Becker's Hospital Review

FINANCE STRATEGY AND INNOVATION 11 Investing in innovation for the future As exciting as the prospect of launch- ing an innovation center may be, the con- cept of dedicating resources to such an open-ended venture is bound to make some hospital executives nervous about the return on investment. e average innovation center annual budget sits around $1.9 million, according to e Commonwealth Fund survey. Many centers receive 75 percent to 100 percent of their budgets from their home institution, although funds may also come from foun- dations or government sources. Although both Dr. Fleischut and Mr. Dawson understand why many hospi- tal leaders expect long-term cost savings when it comes to such a big project, they encourage focusing on other metrics, such as improving patient satisfaction. Focusing too much on the ROI distracts from the main goal of innovation centers which is to create products and processes that im- prove efficiency and quality. Even if not ev- ery project an innovation center works on creates a lucrative revenue stream, ignor- ing innovation altogether puts hospitals at the risk of becoming irrelevant. "It's a clichéd thing to say that we are in a time of unprecedented change in healthcare, but it's true," said Mr. Daw- son. "Margins are not what they used to be, physician reimbursement is not what it used to be and the entire payment struc- ture is changing. What we've learned from other industries is that companies that fail to pivot during times of great change risk going away and getting le behind." e innovation centers at NewYo- rk-Presbyterian Hospital and Johns Hop- kins Sibley Memorial Hospital are both funded through their respective institu- tions. Mr. Dawson notes the cost of fund- ing Sibley's project has been a modest amount — "less than a fraction of a percent of the hospital's operating budget," he says. Neither Dr. Fleischut nor Mr. Dawson specified the exact cost of launching the innovation centers at their respective in- stitutions. Although the Hub doesn't cost much in the grand scheme of things, Mr. Daw- son recognizes the professional and moral responsibility to use its resources respon- sibly. In its second year, the Hub will set targets to generate new revenue and offset costs of running the center. Tackling healthcare's biggest problems Hospitals that weigh the costs and benefits of having an innovation center and ultimately decide to launch one are committing to a very big, exciting project. "To launch an innovation center, you need to have a solid infrastructure," says Dr. Fleischut. "You need to have an idea of how all the center's activities are going to be aligned with each other and the culture of the institution, and what the center's ul- timate strategy is going to be." Creating a center's infrastructure and physical space can take months, even years. In addition to setting up the tangible parts of a center, hospitals need to focus on the intangible as well: pinpointing the center's focus. With all the problems persisting in healthcare, how do innovation centers pri- oritize which to tackle first? For hospitals, picking the ultimate fo- cus of their innovation center is how they distinguish themselves from others. e Hub at Sibley defines itself by focusing on the people-facing problems in health- care more than the tools, according to Mr. Dawson. "We don't begin with the end in mind — be it a mobile application or specific tool or process — we begin with the end user in mind," says Mr. Dawson. "If you're not solving for people, you could come up with the greatest thing in the world and no one would ever adopt it." One problem the Hub decided to tack- le was needle stick-related nurse injuries. e Hub's design thinkers met with front- line workers to discuss how they get stuck with needles. ey then visited the reptile house at the Smithsonian's National Zoo to see how workers avoid getting bitten and Chipotle Mexican Grill to see how workers avoid cutting their fingers when they slice meat. ey analyzed a number of other New York-Presbyterian Hospital's Hackathon team at work.

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