May 20, 2022: How do mid-size health systems get funding for investments that will spark innovation? Joel Vengco, SVP and Chief Information & Digital Officer at Hartford HealthCare and Jeffrey Sturman, Senior VP & CIO at Memorial Healthcare System join us today to discuss. How do you narrow down your investment focus? What are the primary benefits of an innovator working with a health system? How does this funding stand up from a governance standpoint? What role do other health systems play in the investing process? How do you de-risk investments?
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Today on This Week Health.
Organizations the size of mine have to look at partnerships, have to look at new ways to be innovative and creative in moving the needle on health care. And one of those ways is investment in venture capital companies. And another way is partnering with other healthcare systems through this investment capable solution that we can bounce ideas around.
Thanks for joining us on This Week Health Keynote. My name is Bill Russell. I'm a former CIO for a 16 hospital system and creator of This Week Health, a channel dedicated to keeping health IT staff current and engaged. Special thanks to our Keynote show sponsors Sirius Healthcare, VMware, Transcarent, Press Ganey, Semperis and Veritas for choosing to invest in our mission to develop the next generation of health leaders.
all right, here we are for the keynote episode. And if you're watching on video, you know that I have a Baylor hat on, a Baylor shirt on and my daughter graduated from Baylor. So I am flying the colors. I am a proud graduate father. I'm looking forward to today's show.
We're going to talk about innovation investments for small, mid sized health systems and what they do with those investments to spark innovation. We have Jeff Sturman, CIO CDO Memorial health system, and we have Joel Vengco, CIO CDO, Hartford Health 46 days into the job. Is that close.
That's right. You're spot on.
But, oh, you got a ton of experience at your previous role doing this, this very same thing. So gentlemen, thank you for joining us. I'm looking forward to this conversation. I'd like to start with each of you talking about your health system's journey into funding the innovation investment.
Maybe what was the spark for doing that? Where did the money come from and how much we're talking about in terms of what's set aside to do this, and then later we'll get into what do you do now that you have the board commitment and the leadership commitment for this Jeff, Jeff, we'll start with you.
Yeah great. Bill always good to be here, Joel. Nice to see you. So thank you bill again for doing this and posting these these sort of sessions. I know we all, we all find them valuable in the industry. So Memorial healthcare system, I know I've done this before, but six hospitals south Broward county of Warda sort of Southeast just south of Fort Lauderdale, north of Miami Dade.
We are a safety net public health care system. Approaching two and a half billion dollars in revenue. And like you said, mid-size healthcare system and probably the grand scheme of, of our industry these days. And really frankly the ability for us to make investments, like what we're going to talk about today and stay out in front of innovation is sometimes challenging.
And so. Especially for a public safety net governmental organization like ours. So our charter to some degree limits our ability to, to do some kind of a, what I'll call innovative or or ventures outside of. Well, what I get I'll say is outside the four walls of our hospital system. And so we have an arm that sits over top of Memorial healthcare called Florida community health network, FCHN. And FCHN's mission is actually purely an investment arm to serve the south Broward health care district and that's Memorial health care system. And so that investment arm allows us to make investments in. A multitude of, of areas whether it be laundry services, nurse staffing technology and we've kind of done that, all that in itself is a, fund that lives on its own has its own board and sits again over top Memorial. In addition, in the last year, we were able to participate in a digital healthcare only. And through investments from FCHN Jen we're funding that fund. So that is a focus for us to look at digital investment opportunities.
And again, staying out in front of innovation and I have a bias here and I'm sure we'll get into this further that organizations, the size of mine have to look at partnerships, have to look at new ways to again, be innovative and creative in moving the needle on health care. And one of those ways is investment in venture capital companies. Like what we've done. And another way is, again, partnering with other healthcare systems through this investment capable solution that we can bounce ideas around, like. So I know we'll get more into that. Bill
we will, and we're going to talk about strategic investments versus more venture capital investments, trying to make money outside of because there's different models that exist within healthcare. Joel. You might have back and forth. If I think about it, you might talk about your central only 40, some odd days into your Hartford health stage.
When you talk about BayCare a little bit, but give us an idea of, of how these things start and where the funding comes from and, and how it gets stood up from a governance standpoint.
Sure. Yeah. So yeah, this was just, as you mentioned, bill prior to this 40 let's call it 50 days ago, I was at bay state health, which is a health system, five hospital health system, roughly 3 billion in Western, Massachusetts.tern part of Massachusetts in:
And the question was, what if we created a channel an environment, a platform where our collaborators internally, externally could work with us to solve. Some of the hardest problems that we face. And the hypothesis at the time was that the problems that we faced are very similar to what the average health system would face.
