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Blockchain’s Impact on the Healthcare Industry

November 23, 2021 - 14 min read

Blockchain Could Reduce Costs and Fraud While Improving Patient Outcomes

Providing high-quality, affordable healthcare is a challenge for almost every country. However, it’s particularly challenging in the United States, where an aging population, rising insurance costs, and a lack of doctors are leading to skyrocketing healthcare prices. Other major issues in healthcare include fraud, identity theft, and preventable medical errors. 

According to the U.S. Centers for Medicare & Medicaid Services (CMS), America spent approximately $3.8 trillion on healthcare costs, a staggering 17.7% of GDP. CMS data also projects that healthcare expenditures will grow at a rate of 5.4% per year for the next decade, reaching $6.2 trillion by 2028. Outside the U.S., healthcare costs have also risen, particularly in advanced economies, such as EU countries, Canada, and Australia. 

With the adoption of blockchain technology across a wide variety of industries, both startups and large institutions are beginning to utilize blockchains to store and share medical records securely to bring down costs, prevent fraud, and address other industry issues. The benefits of distributed ledger (DLT) technology are vast and can ensure the integrity of data as it moves through various stakeholders. 

In this article, we’ll review some of the major problems facing modern healthcare systems in the U.S. and abroad, while demonstrating how blockchain technology could provide substantial benefits to the healthcare ecosystem. 

Blockchain Could Help Secure Medical Records, Preventing Fraud and Identity Theft

Medical record theft is currently one of the biggest problems in the healthcare industry. According to data from the HIPAA journal, since 2009, over 3,700 reported thefts have led to the exposure of more than 268 million healthcare records, equating to almost 82% of the current U.S. population. The main cause of record theft is currently hacking and IT data breaches. 

According to a Ponemon Institute report, sponsored by IBM, the average healthcare records breach costs an institution $6.5 million, or $429 per record in initial data recovery, legal, and reputational costs. 

While traditional encryption has shown to be effective in preventing some hacks, the rate of healthcare data breaches is only increasing, with nearly 2 major breaches reported every day. Major victims of healthcare breaches in recent years include Anthem, Inc., which suffered a hack of more than 78 million records in 2015. Other notable victims include the American Medical Collection Agency, which lost more than 26 million records, and Premera Blue Cross, which lost approximately 11 million records. 

Image Credit: Gerd Altmann/Pixabay

When considering the impact of stolen medical records, it’s important to realize how these records are often used. Specifically, many stolen records are used for medical identity theft, in which a thief uses a stolen identity to: 

  • Fraudulently obtain prescription medication 
  • Fraudulently get medical care
  • Collect funds through fraudulent insurance claims 

When it comes to medical identity theft, patients are the ones who suffer the most, paying an average of $13,500 per person, typically consisting of paying providers, insurance companies, and lawyers to resolve the situation. However, insurance companies and healthcare providers likely lose billions of dollars as well, which may be one of many contributors to rising medical costs in the U.S. 

Blockchain potentially provides a powerful solution to store medical records both accurately and securely. For HIPPA-compliant entities, private, permissioned blockchains, which are not available to the general public, are likely to be the best solution. Insurance companies and hospitals can operate a system of hundreds (or thousands) of permissioned nodes at different locations in order to reduce the chance of a 51% attack succeeding. Smaller entities may be able to latch on to shared blockchain health record management services in order to increase the number of permissioned nodes operating, therefore increasing the potential security of their data. 

However, it’s important to remember that outside bad actors are not the only ones manipulating medical data. Medical data manipulation can often occur inside doctors’ offices and hospitals, particularly when unethical doctors, administrators, or even insurance adjusters edit records to conceal evidence of medical malpractice. The immutable nature of blockchains can help preserve medical records in their original format, making it significantly harder for these bad actors to falsify or manipulate patient data. 

Blockchain healthcare databases have already been widely adopted in Estonia, where nearly the entire population has medical records stored on blockchain databases. In 2011, the Estonian government began using Keyless Signature Infrastructure (KSI) blockchain methodologies to help secure citizens’ medical records, and in 2016, launched a comprehensive, country-wide medical records system utilizing blockchain technology. Today, Estonian residents are issued smart cards via which they can use over 1000 online government portals to review their healthcare records. 

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In addition to securing medical records, blockchain-based supply chain tracking can make it easier to discover counterfeit drugs, allowing healthcare providers to track medications and other medical products through each stage of the supply chain as they move from manufacturer to patient. This would allow authorities to more easily identify counterfeit drugs and supplies and confiscate them, as well as helping doctors and hospitals ensure that that the drugs and supplies they use are legitimate. 

Supply chain tracking for drugs and medical products is particularly important due to the fact that, according to a study conducted by American Health and Drug Benefits, “40% of drugs are made overseas and approximately 80% of the active medicinal components of drugs are imported.”

Blockchain-Based DeFi Insurance Could Significantly Reduce Premiums and Co-Pays 

DeFi insurance is undoubtedly one of the most exciting new developments in the DeFi ecosystem. The DeFi insurance industry is certainly in its infancy, but startups like InsureAce and Nexus Insurance are already providing high-quality services to clients. For now, these services are limited to DeFi applications, such as securing Ethereum wallets against hacks and providing proof of reserve insurance for stablecoin holders. 

