The healthcare industry has long struggled to control soaring costs while maintaining accessibility and transparency. Applying blockchain technology may solve those issues.

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lockchain: The headline-dominating technology that disrupts every industry it touches. Once a fringe concept preached by radical technologists, blockchain has evolved into a digital landmark of society’s technological advancements. So, what is it exactly?

At its core, blockchain is a decentralized, immutable digital ledger of transactions. This highly sophisticated way of recording and exchanging information is the basic framework behind cryptocurrencies such as bitcoin, ethereum and ripple. Already, there is considerable public interest in blockchain as a disruptive and innovative platform.

More than $1 billion of venture capital was invested into the emerging blockchain ecosystem in 2014 and 2015, and the rate of investment is nearly doubling annually, per a recent study. Industries ranging from consulting to financial services have already begun to reap the benefits of blockchain technology. Now, industries like healthcare are looking to get in on the action.

To fully realize blockchain’s disruptive potential, however, it’s important to recognize what its technological capabilities are and how they can bolster work streams in the healthcare industry.

The Building Blocks of Blockchain

Three key characteristics underpin blockchain technology’s efficacy: decentralized network distribution, immutable transactions and pseudo-anonymous identification.

Decentralized

The best way to envisage the technology is as a distributed, global spreadsheet that everyone has access to, but no single person can control. Say a transaction takes place, and an individual submits a proposed exchange of information through the blockchain network. The transaction would instantly be posted onto the network in real time, awaiting verification and storage in the blockchain.

Immutable

Each time someone sends in a request to transfer a piece of information or initiate an exchange along the blockchain, a transaction is created. That transaction is then linked to other transactions, creating a “block” of transactions. Through cryptographic programming, each block is tied to another block, creating a chain. Once linked, any attempt to alter or defraud information in a block would result in the immediate invalidation of the transaction, collapsing the chain and rendering it invalid. This is what creates the immutability of the blockchain, further securing user information.

Pseudonymity

Since the blockchain is a public network accessible to millions of users, it is vital that the identities behind transactions and what information is being transacted is veiled. While blockchain does not provide complete anonymity, it does provide “pseudonymity” by masking the identities tied to an information exchange. To ensure security, any transaction between parties requires an address that is tied to a person — like a proxy. However, this address does not reveal any identifiable information about the entities involved.

Each of these three characteristics is linked by one unifying construct: trust. By facilitating and securing a trusted peer-to-peer exchange between two entities, the process eliminates the need for a trusted third party to coordinate and verify the transaction. And while this accolade is valued in nearly every industry, it is the systemic challenges in healthcare today that make blockchain such an effective solution.

What’s Ailing Healthcare?

The healthcare industry has experienced radical transformation over the last 25 years. The passage of the Health Insurance Portability and Accountability Act (HIPAA), Medicare Modernization Act (MMA) and Affordable Care Act (ACA) has upended the way that the United States delivers, finances and coordinates care.

As policy makers attempt to balance the quality and costs of patient care, many healthcare organizations are still burdened by siloed systems, fragmented experience and interoperability inefficiencies. The advent of accountable care organizations and the migration toward a value-based care model has placed a greater focus on improving patient outcomes, yet many providers across the country are still debilitated by poor medical record handoffs.

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Enter blockchain, with its ability to revamp industries. Given the technology’s expansive capabilities, the government has focused on finding new, innovative ways to leverage the disruptive technology.

Consider the Office of the National Coordinator, which hosted a challenge titled, “Use of Blockchain in Health IT and Health-Related Research.” Academic institutions submitted papers describing potential use cases for blockchain, ranging from EHR management to data security. Participants from the Mayo Clinic, MIT, Deloitte, IBM and Accenture all submitted papers, validating the government’s interest in leveraging blockchain as a revolutionary tool.

Beyond these practical applications, blockchain has the potential to serve as the framework for other tools. Machine learning, predictive analytics and precision/personalized medicine can all be built on blockchain, enabling healthcare providers to make more informed decisions about patient care.

Power to the Patient

According to KFF, 29 percent of Americans have reported problems paying medical bills, therefore neglecting treatment and other necessities. The blockchain revolution could pave a new way for patients, granting them more control over medical costs with better oversight of the billing and claims adjudication process.

Using the blockchain platform, a claim submission would be faster and much more transparent, as the transaction is posted to a public blockchain. Smart contracts — a type of business programming code — would review medical record information posted to the blockchain by each of the parties and determine payment without the need of manual claims adjusters and other systems that could be prone to error. Accountability and monitoring would be far more transparent, sharing the onus of treatment with patients.

Furthermore, empowering patients is key in fostering a patient-centric care model. Blockchain’s technical characteristics and underlying security benefits make the technology a strong candidate for transforming the way medical records are developed, stored and transmitted.

Granted, there will be challenges to implementing this transformative technology. Acceptance from key players is necessary to mitigate interoperability issues and surpass scalability barriers. Moreover, the technology is subject to inherent limitations and is often found to create regulatory confusion and uncertainty.

Still, the healthcare market continues to be one of the most complex industries in the United States. We are entering an era where technology could be the catalyst that overhauls a sector in dire need of solutions. As health IT and blockchain markets continue to burgeon, blockchain could be the remedy that the healthcare industry is looking for.