Event Report: 2017 JP Morgan Healthcare Conference exposes industry to blockchain

jp morgan healthcare conference 2017 blockchain healthcare

2017 J.P. Morgan Healthcare Conference Review by Giles Ward, Executive Director, Consortium

JPM is always a whirlwind, but with 40mph winds and several inches of rain, 2017 will be remembered as a gathering of very soggy blue suits and city trash cans piled high with broken umbrellas. With approximately 4,000 registered attendees, the city has not a hotel room available and is filled with five times that number for the related showcases and side meetings. Every coffee shop, restaurant, hotel lobby and bar is spilling over with earnestly huddled suits looking a laptops or pitch books. Entire hotel floors have had the beds removed creating hallways of mini meeting rooms making elevator banks inaccessible on the hour or half hour as everyone moves on to the next tightly scheduled appointment.

Credit to Bass, Berry & Sims this year for pulling out of the over-booked cocktail reception, dinner, after-party and late-night scene to rent the upstairs of a conveniently located restaurant that they made available to friends of the firm for meetings and shelter from the rain – resources well deployed. Also a well-continued tradition by the old GE Healthcare team now largely intact at Capital One – they put on one of the most diversely representative and well-attended receptions of the week that made staying put and hunkering down out of the rain seem better than all the other options.

Even though the closest I got to the official conference was maneuvering around the Joe Biden road closures, and that I did not hear any of the keynote speakers, the elevator and lobby buzz was again about solving the inefficiencies in healthcare and low mumblings about what repeal of the ACA will actually change. Possibly because of where I was staying, but pharma seemed to run almost as its own parallel universe in and around the main JPM events. In some hotels with the huge international contingents and pharma branding, you could have been forgiven for not knowing that there was any payor or provider attendance at all.

As for blockchain, there are a lot more people in healthcare who have now heard the word, but a surprising number who have either not heard the word or have no reference beyond Bitcoin. Hashed Health was spreading the good word all week through our own networks and with the help of kind invitations and introductions from friends and advocates. While fully acknowledging the number of forward-thinking and innovative companies thinking about how the blockchain can relieve their pain points, we still have our work cut out for us in industry C-suites. That said, as conversations started, the appetite to learn more was sincere. My takeaway is that we are on the right track – the virtues of blockchain are clear and the core strengths of blockchain neatly line up with the inefficiencies and friction that healthcare is going to be forced to address. The integrated patient record remains the daunting holy grail, but we must walk before we can run. There are plenty of pain points neatly addressed by the blockchain that will prove to healthcare that it is a solution worth pursuing. This year we attended JPM to introduce the possibilities and spread the word – we will be back next year to show how it is working. Stay tuned….

Hashed Health Blockchain Proof of Concept

The potential for healthcare industry applications of blockchain and distributed systems is vast. Approaching the topic broadly, a number of themes emerge, highlighting the unique features of distributed ledgers: immutability, integrity and transparency. In this first of a three-part series, starting with auditability, we will explore these themes through the lens of practical use cases for blockchain technology in the healthcare industry.

Some argue that auditability is the key defining feature of blockchain healthcare. It is also an area of considerable administrative burden and expense in healthcare operations, and for this reason has been an immediate target for POC development.

A core function of any blockchain healthcare solution is to immutably record entries into a time-stamped and persistent replicated ledger. As stated in a recent Bitfury white paper, “The term ‘blockchain’ is derived from a hash-based linking among transactions, the main purposes of which are:
• Make blockchain revisions and equivocation detectable and costly (i.e., ensure accountability of block producers)
• Enable audits by computationally and space-constrained lightweight clients” (1)

Accountability is achieved by recording the base transaction data, transactional authorization data, identity and time-stamp information stored in the distributed ledger. Further, immutability of past recorded transactions enables blockchains to function as trusted repositories.

In this fashion, blockchain-generated transaction logs provide an essential foundation for continuous data assurance and further continuous controls monitoring. This foundation allows for the integration of a manager’s responsibility for performance of controls, with internal audit’s responsibility for assurance regarding those controls. Increasing coordination between management and internal audit minimizes duplicative and otherwise wasteful efforts. That value increases in use cases where those same or similar controls are required inside a partner institution.

