Blockchain in Healthcare: Complex Challenges, Overshadowed by the Hype, Need to be Overcome

07 March 2018
By Leo Carpio, Independent Healthcare Consultant and Kirill Timofeev, Software Project Manager

Blockchain in Healthcare Complex Challenges (1)

Blockchain technology, the platform underpinning cryptocurrencies such as Bitcoin, has been touted as the “magic bullet” to solve the healthcare industry’s data interoperability and security issues and, possibly, usher in a new era of personalized medicine and scientific research. Overshadowed by the hype are the complexity and challenges involved in funding, implementing, and administrating a healthcare blockchain ecosystem. We spoke with Kirill Timofeev, DataArt’s Senior Project Manager and Lead Blockchain Expert, who provided valuable insights into the issues faced by the healthcare industry in adopting blockchain technology. Despite the uncertainty, the healthcare industry will continue to move forward with blockchain adoption.

What Is Blockchain?

Basically, blockchain is a digital ledger in which all transactions are recorded chronologically and openly. Unlike a bank or government-sponsored centralized system, the data in a digital ledger is decentralized, with multiple copies stored across a wide network of replicated databases (“nodes”) that are always in sync. For security purposes, users can only update the block they have access to, and those updates get replicated across the network. Most importantly, all entries are time and date stamped. Blockchain network participants who update the ledger are compensated for their work via digital currency or “token”.

Blockchain’s Potential Healthcare Benefits

Blockchain in healthcare can address a variety of problems, such as care coordination, data security, and interoperability issues. Every day, the healthcare industry is generating new data – medical records, laboratory test results, billing, clinical trials, remote monitoring, and other sources – which is often trapped in numerous disparate, isolated databases. Blockchain can harness the data stream to improve quality of care provided by streamlining the sharing of medical records, protecting sensitive data from hackers, and giving patients more control over their information. For example, blockchain technology can aggregate a patient’s medical and prescription records from multiple sites/providers to generate a single, up-to-date record which an ER physician can refer to when treating a patient.

Figure 1. Blockchain in the Healthcare and Life Sciences Eco System


Source: DataArt

Figure 2. Examples of Blockchain Technology’s Potential Uses in Healthcare

  • Electronic Health Records (EHRs) Interoperability. Blockchain could facilitate nationwide interoperability of electronic health records, which would allow providers access to patients’ medical histories, current medications, and prior imaging studies. According to one study, full interoperability could save the US healthcare system $77.8 billion per year.
  • Supply Chain Integrity. Blockchain can verify every transaction among drug manufacturers, wholesalers, pharmacists and patients, as well as secure drug supply, which could reduce counterfeit drugs ($200 billion in annual losses).
  • Drug Development. Blockchain can facilitate new drug development by making patient results more widely accessible.
  • Smart Contracts. Blockchain can create rule-based protocols where contracts are executed when conditions are met. For example, a patient with health insurance has policy details linked to their profile that are triggered when they seek medical care, ensuring correct payment to providers.

Eagerly Embracing Blockchain

Enthralled by its potential benefits, the healthcare industry globally seems to be embracing blockchain. Healthcare Rallies for Blockchain, an IBM study of 200 healthcare executives – both payers and providers in 16 countries – found that 16% of surveyed healthcare executives had plans to implement a commercial blockchain solution this year, while the vast majority (56%) expected to do so by 2020. Last year, Alibaba partnered with the city of Changzhou, China to launch the country’s first application of blockchain technology in the healthcare sector. Additionally, IBM Watson signed a 2-year agreement with the US FDA to explore the use of blockchain technologies to securely share patient data.

