Blockchain in Financial Services Offers a Case Study for Healthcare Adoption

This story is taken from the STAT report, “STAT’s guide to blockchain in health care”.

NOTLong ago, blockchain technology captured the imaginations – and the wallets – of financial services firms seeking a “first-mover” advantage by integrating it into their outdated business systems. Experts have predicted that blockchain could yield millions of dollars in savings, with uses ranging from real-time clearing and settlement of securities-related transactions, to cross-border payments and regulatory compliance.

But with fierce competition from the financial sector and distrust of transparency, adoption of the technology has so far brought little success.

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It is now the turn of the health sector. Hospital systems, tech startups, pharma companies, payers and others in the fiercely competitive $4 trillion healthcare industry have set their sights on blockchain – the technology that powers bitcoin and data. other cryptocurrencies – in hopes it can reduce costs and spur innovation. From 2018 to 2021, global blockchain in the healthcare market grew at an average annual rate of around 55%, driven by security and transparency issues along the industry’s value chain, according to a recent report.

It remains to be seen, however, whether healthcare companies can overcome the hurdles that have impeded its adoption in the financial sector, or the barriers specific to patient care.

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At its core, blockchain is a ledger that can track transactions and assets, whether it’s a cryptocurrency change of hand, a patient’s medical record, or a pill circulating in the drug delivery pipeline. The technology distributes information across multiple computer centers, creating an immutable, decentralized system of linked and synchronized “blocks” of data, joined or “chained” together by digital signatures.

Even more simply, a blockchain is a decentralized list of largely unmodifiable digital records, linked together by computer code. In healthcare, a blockchain network might work like this: Imagine a lab technician who wants to attach a doctor’s referral to a patient’s digital records on the blockchain. The technician would enter the transaction on the blockchain, creating a “block” consisting of the medical data linked to the referral, the author of the transaction and a timestamp. The block would then be transmitted to the entire peer-to-peer network, which could include the patient’s doctor and family members.

Proponents claim that upgrading to blockchain could save the healthcare industry billions of dollars a year in costs associated with data breaches, information technology, operations, support function, personnel, counterfeiting and insurance fraud. It has enormous potential to allow organizations to verify the sources of goods, track their movements, and build transparency in supply chains. Businesses could immediately identify fraud, contamination or counterfeit products.

The pharmaceutical industry, which loses around $200 billion each year to counterfeit drugs, would be a natural beneficiary of the technology.

Blockchain could also enable better exchange of health information, which is essential for managing rising healthcare costs and promoting quality care.

Covid-19 has helped bring the healthcare sector further into the digital world and draw more attention to the potential of blockchain. The pandemic has pushed providers to embrace digital technology, remote patient monitoring, and artificial intelligence to help providers monitor and treat more patients remotely. The use of telehealth has also exploded.

Blockchain-enabled tools are emerging to fight the virus, including an identity management system that supports contact tracing in South Korea, according to a 2020 report by the Organization for Economic Co-operation and Development. a data sharing system and software to support research. Blockchain has also been used or proposed for supply chain management of medicines and medical supplies, according to the report.

The financial services industry’s foray into blockchain technology illustrates some of its opportunities – and potential pitfalls – and can provide a roadmap, as healthcare innovators consider how to advance the use of blockchain.

After the collapse of the housing and financial markets in 2008, traditional financial services firms faced a host of challenges regarding their business models.

New regulations, such as the Basel III framework – which established international banking standards for capital adequacy, stress testing and liquidity requirements – and the Dodd-Frank legislation, which revised the financial regulations, have brought dramatic changes to the competitive landscape, forcing companies to reassess how they have deployed their capital.

What followed was an era of radical innovation. Rather than migrating to jobs within the traditional investment banking community on Wall Street, many newly unemployed workers have opted to join or build fintech startups. The departure of the brains of global investment banks has paved the way for these leaner, unregulated firms to gain traction.

