01: Micah Winkelspecht — How the Blockchain can fix healthcare
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AMLG: For our inaugural podcast I’m thrilled to welcome Micah Winkelspecht, a friend and founder and CEO of Gem based in sunny Los Angeles, otherwise known as Silicon Beach. Gem is applying blockchain technology to solve a horribly broken system — U.S. healthcare. Micah helped fan the flames of blockchain in Southern California as the organizer of the Los Angeles Bitcoin Meetup, which has grown super fast and now has thousands of members. He is one of those rare founders in that he himself is a hardcore engineer. Prior to getting pulled down the bitcoin rabbit hole, Micah spent over a decade as a software developer for major companies including AT&T. We’re lucky to have him on the show today. Let’s start at the beginning — tell us what got you interested in the bitcoin world?
MW: Sure. Well first of all hello Alice, good to talk to you. I think like most early bitcoiners I was initially fascinated by the incredible technology. My background is as an engineer. I’ve been building products and coding for about 14 years now. To be frank I got into this because I was pissed off in 2008 and 2009 about the financial crisis and I spent a lot of time reflecting on how it happened, and what was this thing that we call money. I did a lot of research on the history of money and tried to understand it as a concept. I was just fascinated by that topic. And around that time bitcoin was just released. So in about 2010 I started playing around with bitcoin and mining fractional bitcoins, then kind of forgot about it for a few years actually. At the time it was such a niche thing. I didn’t pay attention to it that much. Then a couple of years later it got brought back on my radar and I took a deeper look. I read through Satoshi’s whitepaper, which by the way is only eight pages, so if you haven’t read it go and read it. It takes less than an hour.
AMLG: For listeners who don’t know, Satoshi Nakamoto is the pseudonym of the elusive creator (or creators) of bitcoin, who published this succinct and brilliant whitepaper online in 2008.
MW: Right, the electronic cash white paper that he wrote, which was really the foundation of bitcoin and this technology. So I really fell in love with the technology. I didn’t know what was going to happen with bitcoin and blockchain. But I did know that it was going to be important in some way. So I said, I need to focus on this. I dropped everything I was doing and went down to Costa Rica for a month and locked myself into the jungle and just started writing code.
AMLG: So you hit the beach in Costa Rica with your laptop and boom the company was born?
MW: That’s actually the true origin story of our company. I went down there and started writing software. Initially I wrote security software for bitcoin. Then when I came back I joined an accelerator and raised money, and then we were off to the races. But ultimately I got into bitcoin because I fell in love with the technology.
AMLG: It’s amazing how just a few years ago it was this niche technical protocol with a fan club. I remember the first meetups that I went to in New York in 2013. There were three types of people who came: traders who saw opportunities to make money in a volatile market, and second was the ideologically-minded folks who were drawn to come discuss the political implications, and lastly engineers who were fascinated by the protocol and hacking around on their computers. And here we are, seven years later, without one hack or failure of the blockchain, and the JPMorgans and IBMs just cant get enough.
MW: Yeah the first bitcoin event I ever attended was in a park in downtown L.A. with about 15 people, a couple of silk road drug dealers exchanging bitcoins, sitting with their laptops in the middle of the park by a fountain. I got really involved in the community and we grew that group from 15 people to over a thousand people. I got to watch the evolution of this thing from straight up scratch. I’ve watched this technology go from something where there were a few crazy enthusiasts gabbing around a fountain to a technology that is now attracting the attention of the largest banks in the world, the central banks of the world, the largest healthcare institutions, the largest supply chain companies. It’s been incredible to be a part of that cycle.
AMLG: Let’s back up a bit. Not all of our listeners know exactly what bitcoin and the blockchain is, and people get confused about the currency bitcoin versus the technical rails, the protocol. I find it helpful to distinguish between bitcoin with a capital B, that’s the network, the decentralized global ledger, the protocol, versus the unit of that network which is written as bitcoin with a lowercase ‘b’ and that’s the currency whose price swings we all track and hope goes up. I’d love for you to define bitcoin and the blockchain as you find that people understand it best.
