Session 28WS, Blockchain Innovation in Healthcare

Presenters: Tom Murawski, FSA, MAAA

Karena M. Weikel, ASA, MAAA

SOA Antitrust Disclaimer SOA Presentation Disclaimer

2018 SOA Health MeetingPRESENTERS:

KARENA WEIKEL, ASA, MAAA

THOMAS MURAWSKI, FSA, MAAA

Session 28W, Blockchain Innovation in HealthcareJune 25th, 2018

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Presentation Disclaimer

Presentations are intended for educational purposes only and do not replace independent professional judgment. Statements of fact and opinions expressed are those of the participants individually and, unless expressly stated to the contrary, are not the opinion or position of the Society of Actuaries, its cosponsors or its committees. The Society of Actuaries does not endorse or approve, and assumes no responsibility for, the content, accuracy or completeness of the information presented. Attendees should note that the sessions are audio-recorded and may be published in various media, including print, audio and video formats without further notice.

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Karena Weikel, ASA, MAAAVice President, Risk & Revenue Management

Karena is directly accountable to the Chief Financial Officer/Chief Actuary for Geisinger Health Plan. She is a risk professional with 16 years of healthcare experience. Karena is responsible for managing overall cost of care (expense, vendor), trend mitigation, data management, vendor relations, underwriting, provider economics, risk adjustment, operational and regulatory reporting, rate filing support, and organization-wide financial analytics (FWA, employer group, regulatory, compliance, government, sales, IT, etc.) across all lines of business (Commercial, Medicare Advantage, Medicaid). Karena leads a team of 110+ highly skilled and experiencedprofessionals whom develop the analytics that improve revenue and expense that drive GHP’s success. She provides direct administrative oversight to Certified Professional Coders, Actuaries, Analysts, and Business professionals.

Thomas Murawski, FSA, MAAAActuary

Thomas provides consulting services to wide variety of clients in the U.S. healthcare system including insurance companies, stop loss carriers, employers, provider groups, government entities, and advocacy groups. Thomas’ focus has been on advising clients inunderstanding the impact and strategic implications of the ACA. His experience includes pricing health benefits, estimating reserves, and projecting financial results. Thomas has led projects to assist clients in these activities for many different health products including individual plans, small and large group plans, and stop loss products.

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Blockchain Innovation

in Healthcare

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Agenda

• What is Blockchain?• How Blockchain technology works?• Applications of Blockchain• Blockchain in Healthcare• Strengths & Weaknesses of Blockchain

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Blockchain Mechanics

• Blockchain allows for maintaining a decentralized ledger

• How to build trust – digital signatures• Building blocks – decentralized consensus

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Maintaining a Ledger• Typically a universally trusted party (e.g. bank, government,

etc) maintains the ledger

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Maintaining a Ledger• Blockchain technology allows for a secure ledger to be

maintained without reliance on trusted party• How can this be trusted?

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Maintaining a Ledger

A pays B $50B pays C $10D pays C $40

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Maintaining a Ledger – Digital Signatures

A pays B $50 x_____ B pays C $10 x_____ D pays C $40 x_____

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Maintaining a ledger – Building Trust• Anyone can add to the ledger, so how can we trust that

transactions are what the sender really meant them to be?• Digital signatures – key concept

• Something that proves that the submitter are who they are, they saw the transaction and support it

• Digital signature is a function of the message• Done through principals of cryptography

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Cryptography .101• Cryptographic HASH FUNCTION – takes input and

produces fixed-sized output

256 − 𝑏𝑏𝑏𝑏𝑏𝑏 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻 𝑏𝑏𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑏𝑏𝑏𝑏𝑖𝑖𝑖𝑖 =

1001111110010000000001001011100110000111000001010000011101101101101011100001101110010010111111011010111110001010000010000001110110010111111001010110010010111101001101110100111000100100001110110110001000001100011100110111111100001110101100000110001001001101

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Cryptography .101• You can use this to develop a digital signature

𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻 𝑏𝑏𝑖𝑖𝑖𝑖𝑖𝑖,𝑝𝑝𝑖𝑖𝑏𝑏𝑝𝑝𝑖𝑖𝑏𝑏𝑝𝑝 𝑘𝑘𝑝𝑝𝑘𝑘 =

1001111110010000000001001011100110000111000001010000011101101101101011100001101110010010111111011010111110001010000010000001110110010111111001010110010010111101001101110100111000100100001110110110001000001100011100110111111100001110101100000110001001001101

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Cryptography .101• If you change the message even slightly, the resulting hash is

completely different

𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻 𝑏𝑏𝑖𝑖𝑖𝑖𝑖𝑖 + 1,𝑝𝑝𝑖𝑖𝑏𝑏𝑝𝑝𝑖𝑖𝑏𝑏𝑝𝑝 𝑘𝑘𝑝𝑝𝑘𝑘 =

0001010111001101011111101110111010111010011111101110101000001000011010010011100010111110100100000100001110010101101110100100010101011011110010001000111110011001111110000010010101111001100011100001101101001101010101111100011011000001110100110111011100100010

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Cryptography .101• Verify function – uses public key, can quickly verify signature

𝑉𝑉𝑝𝑝𝑖𝑖𝑏𝑏𝑖𝑖𝑘𝑘 𝑏𝑏𝑖𝑖𝑖𝑖𝑖𝑖,𝑝𝑝𝑝𝑝𝑏𝑏𝑝𝑝𝑏𝑏𝑝𝑝 𝑘𝑘𝑝𝑝𝑘𝑘, = 𝑇𝑇 𝑖𝑖𝑖𝑖 𝐹𝐹

1001111110010000000001001011100110000111000001010000011101101101101011100001101110010010111111011010111110001010000010000001110110010111111001010110010010111101001101110100111000100100001110110110001000001100011100110111111100001110101100000110001001001101

DIGITAL SIGNATURE

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Cryptography .101 – Strength of 256-bit• Virtually impossible to solve for signature using brute force

(with current technology)

𝑉𝑉𝑝𝑝𝑖𝑖𝑏𝑏𝑖𝑖𝑘𝑘 𝑏𝑏𝑖𝑖𝑖𝑖𝑖𝑖,𝑝𝑝𝑝𝑝𝑏𝑏𝑝𝑝𝑏𝑏𝑝𝑝 𝑘𝑘𝑝𝑝𝑘𝑘, = 𝑇𝑇 𝑖𝑖𝑖𝑖 𝐹𝐹

1001111110010000000001001011100110000111000001010000011101101101101011100001101110010010111111011010111110001010000010000001110110010111111001010110010010111101001101110100111000100100001110110110001000001100011100110111111100001110101100000110001001001101

DIGITAL SIGNATURE

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Maintaining a Ledger – Digital Signatures

A pays B $50 x_____ B pays C $10 x_____ D pays C $40 x_____

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Maintaining a Ledger – Fraud Prevention

A pays B $50 x_____ A pays B $50 x_____B pays C $10 x_____ D pays C $40 x_____

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Maintaining a Ledger – Fraud Prevention

1 A pays B $50 x_____ 2 B pays C $10 x_____ 3 D pays C $40 x_____

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Making a Transaction – Adding to Ledger

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Maintaining a Ledger – Decentralized• How can the ledger be decentralized?• Many people keep their own ledger• To add transaction, you broadcast it out for everyone else

to add to their ledgers• How do you know everyone agrees to the transactions?

