How Healthcare Is Applying Blockchain Technology

Advocates say blockchain technology, with its core attributes of decentralization, security, transparency, and immutability, could address some pressing challenges facing the U.S. healthcare system.

While the technology was initially developed for cryptocurrency transactions, blockchain’s ability to securely manage and share data across distributed networks makes it promising for an industry plagued by fragmented information systems, data security concerns, and inefficient payment processes.

Key Takeaways

• Healthcare data interoperability and security remain major challenges in the U.S. healthcare system, with patient information scattered across disconnected systems.
• Blockchain technology can provide a secure, decentralized infrastructure for managing healthcare data while maintaining HIPAA compliance and patient privacy.
• For blockchain to succeed in healthcare, key stakeholders including providers, insurers, and technology vendors must collaborate on implementing standardized protocols and data governance frameworks.
• Nevertheless, uses of blockchain remain largely theoretical when not limited to specific uses and pilot programs.

Healthcare Issues in the U.S.

Many issues plague the U.S. healthcare sector, but patient data and information are the most important, besides the astronomical costs of care and insurance. Patient data is often scattered across different facilities, sometimes in separate counties or states. This usually makes it difficult for doctors to provide continuity of care because critical medical information can’t be accessed at crucial times.

Data Fragmentation and Interoperability

Patient data is siloed across different healthcare providers, facilities, and electronic health record systems. When a patient visits multiple providers, their medical history may be incomplete or inaccessible at critical moments. A recent World Economic Forum report indicates that a single hospital generates about 50 petabytes of healthcare data annually, yet much of this data remains isolated within individual systems.

Blockchain could create a secure, unified ledger where authorized providers can access complete patient histories while maintaining strict privacy controls.

Security and Privacy Compliance

Healthcare organizations must balance data accessibility with strict HIPAA compliance requirements and cybersecurity concerns. Patient records contain highly sensitive personal information that, if breached, can lead to identity theft and insurance fraud.

Blockchain’s cryptographic security features and immutable audit trails could help organizations maintain regulatory compliance while protecting patient privacy. Smart contracts could automate access controls and keep detailed records of who accesses patient data.

Payment Processing and Claims Management

Healthcare payment systems involve multiple intermediaries, which leads to slow processing times and high administrative costs. Payment delays and coding errors create added stress for patients with health problems.

Blockchain-based smart contracts could automate claims processing and payment verification, reducing administrative overhead and accelerating reimbursements.

Data Quality and Care Coordination

Without standardized record-keeping across providers, patient histories can become fragmented or contain errors. This can lead to misdiagnosis, duplicate testing, or inappropriate treatments.

A blockchain-based health information exchange could ensure that all providers work from the same verified patient record, improving care coordination and reducing medical errors.

How Could Blockchain Help Healthcare?

Blockchain propopents say it could improve healthcare data management in several key ways:

Secure Health Information Exchanges

• Blockchain could create a unified, secure network where medical records are accessible to authorized providers in real time.
• Each medical event would be recorded as a transaction in the chain, creating an immutable audit trail.
• Smart contracts could automate access controls and maintain HIPAA compliance.
• Patients could be given control over who accesses their records through private keys.

Claims Processing and Payment Systems

• Smart contracts could automate insurance claims verification and processing.
• Payment transactions could be executed automatically when predefined conditions are met.
• Reduced administrative overhead could lower healthcare costs.
• Real-time claim status tracking would improve transparency for patients and providers.

Clinical Research and Drug Supply Chain

• Blockchain could ensure the integrity of clinical trial data.
• Smart contracts could automate protocol compliance.
• Drug supply chain tracking could reduce the number of counterfeit medications.
• Patient consent management could be streamlined through blockchain.

Blockchain Applications Already in Healthcare

Like other sectors’ adoption of blockchain technology, healthcare organizations are moving from theoretical use cases to practical implementations. Two of these initiatives provide examples for how blockchain’s core features—decentralization, immutability, and transparency—can be leveraged to address healthcare’s most pressing challenges.

Securing Patient Records

Medrec:M operates a transparent peer-to-peer ledger that allows providers to track files and information.