MW: Blockchains are interesting because if you ask a hundred people to define a blockchain you’ll get a hundred different answers. I would describe a blockchain as essentially a shared data infrastructure. We’ve constantly centered ourselves around this idea that we’re going to entrust our data with a central party or central counterparty that sits in the middle of everything that we do. When we talk about finances, we center our data with banks and they keep track of the global ledger of who owns what. They keep the transaction logs of where money goes around the world. And the same is true for pretty much every other industry. In the healthcare industry especially, there’s a huge amount of centralization of our health data. If you ask the average person when was the last time he had a full copy of his health record, they’ll look at you blankly. There really is no such thing as a global health record for a patient. Instead your health information is scattered about in many different provider systems around the country. Every doctor that you’ve visited has a piece of your record stored in their system. There’s nothing that ties all that together into a universal record that you can have access and control over. Blockchains are a mechanism that will allow us to create that for the very first time in healthcare.
AMLG: So there’s this exciting, brand new mechanism. But what specific features of blockchain make it suited to solving health data problems? Why is there such great potential for blockchain in healthcare?
MW: Blockchains as a more general term represent the underlying data structure that allows for that bitcoin currency to function and to work. We can take the same concepts from what made bitcoin work and apply it to other things. In healthcare, data is not in one company’s hands, it’s really kind of scattered across a global infrastructure of health companies. What’s missing is a link that ties that disparate data together to a single global patient identifier system. I wouldn’t advocate for putting a bunch of private health information on a blockchain and then replicating it and sharing it with everybody in the world — that’s certainly not what we’re trying to do. What we want to use the blockchain for is to create essentially a global registry.
AMLG: So the question that comes to mind is, why haven’t other database technologies worked? Things have been tried. Why will the blockchain work?
MW: It comes down to trust. There have been many attempts to create this idea of a global patient identifier system. Where they’ve fallen down is that they’ve always been highly centralized solutions where one company or one entity set out to manage identities, to be the sole provider for those identities. The problem is that they’ve never been able to garner the trust that’s required to get broad adoption across the entire market. Even Google has tried to build this and has failed. If Google can’t do it it’s really hard to imagine how any other sort of centralized institution could pull this off. What you want is not necessarily a centralized identity provider but rather a protocol that enables these many different identity providers to be able to build along the same protocol in a global, decentralized, distributed way where there is no central counterparty, where there’s no central controller of the identities and instead blockchains perform that function. What blockchains do better than anything else is create a global distributed network where there is no center counterparty that’s responsible for trust, but rather the network itself is managing the trust relationships using modern cryptography. That’s the real, true innovation of blockchain.
AMLG: So the trusted, decentralized nature is really the elegant solution under it all. And that’s how the public blockchain works, the idea of no central authority, and instead you’ve got these anonymous pools of miners who are securing the network and adding new data and records to the bottom of the chain. But there’s a debate that’s been raging recently about public versus private, and permissioned versus permissionless blockchains. Do you think this design we’ve discussed, of publicly secured blockchain with no central authority, is the best design for a healthcare use case?
MW: There’s a lot of confusion around this. Actually the word “private” throws people off. Oftentimes when we’re talking about public infrastructure versus private infrastructure, we’re not talking about one company managing the ledger, but rather, in the types of blockchains that we’re looking at for larger industry problems, typically what we’re looking for is a technology that allows for multiple companies to come together to collectively build infrastructure for their industry. There are several different consortiums that have been popping up, where multiple companies come together to build a shared ledger to be able to record transactions.
There’s tradeoffs to both approaches. And as a company we’re agnostic. At Gem, we’re agnostic to what kind of blockchains we build on. We’ll build on the right type of technology that makes sense for the problem. But there are tradeoffs. In a more public infrastructure like bitcoin, bitcoin was designed with very specific goals. The goal of bitcoin was to create a new type of network where anybody, without permission, could participate in the management of the global ledger, in verifying the transactions and making sure that they’re legit. Oh and by the way that needed to be able to do that in a completely anonymous way so that anybody could join the network, drop out of the network, and you’d never need to know who they were, and the network would still function.
