Healthcare’s Third-Party Reckoning Begins at the Contract Table

The lawsuit fallout from the TriZetto data breach has accelerated a reckoning long overdue in healthcare IT governance: vendor partnerships are not cybersecurity strategies. As Cognizant Technology Solutions now faces multiple U.S. class-action suits over its handling of a 2020 breach affecting its TriZetto Provider Solutions platform, the liability spotlight is shifting upstream. In a sector increasingly dependent on outsourced infrastructure, cloud-based platforms, and revenue cycle management automation, enterprise buyers can no longer separate procurement from risk management.

Health systems and payers use TriZetto to manage billing, claims, eligibility checks, and a range of core administrative workflows. According to court filings, unauthorized access to the system reportedly began in late 2020, yet key vulnerabilities went unremediated well into the breach timeline. Stolen data allegedly included Social Security numbers, financial records, and insurance details tied to both providers and patients.

The specifics of the breach are now public record, but the implications stretch far beyond a single vendor’s controls. This is a case study in the consequences of strategic misalignment between IT outsourcing and cyber accountability.

When Delegated Risk Becomes Legal Exposure

Regulatory momentum around third-party cybersecurity risk is not new. In 2023, the Department of Health and Human Services (HHS) proposed updates to its HIPAA Security Rule that would explicitly require covered entities to assess vendor safeguards as part of their own compliance audits. But the Cognizant lawsuits point to a faster-moving force than regulation: litigation.

Court documents claim Cognizant failed to implement “industry-standard safeguards” and did not act on early indicators of compromise. If these claims hold, it could set a precedent in which enterprise clients are not only expected to vet vendors, but are also legally responsible for ensuring incident response capabilities and governance structures are in place before services go live.

This raises the stakes for CIOs, CISOs, and compliance leaders who routinely contract with third-party IT vendors for EHR support, RCM platforms, and population health analytics. It’s no longer sufficient to verify technical capabilities, executives must evaluate breach transparency policies, data access governance, and how liability will be shared or shouldered across contract terms.

Cyber Insurance and the Limits of Financial Backstops

As breach fallout becomes more costly, many organizations have looked to cyber insurance as a stopgap. But as outlined in a 2024 report from Becker’s Hospital Review, the scope of coverage for third-party breaches is narrowing. Policies increasingly exclude damages resulting from vendor-side failures unless explicitly negotiated.

This means healthcare organizations relying on boilerplate indemnification clauses may be underestimating their real exposure. The Cognizant case underscores how ambiguous language in service agreements can open the door to lawsuits that drag covered entities into court, even if the breach originated outside their direct environment.

Further complicating the picture is the rise of consolidated service providers that deliver both software and business process outsourcing. TriZetto, for example, supports claim submission workflows that involve sensitive patient and financial data. The convergence of software and services blurs accountability lines, and in breach scenarios, plaintiffs will follow the data trail, not the procurement logic.

Risk Assessment as Executive Function, Not IT Task

One of the clearest takeaways from the TriZetto fallout is that risk delegation is not risk mitigation. Health systems and payers that rely on third-party platforms must move from technical assessments to executive-level governance reviews.

According to Health Affairs, fewer than 30% of hospitals conduct formal breach drills involving external vendors. Even fewer assess vendor incident response policies beyond what is outlined in the master service agreement. As cyberattacks grow in frequency and sophistication, these oversight gaps will become active liabilities.

Smart executives are beginning to implement continuous vendor risk monitoring and to treat IT contracts as living documents. Tools such as shared risk scoring, real-time SLA tracking, and joint tabletop exercises with vendors are emerging as hallmarks of a maturing cybersecurity posture.

But governance maturity cannot be outsourced. It starts with internal clarity: who owns the risk, who has authority to enforce controls, and who is accountable when things go wrong.

The New Due Diligence Mandate

For healthcare leaders, the lesson is neither new nor easy. The market will continue to demand outsourcing efficiencies, platform integrations, and data-sharing automation. These needs are structural. But the Cognizant episode proves that cybersecurity immaturity at the vendor level can reverberate across entire health ecosystems, and into courtrooms.

In this environment, due diligence is no longer a compliance checklist. It is a strategic mandate that must include:

• Independent security audits and certification review
• Legal review of indemnification and breach notification clauses
• Governance mapping that connects vendor incidents to internal escalation protocols
• Ongoing reassessment of contract performance, not just pre-signature vetting

The healthcare sector is late to this posture not because it lacked insight, but because it lacked urgency. That era is over. Liability will now follow leadership. And leadership means asking harder questions before ink hits the paper.