How to build a consensus?• Everyone agrees to trust the ledger with the most ‘proof

of computational work’

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Reminder – Hash Function• Cryptographic HASH FUNCTION – takes input and

produces fixed-sized output

256 − 𝑏𝑏𝑏𝑏𝑏𝑏 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻 𝑏𝑏𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑏𝑏𝑏𝑏𝑖𝑖𝑖𝑖 =

1001111110010000000001001011100110000111000001010000011101101101101011100001101110010010111111011010111110001010000010000001110110010111111001010110010010111101001101110100111000100100001110110110001000001100011100110111111100001110101100000110001001001101

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Proof of Work - Example

1 A pays B $50 x_____ 2 B pays C $10 x_____ 3 D pays C $40 x_____

3246125432161258

HASH

0000000000000000000000000000001000101011110010101011011100000010001010111010101011101010011010101101011110000011101111011111110110000011000001011100001010110101101011011111001011001100001100111100101001111000101000001010010101101000011100000011001101100110

First 30 bits are 0

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Proof of Work - Example

1 A pays B $50 x_____ 2 B pays C $10 x_____ 3 D pays C $40 x_____

3246125432161258

HASH

0000000000000000000000000000001000101011110010101011011100000010001010111010101011101010011010101101011110000011101111011111110110000011000001011100001010110101101011011111001011001100001100111100101001111000101000001010010101101000011100000011001101100110

First 30 bits are 0

Probability of guessing is 1230

≈ 11,000,000,000

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PROOF OF WORK

Blockchain Structure

1 A pays B $50 x_____ 2 B pays C $10 x_____ 3 D pays C $40 x_____ BODY WITH TRANSACTIONS

FOOTER – Hash of entire block leads with 0’s

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PROOF OF WORK

PREVIOUS HASH

Blockchain Structure

1 A pays B $50 x_____ 2 B pays C $10 x_____ 3 D pays C $40 x_____

HEADER

BODY WITH TRANSACTIONSwith block reward

FOOTER – Hash of entire block leads with 0’s

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HASH

HASH

HASH

0000000000000000000000000000001000101011110010101011011100000010001010111010101011101010011010101101011110000011101111011111110110000011000001011100001010110101101011011111001011001100001100111100101001111000101000001010010101101000011100000011001101100110

0000000000000000000000000000001000101011110010101011011100000010001010111010101011101010011010101101011110000011101111011111110110000011000001011100001010110101101011011111001011001100001100111100101001111000101000001010010101101000011100000011001101100110

0000000000000000000000000000001000101011110010101011011100000010001010111010101011101010011010101101011110000011101111011111110110000011000001011100001010110101101011011111001011001100001100111100101001111000101000001010010101101000011100000011001101100110

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Blockchain Structure

• What is a Block ?• Header – Hash of previous block• List of transactions, each with unique ID and signature• Block reward• Proof of work at the end• Proof of work is function of all preceding transactions

• Blockchain are all of the blocks strung together by header being the hash of the previous block

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Blockchain ‘Mining’

MINERS SOLVING FOR

PREVIOUS HASH1 A pays B $50 x_____ 2 B pays C $10 x_____ 3 D pays C $40 x_____

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Blockchain ‘Mining’

MINERS SOLVING FOR

PREVIOUS HASH

1 A pays B $50 x_____ 2 B pays C $10 x_____ 3 D pays C $40 x_____

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Decentralized Consensus

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Decentralized Consensus

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Decentralized Consensus

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Decentralized Consensus

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Decentralized Consensus – Example of Trust

• Remember, solving for a block is like winning a ‘mini lottery’• Let’s say you want to add a fraudulent transaction• You would need to add a transaction, build a block, and verify

it by successfully ‘mining’ it (i.e. you won the mini lottery)• To keep fraudulent transaction, you would have to keep

mining all subsequent blocks and winning every ‘mini lottery’• Mathematically improbable• Proof of work changes over time to keep up with increase in miners

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Blockchain – Sense of Scale with Bitcoin• Current block reward = 12.5 bitcoin ($7,600 USD =

$95,000)• Transaction fee (optionally included to incentivize miners

to include transactions in block)• Block size – about 2500 transaction per block• Proof of work such that blocks are verified every 10

minutes• VISA – current volume is 1,700 a second (about 1

million every 10 minutes)

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Applications of Blockchain

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Applications of Blockchain

• Finance: Cryptocurrency, Smart Contracts & Distributed Ledger, Initial Coin Offering

• Supply Chain• Governance• GAFA

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Finance: CryptocurrencyWhitepaper: https://bitcoin.org/bitcoin.pdfOct. 31, 2008 (8 pages, 8 references)

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Finance: Cryptocurrency

• Digital, decentralized currency• Bitcoin: Technology endoskeleton is blockchain

• Ethereum: System live 7/30/15, Smart Contracts

• 2nd most successful app of blockchain

• Estimated over 700 cryptocurrency

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Finance: Cryptocurrency

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Finance: Smart Contracts

Self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized blockchain network. They render transactions traceable, transparent, and irreversible.

