Blockchain Hype: Healthcare Style

Is the blockchain coming to healthcare?

Good Morning,

A few quick updates:

  • Fitbit announced yesterday they’ll acquire Twine Health, a health coaching software platform. Study after study has emerged revealing that a Fitbit on its own won’t improve your health, so this is Fitbit exploring ways to improve on the behavior change side of the equation. Expect them to apply this to their already growing activity in the chronic condition space around Diabetes.

  • Tim Cook told Apple shareholders he has big plans for healthcare, beyond what their devices and software can do. This is very early, vague, and most likely a response to Amazon and Google’s increasing spend in the industry. Stay tuned.

  • The Wall Street Journal reported that Amazon wants to become a serious medical product supplier. I touched on this possibility in my post from last month. Where I got it wrong is in speculating that Amazon would experiment and make one big entrance in healthcare. I’m now convinced they’ll make many big entries into the space through medical product supply, pharmaceutical sales, perhaps even purchasing a provider group. Expect more on this topic from me.

On to the blockchain!


As interesting new technologies emerge, it's tempting to shrug them off as over hyped. You don't want to fall victim to overblown promises made by excited techies imagining how the world might look completely different in the wake of this new invention.

The blockchain, in part because it's wrapped up in the discussion of Bitcoin, has become one new technology that's being vaunted as a world-changer. As I'm not in the business of making predictions I won't leap to speculation here. Instead, we can explore how the blockchain might be applied to healthcare, and the economic effect it would have.

Blockchain Basics

I'm not sure if we're at the point in time where we can talk about the blockchain without explaining what it is, so I'll play it safe and give a brief overview and emphasize the pieces that are important for our purposes.

The blockchain is a distributed ledger; essentially a record of transactions that anyone can see. It is also entirely anonymous, so all transactions are listed using generated keys that are unique to a person, and known only to that person. Because anyone can see the ledger and the flow of transactions, fraud becomes functionally impossible. With a publicly visible and immutable ledger, there can be no disagreement over how much was traded and between whom.

Another key point in understanding the blockchain and why it is so revolutionary: it is entirely distributed and maintained by its users. There is no entity in charge of the blockchain. The practical effect of this is that the blockchain enables two parties to have a verified and trusting transaction without a third party involved. If you want to transfer money to a friend, there's no need to go through PayPal; you can just give him the money and it's recorded publicly and forever.

In healthcare the blockchain is being viewed as a potential answer to the woes providers and patients currently face when it comes to Health IT. While more and more health data, specifically patient health records, are being digitized, there are still major issues with portability and interoperability that the blockchain might help solve.

The Problem With Health IT

While President Obama's healthcare legacy is tied to the lightning-rod legislation that carries his name, his first act in healthcare came much earlier. Passed as part of the American Recovery and Reinvestment Act of 2009, the HITECH Act set standards and requirements for the cresting wave of digital record keeping in healthcare. "The 2009 Health Information Technology for Economic and Clinical Health (HITECH) legislation contained two basic components: a certification program to make sure that EHR's had certain common capabilities, and the 'Meaningful Use' program, divided into three progressively more complex stages, that gave providers incentive payments for using EHRs." A key part of these requirements laid out for EHRs was their interoperability, or put another way, their ability to move healthcare information and data seamlessly between systems - even between EHRs created by different companies.

It was clear that regulators wanted to make sure healthcare providers were moving towards using digital record keeping, and that such digital records would be portable. To employ a common conceit in healthcare, an Electronic Health Record that can't be transferred between EHR systems is no better than a piece of paper. These requirements around creating Health Information Exchange (HIE) ability in EHR systems were initially envisioned to be a part of the first stage of Meaningful Use, but regulators ultimately deferred these requirements to stage 2, citing the complexity of implementation as a reason.

The practical effect of this HIE deferment is that by the time it was set to be required, the EHR systems adjusting to this new regulation had already been built and deployed. EHR vendors like Epic and Cerner had no incentive to bake this functionality into their offerings, and thus it was even more complicated to implement them later on once it was mandated.

For the source of the above quote and a good read on the recent history of Health IT, check out Julia Adler-Milstein's superlative piece in NEJM.

The Economic Case for Interoperability

I noted above that EHR vendors had no regulatory incentive to incorporate HIE into their offerings. More importantly, they have no market-based incentive to do so. Just as Microsoft never had to care if you could turn your Word documents into Mac's Pages format, EHR vendors don't gain by making it easier for patient records to be transferred to their competitors. Their customers - providers - certainly aren't demanding this functionality, as they benefit most when patients stay with them. The pain point of transferring medical records between providers raises the switching costs of changing providers, and thus while I'm not alleging providers are curtailing patient choice deliberately, none of them are calling their EHR vendors and demanding this feature.

