Tackling Health Care with Health Nexus by Simply Vital Health

Types of Blockchains

For this week,  in preparation for the ICO we need to cover some things that might not be completely obvious to most some readers.  There are four major types of blockchains –- Public, Permissioned, Private and Consortium.  The differences of these have mostly to do with who can participate in the network – and to what level they can participate.  On a blockchain, one of the most important “Actors” so to speak, is a member that is running what is known as a “full node”  This usually means a computer that is running software that downloads a full copy of the blockchain, validates blocks of transactions. This function is called “mining” in a proof of work method of consensus – where a complex mathematical problem is attacked and solved, and “forging” in a proof of stake method of consensus, where a block is awarded based on an algorithm that takes into account the amount of “stake” a node has in the token in question.

Public Blockchain

In a public blockchain, like Bitcoin, anyone can run a node and anyone can validate blocks. There is no “approval” mechanism and there is no “governance.” Same thing with Ethereum.  There is also a degree of anonymity in a public blockchain.  The nodes are not necessarily known and certainly not “validated” actors.

Permissioned Blockchain

In a “Permissioned” blockchain, those that are allowed to operate a node, and in some cases even those that are the client users of the network must have permission to do so.  What they can do is largely decided on certain levels of permissions, and there is always some type of “validation” that must occur so that the organization or person running the node can be held accountable if necessary. There is also sometimes a level of commitment expected in a permissioned blockchain, with nodes that honor their commitment rewarded and those that do not punished in some way. In this type of blockchain, almost anyone can join and validate transactions, but they do so with permission and depending on what function they wish to provide, they undergo an appropriate validation.

Private Blockchain

Then, there are Private blockchains. Private blockchains are operated and controlled by a single entity. You see this from organizations like banks that would love to use some of the aspects of blockchain technology but can’t accept the more public aspects, and so they wish to exert complete control over any aspect. Needless to say, this type of model has a healthy number of skeptics in the cryptocurrency and blockchain communities, for what you might consider political reasons involving decentralization and the concentration of power.

Consortium Blockchain

Finally, there is another type – the “Consortium Blockchain.” This is more of a type of Permissioned blockchain – but it’s a bit of a hybrid.  In this model, there are a group of validated, trusted nodes that are allowed to operate the network – but it’s usually a limited group, and it’s not a single, private organization. The organizations within the consortium must work together, and there needs to be rules for who can join and under what circumstances.

Very often, the type of blockchain that is chosen for a project depends on things like trust, security, and outside regulatory forces. Of these four types, possibly the most complicate is the Consortium blockchain, because it would require a hierarchy to manage, as well as a sophisticated mechanism to ensure that all actors are treated fairly, and would discourage or perhaps even disallow factionism. Using this structure well, however, could go along way to solving some of the more trickier problems in certain vertical markets – as we will see in this week’s ICO.

Health Nexus by Simply Vital Health

This is one of those ambitious ICO projects that intends to take on a large, difficult and complex problem – in this case it’s health care. Now, it should be understood that healthcare was one of the first things that early champions of blockchain techhology though of when they began to realize that block chain technology could be used for more than digital currency transactions. In fact, there is a provisional patent filed with the US Patent Office in May of 2014 that outlines the concept of a blockchain consisting of health care records as a chronicle of a person’s health care through their lives, validated through a proof-of-work mechanism based on the same consensus algorithm used by bitcoin. Needless to say, I’m greatly simplifying this patent, but the fact remains that this has been on the minds of blockchain architects for a few years. However, it’s only recently that we see actual blockchain applications appearing in health care – and it’s still very early.

Simply Vital Health happens to be one of those companies that has introduced a working application for health care based on blockchain technology which is functional now. It’s named ConnectingCare and it’s a modest introduction into the application of blockchain technology in health care.  Health Nexus has recently announced a token sale to help fund a much, much larger solution to various issues that face health care today.  Namely …

  • Pressure on traditional revenue streams in the healthcare industry from a shift from “fee-based” services to “Value Based Care”
  • Difficulty in provided Value-Based Care due to data that is siloed and inaccessible to providers, as well as severe challenges in providing timely and accurate communication between providers.
  • Monopolization of health care data, where a few data aggregators hold massive amounts of data and sell it at exorbitant rates to whomever will pay them.
  • Inefficient insurance payments and reimbursements, such as Bundled Payments.

Healthcare Regulations and Blockchain

The big problem with applying blockchain technology with healthcare, however, is the sensitive nature of the data, as well as the regulatory environment about that data – such as HIPAA and in placed like California even more stringent laws such as the CMIA, which overrides even some of HIPAA provisions to provide more privacy and penalties for breach.

As a result of this, applying blockchain technology to health care requires a bit more thought to the underlying architecture and approach of using a distributed system to store data and to track and allow transactions.

As we will see when we examine the whitepaper and network this requires a slightly more complex approach in the application of the blockchain.

