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Healthcare Data Breach Costs Remain Highest at $408 Per Record

July 13, 2018
by Heather Landi
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The global average cost of a data breach is up 6.4 percent over the previous year to $3.86 million
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The cost of a data breach for healthcare organizations continues to rise, from $380 per record last year to $408 per record this year, as the healthcare industry also continues to incur the highest cost for data breaches compared to any other industry, according to a new study from IBM Security and the Ponemon Institute.

The global average cost of a data breach is up 6.4 percent over the previous year to $3.86 million, according to the 2018 Cost of a Data Breach study. The average cost for each lost or stolen record containing sensitive and confidential information, globally and across all industries, also increased by 4.8 percent year over year to $148. And, the 2018 cost of a data breach compares to $3.50 million in 2014, representing nearly a 10 percent net increase over the past five years of the study.

For the eighth year in a row, healthcare organizations had the highest costs associated with data breaches – costing them $408 per lost or stolen record – nearly three times higher than the cross-industry average ($148). The next highest industry was financial services with an average of $206 per lost or stolen record. You can read about last year's study here.

The 2018 Cost of a Data Breach Study, sponsored by IBM Security and conducted by the Ponemon Institute, is based on a survey of more than 2,200 IT, data, protection and compliance professionals from 477 companies in 15 countries. For the first time, this year the study also calculated the costs associated with "mega breaches" ranging from 1 million to 50 million records lost, projecting that these breaches cost companies between $40 million and $350 million respectively.

"While highly publicized data breaches often report losses in the millions, these numbers are highly variable and often focused on a few specific costs which are easily quantified," Wendi Whitmore, Global Lead for IBM X-Force Incident Response and Intelligence Services (IRIS, said in a statement. "The truth is there are many hidden expenses which must be taken into account, such as reputational damage, customer turnover, and operational costs. Knowing where the costs lie, and how to reduce them, can help companies invest their resources more strategically and lower the huge financial risks at stake."

The study looks at abnormal churn rates among industries, or the greater than expected loss of customers following a data breach incident. The healthcare industry had the highest abnormal churn rate among 17 industries, at 6.7 percent, compared to the average of 3.4 percent. The report notes that customers have high expectations for the protection of their data in highly regulated industries, such as healthcare and financial services. When these organizations have a data breach, customers’ trust will decline and they will try to find a substitute, the report states.

The study also compared the cost of data breaches in different regions, finding that data breaches are the costliest in the U.S. and the Middle East, and least costly in Brazil and India.  U.S. companies experienced the highest average cost of a breach at $7.91 million, followed by the Middle East at $5.31 million. The lowest total cost of a breach was $1.24 million in Brazil, followed by $1.77 million in India.

One major factor impacting the cost of a data breach in the U.S. was the reported cost of lost business, which was $4.2 million—more than the total average cost of a breach globally, and more than double the amount of "lost business costs" compared to any other region surveyed, according to the study. One major factor impacting lost business costs is customer turnover in the aftermath of a breach; in fact a recent IBM / Harris poll report found that 75 percent of consumers in the U.S. say that they will not do business with companies that they do not trust to protect their data.

In the past five years, the amount of mega breaches (breaches of more than 1 million records) has nearly doubled—from just nine mega breaches in 2013, to 16 mega breaches in 2017. Based on analysis of 11 companies experiencing a mega breach over the past two years, this year's report used statistical modelling to project the cost of breaches ranging from 1 million to 50 million compromised records.  Key findings include that the average cost of a data breach of 1 million compromised records is nearly $40 million dollars. At 50 million records, the estimated total cost of a breach is $350 million dollars.

What’s more, the vast majority of these breaches (10 out of 11) stemmed from malicious and criminal attacks (as opposed to system glitches or human error). And, the average time to detect and contain a mega breach was 365 days—almost 100 days longer than a smaller scale breach (266 days).

For mega breaches, the biggest expense category was costs associated with lost business, which was estimated at nearly $118 million for breaches of 50 million records—almost a third of the total cost of a breach this size.

The study also examines factors which increase or decrease the cost of the breach, finding that costs are heavily impacted by the amount of time spent containing a data breach, as well as investments in technologies that speed response time. The average time to identify a data breach in the study was 197 days, and the average time to contain a data breach once identified was 69 days. Companies who contained a breach in less than 30 days saved over $1 million compared to those that took more than 30 days ($3.09 million vs. $4.25 million average total).

