[E9.3] A Deep Dive into Connected Transactions
Secure, open-source blockchains accelerate transforming care within a Health Ecosystem
Dear Reader,
This Profile in Product | Strategy | Innovation completes a 3-Part Series on a Health Ecosystem and model to describe it. Part 1 summarized a 3-Pillar model and overview. Part 2 presented improving outcomes with Connected Care. This Profile will focus on Connected Transactions. I will assume this is the least interesting topic within healthcare, but to disrupt the status quo, you should tackle friction where the pain is greatest.
Many healthcare transactions today are similar to walking into a local bank, filling out a paper form, wiring money to a third party in a foreign country through multiple intermediaries and receiving a notice in the future notifying you the funds were transferred for a fee. Western Union streamlines the process somewhat within a closed network, but uses the same financial infrastructure and associated high costs.
The fintech alternative uses Cash App, Strike or Twitter to send money anywhere in the world instantly on top of an open network using Bitcoin for free in some cases or at minimal cost. And the latest innovations provide interoperability where a Cash App user can send money to a Twitter user leveraging the open source layer 2 lightning network on top of the secure, open source layer 1 Bitcoin network.
We usually think of healthcare as a health service provided to a patient by a licensed provider, but end-to-end healthcare includes a whole ecosystem with multiple stakeholders and intermediaries to facilitate and pay for this regulated care.
A financial use case with an extremely high pain point that drove El Salvador to adopt Bitcoin as legal tender in 2021 is the remittance of money outside of the country back to family or friends who live in El Salvador. Reducing significant friction, high cost and time encourages remittance of more money into El Salvador. That is low hanging fruit to improve El Salvador’s economy with more liquidity. As they say, “necessity is the mother of invention” or in this case the “spark” for the Bitcoin Law in El Salvador. Other countries will follow their lead to adopt the same pain killer.
We usually think of healthcare as a health service provided to a patient by a licensed provider, but end-to-end healthcare includes a whole ecosystem with multiple stakeholders and intermediaries to facilitate and pay for this regulated care. In this Profile, we will cover 3 primary use cases for transactions to deliver care, their limitations and the means to improve them. These include:
Identity management,
Secure communications and electronic health records, and
Medical claims processing.
Secure, open networks provide a proxy for what is also possible for transactions to deliver and receive care. These form the basis to provide a service or more importantly, a desired outcome, through a value-based supply chain for a fee. However, an even more basic transaction verifies identity and credentials within a network so licensed providers can submit claims for payment linked to the services provided. This process to verify identity is an ongoing process repeated many times across multiple stakeholders. Medical claims are then processed on top of this layer of identification for patients, providers and their services.
I provided a primer on blockchains in a recent update. Hyperledger is open source software to build enterprise blockchain ecosystems through global, open source collaboration.
The Hyperledger Foundation is a non-profit organization that brings together all the necessary resources and infrastructure to ensure thriving and stable ecosystems around open source blockchain projects. The technical steering committee and governing board for the Hyperledger Foundation include participants from companies like IBM, Walmart, JP Morgan, Accenture, Hitachi and others. Hyperledger Fabric is one of the Foundation’s projects and provides a modular architecture for blockchain use cases. Hyperledger Fabric deployments are supported by IBM Cloud, Amazon Web Services and other providers.
1. Identity Management
Licensed healthcare providers include many disciplines, but physicians are key stakeholders for a care team. Physicians and surgeons must be licensed in a state to practice medicine in the state. This is typically done through a State Board of Registration or Licensing Board and requires verification of credentials like post-graduate training completion, passing the U.S. Medical Licensing Exam and Medical School with graduation date. Providers are also required to obtain and maintain a unique National Provider Identifier. Health systems verify credentials and licensing information for a provider and board certification for privileges to admit and provide specific patient care based on credentials at a specific facility. Payers also verify provider credentials to deliver and bill for medical services. Patients provide and maintain accurate contact, employment linked to health benefit plan and primary care physician details.
This matrix of information must be completed and maintained to process medical transactions. If information is incomplete or expired the transaction will most likely not process. This requires the issue to be addressed to submit the transaction again. And the process to create multiple instances of the same identity across multiple medical facilities and payers has to be repeated each time. This adds complexity and burden for a routine and very simple task.
