© 2019 RSM US LLP. All Rights Reserved. · Blockchain is a tool •Blockchain is an immutable distributed ledger •It works well in environments of distrust with one large player

© 2019 RSM US LLP. All Rights Reserved. © 2019 RSM US LLP. All Rights Reserved.

© 2019 RSM US LLP. All Rights Reserved.

HEALTH CARE BLOCKCHAIN PRIMER

February 26, 2020


Speakers

3

Rick Kes

Senior Health Care Analyst, Partner

Matt Wolf

Senior Health Care Analyst, Director


Learning objectives

• Understand the difference between blockchain and bitcoin and what

makes an ideal blockchain use case


Agenda

Section Minutes

What are blockchain and bitcoin? 15

The evolution of digital health care 15

Blockchain in health care 15

Distributed ledger technology use cases in health care 10


Show of hands

• Do you know what bitcoin is?

• Do you own a bitcoin or other cryptocurrency?


WHAT ARE BLOCKCHAIN AND BITCOIN?


Understanding Blockchain Through the Lens of Bitcoin

“Blockchain is to Bitcoin, what the internet is to email. A big electronic

system, on top of which you can build applications. Currency is just

one.”

— Sally Davies, FT


Let’s Try to Keep it Simple

If you can’t explain something in

simple terms, you don’t understand it


The Problem Solved by Bitcoin : How to Create Digital Cash (e-cash)

“The one thing that’s missing, that will soon be developed, is a reliable

e-cash; a method whereby on the Internet you can transfer funds from

A to B without A knowing B or B knowing A, the way in which I can take

a $20 bill and hand it over to you.”

Nobel Prize winning economist Milton Friedman on the potential of e-cash (1999)


What’s So Hard About Creating Digital Cash?

• Since the early 1980’s developers had been trying to find a way of

digitally replicating the cash transaction

⁻ Direct transaction

⁻ Frictionless

⁻ A to B transaction

• Difficult to avoid “double-spending”

⁻ E-mail, pictures, video or any code can be copied and resent

⁻ Double-spending destroys value of digital cash

• Solutions required an intermediary to verify and process transactions

⁻ By mid 2000’s the idea of e-cash was given up as effectively unsolvable


A New System of Digital Record Keeping

So if you want to create a digital cash

that solves the “double spending”

problem, and is able to be transacted

everywhere across the globe, you will

need the world’s largest system for

record keeping. This will need to be

the single, undisputable record to

truth, with all transactions fully

transparent and secure.


Bitcoin’s Brilliant Simplicity

• Nine pages

• Eight references

• Combination of known solutions

• 10 years later $100B+ in market value


Hashing: Creating Unique Digital Fingerprints

Hello! My name is Matt Wolf

8E7B7B1A9757C48C28AD0E2B3E6123250BCA99B93BEE9FE8E7B5749267214A0B

Hello! My name is Matthew Wolf

93610B71655A99729E772776F245A3291BC8D03D0D521C19DF2329024637C711


Proof of Work

• Requires showing that the

computer performed work, to

prove that they spent real-world

resources.

• Proof of work was essentially the

first concept akin to virtual

scarcity that didn’t rely on a

central party: it tied digital data

to the real-world, limited

resource of computing power.


The Bitcoin Architecture

• De-centralized peer-to-peer

architecture

• Pseudo-anonymity

• No double-spend

16


Bitcoin Launched the Blockchain Architecture

• Bitcoin addressed a long-standing challenge in digital value transfer⁻ Preventing “double-spending”

• Created a novel architecture⁻ Peer-to-peer

⁻ Cryptographic hashing and timestamping of records

⁻ Preventing fraudulent transactions through proof-of-work

• Created a new system of digital record keeping⁻ Distributed

⁻ Cryptographically secure

⁻ Common ledger (enabled triple entry bookkeeping)

• Broad range of consumer and enterprise use cases⁻ Explosion of ideas for applying this novel architecture


When does blockchain work well?

Blockchain needs

• Distrust

• One player with market share

or force

Examples


THE DIGITAL EVOLUTION OF HEALTH CARE


From medical care to health care


Three primary factors driving digital health

Consumer Preferences

CostDigital

Technology

21


Blockchain is critical to health care digital transformation

Image Credit: University of Utah


Why Is It Evolving?

23

Consumer Preferences

Technology

Data


Growth of Health Data Will Significantly Outpace Industry Revenue

24


Digital health funding

25

$1.1B

$1.5B

$2.1B

$4.1B

$4.7B $4.6B

$5.8B

$8.2B

$7.4B

93

142

196

291320

340363 376 374

0

200

400

600

800

1,000

0

1

2

3

4

5

6

7

8

9

10

2011 2012 2013 2014 2015 2016 2017 2018 2019

Total Venture Funding # of DealsSource: Rock Health Funding Database


BLOCKCHAIN IN HEALTH CARE

26


Health care blockchain investments

27

10

2

6

23

45

32

0

5

10

15

20

25

30

35

40

45

50

2013 2014 2015 2016 2017 2018 2019


Blockchain and Health Data Security

• Immutable

• Distributed ledger

• Data integrity saves lives

28


DISTRIBUTED LEDGER TECHNOLOGY USE CASES IN HEALTH CARE


Health care does not lack ambitious blockchain startups

Source: Center for Biomedical Blockchain Research


Focus on health care operations

31

0% 5% 10% 15% 20% 25% 30% 35%

Health care operations

Personal health records

Digital medicine or care delivery

Blockchain infrastructure

Unspecified

Pharmaceutical

Fitness or wellness

Research and clinical trials

Genomics

Source: Center for Biomedical Blockchain Research


Physician privileges and credentials

32


Pharmacy supply chain

33


Patient control of health data

34


RSM Digital Transformation Survey

• Needs to improve outcomes

• More than interoperability – even if you know everything about

your patient you need to have procedures and practices in place

to use that info

⁻ Similarly on supply chain / ops side – as you drive waste out of the

system need to have a plan for the savings and to re-allocate people to

new roles if/as necessary

35


SUMMARY

36


Blockchain is a tool

• Blockchain is an immutable distributed ledger

• It works well in environments of distrust with one large player

• It has some promising use cases in health care pursued by many

companies

• It will not solve all our problems


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© 2019 RSM US LLP. All Rights Reserved. · Blockchain is a tool •Blockchain is an immutable distributed ledger •It works well in environments of distrust with one large player