Key facts:

• Developed by MIT Media Lab
• Creates a decentralized record management system
• Enables patients to control access to their medical data
• Uses smart contracts for automated consent management
• Being tested in multiple healthcare networks
• Focuses on maintaining HIPAA compliance while improving data accessibility

Pharmaceutical Supply Chain Issues

International Business Machines Corp. (IBM) and Walmart Corp.’s (WMT) blockchain initiative tracks pharmaceuticals from end to end.

Key facts:

• Provides end-to-end tracking of pharmaceutical products
• Ensures drug authenticity and proper handling
• Creates immutable record of temperature controls during transport
• Reduces counterfeit medications in the supply chain
• Enables rapid response to quality issues or recalls

Why Blockchain Adoption Remains Limited

The lag in a broad uptake of blockchain uses in healthcare stems from several interconnected challenges that are particularly acute in the sector.

Legacy Systems

The most significant barrier is the deeply entrenched nature of existing healthcare IT infrastructure. Unlike many financial institutions that could build blockchain systems from scratch, healthcare organizations have invested billions in electronic health-record systems over the past two decades. These systems, while often criticized for their limitations, represent massive institutional investments and are deeply integrated into clinical workflows.

Replacing or significantly modifying them would create both financial and operational risks that many healthcare organizations are reluctant to take.

HIPAA Compliance

Healthcare’s complex regulatory environment presents another major hurdle. While blockchain can theoretically improve HIPAA compliance through better security and audit trails, implementing these systems would require careful navigation of privacy laws that weren’t written with distributed ledger technology in mind.

Organizations must ensure that blockchain implementations not only improve data sharing but also maintain strict compliance with evolving privacy regulations.

Healthcare Is Not a System

The fragmented nature of the U.S. healthcare system itself poses unique challenges. Unlike countries with centralized healthcare systems, the U.S. has thousands of independent healthcare providers, insurers, and technology vendors.

Each has its own priorities, systems, and data standards. Creating a blockchain network that serves all these stakeholders requires unprecedented cooperation and standardization, which has been historically difficult to achieve in American healthcare.

Costs vs. Value

Cost considerations also play a crucial role. While blockchain might cut expenses in the long term—this is still theoretical—the initial investment required for implementation is substantial.

Healthcare organizations, particularly smaller providers operating on thin margins, often struggle to justify such investments, especially when the return on investment isn’t immediate or certain.

These challenges aren’t insurmountable, but they help explain why blockchain adoption in healthcare is going to be, at best, evolutionary, not revolutionary. Success will require not just technological shifts, but also industry-wide collaboration and regulatory clarity.

What Exactly Is Blockchain in Simple Terms?

Blockchain is essentially a secure digital ledger that’s shared across a network of computers. Each block contains a set of records or transactions, and once information is added to a block, it can’t be changed without leaving a clear trace. Every computer (or “node”) in the network has a copy of this entire chain, and they all work together to verify new information before it’s added.

In healthcare, these blocks might contain things like medical records, prescription information, or insurance claims. Data in the blockchain is decentralized, transparent, secure, and permanent. This is quite different from traditional databases where information is stored in one place and controlled by a single organization, like a hospital or insurance company.

How Could Blockchain Ensure Patient Privacy While Still Enabling Data Sharing Between Healthcare Providers?

Blockchain accomplishes this through the use of private and public keys, like a highly secure email system. When patient data is added to the blockchain, it’s encrypted with the patient’s public key. Only those with the corresponding private keys—controlled by the patient and authorized providers—can access the data. This means data can be shared widely across the network while remaining inaccessible to unauthorized users.

What Do Proponents Say Makes Blockchain More Secure than the Current Electronic Health-Record Systems?

Traditional systems store data in centralized databases, creating a single point that hackers can target. Blockchain distributes data across many nodes in the network, making it very difficult to compromise the entire system. In addition, the blockchain’s immutable ledger means that any attempted changes to medical records are permanently logged and must be verified by multiple parties. This creates an audit trail that makes unauthorized modifications or access immediately apparent.

The Bottom Line

Blockchain technology advocates offer compelling solutions to healthcare’s most pressing challenges, particularly data security, interoperability, and administrative efficiency. However, its adoption in healthcare remains limited to pilot programs and narrow use cases rather than system-wide deployments.

Healthcare presents unique challenges because of regulations, complex stakeholder relationships, and deeply entrenched legacy systems. Success will require not just technological changes but also industry-wide collaboration on standards, significant investment in infrastructure, and careful navigation of privacy regulations.