Getting into the Flow of Blockchain: Do you need a blockchain? Healthcare Edition

For many healthcare executives, it can be difficult to sift through all of the blockchain hype when deciding whether or not to further explore the technology. A lot has been promised in terms of better patient privacy and financial exchange, but without a great deal of tangible progress, assessing the validity of these claims is difficult. While blockchain technology is revolutionary in that it can power consensus in decentralized networks, many of its features are a product of unique tradeoffs. When deciding whether or not to use a blockchain, innovators have to consider many factors including speed, scalability, and censorship resistance. A blockchain might not always be the best solution to a technical problem. In this post, we’ll explore the scenarios in which a blockchain makes the most sense and specifically apply it to emerging use cases within the healthcare industry.

A blockchain is really just a linear, hash-linked data structure that records changing states within a network. Changes in the state are referred to as transactions. In the case of the Bitcoin blockchain, when Alice sends Bob 5 BTC, the state of the ledger is changed to reflect that Bob now owns those Bitcoins. What makes blockchains especially unique is that they can change network states accurately without a central party. This is particularly true for permissionless networks, meaning that anyone can join the network and write to it. Permissioned blockchains on the other hand, are networks in which a central party can control who has the ability to propose changes to the network. Deciding on the appropriate structure depends on the specific business use case.

Regardless of how promising blockchain technology sounds, it is still in its infancy stages and requires a great deal more iteration before it’s ready to handle enterprise applications at scale. Similarly, most proposed use cases can be accomplished using a standard relational database. This type of architecture has decades of development and innovation behind it. They’re deployed across millions of servers and can handle exponentially more throughput than today’s blockchain infrastructure. If a use case simply requires quick transaction processing, it’s probably better off using a relational database than expending resources trying to navigate blockchain technology.

A blockchain makes the most sense when you have multiple mistrusting parties writing to the network ledger. In these so-called trustless systems, it must be assumed that every party could act maliciously as to prepare for the worst case scenario. Today’s infrastructure requires intermediaries whose sole purpose it is to validate network states.These middlemen extract value from participants by charging service fees for network reconciliation. Blockchain technology proposes a way to achieve consensus on network states without these intermediaries. Multiple writers, absence of trust, and disintermediation are all characteristics shared by good blockchain use cases.

Healthcare Use Cases

If we apply these criteria to the healthcare industry, it’s evident that there are a multitude of qualified use cases. Most EHR data lives in siloed databases, each maintained by a different organization. A lot of this data is similar but since they’re kept across disparate systems that can’t communicate with one another, we have to spend money on reconciliation.The medical claims industry is also a perfect example of mistrusting parties writing and requesting data from a shared ledger.

Data Reconciliation

Sharing medical data between providers is obviously crucial to evolving the level of understanding we have about healthcare, but it’s extremely difficult to do so in a quick and secure manner. Data can exist in an infinite number of structures, each of which has its own meaning, and in order to decode the necessary intelligence, institutions have to rely on intermediaries with the proper knowledge to do so. Blockchains offer a way to automate the reconciliation process and cut costs for every party involved. If all records lived on the same ledger, distilling them down to common structures would be easy. In the cases where interoperability doesn’t work, each network would also have a baked in consensus mechanism by which the network would be able to agree upon the accuracy of the data on it’s own. Different parties used in the consensus process could include patients, inpatient facilities, outpatient facilities, and pharmacists.

Claims Adjudication

Another huge issue in the healthcare world is claims adjudication. Today’s medical claim industry is highly fragmented and inefficient. It can take up to 90 days for a medical claim to be processed and it’s estimated that more than 300 unique pairs of eyes can view your sensitive medical information. The way it works now is payers frequently request data from patients and healthcare providers to determine if and how much they owe for each bill. Not only is this sensitive patient data, but each party has a financial incentive to act maliciously. This doesn’t necessarily mean that they will, but the fact that the risk exists necessitates a strong security mechanism. Blockchain technology can automate a lot of these processes by verifying the integrity of medical claims data as it moves between parties. Patients can get paid faster and have less of their data be exposed to unwanted eyes.

Gem has been working closely with healthcare leaders to conceptualize and create blockchain applications for the industry’s largest problems. Although there is such high promise, the healthcare industry still needs a more solid grasp of what blockchains are really good for. Micah Winkelspecht, CEO of Gem commented, “Blockchains are not a panacea for all of the healthcare industry’s ailments.” If your use case involves multiple mistrusting parties trying to work together in the same decentralized system, you’re off to a good start.

Max Bronstein is a Contributing Writer at Gem.