Blockchain Transforming HealthcareJanuary 16, 2019

Ground to be covered

▪ Introduction -who we are

▪Why the hype

▪What blockchain is and how it’s being used

▪Barriers to use

▪Requirements for adoption and growth

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PNC Healthcare

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1 Full year 2017

Who we are, what we do and why clients choose us

PNC helps providers and payers

automate data and dollars

▪ 25+ year continuous commitment to providing

solutions to the healthcare industry

▪ Support more than 2,500 Healthcare clients

▪ Direct connections with more than 3,300 payers

Why?

PNC

The promise of Blockchain?

A) Total Hype

B) Somewhat of a Hype

C) Too Soon to Tell

D) Getting Closer to Reality

E) Reality

RESULTS –

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Is blockchain technology hype or reality?

Attendee results

17%

41%

32%

9%

2%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Reality

Getting Closer to Reality

Too Soon to Tell

Somewhat of a Hype

Total Hype

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Is Blockchain Technology Hype or Reality?

Assoc. of Financial Professionals 2018 Nat’l Conference; PNC Healthcare Client Advisory Board 12/2018

2018 Deloitte survey of global blockchain experts

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Survey cconducted March –April 2018’

Agreement that blockchain will disrupt their organization’s industry

MBE

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0% 5% 10% 15% 20% 25%

Source: Stanford University, 2018

2018 and 2019 — Defining Years for BlockchainHealthcare Has Attracted More Blockchain Initiatives Than Any Other Sector

Percentage of Catalogued Initiatives

Health

Financial Inclusion

Energy, Climate and Environment

Philanthropy, Aid and Donors

Democracy and Governance

Agriculture

Land Rights

Source: IBM Institute for Business Value Analysis

The first health insurancecompany to master blockchain

will 'rule,' expert says

Blockchain will eventually connect payers not only to providers, but to pharmacists in an end-to-end transaction from first encounter to post-op.

Susan Morse, Sr. Editor, December 10, 2018

Cutting edge work using blockchain is underway

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Providers and payers are evaluating it to streamline and simplify

Blockchain use case:

Healthcare supply chainTamper-proof distributed ledger tech helps with efficiency, security, integrity and visibility of pharmacy and other supply chain data. And because it doesn't necessarily involve PHI, it may be a logical place for hospitals to start exploring.

By Mike Miliard December 13, 2018

Transformative power of blockchain

‘As fast as you can think it, we could know it…..

food traceability at the speed of thought.’

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Frank Yiannas, Vice President of Food Safety for Walmart

-

Why healthcare is ripe for disruption The healthcare ecosystem needs a redesign

Opacity in the benefit/claim payment requirements results in inefficient

Reconcilement/audit requirements and distrust

Consumer are demanding a

more ‘retail- like experience

as their portion of the cost of care continue to rise

National healthcare cost growth is unsustainable;

as a response reimbursement continues

to be reduced

Administrative and process inefficiencies result in significant costs to both insurers and providers

$375BAnnually

$5.7Tby 2026

$16BAnnually

11%in 2017

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https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.htm

https://www.surgicalproductsmag.com/news/2015/01/375b-wasted-billing-and-health-insurance-related-paperwork-annually

https://www.fiercehealthcare.com/finance/patient-out-pocket-costs-increased-11-2017-analysis-finds

Is your organization exploring Blockchain?

A) Yes

B) Exploring Opportunities for Application

C) Not at This Time

D) Not Sure

RESULTS

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Do you have a project that involves blockchain technology within your Organization?

Majority are not actively experimenting

Have a Project That Involves Blockchain Technology Within Your Organization?

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Assoc. of Financial Professionals 2018 Nat’l Conference; PNC Healthcare Client Advisory Board 12/2018

4%

68%

11%

17%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Not Sure

Not at This Time

Exploring Opportunities for Application

Yes

Blockchain technology is NOT cryptocurrency

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Blockchain is an electronic distributed ledger technology (DLT)

Blockchain is a distributed

ledger application

Bitcoin, or cryptocurrency, is a

digital asset

Every computer has an identical record of activity

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Shared design enables near real-time data between parties

Traditional Systems:

▪ Transactions are recorded in multiple ledgers.

▪ No record of what happens next, what came before,

or the role of others in the transaction.

▪ Prone to human error and vulnerable to tampering.

Blockchain Solutions:

▪ Can be shared and updated in near real-time

across participants.

▪ Every transaction becomes part of the permanent

record.

▪ Relevant information can be shared with others

based on their roles and privileges.

Distributed Network

Leverages a distributed network of computers sharing and “hosting” the exact history of activity, transaction data

Security/Privacy

Enhances security and privacy through encryption, cryptography, permissioned access

Single Source of Truth

Provides a single, consistent and shared view of the state of a business process

Immutable Record

No one unilaterally has the power to edit transactions

Provenance

Establishes provenance, or a record of an entire transaction, workflow

‘Smart’ Contracts

Automates transaction execution and integrate workflows

Blockchain properties enable transformative redesign

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Traceability, enhanced security, immutable record of activity and/or assets

Blockchain enables real-time, transparent, secure data fluidity and workflows across stakeholders.

15https://www.chicagofed.org/publications/economic-perspectives/2017/7

“Smart Contracts” unlock the full power of Blockchain

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Agreement terms are codified enabling auto-execution when validated

A Smart Contract is a computerized

transaction protocol that executes and

enforces the terms of an agreement.

Like traditional contracts, Smart Contracts

define the operating rules and penalties

between parties around an agreement.