Blockchain-enabled audit logs have further benefits. Continual transactional block generation also permits more complete auditing activities, going beyond random sampling to represent 100 percent of transactions. In addition, these immutable logs essentially function as “black box logs” without the need for a trusted third party to protect against auditor and/or management manipulation of the baseline transactional data. And in situations in requiring auditability between multiple parties, blockchain generated logs obviate the need for encrypted email, data feeds or other secure transmission methods.

This foundation makes blockchains ideal for auditing and compliance applications in healthcare including logging access to PHI, duplicate payment auditing, regulatory billing and payment compliance, excluded provider screenings, three-day payment window analysis, “sunshine law” reporting and MACRA (MIPS) and Meaningful Use attestation and compliance.

A brief example of a blockchain-enabled MU attestation auditing demonstrates significant cost-savings and efficiency gains. The EHR Incentive Program (MU) requires reporting of 15 measures for physicians and 9 measures for eligible hospitals in addition to accompanying cost reports and clinical quality measures (CQM). Documentation retention policies require providers to keep the underlying attestation documentation for at least a period of six years. Providers are at risk for years after attestation periods.

Such requirements impose significant cost and effort on participating healthcare providers. These costs are beyond the extremely substantial cost of selecting and implementing EHR platforms themselves. Compliance and audit activities also include stakeholder management, workflow and change management, risk assessment and governance and project management.

Meaningful Use attestation is tied to significant federal and state (Medicaid) incentive funding in addition to avoiding payment scaling payment penalties. To date, more than $23.8 billion in Medicare EHR Incentive Program payments have been made since May 2011. From state programs, more than $11.2 billion payments have been made since January 2011, when the first set of states launched their programs. (2)

Contrasting with the financial benefits of MU incentive payments, financial and legal risks are considerable. Under CMS audits, the documentation will be used to validate that the hospital accurately attested and submitted CQMs, as well as to verify that the incentive payment was accurate. Documentation to support payment calculations (such as cost report data) will continue to follow the current CMS documentation retention processes. Further, false attestations can trigger liability under the federal False Claims Act or related state laws. Additional expense associated with audit contractors, similar to the RAC audit program, is also significant. (3)

Hashed Health’s consortium members see auditing and compliance as a viable short or medium-term use case. Entrepreneurs, corporations and regulators interested in these or related use cases are encouraged to get involved as a way of becoming familiar with the technology and its horizon.

Corey Todaro

COO, Hashed Health


1. http://bitfury.com/content/5-white-papers-research/bitfury_white_paper_on_blockchain_auditability.pdf

2. https://www.cms.gov/Regulations-and- guidance/legislation/EHRIncentivePrograms/DataAndReports.html

3. http://www.aafp.org/news/government-medicine/20150408muaudit.html

Distributed Ledger Architecture and Our Fractured Healthcare System

That the U.S.healthcare system is overly complex is not a controversial perspective. The sheer multitude of enterprises which collectively make up the healthcare system have given rise to a truly byzantine system of transactions which over-complicate the accessibility, delivery, cost and quality of the care that we receive. Further, this is an accelerating trend.

A few stats bear out this trend. “In 1940, three-quarters of America’s physicians were general practitioners. By 1960 specialists outnumbered generalists, and by 1970 only a quarter of doctors counted themselves general practitioners. This increase paralleled an equally dramatic rise in medical expenses, from $3 billion in 1940 to $75 billion in 1970.” (1) The flipping of general practitioners for an expanding set of specialists has greatly impacted the frequency [with] which patients touch the healthcare system. In a 2010 survey conducted by Practice Fusion, it was found that the average number of doctors by an individual was 18.7 over a lifetime. For patients over 65, the average was 28.4. (2) A single primary care visit is now more likely to lead to a range of specialist referrals. A hospital stay is punctuated by a parade of specialists. This trend is mirrored in the explosive growth of prescription medicines taken by patients. In 2011 alone, over 4 billion prescriptions were written in the U.S. This equates to an average of 13 prescription medications taken per person in the U.S. (3)

The healthcare outlined above is delivered in the U.S. by over 5000 hospitals, 800,000 physicians, 67,000 pharmacies, 35 health insurance companies, thousands of PBM’s, pharmaceutical, biotech and medical device companies and thousands more technical and service companies that sit between these care entities.

