As digital innovators, we pitch crazy ideas in every office room we step into and we try to figure out which ones make dreamers dream. We believe coming from different industries into the digital health and InsurTech space is an asset, as we tend to think more divergently than actors who have spent years in the business.

Twelve months into our project, with a live telemedicine product and lots of problems to solve, I figured it was the right time to put all the small hallway conversations I have had with the people building Elma into a single post that defines a possible roadmap to improve access to healthcare. Here it goes.

Why healthcare data is maybe the best use case for blockchain technology

There are multiple agents who may generate value to society by using healthcare data. Insurers can understand risk better and provide lower premiums for everyone. We patients would love to have our doctors record all our healthcare data in a single place, so we can grant access to our full records to any other doctor. There is a lot of literature on why healthcare data portability offers great benefits.

Researchers would benefit greatly of structured and live datasets to find correlations in the data. Recruiting for clinical trials is another core activity that would enjoy the new ecosystem. The pharma industry is another actor that uses data intensively. There are multiple stages in the drug development life cycle in which getting reliable data on the state of health of a population is relevant. It makes sense for society to have the whole pharma industry (and not only some players) get access to up-to-date, aggregated, anonymous data.

In its essence, blockchain is a solution to coordinate agents when no central authority can be trusted. The whole reason healthcare data is not already portable, anonymous, owned by patients and voluntarily donated (or not) is precisely because we don’t have anyone to trust it to. Perhaps the simplest way to make my point is this: as a Spanish citizen, go to a public hospital in Spain and try asking for your complete medical record. Good luck getting it!

What would an implementation look like?

I’ll do my best to give a satisfying answer given my limited understanding of how different public blockchains work at a deep level. I’ll let someone more literate in tech explain the details on which public blockchain would cover this use case better in another post. But its definetively a public blockchain (I’ve looked into the available private ones, and I personally believe its Microsoft trying to own the internet all over again).

The main goal is to store healthcare data in a public blockchain that affords smart contracts which are formally verifyable, high transaction throughput, and governance, such as Tezos (more on why these features are important in another post). As soon as healthcare data is separated from personal data, all entities using it will operate in accordance with European Data Protection Laws.

Patients, of course, will be the data operators and will choose what to share and what not to share. Third party services (probably insurers) will provide the interfaces through which each of us will handle our data. Keys to the wallets signing operations will be held in custody by the service provider, or by the patient. Notice I’m basically describing an implementation of USV’s thesis on where value sits in the new paradigm of decentralized databases.

Any entity who wants to use the available data will have to pay the ecosystem for it, and the distribution of revenue will be defined in smart contracts. Suppose a patient decided to pay a healthcare service with data. The revenue generated by the use of her data would be assigned to the healthcare service. Alternatively, someone may choose to donate their earnings to a researcher in the network.

Why traditional health insurance models will never adopt this use case for blockchain technology

Incentives. This is a bold statement on my part, but here’s public data on the Spanish healthcare market to back it. We have come to this conclusion after twelve months of commercializing a full stack telemedicine solution in Spain.

Private healthcare insurance has a penetration of over 30% in households in major Spanish cities (see page 16 of this report), and over 9.5 million people are insured privately in Spain. Churn rate is somewhere between 12% and 20% —higher than in telco companies! (This data is provided by our industrial investors and advisors). It’s obvious that portability would increase churn, so any innovation that features portability collides with the economic incentives of the industry.

On top of this, data protection laws are hard to understand, and traditional insurers prefer a known evil to an unknown good.

Saying that healthcare data is too complex to structure in an internet-friendly way is a fallacy, as there is a long history (more than twenty years) of innovation in protocolization of healthcare data on the internet. FHIR and HL7 standards, for instance, are present in over 50 countries, including most public healthcare services in southern Europe, and is chosen as the supported protocol by major tech companies. Yet, the existing implementations make the data actionable, but not portable. Twenty years is enough to see a lack of incentives to develop portability features in the industry. Data portability will bring higher insurer churn, and thus more competition to a space with high entry barriers, translating into tighter premiums. That’s the real issue.

It also turns out that healthcare data is amongst the most expensive assets sold in the dark web. No wonder why.

Why a "service-based" health insurance model is the first step towards data-driven healthcare

I'll start this section by sharing two key concepts we use internally to define health insurance company types:

Coverage-based insurance is the traditional model, where the insurer simply provides financial coverage, but will do everything they can to avoid members using the coverage, resulting in a poor or non-existent service. How to identify a health insurance company of this type?

is the traditional model, where the insurer simply provides financial coverage, but will do everything they can to avoid members using the coverage, resulting in a poor or non-existent service. How to identify a health insurance company of this type? You get a pay per call phone to reach out to your insurer.

Digital services are only provided if you pay for them.

You hardly call your insurer for medical advice. Only 0.7% of Americans reach out to their insurer for medical care guidance.

Service-based insurance is what we see as the new model. This type of insurers focus on delivering a superb experience to their members in order to optimize risk management and improve retention.

The entire insurance industry has focused too much on the wrong things, and now, four in five members believe insurers don’t value their loyalty. It turns out that 80% of claims in the whole Spanish insurance industry happen in healthcare, which again only has a penetration of 30% of households (see page 6 of this report). If there is any insurance segment where it makes sense to provide better service, it's precisely in healthcare.

The whole point of going service-based is changing the incentive structure between members and insurers. This is a megatrend, as described by Angela Strange, General Partner at Az16.

Why telemedicine is the base layer of open healthcare data

In order to align the interests of health insurance providers with those of the whole ecosystem when it comes to data, we must first change the incentive structure in health insurance. Telemedicine is the first step to service-based healthcare paradise. Only then can healthcare data heaven be unlocked. But who must lead this? Insurers, and I’ll make my point.

Adoption in this industry is slow. Slow as hell —notice my co-founder, all of our team and myself come from the fast-paced world of the internet, so we are hypersensitive to the slowness of the healthcare industry. Yet, payouts for healthcare claims in Spain have nearly doubled in GDP terms over the past 15 years (see slide 8 of this report, which proves my point that private healthcare is expanding. But who is absorbing all of this growth? Health insurers and healthcare providers (large hospital groups, essentially), no one else. Therefore, it's a health insurer that has to push this innovation forward.

As Elma thrives to be this base layer for the industry, the details of this great adventure are reserved to those who join us. Our members will hopefully be the first to enjoy results, and yours truly will be happy to write another post in a few months sharing any exciting news we have.