The amount of lost or stolen records also impacts the cost of a breach, costing $148 per lost or stolen record on average. The study examined several factors which increase or decrease this cost and found that having an incident response team was the top cost saving factor, reducing the cost by $14 per compromised record. The use of an AI platform for cybersecurity reduced the cost by $8 per lost or stolen record, according to the study, and companies that indicated a "rush to notify" had a higher cost by $5 per lost or stolen record.

The report also examined the effect of security automation tools which use artificial intelligence, machine learning, analytics and orchestration to augment or replace human intervention in the identification and containment of a breach. The analysis found that organizations that had extensively deployed automated security technologies saved over $1.5 million on the total cost of a breach ($2.88 million, compared to $4.43 million for those who had not deployed security automation).

"The goal of our research is to demonstrate the value of good data protection practices, and the factors that make a tangible difference in what a company pays to resolve a data breach," Dr. Larry Ponemon, chairman and founder of Ponemon Institute, said in a statement. "While data breach costs have been rising steadily over the history of the study, we see positive signs of cost savings through the use of newer technologies as well as proper planning for incident response, which can significantly reduce these costs."

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Cybersecurity, Telehealth and Interoperability “Top of Mind” for IT Execs in 2019

November 19, 2018
by Heather Landi, Associate Editor
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As health system leaders look ahead to the challenges and opportunities of the coming year, they are increasing their spending to defend against cyberattacks, expressing optimism about reimbursement for telehealth services, and feeling anxiety about Apple, Amazon and Google entering the health care space, according to a new survey.

The second annual survey, conducted by the Pittsburgh-based Center for Connected Medicine (CCM) in partnership with the Health Management Academy, reflects the opinions of healthcare C-suite leaders from nearly 40 major U.S. health systems across the country about their IT priorities for the year ahead. CCM is a collaborative health care executive briefing center jointly operated by GE Healthcare, Nokia and UPMC. The Alexandra, Va.-based Health Management Academy is a membership organization consisting of executives from the country’s top 100 health systems focused on sharing best practices.

Conducted in three parts, the research started with a survey of health system information officers—CIOs, chief medical informatics officers (CMIOs) and chief nursing informatics officers (CNIOs— in May 2018 to determine the top areas of health IT for 2019. A quantitative survey was conducted in July 2018 with questions focused on cybersecurity, telehealth and interoperability. In September 2018, qualitative interviews were completed with 18 C-suite executives, including chief executive officers, chief operating officers, CIOs and CMIOs.

According to the survey report, “Top of Mind for Top Health Systems 2019,” health system executive leaders identified cybersecurity, telehealth and interoperability as the top three areas of health IT that will have the most impact in 2019. Cybersecurity remained at the top of the list from the previous year’s survey, and telehealth and interoperability climbed the ranking. The previous year’s Top of Mind report had identified cybersecurity, consumer-facing technology, and predictive analytics as the top three areas of focus for 2018.

“While consumerism and analytics remain hot topics in health care, it was not surprising to see telehealth and interoperability rise in the minds of health IT executives for 2019. Policymakers, in particular, have emphasized telehealth and interoperability in the past year, and the threats of cyberattacks and data breaches are constant in health care,” the report authors wrote.

While healthcare executive leaders cited those three topics as immediate, pressing concerns, when asked what health IT technologies they anticipated would have the most impact on health care five year from now, health system executive leaders identified artificial intelligence, consumer technology, and genomics. According to the report, one CNIO said: “The technology is moving so fast that it is hard to predict five years out. I would not have picked some of these for 2019 one year ago.”

Cybersecurity

Hackers and other cyber-criminals are stepping up their attacks on the health care industry, leading 87 percent of respondents to say they expect to increase spending on cybersecurity in 2019; no health system was expecting to decrease spending. Half of respondents expect a spending increase greater than five percent.

For 2019, health systems said they would invest cybersecurity resources to bolster current areas of investment, with many focusing on both staff and technology, such as firewalls, intruder detection software, and dual authentication that guard against breach of protected health information (PHI).

Despite increasing financial investment and prioritization of cybersecurity at health systems, executives did not express robust confidence in their organization’s IT recovery and business continuity plans after an attack or breach. Seven out of 10 respondents reported being “somewhat confident” in their recovery and continuity plans; only 20 percent said they were “very confident.”

The most commonly cited challenge in cybersecurity was employee education—62 percent of respondents named “staff” as greatest point of cybersecurity weakness. What’s more, phishing and spear-phishing were cited as the most common types of cyberattacks in the previous 12 months.