If a foodborne outbreak occurs, the associated food can be traced back almost instantaneously through the entire supply chain back to the original source.
What if stakeholders decided to opt-in and actively participate an ecosystem that adopts a common platform for identify management and verification. Unique information could be entered and verified once with a trusted source and renewed as required. All subsequent credentialing and verification could just reference this trusted source. This is similar to creating a unique identifier that follows a standard for a batch of food at its source like a farm and then tracking that unique identifier through the supply chain all the way to a retail grocery store or restaurant to document end use. If a foodborne outbreak occurs, the associated food can be traced back almost instantaneously through the entire supply chain back to the original source. Investigation can then target this specific supply chain to identify potential cause.
This supply chain technology has evolved through a collaboration between IBM and Walmart and is called now called the Food Trust. Blockchain technology using the open source Hyperledger Fabric makes the Food Trust possible along with a labelling standard to generate unique identifiers that are tracked through the supply chain using the IBM Food Trust blockchain. But the real advantage is it is a secure, open-source technology that is being adopted by a growing ecosystem of stakeholders to improve food safety. Walmart and Albertsons compete for retail customers, but collaborate on the Food Trust to collectively improve the quality of the food supply chain. The value provided to end users continues to improve as more stakeholders join this food safety ecosystem to contribute even more meaningful innovation. Friction with the process is reduced by incorporating advanced technology into existing routine processes that utilize inferior or limited technoloy.
Aetna, Anthem, Cleveland Clinic, HCSC, IBM, PNC and Sentara are the founding members of Avaneer Health in 2021. This member-based, secure, open network supports utility applications developed for and by the healthcare industry and originated as a Health Utility Network to develop blockchain use cases in healthcare. Identity management was selected as the primary utility to enable other applications. Like the Food Trust, companies like Aetna and Anthem compete for end-user customers, but are collaborating on Avaneer Health to improve processes like identify management that cause friction, burden and increase cost for all stakeholders.
2. Secure communications and electronic health records
Connected Data are a key domain for the Health Ecosystem model discussed in this 3-Part series. The delivery of services to provide care requires these data to document and communicate measurement(s) and intervention(s). Connected Transactions also require this documentation on the services provided. And although molecules and devices are often key components to provide care, a digital layer advances a viable Health Ecosystem for data-driven and Connected Care.
The Health Insurance Portability and Accountability Act (HIPAA) is a federal law passed by the U.S. Congress in 1996 to establish national standards to protect sensitive patient information from being disclosed without the patient’s consent or knowledge. HIPAA compliance is an important feature of Connected Data and Connected Transactions. Legacy systems require modifications to comply with HIPAA, but new systems just include HIPAA within design requirements to drive technical specifications. All the benefits provided by blockchain, HIPAA, process automation, artificial intelligence and other technologies plus open source collaboration often challenge continuing with legacy systems. Target use cases with new systems may drive efficiencies, improve quality and lower costs.
Early adoption of Google’s personal health record found a very specific use case. Adult children used the sharing capability of the Google health record and integration with third parties to monitor their elderly parents who might live in another city. The sharing of health information required a parent’s consent, but provided visibility into prescriptions and whether they were being filled by the parent.
This is where the 3-Pillar model for a Health Ecosystem adds value. Google and Microsoft both tried building patient-centered electronic health records starting around 2006. Early adoption of Google’s personal health record found a very specific use case. Adult children used the sharing capability of the Google health record and integration with third parties to monitor their elderly parents who might live in another city. The sharing of health information required a parent’s consent, but provided visibility into prescriptions and whether they were being filled by the parent. But this feature doesn’t require an electronic health record. It highlights a design requirement for an effective Health Ecosystem.
Patients should be able to determine if they want to share information and with whom to receive more value out of the services used. This feature can be supported across multiple systems for an even better customer experience. But this is a feature, not a product. That is why Google and Microsoft eventually cancelled these personal health record products. The adoption was just too narrow to support a core product. Google has resumed working on a health record, but the focus is now on health systems like a teaching hospital to leverage a full suite of solutions from Google.
