Imagine if all electronic medical records (EMRs) and other electronic health data in the U.S. could be shared—quickly and securely—to advance medical research and promote preventive medicine while drastically reducing payer and provider costs on data access and exchange.

Sound like a pipe dream? It may not be, according to some who believe in the emerging technology of blockchains.

“Blockchains give us a real chance, another go to try to save our bloated healthcare system,” writes Afsaneh Naimollah, managing partner at XEN Partners. Similarly, healthcare business and technology executive Peter B. Nichol writes that “Blockchain opportunities are changing healthcare globally—blockchain is fitting into a new world.”

HIPAA Final Rule Playbook: All the tricks you need to win the compliance game

What Is Blockchain?

Even its biggest proponents acknowledge that the movement to use blockchains in the healthcare arena is just getting started. In fact, many executives may not understand what the technology—which most famously enabled the Bitcoin digital currency and payment system—actually is, and how it might be used to serve the healthcare industry.

A blockchain is essentially an open-source, distributed technology that can record and store transaction records in a so-called “digital ledger.” Members of a blockchain network can store, exchange, and view information without need for a central authority, using cryptography to allow each participant to operate securely.

In a permissionless blockchain like Bitcoin, anyone can participate and contribute to the digital ledger. In healthcare, it is more likely that private, permissioned blockchains would emerge, with networks made up of known participants that agree to specific protocols.

As a start, blockchains could be used to eliminate the “middle man” (and associated time and costs) in various healthcare transactions. With shared data on digital ledgers, all networked parties could also securely access near real-time updates of patient longitudinal health and other data, which could lead to improved patient care, research advances, and more.

The Financial Industry Went First. Is Healthcare Next?

The financial industry was the first major sector to take advantage of the opportunities afforded by blockchains. According to an August 2016 report from the World Economic Forum, The Future of Financial Infrastructure: An Ambitious Look at How Blockchain Can Reshape Financial Services, 80 percent of banks are expected to initiate blockchain (or distributed ledger technology) projects by 2017 and more than $1.4 billion has already been invested over the past three years by more than 24 countries worldwide.

As described in Wall Street Journal, some financial institutions are already using the technology to make and verify transactions instantaneously, securely, and at lower cost than with a central clearinghouse. Eventually, the goal is for true operational transparency that will help reduce fraud, minimize disputes between businesses, and give regulators the ability to monitor transactions in real time.

It is unclear whether the healthcare industry will follow in the footsteps of the financial sector, but already healthcare leader Philips has partnered with Gem, a company that offers data management operating systems for blockchains. At the Philips Blockchain Lab, a research and development center, Philips IT experts, healthcare professionals, and blockchain developers are working together to explore potential blockchain applications in the healthcare industry.

Capital One also formed a healthcare blockchain joint venture recently with multiple partners, including Gem. The companies are targeting the areas of claims management and payment processes, where they hope to use blockchain to remove obstacles to fast and transparent data exchanges among payers, providers, and patients.

An August 2016 report from Deloitte states, “While blockchain technology is not a panacea for data standardization or system integration challenges, it does offer a promising new distributed framework to amplify and support integration of health care

information across a range of uses and stakeholders. It addresses several existing pain points and enables a system that is more efficient, disintermediated, and secure.”

Questions remain about whether blockchains could scale to meet the needs of the healthcare sector while still maintaining the high level of data security and privacy the industry requires. And that’s not to mention the technical and practical challenges involved. But, given how rapidly technology is changing as well as the worldwide trend toward democratization of data, it is tough to bet against blockchains playing a role in the future of healthcare. At the very least, it is a trend worth watching.

HIPAA Final Rule Playbook: All the tricks you need to win the compliance game