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Geisinger launches startup with $40M backing to help health systems implement reform

2:00 pm by | 0 Comments

EPS PhotoGeisinger Health System is frequently held up as a national model for other health systems from developing and implementing services to improve patient outcomes and reduce healthcare costs to cutting down on readmissions to establishing patient-centered care homes. Now it’s taken those services and has packaged them into a startup that will offer them to other health systems.

The executive vice president of innovation at Geisinger, Dr. Earl P. Steinberg, will helm the new company called xG Health Solutions. Oak Investment Partners has invested $40 million into the startup, which will have its own board and will operate as a separate company, though four employees will split their time between the health system and the service provider and consultancy. Steinberg told MedCity News in a phone interview that although it has 28 employees, in two to three years it expects to grow that to 100.

The move at the Danville, Pennsylvania-based health system is part of a plan four years in the making, but which picked up speed with Steinberg’s hire 18 months ago. Steinberg worked for Indianapolis-based health benefits company WellPoint (NYSE: WLP) after it acquired his own company, Revolution Health, in 2008.

Among the services it will offer are ProvenHealth Navigator, a patient-centered medical home with data-embedded case management. It will also provide consulting, population health data analytics, patient- and population-focused care management, healthcare IT optimization and third-party administration services.

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Although it seems unusual for a healthcare system to launch a startup offering these kinds of services, Steinberg points out that isn’t all that different from what some other groups have done. Cleveland Clinic launched Explorys in 2009. Earlier this year, Mayo Clinic formed a joint venture to improve rural healthcare called Allevant Solutions with acute-care rehab specialist Select Medical Holdings. Still, Geisinger has spent the past year pilot testing its approach and has been working outside of its health system to implement programs to reduce hospitalizations and readmissions. “The preliminary data we have suggests we have been successful.”

The move reflects the reality that healthcare systems are looking for new ways to generate revenue, particularly to try to offset the costs they face to implement healthcare reform. Although Steinberg acknowledged this was one reason behind the new company, he said it was not the driving force.

“The driving force for Dr. [Glenn] Steele (the CEO) was a sense of mission and interest in the need for change in the healthcare system as a whole. At the same time, he wanted to produce an economic return and he understands that Geisinger,  like every provider, will be under pressure to further reduce costs, so diversifying the economic return is viewed as a desirable thing to do.”

Under the terms of the agreement between Geisinger Health System and xG Health Solutions, Geisinger has licensed all of the healthcare improvement related to its intellectual property that exists now and over the next 10 years to xG, and xG has agreed to license to Geisinger all the intellectual property it develops.

“We are envisioning this relationship as being synergistic and view Geisinger as the main engine of innovation and xG taking that innovation out to market,” Steinberg said.

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Stephanie Baum

By Stephanie Baum

Stephanie Baum is the East Coast Innovation Reporter for MedCityNews.com. She enjoys covering healthcare startups across health IT, drug development and medical devices and innovations deployed to improve medical care. She graduated from Franklin & Marshall College in Pennsylvania and has worked across radio, print and video. She's written for The Christian Science Monitor, Dow Jones & Co. and United Business Media.
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