Health systems today face a pivotal opportunity: the chance to move beyond being mere customers of new technologies and instead become active co-developers and owners of healthcare innovation. As healthcare grapples with significant financial strain, with over half of U.S. hospitals ending 2022 and 2023 at a loss, the need for sustainable solutions and revenue diversification is more critical than ever.
The Digital Age: Clients or Co-Owners?
In the age of AI, building digitally enabled solutions becomes more of a commodity. Health systems face two paths in digital adoption: remain customers of solutions built on their own data, information, and intellectual property, or become co-developers and owners—gaining long-term value instead of simply paying for an annual contract.
So far, the financial returns from digital innovation—driven by health systems that build and implement these solutions—have largely flowed back to investors and founding teams. It’s time for health systems to secure a “quadruple dip” of benefits from digital innovation—gaining financial rewards for their implementation expertise and IP, long-term equity returns for shaping product-market fit, direct investment gains, and the strategic and operational advantages of the solutions themselves.
Financial Sustainability through Equity Sharing
By becoming co-developers in healthcare ventures, health systems can earn equity and a share of long-term financial returns. Traditional models often leave hospitals footing the bill as early adopters without benefiting from the venture’s commercial success.
Providence, a health system with a robust innovation arm, has launched four spin-off companies, maintaining equity stakes in each. These companies include Xealth, a platform for digital health prescriptions; Circle, an app designed for expectant mothers; DexCare, a platform focused on digital access; and Praia Health, a digital health venture.
Equity-sharing arrangements provide a vital hedge against financial pressures, especially in a climate where hospitals’ labor costs increased by more than $42.5 billion between 2021 and 2023 to a total of $839 billion.
Strategic Operational Impact
Active involvement in developing technology ensures that solutions are tailored to the specific needs of the health system. Unlike generic, off-the-shelf products, co-developed innovations incorporate workflows that are needed by your unique patients, clinicians and administrative workforce. This collaboration minimizes redundancy and optimizes workflows, addressing inefficiencies that cost the health system millions annually.
Moreover, this model allows health systems to rapidly adopt cutting-edge tools, such as AI-driven diagnostic platforms or advanced patient engagement technologies, to optimize their workforce.
Building a Sustainable Future
As healthcare evolves, health systems must embrace roles as innovators, not just implementers. Collaborative ventures that include co-development and ownership empower systems to align their goals with technological advancements, ensuring financial sustainability, improved care delivery, and operational efficiency.
By taking a proactive stance in innovation, health systems can not only adapt to the challenges of today’s healthcare environment but also shape the future of the industry for generations to come.