As private equity firms and other ventures make strategic decisions to invest in healthcare M&A, the biggest threat healthcare institutions encounter isn’t always the billions of dollars worth of investment at stake or complications emerging from a consolidation, but vulnerable healthcare data that could turn out to be a costly liability.
Due diligence extends far beyond having a comprehensive data security policy. It requires ongoing security testing, which assesses an organization’s overall data security posture against evolving threats and the efficacy of networks, systems, applications, and tools deployed to secure healthcare data.
PwC’s latest Global M&A Trends in Health Industries report offers a mid-year 2025 outlook on the healthcare and pharmaceutical sectors’ transaction volumes and values, which show diminishing activity overall.
Core to this slowdown is the evolving economic landscape and, most importantly, heightened concerns by patients and regulatory bodies regarding inferior security protocols, excessive patient data sharing without ensuring adequate security guardrails, and a surge in digital health integrations, making healthcare mergers and acquisitions a critical vulnerability.
Why Merging Hospitals Is So Risky
In an increasingly hyper-connected digital environment, a robust cybersecure data security posture can make or break the value of a healthcare merger and acquisition deal. The very confidence that supports the healthcare deal can be quickly threatened by a single undetected vulnerability that exposes sensitive healthcare data. Hence, merging hospitals comes with this inherent risk.
According to KPMG, security risks are increasing exponentially each year, impacting functions across the enterprise, and the M&A process is no exception. The often-overlooked vulnerabilities and threats that arise during these transactions are cause for concern, prompting the need for organizations to prioritize cybersecurity measures to safeguard sensitive data and protect their investments.
There are two primary ways that healthcare mergers pose serious cybersecurity challenges:
- Integrating disparate security infrastructures can be difficult, and
- An M&A transaction brings together different organizational cultures, which poses additional cybersecurity challenges.
However, the lack of IT and cybersecurity participation in M&A teams may cause cybersecurity concerns to be ignored early on, which might result in unanticipated risks and vulnerabilities in the future.
Additionally, hospital mergers expand the attack surface as multiple networks, data systems, and services containing health data merge. The merging parties may contain vulnerabilities that could attract malicious actors to conduct a grand-scale cyberattack. What’s more cause for concern is the use of legacy systems that lack modern data security controls and result in inadvertent data exposure.
Data migration risks and regulatory compliance gaps further fuel risk as large-scale data migration escalates chances of data leaks, corruption, and unauthorized access. In addition, noncompliance with regulatory standards can lead to hefty penalties post-merger.
Other risks, such as lack of security assessments and audits, impact assessments, and penetration testing, coupled with third-party risks, amplify the overall risk posture.
Key Security Testing Measures in Healthcare M&A
Another KPMG Global Tech Report: Healthcare Insights reveals that 70% of healthcare tech leaders say cybersecurity has a strong influence on tech investment decision-making processes. This demonstrates the critical need for security testing to ensure a robust cyber-secure infrastructure that paves the way for when the healthcare institution scales its operations.
Prior to any deal closure, both stakeholders deciding to merge or acquire the other must conduct comprehensive security testing as part of due diligence. Security testing extends from basic readiness assessment or an audit; it’s a comprehensive approach that requires a multi-layered approach to enhancing the healthcare institutions’ overall security posture.
a. Conduct a Cybersecurity Assessment of the M&A Target
Several security concerns can be avoided by involving the cybersecurity team early on in the process. The Chief Information Security Officer (CISO) or the security team must be included early in the process and must always have a place at the table. They can recommend various security tests to assess the target institution’s cybersecurity posture. These include vulnerability assessment, penetrating testing, cloud security testing, data privacy and compliance testing, internal and third-party vendor risk assessments, etc.
b. Digital Health Ecosystem Stress Testing
Mergers and acquisitions can take the company to great heights or take it downhill. Stress test the digital health ecosystem by assessing interoperability between various data touchpoints and discovering whether any vulnerabilities exist between interconnected technologies. This could include the network and infrastructure through which data flows or remains at rest.
c. Data Lineage and Integrity Testing
Assess data privacy and security, integrity, and provenance of Protected Health Information (PHI) by tracking the data lifecycle across both stakeholders. This helps identify hidden data repositories that could violate compliance requirements, result in data poisoning, unauthorized data flows, and sensitive data exposure.
d. Zero Trust Readiness Assessment
As fiercely competitive as it might sound, engage the merger and acquisition process with zero trust principles in mind. This means conducting a gap analysis of current security infrastructure, applications, and practices against Zero Trust principles, which require each access request to be verified, the minimum level of access granted, and the assumption that a breach is inevitable or has already occurred.
e. Human Factor and Cultural Security Testing
At the end of the day, humans are the weakest link in the cybersecurity chain. Identify gaps that technology alone cannot address. This can be achieved by evaluating employee cybersecurity awareness, their security choices, and security culture alignment between the merging stakeholders.
Key Risks Mitigated Through Security Testing
Security testing mitigates several risks, most notable include the following:
a. Digital Trust Erosion in Integrated Ecosystems
A comprehensive security testing activity mitigates the wearing away of digital trust that takes years to build. This is particularly helpful as integrated data ecosystems engage in data transfer from various data points, such as Internet of Medical Things devices, clinical services, patient applications, etc. This ensures data accuracy, integrity, and provenance, resulting in greater patient care and trust in healthcare institutions.
b. Shadow Data in Legacy Systems
Like a plague, shadow data is like a quiescent volcano that can result in sensitive data exposure. Security testing reveals vulnerabilities, unpatched gaps, and weak encryption protocols that silently turn data assets into data liabilities.
c. Regulatory Non-Compliance
Compliance varies across industries and even same sector organizations. This is primarily because each institution has varied processes and unique internal approaches to handle compliance. However, a unified approach is required when it comes to ensuring regulatory compliance with evolving data privacy and healthcare laws. Security testing provides transparency into compliance gaps, enabling security teams to bridge these gaps before incurring noncompliance penalties.
How Securiti Can Help
Robust security testing and a solid data security posture are core to addressing evolving risks, safeguarding sensitive patient data, protecting healthcare institution valuations, and ensuring compliance throughout the M&A lifecycle.
Securiti Data+AI Command Center enables organizations to enforce least privilege access that’s critical during an M&A transaction. It helps organizations secure AI adoption in pharma R&D, prevent data exposure, govern data access across healthcare systems, automate compliance controls for MedTech expansion, drive data minimization in clinical research, and much more.
Additionally, Securiti’s Data Security Posture Management provides holistic insight into the security posture of your data assets, whether on premises, cloud, or spanning multi-cloud environments. It automatically remediates misconfigurations by continuously assessing, managing, and reporting on compliance posture while organizations focus on detecting and remediating risks, ensuring that your sensitive data stays protected.
With Securiti’s DSPM, organizations can:
- Discover dark & cloud native data assets and connect to SaaS applications
- Scan and label sensitive data in structured and unstructured systems
- Prioritize & remediate misconfiguration issues based on sensitive data type
- Monitor access to sensitive data and enforce least privileged controls
- Extend data controls to improve data privacy, governance, and compliance
- Detect security misconfigurations of SaaS applications (Workday, ServiceNow, Snowflake, Zendesk, Salesforce, Slack, and IaaS applications
- Activate hundreds of built-in or custom policies to detect security misconfigurations related to identity, access, encryption, and more
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