So if it worked in our organization, it would likely work in other organizations, many of the organizations that are out there in the country, like Jeff's organization, for example, and with that hypothesis we sort of went on to say, okay, then how could we. Invite these organizations here, what problems could we try to solve?
How do we involve the institution writ large to be able to participate in what we would consider an innovation process. And then how would it fund itself so that. The question that that created all these other questions. And I had a, an idea in mind first and foremost, to get funding from the state to get some capital funding, to create an environment, a really capital to, to develop a space where we could house individual.
Companies or, or individuals themselves who would want to work on solving these problems? From there, we ended up creating a process where we developed a sponsorship model. Where large organizations and, or fairly well capitalized startups, let's call it mid to late stage. Startups could leverage our assets as a health system to essentially progress their product development, their startup idea, et cetera, and and sort of run it through its paces in a real live health system.
And that was sort of the intention there. So we got capital from the state roughly 10 million to open up this space and infrastructure associated with that space. We then had to also create a business model because that was part of the grant agreement was in terms of the operations and the expense of the of this new innovation space, you have to figure out.
Make it solvent, run it over the next seven to eight years. And that was what necessitated and created that that, that model and from there, what we ended up doing was really bringing in startups, like I said and we matched them up with. Champions in the enterprise who had problems to be solved physician burnout patient engagement analytics problems and models to be solved so that we could have in a next best action for clinicians and our patients supply chain issues.o see, because as from really:
You've got a whole bunch of startups that are being capitalized, funded, et cetera. And there's like a dozen of everything for every problem that you want to solve. And so this allowed us also to filter through. And work through those problems, identify those organizations that would really help us solve those challenges.
And that's really the process that we undertook that then led to, and we'll, I'm sure we'll talk about this. This notion of, well, how do you know. Piece of, of the action. One of the things that we might want to do to, to create an infusion of funding, to, to fund the pool of startups and, or innovations that we're starting to see come through our innovation center, which again, as it's called tech spring, and that was what we called it at bay state.
And that led to partnerships with some some VC firms and also. Sort of a, more of a local kind of investment capability that enables us to also fund some of these these programs and projects. So that's a lot to say that, that to go through the history, but it was, it was really about solving problems initially.
And innovation turned into. Solution development and real benefits to the health system. And then we created a, at some level and a creative process that benefited the organization.
So getting to the heart of it, because we have incubators, we have accelerators, we have VC, we have strategic, we have a bunch of things, but I think the question I want to ask to get to the heart of it is what would define success for your innovation program. So, Joel, we'll come back to you real quick. What would define success for for the, the work at Baystate
So the success for us was really particularly at the, at the time we initiated the our innovation center was, could we solve the problem at hand?
So it's strategic solutions to the problems that that Baystate was experiencing.
That's right. And we, we didn't have our eye on, can we make money on this, right. That wasn't the initial intention. I'll give you an example of a great company that came through early on. Careport I don't know if you've heard of that company. Right. So they were they were eventually bought by well investments and for, it was like 1.3 billion or something like that.
Don't quote me, I think it was 1.3, 1.5 billion. But you know, we were looking at. Partaking in a sale of that company and didn't think that it was something that was like a Google, like investment. It was more of could it solve our problem on the post-discharge and subacute transition of patients and it solved our problem. And solved a lot of other organizations problems and that created. You know this I think snowball of real value and benefit. But I could name another half a dozen other where the same thing. So.
But that would define success. It's solving strategic problems that you guys had.
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Jeff, what would define success for your.
Yeah, I think it's a multiple levels of success. So one, like Joel said, obviously the strategic value is of most significance. What's going to move the needle in terms of patient care. I don't have the organizational setup or like even the financial wherewithal is set up up what I'll call an innovation center. So we have really leveraged the relationship we have with our venture capital. For two reasons, one to help set up a level of innovation and really, again, move that needle from a, whatever the needs. And to investment. So really, I don't look at it as, as much as the investment opportunity. I know my organization and certainly FCA, Jen, as I talked about previously, looks at this purely from an investment standpoint. So success for us would be I get to vet all of these various companies that come through the VC, figure out which one of those is going to fill a gap or need for me at Memorial. Help to implement even sometime be an early adopter of those solutions, because many of these companies that get introduced to the VC is an early stage and early stage of their evolution.
