"The folks in the investment group are focused exclusively on whether companies meet our investment criteria--whether an investment in them is a good deal to recommend to the board," says Hermann. That evaluation is made separately from decisions about whether an Ascension limited partner or hospital will serve as a beta site or otherwise test products that come out of companies in the investment portfolio.
The AHV team can inform Ascension decision-makers about areas "where our companies have products and expertise and want to find a partner to work with," he says. "We act as an intermediary. We don't mandate adoption. It doesn't work." Ascension's end users make their own decisions about that.
"That's been a learning curve for the companies we invest in because they see Ascension Health as being able to make the market-which we can, technically," says Tersigni. "But that's not how we approach it. We may end up making the market, but it won't simply be because it's a company we've invested in."
Profiting from Invention
Academic medical centers have long sought ways to bring ideas from their clinicians to market based on the ideas' innovative potential. But rarely have they been so involved from conception to market as they have in recent times.
"There are a number of barriers," says William W. Stead, MD, associate vice chancellor for strategy and transformation and chief information officer at Vanderbilt University Medical Center in Nashville. "It takes a particular mind-set to be an effective entrepreneur. And there are a limited number of medical center teams, certainly academic ones, that understand entrepreneurial people well enough to know how to lead them."
Still, that hasn't stopped a number of academic medical centers from developing their own venture capital arms as Ascension Health has done. Harvard-affiliated hospitals in Boston also recently set up a $35 million proprietary venture capital firm. Some still feel they'll do better and retain more control in some circumstances by directly investing in bringing their ideas to market without the help of venture capital--at least initially.
Vanderbilt was one of the first academic medical centers to take a more aggressive tack in 1998 by creating a small venture capital fund using a part of its endowment. "That money let the university invest in startup companies where that seemed to be the best way to get Vandy intellectual property out into the marketplace," Stead says. "Sometimes we license, sometimes we build companies, but we don't invest in companies unless we are part of the actual intellectual creation that underpins the company."
That was the case with the intellectual underpinning behind McKesson's Horizon clinical IT solution, a clinical decision-support system that was developed initially at Vanderbilt as a way to create a computerized physician order entry system using algorithms to decipher clinical shorthand, Stead says. In 2000, Vanderbilt formed a startup, seed funded by its venture fund to take the techniques to market. "We showed them to every major vendor, but none were interested in buying them," Stead says. "So in essence we created a management team and a business plan, raised venture capital, and McKesson came in as a strategic funder in that round." McKesson eventually bought the company out entirely and developed their Horizon Expert Orders product at Vanderbilt.