According to the report, one CEO commented during an interview: “The people that are up to no good have far better tools than we do on our platforms. If they really target you, they will likely find a way in.… We are not trying to make it impenetrable, but we are trying to make it more difficult to break into our system than others in our market.”

Telehealth

Health information technology (IT) leaders overwhelmingly expect government and commercial reimbursement to provide the majority of funding for telehealth services by 2022; internal funding and patient payments are expected to provide the majority of funding for telehealth in 2019.

Government policy is driving some of this optimism, the report authors wrote. “For example, CMS [The Centers for Medicare & Medicaid Services] published a proposal in July 2018 that provided three new remote patient monitoring reimbursement medical codes. While some critics have said the proposal’s $14 reimbursement for virtual check-ins is too low, the move by CMS appears to cement telehealth reimbursement as a priority for the agency.”

All responding health systems report telehealth accounts for 10 percent or less of their organization’s total care delivery, however, over the next three years, 45 percent of respondents expect use of telehealth to increase by 10 percent or more. Lack of reimbursement was cited as the most significant barrier to adopting greater telehealth services, cited by 70 percent of respondents.

Most health system executives interviewed for the study said their health system had not yet calculated a specific return on investment (ROI) for telehealth. But systems are investing anyway as a hedge that future reimbursement will outweigh the potential losses of today, according to the survey report. “For the moment, reimbursement is widely thought of in terms of physician time, but as technologies evolve, the question will be whether reimbursement will expand to hardware. Investment can also be seen as a bellwether for provider sentiment toward transformation to value-based care,” the report authors wrote.

When considering a telehealth technology system, top features/priorities are “integration with the clinical workflow” and “ease of patient triage and virtual follow-up,” according to the survey.

Need for Innovation Drives Focus on Interoperability

Interoperability has emerged as a key challenge in health care as hospitals and health systems pursue value-based care, consumerism, and other initiatives that require broad sets of data from disparate IT systems, the report noted. As the health care industry continues to evolve, provider health systems are having to think more creatively about their strategies in order to remain successful.

A lack of interoperability has made it more difficult for health systems to address certain key priorities, most commonly improved efficiency / cost reduction, and advanced analytics, the report said. Additionally, executives report challenges addressing care gap closure, longitudinal patient data, and integration with non-owned partners

More than half of respondents (61 percent) said the use of a major electronic health record (EHR) system was not stifling digital innovation at their health system. However, in qualitative interviews, several executives said an EHR was limiting their ability to innovate by locking them into a single vendor’s products, according to the report.

Seventy percent of informatics executive said they were “somewhat concerned” about big tech companies, such as Apple, Amazon and Google, disrupting the health care market; 10 percent were “very concerned,” the survey found.

The report quotes one CEO who said: “They are new competitors that look very different from traditional health care competitors. They are better in their space and can catch up quickly. Current stakeholders are resistant to change. If we’re slow and dodgy we’re going to get lapped.”

The survey also examined the role of the cloud in the future of health IT. The majority of health care data is expected to be stored in on-premises data centers (20 percent) or hybrid / private cloud (60 percent) in the next three years, according to the survey, and 10 percent said they anticipate storing health data in a public cloud.

 

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Health First Data Breach Exposes Information of 42K Patients

November 15, 2018
by Rajiv Leventhal, Managing Editor
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A data breach at Florida-based Health First exposed the personal information of some 42,000 patients, according to various industry media reports this week.

The website DataBreaches.net reported that in early October, the healthcare provider Health First notified the Department of Health & Human Services (HHS) of a breach that affected 42,000 patients.  The breach actually occurred earlier in the year, however, between February and May 2018, according to the report, which received a statement from the organization’s senior vice president, consumer and retail services.

The Health First executive noted that “a small number of our employees were the victims of a phishing scam which compromised some of our customers’ information. The criminals were able to gain access of these employees’ email accounts for a limited period of time.”

Health First officials also told Florida Today this week that the data breach “was fairly low-level, though it could have included some customers' Social Security numbers. Mostly it appears to have involved information such as addresses and birth dates. No medical information was compromised,” according to this report.

Phishing attacks continue to plague the healthcare industry; the single largest breach this year was a hacking incident affecting 1.4 million patient records that involved UnityPoint Health, an Iowa-based health system. That said, cybersecurity professionals are still looking for more advanced ways to get out in front of these attacks, as healthcare has traditionally lagged behind other industries in in phishing resiliency.

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