Reducing Health Care Transaction Costs Through Blockchain

The world has become such mass consumers of data, that the amount generated throughout the past two years eclipses the last 5,000 years total for the entire world. Trends and correlations gleaned from this mass of information can prove valuable in decision making and planning. Yet, despite the incredible growth in computing and processing power, we still have challenges accessing, analysing, securing, and connecting data. We have analysed less than 1% of all data available. This lack of access and inability to analyse the data hinders businesses’, governments’, and individuals’ ability to make strategic and wise decisions.

The key to solving the problem is connecting and sharing available data in a way that maintains security, reduces transaction cost, and creates a single record of truth without contradictions. This is especially necessary in industries like heath care, where data is plentiful, essential, and largely locked away in data silos without a secure way of processing all the information. Unlocking this data while preserving privacy could improve the delivery of health care services, and lead to significant savings for taxpayers.

The options to remedy this lack of connectivity are threefold. First, Application Programming Interfaces (API) are useful in assessing data and connecting patients, doctors, and insurance providers. Information about available patients and available services are easily transmitted via APIs. APIs serve as the messenger between an individual and a system, delivering requests and responses between each party, or specifically as it relates to health care, between patients and doctors. Some have described APIs like a waiter at a restaurant that serves as the messenger between the table and the kitchen, delivering relevant information to both.

According to Andy Oram, a health care IT specialist, since APIs standardize the data being transmitted, “Each field must use consistent units and terminology, quite different from the discourses put in most health care records.” This is tremendously helpful in simplifying health care data and making specific, detailed conclusions and recommendations to patients.

According to Micah Winkelspecht, the CEO and Founder of GEM, a blockchain health care company, API’s would be a step in the right direction. However, Winkelspecht also notes that API’s lack the ability to create a single record of truth about a patient, meaning new connections would have to be made every time data is required or requested. API’s would be able to increase connectivity, but would not allow enough interactions between different databases to establish a single, self-correcting record of truth about patients, doctors, and hospitals. Under API’s, each hospital and health provider would still have their own local record of truth in their database, but would not be able to compare and address any inconsistencies with other hospitals and health care providers’ databases. Thus, the major limitation in API’s are that they do not secure a single record of truth that can be acted upon with complete certainty.  

Second, all data could be accumulated in a centralized source, like a single party or clearinghouse, and that source would be responsible for protecting and distributing in data. However, as NTUF has mentioned in earlier posts, centralizing data creates a massive security risk and would actually incentivize hospitals and health care providers to keep their data secret in the name of security, which clearly would be counterproductive to connectivity. Therefore, the major concern about centralizing the data in a clearinghouse system is the long term security of the data.  

Third, thanks to the immutable nature of blockchain, it could be used to unlock these data silos within the healthcare industry while maintaining security and a single record of truth. Any contradiction on the blockchain related to a patient's health record would be easily identifiable and remedied. Blockchain would allow meaningful data sharing within, and across health care organizations and still be in compliance with the Health Insurance Portability and Accountability Act (HIPAA). Organizations, like Gem, have already taken steps to create patient-centered approaches to health care centered around blockchain technologies.

The health care industry, and by proxy the patients and doctors, experience $250 billion in costs for 30 billion transactions of data per year. Using the distributed ledger structure of blockchain or other alternatives to connect and share data locked away in silos could create over $3 trillion in new value. Currently, according to Gem, it costs $8 to simply transmit data from point A to point B in the health care market, no other industry experiences this high of a transaction rate per transaction. By addressing this high transaction cost through blockchain technologies, not only could health care costs decline, but it also could result in savings for taxpayers. By utilizing blockchain federal health care programs, like Medicare, Medicaid, TRICARE, and others, could become better managed and cheaper to administer without compromising quality of service.  

The high costs of health care are in part driven by the industry's inability to manage, protect, and share data. If allowed to compete and develop, blockchain technologies could help solve this data management problem and still be in compliance with HIPPA regulations. Congress and health care providers should look toward blockchain and other comparable technologies to solve the rising cost of managing health care data, and use these tools to help patients and doctors make better decisions.