Atlantic Health's Venture Studio Sees the Value of Being a Disruptor

With an aggressive innovation strategy, the New Jersey health system wants to be a force of change rather than a passive participant

Healthcare innovation is a popular topic these days as healthcare organizations strive to redefine care delivery in a time of tight margins and increasing competition. But for all the talk of AI, virtual services, and value-based care, how do executives identify what needs to be changed?

Health systems looking for an innovation model could check out the Atlantic Health System. The New Jersey-based organization, comprising six hospitals and more than 400 care sites, is fostering new ideas through the Atlantic Health Venture Studio, which not only offers capital investments but also provides mentorship, forges strategic partnerships with new and emerging companies and offers product and service c-development for in-house partners.

"We wanted to take a more proactive and intentional approach," says Doug Hayes, the studio's executive director. "We don't want to just passively receive the innovations that are coming out of the market. We want to actually help play a role."

Hayes, who ran his own New York City-based venture studio for eight years and was a partner and executive director of Blueprint Health, launching close to 50 VC-backed digital health startups, joined Atlantic Health roughly three years ago, when the health system had decided to develop its own venture studio.

The timing was right. Coming out of the pandemic, many health systems were struggling with staff shortages and mandates to improve care, while the innovation landscape was filled with new ideas and technologies aimed to tackle those pain points. At the same time so-called disruptors, such as Amazon, Google, Walmart, and the large pharmacy chains, were jumping into the sandbox with new strategies aimed at addressing healthcare's problems and giving consumers an easier way to access care.

Hayes points out that the disruptors, coming in from more consumer-friendly industries, are "very good at what they do. [And] that's a type of thinking that … we're not accustomed to thinking in healthcare."

But healthcare is different—as proven by Walmart's decision to close its in-store health clinics and telehealth program, UnitedHealth's shuttering of Optum Virtual Care and the continuing problems faced by Teladoc and American Well. Hayes notes that healthcare organizations can embrace new ideas from outside the industry and perhaps even partner with disruptors, but they have to own their innovation strategies.

In other words, they want to be the disruptor.

"We're not going to be looking to them to think about what we've got to do," he says. "We have a growing internal competency and fluency around innovation."

In other words, healthcare organizations like Atlantic Health aren't necessarily interested in the next shiny object. They're focused on creating a comprehensive strategy that identifies new ideas and tools and fosters growth and integration into the enterprise.  

Hayes says the venture studio has developed a few key guidelines along the way:

Don't mix innovation with the operating budget. Atlantic Health separates its investment funds from the operations budget, instead using long-term capital to support innovation. Hayes says it's important to make clear that innovation isn't taking money that would otherwise be used for salaries, new hires, or other operational expenses.

Innovation and technology are also separate. The key to enacting any meaningful change, says Hayes, is change management. Oftentimes the most meaningful changes come in workflow redesign or operational adjustments. New tech is a tool that can be used to achieve better or new results, but there's a lot of groundwork that has to be done first.

"Goals are for people who want to accomplish something once, and systems are for people who want to accomplish something repeatedly," he points out. "We're trying to set up a system."

Good ideas can come from anywhere. Ditch the thinking that the only good ideas come from the management level. Clinicians and nurses have the front-line knowledge to come up with the most effective workarounds, or new ideas to address pain points. Likewise, a small start-up might see things differently than a tech giant and come up with a better solution. Hayes says the key is to create an atmosphere that welcomes ideas from any and all sources and gives them the right support and resources to develop.

An example of this, he says, is Atlantic Health Advancements (AHA), a $500,000 fund set up to catalyze ideas from within the health system. The program targets small projects, often process innovations typically generated from front-line staff like nurses. A program like this, Hayes says, instills an interest in employees to be creative and come up with new ways of doing things, while giving management a forum for letting those ideas gain traction.

Be nimble, and ready to act quickly. "Anyone or any health system that thinks they can predict where the future of technology is going to lie in 18 months is lying to you or themselves or both," says Hayes. Healthcare organizations have to diversify their approach to innovation, pivoting when something doesn't work out and being willing to "look under the hood" just to see where a new idea or tech might go.

And at a time when healthcare organizations are struggling to make ends meet, an important benchmark for any innovation is ROI. Hayes says Atlantic Health treats this business line as any venture studio would.

"We want outsized and uncorrelated returns," he says. "And we don't just want the return. We want these partners to make us smarter."

That's what health systems across the country are pursuing. And while the so-called disruptors are taking a hit at present, it's imperative that healthcare executives understand the need for change, and the value of affecting that change rather than waiting for change to happen.

"The things that got us here won't get us there," says Hayes of the push to redefine care. "Our patients don't ow us a lifetime of committed usage … so we need to earn their business over time."