In this blog post, Very co-founder Tyler Jenks speaks with John Bass, founder and CEO of Hashed Health about the potential of blockchain to usher in value-based healthcare.
TYLER: Today we have a very special guest: John Bass is here with us.
John is the Founder and CEO of Hashed Health. Hashed Health is a leading consortium of healthcare companies focused on accelerating meaningful innovation using blockchain and distributed ledger technologies. To empower its consortium members, Hashed Health provides value-added services such as product management, product development, regulatory guidance and technology support services for blockchain solutions and blockchain networks.
Based in Nashville, Tennessee, Hashed Health’s healthcare experts focus on making sure the business problem drives the appropriate technical solution. They help members launch new industry level solutions, more effectively at a lower cost. They also provide exposure to existing networks who are actively exploring, piloting, or using existing solutions.
Thanks for coming and do you want to spend a second, John, in case the description didn’t quite hit it for Hashed Health, just who you are and what you guys are doing today?
JOHN: Yeah! Sure. Thanks again for having me and you know, Hashed was the first healthcare-focused blockchain company. We put it together back in 2015, and I launched the company, and at the time, it was all about creating a market, and organizing, and educating the constituents of that market to understand what blockchain is, what it means to their strategy and get them to a place where they have the business and technical expertise required to work with us to build products and build networks and participate in those networks. That really matured a lot over the last year and a half.
It’s really interesting, we focused on three different areas in Hashed. We focus on the community, which is having a place where people can come together to talk about the opportunities, and blockchain, and healthcare. So, we do a lot of work around community-building activities. We do a lot of conferences, and we do some webinars, we have a podcast, and we do hackathons, and conferences, and lots, and lots of community building efforts to drive that social conversation forward and build the community around it. This is an incredible opportunity we have to use the technology to improve the delivery of care.
And then we have our enterprise-focused business, Hashed Enterprise, which is focused on meeting companies where they are in terms of their readiness for blockchain, and their business, and technical expertise around blockchain. It helps them understand what’s being done, what could be done, what use cases are — and maybe are not — appropriate for blockchain and distributed ledger technical solutions. And once they are ready, we have Hashed Labs. That’s really geared toward product management, product deployment, product development, and network support.
So those are the big areas, and all of that is now in the process of spinning out, all of those is kind of three things, you can think of them as a funnel that kind of spits out these product initiatives. So we’ve got product around identity, both physician identity and patient identity. And we’ve got some initiatives around IoT, like wearables and internet-connected devices, and bringing those things onto the blockchain and being able to secure and trust the data coming from the Internet of Things and devices out there. And we’ve got a really neat product revolving around value-based payments, which I think is part of what we’ll talk about today. We’ve got a couple of other emerging areas of the company around things like supply chain and clinical trials that are sure to be hot areas for 2018.
So over the last year and a half, we feel great about where Hashed is and how the market has evolved, and we could not be more excited about everything that’s going on in the space.
TYLER: That’s really exciting, John. Thank you for the additional color there. Sounds like you guys are sort of riding this wave, and there are so many different areas in which blockchain can be applied. Particularly with regard to healthcare, which is just this multi-headed monster — everyone describes the healthcare problem as this gigantic tangle, and nobody's really sure exactly where to attack it. But, using things like blockchain in different areas, whether it’s for patient identity, like you said, or coding, or billing, or this value-based healthcare. It’s exciting that you guys are touching so many different things.
JOHN: Yeah. Here in the US, we have a real challenge around the cost of care. That is our big hairy problem right now. We are approaching five trillion dollars and around 20% of GDP in the next five years going to healthcare. That’s just simply unsustainable. We cannot continue down this path.
So how are we gonna change that? Well, we’ve got these neat new tools, AI and IoT and machine learning and other tools. What I would say is all of these tools, in order to be effective, need a strong foundation upon which they can rest. I believe that blockchain can be a big part of the solution that changes the conversation and honestly, changes the whole relationship between commerce and care. I don’t know of any other way of fundamentally redesigning the care-delivery model other than this conversation that we’re starting now. So it’s an incredibly attractive and exciting space and it has resonance, not only in the US but around the world.
TYLER: Yeah. It’s really amazing, and that five trillion number — it’s the first time I’d heard the number that big, although maybe in the past couple of years it’s really swollen with some of the Affordable Care Act aspects coming in to play.
