How hospitals can turn innovation labs into commercial profit centers
Some U.S. hospitals and health systems have turned their successful in-house work in health IT into commercial offerings that other hospitals and health systems can benefit from. This work is typically done in what is called an innovation lab.
This is not necessarily an easy task. First one must have the talent to come up with great IT. Then the IT must be proven. Then the IT must be packaged as a product. And then the package must be commercialized and marketed to turn the healthcare organization’s IT operations into a profit center.
Some healthcare organizations have been very successful in these efforts. Two include: Sinai AppLab at the Icahn School of Medicine at Mount Sinai Health System in New York; and UPMC Enterprises, the commercialization and innovation arm of UPMC in Pittsburgh, Pennsylvania. Executives at these two organizations offer advice to C-suite executives at healthcare provider organizations considering commercializing in-house health IT.
Right from the start
Provider organizations have to set up teams and technology efforts in ways that will make them most successful at making sure that in addition to producing excellent technology they also are keeping successful commercialization in mind.
“Innovation centers in healthcare can try to implement various technologies or can focus on one set of problems in particular,” said Dr. Ashish Atreja, associate professor and chief innovation officer, medicine, at Sinai AppLab. “Our AppLab digital medicine innovation center has been focused the last five years on building and integrating digital medicine technologies for value-based healthcare.”
This has allowed Sinai AppLab to see the technologies from a unique lens, prioritize them, and align them with business value over a period of time, he said. ROI for the innovation center is generated through one of the following three ways, he explained.
First, scalable implementation in the health system – decreasing revenue leaks and penalties, and increasing revenue through better access and value-based incentives. For example, Sinai AppLab implemented a pre-post patient empowerment platform for patients in joint replacement bundles to optimize them before surgery (pre-rehab), decrease 7-day and 30-day readmissions, and increase their functional outcomes. The health system directly reaps the benefit from this technology as soon as it is implemented – no delays related to licensing and testing or approving new technologies, Atreja said.
Second, licensing of different technologies and intellectual property.
“We have worked closely with Mount Sinai Innovation Partner to identify and license technologies from Medical School and Health Systems, especially around digital medicine – apps, analytics, remote monitoring, etc.,” Atreja said. “Licensing models in health IT are very different than devices or drugs and my previous experience in licensing virtual paging technology from Cleveland Clinic has helped us capitalize this revenue stream.”
And third, creating spin-off entities. While spin-offs are very lucrative, the technology has to be addressing a real problem, very novel in its approach and mature for scalability, before it can stand on its own legs in a startup, he stated.
“We spent over three years iterative building and testing a digital medicine platform, RxUniverse, that curates best evidence-based apps and solutions, prescribes them at the point of care to individual patients’ smartphone or to populations at large as customizable links, and collates data back from multiple sources to dashboards linked to EHRs,” he explained.
The problem Sinai AppLab tried to solve was that neither patients nor providers have time or resources to identify which solutions are evidence-based out of more than 350,000 apps available.
"Innovation done half right cannot support scalable transformation."
Dr. Ashish Atreja, Sinai AppLab
“We saw only 7 percent adoption if patients were just informed about an app since they often forget the exact name, misspell the name, or get lost among many apps with the same name or lost their unique code,” he said. “By enabling a digital prescription which comes as a text link on their phone, we have seen adoption increasing to 92 percent.”
Tal Heppenstall, president of UPMC Enterprises, said the focus on commercialization needs to be part of the mission of any such innovation center from the very start if one wants to create technologies and solutions that can make a difference in healthcare at scale.
“While some of our ideas and products are ultimately used only to improve operations at UPMC, which is still a win, we always start with the broader market in mind and measure the success of UPMC Enterprises on that basis,” he said. “It’s important to quickly get at least one other customer besides your own health system to validate your assumptions about the market and the technology.”
Commercialization deep dive
Atreja and Heppenstall take a deeper dive into commercialization by looking at one of their products and walking through the factors that had to be handled in successfully commercializing the health IT.
