More Health Systems See Themselves as Innovation Testbeds

July 26, 2019
An increasing number of health systems are creating innovation centers to partner with startups and their own employees to develop and commercialize digital health solutions

On a regular basis, Healthcare Innovation’s editors report on yet another health system opening an innovation center to help foster the creation of startups among its clinicians and administrators or to form partnerships with startups to help mature and commercialize new solutions. Why has this trend accelerated in the past few years and where is it going next?

As digital tools become more of a factor in healthcare, there is pent-up demand from clinicians and researchers for help, says Mark Zhang, M.D., medical director at Brigham Digital Health Innovation Hub (iHub) at Brigham and Women’s Hospital in Boston. “Having a central connector to see trends and be a beacon for digital health is incredibly important. Within the Brigham, the iHub plays that role of being a place of support both for internal and external stakeholders.”

As the healthcare sector becomes more digital, organizations will need to find ways to align their strategic, operational and economic models under the umbrella concept of innovation, said Michael Schmidt, managing director of the Strategic Innovations program at seven-hospital Orlando Health, when he was speaking at the Florida Health IT Summit earlier this year. Healthcare Innovation’s Mark Hagland reported on the event.

Schmidt, who estimated that at least 66 health systems now have innovation programs, described some challenges involved in starting up an innovation program. “Because we didn’t have a dedicated program at the start, we had had difficulty retaining physicians and others who wanted to participate in this,” he said. “The intellectual property landscape was really the Wild, Wild West, because when we started out, we didn’t have a clear process for capturing the best ideas and doing things with them.”

Seeking broad market appeal

Some health systems have a head start on creating an innovation pathway because they have been working on it for many years. Utah-based Intermountain Healthcare has created a system that can spin out not just great ideas from people at Intermountain, but also invest in the best tools for the care of patients from external companies. “Our philosophy for our investment fund is that we only invest in products we use,” says Michael Phillips, M.D., a partner and managing director at Intermountain Ventures. “We pick products we think can help us treat our patients better, lower cost and improve quality of care. And we only pick products we think will have a broad market appeal. We know that if we don’t build for broad appeal, there will never be a version 2.0. It will just die here. We also believe we have an obligation to promote things that will make medicine across the country better.”

Phillips says that Intermountain believes that by being a customer, it can make a product better and help a vendor address the broader market. “We want to create value for them. We also have to believe we can extract that value we create. Often we will do that with warrants or investing directly in the company. The reason we do that is that any money we make, we are going to put it right back into further improving patient care. Mostly we look for things that are ready for market that we can make better.”

In addition, innovations developed by Intermountain employees are sometimes spun out into companies. One example is a company called Empiric Health that addresses variation in costs and outcomes for both clinicians and administrators. Its initial solution is based on Intermountain’s ProComp program built by clinicians to help understand how differences in the way surgical procedures are performed impacts outcomes and overall cost of care. “That saved about $100 million at Intermountain and now it is doing the same for other health systems,” Phillips says.

Innovation in the DNA

Another health system with a long history of working as a testbed for new solutions is UPMC in Pittsburgh, which has been thinking about how to apply tech innovations since at least 1973. “UPMC Enterprises is a result of us trying to stay ahead of the problems in healthcare,” say Tal Heppenstall, president of UPMC Enterprises. “This is not a new thing for us, but it seems to be getting more popular among our peers.”

As at Intermountain, Heppenstall says the only investments UPMC makes are in companies that solve a problem for UPMC. “Our first investment criterion is whether UPMC is a customer. If UPMC is not a customer, it has to be one before we make a commitment to invest in a company. Also, there is a lot of value that accrues to younger companies by having UPMC as a customer. With equity investments we make, we try to capture some of that value. That is our playbook. Many of our peers are starting to adopt the same type of playbook.”