However, these companies, as well as other DeFi insurance startups, plan to eventually extend their insurance services to “real-life” applications, such as automotive, life, and health insurance. 

Decentralized insurance may be able to provide many of the benefits of traditional health insurance, while greatly reducing costs. DeFi insurance protocols eliminate the middleman by providing insurance directly to consumers. In one popular DeFi insurance model currently used by Nexus Insurance, investors buy tokens using cryptocurrency which are held in a risk-sharing pool. The funds gathered via token purchases in turn fund the insurance policies that are purchased by customers. In addition to holding tokens which may increase in value, token holders are also given a percentage yield based on the overall profitability of the protocol. 

A modified actuarial model is used to ensure that there is enough money/total value locked (TVL) in the insurance pool to fund the insurance policies that are issued, while smart contracts verify the circumstances in which an insurance claim is to be paid out, as well as the specific size of the payout. 

In cases where there is confusion regarding the claim, Nexus uses Kleros, a decentralized dispute resolution service, to arbitrate claims. Nexus believes that it can cut insurance costs by as much as 18% over a wide variety of industries by eliminating traditional sales and management teams and other administrative overhead costs. 

Currently, Nexus holds its funds in a DAO (decentralized autonomous organization), which demonstrates its commitment to full decentralization. This DAO model may or may not be effective when expanded to health insurance, as the lack of real-life customer support and claim arbitration may leave customers unsatisfied or unable to get the full payouts they deserve. However, it is easy to envision that partially decentralized insurance models may be able to bring down costs while still adding a “human touch” to the insurance process, leaving customers better-off financially while still receiving quality healthcare. 

Blockchain Data Could Help Traditional Insurance Companies and Healthcare Providers Reduce Costs 

Major health insurance companies, which are notoriously competitive, have actually begun to work together on blockchain technology in order to create better healthcare data systems, potentially improving outcomes for all stakeholders. 

In 2017, major health insurance providers Optum and Humana began working together on a project to create a shared blockchain database for medical records. Soon after, UnitedHealthcare, MultiPlan, and Quest Diagnostics joined the initiative. They hope to expand the program nationally, with the intention of reducing friction, addressing inaccurate records, and preventing cyberattacks. 

Right now, healthcare data is extremely siloed, meaning that hospitals, doctors’ offices, and insurance companies typically have to make slow, manual requests to get necessary patient data. This means that, at the current time, creating a fully holistic, secure, historical, and transportable health record of a patient is nearly impossible.

However, blockchain could solve that problem, and it could greatly improve healthcare outcomes for individual patients while reducing cost and friction for providers and insurance companies. 

If a change is made to the records in a blockchain database, all parties involved will see the change, which would lead to information such as doctor’s office and patient addresses being updated across the entire blockchain database. A blockchain database can also be used to easily verify the credentials of healthcare providers that need to be added to an insurance system or to a hospital system for out-patient care. 

In Addition to Cutting Costs, Blockchain Data Can Improve Patient Outcomes 

In the case of patient care, an encrypted record of a patient could show that they have taken out multiple opioid prescriptions at different doctor’s offices. This data could prevent doctors from issuing additional prescriptions and could instead assist the patient in getting the help they need to overcome addiction. 

Image Credit: Yerson Retamal/Pixabay

In another example, a cardiologist could have access to a patient’s dental or psychiatric medical records in order to judge their risk for a heart attack or stroke in the near future. Instead of performing guesswork, the cardiologist could put together a more comprehensive treatment plan to assist them in avoiding a stroke or a serious cardiac event. This type of preventative medicine could greatly decrease medical costs by helping to avoid healthcare emergencies in the first place. 

In theory, blockchain databases could also allow individual patients to gain access to their entire lifetime of medical records by using their own private key. Overall, this would give patients more information, which they may use in order to help them make better lifestyle choices. It also would give patients more confidence to move between medical providers to get the best care possible. 

Of course, the usage of private keys can be problematic, as they are easy to lose. This may require some type of systematic backup mechanism for patients, though the usage of such a mechanism may be difficult to achieve and could compromise the security of the system as a whole.

Blockchain Healthcare Databases Could Help Reduce Preventable Medical Errors

In addition to providing doctors and other healthcare providers with the information, they need to engage in proactive preventative medicine, blockchain could help prevent medical errors. According to a study conducted by Johns Hopkins, more than 250,000 deaths occur in the U.S. each year due to preventable medical errors. This means that preventable medical errors are now the third leading cause of death in the United States and account for 10% of all deaths in the U.S. each year. 

While many deadly medical errors are the result of negligence, doctor exhaustion, or other unpreventable factors, a sizable percentage of these errors can likely be attributed to faulty or incomplete medical records. This is a particular concern for patients undergoing major surgeries, which often require anesthesia. Common forms of anesthesia can be deadly for patients taking certain medications or who suffer from certain medical conditions. 