When we’re talking about shifting this technology over to broader industries, typically the design goals are different. There’s no desire to create an anonymous participation network. Instead, the companies that are in charge of managing the ledger are well-known entities that are gathering together contractually to manage the shared infrastructure. In that case, you don’t need a lot of the complicated processes that bitcoin performs, like distributed mining. Instead you can use simpler consensus protocols that are faster and cheaper and don’t require massive computing power like bitcoin requires. There’s a huge debate about this, about what’s a “true” blockchain. To me they’re all true blockchains, it just depends on the use case.
AMLG: It almost seems like there’s religious wars in the bitcoin world now, with things like bitcoin versus ethereum and other new protocols cropping up, and all different theories about how it should work. What’s your take?
MW: My viewpoint on this has changed over the years. I got into this space, like many bitcoiners did, to totally disrupt the financial system. Bitcoin was this amazing technology that had that promise, that allowed anybody to participate in a new financial system. And I’m 100% for bitcoin. I own bitcoin, I invest in bitcoin. I believe in the public networks and I believe that they’re going to become massively powerful tools. But that doesn’t mean that that is the only tool that needs to be used to solve all problems. When we’re dealing with sensitive healthcare information and doing exchanges across a closed set of providers, the overhead that comes with using public blockchain and public infrastructure just does not make sense.
AMLG: We’ve seen these consortiums coming together on Wall Street to manage shared protocols. Do you think there’s a similar solution for healthcare, where the industry itself can help accelerate innovation, so existing players like Electronic Medical Record companies and providers would work with each other to help create and manage a shared blockchain. Do you think that would work?
MW: I think so. The public networks are also extremely efficient at finding bugs and security holes that can then be brought over into the more consortium-based blockchain world. With bitcoin there’s an eight or nine billion dollar bug bounty on the bitcoin network because of the value of that currency. If you can break bitcoin, then you can steal that money. So it is probably one of the most effective ways to create a highly secure system because you’re putting it out there in the open and letting anybody attack it. A lot of the learnings that we get from the public community also transfer over to the private community.
AMLG: So, spillover effects from the public to the private. I want to go back to the nitty gritty of how this healthcare on the blockchain thing would all work. What’s a practical example of use case? How would a doctor or patient interact with the blockchain, what’s the product flow?
MW: If you’re a patient who has been recently discharged from a hospital, you’re going in from a very centralized hospital point of view around your patient profile, where the hospital has full control over everything and you’re in their realm. Then when you get discharged you’re being pushed out into a much more informal decentralized care network of in-home nursing companies, potentially your spouse or other types of care providers and they may also start to give you additional resources, like IOT devices that are tracking and monitoring your health.
You’re basically collecting data points from many different sources that are all centered around your patient profile as you’re being discharged from a hospital. Now this is an example that we actually dealt with with Philips, which is why I’m speaking about this case. There’s really no system or infrastructure in place to manage all these multiple data points about the patient in a uniform way. Especially if there’s a problem and you go back to the hospital, there’s no way to take all that information that you’ve been collecting post discharge and bring that back into primary care hands. If the doctor was able to get information about your Fitbit tracking devices and your in-home nursing qualitative reports and your spouse’s mood indicators — these are all data points that could be used to create better and more informed healthcare decisions at the provider level.
Right now there’s no framework in place that allows that data to move seamlessly between providers. By building new infrastructure in that space you can actually create entirely new channels for that data to be shared, while maintaining extreme privacy and security around the data. We can actually create a whole network, a whole graph of your data, while you’re in home post discharge. Then if you have to go back to the hospital 30 days later because there a complication, we can retroactively make all that data available to your primary care physician or the doctor’s office, right in the hospital.
So what we’re really building is a way to do free-form, decentralized flow of patient information between a broad set of providers, completely outside of the entire electronic health records system that currently exists, and which, by the way, doesn’t work well for the industry.
AMLG: That’s super interesting. Especially because there are so many different people and interests touching on that data. Which is I guess why blockchain is really appropriate here, because one of its flexible features is that you can permission read and write access, right?
