Startup founders warn their peers to think carefully about deploying distributed ledger technologies.

According to IDC, 20 percent of healthcare organizations will be using blockchain by 2020. So should startups in the healthcare space be using it now? Well, not necessarily. While many digital health startups are putting blockchain to good use, for others it might be premature, or even extraneous.

“I think companies over the last couple years have been asking the question ‘I want to use blockchain; let’s find a problem for it,’ which I think is the wrong approach,” Dennis Grishin, cofounder and CSO at Nebula Genomics, told MobiHealthNews. “In our case we started with the question of ‘How can we solve the problem of personal genomics?’ There were some privacy issues and we looked for some technologies that could help address those issues and brought them together. I think this way of thinking is the one that I would encourage, starting with there being an existent problem and then researching, in an unbiased way, available technologies.”

It can be tempting to become ‘a blockchain company’ because the space is hot and sought after by investors, many founders told MobiHealthNews. But the reality is that blockchain is a tool that should be brought in to solve particular problems.

“In the beginning, saying the word blockchain opened a lot of doors for us,” Troy Bannister, CEO of Particle Health, said. “Everybody was very interested in what different use cases were being applied for blockchain. Today, a year later, I absolutely feel people are much more detail-oriented about the blockchain. We have to think about the scope, about energy consumption, the transaction.”

Is blockchain right for you?

Blockchain is all about making data transfers transparent, making actors verifiable, and giving data owners control over how their data is used. So the use cases where it’s really wanted are use cases where one of those functions is wanting.

For instance, Anthony Begando’s startup ProCredEx is focusing on using blockchain for clinical credentialing, a use case which is all about efficiently transferring signed, verified documents.

“What we’re using blockchain for is a component of the exchange that manages the trust and lets you know that what you’re receiving came from St. Joseph’s Hospital on December 3rd in 2012,” Begando said. “That verification asset, you know where it came from. And then we can track and trace that asset throughout its lifecycle throughout the exchange, for doing everything like the trades themselves, converting ownership, preventing other parties from selling access.”

Similarly, Particle Health, Bannister’s company, is focused on hospital authorization documents, which similarly need to be shared often but also carefully controlled.

“If you sign an application form at a hospital, that form stays at the hospital,” Bannister said. “Other hospitals can’t get it, insurance companies can’t get it, it just exists in a silo with that signature. So what’s great about blockchain is you can sign that authorization form and everybody gets a copy of that authorization. We allow all the stakeholders to gain access to that information.”

For Open Health Network CEO Tatyana Kanzaveli, her company was building an app called MyCardiacCoach for patients recovering from heart attacks.

“If you look at the process, patients who are released from the hospital, they go to cardiac rehab, right? And they have to bring papers or manually write every time they do whatever. There’s no way for them to share anything,” she said. “… [So] we looked at the best way to enable it and we realized that if you would utilize certain parts of blockchain technology — the middleware that was built, the whole ledger where you can track the different paths and interactions of the data, who accessed it when — that’s helpful right? You want to see what has been done with your data. So this is where the blockchain makes sense for us to use. And we have people who can help us to build our own. That’s basically how, from a decision point of view, it’s just a natural extension of the things we have been doing.”

For Grishin, blockchain was the answer to a longstanding problem he had watched his mentor and advisor, geneticists and Harvard professor George Church, struggle with.

“Professor Church has been for a very long time trying to incentivize adoption of gene sequencing.  He has tried different approaches and encountered different obstacles. … And one of the big obstacles are the privacy concerns that people have with regard to their genomic data,” he said. “Those concerns have always existed but they have been enhanced over the last couple years due to developments such as other personal genomics companies increasingly monetizing the genomic data of customers. This has led to big privacy questions. And we realized that blockchain can be part of the solution to address this issue. In particular, with blockchain, genomic data sharing can be transparent and therefore controllable.”

Is blockchain ready for you?

Even if you have a use case that would benefit from blockchain, it’s not necessarily the right move. Karoline Starczak, CEO of Nutrimedy, said her company looked into blockchain and decided to pass for now.

“Like any startup, we sort of have to monitor our roadmap very closely in terms of what we’re adding and really prioritize and reprioritize what we’re focusing on,” she said. “…If we’re looking at something like secure information exchange, if none of our customers are really adopting and having it readily available, then putting resources into having that capability doesn’t necessarily make sense. As we know, healthcare tends to move pretty slowly. Adoption has a lot of difficulties and challenges.”