Difficulty in Estimating Blockchain’s Market Size in Healthcare

Despite blockchain’s potential benefits for the healthcare industry, it is difficult to estimate the potential market opportunity. Kirill Timofeev, DataArt’s Senior Project Manager and Lead Blockchain Expert, attributes the difficulty to blockchain’s design, which is not a solution to a particular problem per se, but rather a foundational technology that can be used to create disruptive solutions across the healthcare industry. Blockchain-based solutions can be impactful in claims processing, patient incentive programs, decentralized patient records, medication supply chain, and fraud prevention. Each of these segments has the potential to grow to tens of billions of dollars. Timofeev cites as an example IBM’s recent announcement that it will use distributed ledger technologies to simplify supply chain solutions. Currently, local and national agencies maintain a ledger that is costing them more than twice the cost of actual physical transportation to manage and use [1].

Challenges to Adoption

Significant challenges exist to blockchain adoption in healthcare, such as technical challenges and question of ownership. As the technology advances, technical challenges like the speed of processing and the massive duplication of data will be resolved. Yet, Timofeev believes, the main obstacles to blockchain in healthcare will be around ownership – public vs. private. As a potential solution, Timofeev cites Estonia’s government-backed blockchain initiative, which allows companies to create their own solutions on the blockchain and build a whole new ecosystem for healthcare innovation. However, public blockchain does not mean that information is going to be open to everyone.

According to Timofeev, another major technical challenge for blockchain’s distributed ledger solutions is compliance with existing HIPAA privacy regulations, while keeping the data distributed across the network. The blockchain system must be designed such that it is impossible to be cryptographically compromised. In January 2018 alone, 433,192 individuals were affected by data breaches of traditional systems [2], which could have been prevented by using blockchain-based solutions.

Who Will Pay?

Even though the US government has funded several blockchain initiatives, uncertainty persists over who will ultimately fund blockchain’s implementation costs. Timofeev believes blockchain financing will depend on who drives blockchain innovation. If the US government were to back blockchain innovation, companies that used the service to build out new solutions could pay for connection to the chain. While individual companies will likely build their own blockchain solutions, a blockchain-based solution covering the entire US healthcare system would require government backing. It would also be possible for companies to band together in a consortium to move blockchain innovation forward on a large scale.

Disruption in the Healthcare Ecosystem

While we have highlighted the payment integrity, data interoperability and data security benefits, blockchain has the potential to disrupt how the healthcare ecosystem operates. For example, pharma research would be transformed from a time consuming, laborious process into a streamlined, data driven, and efficient one. If patient data were to be stored using a blockchain solution where control, ownership and access to that data were assigned to the patient, it would greatly impact the way companies access and use both identifiable and de-identified patient data.

Identifying patients who may be a good fit for clinical trials would finally be made simple with blockchain technology, according to Timofeev. A clinical trial awareness study found that only 16% of cancer patients were aware of any relevant trials being held at the time they were considering treatment [3]. When information is de-identified and deployed to a distributed ledger, requests can be conveniently and cost-effectively broadcast to patients and healthcare records may be revealed only if there is a positive match and patients agree to participate in the research. The ability to run analytics across all patient data would be a major benefit for research, but patients would have to consent to donating their de-identified data for science. For areas like pharma marketing, patients may be less inclined to share their data free of charge, and might seek to monetize their data.


Blockchain technology could transform the healthcare industry’s IT infrastructure from centralized, isolated, and small-scale systems to distributed, decentralized and worldwide systems, which could dramatically improve the quality of care provided and eliminate costly administrative inefficiencies. While the path to this new paradigm is fraught with challenges and uncertainty, the healthcare industry will continue to move forward by piloting more blockchain initiatives, garnering regulatory support, pushing for standards, and lastly, demonstrating success in local/regional ventures. Ultimately, the push toward value-based reimbursement and evidence-based medicine will serve as the catalyst to drive blockchain adoption in healthcare. For this transformation to occur, healthcare leaders, government officials, payers, and tech innovators will need to work together and confront the challenges, many of which have vexed the healthcare industry for decades.

[1] Blockchain for supply chain. Link:

[2] U.S. Department of Health and Human Services Office for Civil Rights. Breach Portal

[3] Clinical trial awareness, attitudes, and participation among patients with cancer and oncologists. Link:

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