Commercial risk will be a critical catalyst of progress – it’s complicated, but is it possible? We think so.

Blog Post

Innovation labs' growing place in health care: What you need to know

March 20, 2017

    No matter what happens with the Affordable Care Act, hospitals will continue to work under the same imperative; they are going to have to provide cheaper care that more directly appeals to patient needs for convenience and cost transparency. The rise of new market entrants shows that traditional providers are not meeting all of these needs. 

    Below, I've pulled out some of the forces of change we're seeing and examples of disruptive innovation that have arisen to meet new market needs. Note that these market forces very much feed off each other and it's likely they'll create even more opportunities for disruptive innovation as they strengthen.

    Hospitals will need to adapt in order to avoid losing their patients and revenue to other care sites or to Silicon Valley tech innovators. Given the benefits of a financially healthy customer, suppliers have an incentive to help their respective hospital service line(s) adapt effectively. Some leading hospitals are building innovation labs (or centers) to originate new ideas and partner with companies like yours to transform the way they deliver care. Below, we'll show you an example of an innovation lab and share suggested areas you may consider collaborating on with a lab.

    Building an Innovation Infrastructure

    Hospitals will have to make changes of their own to meet the forces of change in their markets. Right now, many of your customers are being outflanked by disruptive innovations from nontraditional competitors.

    Your customers will make a wide variety of investments in response. They may begin investing in sustaining innovations that allow them to improve the quality of their services and hold on to their customers. These are obvious spaces for you to step in to support with operational support, educational programs, and data to inform clinical and economic decision-making. Other hospitals may pursue disruptive innovations of their own, several of which are included in the rightmost column in the above graphic. In short, there are more potential investments than resources to make them. Hospitals will need to find a way to make quick decisions and lead effective transitions.

    Hospitals don't know how the forces of change will play out, so many of the leading ones are focusing on how to bake an innovation process into their organizational culture.

    One trend we've seen supporting this is the rise of dedicated innovation labs or teams. Florida Hospital Orlando, Intermountain Health, MedStar, the University of Pennsylvania, and many others have put groups in place to evaluate new and out of the box investments. I've included a closer look at Carrinn Health (a pseudonym) which deploys two committees meant to prepare the organization to meet forces of change.

    Look at how Carrinn implemented a partnership with CVS Minute Clinic. After a strategy leader recognized a potential opportunity for a retail alliance, the innovation team worked with CVS to examine data and create a financial model. The innovation lab recommended the alliance during a meeting with the system president and it was approved an implemented. Many innovation labs feature partnership with system leaders and the rigorous data and evaluation process that allowed Carrinn to successfully scope and implement this project.

    Early thoughts on working with innovation labs

    The level of investment from providers and suppliers may be high, but view these innovation groups as a potential avenue to:

    • Pilot clinical/economic data studies on new products and services;
    • Investigate the potential for integrated solutions or value-add services; and
    • Examine alternative contracting approaches.

    At most hospitals that have them, innovation groups are likely to have influence across their system and be more open to creative support solutions from vendors than a traditional purchasing committee might be.

    Whether a hospital maintains an innovation-focused committee or not, they'll all have to make fundamental changes to adapt to market forces. It's time to also start thinking about how you'll take that next step toward innovation.  

    Have a Question?


    Ask our experts a question on any topic in health care by visiting our member portal, AskAdvisory.