Pragmatic Innovation in Healthcare: Taking Risk and Establishing Partnerships
Recently, I had the honor to speak at The Health Management Academy on the topic of investment and innovation in healthcare. More specifically, the assignment was to share experiences with healthcare system leaders on how venture capital and the act of health system providers partnering with entrepreneurs can be a powerful tool for sourcing and implementing innovation as a means to: inform health system strategy, generate alternative sources of financial value, enable new business partnerships, and ultimately serve as the basis for outcomes improvement.
In addition to the role of investment capital and innovation, this got me to thinking about the power of taking shared risk.
Innovation Through Shared Risk
My venture capital background includes making investments in start-up technology companies in affiliation with both academic and healthcare strategic investors. While I was at Rose-Hulman Ventures, we invested in promising technology companies to generate a financial return, but also to provide compelling education and technology development opportunities for students and faculty at Rose-Hulman Institute of Technology. We successfully achieved a combination of financial and education objectives. At IU Health, we invested in promising healthcare technology companies that aligned with the clinical and research missions of Indiana University Health. We successfully achieved the combination of financial and patient outcome objectives, including an investment in Health Catalyst.
But, what did both models share? Both models shared the concept of marrying innovation with its implementation and using shared risk as a tool to align interests in a pragmatic outcomes-based partnership.
Pragmatic Innovation at Health Catalyst
At Health Catalyst, we are passionate about outcomes improvement and transformation in healthcare. Improvement and transformation require innovation; and innovation requires partners. Our mission is a daunting one, and will necessitate technological innovation, innovation in leadership, and innovation in business models. Innovation, unaccompanied, however, can often yield academically appealing ideas with little practical application or mechanism to implement.
It is this balance—the balance between being a catalyst for innovative change while being grounded in application—that is the source of one of our company’s four Operating Principles: Pragmatic Innovation.
On a company level, we encourage innovative thinking at Health Catalyst through weekly “innovation time.” Every team member gets a few hours a week to think deeply about our business and our company. Though this process, team members come up with new, exciting, innovative ideas that occasionally we implement.
But how do we stay pragmatic? How do we stay focused on implementation and outcomes in the face of such an overwhelming need for innovation and new business models in healthcare?
The answer: we share risk.
Innovation in Action: Shared Risk with a Health System
From the beginning, Health Catalyst was built in close alignment, including risk sharing, with health system providers. We are grateful to count healthcare delivery organizations as customers, as investors, as innovation and development partners, and now, as partners in outcomes improvement. All these types of partnerships have one thing in common: shared risk. Shared risk in our partnerships is used as a tool to focus innovation on what is pragmatic and to align our shared interests on an improved outcome.
Earlier this year, Health Catalyst and Allina Health announced an innovation in healthcare: a true partnership to improve outcomes. Each party took risk, and each will share in the improvements derived.
And, while this partnership represented a novel approach to share risk in healthcare, in fact it was a very natural application of our tried and true Pragmatic Innovation Operating Principle.
Thank you to all our fellow healthcare system pragmatic innovators and risk takers: our customers, our innovators, our investors, and our clinical outcome partners. Thank you, Allina Health, for helping to pave the path for industry transformation and partnership. Cheers to this next logical step in applying Pragmatic Innovation in healthcare—one defined by the investment discipline of using shared risk to focus and implement innovation.
We look forward to applying the principle of Pragmatic Innovation again and again.