“One of the technologies that we have successfully commercialized is a telemedicine solution for long-term care facilities, built around research led by a UPMC geriatrician,” Heppenstall said. “The goal is to make geriatricians available virtually on nights and weekends to potentially avoid unnecessary transfers and hospitalizations of nursing home residents. Curavi Health, as the company is called, now offers its services in about 50 facilities in three states.”
Curavi Health’s technology was developed specifically for nursing homes and the workflow of their staff. A critical factor in launching Curavi – and other companies in the UPMC portfolio – is having UPMC as an initial customer, so UPMC clinicians and staff can provide rapid feedback for further development and improvement, he explained.
“Many startups die in the pilot stage, so we think that having a customer/investor/partner like UPMC is critical to improving those odds for healthcare innovators,” he said. “It’s also important to show immediate value and return on investment given today’s healthcare cost pressures.”
Atreja of Sinai AppLab has an excellent vantage point for commercialization.
“Speaking from the experience of licensing one of the first virtual messaging applications from Cleveland Clinic and creating spin-off Rx.Health from Mount Sinai, I can say that commercialization first starts with identifying real need that people are willing to buy/invest in,” he said. “Once the solution is conceptualized or started to be made, we first fill an invention disclosure form, an IDF, typically to tech transfer offices.”
Unproven business models
It’s key to note that for new technologies with unproven business models, none of the paths – licensing, spin-offs, etc. – are clear from the outset, he added. So it’s prudent not to get carried away and invest too much money in intellectual property protection or creating a startup too early, when technology does not have legs, he said.
“The journey of startup evolves in quite unpredictable fashion,” he said. “For example, Rx.Health has now expanded the platform to prescribe patient-reported outcomes, surveys, digital care plans for pre-post surgeries, shared decision making tools before complex decision making, appointment reminders, campaigns to close the care gaps, as well as transitions of care support to reduce readmissions.”
Identifying different business models, negotiating terms for licensing/spin-off and finding key co-founders for spin-off are some of biggest challenges that prevent many good technologies making it to the market, he added.
So ultimately, what do the CEO, CFO and COO at the umbrella healthcare organization need to know about commercialization efforts? How does a CIO inform them on efforts? What must they understand to help commercialization efforts be successful?
Transformative innovation starts with the CEO, Atreja said.
"It’s important to quickly get at least one other customer besides your own health system to validate your assumptions about the market and the technology."
Tal Heppenstall, UPMC Enterprises
“Having executive sponsorship from the C-suite – it varies between the CEO, CFO, COO, CIO, CMIO and CMO – and keeping them informed about possibilities, barriers and success stories is key to continue momentum and make innovation centers sustainable,” he said. “Successful commercialization efforts take more than a few years and we are seeing a trend where innovation centers are supported by the operating budgets of health systems, rather than a 1-2 year grant or philanthropy to ensure longevity of innovation initiatives.”
Once there is a success story, it’s good to have it shared by the C-suite to the board and to the public through press releases, social media, and articles or publications, he added.
Treating an effort like a vendor
The C-suite needs to understand that most of these efforts will fail and that the ones that succeed will eventually need to be treated like a vendor and not a department of the health system if they are going to grow and attract the best talent, Heppenstall said. He and his team regularly update their board on the activities of UPMC Enterprises and have a well-defined process for authorizing investments.
Atreja and Heppenstall have advice for peer healthcare provider organizations considering getting into the innovation lab and commercialization business.
“Be sure you are ready to accept the risk of failure because that’s a given for innovators,” Heppenstall said. “And be sure that you have the patience, board support and clinical buy-in that will be necessary to succeed.”
Let strategy guide the innovation, rather than vice versa, Atreja advised.
“Once a strategic roadmap is defined, it’s crucial to bring on the right team, with the right support for many years and the right reporting structure to the board or C-suite so these centers/labs have the maximum chance to thrive and change the culture of the institution,” he said. “Innovation done half right cannot support scalable transformation.”
Focus on The Business of Healthcare
In December, we take a deep dive into what top business decision makers need to know about digital transformation.