors should be classified based on what they are offering to the institute. This helps simplify assessments and enables faster response. It also helps prevent assessment fatigue by reducing the burden on the IS team. The classification also helps narrow down the data that can be accessed by the third parties (law of least privilege).
Risk Assessment: This can be done on-site or with questionnaires. The first method is more accurate and is recommended for High-risk vendors.
Addressing the risks: Once an assessment is complete, you should work together with your vendor to derive a corrective action and remediation plan. A system or process should also be put in place to track progress.
Breach Notification: Timely breach notification can enable recovery of the compromised resources, or prevent further damage and fortify existing mechanisms. You should make sure to add such a clause to the third-party contract or policy. If a breach involves a third-party provider, it’s essential for your organization to promptly reach out to determine whether your data was affected and to verify how the vendor has established the impact on your systems. This step not only ensures transparency, but also helps you understand the scope of the incident and take swift, informed action as needed.
Automation: A research study on the impact of TPRM in healthcare conducted by the Ponemon Institute shows that 2/3 respondents believe that current manual processes for risk management cannot keep up with cyber threats, while 63% believe they cannot keep up with the proliferation of digital applications and devices. Automating manual processes and the vendor lifecycle eliminates redundancies and potential error, delivering more accurate risk assessments, faster audits, and reduces the burden of TPRM for healthcare providers.
Utilize framework for managing Risks and Personal Data: Implementing these mechanisms and controls is one piece of the puzzle, but you also have to show compliance to the security frameworks for demonstrating secure operability of healthcare institutes. These frameworks vary from region to region, and even though it may not be an international requirement, they are recognized and accepted for basic security in healthcare.
Building a Comprehensive Third-Party Inventory
A critical first step in managing third-party risk is to maintain a complete and up-to-date inventory of every external entity with access to your organization’s network or sensitive data. But just knowing who your vendors are is not enough—the goal is to gain clear visibility into exactly which third parties have access, what level of access they hold, and what information or systems they can interact with.
So, how do healthcare organizations achieve this?
Centralize Your Vendor Management: Begin by consolidating all vendor information into a single, well-maintained repository. This could be a dedicated vendor management system, a secure spreadsheet, or a more robust governance, risk, and compliance (GRC) platform. The key is consistency and accessibility for security, IT, and procurement teams.
Conduct Detailed Assessments: During onboarding and then regularly throughout the business relationship, collect detailed documentation from each vendor. This includes policies, certifications (like SOC 2 or HITRUST), and clear descriptions of the systems or data they need to access. Make sure to update this information whenever a vendor’s scope changes.
Work Cross-Functionally: Collaborate with internal stakeholders—legal, compliance, procurement, and IT—to ensure that vendor contracts specify precise data access and cybersecurity requirements. Your contract language should spell out both responsibilities and accountability for all parties.
Leverage Automated Tools: Use tools like continuous monitoring solutions and threat intelligence platforms (for example, BitSight or SecurityScorecard) to track vendor activities, flag unusual behavior, and verify that only authorized vendors and individuals have access to your network.
Regularly Audit and Reconcile: Schedule periodic reviews to cross-check your inventory against actual network logs and access controls. Tools like identity access management (IAM) platforms can automate this, helping you spot vendors that may have slipped through earlier checks.
It’s worth noting that efforts like these pay off: According to a recent Ponemon Institute report, organizations that comprehensively inventory and track third-party access are significantly more capable of identifying vulnerabilities before they lead to incidents.
With these practices in place, you’re far more likely to know exactly who has the keys to your digital kingdom, and you’re in a much stronger position to manage risk proactively.
Information Security & Compliance Frameworks
Information security frameworks and regulations intend to provide a set of best practices for healthcare organizations in order to implement risk-based controls and mitigate cyber threats. The frameworks assist organizations in answering the following questions:
What is our current security posture and gaps?
What security maturity level we want to achieve?
What controls do we need to implement?
The frameworks ensure a uniform security infrastructure is implemented by organizations in order to protect personal health information. Below are some examples of those frameworks.
Healthcare Information Portability and Accountability Act (HIPAA)
A well-known US-based framework, HIPAA defines a standardized range of security practices for processing, storing, and transmission of PHI. It applies to healthcare providers, health plan providers, healthcare clearinghouses, and (thanks to HITECH Act) business associates.
The Privacy Rule ensures the protection of PHI and patients' medical records. It limits the usage and processing of the data and prevents disclosures without the patient's consent.
The Security rule defines the procedures and standards for the protection of PHI in processing, storage, transmission, or accessibility.
The Transaction rule defines the code sets and transactions to ensure the safety, integrity, and security of PHI.
HIPAA also has an enforcement and notification rule, that is derived from HITECH ACT, which was implemented in 2009 to further specify requirements of HIPAA.
The Health Information Technology for Economic and Clinical Health Act (HITECH)
The goal of HITECH is to develop IT in the healthcare sector. It expanded on the existing rules and laws of HIPAA to fortify healthcare security and ensure stricter enforcement. Some notable rules are:
The enforcement rule contains provisions for compliance, violations, and the imposition of penalties accordingly. It applies to violations that have occurred before, on, or after the compliance date i.e. February 18, 2015.
The breach notification rule specifies that notifications must be issued to all parties covered by HIPAA impacted by a breach within 60 days of its occurrence.
The minimum disclosure rule restricts the usage, processing, and sharing of all PHI beyond what was previously allowed by HIPAA.