We will be using our standard 14-point analysis methodology for this post. These points consist of:

  1. The Concept
  2. The Company
  3. The Team
  4. The WhitePaper
  5. The Road Map
  6. The Token
  7. The Network and Technology
  8. The Presale
  9. Offering Details
    1. Platform
    2. Structure of the Offering
    3. Exchanges Supported
  10. SEC Compliance
  11. Business Viability
  12. Community Response and Anticipation
  13. Possible issues and little bit of devil’s advocacy
  14. Final Takeaway

Health Nexus Concept

I’m not sure if you could come up with a more challenging use case for the application of the block chain than Health Care. It’s maybe one of the most broken systems in place  – at least in the United States, certainly, and I would argue that there is probably no perfect model anywhere. Wherever you go in the world, the problems that Health Nexus has identified are the same – a lack of provider coordination, high fees for data – or in developing nations no data – and inefficient payments mechanisms.  Our family lived in Mexico for a year and even in that case we witnessed firsthand the complexity of obtaining health care in a semi-socialized country like Mexico, where citizens often took matters into their own hands in order to work within an inefficient system.

The concepts, therefore, are quite valid, and the idea of using the blockchain is also valid.  This is true for the access to data – if data that is collected about a patient is added to an immutable ledger, and signed by the appropriate actor, then the actor that can unlock that data for the use of a requestor would be rewarded directly, and without the involvement of a data provider – this is only possible on a distributed system that is accessible through smart contracts and private keys. Also true for what are known as “Shared Savings Programs” as created by the Centers for Medicate and Medicaid Services. What has developed because of these programs is a somewhat complicated system of “Accountable Care Organizations”, which are groups of providers – doctors, hospitals, nurses who work together to demonstrate that money was saved during the care of a given patient.  If they can demonstrate that, the ACO’s can receive of share of the savings.  However, it’s a bit complicated in the way that it’s determined, with various payments systems and a number of criteria that determine the details.  Health Nexus maintains that this system can be made much more efficient with the use of Smart Contracts that run on a blockchain.  These kinds of solutions are really what the founders of Ehtereum had in mind when they invented the concept of a Smart Contract.

The Company and the Team

In many cases, there is no real company to examine with these ICO’s but this is a rare exception. Simply Vital Health is an established company with products, services, and customers.  A year ago the company won best in class at the Distributed:Health hackathon for building and demonstrating a blockchain solution in 24 hours. They have released a product named ConnectingCare, running on a blockchain, and they have customers.

The team to support the token sale is a bit larger than the team listed on the main site. The core team for the token sale have impressive backgrounds, and they show a good deal of passion that seems borne of experience in the health care industry. The CEO spent two years working at Yale New Haven Health and was a hospital administrator. The CTO spent two years at CapitalOne as a lead developer for blockchain applications – in this very young industry that’s a pretty decent credential. About six months ago he pointed out in an article in Medium that the use of blockchain technology and the distributed nature thereof along with encryption could mitigate the results of attacks like WannaCry.  The director of growth and operations came from the Yale School of Management and worked for Goldman Sachs.  The advisory team has a number of people well-versed in blockchain technologies.

Whitepaper

There are a number of reasons why this whitepaper stands out to me – one is that it was clearly written by people who had gone through development cycles.  If there’s one thing I’ve learned in the last ten years in managing the construction of software applications, it’s that nothing in the beginning is truly cast in stone.  Especially in a nascent technology like this one – the blockchain. The approach that I found in the whitepaper that I liked was that the authors discussed a range of possibilities to solve any given problem, and admitted that several factors could sway them one way or another – and that ultimately it would be decided as the project unfolds.  The choices they provided all made sense, and the reasons they gave made sense to me.

Governance

One of the most important aspects of the whitepaper is the type of blockchain to be employed, and the concept of “Governance.”

As we mentioned before, in some industries, a fully-public blockchain like Ethereum or Bitcoin just isn’t realistic. This is especially true, in our opinion, with Health Care, and this is for regulatory reasons.  The privacy laws would make it very difficult to store data, even if it was encrypted, on trustless and un-validated nodes.  It’s not only for security, either – it’s for availability. When you are talking about health care data you are sometimes talking about life of death – so you can’t have a system like bitcoin where any node can drop off the radar for no particular reason and not be punished by more than opportunity loss. For these reasons, the architecture Simply Vital Health has settled upon is a Permissioned blockchain run by a Consortium.  The Conosrtium of “executives” as they are called in the whitepaper will be initially selected as a finite number and based on their level of commitment and ability to serve the network in the beginning. This will be a focused consortium that has the best interests of the network in mind. New members may be added through a process that involved invitation and voting. New member would apply to existing members, a proposal would be presented to the group, the candidate would be “validated” and if validation passed, voting would take place, and then if the member was admitted, they would earn the right to participate in some fashion.  Examples would include validating blocks for transactions fees, or storing off-block data as so-called “GateKeepers”.  Before a node can host data, they must be validated in terms of compliance with regulations such as HIPAA.

It should be understood that this is not a private blockchain, in the sense that first, there is a consortium of executives, and secondly, it’s a public blockchain in that the network will be remain open to the public to use – it’s the nodes that are running the network and validating the data that are permissioned and hierarchical.