(Un)Intended Consequences

Many of the adverse consequences of the above trends are well-documented, including exploding healthcare expenditures, unnecessary and wasteful utilization, adverse outcomes and patient harm and abysmally poor patient experience. But let’s set these issues aside to examine the root cause: every healthcare interaction triggers a maze of behind-the-scenes interactions and transactions. Every physician visit or prescription triggers a transaction claim that bounces from enterprise to enterprise all to simply document the care and deliver payment. The CAQH has flow just between commercial health plans and providers alone account for an estimated 16 billion administrative transactions annually. Even more disturbing is that over 20 percent of these transactions are conducted manually. (4)

Two of the many practical impacts of this transactional torrent are lost time and lost money. A recent article dubbed the patient as the health care system’s “free labor.” It is the patient or a caregiver who most often bears the burden of navigating these inefficient transactions. “But American medicine demands another scarce resource from patients, and that is their time. The time it takes to check in on the status of a prescription, to wait for a doctor, to take time away from work to sit on hold and hope that, at some point, someone will pick up the phone.” (5)

In dollar-terms, the cost of just administrating healthcare payment is staggering. “Fifteen cents of every US healthcare dollar goes toward revenue cycle inefficiencies. Of the $2.7 trillion the country spends annually on healthcare, $400 billion goes to claims processing, payments, billing, revenue cycle management (RCM), and bad debt—in part, because half of all payor-provider transactions involve outdated manual methods, such as phone calls and mailings.” (6)

The Solution and Its Structural Flaw

Healthcare enterprises keenly understand the cost and inefficiencies of our fractured system. Over the past 15 years there have been two major trends, one organizational and the other technical.Taken together, though, these trends can’t really address the problem at a fundamental level.

The largest organizational trend in healthcare has been provider and payor consolidation. The rationale is that larger combined enterprises can harness economies of scale and reduce redundant administrative overhead.  Mergers of major commercial health plans, PBMs and other payor types has reached a dizzying pace. On the provider side, hospital consolidation continues to accelerate as does the acquisition of physician groups and other facilities to extend reach into outpatient care and pre/post-acute care. (7) But the promised efficiencies have not resulted in lower costs. (8) In fact, vertical integration of health providers has been associated with higher overall costs of care. (9)

On the technical side, the rise of electronic systems to manage the complex flow of transactional data has been considerable. With considerable cost (some subsidized), electronic medical record systems are now all but ubiquitous. The adoption of electronic claims processing also continues to rise modestly. But the technical systems pose their own set of problems, owing to the organizational structure of the industry.

These trends are not capable of significantly reducing transactional complexity in healthcare. The reason is architectural. Despite consolidation, electronic transactional systems are still centered in healthcare operational silos: provider, middlemen, payors, manufacturers, wholesale distributors, pharmacies, etc. While electronic data exchange is more efficient, the transaction still has to bounce between the siloed enterprises. The technical advance enabling the digital exchange of transactional data is overwhelmed by the challenge of ensuring that all parties agree on the details and state of a transaction. Error rate of medical claims still hovers at nearly 20 percent of all claims accounting for over $17 billion in waste and requiring large and challenging auditing procedures. (10)

Leapfrog – Distributed Ledger Architecture

Blockchain or Distributed Ledger Technology (DLT) offers a fundamentally different approach to the problem outlined above. Beyond the electronic transmission of transactional data, blockchains offer important and distinct structural features:

  • Reduced Friction: transactional ledgers can be shared by all parties to the transaction. The state and status of each transaction is consistent across all copies of the shared ledger in real-time.
  • Security: Transactional ledgers are secure from tampering by any party via array of consensus mechanisms; all interactions are immutably time-stamped.
  • Auditability: With complete and secured copies of transactional ledgers shared among all parties to a transaction, the ability for any party to audit transactional legitimacy and easily identify points of failure in the transactional chain.

Blockchain technology is rapidly maturing and reaching the scale and through-put threshold to reliably handle industrial transactional volume, for example international financial services or healthcare. Hashed Health is actively building prototype blockchain systems that offer healthcare enterprises to jointly execute virtually any healthcare transaction. By simply moving transaction execution outside the imposing walls of our healthcare enterprises to a shared and securely transparent ledger would significantly ease the burden of our fractured healthcare system.

Corey Todaro
COO, Hashed Health