While no one can prevent all medical errors, blockchain healthcare databases could make it much less likely that doctors are operating on inaccurate or limited data. This could prevent a significant amount of deaths attributed to medical errors across the U.S. and abroad.

Blockchain Data May Also Help Government Organizations and Non-Profits Better Understand Patients’ Healthcare Needs 

Much like private healthcare records, public healthcare data is also siloed and suffers from security, inaccuracies, and redundancy issues. Having better medical and healthcare records for the population at large could help government programs, such as Medicare and Medicaid provide better services to their patients while being able to better understand the impact of health issues on at-risk populations. 

Better medical records can also help government institutions, such as the National Institutes of Health (NIH), and the Centers for Disease Control and Prevention (CDC) make better recommendations to both government bodies and the general public. Better healthcare data may be particularly effective in improving outcomes for serious public health crises, such as the COVID-19 pandemic. 

Government organizations may create their own private, permissioned blockchains unique to their organization, but they may also choose to create larger blockchain database infrastructures that facilitate communication between multiple different government organizations to facilitate data sharing and cross-organizational cooperation. In addition, insurance companies and government organizations may wish to collaborate on yet larger blockchain databases to facilitate public-private communication. 

The creation of massive blockchain databases could revolutionize healthcare as we know it, as insurance programs and government healthcare programs could be tailored to specific patient avatars and specific regions to combat health issues prevalent in specific populations or regions. This could allow more efficient allocation of healthcare resources and better cost calculations for both insurance companies and government insurance and insurance tax-credit programs. 

Blockchain Health Data Stripped of Personal Information Could Provide Value to Researchers, Institutions 

It is potentially feasible that additional blockchain healthcare databases, stripped of private patient information, could be accessible to the general public. This could provide an incredible amount of research data for research scientists, pharmaceutical companies, and other groups engaging in cutting-edge medical research. This type of “stripped data” could be available as a traditional database, or perhaps on its own, separate public blockchain, in which researchers could add research findings based on the medical data provided by the database. 

To Be Effective, Blockchain Healthcare Databases Must Be Secure and Accurate

However, having large inter-organizational blockchain databases, whether composed of private institutions, public institutions, or both, does provide additional risks due to the massive amount of private information involved. Such databases will need to utilize cutting-edge blockchain technology, and will need to have: 

  • A wide amount of well-distributed nodes
  • An effective consensus mechanism
  • Strong infrastructure to prevent 51% attacks
  • Incentives to prevent fraud or mismanagement 

The incentivization aspect is one often overlooked element of private blockchains, particularly in the case of blockchains utilized for storing and sharing healthcare data.   While it’s unlikely that insurance companies or government organizations will stake tokens that could be slashed if they provide inaccurate or incomplete information, some type of incentivization mechanism could still be employed. 

For instance, if a healthcare provider or insurance company consistently provides incomplete or inaccurate data, or attempts to manipulate the blockchain, its nodes could be locked out for a certain period of time, which could cause a serious impact on the organization which they would be strongly incentivized to avoid. 

Blockchain Oracles Will Be Required to Provide Outside Data to Blockchains 

Blockchains are inherently closed systems, which is why most blockchain applications and protocols need a third-party information provider, known as an oracle, to populate the blockchain’s smart contracts with real-world data. Though medical providers, insurance companies, and other parties may directly enter patient data into a blockchain database, outside information will likely be needed to gain a full picture of various relevant datasets. 

For instance, an oracle could provide a blockchain with real-time weather data, which could be correlated with viral infection data to determine the influence of weather on disease. Oracles could also pull tangential information from internet sources, such as doctor, insurance, or hospital reviews, or the amount of Google web searches for various medical conditions in various locations. 

This would allow relevant parties to get ‘three-dimensional’ healthcare data at the population level, answer key questions about public health, and help create the next generation of healthcare solutions. 

SupraOracles is Positioned to Provide Powerful Blockchain Oracles for the Next Generation of Healthcare Data Systems

SupraOracles can allow both private, permissioned blockchains and public, unpermissioned blockchains to allow smart contracts to securely share and authenticate healthcare data, including patient records, medication supply chain information, and essential medical statistics. 

By using secure data queries and powerful, decentralized consensus mechanisms, SupraOracles can help ensure that medical records stay private while allowing them to be shared between the medical providers, insurance companies, government institutions, and patients that need them.


  1. (2019) NHE Fact Centers for Medicare and Medicaid Services. 
  2. Healthcare Data Breach StatisticsHIPPA Journal. 
  3. (2021) Cost of a Data Breach Report 2021IBM. 
  4. (February 2018) Blockchain and healthcare: the Estonian experiencee-Estonia. 
  5. Sharma, Udit (October 2017) Blockchain in healthcare: Patient benefits and moreIBM. 
  6. Blackstone, A., Fuhr, J., Posiask, S. (June 2014) The Health and Economic Effects of Counterfeit DrugsAmerican Health and Drug Benefits. 
  7. InsurceAce Protocol: Insure Your DeFi JourneyInsurAce. 
  8. Nexus Mutual WhitepaperNexus Mutual.  
  9. Livingston, Shelby (February 2019) Will blockchain save the healthcare system? Modern Healthcare. 

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