To integrate or innovate?

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As the business of healthcare undergoes radical transformation, many hospital executives are focused on two primary alternatives to keep pace: innovate or integrate with a partner. But this doesn’t have to be an “either or” choice.

In today’s fast-changing world, providers can, indeed must, innovate even as they integrate. The future of their business depends upon it, because as outside entrepreneurs are transforming healthcare delivery, they are, in many cases, simultaneously pulling revenues away from hospitals that cannot figure out how to compete, leverage or partner with innovative companies. Most of these companies seek to collaborate with healthcare providers, but hospitals repeatedly fail to engage with them.

Integration has taken precedence at many hospitals. The transition from fee-for-service medicine to value-based care, which requires providers to assume financial risk for the cost of treating patients, has accelerated new strategies, including the “urge to merge” among hospitals. These transactions make sense for some organizations, because in today’s increasingly cost-conscious environment, hospitals need to boost efficiency and economies of scale. So it’s understandable that many hospital executives are intensely focused on merger integration, aiming to strengthen their health systems’ finances.

Meanwhile, entrepreneurs are innovating at an unprecedented rate, creating new enterprises and services that sometimes siphon away steady business from hospitals and their physician practices. Independent urgent care offices, pharmacy-based health clinics, rehabilitation networks, and private ambulatory surgery centers continue to expand across the nation, all services that were once the domain of hospitals or physician practices.

Entrepreneurs are also tapping into growing digital healthcare consumerism, enabled by nearly universal broadband and mobile digital access, taking advantage of providers’ shortcomings in rapidly addressing their patients’ interest in digital offerings. For instance, ZocDoc allows patients to easily find a doctor and schedule an appointment on a mobile device, instead of visiting the hospital’s website where they can view information about a provider but cannot directly book an appointment. Better PT brings physical therapists to the patient, at home or office, instead of forcing the patient to adjust his schedule. Simple Contacts enables patients to have a mobile-based eye exam resulting in a prescription and delivery of contact lenses in the mail, rather than requiring time-consuming office visits. Using their technical expertise, entrepreneurs are creating these innovative solutions much faster than hospital organizations can.

The fact is, the entrepreneurial community has become both an asset — providing solutions that help hospitals provide better care — as well as a threat, as they continually chip away at the core revenue streams that providers have traditionally relied upon.

For the stability of their businesses, hospitals need to prioritize innovation to drive value for patients while creating new streams of income. Hospital executives must ask themselves, “Can I afford not to innovate?”

There are challenges, though. Hospitals are bureaucratic organizations, with cultures which may be resistant to change. They also must be sensitive to privacy and security concerns and abide by strict regulations, which can slow the innovation process.

Hospitals can innovate, but it requires investment in recruiting talent that can think out of the box with the ability to actually implement new ways of delivering care. It requires a commitment to become more nimble, less risk averse, and to expedite decision-making.

It is easier and faster for disruptors to operate outside the established system. So, in some cases, hospitals are creating spinoffs, to set free hospital-based innovators’ creative minds. This allows them to work independently, apart from the bureaucracy, then, at a later date, bring their innovations back into the system where they can be applied to benefit patients, hospitals and other care providers.

Another approach is to collaborate. Cedars-Sinai in Los Angeles has partnered with Techstars, which bills itself as an ecosystem for entrepreneurs, to create an accelerator for health tech startups. Last year 11 companies each received funding and space on the Cedars-Sinai campus, with most startups securing commercial relationships with the hospital at the end of the program. Massachusetts General Hospital and Brigham and Women’s Hospital have partnered with MIT’s Hacking Medicine initiative, which brings together experts in technology and health to fuel entrepreneurial and digital strategies that can solve healthcare delivery challenges. Hospital for Special Surgery Innovation Center has a multi-pronged strategy, which includes driving innovation from the inside-out by spinning off companies, developing and commercializing technology or partnering with companies to solve complex problems, as well as driving innovation from the outside-in, by engaging with early-stage companies to share intellectual property and knowledge that can advance healthcare innovation.

Technology holds the potential to improve care coordination; better track and reduce errors; streamline interaction with insurers; reduce paperwork; monitor patients between office visits, including their compliance with doctors’ orders; facilitate communication between patients and doctors; and engage patients more in their own care. These are needs begging for invention and foresight, and hospitals should play a role in providing the answers -- not only to raise the quality of their care delivery services, but also to maintain financial strength in a rapidly changing healthcare landscape.

To accomplish this, hospitals must do a better job of fostering viable environments for innovators to thrive while partnering with savvy entrepreneurs and industry to create value for patients.

 Leonard Achan HSS 1 Leonard Achan, RN, MA, ANP, is Chief Innovation Officer and Senior Vice President of Innovation and Business Development at Hospital for Special Surgery (HSS).

The views, opinions and positions expressed within these guest posts are those of the author alone and do not represent those of Becker's Hospital Review/Becker's Healthcare. The accuracy, completeness and validity of any statements made within this article are not guaranteed. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with them.

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