Unlike traditional contracts, Smart

Contracts also automatically enforce

those obligations.

What are Smart

Contracts?What is their role?

Process, workflow and transactions automation.

Allow parties to interact directly, eliminating the

need for a “middle man” or additional

communication to validate that activities are being

carried out according to defined terms.

What is their value

proposition?

Auto-validation and term execution streamlines work processes

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Shared environment and consensus builds “trust” environment

Blockchain and smart contracts are being actively deployed in other industries. The future is now.

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International cross-border payments

Trade and shipping supply chain

Food traceability farm to table

Property & Casualty insurance consortium

Securities trading and settlement platform for the

Australian Securities Exchange

Blockchain may be targeted to a number of healthcare’s ills

A) Reducing Costs and Operational Inefficiencies

B) Potential for New Revenue Streams

C) Meeting Regulatory Compliance Obligations

D) Potential Competitive Advantage

E) Other

RESULTS

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Which factors do you think will drive blockchain adoption?

Cost reduction is in the cross hairs for initial use

Which Factors Do You Think Will Drive Blockchain Adoption?

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5%

10%

24%

16%

46%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Other

Potential Competitive Advantage

Meeting Regulatory Compliance Obligations

Potential for New Revenue Streams

Reducing Costs and Operational Inefficiencies

Assoc. of Financial Professionals 2018 Nat’l Conference; PNC Healthcare Client Advisory Board 12/2018

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Blockchain technology will revolutionize the business of healthcare

Mutualized infrastructure

reduces operational costs

and reliance on legacy

systems

An immutable, cross-

organizational single

source of truth radically

improves stakeholder

interactions

Smart Contracts enable

straight-through healthcare

transaction processing

(STP)

Real-time sharing of

information leveraging

permissioned access to

enhance security

A modern, highly secure

and scalable platform

increases operational

certainty

Smart contracts to streamline transactions in healthcare

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Opportunity for real-time authority application and multi-party transparency

- Current State -

Benefit, Claim and Payment Transactions

Healthcare Provider

Bank

Insurance CompanyClearinghouse

Bene Check Bene Check

Bene Response

Claim Claim

RemitRemit

Claim

Payments

Claim

Payments

Bene Response

A shared network powered by smart contracts could create transparency, reduce costs, and improve experience for all stakeholders.

❖ Providers, Insurers, Banks and other stakeholders

were on a distributed, shared, and permissioned

network

❖ As an ‘event’ (transaction) occurs information is

committed to the ledger

❖ Visibility and transparency are achieved without

sacrificing security

❖ Smart contracts are utilized to model policies and

contracts between stakeholders enabling straight-

through processing

❖ Administrative waste is eliminated through a single

source of truth and machine executable smart

contracts

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What If ???

Barriers to use need to be identified and resolved

A) Regulatory

B) Performance/Scalability

C) Maturity of Technology

D) Interoperability

E) No Clear Business Case

F) Other

RESULTS

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What is the Biggest Barrier to Adopting Blockchain Technology?

Regulated industries concerned with ‘maturity’ and ROI

What is the Biggest Barrier to Adopting Blockchain Technology?

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Cross industry global point to regulation, legacy systems, security & ROI

4%

31%

4%

45%

5%

12%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Other

No Clear Business Case

Interoperability

Maturity of Technology

Performance/Scalability

Regulatory

Platforms are becoming production hardened

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Scaling to industry volumes, complexity and security is underway

• Production grade solutions being

deployed in other industries

• Platforms continue to develop & evolve

• Smart contract languages becoming

increasingly sophisticated

• Permissioned vs Public networks

• On / Off chain data

• Platform design trade-offs

HIPAA privacy and security requirements remain

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Design and implementation decisions will determine compliance

As with any technology, platform design, implementation and participation decisions will

likely determine if and how Privacy and Security standards are met

On-chain vs Off-chain data

Permissioned vs Public

Deployment model

Concern with selecting ‘the wrong’ platform?

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Source: https://www.accenture.com/us-en/insights/blockchain/integration-ecosystems

Interoperability between blockchain platforms is already being worked on

Accenture Proposed Interoperability Model

In defined use cases across industries blockchain is proving its value

A) Actively Exploring Now

B) Six Months

C) One Year

D) Two Years

E) Too Early to Tell

RESULTS

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When Will Your Organization be Ready to Examine the Value and Eventually Use Blockchain Technology?

Opinions are somewhat split – ‘too early’ and ‘using/within the year’

When do you Think Your Organization Will be Ready To Examine the Value and Eventually Use Blockchain Technology?

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Assoc. of Financial Professionals 2018 Nat’l Conference; PNC Healthcare Client Advisory Board 12/2018

46%

12%

20%

4%

18%

0% 10% 20% 30% 40% 50%

Too Early to Tell

Two Years

One Year

Six Months

Actively Exploring Now

42% < 1 year

Blockchain requires a NETWORK, likely co-opetition

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https://www.chicagofed.org/publications/economic-perspectives/2017/7

Even the best designed blockchain solutions will fail without a network

Network Ecosystem

74% of global organizations are or will join consortia

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Modicum of consortia activity in US Healthcare – Synaptic Alliance

Blockchain’s promise to transform healthcare business

▪Great hype and promise but the market remains “split” likely because business transformation is required

▪Significant experimentation across industries with Healthcare having had the greatest amount of activity

▪ ‘COOPETITION’ and network formation is critical IF the healthcare industry is to reap the transformational promise of blockchain

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Where do we go from here?

Standard Disclosure

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