How Cleveland Clinic takes clinician ideas from the bedside to the boardroom

Cleveland Clinic Ventures Partner Todd Schwarzinger told Becker's the health system's venture capital arm is taking a "wait and see" approach to some of the artificial intelligence startups taking the healthcare world by storm.

Becker's talked to Mr. Schwarzinger to learn more about the health system's innovation program and the state of the healthcare investment market so far in 2023.

Question: What has been the biggest healthcare investment trend in the first half of 2023?

Todd Schwarzinger: It has been a tale of two worlds. In traditional healthcare, life sciences, med tech and even health tech investing, it's been a really difficult environment to raise capital for companies. But artificial intelligence has been a completely different story. You've got this dichotomy of some companies that are really struggling to raise capital and then some newer platforms shifted into leveraging AI in their solutions. Then based on the promise of some of those platforms, and the impact that can have on healthcare, you've seen a lot of capital flowing into those opportunities.

It is a tale of two worlds, and we've seen that internally too. We're very much focused on technologies that we've developed and fostered here at the Cleveland Clinic. The majority of our portfolio is companies that we've launched based on innovation here. Also spending time aligning external innovative companies back into solving really important problems for caregivers, and helping us to deliver better care for our patients.

Q: How are you handling the drop in funding in the post-COVID-19 digital health market?

TS: The pace of innovation has exploded. It seems like every company we're coming across today has some AI element in their story, or they should. We're very much "wait and see" for a lot of these AI-driven models. The pace of innovation might be accelerating quickly, but in in digital health and health tech, you come across the issues of reality and implementation of these solutions.

It may be really interesting, you may be applying AI to really improve a process or delivery of care, but integrating that into the existing paradigm of care and getting those systems adopted within provider networks like ours is just really difficult. It's going to take time to see how this ecosystem plays out.

Q: In a recent funding round for MediView XR, you partnered with Mayo Clinic. Are these types of investment partnerships with other health systems something you anticipate doing more of?

TS: That's a pretty consistent theme across the space. We really enjoyed working with the Mayo Clinic team on that transaction. It's a really interesting mixed-reality solution to support different types of applications.

Mayo Clinic did a view of the broader VR space and identified MediView as one of the top players, and we worked together closely on that investment. We are looking for other opportunities to work together as well.

Q: What innovation projects are you working on right now that you are excited about?

TS: The beauty of the position I'm in here is that we have a ton of new innovation that's coming through, in therapeutics, medical devices and health technology — so across all three of the verticals where we spend our time.

On the medical device side, we're obviously one of the leading hospitals in the world, so we're getting a ton of procedural innovation. Some of our top clinicians are innovating on a day-to-day basis on how they can provide better care, whether it be a new heart valve or some other device.

On the therapeutic side, we've got the Lerner Research Institute here, which is dedicated to that next wave of discovery in a therapeutic space. We have a host of new inventions coming through every year, new drug candidates, new platforms that we're looking to either potentially launch new companies or license to partners to help take technologies. Increasingly on the health tech side, we're using our data, our clinical insight, our care pathways and just the sum of our clinicians' knowledge to help drive forward some of these new platforms as well.

Q: How do you work with clinicians to bring their ideas from clinicians into the VC world?

TS: We're a part of a broader innovation team here at the clinic that basically is responsible for all innovation coming through and we established a pretty innovative model. Actually, two years ago, we redesigned our structure and it's pretty unique. It's a team of teams function. We've got four separate teams. Our engagement team that's focused exclusively on building connectivity into our various institutes and into our clinicians. They're building relationships. They're helping to identify new opportunities, new ideas, new inventions, helping to foster innovation and really building that kind of top of funnel for us.

Then we have a really detailed assessment process that helps us to identify which of those projects make the most sense for us to push forward, making data-driven and quantifiable decisions to decide what projects we're working on. 

We have a dedicated development team that takes those from the bench to an idea to something that we can either license to a partner or launch a company around. Then we have a business development team that's building those relationships with partners in the ecosystem, whether it be pharma, medical device or health tech. The last team is our ventures team and those best ideas where we think we can raise traditional venture capital around them and build a company around. We'll launch anywhere from zero to three companies a year.

Q: What advice would you give to other health systems considering launching their own venture or innovation studio?

TS: Innovation in care, innovation in therapeutics and innovation in medical devices is coming from providers, but it's also coming from innovative companies that are out in the ecosystem trying to take ideas forward. If you're not working with those innovative companies, you're missing a beat in terms of where innovation is going. I think it's really important that you have your finger on the pulse of what's happening in the ecosystem.

A venture platform is a great way to do that. You have regular dialogue. One of the things that we've tried to institute is identifying problems at the Cleveland Clinic as a starting point for relationships with external companies then try to then take those problems and solve them with some of the best and brightest new innovative companies through the ecosystem. Making these work is sometimes challenging. It's really important to be integrated with the overall organization. You have to have the connectivity to both leadership and you have to have the connectivity to the caregivers themselves to really understand how to help solve those problems with external innovative companies.

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