Source: https://www.investopedia.com/terms/s/smart-contracts.asp

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Finance: Smart Contracts & Distributed Ledger

• Quorum: JP Morgan Chase launched 2017, enterprise-ready platform

• Hong Kong Monetary Authority (HKMA): central banking, launched 2016, trade finance platform via smart contracts on private blockchain. Developed two others: Mortgage applications and digital identification

• International (HKMA and Singapore) blockchain ecosystem: Global Trade Connectivity Network

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Finance: Smart Contracts & Distributed Ledger

• Mycelia: Music smart contract, peer-to-peer distribution system, enables musicians to sell songs directly to audiences

• Resonate: “Stream-to-own” music distribution model• Toyota: Autonomous vehicle technology (self-driving

cars), fuel smart contracts, driving database• B3i: Blockchain Insurance Industry Initiative, simulate

creating and settling reinsurance contracts• 15 global insurers and reinsurers who came together in late 2016• First product – Property cat excess-of-loss reinsurance contracts

in mid-2017

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Finance: Initial Coin Offering (ICO)

• Funding mechanism to raise capital• Crowdfunding for start-ups • Not an investment in company• Buying a token, investing in value of token

• Tokens: rewards points, utility/usage tokens, equity shares and capital assets

• China has banned ICO sales• Deloitte 2017, 800+ companies participated in ICO, digital currencies global market over $700B

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• eSports (aka electronic sports, competitive (video) gaming, professional (video) gaming, or pro gaming) – a form of competition using video games. (Wikipedia definition)

• UniKrn – wagering on blockchain

• Unikoin gold and silver – Gaming Token

• Mark Cuban & Ashton Kutcher

Finance: ICO example

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Supply Chain

• Diamonds: trackability• Fish: illegal fish catches, Ethereum blockchain in UK-

based Provenance pilot project, sushi restaurants in Japan• Land: Ghana, titles in developing markets• Cement: quality of cement in building, impact on

foundation when earthquakes• Drug: eliminate counterfeits• Food safety: Walmart, Nestle, Dole creating immutable

audit trail• Employment: verification of university degrees

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Governance

• 40% of Blockchain projects originated in U.S.• Second highest is U.K. at 17%• Brexit: Move fintech initiatives to mainland Europe• Boardroom App: organizational decision-making• Estonia: healthcare data security, citizens’ medical data, patient

portal. Guardtime, over a million Estonians health records. Doctors, surgeons, pharmacists and other medical professionals all have instant access to an agreed set of patient data, subject to strict privacy limitations

• Switzerland: Jan 2018, launched a blockchain task force to regulate blockchain and digital currency

• Minister said, “Should become the Cryto-Nation”Source: Bravenewcoin.com

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What is GAFA?

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• Google, Apple, Facebook, and Amazon• March 22, 2018, Google is working on blockchain-related

technology• Distributed digital ledger that third parties can use to post and

verify transactions• Blockchain’s potential to facilitate digital ad buying• Presearch project is using blockchain to try to compete with

Google’s search engine• Apple filed a patent Dec 7, 2017 for a blockchain-based

timestamp verification system• Facebook is looking at cryptocurrencies and encryption • Amazon helps companies build blockchain applications

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IBM & Microsoft

Source: https://www.ibm.com/blockchain/hyperledger.html

• IBM and Microsoft Corp offering blockchain related cloud platform tools

• Blockchain–as–a–service (BAAS) • AWS largest public cloud• Microsoft Azure 2nd largest public cloud• IBM private cloud• IBM has 400 active clients on its

blockchain platform• Microsoft is the closest private cloud

rival• Juniper Survey: Who leads in

Blockchain?• 43% IBM, 20% Microsoft, 17% Accenture

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Blockchain in Healthcare

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Blockchain in Healthcare

• Provider Directories• Provider Identity Tool• Data Management• Electronic Health Record• Value-Based Care• Other