For those who don’t know, the healthcare system that we have today emerged from, you know — think back to pre-industrial civilizations: you’ve got farm towns all around the United States or around the world where you’ve got fairly small densities of population in one hundred square miles or two hundred square miles. The medical system was: you had a physician who had some degree of expertise or education, and you either went to the physician by horseback or carriage, or vice versa — they would make house calls. These physicians would need to be able to handle whatever spectrum of problems came up. Obviously, the technology was extremely limited; there wasn’t any sort of imaging technology, they didn’t have electronics.
But the whole healthcare system emerged from this idea that you have that, which evolved into bigger cities, finally, building a hospital and that was like the beginning of — other than like little clinic or things like that — having a hospital, a single hospital, care for an entire city. And they started to bring in whatever equipment or new technologies, whatever the experts happened to have available to them at the time. That’s where it all started, and everybody paid out of pocket.
As more difficult problems emerged or more sophisticated treatments emerged that were just too expensive for individuals to pay for themselves, the only way to go deeper and for there to be incentive for more specialists and more technology to be developed was for the insurance companies to come around. And they finally figured out a way of normalizing how people paid for, or who paid for, healthcare.
So fast forward 100 or 200 years, and really it’s just become a more complex version of that same thing. Providers, whether it is a hospital or specialist, they are caring for a large number of people with a broad spectrum of different challenges, and they don’t really have the ability to become extremely good at any one thing. If you look at the hospital today, often on any given day, the combination of conditions that they may be addressing for all the different patients in that geography — maybe 1% of all of the patients are going to be joint replacement patients or transplant patients or diabetes patients or whatever it happens to be. So it’s this interesting symptom of the whole configuration of all these different parties: your hospitals, your doctors, your outpatient therapists, your outpatient psychologists and specialists, your imaging centers. They don’t get remunerated through value creation; they only get paid when they see somebody, for the time and the energy that they spend in a 30-minute visit or an hour-long visit or whatever it happens to be.
This is a very complex problem — multi-trillions of dollars every single year — and the goal of moving to value-based healthcare is simply this idea of: how do we go from patients paying for every single visit, or every single bit of service that they receive in all these different places, and start looking at the condition that the patient has and solving their problem as quickly and efficiently as possible, and doing it as cheaply as possible. That was a bit of a long-winded explanation but John, is there anything else that you think is particularly important about how this emerged?
JOHN: Yeah. Look, the United States healthcare system has been remarkably successful in a whole lot of ways. And for most people — not all, a lot of it depends on where you live — but for a lot of people, it’s a great system. We’ve gotten really good at treating acute care illnesses, we’ve gotten really good at preventing communicable diseases, we’ve gotten good at keeping people alive.
The problem that we’ve developed for ourselves through all these successes is the cost problem. You know, when I said five trillion, we’re getting close to four now and it’s rising so quickly, it will be at five — I think by 2022, is the last estimate that I saw. It’s just too much, it’s too expensive. And at the same time, the variability in care is also rising. So, in the US and globally really, you’re seeing massive variation in quality. Here in the US, there is two times variation in 30-day mortality rate from heart attacks in US hospitals. So depending on where you are and what hospital you’re going to, the outcome or the quality of your treatment for heart attack varies by 2x. The obstetrical complications in US hospitals has 5x variation. So a couple of other stats — medical errors is the third-largest cause of morbidity and mortality next to, I believe, cancer and heart disease.
So clearly, there’s something wrong. We’re not getting our money's worth. And what you described earlier, the incentive structure in that fee-for-service model, where you are paying based on doing things to people does not create the right incentive for fixing that cost-quality problem, right? So when you pay a physician, to provide more treatment rather than good treatment, there is no incentive for a physician, except for their internal motivations, there is no financial motivation for them to have high quality.
What we’ve got is this high variability in outcomes, but physicians and caregivers in hospitals — which operate like hotels, it’s all about heads in beds, right? — they’re all being rewarded for filling those beds up. They get actually paid more if you’re discharged and you come back with a complication because that complication is oftentimes a higher acuity event, and you get paid more for those events in some cases.
So part of the problem — it’s not the whole problem, it’s not this easy — but a lot of people would say that this fee-for-service system that we’ve created is part of what’s having a lot of cost. The potential answer to that is a value-based system that’s largely become a conversation of the last 10 years.
EMILY: So how does blockchain fit into this? Value-based systems sound really appealing and sound like something that we should all be on board with. Obviously there is the technology piece and changing incentives, but how does blockchain fit?
JOHN: Yeah. Here is the great hope — I’ll explain the hope, and some people equate hope with hype. We can get into the details around it, but here is the hope. My background is with value-based initiatives, I’ve got a background in this area, so I’ve got extreme experience with things like bundle-payment programs in healthcare.