Epic is the dominant and priciest electronic health record system in the United States with a market share . The cost for the Mass General Brigham health system in the Greater Boston area to migrate to a customized Epic deployment starting in 2014 was $1.2 billion. A primary reason for this purchase was interoperability with other health systems also using Epic. Budget overruns were common after the deployment due to higher costs than forecasted to operate Epic. This is one key reason why a Health Ecosystem should exist to build interoperability as a core feature with secure, open source software that serves an even greater purpose. Interoperability should not be the product that requires $1.2 billion to deploy.
But deploying enterprise software systems like Epic, Cerner, Oracle and SAP into large organizations usually requires a client organization to adapt to the software and its customer controls. This is not a desirable customer experience where enterprise software should really adapt to the culture and values of a client organization.
Health systems that deploy Epic can gain access to a HIPAA-compliant messaging platform called Secure Chat. This is a great tool to manage secure messaging within a health system to facilitate patient care and archive these discoverable communications. But a secure Instant Messenger solution should not require $1.2 billion to deploy.
The Department of Veterans Affairs in 2017 issued a sole-source, multi-year contract to Epic competitor Cerner for $16 billion. This transition from the existing Veterans Health Information Systems and Technology Architecture (VISTA) electronic medical record system started in 2020 and is scheduled to finish in 2028. But deploying enterprise software systems like Epic, Cerner, Oracle and SAP into large organizations usually requires a client organization to adapt to the software and its customer controls. This is not a desirable customer experience where enterprise software should really adapt to the culture and values of a client organization. The existing VISTA system was built and maintained to support a VA culture among 180,000 providers and 9 million veterans. Physicians rated VISTA higher than any other electronic medical record system in a 2016 survey. VISTA is not an open source project, but the software is available in the public domain for anyone to use.
Google, IBM, Microsoft, Amazon, Oracle, Walmart, CVS and major health systems could collectively spearhead defining the standards for secure, open source, HIPAA-compliant communications and electronic health records. The scale and services to deploy and maintain these systems will move revenue from Epic and Cerner to a larger set of players who will continue to advance the software within a Health Ecosystem of users.
Open source software can expand its scope to include a growing Health ecosystem that includes these other providers like dentists and optometrists in private practice.
Dentists, optometrists, and other providers cannot easily integrate into many core medical information systems. They often use their own siloed systems that makes interoperable exchange of information difficult with physicians. Open source software can expand its scope to include a growing Health ecosystem that includes these other providers like dentists and optometrists in private practice.
Organizations use a common internet to connect systems to exchange information. Each industry may have different types of information, but they use the same internet. That is the concept behind a Health Ecosystem to drive common standards for basic software utilities. Interoperability is a feature by design.
Many standards and open source projects already exist in healthcare like Health Level 7 (HL7.org), Fast Healthcare Interoperability Resources (FHIR), and Clinical Data Repository (CDR) to design and build interoperable systems using the latest tools. OpenEMR was developed in this way to provide an alternative to Epic and Cerner. Early adopters of OpenEMR tend to be small, private practices where Epic and Cerner are out of scope due to the cost to implement. But 50,000 physicians in small private practices could make a sustainable beachhead to reach large health systems willing to disrupt the large incumbent enterprise systems. Otherwise, small practices are forced to join large health systems to access Epic or Cerner.
3. Medical claims processing
Another core utility for a viable Health Ecosystem is processing a claim for payment after providing a service to deliver care. A feature may require prior authorization to provide a specific service to process a claim later for payment. The scope of medical services includes patient visits, tests, procedures, and surgery.
The administrative complexity to process these medical transactions in 2020 cost $372 billion or 9% of the $4.1 trillion U.S. healthcare spending that year.
CAQH data from 2020 show 43.3 billion medical transactions were processed in the U.S. for the year or over 100 million transactions per day. The administrative complexity to process these medical transactions in 2020 cost $372 billion or 9% of the $4.1 trillion U.S. healthcare spending that year. Administrative costs have improved substantially with more automation, but many claims are still submitted by fax or require partial manual processing.
