Healthcare Musings May 2017

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Innovation as a Competency
by Neil Patel

May 2017 - "But healthcare is different." This often-used excuse by many in our field attempts to explain why strategies and tactics that have worked in other industries would not work in healthcare. When it comes to innovation, you would be hard-pressed to find a non-commoditized industry where a firm that does not consistently innovate stays competitive over the long-term.

One reason why corporations in most other industries have had to constantly innovate their products and services is because they compete on a regional, national, or global playing field. With the exception of tertiary and quaternary care, this type of competition does not exist in healthcare delivery. In healthcare delivery, most competition is on a local and often times, hyperlocal, level. This competitive environment breeds organizations who by and large are consumers of innovation rather than producers of innovation.

When the Affordable Care Act was signed into law in 2010, many forward-thinking providers built a new pillar into their organization’s strategic plan: “Build Competency for Value-Based Care.” It is clear now that some derivative of value-based care is here to stay, regardless of the fate of the ACA, but simply building competency is no longer sufficient. An organization’s strategic, operational, and economic models need to be entirely realigned to deliver care in a changing environment. It is this sea change that is driving a new strategic pillar: "Build Innovation Competency."

This does not mean that all healthcare providers need to become producers of innovation, just as “building competency for value-based care” did not mean that all providers needed to develop new risk-payment models. For most providers, innovation needs to be a tactic to address a specific set of goals. In some cases, it should evolve into a holistic growth strategy. Put another way, all healthcare providers should be consumers of innovation while historically only a select few have been and should be producers of innovation.

To effectively consume innovation and use it as a tactic, organizations need to first determine what they are solving for, create metrics, and then search for solutions on the market. The problems addressed generally fall into one of the four buckets of the quadruple aim: quality improvement, cost reduction, patient experience, or provider experience.

Organizations who are on the bleeding edge take a leap of faith and adopt innovative solutions before there is evidence to support adoption. Early adopters aside, for a solution to move downstream along the adoption curve, especially in healthcare, startups need to be rigorous in gathering evidence of impact across the quadruple aim. The majority of digital health solutions have not focused on gathering evidence, bringing rise to organizations such as Evidation Health and NODE Health, who seek to bridge this divide and prove (or disprove) the promise of digital health. The digital health solutions that will win will focus on collecting evidence of their impact and often force that discipline onto their customers, rather than the other way around.

To produce innovation and use it as a strategy, organizations need to, once again, determine what they are solving for, create metrics, and only then develop programs. For these organizations, in addition to addressing the quadruple aim, the goals generally fall into two buckets: revenue (diversification and growth) and human capital investment (recruitment and retention; the producers of innovation often have a cachet that attracts and keeps talent).

Healthcare organizations need to be intentional when it comes to building programs and committing resources to this type of strategic innovation. These pursuits require long time horizons, willingness to take on risk, and fortitude to not see innovation programming as a budget easily cut if the health system falls on hard times.

With healthcare providers, the innovation producers have largely been the research arms and tech transfer offices of universities and academic medical centers, and the innovations produced have generally been pharmaceutical compounds, biologics, and medical devices. The advent of digital health has democratized innovation to some degree and made it possible for non-academic health systems to become producers of innovation without having to make significant infrastructure investments.

The expanding landscape of innovation producers is absolutely critical for value-based care to succeed. Academic medical centers have not historically been known for patient experience, provider experience, or cost management; rather, they take pride in quality of care and provider workforce training. Community health systems, on the other hand, compete on all aspects of the quadruple aim and those that outperform through processes and tools they have created have the potential to develop commercial solutions, scale their experience, and generate additional revenue, if so inclined. Further, these solutions are often created by the organization’s own nurses, physicians, IT staff, etc. When supported in the right environment, they can pay dividends beyond the commercial revenue from the solutions themselves by creating a self-reinforcing culture of innovation. These types of organizations comprise a third type of innovation producer: those that become producers because the problem they are solving has not yet been addressed sufficiently by the market and the organization has the competency and assets to build a solution.

In summary, the role that innovation plays in healthcare is changing. I’m excited to see more health systems embracing innovation as a tactic, forcing digital health entrepreneurs to be disciplined around evidence, and showing the skeptics that healthcare isn’t all that different.

 

About the Author

Neil Patel is the President of Healthbox, an innovation services firm empowering healthcare organizations to build and sustain innovation initiatives that deliver results at market speed. Healthbox was the first to combine investing experience and consulting services in a way that is strategic, objective, and actionable for providers, payors, and others across the industry. Its history as an accelerator enables and informs its innovation services in ways that others can’t. This unique expertise drives innovation from the inside and out to deliver results at market speed. Leading organizations trust Healthbox with decisions on when and how to build, buy, or partner. Neil is responsible for executing the company's vision to foster entrepreneurial collaboration through internal and external strategic initiatives.

Prior to joining Healthbox, Neil developed long-range strategic plans for children's hospitals, integrated delivery networks, and academic medical centers at the Chartis Group and served at Sg2 in a technology evaluation and consulting role, focusing on surgical services, operations, and enterprise strategic planning. Neil holds a BS in Biomedical Engineering from Johns Hopkins University and an MBA with concentrations in finance, healthcare, and entrepreneurship from The Kellogg School of Management.

Follow Neil on Twitter: @neiljpat

Follow Healthbox on Twitter: @healthbox

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