Traditional financial services companies have seen their business models under attack by Silicon Valley, causing disruption in nearly every silo of the financial services vertical, from banking to payment processing.

This surge in unforeseen competition and the overhang of new regulations paved the way for the financial industry’s adoption of consumer-driven fintech – a portmanteau for “finance” and “technology” – and spawned to Stripe, PayPal, Robinhood, Square and many other fintech companies whose apps can be found on almost every smartphone today.

But another by-product has been increased consumer access to digital currencies supported by blockchain technology.

Initially, financial services firms were content to invest in bitcoin wallets and exchanges. But over time, they focused on blockchain, the technological infrastructure that underpins cryptocurrencies.

In the race for real-time financial services, stakeholders at the highest levels have seen the vast possibilities of blockchain and its cost-cutting potential. Seemingly overnight, financial services firms and other strategic players sought to invest in commercial applications for blockchain technology at large. In 2016, blockchain efforts accounted for nearly 70% of Series A funding, with bitcoin investments remaining at around 30%.

How has this wave of blockchain investment for financial services played out?

“It was very high-profile initially,” said Larry Tabb, head of market structure research at Bloomberg Intelligence. (Tabb is the former chairman of TABB Group, where the author previously provided consulting services.)

“We’ve seen very little going into production,” Tabb added. He and others said costs, backbone infrastructure and reluctance from financial industry players have prevented it from gaining traction.

The healthcare industry may be able to succeed where Wall Street has failed. If successful, the resulting disruption could change the way healthcare companies deliver their services. Many habits woven into the financial industry’s DNA, such as an aversion to sharing data, are less prevalent in healthcare. And while the financial services industry is loath to upgrade its back-end systems to accommodate blockchain technology, the healthcare industry has a regulatory obligation to do so.

Financial services and healthcare are different animals, but the two industries share certain pressure points. Both industries struggle with legacy administrative systems and bear a significant responsibility to consumers.

“You could argue over health care, you make a mistake and people die. In finance, you make a mistake, you completely ruin people’s lives,” said Mariya Filipova, chief innovation officer at CareQuest Innovation Partners. “There are likely parallels to be drawn in how industries have dealt with complexity, high risk, handling highly sensitive information and managing innovation.”

On the other hand, solutions that may be undesirable to the finance business model may benefit healthcare companies trying to reduce their reliance and expense on third parties.

Since many healthcare blockchain projects are still in the research and development stage, companies have some trail before blockchain-based partnerships and programs reach critical mass. That said, several players are leading the way in delivering on the promise of this emerging technology in various ways, offering proof that blockchain can be more than buzzwords and hype.

To give an example, San Francisco-based Chronicled, a company using blockchain to support the pharmaceutical supply chain, has two blockchain-based technologies in production: one to authenticate drugs and another to automate revenue management. .

Another company, digital health startup Patientory, uses blockchain to help protect medical records. Health records on blockchain systems can be linked to existing medical records software and act as a holistic view of a patient’s record without placing patient data on the blockchain. Each new patient record can be added to the blockchain as a unique hash function, which can only be decoded if the owner of the data consents.

“We sought to really create a secure platform that would allow users to take control of their health records. Because right now it’s under the control of electronic medical record systems and hospital systems,” said Chrissa McFarlane, CEO of the company.

The popularity of cryptocurrencies has given blockchain technology an almost mythical status among the general public. But although blockchain solves many lingering problems, such as data security, privacy and supply chain management, there are other problems that this revolutionary technology does not solve, especially in the field of Health care.

“It’s still pretty new, when you think about it, digital health,” McFarlane said. “I would say it’s still early days. I mean, if you look at the industry as a whole, knowing that healthcare is still ten years behind, it’s like 1994, right? »

“We are still in the pilot phase and the implementation phase,” she said. “I would say to see critical mass, it won’t be for five years, really.”

But, she added, “It’s here to stay.”

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