November 2021 | Resource

New Building Block: How Blockchain is Changing the Healthcare Industry

Blockchain technology can change how healthcare payers do business—and the time to act is now

New Building Block: How Blockchain is Changing the Healthcare Industry

The healthcare landscape is changing—from transformative legislation around interoperability to expanding partnerships to the seemingly constant entrances of new vendors offering more services to patients, health plans, and providers. The ability to efficiently and safely transfer data from entity to entity is essential as the touchpoints in any single healthcare journey proliferate well beyond the doctor’s office. Blockchain is a way to keep the data generated at each touchpoint secure, private, and immutable—allowing it to be exposed to the parties that need it when they need it. 

For health payers, blockchain provides a new avenue to deliver products and participate in the healthcare ecosystem, creating possibilities to add market-facing opportunities, reduce operational inefficiencies, and contribute to standardized, shared processes across the healthcare landscape. It also offers the chance to reimagine operations with a digital mindset where innovation plays more than a supporting function, becoming a transformational capability that augments existing solutions. 

But blockchain isn’t something that can simply be developed, pushed out, and monitored—it’s more than an ordinary development play. To fully realize the benefits of this digital technology, health plan organizations will need to rethink their approach to IT and potentially to the business strategy as a whole. The operating model and target customer or partner is different than the traditional health plan business model. Organizations should also go into this conversion with their eyes wide open to the upfront costs of prototyping and scaling up a blockchain SaaS model. 

Because we work with companies on the forefront of adding blockchain to their toolkits, we know the formula for operationalizing a blockchain portfolio. It starts with understanding where you are today and then, based on your readiness and ambitions, identifying realistic next steps while anticipating the future of the technology and its potential to change the industry. 

Blockchain applications in healthcare

Blockchain technology is synonymous with cryptocurrencies like Bitcoin and Ethereum these days, and more recently unique creations known as non-fungible tokens (NFTs), which give ownership to digital art and video. Blockchain is not a database; it’s a distributed ledger—a complete record of all transactions of which all nodes in a given network hold a copy—that stores and publishes digitized transactions on a computer network spread around the world. The records are time-stamped, encrypted, and immutable, meaning they cannot be tampered with.  

In healthcare, blockchain can safeguard and provide secure access to important data without the need for costly intermediaries. Since the key features of blockchain technology are interoperability and portability, deploying it means patient information is no longer captive at each location of care, but is instead bound to each individual patient.  

In this way, payers, provider organizations, and the multitude of healthcare service locations—both virtual and physical—are constantly contributing to and participating in a shared ownership model of secure healthcare data, whether that’s provider demographics, benefit accumulators, or enrollment eligibility verification.

The advantages and disadvantages of blockchain in healthcare

While all parties are owners in the system, blockchain does not simply provide an open door for anyone to walk through at anytime—authorization is required, and the data accessible to users is exposed in accordance with specific functions and use cases (such as those examples mentioned above). Once authorized, though, information can be quickly and easily shared with others no matter which transactional platforms an organization is using. Thus, the technology can obviate the most prevalent problems with healthcare data: decentralization, permanence, security, and transparency. 

For health plans, the most immediate financial value proposition from employing blockchain is cost savings stemming from greater operational efficiency, as processes that were previously manual or reliant upon external parties can be digitized. Innovative market leaders will take their foundational blockchain capabilities and identify opportunities to commercialize solutions to shared challenges.

But blockchain isn’t plug-and-play, and it’s not for everything.

Highly transactional processes like claims processing and enrollment, for instance, are not going to be blockchain use cases for quite some time, as the computing power and storage capacities needed are simply not yet feasible. When exploring use cases, pay close attention to the likely adjustment points within prioritized processes in order to simplify adoption and accelerate ROI.  

Additionally, it’s important to understand the costs of operationalizing a blockchain portfolio, commercializing products, targeting different customers, and introducing a SaaS operating model to your IT and business strategy (which will be new to many organizations) to succeed as a blockchain-solution provider. This requires embracing a digital mindset that extends innovation beyond the IT department to product management, product marketing, and production support, for example. Successful adopters will have to develop effective strategies for operations adjustments if they want the new approach to truly take root throughout the organization.