MW: Right. One of the features of blockchains is that you can create specific controls about how data can be modified or changed in the ledger. Blockchains allow for you to create specialized rules around every transaction that must be verified, and then can also be verified by the entire consensus network before any changes are made. That gives us a whole level of flexibility to be able to program whatever types of transactions we want into that system.
AMLG: And it also means that I, as the patient, can then access my passport of data and share it with whoever I want. So there’s a consumer empowerment , in owning your own data and allowing different doctors and hospitals to read and write to your universal health passport. But that also means there’s got to be some behavior change in the industry, right? We’re putting control into the hands of the patient?
MW: Right. The healthcare system for hundreds of years has been centered around a much more paternalistic view of care. You go to a provider and your provider dictates to you what your care is going to be like. You have little choice over the matter and little control over your own data. There’s no mechanism to actually transfer those records to you. But that’s changing. In the healthcare system there’s a huge push to move towards a more patient-centric approach that puts the patient at the center of the decision-making process, particularly in how they receive care, in terms of turning patients into consumers rather than recipients of healthcare. And also on the data side, putting more controls in the hands of the patient to choose how their data is used and shared. It’s a much broader change outside of blockchain that’s going on. But one of the problems is that this is a major goal for the healthcare industry, but until blockchains came around, there wasn’t a great mechanism to achieve it.
AMLG: It sounds like a great trend. The question that then comes to mind is the complexity around this data. Who’s going to own it and where will it be stored, on the blockchain or off the blockchain? Will I be the guardian of all my own health records and choose who to share it with and when? I don’t even know if I’m ready, as a consumer, for that kind of responsibility. What do you think?
MW: In some jurisdictions already you technically legally do own your own data. In practice, because those systems aren’t built to share that data with you, you don’t really get access to it. But it is technically your data. I think that we can actually build systems that put more of that control directly into your hands, where you can actually have a stake in your own data. It’s sort of a balancing act that we’ve found in bitcoin as well. It’s tough to take something that was completely centralized, say your money, which is stored in a bank, and flip that over and hand the money back to the consumer and say, hey, you can be your own bank.
Most consumers are not yet ready for that level of control and responsibility. The same issue exists in healthcare. If you were solely responsible for owning and taking custody of your health information, if you lose your health information and go to a doctor you’re starting from square one. So I don’t know that that’s the best model. What I do find interesting is a shared custody model, where your primary care physician may have a key to your data, and you have a key to your data, and it requires both of you to participate. Potentially there are rules where if there’s an emergency then there’s an override function where your doctor can unlock it with an independent third party. We actually built these exact systems in bitcoin with this idea of what’s called multi-signature transactions, where you can take a bitcoin wallet and split that up into multiple keys and require multiple parties to come together to unlock funds. We can bring that same logic to healthcare records and many other different industries.
AMLG: That seems like a good idea. I’m not sure I can be trusted not to lose my keys in general, so I’d like it if someone else out there had a set of keys..
MW: Yeah and it’s funny because in the bitcoin industry, it is the ideal that we all strive for. But even people in the bitcoin industry lose their passwords and I have a hard time imagining a world where we say, “hey this is your password and if you lose it you lose your entire digital life. So you better hold onto it.” I just don’t know that consumers are ready for that.
AMLG: So that’s a helpful sense of what the consumer experience might be like. But in terms of the third party players, healthcare is a big, legacy industry that has been slow to adopt innovation. It seems like this is a hard problem to solve, and that this kind of system is going to require a lot of standardization and collaboration between many different stakeholders who have different interests. I’m curious how you as a startup approach working with large organizations, both public and private, to make this work. Are they correctly incentivized, and how do you sequence collaborating with these players to get this done. Where do you start?
