The critical role of third-party risk management in healthcare

Introduction

The European healthcare landscape is undergoing rapid transformation, driven by advancements in technology and service delivery that aim to elevate patient care and streamline medical operations. However, these advancements introduce fresh challenges, particularly around the safeguarding of data privacy and security. Healthcare providers are increasingly dependent on external vendors for essential services like electronic health record (EHR) systems, medical devices, and cloud storage solutions. Despite their critical role in the efficient functioning of healthcare organisations, these third parties also pose a considerable risk to the security of patient data.

In this article, we will delve into the criticality of third-party risk management within the healthcare sector. We'll scrutinise the risks associated with healthcare third-party vendors and consider the roles of procurement and security departments in mitigating these risks. Additionally, we'll discuss the necessity for suitable tooling to manage third-party risk adeptly. To conclude, we'll offer insights into real-world instances of effective third-party risk management in the healthcare industry across Europe and beyond, alongside guidance for healthcare providers looking to enhance their practices in this domain.

Risks linked to third-party vendors in healthcare

Third-party vendors are integral to healthcare organisations, providing crucial services that include EHR systems, medical devices, and cloud solutions. However, they bring significant risks, particularly to the security of patient data.

A paramount concern is patient safety. Should a vendor falter in delivering essential services or products, patient well-being could be jeopardised. For example, a failure to supply necessary medical provisions could result in subpar patient care, potentially leading to grave health outcomes or even fatalities.

Third-party incidents can also precipitate operational continuity problems. A ransomware attack on a vendor, for instance, could cause system outages, data loss, and operational disruptions affecting healthcare providers' ability to offer critical services. Such interruptions could necessitate the postponement or cancellation of patient appointments and procedures, detrimentally affecting patient care.

A case in point is a ransomware incident in 2020 when a healthcare provider's third-party vendor was attacked, leading to a temporary inability to access EHRs and resulting in the cancellation of appointments and procedures. This not only affected patient care but also led to financial losses for the provider.

Moreover, the risk of data breaches is ever-present, as third-party vendors often handle sensitive patient data. Mishandling or theft of such data can have severe repercussions for both patients and healthcare organisations.

Instances of data breaches in healthcare due to third-party vendors include the 2017 WannaCry attack on the UK's NHS, which disrupted services nationwide, and the 2020 attack on Finland's Vastaamo, compromising the personal data of numerous patients. The Dutch Healthcare Providers of Municipalities (GGDs) also suffered a data breach.

These incidents have broad implications:

• Financial Impact: Data breaches can lead to considerable financial losses, encompassing data recovery costs, remediation, and legal expenses.
• Reputational Harm: Incidents involving vendors can tarnish the reputation of healthcare providers, erode public trust, and lead to operational setbacks.
• Legal Ramifications: Affected organisations might face legal proceedings from patients, regulatory entities, or other impacted parties.
• Regulatory Penalties: Failure to manage third-party risks effectively may result in fines and sanctions from oversight bodies.
• Patient Endangerment: Breaches can lead to identity theft, medical fraud, and other financial harms to patients.
• Operational Disruptions: Healthcare services can suffer interruptions, causing delays in patient care.

The role of procurement departments in managing third-party risk in healthcare

Procurement departments are instrumental in mitigating third-party risk within healthcare settings. They are tasked with the selection and oversight of third-party vendors, contract negotiations, and ensuring vendors adhere to obligations concerning data privacy and security.

A key challenge for procurement is to confirm that vendors satisfy stringent security standards. This involves a deep understanding of the vendor's security measures and a capacity to appraise their security posture accurately. Contracts should encompass data protection clauses, breach notifications, and indemnification terms, especially for critical vendors.

Procurement departments can employ various strategies to manage third-party risk effectively:

• Conduct comprehensive assessments before engaging with new vendors.
• Incorporate explicit security stipulations in vendor contracts.
• Regularly monitor vendor security practices against contractual commitments.
• Offer training and resources to vendors to aid them in fulfilling security requirements.
• Perform periodic audits and risk assessments on vendors.

The role of security departments in managing third-party risk in healthcare

Chief Information Security Officers (CISOs) and security teams are pivotal in managing third-party risk. They are tasked with implementing cybersecurity measures to safeguard continuity and protect patient data, including that which pertains to third-party collaborations. These teams must ensure vendors abide by security policies and procedures, encompassing access controls, data encryption, and security audits.

A significant hurdle for security departments is maintaining visibility over the expanding third-party ecosystem. Continuous monitoring and proactive risk management are indispensable to detect and address potential threats promptly. Security teams should:

• Define clear security requirements for vendors.
• Conduct periodic security assessments.
• Facilitate threat intelligence sharing with vendors.
• Develop incident response plans involving vendors.
• Hold regular security training and awareness sessions for all stakeholders.

Conclusion

Third-party risk management is a critical concern for healthcare providers as they depend increasingly on external vendors. Effective risk management entails collaboration across procurement and security departments, investment in appropriate tooling, and continuous improvement of practices. By adopting a comprehensive approach to third-party risk management, healthcare organisations can safeguard patient data, ensure service continuity, and uphold their reputation in the face of evolving risks and regulatory landscapes.

For healthcare providers seeking to fortify their third-party risk management, it is imperative to recognise the risks, allocate resources wisely, and implement strategic measures to mitigate potential threats. Only through such diligence can the healthcare sector thrive amidst the technological advancements and service delivery innovations that characterise today's digital age.