UPMC has about 20 to 30 solutions per week enter its pipeline, which has a five-stage evaluation process. “If it actually does solve a problem and another vendor isn’t already doing it, we will take it in to incubate the idea,” Heppenstall says. “Then we might pilot the effort at UPMC and start a company around it or form a partnership.”

Evolent Health is one example of a successful spin-out. It involved intellectual property contributions from UPMC Health Plan and The Advisory Board Company. But because of the size of the deal, it involved a fair amount of risk tolerance. “Because of our history, our board does have a different level of risk tolerance that allows us to do things our peers wouldn’t do,” Heppenstall notes. “We have been doing this for so long and have so many policies, procedures and governance in place, there is acceptance about what we are doing.”

Inside-out and outside-in approaches

The Brigham Digital Health Innovation Hub describes its approach as outside-in and inside-out. Inside-out is a network of innovators, clinicians and administrators who bring ideas to iHub to develop, says Santosh Mohan, managing director of iHub. “With outside-in, we look at our internal challenges and priorities that can be solved by market-ready solutions and figure out how to bring them in as fast and as efficiently as possible while making sure the entrepreneur can succeed inside a large organization such as ours.”

The iHub’s medical director, Mark Zhang, M.D., says the sweet spot involves projects that have a clinical burning need and an operational champion. “When the stars align, we can speed things along, or if a clinical or operational champion or funding is not there, we can work to bridge that gap.” He gives an example of Brigham’s work with a company called Orbita, which has a middleware platform to allow hospitals and health systems to work in conversational user interfaces using voice. “You can build your voice experience agnostic of the platform it will be deployed on,” he explains. “We were seeing an interest from internal innovators to use voice as a way to interact with patients or do research and an increasing number of companies playing in the voice field. People were going to try to do things anyway, so when we saw a company that had a middle layer you could develop on, we thought that was a great way to get staff members and researchers on a platform to create their inventions while the technology become more mature and secure. That has been a fruitful collaboration.”

In a traditional model several departments at Brigham would reach out to a number of startups in a space like voice and the organization would potentially be working with a number of companies, he adds. “We were able to consolidate that and use our buying power to create a system-level agreement.”

Mohan says iHub has made changes to assure that its processes for working with startups are fast and light. “We have tailored a number of internal processes for more agile interactions,” he says, including having dedicated staff to work with nimble startups while the rest of the organization focuses on business as usual. “We try to present startups to a number of key stakeholders at once, and we put in new procurement and legal processes, as well as governance to provide the startups with easy access to resources. These are all things we have done to become the collaborator of choice for startups.”

From the vendor’s perspective

If health systems are finding partnerships with software companies more attractive, what is appealing about these relationships from the vendor perspective?

Salt Lake City-based Health Catalyst, formed by former Intermountain executives, has a deep mission orientation and culture that views providers as partners and orients everything it does around pragmatic solutions to improve patient outcomes, says Kyle Salyers, a senior vice president. “Although we believe innovation will be a transformative force to improve healthcare, we moderate that with a pragmatic view by prioritizing those innovations that can truly move a clinical or financial outcome. We look for the combination of providers’ pragmatic understanding of problems to be solved or improvements to be made with our ability to scale and apply those solutions more broadly in the market.”

Health Catalyst has partnered with health systems such as Partners HealthCare, UPMC and Allina Health. In many cases, the health system employees in data warehousing and analytics transition to become Health Catalyst employees. What characteristics does the company look for in partners? “It starts with a culture of openness,” Salyers says, “combined with a structure and organizational capacity to support the culture of innovation. Another important element is an appreciation for how data infrastructure can help provide new insights and scale those insights.”

Salyers says the partnerships require putting in place governance structures and holding quarterly meetings to track all aspects of the relationship. “It is important that both parties realize going in that we are going to align around core principles and measure our progress and objectives together over time. Both partners must recognize we need to adjust along the way as we learn from the market and hit different developmental milestones together and stay entrepreneurial along the way.” 

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