Our healthcare system is failing. It costs more and has overall worse outcomes than any other industrialized nation. It is failing because those on the front lines of healthcare – the physicians and patients- have no say in how the system is run. Distributed Ledger Technology (DLT) – otherwise known as blockchain – has the ability to change that. DLT allows for secure direct peer to peer (In healthcare this means patient to doctor and doctor to doctor) communication and data transfer. No more storage of private information and transactions on centralized data capturing systems like electronic health records platforms.

Distributed ledger technology is about decentralization, disintermediation and eliminating censorship by removing the need for a third party in any transaction. We need no middlemen between us and our patients, and this technology has an ability to make that our new reality. Our failing healthcare system is run by middlemen, so the potential of distributed ledger technology to disintermediate those middlemen yields potential to improve the failing system.

Healthcare is one industry that has experienced increasing consolidation, vertical integration, and centralization over the years and it has heavy regulatory oversight.

Consolidation, regulation and exploitation of the healthcare markets have created misaligned incentives. The slow regulatory capture over the practice of medicine has been achieved through laws that have been pushed through congress as outlined in the historical summary included in this article. As a result, healthcare has become radically inefficient, and in many cases borders on a monopoly. There are single health systems dominating entire geographic areas, leaving little to no choice for patients. Third party administrators are gaining market share and driving up the cost of healthcare through obscure mergers and pricing practices.

Some examples:

Pharmacy benefit managers are merging with insurance companies, as with the recent 2018 CVS – Aetna and Express scripts and Cigna mergers. This creates a situation where the one controlling the supply of the medications will be negotiating the payment and pricing for those medications. With the creation of in-pharmacy minute clinics they can then also hire, employ and control the prescribers of those medications by giving them protocols to follow.

Large health systems are attempting to merge with physician staffing companies such as the recent attempt at an HCA-Envision Merger in order to control the entire supply chain of physician services. Often in order to work for one of these systems you must sign a non-compete. This leads to physicians being trapped in these systems, unable to move and fearful of retaliation should they resist protocols or practice guidelines forced upon them and their patients.

Physician practices are being bought up by private equity firms -and at times the physicians are being replaced by less qualified personnel to save money- example Children’s Health in Texas where the group was purchased and the physicians were replaced by lesser trained non-physician practitioners.4 Health systems also merge, leaving little choice in where people in geographically isolated areas can get their healthcare.

Hospitals also own other third-party administrators (TPA’s) around the pharmaceutical supply chain, such as the group purchasing organization (GPO) Intalere which is owned by Intermountain Healthcare. Intalere is one of the four GPO’s in the country that control the in-hospital supply chain of pharmaceutical and medical resources. Interlare was formerly Amerinet, demonstrating an example of the tactics these organizations use – frequently changing names in order to obscure the truth around their economic strategy and market share.6 Intermountain Healthcare claims to be “fixing the problem” by making their own medications – because they own the TPA’s that administer and decide on medications and devices, they profit on both ends at the expense of the patient.

Mergers like this not only leave patients with little choice, but drive up the cost of healthcare by creating a lack of competition in the markets. It is for reasons outlined in the examples above, that decentralization enthusiasts are turning to distributed ledger technology in hopes that this technology will disrupt the trend. The lack of a need for a trusted third party to broker a deal is especially interesting for healthcare considering the mal-aligned incentives these third parties create.

And the worst problem: when a physician is employed, or if they take insurance they are forced to share their patients’ protected health information with insurance companies and health systems. Those systems then do data analytics on that information in order to find ways to deny services to patients while denying payments to physicians. This is why we have seen an increase in unpaid services, surprise bills and prior authorizations. This is wrong. Physicians have an ethical obligation to protect the privacy of their patient’s information, and insurance companies should be obligated to pay for covered services.

Distributed ledger technology has the potential to revolutionize how healthcare is delivered, documented and paid for, but only if it is implemented properly. The question is how can we create an optimal and truly decentralized healthcare system for the benefit of the patients? How do we make sure not to create a new system void of misaligned incentives in the future? It is a two-step process:

Step 1

“We must first let go of the idea that we need to work within the current system, and integrate with current legacy systems”

Those systems are the very systems that need to be decentralized. The record systems are full of junk data and they lack the appropriate security features to protect patients. There are inefficiencies and misaligned incentives that can be addressed in nearly every aspect of the healthcare system.

Step 2

“We must put the physicians back in charge of healthcare at every level, in order to restore privacy and decision making agency to the patients they care for”

This is the only true solution is to completely reorganize and decentralize power away from the consolidated third parity stakeholders such as the health systems, pharmaceutical companies and insurance companies and towards the individual people who consume, create and utilize healthcare. The individual people who utilize, consume and create the current healthcare system will now collectively build the new community driven decentralized system.

