This week I had the privilege to speak at the American Hospital Association’s Leadership Summit on a topic I’m passionate about, strategic investing in innovation. Hospitals and investing may not seem like they go together but sitting alongside the other panelists this week, it was clear that strategic investing—particularly venture investment—is continuing to expand in the healthcare industry as health systems recognize the need to support innovation. Throughout the panel we discussed how this approach can not only create better care for our patients, but also create market value which can be reinvested in future healthcare breakthroughs and care models. This creates a virtuous cycle of investment and innovation for our patients and communities.
I was joined by Robin Damschroder, FACHE of Henry Ford Health, James T. Olsen of Concord Health Partners. The panel was moderated by C. Douglas Shaw of the American Hospital Association.
Why Invest in Innovation?
The panel led with a question about why health systems are investing in innovation in the first place. I shared that corporate venture is one way health systems can support innovation sustainably. Through innovation, finding partners, and working with startups we have a huge opportunity to really pivot the industry. I used my favorite analogy: the banking industry and what it went through starting in the early to mid 90’s. Healthcare is a very similar industry in that it’s highly regulated with multiple types of players. It used to be all brick and mortar until people demanded different ways to access their finances. Today, chances are you do the majority of your banking without ever setting foot in a bank. That progress did not happen without investment and innovation.
By innovating and improving the healthcare experience in a similar way, patient hospital stays could be reduced or they may not have to set foot in a hospital at all. As we introduce more efficient ways of working with our team members—something we call the Digital Operating Model—team members can focus on operating at the top of their license, be a bit happier and reduce burnout. The first company Catalyst launched, vflok, was aimed at doing just that. Transforming the nurse scheduling experience. Equally important to the investment we’ve made in vflok is the access and insight our clinical team is providing vflok to refine and hone their product offering so this innovation succeeds in helping nurses and nurse managers—that’s where the magic happens.
By investing in early-stage startups we can shape the problem statements, products and solutions of promising young companies. We can provide them with invaluable insight and the ability to pilot inside one of the largest health systems in Georgia which can greatly increase their chances of commercial success; and ultimately we can create better care and market value which can be reinvested to benefit the healthcare ecosystem, Wellstar, team members, patients, and our communities.
How Do You Measure the Success of Your Investments?
All panelists offered insightful responses to this important question and I shared that at Catalyst we aim for our investments to create better care and market value for reinvestment. Ultimately, we’re looking for these investments to make us better. To make the patient experience better, to make delivering care better and ultimately better outcomes for patients.
A great example of this is our recent investment in Betty’s Co which focuses on expanding healthcare access among young women, those currently Gen Z. This is a unique physical (through mobile units) and digital model that is making great strides improving the patient experience for young women seeking care. The company is headquartered in Texas and with our investment Betty’s Co can expand their work, hopefully to the Georgia market where Wellstar is headquartered. Again, our team is actively working with Betty’s Co to give them the best chances of success as they scale to new markets.
There was a good sidebar about measuring the adoption of innovations within health systems and I shared that Catalyst’s first investments was in Engage, an innovation and venture platform where we, alongside other leading organizations like Coke, Home Depot, and Georgia Tech, evaluate startups for potential fits with Wellstar. Through this partnership and investment, we’ve evaluated well over 200 companies, launched 13+ pilots, and signed 7+ enterprise contracts. We’ve seen so much promise in these companies that we’ve made direct investments in Engage cohort companies.
What does it take to succeed with these investments?
I talked about how patience is critical for success because corporate venture is a different asset class and can take 5-6 years to see returns, with a full cycle potentially taking 15 years. You also need curiosity and a willingness to try new things. At Wellstar, curiosity is driving excitement and understanding of what the team is working on which is huge. The thousands of Wellstar doctors, nurses, pharmacists and other clinicians make up one of our superpowers: the powerful insight of being close to patients.
One of my points was that you also need curiosity and a willingness to try new things. At Wellstar, curiosity is driving excitement and understanding of what the team is working on, which is huge.
How should organizations evaluate prospective partners to find the right one?
I told the audience this question depends on what your strategy is because different health systems are going to approach this differently. Some may only want to do limited partner investment in funds; they don’t want to put together a team to do direct investments— that that’s not what they’re interested in. Their goal may be to get a good return and get introductions to startups and be able to understand where the ball is going.
In cases like that, you want to find good partners like my fellow panelist James Olsen, Founder and Managing Partner, Concord Health Partners who I’ve known for years. James knows the right folks that can make those introductions, can help evaluate opportunities and provide resources.
We’ve constructed Catalyst differently. Our innovation and venture efforts are all under one roof for a reason, and that’s because we need that level of communication. We need to be working together, especially with early-stage startups when there is so much that we can influence by being a single team doing both venture and innovation. It also helps us see where the gaps are, and that’s where Catalyst Studio comes in.
Our team is co-creating solutions with startups like Moth+Flame, an award-winning virtual reality startup. What began as a pilot was quickly scaled to an enterprise-wide contract with Wellstar’s Learning and Development team. When Wellstar’s director of Palliative Care, Dr. Grandhige, experienced this training for herself she immediately saw the potential to use this powerful and immersive training with her team. Working collaboratively with Moth+Flame, we co-created a groundbreaking new VR training library called “Conversations in Healthcare” to help palliative care team members have effective yet extremely difficult conversations with patients—think stage 4 cancer diagnosis.
Identifying this gap in the marketplace and developing solutions to meet it is another exciting opportunity for Catalyst.
I also stressed how important mission-alignment is when evaluating potential partners. Wellstar’s mission is to improve the health and wellbeing of every patient we serve. A prospective partner may be able to generate outsized returns but if they are not aligned with and support our overall mission—they’re not a fit.
I encouraged the audience to consider whether a potential partner can provide exposure to industries or ideas beyond your own. We believe not all healthcare problems are going to be solved by healthcare solutions and actively seek partners that can help us look beyond our own backyard. The next breakthrough idea impacting Wellstar could come from the transportation/logistics sector, or from the banking or retail sector.
Consumer expectations are continually being reset higher and higher by other industries and healthcare many times is playing catch up. Find partners that push you and your team to explore beyond healthcare.
Last point and possibly the most important: the most critical partners you’ll need are those internal to your organization. For pilots, we know you’ll need at least two champions within the organization to successfully execute and scale. On the investment front you’ll need buy-in and multi-year support from board and system leadership to be successful. Over-index on these critical partners.
I’m grateful for the opportunity to share these thoughts and hope they help other health systems find ways to sustainably care for patients in the decades to come.
