Does Your Health System Need an Innovation Center?

Dec. 8, 2015
John Gallagher, practice leader for innovation at Simpler Consulting, says he is starting to see more organizations, ranging from academic medical centers to safety net hospital systems, creating innovation centers because they realize that the healthcare landscape is changing so fast that their traditional improvement approach is not moving fast enough.

I have written several stories about innovation centers established at some of the leading health systems in the country, such as Cleveland Clinic, Johns Hopkins, Partners Healthcare and Intermountain. A few weeks ago I interviewed Dr. Michael Blum, director of UCSF’s Center for Digital Health Innovation about its partnership with Cisco. With all this innovation center activity, it got me wondering whether smaller health systems, large physician groups and federally qualified health center networks are planning innovation centers.  

That led me to interview John Gallagher, practice leader for innovation at Simpler Consulting, a division of Truven Health Analtyics. He works with health systems to create specialized innovation teams. Gallagher said that he is starting to see more organizations, ranging from academic medical centers to safety net hospital systems, realizing that things are changing so fast in the landscape that their traditional improvement approach is not moving fast enough. “They say, ‘we need a big quantum leap to meet what is going to happen in the future,’ so it is forcing them to get bolder,” he said.

Health systems are trying to figure out how they will move from fee-for-service to value-based payments in a way that makes sense for them. There are new technologies involving mobile apps, virtual visits, or even in the medical records space they have to explore, Gallagher said.

Obviously, he added, it is easier for the Cleveland Clinics of the world, which have significant access to capital, to fund innovation centers. It is very difficult for smaller systems. “One of the biggest failure modes we see inside these innovation centers is when they are not funded properly,” Gallagher said. “A lot of times smaller organizations are forced to try to fund this out of operations funding,” he explained.  Because it takes 12 to 24 months to see returns, the smaller groups tend to get a little bit nervous. “This is one of the first areas to get cut when times get tough,” he said. And because CEOs stay in their position on average only about five years, they are less willing to take risk. And when there is a transition in CEO, it can disrupt innovation center progress. “When a new CEO comes in from the outside, they are going to run their own show and have their own ideas. Generally, in the innovation space, if it is not showing dramatic returns right off the bat, it can be challenging.”

Simpler has worked with a large multispecialty physician group, Atrius Health in Massachusetts, which has invested $10 million in its innovation center.

When it was announced in April 2015, Daniel Burnes, M.D., who was serving as transition CEO of Atrius at the time, said, "As the industry continues to move towards increased risk sharing, accountability and transparency around performance, increased patient engagement, and demands for big gains in efficiency, it is requiring us to rethink how we deliver care. As a leader in transforming healthcare delivery, Atrius Health is well-positioned to use the Innovation Center to demonstrate our commitment to the health of our patients and to navigate an ambitious path to remain a world-class provider organization."

Gallagher says there is no one correct approach to creating an innovation center, but he says Simpler likes to think of the innovation center as a concept more than a building. “It is generating a core competency inside your organization to generate new care models, new service lines, new business models that prepare you for the future.”

Organization must prepare for the future, but it is difficult for the leadership team and physicians to operate in the challenges of today while at the same time innovate for the challenges of the future, he said.  “We encourage them to be an independent innovation team inside the healthcare organization. That frees up the position resource to be a dedicated member of that team. The project managers and knowledge people can take ideas systematically through research, feasibility, and deploy that in an effective manner into the care model.”

He said it is important for IT leaders to be involved, but he added, “We have seen the most success when it is led by a physician. That physician needs to continue to practice, so they can test out some of these solutions and it gives more credibility to the process inside the organization. Anytime there is a process improvement, the physicians tend to translate that into ‘I am going to have to work harder.’ And what the physician inside an innovation space has to say is I have the patient at the center, but I also have to develop something that can be delivered by our physicians and staff in an effective way so I don’t overburden them.”

I asked Gallagher about the challenge of working with startup mobile app developers from outside the health system. It can create a challenge because people are designing apps and they may or may not understand the entire care delivery model. “What we would encourage,” he said, “is to identify a pain point, then bring in a startup in and say ‘here is my concept, can you help me to develop an app that would satisfy this need?’ So drive it from the other direction. In the startup companies, they don’t have the capital to play with your team for a while. They want to sell you something right away.”

It will be interesting to see if 2016 brings the announcement of more innovation centers at health systems -- both large and small.

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