Frustrated by the red tape of the U.S. healthcare system, blockchain startups founded to improve the sharing of patient data are looking abroad to prove their use cases.

The moves by Gem, which has partnered with a Scandinavian company, and IncentHealth.io, which is scouting opportunities in Canada, underscore the challenges blockchain technology faces in any heavily regulated market with powerful incumbents and resistance to change.

In U.S. healthcare specifically, rigid privacy laws, an abundance of intermediaries and actors, and the dominance of a few electronic health record (EHR) vendors have hindered startups' efforts to create comprehensive medical histories for people.

"It's the problem that everybody brings up at every conference, but it never really gets solved in the U.S.," said Micah Winkelspecht, founder and CEO of Gem.

One possible response is to start with a subset of healthcare not yet mired in such complexity.

"Innovators in the healthcare space are definitely looking for use cases that do not involve Health Insurance Portability and Accountability Act (HIPAA) regulation," said Daniel Schott, the co-founder of North Dakota-based IncentHealth.io, which created a smoking cessation program using the ethereum blockchain.

Yet, even though Schott doesn't think his project falls under HIPAA's scope, he's still looking outside the restrictions of U.S. industry first.

"Because healthcare blockchain use cases face U.S. regulatory hurdles and the slow pace of technology adoption within healthcare, I will be looking to Canada as a space to further develop the IncentHealth prototype and find partner organizations," Schott told CoinDesk.

But IncentHealth isn't quite as far along in development as enterprise healthcare blockchain startup Gem is, nor does it have the struggles that come from dealing with the traditional EHR system, which in the U.S. is dominated by two players, Epic and Cerner.

So Gem had a similar idea to IncentHealth: take the product overseas.

As announced at the Distributed: Health 2017 conference in Nashville several weeks ago, Gem has partnered with Nordic-based Tieto, one of Europe's largest IT software and service providers, to build a blockchain ecosystem that aspires to give consumers control over their individual data.

Winkelspecht told CoinDesk:

Particularly in Scandinavia, Gem found less-convoluted healthcare systems, a more consumer-centric ethos toward health data and a partner on the ground willing to deploy a blockchain solution in its home market.

The move makes Tieto – which controls 60 percent of the EHR market in Finland and has a significant footprint in Sweden and Norway – the first major legacy health record vendor to fully embrace a blockchain project.

Blockchain goes hand-in-hand with the company’s long-term vision for building a decentralized health model that emphasizes patients rather than providers, said Maria Kumle, business development manager at Tieto.

She continued:

Expected to launch next year, the application will be built on Gem's enterprise blockchain platform and will aim to give consumers control over their medical records and genomic data. Such control, according to adherents of the idea in the blockchain space and in traditional industry, has the potential to improve patient outcomes, reduce costs and waste, create personalized medicine plans and put greater focus on preventive care.

Further, a blockchain-based system could in theory let patients leverage their data for other purposes. For instance, they could consent to provide their data for research or for customized precision medical treatments.

The partnership will also serve as a test case for how blockchain solutions can help firms comply with stringent new consumer data protection rules in the EU (scheduled to come into effect in May 2018).

The General Data Protection Regulation (GDPR) harmonizes a wide swath of patchwork consumer data protection rules into a single framework and canonizes them at the EU level. The rules apply to any company with EU customers, and failure to comply could result in a fine of as much as 4 percent of gross global revenue.

The Tieto project is attempting to tackle the portion of GDPR requiring user consent for data sharing, Winkelspect said.

Because consent will need to be provided before a company can use an individual’s data for a specific purpose, and that consent must be demonstrable afterward, the immutability and auditability of a blockchain make it a potentially powerful compliance tool in this scenario.

Winkelspecht said:

Through all this, Winkelspecht hopes to come away with enough successes from the project to prompt legacy EHR vendors and stakeholders in the U.S. and elsewhere to take a deeper look at blockchain-based health data storage and ownership systems.

"One of the biggest complaints about EHR systems and the large vendors is that, while they talk about interoperability a lot, it takes them literally decades to open up their systems and, even then, they really only open them up when they have to," he said.

As with any project seeking to build a blockchain ecosystem, the key challenge will not just be getting the infrastructure right, but creating a user experience that will entice consumers to participate.

But if it's successful, the project could be a stepping stone toward rethinking ground-level assumptions on how consumers view healthcare data, Winkelspecht said, adding:

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Gem.

Operating theater image via Shutterstock