Patient Data

One item that stood in out in the whitepaper for me was the potential to allow patients themselves to have a say and possibly even profit from the data that is collected ABOUT them.  This is a fascinating idea, and there has been plenty of controversy about this – for example the various lawsuits that issues that have been raised regarding the use of the Hela cell in medical research, and what rights patients have to data in general.  If this component is implemented it should make for some interesting outcomes.

The Token and the Technology

The token is HLTH known as Health Cash – and that token will be used for transactions such as Bundled Payments. There will be another type of token for the Executive ID’s – this was actually clarified for me in a chat with the CEO, which will provide the authority for those actors to perform certain functions and take on certain responsibilities tied to governance. Data will be stored on the blockchain and off the blockchain. For on-chain data storage a Distributed Hash Table will be used. This is a structure which allows for quick lookups to data using a hash as a key. This is a highly efficient structure – in fact it’s used by BitTorrent. It was selected by the team also because using this you can store identity, which will allow specific sets of data to be tied to the requestor – a patient, for example. Also, DHT allows identity, so that miners can be identified and validated periodically to ensure compliance with data storage regulations.

Health Care Marketplace

A Smart Contact will be the engine for a data marketplace, which will allow permissioned access to off-chain data storage.  This is how it might be possible for patients, for instance, to obtain some compensation for data. In fact, the general process for storing and accessing data is very well thought out and presented in detail.  There will be a marketplace with price discovery and negotiated data storage rates as well as criteria such as distance figured into the calculations using a Kademlia application of a Distributed Hash Table. The Kademlia type of Distributed Has Table takes into considering routing distance between nodes.  It’s more efficient, because in Kademlia the nodes are aware of each other – this reminds me a little bit of the way certain Internet routing protocols work.

The Presale

The Presale –The presale starts on September 26th.  There is little information about it, and the team has said that the price in ETH will be set shortly before the pre-sale. You can sign up for the presale by visiting the token sale website and clicking the link “Participate in the Presale.” You will then get an email as an introduction. I was told on Telegram that the presale should be open to US investors.

Token Sale Specifics

  • The ICO open on October 31st, 2017. It ends November 30th.
  • There will be an announcement as to whether US citizens will be allowed to participate
  • The hard cap of the sale is $40,000,000 USD.
  • The ICO is being engineered by Token Market. This in and of itself is actually a positive because that company is known for vetting ICO’s carefully before agreeing to work with them. They have a decent track record with helping launch such companies as Storj, Monaco and Civic.

SEC Compliance

With respect to the SEC and the infamous Howey Test, which  refers to a supreme court case which decided whether an investment could be considered a security or not. This has profound implications for the ICO industry, particularly those open to US investors, in that if an offering could be considered a security by the SEC, then the company issuing the offering would need to register it with the SEC as such. This is a long-term and expensive process which ICO’s generally want to avoid at all costs. While it does not appear that the whitepaper is aggressively promoting a stance designed to pass the Howey test explicitly, like we have seen with other ICO’s, it appears from the whitepaper that the use of the token is entirely utilitarian. There is a bullet point around the token that mentions that it could be used as a way to fund projects, but there is no indication that the token would be used as a store of value in a way that would fail the Howey test – at least in our humble opinion.

Business Viability

 

In terns of viability we could see the potential for a business case with respect to the efficiency of payments of Savings Programs to various stakeholders, as well as data storage costs, especially if a marketplace really does develop where data could be offered as an alternative to the large monopolistic organizations like Lexis/Nexis.

The viability of the business model will largely be dependent, in our opinion, on the initial body of governors. If Health Nexus can manage to attract a wide-ranging set of governing executive stakeholders as the initial set of selected board of governors, then the project has a very high chance of success in our opinion, because of the weight and commitment that these kinds of actors will bring as well as the method of bringing on new members outlined in the whitepaper would allow should foster a strong community.

Reaction from the Blockchain Community

The reaction from the community has been universally positive, but I should mention that there is not a large amount of reaction one way or another.  I could find no sub-reddit, and the bitcointalk announcement has very little conversation and reaction – although I will say that almost all of it has been positive and it doesn’t appear to be newbie shill accounts.  People are responding to the whitepaper positively.  My questions to the team on Telegram and Discord were answered quickly by the CEO and backed up and clarified by the CTO within minutes. It’s a bit early, so there isn’t much code on github, but the CTO explained that they are cleaning up the code and testing and they would be uploading some soon.

Gotchas

The gotchas and devils advocacy here is not really around the ideas, the project, or the whitepaper and the underlying technology – it’s mainly around the health care system in general. The sheer amount of regulation around the health care industry and data storage and privacy is bound to lead to complexity which cannot be solved quickly and easily no matter what the technology.

Takeaway

Our final takeaway for this ICO is that while the vision is large, the team seems to have a phased approach, and the right kind of blockchain structure that will be amendable to the healthcare industry, and the fact that they have one of the very few operational blockchain applications in health care that is actually operational, we believe that there is a good chance that this project will gain traction.

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