Healthcare’s digital-first future is being built by an intricate and largely invisible web of vendors. AI diagnostics, blockchain-based records, and IoT-enabled care all rely on layers of third- and fourth-party providers that most health systems are unaware of. Yet, under regulations like HIPAA, providers are accountable for all of them. The core challenge for leadership is no longer merely managing direct vendors; it’s the cascading risk of the “nth-party” supplier.
The expanding chain of accountability
Let’s say a hospital wants to launch an AI-enabled diagnostic tool that could improve patient outcomes. Their challenges lie beyond assessing the AI vendor alone. The hospital’s Governance, Risk and Compliance (GRC) team needs to ensure that the vendor’s platforms — such as their cloud infrastructure provider or Customer Relationship Management (CRM) platform — are vetted and comply with both global and local regulations. This requires not just technical validation, but a deep understanding of how those systems learn, store, and propagate data.
For the healthcare provider, each link in this chain impacts Protected Health Information (PHI) and represents a potential liability. Most providers use external vendors to manage their Electronic Health Record systems, billing services, device management, and telehealth services, as well as cloud hosting and SaaS services.
However, each of these relationships introduces another layer of exposure. A breach involving a fourth-party supplier — essentially a vendor’s vendor — can compromise sensitive health data even when the provider has no direct relationship with the compromised entity.
This diffusion of responsibility is creating a new class of systemic risk, one that traditional vendor assessments were never designed to address.
These are today’s challenges. Fast forward to 2030 and verifying compliance across an even more complex vendor network will be like orchestrating a symphony. New niche vendors will emerge in areas such as gene therapy delivery, 3D-printed implants, and AI audits. A hospital that once managed 50 key vendors could soon have to juggle substantially more. In this future, compliance will not only support operations; it will become an integral operating capability.
The hidden growth tax
This complexity quietly slows growth. When you can’t see where data is going, new digital health tools become legally risky, and gaps in a vendor’s compliance can delay launches or lower the value of an acquisition or M&A deal. This is the “hidden growth tax” from the cost of stalled projects, extra work and missed opportunities simply because the vendor network is too hard or too slow to verify.
How many good ideas get shelved because the compliance workload across the supply chain feels impossible to tackle in time?
Beyond the financial ledger: The cost of compromised trust
The stakes are immense and extend far beyond regulatory fines. While the financial cost of a healthcare data breach is projected to average over $10 million, the real damage is measured in human terms and eroded trust.
A report published in Health Services Research found a direct correlation between data breach remediation efforts and the quality of hospital care. In fact, following major hospital data breaches, 30-day mortality rates for heart attack patients increased by as much as 0.36 percentage points.
The stark reality is that healthcare organizations typically only discover that something has gone wrong after the fact. Additionally, the resulting negative press and loss of consumer trust can be more damaging than the regulatory fine or potential lawsuit. This type of “shadow supply chain” associated with data in healthcare ecosystems is becoming increasingly commonplace and poses a significant danger.
From paper trust to queryable assurance
In the past, security and compliance were treated as a periodic, paperwork-driven transaction, and trust was established through documentation. However, today enterprise buyers want evidence that security systems are mature, effective and continuously improving. The technology now exists to operationalize this process and automate evidence collection across first-, third-, fourth-, and fifth-party systems. Queryable trust or assurance means that vendors, data flows, and controls can be interrogated in real-time, and AI can trace patient data across the entire supply chain, continuously refreshing trust registries.
As a result, it’s possible to verify a vendor, or a vendor’s vendor, in seconds, rather than weeks or even months. Compliance becomes invisible infrastructure: the thing that accelerates growth instead of impeding it. Ultimately, competitive advantage won’t be based on who has the largest compliance department; the winners will be organizations that can verify their data in real-time across all ecosystems. In a sector built on trust, nothing less than total transparency will sustain the confidence on which modern healthcare depends.
Photo: fatido, Getty Images
Girish Redekar is the CEO of Sprinto, a GRC automation platform trusted by 3,000+ companies in 75 countries.
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