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Provider DirectoriesHealthcare IT News

• CMS Mandated Provider Directories

• 2.5% of provider info changes each month

• $2.1B spent annually

• Alliance to share info

• 10K to 100K provider overlap

• Improve quality of data

• Reduce admin costs

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Source: https://healthitanalytics.com/news/hashed-health-launches-blockchain-provider-identity-toolBy: Jennifer Bresnick

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Provider Identity ToolHealth IT Analytics

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Data ManagementMarch 27, 2018

Source: https://hitinfrastructure.com/news/top-hit-infrastructure-uses-for-healthcare-blockchain

• Blockchain based naas• Invitation only, subscription-based,

private network• Does not store health information• Not HIE, ETL, or EHR• Transmits data among healthcare

organizations• Vendor agnostichttps://akiri.com/

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Data Management

• A new way of thinking about DATA• Bitchain DB: Scalable Blockchain Database• IoT, Supply chain, Healthcare data• Eliminate need of duplication• Regular updates• Shared & continually reconciled• No single storage• No centralized version for hacker to corrupt

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Electronic Health Record (EHR)

• EPIC and Cerner are looking at Blockchain

• AMCHART

• MedChain

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Value-Based Care

• Solve.Care (developer)• Smart apps

• Care.Wallet• Provider rewards• Expand to patients

• Care.Card app• Digital ID card

March 20, 20185,500 physicians250,000 patient members

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Other• Revenue Cycle Management• Clearinghouse – eligibility checks, authorizations, streamline premium &

claim payments• Provider Credentialing• Supply chain – pharmacy, DME, medical supplies and equipment

• Remove rebate intermediary’s• BlockVerify, iSolve/BlockRx, Chronicled, The Linklab, Modum, Vechain

• Enabling secure access to medical records• Health Information Exchange (data management)• Identity by consensus (policyholder)• Reduce Fraud Waste and Abuse• Clinical trials (patient matching, monitoring, e-consent)

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Other – Revenue Cycle Management

• 2015 Emdeon rebranded• 2016 McKesson Technology Company (70%

owner) & Change Healthcare created new company

• Provider of revenue and payment cycle management and clinical information exchange solutions

• 1st enterprise-scale blockchain network in Healthcare

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• PokitDok

• Simply Vital Health

• SolveCare• T Systems

• Accenture

• Change Healthcare• Deloitte Rubix

• Factom

• Hyperledger• MedRec

http://go.chilmarkresearch.com/2018-blockchain-msrhttps://www.healthdatamanagement.com/opinion/how-blockchain-could-help-boost-healthcare-security

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Other

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Strengths & Weaknesses of Blockchain

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Strengths of Blockchain

• Transactional• Immutable/Trusted• Consensus• Distributed

• Fully Transparent• Fast• Single source of truth

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Weaknesses of Blockchain

• Strengths are also problems• Proliferation of platforms &

protocols• No technical or process

standards in place• Operational siloes, lack of

collaboration• No Interoperability –

blockchain integration

• Limits to Transactions• Energy costs – mining

requires electricity• Data storage• Scalability• Costs

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Will blockchain revolutionize healthcare?