So we'll help them develop their product. We'll help them then hopefully. Build that business case and recognize the value that it can bring to Memorial. As Joel said, my hope is that through other partnerships, other healthcare systems that are vetting this, these solutions with me and the VC, that we're all moving down a path of similarity and like, Whatever's going to work well, for me is probably going to be equally applied to other healthcare systems. So I think these things can take off. So from a success standpoint, it's clinical, it's quality, it's financial and it certainly the investment side of things.
Yeah. I'm trying to figure out where I want to go. Now. I want to, I want to discuss how health systems work together. I wanna discuss how you de-risk some of these solutions.
let's start with this though. It sounded to me like you were saying early stage. And when, when had the innovation fund at St. Joe's, we were focused on strategic investments that helped us deliver care. And the the thing about that was the, we generally used that money to solve problems that people weren't solving.
yet Right. So it was, it really was early stage companies, people with really smart ideas, really brilliant, and they were sort of playing around, but and, and we brought them in and then we provided them guidance. We connected them with our people and said, no no no this, you have to understand the business model.rying to solve things back in:
you're looking at
I think this is what distinguishes the let's call it the small to mid-size health systems and the really large ones bill is. that for us, when I was at Baystate the margins are razor thin. And so to be able to I don't want to say experiment, but get into something that is maybe five years out was, not something that Baystate was interested in. Yeah, that makes sense could you help me with my discharge or my my ed throughput in the next 12 months to 14 months and their mids And that's why you started the mid stage late stage kind of company model, because we knew that those. individuals Maybe already had a series B, they had some funding to put in. They had maybe a couple of customers, but they needed somebody bigger and they could solve our problem within the next six to eight months or at least start to tackle it. So that, that was for us what differentiated our identification of those innovators.
And because they're at Series B and whatnot they had longevity, you, you knew that were going to be.
Yeah, that's right. Right. And we, and I mean, we, we dabbled in some of the early, really early stages where, or there were they didn't even have they had friends and family and, and I wanted to see what that felt like.
and some of them were so early. And so on the edge bleeding edge that even the folks that I saw had problems that this could be solving. Couldn't understand or wrap their head around how they could use it to solve their problem. And, I don't want to sound disparaging to a small health system or community-based health system, but they didn't see it the same way that let's say a mail or
the number one thing I always say to people when they say smaller houses versus a larger house, it's so much the biggest thing. It's like, you can't make as many mistakes. Yeah care, your investments have to be good investments. So you're not, you're maybe not taking the risks that a larger house was, was going to take. Cause they can absorb those. At least they used to be able to absorb those kinds of risks. So,
And bill, we see a similar to the way Joel described it, but also we look at this. Look, we're not, we're not doing a lot of bleeding edge investment, meaning these are startups and unproven in, in a sense of functional functionality. I mean, sure. There's a lot of startups we work with, but these are kind of almost table stakes for us now in the industry. And there's so many cats and dogs out there. I'll give you this example. So remote patient monitor. Everyone, every healthcare system needs probably be doing some level of remote pitcher monitoring for chronic disease conditions for primary care, for value-based care population, health requirements, and all of that makes sense, but there's so many vendors out there in the marketplace. So how do you figure out which one you want to play with and how do you want to move the needle again? Quick enough and in a smart way. So we've worked with a very early stage company in the remote patient monitoring world. And I say early stage because they don't have a lot of experience doing this at all 20 different healthcare systems.
So we're working with three or four, which will build integration with our EMR and have we've already done that. In a lot of ways, we're putting them on the map and proving the case, study around what they can provide and we'll help them evolve that company it's early stage for them in the sense that they're early in their technology footprint, they're early i their investors.
It's not early from an industry standpoint of rPM. I mean, RPM has been around for a long time now. So it's that sort of investment that we're looking at, not necessarily leaving edge technology.
Talk to me about how health systems work together from time to time, I hear these stories of how health systems are working together to sort of de-risk some of the things that they're doing. And one of the ways we de-risk is multiple health systems using the same solution provides that, that base to know that that company is on solid footing. Jeff, why don't you start with that one? How can health systems de-risk and how have they worked together?
Yeah. And so, and some of the folks that maybe will even join us on this call later on, we'll see we've worked great with healthcare systems and candidly. I, again, I believe that healthcare systems have this kind of collaborative way about doing things that a lot of under other industries just don't have that in their DNA. And so I look at this as I got a lot of smart people at Memorial But Joel has got a lot of smart people at Hartford Chad has a lot of smart people at St Luke's and the list goes on and on.
