Skip to Content
Dennis Bagley Cody Allen
April 3, 2018 Article 6 min read
Blockchain is being hailed as one of the most potentially disruptive technology advancements since the internet. But what exactly is blockchain; how might healthcare organizations leverage it; and what are the risks?

Business man using tablet device on a city street.

It’s no wonder that blockchain is attracting attention — it’s one of the most potentially disruptive technology advancements for the healthcare industry. Organizations are not only taking notice; many are already putting resources behind blockchain projects.

Organizations are not only taking notice; many are already putting resources behind blockchain projects.

But, what exactly is blockchain; how might healthcare organizations leverage it; and what are the risks?

What is blockchain?

The technology is rapidly evolving; but in simple terms, blockchain is a digital, distributed ledger of transactions. All participants in a blockchain have identical copies of the ledger, which eliminates the need for a central server or intermediary to store and maintain it. The distributed nature of the ledger enables participants to validate transactions with automated algorithms. (Think online banking without, in theory, the bank.)

Once a transaction is made, it's digitally signed, timestamped, and posted to the ledger. Transactions are recorded and stored in blocks of data on every node of the network. In other words, each participant's copy of the ledger is updated in real-time as these validated, automated additions occur.

Each block contains a unique identifier — today’s public blockchains use a cryptographic hash — as well as other attributes such as a timestamp and transaction data. The new and validated blocks are linked together in a linear, chronological chain over time.

Blockchain is designed so that data is not easily altered, and transactions are not easily deleted. These attributes are what make blockchain so potentially transformative: Imagine real-time data capture and visibility, greater ease of data sharing and interoperability, and automation that can improve security and privacy and reduce fraud and errors.

Imagine real-time data capture and visibility, greater ease of data sharing and interoperability, and automation that can improve security and privacy and reduce fraud and errors.

How can we leverage blockchain in healthcare?

With so much promise, nearly all healthcare organizations can benefit from blockchain's potential power in any number of important ways, including:

1. A more secure medical device and pharmaceutical supply chain

With blockchain's single source of truth — that is, data about the original, validated transaction — as well as an audit trail, opportunities for fraud drop significantly. This means, the technology can be used to strengthen track-and-trace capabilities and data provenance for prescription medication; a problem that costs pharmaceutical companies an estimated $200 billion annually, according to Forbes.

Blockchain can improve track-and-trace by automating the process of identifying and authenticating originating manufacturers' GTIs (global trade item numbers) and device serial numbers. It can facilitate faster and more accurate investigations and recalls, and it can help businesses ensure compliance with the Drug Supply Chain Security Act. When it comes to prescribing, blockchain can also provide additional checks and balances and a new level of assurance to make sure prescriptions aren't altered or forged.

2. Improved security of and access to patient records

Paper files aren't the only record-keeping challenge organizations face. Even those with electronic health record (EHR) systems struggle with interoperability issues that make access and sharing a challenge for patients, providers, and payers alike. Keeping medical data current and accurate for all parties can be clunky, mistake-prone, and inefficient.

Using blockchain to store medical records, or metadata about medical records, can ensure records aren’t manipulated and provide real-time visibility at a lower cost for patients as well as other stakeholders, including their doctors, laboratories that run their tests, consulting specialists, pharmacies, and payers.

Here's how it might work: Patients could unlock their electronic health records for their medical providers, insurers, or other stakeholder s by using a combination of cryptographic keys — think of it like a username and password. That stakeholder could view and add medical data to the patient record on an append-only basis in encrypted, timestamped blocks. Once the patient has given permission, blockchain's automated and distributed design would make up-to-the-minute data about that individual's care accessible in real-time to all trusted, verified parties.

In this way, blockchain technology can address the existing — and frustrating — trade-off between data availability and security.

Blockchain technology can address the existing — and frustrating — trade-off between data availability and security.

It can allow increased patient control and quick access to current records — while adhering to strict HIPAA privacy regulations and other privacy and security standards.

3. Faster claims adjudication and payments

Blockchain brings the idea of “programmable payments” to life through smart contracts. A smart contract is a computer protocol stored on the blockchain network, intended to digitally facilitate, verify, or enforce a contract without the need for a third party to approve related transactions.

The smart contract defines the conditions to which all parties using the contract agree. For example, an insurer agrees to pay a particular dollar amount for a given procedure code under specific circumstances; the insured patient agrees to the copayment amount set by their health plan, and the physician agrees to accept those amounts as payment in full.

With each claim, all conditions must be met in order for the contract to be executed, and automated payments to be authorized and transmitted. Smart contracts can automate the entire claims process — from pre-authorization to payment — and reduce the associated time and costs.

Other administrative responsibilities, too, such as underwriting or benefit reconciliation, can be automated using blockchain. That's likely why some 70 percent of payers indicated they plan to incorporate blockchain technology by early 2019, based on a survey conducted by Black Book Market Research.

What are the risks?

The applications of blockchain seem boundless — clinical trials, monitoring public health, provider credentialing, supply chain efficiency and security, patient agency and privacy; the list could go on and on.

But, with those opportunities, of course, come challenges. As with most technologies, the promise (and, likely, at least a small dose of hype) also brings new vulnerabilities, risks, and questions.

One important area of concern, always on the minds of healthcare leaders, is regulation, particularly related to protecting personal health information (PHI). HIPAA and other regulations will no doubt heavily influence how blockchain might be deployed in the healthcare space.

Who owns the blockchains your organization will use? Are they public? Private? A hybrid of the two? With ownership and access comes the question of who bears the costs and upkeep responsibility. Those aren't insignificant issues given that storing data with blockchain and the audit trails of, for instance, patients' medical and insurance records over a lifetime would consume a lot of server space and computing power.

A lack of technical standards and standardization, and no currently agreed-upon path forward among industry members or regulators, also create obstacles. What if pharmaceutical companies or insurers implement blockchain, but consumers or providers resist? Each stakeholder group will have different motivations, priorities, and incentives; coming to consensus isn't likely to be easy, or quick.

In conclusion

Blockchain is quickly making its way from technical circles to the mainstream, and we can probably count on some hype along the way. Still, despite many open technical and other issues to address, the potential is real. Healthcare organizations should keep a close eye on developments and plan to invest in R&D or pilot projects. As blockchain gains traction, organizations will have to move quickly along the learning curve toward adoption or risk falling behind.