Right now, both physicians and patients are frustrated with the current system, so it makes sense that the solution lies with them. Now may be the optimal time for them to take that initiative, in order to build a new system they can be proud of. Physicians must be willing to take that step, to advocate for their patients and make a change by considering themselves part of the solution. This inefficient system is in need of a change especially because the massive administrative overhead and costs, and bureaucracies that leads to these costs and disappointments are the result of layers of regulations that have been stacked on top of one another over the years.

Brief Historical Summary

(Outlining How The Practice Of Medicine Has Been Regulated:)

  • 1929 – First Employer sponsored health insurance created for teachers. It later gave rise to Blue Cross.
  • 1946 – The McCarran-Ferguson Act was passed. It exempts the business of insurance from most federal regulations including antitrust laws in some instances.
  • 1965 – The Center for Medicare and Medicaid (CMS) was created through amendments to the Social Security Act of 1935. It sponsored healthcare coverage for the elderly disabled and the poor.
  • 1971-1972 – Additional amendments to the Social Security Act widened enrolment in CMS.
  • 1973 – Health Maintenance Organization (HMO) act of 1973- incentivized the privatization of Insurance through HMOs; medical insurance groups that provide health services for a fixed annual fee.
  • 1981 – The Accreditation Council for Graduate Medical Education (ACGME) was created to fund advanced medical education. They were initially created because VA hospitals were short staffed. Residency programs created a way to get cheap labor from highly trained physicians.
  • 1982 – Equity and Fiscal Responsibility Act of 1982 (EFRA ) created more government incentives to utilize for-profit HMO’s.
  • 1986 – Emergency Medical Treatment and Labor Act (EMTALA ) requires every patient to be screened for an emergency regardless of ability or willingness to pay.
  • 1991 – Safe Harbor Act- Instructs the Office of the Inspector General (OIG) of the US Department of Health and Human Services (HHS) to implement a safe harbor law that protects Pharmacy Benefit Managers (PBMs) and Group Purchasing Organizations (GPO) from antitrust and anti kickback laws. This act has given PBMs and GPOs (third party administrators) the ability to establish a buyer’s monopoly on the purchase of medical goods for health systems and insurance companies.
  • 1992 – Current Procedural Terminologies (CPT codes), Diagnostic Related Groups (DRG’s), Relative Value Units (RVU’s), and the International Classification of Diseases (ICD) were all created in an attempt to control costs by monitoring and controlling how physicians spend healthcare dollars – all controlled by the American Medical Association (AMA) 3
  • 1996 – The Health Insurance Portability and Accountability Act of 1996 (HIPAA) became law. HIPAA created standards for the electronic exchange, privacy and security of health information. The final privacy rule was published in 2000.
  • 1997 – The Sustainable Growth Rate (SGR) was created. A freeze on graduate medical education was imposed. This has contributed to the current physician shortage.
  • 2003 – Changes made to HIPAA eliminated the patients’ right to control the disclosure of their own medical records.
  • 2009 – The Health Information Technology for Economic and Clinical Health (HITECH) Act was enacted as part of the American Recovery and Reinvestment Act of 2009 (ARRA) to incentivize the adoption of Electronic Health Records (EHRs) and to attempt to address the privacy and security concerns associated with the electronic transmission of health information. This was done in part, through several provisions that strengthen the civil and criminal enforcement of the HIPAA rules.
  • 2010 – The “Affordable Care Act (ACA)” was passed. It incentivizes everyone to have insurance coverage by penalizing those that do not.
  • 2014/2015 – The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) became law. It attempts to place a value on physician services in order to reduce costs.
  • 2016 – The Physician Quality Reporting System (PQRS) – ended in 2016 and became the Merit Based Incentives Payment System (MIPS) in 2017. MIPS is an attempt to tie payments to “outcomes” by replacing PQRS which was a “patchwork collection of programs” according to CMS.

Despite efforts by the government to regulate and control the healthcare system it continues to get more complex, more expensive, and less efficient. Considering our laborious legislative process, the likelihood for major change within our current system is low. Special interests who have a lot to lose, spend money on lobbying to keep their interests in favor. Furthermore, many of the above policies took years to create, and with the acceleration and advancements we are making in technology it is becoming impossible to create policies in a timely enough fashion in order to keep up.

So how do we fix this? At the organization I founded, the Humanitarian Physicians Empowerment Community (HPEC), we believe that the answer lies in putting those with the appropriate competency, training and compassion back in charge: the physicians! Thus we should be building the future of healthcare with physician-led solutions that put patient privacy at the center.

Leah Houston, MD is the CEO and founder of the Humanitarian Physicians Empowerment Community (HPEC). She can be reached through her Twitter account <@LeahHoustonMD>.

This article was first posted in Physician Outlook. It is reprinted here with permission from the author.

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