When you talk about value-based care, it’s really a representation of the relationship between cost and quality; so value equals the balance between cost and quality. So, really what you’re saying there is reimbursement and payment should be — instead of fee-for-service, where no matter what the outcome is, you’re going to pay the same amount — you’re going start to pay, in a value-based world, based on providing high-quality care with a good patient experience.
So all of a sudden, you’re starting to bring in a relationship between what you pay and things like behavior and, outcomes data, and patient experience information. Which is, like you said — why wouldn't you before that, especially when you realize the perverse incentives that a fee-for-service healthcare system has introduced in kind of our difficult situation we’re in from a cost perspective.
So while good in theory, some will say that value-based care has largely not been very effective. Again that’s a general statement. But it’s not because it’s not a good idea; a lot of it’s because of a couple of underlying factors. One is administratively, it’s very difficult to understand the relationship between cost and quality and understand things like outcomes data and relate that to payment and then provide the reimbursement that’s based off the relationship between the two. Collection of that information is a fairly new concept, that’s only been around for about the last seven or eight years. So we’re still not good at collecting the right data to establish a relationship between cost and quality.
Trust is another issue. Right now you’ve got, for example, in an episode of care for a cardiac procedure or any kind of complex surgery, you’ve got this host of different companies and entities. They’re all siloed enterprises that are in a fee-for-service world, in it for themselves. But in a value-based world, they’re all of a sudden tied to each other in a manufactured way to work together and collaborate on cost-quality dynamics.
When you talk about a quality-based system, all of a sudden, a hospital for example — which used out to operate a whole like a hotel — all of a sudden is responsible for the health of the patient before they walk in the door and after they leave. It totally changes their identity. It changes their whole revenue formula. So it’s a different way of thinking, and it also requires some trust mechanisms to exist between, for example, the hospital and the surgeon, or the hospital and the post-acute provider, etc.
Cash distribution is very difficult in a bundled-payment scenario, where you’re still getting paid because you’re on a fee-for-service rail and then there’s some kind of true-up that happens based off the cost-quality data, like a year later. That delay and some of the trust issues in terms of the recording and the distribution of funds creates other issues.
Those are a few examples of why value-based systems are often times difficult to make real. So there are trust issues, there are administrative issues, there are cash distribution issues, etc.
Your question is, how does Blockchain help with that? My honest answer is, it is still unproven, but one of the fundamental characteristics of a blockchain is this concept of programmable value transfer. A cryptocurrency or any kind of blockchain-based asset, where you are moving that asset across a market structure — really, that’s just software. And so, where traditional fiat currency and traditional volume-based claims payment rails were sufficient for fee-for-service healthcare, for value-based healthcare, you really need to create a connection between cost and quality and patient experience. These are difficult, fairly new concepts.
Blockchain allows us to start to re-think the relationship between payments and behaviors, payments and benefits. How do you design an economy, or how do you design a programmatic relationship between these cost-quality factors that exist in these episodes of care? So, that’s a broad answer that the blockchain, using programmable value transfer, all of a sudden allows us to think differently about how we can tie together things like cost, and quality, and physician behavior, and patient’s adherence to a protocol, and all of these characteristics that are previously have been much separate.
TYLER: So that’s really interesting. I watched a video, a presentation that Michael Porter gave — he is a really famous professor out of Harvard Business School — talking about value-based healthcare. He gives this example: in Germany, they put together what is effectively an integrated practice unit for people suffering from migraines. The notion is really simple. it’s a facility that pools all the primary care physicians — all the neurologists, the physical therapists, the psychologists, everybody. They have what is effectively a productized service, and they treat every single patient who comes in for migraines in a coordinated fashion. They function as a team.
Of course everybody is a little bit different, and the pathway of care is a little bit different for everybody, but everything is there. The imaging is there, all the different specialists are there, they know how to communicate with one another, they are coordinated to solve the same problem. They use this value-based care, and it’s a single price for every single person that goes through it. The result is, you have way, way better outcomes — far more people end up being cured or have significantly reduced symptoms of their migraines, and the overall cost — even though it’s much more upfront — ends up being about 25% less on the whole, across all these various patients. Not to mention the societal benefits of people not missing work. They can get back to work because they are healthy. So in that case, you’ve got a well-intentioned system — everybody is well coordinated, and you’ve got this operational tightness. So you can build a productized service where you can measure the value, you can measure the outcomes and measure all the costs, and everybody is operating on the same page.
Is the blockchain solution or the promise that blockchain can offer meant to replace that necessity, the requirement of operationalizing all these people in a single facility and hopefully just unify all these disparate specialists, with software? How do you see that panning out?
