In Part I, we touched on how healthcare stakeholders like clinical researchers, doctors, pharmacists, and other providers can and are implementing blockchain technology to facilitate the collaborative exchange of research and data. In this installment, we discuss the business case for blockchain in healthcare.
Policies and implementation regarding exchanging patient medical data among providers vary by institution and state and are subject to federal privacy law. However, with appropriately designed protocols, blockchain can support common tools for data management and auditing for secure, fast transactions.
Within the healthcare sector, firms could influence and develop the industry’s technological standards. Blockchain’s value in the healthcare industry depends on whether providers, governmental organizations, technology firms, and other healthcare organizations are willing to help create the technical infrastructure required. Some blockchain proponents genuinely believe that blockchain can do for business what the internet did for communication. More practically, some businesses conclude that healthcare blockchain applications will manifest unique technological and regulatory challenges. They see potential benefit in the risk of joining other institutions in becoming early contributors to new health technologies and procedures.
Decentralized Applications
Blockchain proponents often compare the stage of development of open-source blockchain technology to that of the Internet in the early 1990s.
- Internet protocols set conventions for how to manage traffic among computer networks.
- Early use was accessible to a specialized, expert community for many years after initial development.
- Later, additional Internet applications were developed to work with the Web as end-user services, such as e-mail and browsers.
- Analogous services that enable direct interaction between their users and providers on a blockchain network are known as decentralized applications (dApps/Dapps).
- Dapps can have specialized purposes but have common features, namely transparent development via accessible software code, decentralized blockchain records, and an implementation protocol that ensures legitimacy of the asset (e.g. bitcoin, biometric data).
The process for making secure payments using cryptocurrency is regarded as the first application built on a blockchain system. Businesses are now using various blockchain platforms to build specialized network applications. What might such applications be in the private sector? To begin to answer this question, businesses need to identify where blockchain protocol add value to operations, security, or health outcomes. New blockchain network applications can provide user-friendly products or services.
Smart Contracts & Information Frictions
Smart contracts are ordinary computational tasks that take place on a blockchain. They are programs that digitally enforce any sort of agreement, like a contract, negotiation, performance, or obligation. These obligations may or may not be a contract, but smart contracts are certainly rooted in contract law [pdf]. The contracts have their own computing networks, operating systems, and even programming languages, and have a wide array of uses. The technology helps users to solely rely on contracts that are automatically enforced when certain security conditions are met. Thus, smart contracts enable transactions without the need for trust between the two parties or for a third party to back contractual enforcement.
In our current healthcare system, many different third party intermediaries add extra overhead costs and complexity. For example, the healthcare industry spends more than $2 billion annually on maintaining provider databases and verifying clinicians’ credentials. The existing centralized HIE systems used to facilitate interoperability and transactions among participants are expensive because of low transaction volumes (since most medical information is stored non-digitally). They also suffer from inconsistent rules and permissions, making it harder for health organization to access the right patient data at the right time. Like the information-sharing benefits that blockchain offers providers and patients, smart contracts reduce information friction.
Other Business Applications
Blockchain could simplify transparency among stakeholders like insurers, payers and hospitals by simplifying the transfer of value (e.g., medical claims data or payments) without an intermediary like a pharmacy benefit manager. One area where smart contracts can significantly reduce costs for the healthcare industry is the medical supply chain because establishing trust between parties in a supply chain is often costly. Medical firms spend a lot on processes like duplicative testing, manual auditing, and tracking contractual obligations.
In the last post, we saw how insurance firms such as Optum, UHG, and Aetna are partnering with technology and finance firms like IBM and PNC to reduce administrative and reconciliatory costs. There are, however, lesser known startup firms advancing healthcare blockchain applications. For example,
- HCXI has released a payment platform to facilitate transactions between patients and insurers.
- Ernst & Young and Sensyne Health are collaborating on a platform for outcomes-based contracting, binding payments to the completion of specified clinical outcomes, patient satisfaction benchmarks, and improvements in treatment efficiency. The platform is meant to offer fairer reimbursements and access to innovative treatments.
- SolveCare, a healthcare benefits coordination and payment platform, has announced a collaboration with Boehringer Ingelheim Pharmaceuticals to create a care network tailored for diabetes patients to be piloted with Arizona Care Network’s 25,000 patients.
- SolveCare has also recently created partnerships with Lyft and Uber Health using its blockchain platform to help patients get to medical appointments on-time using HIPAA compliant rideshare services. The goal is to increase care accessibility for patient populations and reduce the amount of missed appointments, which cost nearly $150 billion annually.
What’s Next?
If designed properly, blockchain could reduce costs and delays. Although it undermines institutions that provide stability, blockchain could also eliminate the need for a central authority. There is no single model for operation, so participants in a blockchain ecosystem arrive at a consensus on operating standards for particular uses. The consensus protocol will need to address compliance, cybersecurity, privacy, and legal requirements. Private firms should recognize regulatory changes and engage with developer groups to help shape emerging policies and best practices for medicine.
Ultimately, those who participate in building blockchain tools for healthcare are engaging in an infrastructural investment to eliminate old costs and create new benefits. Stakeholders can consider blockchain’s relevance to these costs and benefits from a public health perspective or from a private profit perspective. Private parties should participate with the governments and academics if they plan on staying or becoming relevant in the industry. However, firms who want to be leaders of, rather than simply participants in, the future of US healthcare need to lead research and development for applications.
Justin Kirschner