The significant volume of these transactions increases the challenges to provide a total solution for full automation, but high volume transactions with low complexity can help prioritize use cases for process automation. Prior authorized transactions that just need verification of basic information are less likely to need manual processing and provide less risk with an error of payment amounts are low.
This is where blockchains will deliver efficiency, improve quality and reduce cost over the next decade across many industries.
Besides identity management, medical claims processing provides a significant opportunity to improve automation with blockchain technology. Medical claims processing is a supply chain use case. This is where blockchains will deliver efficiency, improve quality and reduce cost over the next decade across many industries. This is essentially a solved problem to tackle the remaining $372 billion in spending due to administrative complexity processing medical claims.
The founding members of Avaneer Health previously mentioned regarding identity management will take on medical processing with the blockchain resources they are building. This is the core business for members like Aetna, Anthem and the Cleveland Clinic.
Conclusion
Secure, connected data repositories, communication and transactions are as fundamental to providing care for our health as breakthrough drugs, medical devices and procedures. They are the plumbing behind the walls inside the house. Proprietary, legacy systems built on top of mainframe computers have been the norm to process the transaction scale with similarities to financial services in banking systems. But these systems are no longer the standard. The requirement should be secure, interoperable, open source systems built on scalable architectures.
But the transformation required cannot be driven by a technical steering committee for an open source project. They are one of many stakeholders. The required transformation will only come when the major players like Roche, Johnson & Johnson, Novartis, Medtronic, Mayo Clinic, Cleveland Clinic, Mass General Brigham, Anthem, United HealthGroup, American Medical Association, the Veterans Administration and others decide 35% or some proportion of the U.S. economy spent on healthcare is the breaking point. That collective spending is the competition that matters to continue building great businesses, products and services.
Fifty percent of the savings generated through Connected Data and Connected Transactions could be invested back into a Health Ecosystem to advance Connected Care discussed in Part 2 of this series.
The good news is this is basically a solved problem. We are not battling the laws of physics. We just need to fund, resource and execute project plans. Fifty percent of the savings generated through Connected Data and Connected Transactions could be invested back into a Health Ecosystem to advance Connected Care discussed in Part 2 of this series.
The 3-Part series is the result of two types of reasoning. First, reasoning by analogy through this newsletter over the last year. What are the 3 largest global markets? What companies are disrupting those markets? What are common attributes for these companies? Can these attributes be modeled? The answer is yes, but with a caveat. Healthcare is not a winner take all industry. I have modeled a comprehensive Health Ecosystem with multiple stakeholders. But it includes key attributes of disruptive companies. Just like Amazon, Block (formerly Square), Tesla and even Spotify, there is a 2-sided market made of consumers and “suppliers”. These make up the primary 2 pillars. But a third pillar provides technical data services to the other 2 pillars analogous to Amazon Web Services.
Second, reasoning by first principles enables deconstruction of each pillar into its fundamental attributes to the define its unique domains and points of innovation. Three domains simplify the complex, but provide adequate scope to define each pillar. These domains really have nothing in common to the insights from companies that came through reasoning by analogy. Care to sustain Health is its own beast and must be deconstructed into its own basic attributes.
A link to Part 1 of the series including the 3-Pillar model is here.
A link to Part 2 of the series including Digital Health, Digital Medicine and Digital Therapeutics is here.
And finally, models are models. They inform strategy, but do not provide the level of detail needed to define product requirements or innovation objectives. A project might focus on improving Measurement for a target market, then eventually link to Intervention for Digital Medicine to realize Connected Care with a novel drug. Expanding to other indications with additional Measurements and Interventions on a common platform adds even more value. The roadmap for specialty care on that platform could then determine the scale needed for a Primary Care platform to become interested. And then components used for Intervention could be extended into Prevention to start building a brand and value with consumers. Linking 2, 3 or 4 domains on the 3-Pillar model across key indications starts to drive significant value for a defined Health Ecosystem. That value would then provide the motivation to start tackling Connected Data and Connected Transactions with more stakeholders.
Strategy drives Innovation to pursue Product.
Best,
Stephen
I’m long GOOG, JNJ, SPOT, SQ and TSLA mentioned in this Profile. Nothing in this post is intended to serve as financial advice. Do your own research.