A new model for hospital collaboration & innovation: Nonprofit systems fund stand-alone Innovation Institute


As hospitals work to boost their efficiency and the quality of care they deliver, many are finding they need new ways to go about finding and creating solutions to their post-Affordable Care Act challenges. They’re also looking for new revenue streams.

With that in mind, one California health system put up $40 million to seed an independent, for-profit company that will help commercialize ideas that come from physicians and staff members while also feeding them promising new technologies and concepts from the outside.

St. Joseph Health is the founding member of the The Innovation Institute, launching today to serve as a way for health systems to develop, explore and collaborate on new innovations. And the institute’s leadership has turned to Cleveland Clinic Innovations for guidance; it has become the newest member of the Cleveland Clinic Innovation Alliance, a technology commercialization network that also includes health systems North Shore-Long Island Jewish, MedStar and ProMedica.


As of now, St. Joseph is the lone member health system, but the company’s structure  allows for six more to buy in. President and CEO Joe Randolph said he has letters of intent from two other health systems.

Within the Innovation Institute are three units. One, the Innovation Lab, will incubate inventions that come from the health systems’ staff  and leverage technology and healthcare companies as partners. Another unit, the Growth Fund, will invest in mid-stage emerging businesses — probably series B-type investments, Randolph said.

Since both of those entities will take time to generate cash flow, the institute will take care of its short-term cash needs through its third unit, the Enterprise Development Group

“Most health systems outsource some work, so if we could capture that work within the institute, it would bring in some initial revenue,” Randolph said. The Enterprise Development Group will consist of a portfolio of companies that the institute will buy to provide services to its member health systems, like coding or clinical engineering services, for example.

The member systems will also be able to contribute a best practice to the group in exchange for equity in the institute, which could then commercialize the best practice and sell it to other systems.

“Healthcare providers tend to be pretty risk-averse because they deal with patients,” Randolph said. “But when you’re looking at developing new products and ideas, you have to take some risk in the long-run and we think this model will help do that.”

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