Blockchain Technology and the New Economics of Healthcare

In this report we examine some of the implications of blockchain technology for the healthcare sector, with a focus on the coordination of trusted data. We propose that blockchain—understood as a new technology of trust—might propel an institutional re-organisation of the healthcare industry away from hierarchical governance towards digital platform governance. We begin our analysis by introducing the economic problem of the healthcare system. Healthcare decisions must be made under uncertainty. The data used in this process is dynamic, fragmented and often untrusted. The institutional structure of the healthcare industry—siloed but hierarchical organisation—is in part a response to the costs of producing, coordinating, and creating trust in that data. Blockchain technology opens new organisational possibilities in solving these healthcare data problems, and therefore suggests a re-organisation of the sector. Blockchain technology, and distributed ledger technologies more broadly, are institutional technologies. Blockchains leverage economic incentives, cryptography and peer-to-peer networking to facilitate distributed programmable ledgers of information to be governed by computer networks. Blockchain technology is being applied in healthcare in four major areas: decentralised medical records, data markets for scientific research, tracing of devices and pharmaceuticals in supply chains and insurance. In many of these applications the promise of blockchain is as an alternative governance infrastructure for the production and coordination of data. What does blockchain mean for the healthcare sector? The impact of blockchain in healthcare shouldn’t be understood as simple cost reductions within existing organisational structures. More deeply, blockchain looks to catalyse a fundamental institutional re-organisation between data governance in firms, governments, markets and blockchains. The extent of this re-organisation relates to how much of the large hierarchical structures in health (e.g. hospitals) are the result of solving trust problems (within existing technological constraints). We propose that the impact of blockchains is to de-hierarchialise the healthcare industry, pushing data governance towards digital platforms. New platform-based digital healthcare infrastructure might help to ameliorate Australia’s healthcare productivity crisis by better coordinating the inputs into the healthcare discovery problem. That is, blockchain is new foundational infrastructure on which entrepreneurial solutions to healthcare problems may be discovered.