Few health systems positioned to innovate quickly, study finds

Even as U.S. healthcare systems increasingly declare innovation to be a top priority, most are still struggling to scale innovation quickly, according to a recent study.

Two-thirds of health system leaders report that their organizations implement and scale innovation somewhat or very slowly, and fewer than half have formal innovation departments, a study from the Center for Connected Medicine (CCM) and The Health Management Academy found.

The two organizations used extensive quantitative and qualitative surveys of executives from 28 health systems in the U.S. to gauge how health systems effectively structure and drive innovation efforts. The study included surveys and interviews with C-suite health system leaders including chief strategy officers, chief operating officers, chief information officers, chief innovation officers, chief financial officers, chief medical officers and chief quality officers. 

Two-thirds of health systems have a systemwide definition for innovation, according to the study. There was not a clear association between a respondent’s title and the corresponding definition of innovation, but it is evident that a health system’s approach to innovation is reflective of its system-level priorities and overall strategy. This suggests having a common definition of innovation is one way to underscore system-level priorities and ensure synchronization around strategy, the study said.

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According to one chief strategy officer, innovation is defined as: "Discontinuous or breakthrough change creating new value or improved results to customers and stakeholders."

And one health system chief innovation officer said innovation "must be a solution to an existing problem, measurable, and a fundamentally different approach."

The top strategic driver of innovation efforts is to generate additional revenue, cited by 52% of C-suite executives. Cost reduction ranks lower as a driver of innovation (33%), possibly because mature health systems have been trying to reduce costs for years. "With the low-hanging fruit picked, health systems are seeking new revenue streams," the study said.

Many C-suite executives also identified consumer experience and engagement as a strategic driver for innovation efforts, underscoring the increasing prioritization of consumerism among health system executives. Executives often point to the use of technology as a means to improve the patient experience and satisfy changing consumer expectations, the study said.

"Digital health is now part of our system strategy. This focus includes additional revenue generation, cost reduction, quality improvement, patient activation, and operational improvement. We see it as a key competitive differentiator," one health system chief strategy officer said.

Less than half of health systems have a formal process for scaling innovation or a formal innovation department (47% and 48%, respectively).

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Of the one-third of health systems reporting they can implement and scale innovation somewhat quickly, most (88%) have a formal process in place for doing so. That compares with 23% of health systems that report scaling somewhat or very slowly. Not a single respondent said his or her organization can scale innovation very quickly.

Most health systems with an innovation department—typically larger organizations—also have a defined innovation budget, and they’re more likely to have a single executive in charge of innovation, commonly reporting directly to the CEO, the study found.

“New entrants, evolving consumer expectations and decreasing operating margins have led health systems to place a greater priority on accelerating and scaling innovation. Health systems that will be most effective in executing their innovation agendas will be those that reconcile competing priorities by developing a clear, aligned vision across the C-suite leadership team,” Sanjula Jain, executive director of research and advisory for The Health Management Academy and leader of the research in partnership with the CCM, said in a statement.

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Health systems often partner with outside organizations to fill gaps in their innovation strategies. The most common external partners are technology companies (67%) followed by academic institutions (52%), the study found. Systems without a formal innovation department were more likely to partner with payers and medical device companies.

Based on the study findings, the organizations offer six recommendations for scaling innovation:

  • Define innovation: While definitions vary, most health systems focus on new approaches to problem-solving that create additional value, particularly for patients. Technology was seldom cited by respondents.
  • Align with goals: The top functional areas for innovation at health systems are access, information technology and data analytics, and patient and consumer engagement.
  • Structure people and process: Health systems with a defined innovation department are more likely to have a formal process in place for scaling innovation.
  • Empower decision-makers: Allocate a dedicated budget and appoint an executive with decision-making power for innovation strategy. 
  • Simplify signoff: Organizations that report being able to arrive at decisions somewhat quickly in their efforts to scale innovation did not list the board as a key stakeholder in that process. For those able to move more quickly, C-suite and service line leaders were the highest cited decision-makers involved in scaling innovation.
  • Maximize strengths: Systems use a variety of methods for enacting innovation, including internal initiatives (86%), partnerships (76%) and software and technology (67%).