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Sources• Web:

• http://blockchain.global• https://www.coindesk.com/• https://www.coindesk.com• https://blockexplorer.com/

• ACTEX eLearning: Intro to Blockchain for Actuaries and Insurance Professionals (Chris Van Kooten)

• American Academy of Actuaries: Winter 2017 A supplement to Contingencies• Email:

• Healthcare IT News• Healthcare IT Infrastructure• Heath IT Analytics

• Podcasts: BlockChain Innovation, The Block Chain Show.com, 3Blue1Brown on YouTube• Papers/Articles:

• Blockchain to blockchains: Broad adoption & integration enter the realm of the possible, Tech Trends 2018; by Eric Piscini, Darshini Dalal, David Mapgaonkar, Prakash Santhana; Dec 5, 2017; www2.deloitte.com

• Books:• Blockchain Revolution by Don Tapscott and Alex Tapscott

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Appendix

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Finance: Cryptocurrency – History of currency

643 B.C.

Gold as currency

Mined compound

Gold coins, rush

1861

U.S. paper currency

Formation of Federal Reserve

Great depression, two world wars

US holding majority of world’s gold

1971

Gold standard ended

Dollars vastly outweigh value held in gold

2008Digital coins as currency

What happens when you’re able to mine not just earth, but the internet?

Source: Cracking Cryptocurrency

By Ryne Knudson

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Finance: Cryptocurrency – Ethereum White Paper

Source: https://www.weusecoins.com/assets/pdf/library/Ethereum_white_paper-a_next_generation_smart_contract_and_decentralized_application_platform-vitalik-buterin.pdf

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Finance: Remittances

• A sum of money sent, especially by mail, in payment for goods or services or as a give. The action of sending money in payment. (www.dictionary.com)

• Remove intermediary’s (Western Union), eliminate fees• Abra – remittance app using Blockchain

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Finance: Exchanges to buy a Wallet to buy Cryptocurrency

• Coinbase – most popular with around 12M users• Gemini• Binance• Bitfinex• Kraken• BitInstant• WikiLeaks• Binance

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Applications of Blockchain• Consensys: solar panels make excess energy, Ethereum-

based smart contracts automatically redistribute it.• Augur App: prediction market share offerings on the

outcome of real-world events • Scientific Publishing• Social Media: Giving users an opportunity to own &

control their images & content• SecureKey: identity and authentication provider (login’s,

passwords)• Refugee identities

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Applications of Blockchain

• Record Management: financial, medical, legal• Finance:

• Replacement of banks, credit agencies• Stock Trading, cross-boarder payments

• Supply Chain: Everledge (DLT) Ethical Diamonds• Enable peer-to-peer payments like OpenBazaar (Ebay like)

• Don’t pay transaction fees• Remove intermediary (sharing with companies like Uber & AirBnB)• Peer to peer car sharing: get paid to allow others to drive your car

• Governance: Elections/poll taking

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Applications of Blockchain• Gartner predicts blockchain business value-add will grow to $176B by 2025• Shipping: Rotterdam, Europe’s largest port, applied to logistics

• Biggest, fastest vessels, robot-operated ports and vast computer databases tracking cargoes. But it all still relies on millions and millions of paper documents.

• World’s most complex logistics network• Documentation that takes days will eventually be done in minutes

• File storage: Internet with decentralized websites would speed up file transfer and streaming times

• IoT: Monitoring of air temperature in a storage facility, genomic data, Internet of Medical Things (IoMT)

• Prediction markets: Pay out according to event outcomes are already active. Blockchains are a “wisdom of the crowd” technology.

• Oracle (world’s 2nd largest software company): Blockchain – as – a – service (BAAS)

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Applications of Blockchain

• Across United States:• At least 26 states introduced or enacted legislation regulating blockchain in some manner• Arizona – Value-based care, illegal to track the use of a firearm with blockchain• Illinois – Provider credentialing with Hashed Health• Texas – Amending their constitution to protect the right of its citizens to use digital currency• Utah – Digital currencies to the states Unclaimed Property Act

• Human Resources: • Assess, verify, and distribute unemployment benefits securely• Smart contracts – employment, performance mgmt., and compensation• GOVCOIN, U.K. based company, distribute public benefits

• Auto Insurance Fraud: Crash for cash • Insurance: Purchased and delivered via Blockchain• Other: Property deeds, credentialing student transcripts, credentialing clean-energy

marketplace, birth certificates, scientific publishing, refugee identities

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Applications of Blockchain

• Digital cats• First game built on blockchain

• Sell, trade your kittie

Source: https://www.cryptokitties.co/

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