Conversely, interoperability means everything to patients and the health system in aggregate. Note the inclusion of "Economic Health" in the name of the HITECH bill setting out these standards. As I discussed in last week’s post, the ability for patients to easily switch providers will only serve to increase provider competition, thus improving value for money. While there has been little demonstrated demand from patients wanting to maintain and control their own health data, the ability to easily switch doctors has intrinsic benefits and appeal.

Put simply, this is something that really shouldn't be as big of a problem as it is. It's another example of how payers obscure the interests and purchasing power of patients through aggregation.

Blockchain Paradise

As a thought experiment, applying the blockchain to health IT solves many problems. Everyone in the country who'd had an interaction with the health system would have a record on it, and when they showed up for a doctor's visit or at the emergency room their record could be summoned in an instant. The doctor would then update the record with the details from the visit and they'd be instantly applied and verified. If that person got into an accident the next day across the country, the EMTs would be able to pull up a complete health history within seconds, and including the recent visit notes.

This system would exist without a centralized vendor in control. The healthcare blockchain would be hosted and supported in a distributed fashion by the providers and insurance companies that utilize it for record keeping. Your health information would be available to you, and to any party you grant permsision to access (providers, insurance companies, your child's school, etc.) with the press of a button (or perhaps a biometric scan of your face).

When you arrived at a new doctor's office, you wouldn't have to provide a health history on a clipboard in the waiting room. You'd simply grant the office permission to view your files at check-in, and they'd have your complete history, even the things you forgot like when you last got that tetanus shot. If you decided you didn't like this new doctor you'd simply revoke access and go visit a new one.

The Barriers to Blockchain

Where to start?

There are serious technical barriers. Blockchain technology currently handles text-only data, while medical records contain images and data files. Cryptocurrencies are also easily stolen when user's unique ID keys fall into the wrong hands. This is one thing when it's digital currency, but regulators would set a higher bar for security standards around personal health information. (If you'd like to understand more of how things are "stolen" on a blockchain, try this from The Verge.)

Technical barriers don't rule out the possibility of a healthcare blockchain, but they certainly make it more complex.

The real barriers lie in the market. The existing digital health record industry has three major players - Epic, Cerner, and Meditech - who control 90% of the hospital market. They'll do everything they can to continue gaining their respective market share as well as using lobbying to stymie blockchain on a regulatory level. Most importantly, should the blockchain ever become anything close to a reality in healthcare, these companies could quite rapidly agree among each other to an HIE standard and simply implement it. This would render the biggest benefit of a healthcare blockchain - interoperability - as table stakes.

Epic has already introduced a system by which patients can grant any provider access to their Epic health record. It's not full interoperability, but it shows that they're thinking about it.

If interoperability is solved the other benefits of blockchain over traditional EHRs, namely a distributed architecture and immutable transaction record, become academic.

One could also argue that the blockchain would be cheaper than EHRs. It's open source technology. But it would require significant alteration by private enterprise to transform it into a healthcare appropriate tool, and then there would still be the cost of data storage borne by the providers and insurers hosting the network. They would also need to hire technical staff or consultants to manage their node, as they certainly don't possess that expertise today.

Much like cryptocurrency exchanges have sprung up to allow people to access the blockchain, there would be numerous healthcare blockchain interface providers who would emerge to sell customized interfaces for different healthcare provider types. This would be big business, and would come at a cost.

It's entirely possible that within larger provider networks and integrated delivery networks (of which there is a growing number), they may decide to build their own blockchain for record storage. This would technically be a use of blockchain technology, but wouldn't have the benefits of a completely open ledger in terms of interoperabililty and access.

Perhaps one way a nationwide healthcare blockchain could become a reality is if our healthcare system went single payer. This would create the system in which blockchain could be made the standard by central decree, and where the benfits of a highly distributed system would be best reaped. We'll have to watch existing single payer systems to see if they flirt with the idea of converting.

The Fate of the Healthcare Blockchain

At this point, the prospect of the blockchain in healthcare seems more hype than reality. While it could fix the major issue of interoperability, existing EHR vendors could resolve that issue by simply reaching an agreement, or perhaps by being regulated into one. Even if blockchain arrived fully-formed tomorrow, it would still face a healthcare system resistant to any kind of change and one with powerful forces for limiting patient choice.

It's also important to consider where blockchain arose: in the world of currency. This is a place where many resent the centralized control of banks and government fiat currency, and a way to circumvent those institutions was desirable. Given that the healthcare blockchain would, by necessity, be driven by the institutions themselves, much of the core value proposition is lost. It's filtered down into just another way to store data.

That said, I've taken the foolish step of making a prediction and thus entirely expect to be proven wrong. All hail the healthcare blockchain.