Mapping the swiftest route to success

Blockchain efforts initially should be incubated in the organization’s digital core by a single owner charged with growing skills, building use cases and prototypes, and socializing opportunities. Over time, though, they should grow into a cross-department portfolio supported by—but not belonging exclusively to—IT.  

This is what we mean when we say it requires a SaaS operating model—organizations that successfully operationalize a blockchain portfolio will be those that look at themselves as SaaS vendors participating in a decentralized system. In this model, product teams partner closely with all stakeholder groups to define and design a product roadmap (e.g., a feature set) and solution offerings (e.g., pricing and marketing), integrating tech and business capabilities, and adjusting their internal business processes to reflect the multi-party nature of the solution. 

We also recommend that a single operational leader oversee the platform across business functions. And payers should form, within the digital core, a blockchain transformation office to establish the new operating model, drive blockchain value propositions internally, and advise IT and the business on blockchain opportunities while exploring long-term options to grow the blockchain portfolio.

Supporting new revenue streams and the benefits of the network effect 

The startup expenses related to blockchain may be material, but they should be offset quickly by operations savings. More than that, these investments will empower healthcare payers to introduce new products and services, providing SaaS revenue streams that could supplement traditional premium revenue. Delivered with speed and scale, these solutions will exemplify a differentiated kind of organization that brings emerging and impactful tech to the market.

Unlike other solutions, a blockchain-driven business transformation requires buy-in not only from stakeholders such as investors, employees, and customers but also potentially competitors, vendors, and partners. Many blockchain use cases deliver meaningful reductions in manual work in checking for payments or claims by other payers. The more payers who join in, the more complete and rewarding the blockchain solution becomes. This network effect, in turn, encourages more payers to become partners so that they, too, can reap the benefits.

For the business, one result is of course going to be greater revenue and valuation for the business’ owner or owners. There will also be notable impacts to an organization’s ability to attract and retain talent, with blockchain capabilities demonstrating a differentiated capacity to innovate.

Going forward, organizations should work to grow their blockchain solutions into an internal business division and then to a full-fledged corporate partnership or a new subsidiary or spinoff.

Immediate to-do list for health payers 

With the changes taking place across the industry in terms of data exchange and accessibility, it’s becoming clear that blockchain technology can provide tremendous value in healthcare. While blockchain adoption has so far been limited within the payer landscape, there’s a growing list of use cases and several pathways to participation that payer organizations can take, depending on resources, IT maturity, and business objectives.  

Whether it’s best to rapidly adopt existing solutions, join a consortium as a contributing member, or form a development partnership to bring a new solution to market, payers have very tangible opportunities to aid the industry’s broader transformations to greater efficiency, transparency, and cost-effectiveness. 

In the beginning, though, it’s best not to get too carried away by longer-term possibilities. Start small, with a pilot project to prove the use case and how to best address it. To that end, we recommend establishing an incubator team to lead the effort of understanding where you are, identifying the next realistic step for your particular organization, and being responsible for understanding the future of this capability for the organization and the industry. Led by an owner, strategist, architect, and business operations SMEs, this incubator team will be able to create buzz around the organization to help energize your workforce and generate more ideas. Then it becomes a matter of learning, adjusting, and prioritizing as you move forward in your digital evolution.

It’s where we’re headed 

It’s certainly no secret that the management and exchange of healthcare data requires constant attention to privacy and a high level of trust. With so much data being walled off inside proprietary systems, exchanges are often difficult and costly.

But as we now can see from its uses in cryptocurrencies, NFTs, and early deployment in healthcare, blockchain can support an alternative that’s aligned to where the industry as a whole is heading, allowing data to be securely portable and interoperable.

For health plan organizations, adopting blockchain technology and becoming blockchain solution providers will challenge how data is utilized, opening new doors to existing data sources and providing secure, effective modes of distribution across a growing array of use cases.

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