JOHN: I love the fact that you jumped to Michael Porter. He is like my value-based-care hero. The guy has done amazing work, and I’ve been fortunate to see him speak. He is truly a role model for what we are trying to do here. I’m happy that you’ve made that analogy. What he would say is, you need an enabling technology platform to make it work, and you certainly need an enabling technology platform to make it scale to a geography like the US or China or any kind of country. Different countries have different payment models and insurance; some are single payer, some have a sophisticated insurance programs like the US, but everyone struggles with this cost-quality issue. It’s a universal concern.
What blockchain does is it provides an enabling technology platform. It’s not the solution, but it’s an enabler of the solution. It allows you to create something that can secure the data and scale and create these shared ledgers and shared information, shared market structures across an episode of care, for example — upon which we can create smart contracts, and automate business processes, and make that value-based care system a lot more efficient and effective.
One example is IoT. IoT has been around for awhile. IoT also has a lot of security and scalability concerns around it, especially in the healthcare environment. A lot of the big IoT hacks that have happened over the last several years have caused a lot of concern when you are talking about using wearables, and home monitoring systems, and other types of devices in the care setting. We need a foundational system to secure, to register these devices, to validate the information coming from these devices, and to put wallets on these devices to allow them to sign attestations or conduct machine-to-machine transactions or take on a larger role in how we deliver care.
So, the blockchain provides this nice foundational framework on which IoT can be secured and scaled. And then IoT information can provide a more streamlined way to look at outcomes data that can then be connected to, for example, patient reputation, and patient behavior incentivization in that future marketplace. I’d say that’s just one example of how blockchain provides an enabling framework for advancing value-based care.
There are other concepts around, like I mentioned, programmable value-transfer. How do you create a relationship between, for example, a patient’s behavior, and what a patient pays for or receives in terms of a reward or incentive for following a care protocol given to them by their insurance company or their physician? How do you incentivize a patient to do what their physician says — for example, hey look, if I’m going to do this surgery on you, in order to have a good outcome, you need to lose 20 pounds, and you need to stop smoking, and you need to get your clearance, and you need to show up at these two prehabilitation sessions for strengthening exercises. There’s remarkably poor adherence to those types of protocols today. There’s no incentive because there’s no relationship — or at least there’s an abstract relationship — between that directive and the patient’s actual behavior.
So, this potentially provides us a way to create more of an aligned connection or incentive structure that rewards those types of behaviors. The same thing can be true on the physician’s side. All of a sudden, you can think about ways to incentivize physicians to follow best practices or send a patient home after the surgery rather than to a skilled nursing facility — where outcomes may be worse — or just complying with the patient’s demand that may go against best practices. So, on both sides of the buying and selling marketplace, there are opportunities to create incentive structures and to align payment benefits, payment behaviors using the blockchain. Whereas before, that was really, really challenging to do. And when you did do it, it was really late and the incentive is really kind of weak.
TYLER: That’s really interesting. I had not thought about the patient-accountability side in parallel with the care-delivery accountability side to it, that’s really so fascinating. So, who would specify that, hey, this is the best protocol for achieving maximum value and lowest cost for, say, a hip replacement, in that case? Is that a joint effort across the different disciplines, or do the insurance companies just come in and say, hey, patients if you do these things — doctors or hospitals, if you do these things — then that will maximize the reimbursement that we send you. Or is that just a broader conversation that still needs to be had?
JOHN: It’s a good conversation and my guess is that it depends on the specialty. The American College of Surgeons for example, or a cardiac surgeon association of highly skilled fellowship-trained surgeons with the best outcomes in the world, the American Joint Replacement Registry. There are these groups out there, depending on the specialty, that are already doing a lot of this work. They could become, for example, an oracle on the network or — and this is to be defined, to be determined — but they could take a more active role, and you could see how these groups could start looking at themselves as much as technology companies as a society of surgeons.
The idea would be that, these registries — these places where you’re aggregating a lot of data across a lot of surgeries in a lot of countries — becomes kind of a guide for best practices. By using a shared ledger, you’ll create a learning system that creates a positive feedback loop into those oracles or those societal systems to look at best practices. And at the same time, you can think about how these systems relate to clinical trials and new types of procedures. Those too can be benefited by using a shared ledger. You can imagine these things working together to create a true learning healthcare system over time.
TYLER: That’s really interesting. Yeah, amazing. So, do you see this as public ledgers or as private ledgers that are carefully maintained? I could see, especially as you crossed different borders, there being different sensitivities and certain aspects to that.
