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Can Technology Save a Failing Healthcare System?

For a sector where the outcomes matter so much more than the inputs, the diagnosis on the U.S. healthcare industry is not great. The prognosis is not much better, especially as tectonic shifts are afoot in the U.S., which ranks last in The Commonwealth Fund’s benchmarking of advanced economy health systems. By this measure, the market making moves by Amazon’s triumvirate with JPMorgan Chase and Berkshire Hathaway should be watched very carefully as a portent for how technology (courtesy of Amazon), scale (courtesy of their combined 1 million employees), and financial and actuarial acumen (courtesy of JPMorgan and Berkshire Hathaway’s financial and insurance prowess), shape the industry. If the Amazon triumvirate is a very large beta test for how corporations can opt out of the broken healthcare system effectively creating their own networks, the advent of blockchain technology coupled with the oncoming wave of healthcare innovation can enable this type change and self-sovereignty at the individual level.

One of the reasons the U.S. healthcare system, despite having among the best hospitals in the world, is so persistently under-performing is that it has ossified under decades of opacity, friction and agency issues. Politics has not helped the case. The asymmetry between the payer, the provider and the patient make for anything but a transparent market. Add in the effect of pernicious operating risks, from widespread malpractice claims and the attendant insurance needs, which have made frontline healthcare provision a fool’s errand, to the advent of systemic cyber threats, for which healthcare – broadly speaking – is a sitting duck to anything from ransomware attacks that can cripple entire hospital systems, to massive patient privacy exposures due to the treasure trove of patient information maintained in vulnerable legacy systems. Hardening healthcare to cyber threats would be nearly impossible by today’s standards since access to accurate, real-time patient information at the broadest levels is a prerequisite of care. Across the spectrum, there are so many false tradeoffs for preserving the status quo in healthcare that a sector wide and value-chain long rethink is prescribed. Here too, the right balance of technology, public health policy and financial engineering, both on the payer side of the equation and on calibrating economic risks from operating in the sector, are in order. These shifts are already underway and will be the bane of incumbent, slow-moving players, many of which have grown through acquisitions to an untenable and less than agile size.

Patients want as close to a one-to-one relationship with their healthcare providers as possible. However, the highly intermediated and opaque model of healthcare economics that dominates the industry precludes this patient-provider proximity. Indeed, the advent of high-deductible healthcare plans, in which 43% of the insured population in the U.S. find themselves, means that the gap in access to healthcare is not only an albatross around the necks of the uninsured and poor, but for the insured as well – with both groups often postponing otherwise treatable ailments for economic reasons, only to receive care when issues shift from manageable to acute, thus costing more to the overall system. Add in the effects of stratospheric price inflation (outpacing wage inflation), which reduces the life-saving purchasing power of health benefits and dampens the effects of deductibles and co-payments, the payer side of the market is not only in retreat, insurers are building higher walls to defend their territory. This territory, however, is beginning to shrink, as firms of the titan variety like Amazon, JPMorgan and Berkshire Hathaway begin to make concerted moves to not only opt out, but to reinvent a more equitable and optimized alternative. Meanwhile, small to mid-sized firms are perennially squeezed in a war for talent, shrinking purchasing power and rising rates. Solving the payer and economic sides of the equation is only part of the battle. Patient privacy and provider viability are critically important in a modern, well-performing healthcare system.

Patients own all the consequences of healthcare, but none of their data, which is where the true rewards and medical insights are gleaned. Recognizing this, there is a veritable race taking place to see who can occupy the space between the patient and their medical providers in terms of data gathering. Among the tech titans the race is getting fierce as everyone from Apple, with its wearables and treasure trove of data, to Amazon and Google, are all pitting their best ideas and capital on the medical technology and health data mining market. These moves will invariably come with the attendant risks and rewards and are very likely to unlock new markets worth billions, of which individuals are unlikely to reap any monetary reward (save for the potential of better care) in this bounty. Needless to say, unless this growth is managed carefully and with an eye to prudent public health policy at the design stage, the wave of digital disruption in healthcare, like the advent of consumer credit bureaus before it, has the potential of privatizing gains while socializing losses. Despite these and other risks, we must embrace the era of radical healthcare innovation and pay attention to enhancing outcomes, broadening the base and scope of coverage while reducing the embarrassment of riches garnered from a one-sided economic system – where the bounty goes to insurers and providers, while patients are squeezed between rising rates (and deductibles) and dwindling protection. For this, the U.S. should take no comfort in being the advanced economy that spends the most on healthcare, while remaining at the bottom of the league tables among peer nations.

While blockchain alone is no panacea, as a technology in the digital transformation arsenal it can enhance healthcare in a number of key ways. The first, given the irrevocable nature of how data is stored using blockchain or distributed ledger technology, is to ensure essential patient records are not altered or accessed in an unwanted manner. If so, there would be a record – or digital crumb trail – leading back to the original entry and any changes therefrom. The second key enhancement is trust, which can be greatly enhanced due to the transparency inherent in blockchain. Patient privacy, ever a pressing issue in healthcare, can also be enhanced by having pseudonymous health records assigned to an individual whose identity can remain obfuscated or encrypted, but under the patient or primary caregiver’s control. This model shifts the balance of power and critically access to patient information, tilting the asymmetry to where it belongs, much like identity, in the hands of individuals and not corporations or unknown third parties. Finally, back to the inherent cyber vulnerabilities in the current healthcare model, blockchains are resilient by design where data is segregated as a default thus greatly reducing the likelihood that a single breach would be catastrophic to a hospital, provider or the healthcare system writ large. Needless to say, the radical improvements blockchain enables in payments and supply chain provenance also have profound implications for health systems.

Naturally, for any of this work to take place someone (or better still, some groups), must design healthcare 2.0 and begin piloting at scale. That three bellwether firms, Amazon, JPMorgan and Berkshire Hathaway have decided to do just that should be closely watched by the market, carefully heeded by incumbents and rapidly followed by those nimble enough to catch the oncoming wave of healthcare innovation. Meanwhile, people, healthcare advocates and policymakers would be wise not to take an idle stance for this wave of change will be massively consequential, generational and touch all facets of the healthcare system.

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