Investing in Partnerships for Outcomes Improvement
The corporate venture capital and innovation function is a well-defined market activity in our economy. Many companies will sponsor, in whole or in part, investment platforms to satisfy a range of strategic, operational, and financial objectives. Over the past several years, leading healthcare systems, too, have begun to widely adopt this strategy.
Health systems are seeking to commercialize their intellectual property, assisting and participating in the early development and adoption of innovation, and making direct (and indirect) private healthcare investments in promising new science, medical technology, information systems, and delivery models. Rather than one-off investments, these activities now represent a long-term strategic trend that signals an important shift in the structural landscape in healthcare. These efforts are new corporate development platforms that are aligning industry participants in new ways, influencing the private capital markets in healthcare, and impacting how new technological and business innovation comes to market.
In the late 1990s, I began my involvement in the strategic venture market, or “impact investing,” as part of an economic development initiative led the City of Indianapolis called The Mayor’s High Technology Task Force. From a policy perspective, our community leaders felt the formation of private capital, in conjunction with our region’s largest employers and academic institutions, was an essential step to support the development of the technology sector.
In the early 2000s, I had the opportunity to manage an outgrowth of this effort; a strategic venture fund associated with Rose-Hulman Institute of Technology called Rose-Hulman Ventures. In the mid-2000s to the early 2010s, after writing a business plan to apply the Rose-Hulman Ventures model to healthcare, I had the opportunity to serve as the Managing Director and Co-Founder of CHV Capital. CHV Capital was an early hospital venture fund associated with Clarian Health Partners, now Indiana University Health. Today, I serve as the Senior Vice President of Corporate Development at Health Catalyst, a portfolio company of CHV, where we enjoy deep investment, innovation, and customer relationships with multiple leading healthcare systems from across the United States.
This entry is the first in what will be a series on this trend. We look forward to an exchange of ideas as our industry continues to innovate, improve, and, along the way, create new sustainable business models, healthy populations, and vibrant communities.
The Partnership “Flywheel”
Health Catalyst is deeply committed to working collaboratively with leading healthcare systems to align ourselves toward one goal: outcomes improvement. Keeping outcomes improvement as the singular aim has enabled Health Catalyst to take risk, add 10 healthcare systems as strategic owners, and license and/or co-develop new intellectual property from five healthcare systems or medical institutes. We believe, when well-managed, this partnership flywheel enables alignment between partners as owners, as innovation partners, and as customers.
Partners as Owners
We share stakes in ownership because it enables us to harmonize and align with our healthcare system partners in three dimensions:
- To share a commitment to long-term outcomes improvement.
- To share in risk.
- To share in the creation of value.
Additionally, and most importantly, the act of sharing equity with our health system partners is consistent with our Operating Principle of Ownership, and our practice of ensuring every Health Catalyst team member is an owner in the company.
Partners as Innovators
The healthcare industry’s first purpose-built enterprise data warehouse (EDW), the Adaptive Data Warehouse, the healthcare Data Operating System, machine learning, natural language processing (NLP), population health analytics, cost analytics, performance improvement analytics—yes, we build, we commercialize, and we embrace the power of innovation to improve healthcare outcomes. We balance technological promise, however, with the Operating Principle of Pragmatic Innovation. This principle is grounded in the belief that the value of a technological advance is a measure of its ability to be adopted and to ultimately improve an outcome. Consistent with the application of this principle, we seek deep, committed relationships with leading healthcare systems and medical institutions as sources of innovation, as co-development partners, as pilot sites, and as commercialization engines.
Health Catalyst is grateful to enjoy a number of these relationships, a few of which include:
- Partners Healthcare: Care Management and Population Health
- UPMC: Cost Accounting and Cost Analytics
- Regenstrief Institute: NLP and Unstructured Data
Health Catalyst will continue to seek new opportunities to innovate and to apply new technology and new methods with leading practitioners, investigators, and providers in healthcare. A few primary lessons from these partnerships include:
- Apply The Catalyst Way with an emphasis on outcomes improvement, pragmatic innovation, and transparency.
- Healthcare systems and medical institutions can be powerful sources of—and refiners to—know-how and innovation.
- While technology and business structures are important, success is an outcome most highly correlated with a shared mission, shared values, shared culture, and most of all, shared trust.
Partners as Customers
Distinct from our industry’s legacy HIT/EMR businesses, our sole reason for being is outcomes improvement. Distinct from large multinational and cross-sector technology purveyors, our sole focus is healthcare. Our long-term commitment is to outcomes improvement. Our long-term commitment is only to healthcare. This is our strategic differentiation in the market, and enables Health Catalyst to make very deep and very long-term commitments to our customers.
Our customer relationships are always grounded in Health Catalyst’s first Operating Principle of Customer Outcomes: enabling our clients, in a data-driven way, to achieve better clinical, financial, and patient experience outcomes.
Our commitment to our health system partners, as customers, is for them to achieve a 2-to-1 return on their analytics investment with us. We consider shared risk as one of the virtues of aligning around ownership. We share the risk, as well as the benefit, whether it’s a direct financial upside in terms of creating value for the business, improving patient outcomes, or reducing costs within a healthcare system’s ability to deliver its care.
The Catalyst Way, Partnership and Industry Leadership
In 2016, KLAS Research gave Health Catalyst the highest overall score among enterprise business intelligence (BI) vendors. In describing the rationale for the #1 ranking, KLAS said that Health Catalyst “continues to set the bar for performance and partnership” among BI vendors. The observation relative to partnership, especially partnerships that perform and deliver outcomes, is one for which we are especially grateful, and directly attribute to The Catalyst Way.
The Catalyst Way is the composite of our Mission, Cultural Attributes, Operating Principles, and Strategy, and serves as the filter and foundation for every partnership we establish.
Investing Is a Smart, All-In Commitment
As more and more healthcare organizations commit to investing strategies typically associated with venture capital firms and commercialization efforts typically associated with technology product companies, we at Health Catalyst stand ready to collaborate. These efforts are noble given the size of the task at hand, and our shared imperative to improve outcomes through a more efficient delivery system. As we travel down this path, we’ll need strong governance and transparency to avoid conflict of interest. At the same time, as an industry, we must seek new ways to deploy our talents, allocate our capital, and imagine new technological and business model advances.
At Health Catalyst, we are grateful for the opportunity work in such an entrepreneurial yet mission-oriented fashion with leading healthcare systems. Throughout this series, we will reflect on our experiences and lessons learned with our healthcare systems investors and innovation partners, and look forward to an active exchange of ideas and best practices