MW: We definitely chose a hard problem. Healthcare is not exactly known to move quickly. And on top of that, where blockchains function the best and where they provide the most value are when you’re leveraging blockchains to connect multiple companies together into a network. Not only do we have to sell one company, we have to bring in multiple stakeholders to solve problems. There’s been different approaches that we’ve seen in the blockchain industry more broadly. In finance there have been successful initiatives around groups that have formed consortiums by going out to the market, inviting a bunch of banks to come in to a roundtable, getting them to speak openly about their use cases and then figuring out what to build from there. We’ve taken a different approach. We’ve gone out and talked to roughly 60 or so different healthcare institutions and spent time doing research and trying to understand where their biggest pain points are. Rather than trying to get a bunch of them into a room to figure out what to build, we instead decided to choose specific problems that we knew we could address with the technology. First go and find a core tenant in that solution who’s willing to put their neck on the line and invest in proof of concept, and then start to build a pilot network. From there we go and find the other stakeholders that are party to that transaction and bring them into a pilot network. Then ultimately we need to prove that out in a pilot and scale that out to a production solution where we invite many more participants. It’s an organic approach and its been working well for us. At least in healthcare, its probably one of the only ways that we could make effective change.
AMLG: I know you’re in partnerships with Philips and Capital One. Could you tell us a bit about how those projects are going and what those proof of concepts look like?
MW: Recently we demo’d a proof of concept that we built with Philips around this idea of a patient-centric care coordinated at Distributed Health, which was the first blockchain healthcare conference right in the heart of Nashville, where a huge concentration of for-profit hospital groups and healthcare companies are headquartered.
AMLG: Wow, a blockchain for healthcare conference. You must know that an idea has really taken hold, when there’s a conference dedicated to it!
MW: That’s right. This was the first of its kind and there was a huge turnout. We more than doubled what we were expecting in terms of turnout to the conference. This idea is starting to build. It’s about two years behind the financial industry, but it is starting to build. The healthcare industry is changing whether blockchains change it or not. There’s an industry problem. They’re in upheaval mode and they’re realizing a large part of their problems come from the fact that data does not move freely through their ecosystem. In healthcare, data has become proprietary value. The more data you hoard, the more valuable your company becomes. What that causes is a huge perverse incentive to hoard data rather than to share it, which ultimately leads to not having good information.
If you can’t make good decisions then you can’t get better outcomes. There’s a global problem in the industry, which is getting data to move more freely. So that’s going on in the background. And then you have this crazy new technology called blockchain that’s coming to fruition and being tested out in the financial industry. And the healthcare industry is looking at their problems and looking at blockchains and saying, “wow, maybe this is the answer to our problems.”
AMLG: It seems that outside of Electronic Health Records, there are other areas of healthcare that also think it may be the answer to their problems. I’ve heard of use cases including verifying doctors licenses, auditing of the drug supply chain and tracing counterfeit drugs, mediating insurance claims, fraud detection for claims. What do you think of these other ideas? What other applications are exciting?
MW: Ernst and Young just released a whitepaper around verifying doctors licenses. There’s something called “provider information” and it’s a major problem, keeping track of where doctors go from hospital to hospital and which health insurance groups they are in. It changes all of the time. And there’s no master data set for that provider information. Oftentimes a patient will go to a doctor believing that the doctor is still currently in their health insurance company’s network and they go to get services and find out later that their doctor was out of network and get huge charges. And it wasn’t even their fault; the data records around which networks cover which doctors was incorrect. So there’s a huge industry problem just between payers and providers to maintain provider information. That’s one area that could definitely be solved.
Supply chain auditability and counterfeit drug tracing — this is a more general supply chain problem that we’ve seen blockchains try to solve in many different industries, from the diamond trade to sneakers. In general blockchains can be a really effective tool for tracking the authenticity of things as they move through a supply chain. In this case we can talk about the authenticity of drugs. Currently drugs in the supply chain are really only tracked at about a pallet level. If there’s a problem in a particular batch of drugs it’s extremely difficult to trace the origin ingredients back to their manufacturer so that you can actually root out that problem.
One of the areas that we’re working hard on is, we’re doing a project with Capital One to rebuild the medical claim processing system. Currently the way medical claims are processed is using 20-year-old legacy electronic document interchange, EDI documents, being passed over FTP servers and fax machines. There is so much latency and so many problems that are built into that system because it’s using this legacy infrastructure, such that medical claims typically don’t get paid or adjudicated for anywhere up to three to four months after a patient visits a doctor’s office. Not only that, but there’s a massive amount of people who are currently employed in the claims cycle purely to do manual data reconciliation, to make sure that records are straight between the providers and payers. Using a blockchain to coordinate the lifecycle of a medical claim can eliminate billions of dollars in reconciliation costs and can reduce payment cycles from three months to real time.
