Cyber Settlements Are Not Security Strategies

Veradigm’s recent agreement to pay $10.5 million to settle litigation over its 2024 data breach may resolve legal exposure—but it does not resolve the deeper credibility crisis now facing health IT vendors. As more than two million patients contend with the long-term fallout of exposed medical and financial information, the episode underscores a persistent structural risk: the widening gap between contractual data responsibility and cybersecurity execution in third-party health tech infrastructure.

The breach, which affected names, clinical histories, insurance records, and in some cases Social Security numbers and driver’s licenses, originated from unauthorized access to Veradigm’s systems in December 2024. The company, formerly known as Allscripts, is a major supplier of electronic health record (EHR) platforms and practice management software. Though Veradigm denies all wrongdoing, the settlement’s terms offer financial and monitoring relief to affected individuals, a resolution that delivers restitution without public accountability.

This case is emblematic, not exceptional. And for healthcare executives responsible for technology procurement, data governance, and operational risk, it serves as a sobering reminder that breach response cannot substitute for breach prevention, and that vendor indemnification clauses offer little comfort once patient trust is broken.

Structural Vulnerabilities, Strategic Oversight

The legal action—Goodrum et al. v. Veradigm Inc.—was consolidated from multiple class filings alleging negligence, breach of implied contract, and unjust enrichment. Plaintiffs argued that Veradigm failed to implement “reasonable and appropriate cybersecurity measures,” a claim that mirrors the core allegation in nearly every major post-breach lawsuit involving healthcare data.

The settlement includes reimbursement for documented damages (up to $5,000 per class member), modest cash payments (estimated at $50), and two years of medical data monitoring. Yet the financial calculus is deceptive. The cost of the breach, both in patient vulnerability and long-term reputational impact, extends far beyond the settlement fund. A 2023 IBM report pegged the average cost of a healthcare data breach at $10.93 million, the highest of any sector. And that figure does not account for downstream consequences such as identity theft, fraudulent billing, or mental health distress tied to data exposure.

What remains largely unexamined is how healthcare systems and regulators are adapting their oversight of third-party risk, particularly in contexts where EHR vendors maintain partial or full custody of patient data. Despite increasing cybersecurity investment, the industry has yet to standardize baseline accountability expectations for software providers with access to protected health information.

A Legal Strategy Masquerading as Risk Management

The structure of the Veradigm settlement reflects a growing trend in breach litigation: early resolution without admission of liability. While this can reduce legal costs and public scrutiny, it also shifts the conversation away from structural reform and toward transactional closure. In practical terms, it allows vendors to treat settlements as financial line items rather than catalysts for systemic change.

This strategy, while common, is increasingly misaligned with the regulatory climate. The Department of Health and Human Services (HHS), Office for Civil Rights (OCR), and Federal Trade Commission (FTC) have all emphasized that consent agreements and settlements do not discharge an organization from further investigation or future liability. Moreover, breach history may influence eligibility for federal contracts, interoperability certifications, and payer partnerships.

From a compliance perspective, health systems must reevaluate their procurement and contracting frameworks. Vendor agreements should include not only indemnity clauses and notification protocols, but also explicit requirements for security audits, zero-trust architectures, and rapid remediation playbooks. Too often, these are absent or non-binding, relying instead on trust-based assumptions about vendor maturity.

A 2024 HIMSS Cybersecurity Survey found that only 36% of healthcare organizations conduct formal risk assessments of all third-party partners. That figure is indefensible in an environment where vendor breaches can expose millions of records in a single incident.

Patient Exposure Without Visibility

The patients affected by the Veradigm breach are unlikely to recall whether their data was compromised directly through a provider or indirectly through the provider’s software vendor. To the patient, the distinction is irrelevant. The harm is identical.

Yet this points to another operational challenge: visibility. Many health systems do not have a granular understanding of how their vendors store, transmit, or manage protected data. This is especially true when software-as-a-service (SaaS) models are layered on top of legacy infrastructure, obscuring the flow of data and fragmenting accountability.

The reality is that cybersecurity liability is increasingly mutual, but the transparency required to manage shared risk is still lacking. Executives must treat vendor cybersecurity not as a checkbox in procurement workflows, but as a core dimension of clinical safety and institutional resilience.

Class Actions as Industry Barometer

Veradigm’s settlement follows a pattern seen in other high-profile healthcare data breaches, including cases involving Blackbaud, MCG Health, and multiple ransomware victims over the past three years. As litigation accumulates, the class action model is becoming a de facto barometer for industry accountability. But that is a reactive system, not a protective one.

In some cases, class actions drive incremental improvements. In others, they merely clear the path for financial closure without reform. Either way, they are an inadequate stand-in for comprehensive security regulation. The federal government has not yet enacted sector-specific data security requirements for health IT vendors, despite the critical infrastructure designation of healthcare. Existing HIPAA security rules offer broad frameworks but lack enforcement specificity when it comes to third-party applications and SaaS platforms.

Without stronger incentives or mandates, the cycle of breach, litigation, and settlement is likely to continue, shifting costs to insurers, consumers, and care providers.

Leadership Without Illusions

Veradigm’s $10.5 million payment may close the books on one chapter of a high-profile breach. But it should not close the discussion. For CIOs, CISOs, and compliance leaders, the takeaway is not the dollar amount. It is the structural exposure that enabled the breach, the lack of enforceable standards, and the unacknowledged fragility of third-party relationships that carry enormous risk.

As healthcare systems deepen their reliance on cloud-based EHRs, telehealth platforms, and data analytics tools, executive leadership must adopt a posture of scrutiny, not assumption. Cybersecurity is not a vendor deliverable. It is a governance obligation. And it cannot be outsourced without consequence.