And if we can pull together all of these resources to vet information, to look at where we can actually do things in similar fashion, because I know we all think we're different, but the reality is how different is my healthcare system and the delivery of care from Joel's up, up in the Northeast. Even though I'm in Southeast and I would venture to say that.
We're not all that different. I think there are some nuances obviously to geography, but in large part, how we're going to treat someone with the same chronic disease. It should be based on best practices and protocols that we all can live by. And so I think that level of collaboration and partnership actually is exactly what we need to do.
It's where I see the biggest value. I mean, yes, we're talking to you bill today. I think so much of your audience takes information from this and learns from it and applies it. So what we're suggesting as part of the fund that work. Is actually creating this kind of coalition of resources that we can bounce ideas around with and help prioritize because no one has enough money to do everything they want.
So we really need to have those ideas explore further. And again, frankly, we're not going to be able to compete with some of the big payroll organizations and probably some of the more innovative companies out there, like. And Amazon and Google. So just staying out in front of this stuff, I think requires us to really combine forces.
Yeah. Or even the UPMCs and the Providence world. I mean when they have 50 people just to the investment side, it's you have a team that, to vet it July, I think I was talking to, if I'm not mistaken, I think I was talking to Tressa Springmann and she was talking about how you guys collaborate in that kind of stuff. So you, you have some stories on this collaboration as well.
Yeah. W I had this idea of creating what I called a an innovation network for. Small to midsize health systems. And and so we did an experiment with Tressa at lifeBridge, she's a wonderful CIO at LifeBridge very innovative and, and so we stood up a TechSpring instance at LifeBridge and we call it. TechSpring at LifeBridge and the idea was, well, actually she called me, she said, Hey, Joel, I'm really interested in what you did with, with TechSpring. Can you help us do that here at we're interested in doing that at LifeBridge. And so I said, how about we try to an experiment and we help you accelerate your innovation. Center and process and culture. And we'll give you our secret sauce, cause it took us two and a half years to really get the cycle of everything from legal to compliance, to process and bringing folks together, et cetera, and getting a pool of innovators. Anyway that's a long story, but the short end of it is that we ended up creating that instance and what we attempted to do was, was share in the pool of innovators who would solve problems that were very similar to us. And sometimes what was interesting was we might not have the the appetite to take a risk on a particular startup, but we knew that, or at least many of us on the informatics and technology side knew that it could solve our problems.
But Tressa and her champions and her clinical champions are business champions. We're like, yeah, that's something we want to use. So we ended up seeing kind of a a cross pollination or, or a trade if you will, of vendors that we would bring in that we thought was, were. But we didn't have the appetite to maybe test it out and she would do it instead.
What I added division was the larger consortium of sorts, where we would have those types of a similar size institutions. And to your point, de-risk a certain investments, whether it's a straight up investment in buying that product over time, or if you actually have. A venture fund. With maybe this consortium of mid-sized institutions, you could identify products that, that were ready to go and get further invested and, and, and expanded, or you could identify.
For them to improve the products. And so I we got as far as LifeBridge and then the pandemic happened. And so then things didn't go further. But but that, I think it's still something that's quite necessary because we do it. We do see large institutions doing this, right. The obvious of the world are doing it with large institutions, but not the small mid-sized health systems, like the ones we're talking about.
Yeah. What's interesting is people are going to sit here and go, why don't, why aren't the two of these guys talking. And the reality is you guys should. I mean, you, you knew of each other and run in the same circles, but you just met at the beginning of this call, but you're both talking about the same thing essentially is there's, there's a there's value in bringing this group of people together, either under a fund, like like you're talking about Jeff or, or essentially some sort of consortium.
And as you said, I, I think. Avia used to do this. I don't know if they still do their, their business models. It's it's morphing a little bit, but back in the day, that's what they used to do. They used to run these things for, I mean, cause that's, I was a part of Avia and they used to run these. I forgot what they were, but essentially four or five health systems. We're all looking at a nurse call. So it's not a nurse call would be too easy, but some sort of digital solution, we'd all get on the line. We vet the various things and then Avia would essentially run the process for us and come back and say based on the criteria, this is this is what makes sense.