AMLG: It sounds like there’s a lot of big headaches that could be resolved as well as a huge ROI if we can get these blockchain solutions in place.
MW: That’s the most fun part about working in blockchains - the types of problems that blockchains can solve are usually measured in the billions of dollars. In some cases even in the trillions of dollars. These are massive problems that we’re working on. Not all of them are going to be successful in our industry but if any of them are successful, we’re talking about a truly transformational architecture.
AMLG: Now it’s time to put you in the hot seat and dive into the personal side, because this is really a show about the entrepreneurs, what drives them, why they choose to go down the road less travelled and what makes them tick. Tell me about what were you like as kid. What were your early passions, your hopes and dreams? What did you want to be when you grew up?
MW: You ask most kids what they want to be when they grow up and they say, I want to be the president or I want to be an astronaut. I always told my parents I wanted to be a stockbroker. I watched Wall Street back in the 80s, and for some reason thought I wanted to be a Gordon Gekko. I’ve since changed my opinion and have no interest in that whatsoever. But I was always an entrepreneur at heart. I’d buy comic books and never open them. I never read them, I only bought them for the buy and sell value.
AMLG: Much like trading bitcoin!
MW: Yeah haha. I had a lemonade stand, and it wasn’t just any lemonade stand. It was a professionally printed lemonade stand up that blew away all the other lemonade stands. So I think I’ve always had this in my DNA. Then I switched over to becoming an engineer and focusing on building solutions to problems. It really hasn’t been until this project, until we started Gem, that I brought those two passions together to be an engineering focused founder.
AMLG: As a builder who’s at the frontier I also want to know, is there one invention that you’d really like to see in your lifetime?
MW: For somebody who runs an international company, I travel all the time. In fact at this point I’m probably out of the office more than I’m in the office. So I would really go for a teleportation machine.
AMLG: Well that’s exciting, but also kind of terrifying. Which leads me to my next question. Is there anything about the future that keeps you up at night?
MW: I guess I have the usual fears of AI replacing the need for humanity in one way or another. But I’m also extremely optimistic about what AI can do. I do think there’s going to be a painful adjustment period. As technologists we often talk about shiny new technology as only a positive thing. For the most part I agree with that, but over a longer time horizon. Because in the transition from today to the future there’s a period of time where a lot of people are going to be left behind and aren’t going to adjust well. That doesn’t mean that I don’t believe in progress and change, it just means that we have to be aware of that and to find a way to include those people. Because if we don’t they probably will revolt.
AMLG: We can definitely see all that pent-up anger, recently against trade, where trade has taken jobs and people are getting left behind. You can easily swap in technology for trade and soon public anger is directed at robots and AI. One thing that I’m curious about when I talk to founders is, do you think we have a responsibility to get ahead of these issues? And what can we really do ?
MW: I do. I think there are things that entrepreneurs can do. Silicon Valley and Silicon Beach and the tech community at large often designs products for itself. And that’s a pretty basic human thing to do. We often aren’t thinking about building products for people who are not us. There’s a lot that technology can do to improve the lives of people who are not us. Especially in developing markets and areas around the world where technology could play a major role in bringing people up past poverty levels. If we start thinking about those types of solutions then we could probably make major change in the world.
AMLG: Okay, one more question. If you could live forever, would you?
MW: Absolutely. I have so much to learn and not enough time to learn it. If we can expand lifespans it could have a lot of effect on retaining knowledge that can then be built upon over time. If Einstein had another 50 or 60 years to live imagine what kind of inventions and theories he would have been able to create and how much society could have benefited from that. So I think if we increase lifespans we can also increase collective intelligence and solve a lot of problems.
AMLG: So much to learn, so little time. Bang on as usual. Well I cant wait to see what the year ahead holds for you and for Gem. Thank you so much for coming on the show, it was a pleasure to have you.
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