The healthcare delivery industry needs to do more to fund healthcare innovation.
It needs to give innovative ideas a place to evolve, to measure the impact they can make on patient care and the economy, and exchange value in a way that enables sustainable growth for innovators. Over the last three decades, many insurance companies and providers — hospitals, health systems — became complacent under a system where healthcare was delivered and paid for irrespective of results. We’re suffering from a perspective of so long as that happens, everyone’s doing their job.
What we are seeing now is an incredible frameshift in the way healthcare is being paid for and delivered. The Affordable Care Act has introduced a major opportunity to pay insurers and providers for increasing quality while decreasing cost. But to do so requires development and adoption of new approaches and technologies. The current pace of change and the industry’s conservative nature is, in many respects, making it hard for innovators and startup companies to get new solutions to the marketplace.
It’s a countrywide issue, but it’s especially acute here in Philadelphia.
I applaud Independence Blue Cross for creating an innovation fund to provide capital to innovative healthcare startups in the region. I think that other insurers should be following IBX’s lead in doing that.
But on the other hand, it’s not enough to just provide funding — major companies in our area like IBX, Penn, Temple, Jefferson and others need to follow the lead of healthcare giants in other cities, many of whom are driving adoption of innovations and enabling them to turn into real businesses.
Despite being based here, I have grown my company largely through relationships that I’ve made with innovators outside of Philadelphia — in Miami, Atlanta, Boston — even in Louisville, Ky. Those areas also have high healthcare costs on a per capita basis, but there I’ve found organizations that have been very willing to try new approaches, take risks, adopt and test new innovations, and make it part of their business.
I look at the pace of adoption and the willingness to innovate here in Philadelphia.
Currently, we are moving much slower than other areas.
One area where we see this is piloting. Across the industry, but I think especially here in the Philadelphia area, piloting has become a dirty term.
Five or six years ago, a pilot project represented an investment by both innovator and adopter to test a new approach and see if it worked. It represented a mutual investment of risk and capital. More recently, with the increase in focus on entrepreneurship and innovation created by the ACA, I think providers and insurers have found themselves in a highly advantageous position where ideas and innovations are coming to them. They have the patients and they have the money. Instead of designing for mutual investment, we’re seeing many large organizations say, “We’ll do a pilot but we’re not going help with cost. We’re not going to make an investment.”
In my experience, pilots without mutual investment rarely succeed, and those that do get little attention paid, and little follow-on commitment in return for the value of the product. That doesn’t result in a sustainable business model for anybody.
Startups that are constantly forced to give their product away for free eventually go out of business. And when that happens, the innovation, as well as the purpose and value of the pilot is lost.
I’ve seen this first-hand. Six months ago I was on the phone with the head of innovation for a dominant integrated healthcare delivery network in the Philadelphia area.
Well-heeled, established Philadelphia businesses have been slow to innovate.
He said, “We really like your technology. We think that it could be game changing, but we also know that you’re a small company and we’re large and our brand name on your client list is worth a lot and so we’ll do a pilot. But you should pay us.”
This was coming from the head of innovation.
After that call, we adopted a clear rule: We only do pilots if we agree in advance that the contract will turn into a paid relationship based on the pilot hitting pre-specified performance metrics that support a strong return on investment. That should be a rule for all innovators and the larger companies nurturing them. Create a sustainable business relationship if the pilot works, or don’t pilot at all.
Philadelphia has one of the highest per capita healthcare costs in the country. We owe it to the patient population here to lead the market in developing and adopting new and innovative ways to deliver high-quality care at a lower cost. This region can and really should be the market leader in healthcare technology. We have a very strong base of leading academic research hospitals and medical hospitals. We have a number of incredibly successful integrated delivery networks. We have what many would say is the leading Blue Cross Blue Shield insurance company in IBX, and a very vibrant tech community.
All the ingredients are here for us to take an incredible leadership role, but we have been slow to act. Well-heeled, established Philadelphia businesses have been slow to innovate. Compare the number of provider organizations adopting forward-thinking healthcare models to other major metropolitan areas and you’ll see that despite our high per capital healthcare costs, we have a relatively small number of Accountable Care Organizations, and very few patient-centered medical homes.
It’s a real missed opportunity.
It takes leaders — I don’t just mean innovative startup leaders — it takes innovative corporate leaders willing to put money and business relationships behind innovation in order to build a new industry, and certainly in order to build a leadership role in an industry like this.
As a city, as an area, Philadelphia has to move faster if we’re going to position ourselves on the leadership stage in healthcare tech and innovation. As a self-proclaimed Son of Ben, I hope the corporate leaders of Philadelphia’s healthcare elite accelerate real business relationships to support sustainable innovation, or else we are going to miss it.