The Roles of Health Systems in Sparking Disruption in a Highly Complex Industry

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If there’s one industry that’s ripe for disruption, it’s healthcare.

That’s what many technology and healthcare experts say. And yet there’s a problem. As Tulip Lim, a director for S&P Global Ratings, said in a brief last November, “the industry’s complexity will govern the rate of change.”

That’s not a surprise to healthcare insiders, but it is a major challenge to entrepreneurs who hope to disrupt the industry. While the fabled origin story of Apple saw Steve Jobs launch the firm out of his garage, health-tech entrepreneurs don’t always have it that easy. They need to build technology that fits into the workflow of providers, meet the regulatory mandates healthcare organizations work under and — perhaps most difficult — win the favor of physicians, clinicians and healthcare organizations.

For the healthcare startup culture, this poses a tricky question: Where is the best place from which to develop disruptive healthcare technology? Does disruption necessarily have to come from outside the industry? Or does the complexity of healthcare mean innovation must come from within?

For Paul O’Neill, executive director of Cleveland Clinic Innovations, there’s no single answer.

“There is no playbook for how to successfully be innovative or disruptive,” O’Neill told Inside Digital Health™. “At Cleveland Clinic Innovations, we observe that innovation often happens at the intersection of different backgrounds, and we see that dynamic in healthcare also.”

Healthcare Innovation at Healthcare Organizations

The heralded Cleveland Clinic launched its innovation arm partly to commercialize innovations developed in house. However, Cleveland Clinic Innovations (CCI) also partners with external startups and advisers to help bring healthcare ideas to fruition. Those external partners may or may not come from within the healthcare industry.

“Even though we have important insights from our Cleveland Clinic caregivers, if we’re going to commercialize broadly, we need to have broad market perspectives, which is why we include external advisers to help shape our strategies,” O’Neill said.

CCI began two decades ago, but in recent years the ranks of healthcare organizations with venture funds or commercialization arms have grown rapidly. This spring, for instance, Washington-based Providence St. Joseph Health launched a population health management firm. Other major health networks, including Pittsburgh-based UPMC and Iowa’s UnityPoint Health have also recently announced venture funds.

A connection to a healthcare organization can provide valuable resources and access to facilities and experts. It can also lend credibility to health-tech startups.

“Connection to Cleveland Clinic can be an impactful attribute to achieve commercialization success,” O’Neill said, though he noted that such a connection can exist even if the idea didn’t come from CCI. If tech were to be used at the clinic or receive funding from it, the product can also see a boost.

Hospital Headaches

While being affiliated with a health system can be a benefit in the marketplace, being housed at a hospital or using hospital facilities can also be a headache.

“A real challenge is that hospitals are focused on their mission of serving patients, and in many cases, that covers much of the working day and well into the evening, which forced entrepreneurs and innovators testing solutions in an actual clinic to have to test their products in the dead of the night, without the opportunity to test, refine and re-test,” said Laurance Stuntz, who for the past seven years has directed the Massachusetts eHealth Institute at the Massachusetts Technology Collaborative.

Laurance Stuntz, Director, Massachusetts eHealth Institute at MassTech

Back in April, Massachusetts Gov. Charlie Baker announced the creation of a new digital health grant program that will create “sandboxes” to support the growth of digital health firms in the state. Stuntz’s institute and the MassTech Collaborative will administer the program.

The first such sandbox, PracticePoint, located at Worcester Polytechnic Institute, is slated to create an environment where entrepreneurs can use hospital-level laboratories and care environments — but also have the facilities to rapidly test and re-test prototypes.

“WPI PracticePoint has four unique settings, including residential and rehabilitative care suites,” Stuntz said. “That will allow hardware, robotics and other assistive device companies a place to freely test their products, particularly important for startups focused on the rapidly growing aging and caregiving sector.”

Rachel I. Leblanc, assistant vice president for academic and corporate engagement at WPI, told Inside Digital Health™ that the sandbox will work with innovators of all sizes.

“We are working with early-stage entrepreneurs and very large medical device companies to bring safe and secure medical technology to the market faster,” she said.

While PracticePoint plans to provide talent and infrastructure to startups, she said it doesn’t have long-term residency space available.

Building Disruptive Culture

If PracticePoint provides the facilities needed for healthcare innovation, a more complicated task is creating a culture of healthcare innovation. At WPI, one key ingredient is collaboration.

“We create this culture through actively reaching out to the community for input on everything from facility design to product demos,” Leblanc said. “Faculty and student involvement will also help us maintain a culture of innovation by sharing their cutting-edge research and project work.”

Stuntz noted that Massachusetts has a number of world-class health systems and medical schools and a wealth of biopharmaceutical companies. Thus, many digital health entrepreneurs in Massachusetts come from a healthcare background. He said often these innovators receive encouragement or assistance from their employers.

“Many of our top hospitals here in Massachusetts are also driving opportunities for their staff, whether frontline medical staff or administrators, to grow an innovative startup,” he said. “At the core, though, the founders of these digital health startups are problem solvers driven by their own unique personal and professional experiences.”

Cleveland Clinic Innovations, meanwhile, has a system in place to help identify staffers with promising ideas. Those who have a potential invention are screened to determine which ideas are most likely to succeed in the marketplace. CCI considers include factors like patentability, clinical effectiveness and the degree to which a given invention improves upon the existing standard.

But once an idea is identified and developed, O’Neill said, CCI turns to business experts to help shepherd the concept into reality. Inventors typically take a role on a scientific advisory board or a similar entity.

While CCI takes ideas developed in house and brings in outside advisors to help commercialize, PracticePoint faces something of the opposite situation. Many of its innovators develop new technology outside of a health system. That means they need to find ways to get buy-in from real-world healthcare providers. Leblanc said WPI is working to build a network of stakeholders who can assist in product validation.

“Our network will be used to help make connections with experts and potential end users for feedback throughout the design and testing cycle,” she said. “We have already begun and will continue to host events and coordinate with affiliate organizations in order for companies to solicit feedback from stakeholders on their designs and business plans.”

To be disruptive, even the most impressive healthcare technology must actually be in use. And the imprimatur of a major healthcare organization alone isn’t enough for a startup to change the healthcare landscape.

“We are aware that we need more than just a connection to the Cleveland Clinic brand to be successful,” he said.

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