Medical data breaches are among the worst, given the sensitive nature of personal records. These can be sold on the black market for identity fraud, but also more heinous crimes like blackmailing people of influence by threatening to expose private medical data. However, there are even worse effects of a medical hack, such as shutting down systems that can cause death. From costing a lot to recover from to affected stock prices, here is some more information.
The Financing Costs Will Climb
Financing new projects is a major operational step for many hospitals and medical companies. However, the costs are much more likely to increase if there is even an iota of distrust. Therefore, medical tech companies that have experienced a breach face higher yields on new bonds, increasing borrowing costs. However, a MedTech cybersecurity strategy that includes things like penetration testing can galvanize the security of your products and services.
Medical Data Breaches Cost a Lot to Recover
A data breach is a nightmare for any company, and even more so for medical services that contain very private data. The costs of recovery alone are astronomical, with the average healthcare breach costing $10.93, largely due to the recovery services you will need:
- The cost includes a forensic investigation to find the source and assess the damage.
- System restoration also costs a significant amount of money as well as time.
- There may also be mandatory credit monitoring for the victims exposed to a breach.
Regulatory and Compliance Fines
Medical companies, services, and establishments are under strict regulation in most countries. Countries like Canada, the US, and the UK have some of the most rigorous controls when it comes to medical records. For example, the US’s HIPAA governs most medical companies within its borders. Violating the rules of regulatory bodies like HIPAA can result in massive fines for a business involved in the US medical sector, some of which you may not even recover from.
A Lower Credit Score
Loans and financing decisions are governed by many moving parts and controls. However, the most influential is the credit score. An individual or entity with a reputable credit score is much more likely to be approved for loans and can also expect more favorable repayment terms. However, if you are thinking of investing in a medical business that has been breached, think again. Any medical company with a data breach potentially faces a reduction in its credit score.
Medical Data Breaches Disrupt Operations
It can take up to 9 months to even identify a data breach, and much longer to recover from one. In the medical sector, especially, extra attention and care are needed to ensure the job is done properly. This is one sector where security governance, rather than compliance, is better for preventing medical data breaches in the first place, as they can be disruptive to operations.
Forced hospital closure
A ransomware attack is one of the most egregious that can happen to a company. Through sheer stubbornness and greed, this can force a business to close for an indefinite period.
Damaged clinical workflows
Data breaches of pretty much any kind can take down entire systems. In a medical setting, this is dangerous as it can damage the actual workflow of clinicians and healthcare providers.
Tragic missed appointments
Systems can be offline for an extended period, even months. This means the potential for missed appointments and even diverted ambulances is high, resulting in potential deaths.
There is nothing more inhumane than shutting down the critical equipment, systems, and networks of a medical establishment. The 2019 Springhill Medical Center (US) is a tragic example, where a hack is believed to have contributed to the death of a newborn baby. This highlights the very real need to ensure medical cybersecurity is always a top priority.
Loss of Patient Trust
More than financial damage, a medical business with poor cybersecurity practices will probably lose the trust of patients. Why is this bad? Well, patients are the bread and butter of a medical business, even if you are involved in B2B supply and service. No one wants to think their medical data has been leaked, and doing so means a patient will turn away from the provider. Establishments that are breached usually see a sharp drop in patient intake and retention.
Damaged Brand Reputation
It can take years to build a reputation within a sector, seconds to destroy it, and the rest of your life regaining it. A cyber breach is a surefire way to lose the reputation that has taken decades to build. Investing in a company with a history of cyber attacks and poor security would be a massive waste of time and money, as it is unlikely to recover in terms of reputation, eventually damaging the business overall and failing to attract the top talent it needs for operations.
Medical Data Breaches Affect Stock Prices
Medical data breaches are valuable to criminals and damaging to patients, but also to investors. Stock prices do indeed drop after a cyber attack and breach, as shown by Australia’s Medibank stock drop of almost 5%. Not the worst, but there is a correlation between breaches and stocks:
- Most studies conclude that stocks will drop in the short term following a data breach.
- Stock prices don’t usually fall until the data breach has been publicly announced.
- The stick will typically recover, but affected companies might underperform for years.
Potential for Investor Mispricing
It can take a long time to even realize there has been a security breach at a medical business, or any for that matter. The gap between the initial alarm and reporting means that stock prices can also be misquoted or inaccurate. In terms of how much a breach has cost, investors can also be given the wrong data, especially when a breach hasn’t been given much attention. This alone makes the case for due diligence when considering a medical business for investment.
Summary
Increased financing costs are just one of the consequences of medical data breaches for an investor. However, a breach can also disrupt operations, resulting in tragedy. In terms of money, the cost of a breach and the effects on stock can be understated and unintentionally mispriced.