For instance, there’s no guarantee organizations will adopt blockchain systems that work well with one another and with legacy systems, in which case the technology could cause more problems than it solves.

“Unless you can really prove that it’s going to be that much better, that it’s going to be that much of an improvement, and it gives us a reason to undertake this cost of time, I’m not quite sure a lot of institutions will literally adopt it,” she said. “And again at this point it’s anyone’s guess. But I think we’ll need some additional proof of concept, particularly in healthcare specifically and have it kind of fit in a healthcare organization systemwide and not necessarily in one area like claims adjudication, and have more than one solution. But that’s probably going to take quite a lot of time.”

Bannister agreed that blockchain is at a crucial juncture to prove itself.

“The question is, is the value of the .… added potential benefit,” he said. “We won’t really know that until we have a very diverse group [of users]. If we’re able to get groups that don’t traditionally share information to start sharing information, then it is worth it. If they can understand the value of the anonymity of the data and the security of the transaction, and can utilize that, then it becomes a very valuable architecture.”

Another benefit to waiting is that, if blockchain keeps going the way it’s going, it will become easier to purchase turnkey solutions rather than building a brand-new platform.

“I strongly feel like what you’re going to see emerge are realities like, there’s going to be folks who offer blockchain as a service. It’s happening right now,” Begando, of ProCredEx, said. “I think you’re going to see folks say ‘We’ve got a blockchain service where we offer to license it to you and you can use it like you would a database engine and not worry about engineering all of the functionality you need to engineer with the blockchain side of the application.’”

Five more questions for would-be blockchain adopters

Begando says there are three questions a startup has to ask before tackling the blockchain.

“The first is the governance model, the second is the technical model, the third is the business model,” he said. “And all three of those things need to align. And it’s hard. You’ve heard dozens and dozens of blockchain use cases that have been bandied about in the marketplace. What you need to have is alignment of those three things to have a meaningful solution that’s going to achieve traction in the marketplace.”

The business model and technical model are fairly straightforward requirements— a company needs to know how they will use the blockchain (public vs private vs hybrid, for instance) and how they will make money from the platform. As for the governance model, it’s particularly important for startups using the public blockchain who will essentially be creating a market.

“In the governance model, our members will govern the exchange just like any exchange,” he said. “It’ll have a board of governors that set policy, that drive market conditions and resolve disputes and all that good stuff. And we will facilitate the needs that they prioritize. So we’re not going to create the credentials monopoly. We’re going to allow our members to determine what makes sense and set their priorities.”

A fourth question a startup needs to ask is whether it has done its homework on the healthcare side as well as the blockchain side.

“When it comes to healthcare, there is a lot of red tape around it,” Syed Abrar, founder and CEO of Azaad Health, which is using the blockchain for health data exchange, said. “…So if a new company wants to get in on this they would have to learn all about how the HL7 works, how the Fast Healthcare Interoperability Resource works, how the HIPAA applies, what are clinical terms used, ICD-10, clinical terms and diagnostic codes used to identify any disease or medication or ailment. So you need to be able to basically translate all of that into blockchain, into creating those transactions for the health data ledger.”

Finally, Begando noted, healthcare use cases might have both privacy and computing requirements other blockchain use cases don’t have.

“We have to have something that scales to a market level of performance,” he said. “A lot of the blockchain protocols that are out there were never meant to operate at that level of performance. … If you look at things like bitcoin, you know it’s the first generation protocol but it could never support the kind of transaction this would require on a day-to-day or hour-to-hour basis.”

No blockchain regrets

To recap, before adopting blockchain, healthcare startups should ask:

  • Is blockchain arising organically as a solution to a problem, or am I seeking out use cases for blockchain?
  • Is my area of interest ready for blockchain in terms of adoption, infrastructure, and culture?
  • Do I have a business model, a technical model, and a governance model?
  • Do they all align with one another?
  • Am I taking into account the regulatory realities of healthcare?
  • Do I have the computing power to put blockchain to use on an enterprise scale?

If blockchain isn’t the right technology for your startup right now, don’t sweat it. Starczak says she hasn’t looked back after passing on the technology.

“It’s not something that has ever come up when we have conversations with the site security team and we’re going through security protocols or even talk about any kind of data transfer,” she said. “And who knows? What if in two or three years a completely different way of managing data is created and we realize that blockchain isn’t really a good thing for healthcare? Innovation moves very quickly so this might not be the only solution that we come across in the near future.”