Summation's unique partnership between nonprofit hospitals offers a novel approach to fuel innovation.
When MemorialCare, a nonprofit health system in California, decided to amp up its innovation investment program, it didn't look far; it partnered with another California nonprofit healthcare system.
In 2014 Summation Health Ventures of Long Beach, California, was founded as a joint venture between MemorialCare and Cedars-Sinai in Los Angeles, a nonprofit academic healthcare organization. Together, MemorialCare and Cedars-Sinai have a total of six hospitals with about 2,500 licensed beds, 5,000 affiliated physicians, 22,000 employees, and 250 health care provider locations serving over two million patients annually.
The strategic healthcare investment fund aims to accelerate entrepreneurial solutions for the healthcare systems. It already has propelled the growth of more than a dozen startups.
Summation board member Barry Arbuckle, PhD, president and CEO of MemorialCare, which operates four hospitals and 200 care locations in Orange and Los Angeles Counties, spoke with HealthLeaders' associate editor Jack O'Brien about how this progressive partnership evolved.
Arbuckle addresses the distinctive philosophies they practice, plus the advantages Summation delivers to the health system and the companies they invest in. Following are edited excerpts from that conversation.
Brant Heise, senior managing director of Summation Health Ventures, will present more insights during the NEXT Hospital Innovation conference October 7-9 in Dallas. [Editor's note: This conference took place in 2018.]
1. Innovation Starts With Your Investment Framework
About 25 years ago, MemorialCare started making private strategic venture investments to stimulate innovation. As initiatives ramped up in recent years, a new approach emerged. Arbuckle explains:
"The challenge for us as a health system was that the people that were being tapped to work with these new companies had fulltime jobs as physicians, nurses, pharmacists, and IT personnel. At some point, it began to consume more and more time, so we thought it would be beneficial to create a new strategic investment fund with other partners to leverage and expand the activity we had been doing for many years.
"Adding another healthcare system as a partner in our strategic investment activity offered substantial value to the process. For us, this value included gaining another perspective on innovation opportunities, the ability to work with more individual companies, tapping into another talent pool to help further develop and contribute to the companies that we are invested in, as well as increasing the opportunity for companies that we are invested in to work with multiple healthcare systems as they refine their products, services, and technologies."
2. The First Priority is Not ROI
Arbuckle shares Summation's distinctive approach:
"We're a little bit different from a traditional venture capital investment company in that our first priority is not a return on investment for us as investors. Not that that's a bad thing—and we've certainly had some wonderful successes—but our real interest is determining whether a product has the potential to improve the healthcare value equation. Our choices are based on whether we believe it can help reduce costs and/or improve clinical outcomes or, obviously, both.
"That's really what's been driving us more than anything else. If it works from that perspective, we believe that, at some point in time, the startups will either be sold to a larger company or do an IPO. In the meantime, we work with them to help develop that product.
"If we do our job well, we know, eventually, a handful of these companies are going to make a significant positive difference to our community mission and to help us as a healthcare system. This success can then be leveraged by other healthcare systems. Hopefully, we will make a competitive return on our financial investment as well."
3. Exploit Your Environment and Expertise
A strategic investment fund based in a healthcare system offers innovators advantages that cannot be easily replicated elsewhere. Arbuckle explains how Summation leverages that position:
"Ours is not a style where the investments are purely passive. We like to help the company further develop and refine their product and/or understand how to market it into health systems, or physician groups, or whomever their clientele might be. We find that particularly useful for very early stage companies.
"We're in a unique position. When startup companies come to us for funding, they get something that the big funding houses and angel investors can't deliver in ways that we can." They want to sell their products or services to hospitals, health systems or physicians, and to clearly understand how to position and develop their value proposition to enable that,” he explains. "That inside perspective and hands-on collaboration they get from us as investors and partners adds tremendous symbiotic value to the relationship.
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"On a number of occasions a vendor will come in to demonstrate their product. They think it's the next big thing, and it sounds good to me, but I'm not a clinician. I can take the device back to, say, our interventional cardiologist. I'll explain what it is, and what the company claims it does, and ask if the specialist sees a benefit.
"We've got a unique advantage of being able to tap into the expertise surrounding us. That allows us to identify, invest in, and help develop things that we really believe can help improve the value in healthcare, clinical quality, and cost."
4. Use Returns to Fuel Maximum Potential
Arbuckle describes yet another exceptional aspect of MemorialCare's investment philosophy:
“Strategic investing adds value and benefit to the healthcare system in several ways. While it certainly has the ability to provide financial gain and contribution to the system from competitive financial returns on our investments, strategic investment activity also contributes both tangible and intangible benefits that accrue to the healthcare system.
“The tangible returns can include things like a reduction in the cost of care due to decreased infection rates enabled by better technology, or a reduction in a patient's length of stay. Efficiencies in the workflow and care process can be gained by new, innovative technology and tech-enabled services. We have found improvements in our communication process and better coordination of care through enhancing the flow of information along these lines.
"Intangible returns and benefits we gain by working with these early stage, innovative companies can include, among other things, improved patient satisfaction and insights.. It's also had the side benefit of infusing a spirit of innovative thinking throughout our organization. People are increasingly aware of us working with these products or services and piloting them. It keeps our workforce on the front line of some of the most innovative developments in healthcare."
3 Innovations in the Making
Among the companies Summation is currently shepherding through its pipeline:
- Gauss Surgical develops real time blood monitoring solutions to provide an accurate and objective estimation of blood loss, helping to optimize transfusion decisions, recognize hemorrhage status, and improve patient outcomes
- Prescient Surgical is developing a platform technology for the prevention of surgical site infections
- Silversheet is a company focused on streamlining the credentialing process, thereby improving provider satisfaction and reducing the cost of this administrative burden
Learn more about Summation Health Ventures’ approach during NEXT Hospital Innovation, where 10 leading hospitals and health systems, including UPMC, InterMountain, Northwell, and Baylor Scott & White, will share the processes and concepts behind the innovations they have discovered, fostered, and launched. You also can read how Tal Heppenstall, president of UPMC Enterprises, helped UPMC transform innovation to an enterprise.
To register for the October 7‒9 event in Dallas, visit the NEXT registration page.
Mandy Roth is the innovations editor at HealthLeaders.