Cybersecurity Vulnerabilities Threaten Private Equity-Backed Healthcare Firms’ Future

Cybersecurity Vulnerabilities Threaten Private Equity-Backed Healthcare Firms’ Future

At a glance

• Private equity-backed healthcare companies face serious cyber risk because of gaps in their security programs.
• SEC cyber disclosure rules for public companies are raising expectations for any firm heading toward a sale or listing.
• A healthcare security leader at a major cybersecurity firm warns that the whole sector is underprepared.
• Attacks on patient data are becoming more frequent and more sophisticated.

Gaps in security programs

Private equity-backed healthcare firms hold large amounts of sensitive patient data and face rising attacks. Recent analysis found serious gaps in their security readiness. Unlike large public companies, many of them lack mature security programs, which leaves them open to many kinds of attack.

Rising concerns have been raised by Ryan LaSalle, a cybersecurity industry executive, who points to the sector’s rapid growth. More clinics, more targets. Many of these firms bolt on security piece by piece instead of building a single program.

Regulatory pressure

The SEC’s cyber disclosure rules, adopted in 2023, require public companies to report material cyber incidents within four business days and to describe how they manage cyber risk. Private portfolio companies are not covered directly, but buyers and IPO underwriters now expect the same discipline. That pressure follows high-profile breaches that cost companies heavily and damaged public trust.

Cybersecurity advisers say the rules could change how these healthcare firms operate. Compliance may stretch budgets at first, but it pushes firms toward stronger security programs.

Why attacks are getting harder to stop

Healthcare attracts criminals because it holds so much sensitive patient data. Attackers use sophisticated methods, including ransomware and phishing. Companies have to keep operations running while defending against many kinds of threats.

Risk managers in the field note that healthcare’s interconnected systems raise the risk. Every new device widens it.

How firms can prepare

Experts urge private equity-backed healthcare firms to build full security programs. Key recommendations include:

– Thorough Risk Assessment: Regular assessments to identify potential vulnerabilities in their systems.
– Employee Training Programs: Enhancing staff awareness about potential threats and encouraging vigilance.
– Engagement with Cybersecurity Experts: Partnering with external consultants to develop and refine security protocols.
– Incident Response Planning: Establishing clear protocols for responding to cyber incidents to minimize damage.

These steps strengthen defenses, help firms meet regulators’ expectations and protect their operations and reputations.

What PE owners should check

Private equity owners have to weigh the cost of better security against the cost of a breach, which in healthcare can be ruinous. Before the next acquisition closes, owners should audit the target’s security and ask for an incident response plan that has been tested. Each portfolio company also needs a named security leader with a budget. Firms that do this now will have an easier sale later.

John King, CISSP, PMP, CISM

John King currently works in the greater Los Angeles area as a ISSO (Information Systems Security Officer). John has a passion for learning and developing his cyber security skills through education, hands on work, and studying for IT certifications.