JOHN: I think the appetite right now in healthcare for open public ledgers is not quite there. It’s early. People, for good reasons, want to feel the information on the ledger is private in permission. There’s a lot of philosophers in the blockchain world, and a lot of people would say that, anything that’s private permission is not really a blockchain, that’s more of a distributed ledger. At Hashed we’re not really philosophers, we’re just looking to solve business problems. In our minds, we’re comfortable spanning the spectrum of distributed to decentralized, depending on where the business climate and a technical solutions exist.
I think, generally, the way we are starting with almost all of our use cases in healthcare is with private permission chains — oftentimes, with a group of nodes that already have a relationship that trust each other, like a consortium chain. I do believe that over time, the technology will advance to where open-public chains are the norm and there are safeguards that allow us to address the concerns that exist today. And also comply with the regulatory environment, which is clearly in question in terms of some of these business processes, especially when they relate to medical records and patient information.
To answer your question concisely, in a short term, you’re going to see mostly private permissioned blockchain solutions, consortium blockchains solutions. Over the longer term, I think you will see a movement towards open and public blockchain solutions. I think you can think of it a lot like you think of the internet, where you kind of started with a lot of intranets, and you moved toward an internet mentality over time.
TYLER: I can imagine, if some of these solutions can achieve savings like they are suggesting — 20, 30, 40% savings — if you can get all the data in the right place and have best practices and have accountability and measure all the outcomes, given how people freely give their data to the Googles and Facebooks in the world — I wonder if we are going to start seeing more and more people waiving their confidentiality rights just to participate openly in these accountable, value-driven healthcare systems?
JOHN: Yeah, it is a good question. There’s a couple of things going on in terms of the consumer and how they are going to adopt these. In order to really change healthcare, in order to really move the needle on cost, you’re going to have to have systems that create network-effects amongst the consumers. Enabling or bringing consumers into the conversation is how you get that network effect going. Blockchain creates this really neat way of incentivizing consumers to become a part of a platform. Healthcare has always resisted platforms because of data issues and control issues and various reasons.
The question is now, will blockchain change that? Will the opportunity to incentivize communities of participants allow us to “uberize” healthcare or create network-effects and platforms in healthcare, where they previously have not been available? It’s to be determined, but I think that is where our hope is. We can really drive consumer-facing opportunities and engage consumers directly. This is not, over time, going to be just a B2B conversation. The bigger opportunities are in the consumer-facing solutions. It’s just that, because of the current state of the market, most of the solutions you are seeing, in terms of more incremental changes, are focused on the B2B space.
And again, that’s kind of what you saw in the late 90s and early 2000s. Our company impact was focused on B2B solutions in healthcare, but the Ubers, and AirBnbs, and Amazon — those things didn’t come up until a little bit later. And those were the big companies to emerge out of the .com crisis. So I think we will something similar in the blockchain space in the next 10 years.
TYLER: That’s great. I really appreciate your time, John. Grateful to have you on here. Are there any sort of last announcements or thoughts you want to leave us with? Anything exciting going on with Hashed Health you want people to know about?
JOHN: Yeah, I think 2018 is going to be a really interesting year for healthcare and blockchain. I think a couple of things that you’re going to see are, I think we are planning on having our first use cases move into production. Our goal is to prove that we can solve problems that traditionally have been very difficult to solve using legacy data structures, legacy databases, siloed relational databases. I think a lot of these initial use cases would be fairly simple, and you know, not real sexy, but hopefully solve a meaningful problem and create a foundation for these more disruptive things over time.
So we’re excited about the opportunity to move some products into production. We’re excited about some of the names that are coming into the space. Just recently, we’ve seen a lot of big brand names joining, becoming clients of Hashed Health and coming in to build with us. So, we’re extremely excited about the new projects we’re going to be working on over the next year.
I think the other thing that you’re going to start to see in the healthcare blockchain space is the emergence of ICOs. We’re seeing a lot of ICO activities in the world these days. There are a couple of ICOs every week. There haven’t been many in healthcare in the past, but I know of at least eight or so ICOs that are being developed now. At Hashed Health, we are watching that really closely. As you look at what’s coming out, the projects that are coming out of our funnel, we believe that some of those could be a token that provides a real meaningful value to that project, something that we and our members could not have done without it. We are paying attention to that world, and we’re watching it really closely to see how it evolves. It’s a very, very exciting space and it’s really — we feel like we’ve got the coolest jobs in the world, being able to come in and focus on blockchain and healthcare everyday because it has such amazing potential to help a lot of people avert what we think is going to be a crisis in terms of the cost of healthcare over the next decade or so. So anyway, I think I’ll leave it at that. Everything is moving really quickly and it’s just a super exciting area.