And then as a health system, we had a choice to make them. Maybe our team didn't like the, the number one, one, maybe we liked the number two, one we could invest in the second one or the first one. But there's value in, in in coming together. I, I think people think that there are there's that you guys just naturally get together. Is there not a group yet? That just gets together of these? I know the CEO's get together, but what about the. The the digital officers or the investment officers, is there a group that naturally gets us group gets that those entities.
It's a great question. And I would say no. And I know Jeff agrees with me. I, I think there are some small pockets of some small groups and I think we've attempted to do it in our own ways, but yeah, there's not been really a, kind of a, a function that's sort of brought these organizations together. Well, there are, I mean, there are obviously. Like I said, pockets and small funds that are bringing folks together, but I'm not like if some of the bigger ones that I've, I've seen I was going to use an example for you, bill the folks down at in California, those guys staff go cause a great guy.
But I I think about that model and I think about the institutions that are in that model and they're the biggies, right? They're the, they're the ones that are. in the $15 billion range of, of revenue there's still not a fund or a a group like that for the three to $8 billion organizations.
And I'll be honest with you. I've had some discussions with, with funds that our a hundred, 150 million, 200 million. And I, I float that by them and they're interested but you know, I can never really get them to sort of help me figure out how to, how to really create that kind of group that has what I would consider some leading edge small to mid-sized organizations who could really, I think, hit the railroading with these products.
what you both described and bill, when you really describe as exactly what we hope can turn out of this, what I'll call this innovation council as part of this VC investment that we've made here at Memorial, because we would love, and we already have probably three or four. We, I think we have four health care systems participating as LPs on this and investment coming from multiple sources. As memorials made this investment and it's, it's at the end of the day, not a huge investment over a period of time, but it's putting real money in play here. And so. Again, we look at this as the investment opportunity. I look at it from the partnership of an innovation opportunity. So if I can get Joel and Joel, you and I should talk after this call to be part of that, I'm going to trust a lot more that we're getting the right source of knowledge in these sort of discussion.
Solutions and make sure that these are things that make the most sense for our industry. There's just, and again, one of the benefits of big benefit is that this venture capital firm that we're working with are people who have been in healthcare and technology for a very long time. They know this space and they have the expertise and the resources to do a lot of the vetting for. So I love that.
Yeah. The exit question, I think is what's your learning so far. If you had to share one learning, somebody just got the CDO or or investment innovation officer title. What's your one, one learning in putting these programs together. Jeff, we'll start with you.
Yeah. I mean, I think we said it earlier. I think you got to always be focused on what's the issue that you're trying to address. So what level of strategy?
What's the, what's the focus. If you go down this path of trying to solve everything you won't solve. anything So be very focused on what you're trying to solve and make your investment in those areas. Because again, as Joel said it, and I said it a couple of times now, if you're going to solve a particular problem for your health care system, that would likely can be extended to many, many others. So you're going to make money at the end of the day, which is always goodness, I think, but better than that, you're going to take care of a particular need for your healthcare system.
Yeah, I would agree with Jeff and figure out what the problem is that you're trying to solve. Get champions. And the other thing is, is that innovation is, is not just sort of throwing caution to the wind. There's a process. And that process evolves over time. And that process includes some things that are just absolute basics like compliance and legal. But then there are the things that, you know I think as it professionals, we also have as a strong foundation, it's project management, it's development of whatever you want to call it an S bar or a problem statement, a charter managing that project and then understanding change management and adoption, because one of the things that these companies don't really understand, especially when the startups is H how do they really adopt or get their technologies adopted? It's one thing to say, I'm going to solve this problem. But there are so many pieces of the workflow that they don't take into account and other technologies they don't realize that it's hard to actually change the workflow of a clinician or even an administrator and health system. They need assistance and coaching on how to really adopt their technology as good as it may be. And I think those are the things that we've realized over the course of our run.
Fill out and leave you with one other final thought, maybe on the innovation side and not the investment side, but the innovation side. And it's probably overused, but I'll say it again. We all have to take some risks. We all have to figure out and take some. But when you do, especially in healthcare systems, as you alluded to earlier, like my size, those bets have to be done quickly and therefore fail fast. Don't be afraid of failure. Failing is how we're actually going to learn and how ultimately we're going to innovate, but just fail fast enough, right? Yeah. So the next opportunity and with thank you, bill.
Absolutely. Hey, I want to thank you too for sharing your experience and this really appreciate it. And if people want to reach out to you, they can they can find you or they can reach out to me and I'll connect them with you. So again, thank you for your time. Really appreciate it.
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