Payment Card Industry Data Security Standard (PCI-DSS)
Most hospitals now provide services for card payment and, therefore must comply with PCI-DSS. It is a widely accepted standard to ensure that companies provide a secure environment for any transaction utilizing the card holder's information.
ISO-27001
It provides a framework for developing and managing an Information Security Management System based on risk assessment. ISO 27001 is applicable to any organization and is considered a gold standard in Information Security best practices. For the healthcare sector, it can be integrated with implementation guidelines like ISO 27799 which is the implementation guideline for 35 controls of the ISO 27001 Annex A. It is relevant for all organizations that offer services in healthcare.
ISO-13485
It defines a quality management system (QMS) for medical devices. It ensures that organizations maintain their standards of quality while keeping patients' data risks in account. It can be utilized in conjecture with ISO 27001 as some of the clauses are reused.
NIST-Cyber Security Framework (CSF)
It is a framework established to enable organizations better understand, improve and manage their cybersecurity risk. It is not specifically designed for the healthcare sector but can be utilized as a cohesive framework for implementing a comprehensive security program. Compared to the heavily regulated HIPAA and HITECH frameworks, it is also considered a "cheat sheet".
General Data Protection Regulation (GDPR)
The GDPR requires companies and businesses to manage any data of citizens in the European Union (EU) countries to ensure its protection and privacy. Personal data in healthcare is referred to as 'sensitive data' in GDPR. It mentions three special data types: Data concerning health, genetic data, and biometric data. GDPR also required healthcare sectors to assign the role of Data Protection Officer (DPO) and report security breaches within 72 hours.
Leveraging Continuous Monitoring and Threat Intelligence
To effectively manage third-party risk, healthcare organizations need more than just onboarding checklists and vendor surveys. This is where continuous monitoring and threat intelligence step in as crucial allies.
Continuous monitoring solutions provide real-time oversight of your vendors’ security posture, automatically flagging suspicious changes or emerging vulnerabilities. These platforms help you spot potential risks before they escalate, making it less likely that a vendor’s unnoticed issue turns into your organization’s major breach headline.
Pair this with threat intelligence tools, which gather and analyze information about new cyber threats targeting the healthcare sector. With these insights, you can quickly assess if any of your vendors are exposed to known exploits or malicious actors and take preventative action accordingly.
Together, these technologies enable a proactive approach to vendor management by:
Identifying risks as they emerge instead of waiting for annual reviews.
Streamlining audits with automated reporting and threat scoring.
Supporting escalations and triage when vendor incidents occur.
Automation, combined with up-to-date intelligence, keeps your security team a step ahead—so you’re not left reacting to yesterday’s news. And, crucially, it reduces the manual burden on staff, freeing them up to focus on higher-level oversight and response.
How Cloud Solutions and Remote Monitoring Expand Third-Party Risks
With healthcare organizations increasingly migrating to cloud solutions and rolling out remote patient monitoring, a new set of third-party risk challenges has emerged. Years ago, concerns over cybersecurity and regulatory compliance made many healthcare facilities hesitant to move sensitive operations and data into the cloud. However, as demand for digital efficiency and remote care grows, reliance on third-party vendors has become nearly unavoidable.
This shift introduces a broader attack surface for malicious actors and amplifies the need for rigorous oversight. Here’s why:
Expanded Data Access: Cloud tools and home-based medical monitoring grant a variety of external vendors access to patient records, real-time health data, and operational systems. The more vendors with privileged access, the higher the chance of a misconfiguration or vulnerability exposing patient information.
Complex Vendor Relationships: Managing risk isn’t just about technical safeguards. Healthcare organizations must meticulously review the security policies, compliance certifications, and breach response protocols of every third-party partner. This often involves negotiating detailed contracts, ongoing assessments, and clearly articulated requirements around data protection and incident reporting.
Continuous Monitoring Is Essential: Once the data leaves the organization's direct control, proactive oversight is vital. Real-time monitoring tools, threat intelligence solutions, and contract management systems become the bedrock of mitigating emerging threats and ensuring vendors adhere to defined security standards.
Patient Safety at Stake: As healthcare moves beyond the hospital walls into patient homes via remote monitoring devices, the implications of a third-party breach go beyond compliance fines and lost records. A compromised device or exposed patient record could directly impact the patient’s health outcomes and overall trust in care.
The bottom line? Every step toward digital health—be it cloud migration or telehealth-enabled monitoring—demands stronger third-party risk management processes. For healthcare organizations, it’s critical not just to implement technology, but to build a mature, continuously evolving framework for evaluating, monitoring, and holding vendors accountable in the relentless push for both innovation and security.
TPRM With StandardFusion
Managing third-party risk is a key component of a company's cybersecurity strategy, but often doesn't get the attention or funding required to develop an effective system. Without the right tools to manage compliance and third-party risk, teams face an uphill battle to efficiently mitigate vendor risks and comply with security frameworks.
StandardFusion is an end-to-end GRC software that automates management processes and the complete vendor lifecycle. As new vendors and frameworks are introduced and the scope of regulations increases, it becomes more difficult to keep track of all the moving parts in your system. Our software streamlines vendor assessments and tracks potential risks from your vendors. Implement a structured program for more accurate assessments, immediate status alerts, and provide total visibility of your system.
Schedule your demo and see how you can develop a sound third-party risk management program and reduce organizational strain with StandardFusion.
