Sorry, IU Health.
There’s almost no chance of you becoming the next Cleveland Clinic, according to a report released last week by BioCrossroads, the Indianapolis-based life sciences business development group.
That’s because of the new demands for cost-cutting in health care, which are coming from Congress’ budget battles, the influx of baby boomers into the Medicare program and now Obamacare.
There simply isn’t the money available anymore for a hospital to replicate the 65-person staff and dedicated investment funding that Cleveland Clinic uses to turn medical innovations into high-growth companies.
This is not what IU Health or BioCrossroads wanted to hear. The leaders of both organizations had thought that IU Health individually or Indianapolis-area hospitals collectively could become engines of innovation to produce new life sciences companies.
BioCrossroads CEO David Johnson first mentioned the idea to me in early 2008, when I wrote a story about a researcher at Franciscan St. Francis Health who had stumbled on a way to diagnosis and potentially reverse autoimmune diseases.
That research did turn into a company, Redox Reactive Reagents LLC, which is trying to commercialize the technology as a diagnosis for Alzheimer’s disease. But Franciscan decided it wasn’t going to be in the startup game. It sold its stake in the company to the other owners and walked away.
About a year earlier, IU Health CEO Dan Evans had tapped his longtime friend Matt Neff to launch a venture capital arm, CHV Capital Inc., funded by some of IU Health's large endowment.
The firm has backed several Indiana life sciences companies, including Endocyte Inc., Nico Corp. and Perfinity Biosciences Inc. But it’s one attempt to commercialize research from within the IU Health system—a 2008 investment in CS-Keys Inc.—went nowhere.
The BioCrossroads report concludes that “classic innovation models such as the one resident at the Cleveland Clinic are too capital intensive to replicate.”
But BioCrossroads still sees opportunities for local hospital systems to play a major role in health care innovation, not so much by launching companies themselves, but rather by helping entrepreneurs understand the challenges that need to be fixed and then helping them test, refine and scale up their proposed solutions.
The Infuse Accelerator for digital health startups, which is being launched in Indianapolis, is trying to do exactly that. And so is the Hoosier Healthcare Innovation Challenge, an annual event where health care organizations present problems they have to IT entrepreneurs, who try to invent a solution.
A good example is Indianapolis-based Diagnotes Inc. It won the 2012 Healthcare Innovation Challenge and then worked with Community Health Network to pilot its mobile app, which allows doctors and patients to swap key medical records and images over mobile phones—yet without violating federal medical privacy laws.
Community has now signed a contract to use Diagnotes among some of its physicians.
BioCrossroads also thinks Indianapolis’ hospitals can replicate the kind of collaboration that led to the 2004 launch of the Indiana Health Information Exchange Inc., which allows hospitals to swap electronic patient records as needed from one health system to another.
Indianapolis’ hospitals could collective pitch themselves to drug and device companies to attract more of the clinical trials those companies fund, the BioCrossroads report suggested.
The hospitals could also consider forming a joint clinic that would conduct research, clinical trials and education, such as the Orthopedic Capital Clinic being launched by OrthoWorx, a BioCrossroads offshoot, in Warsaw, Ind.
None of those would have the impact of a Cleveland Clinic. But, as I’ve written elsewhere, in this age of austerity, the nature of health care innovation is going to be different than before.