Joe Randolph is known as a risk taker. He’s also getting to be known for the reward he’s chasing: a new paradigm for reducing costs and improving patient care with new products and services for the healthcare industry.
Randolph has taken up the challenge as the leader of the Innovation Institute LLC in La Palma. The for-profit LLC, a collaborative of healthcare systems across the U.S., opened in January 2013 with Randolph as chief executive.
The institute made big strides in 2015, including:
■drawing two more investors, which put in $10 million each;
■agreements signed by its three industry partners;
■the signing of the first license agreement for a product from the innovation lab’s portfolio;
and the institute’s lab receiving its 300th idea.
Randolph was bursting with innovative ideas while at St. Joseph Health, first as chief financial officer and then as chief operating officer, according to Deborah Proctor, chief executive of the Irvine-based health system.
He also faced the same challenge as other healthcare executives across the country: how to slash costs 15% to 20% in anticipation of the Affordable Care Act taking effect.
Randolph was acutely aware that large healthcare systems and hospitals couldn’t afford to take risks because of their obligation to protect patients. He wanted to somehow bring health systems together in a way that could foster “transformational change,” he said.
Proctor said she agreed that the bureaucracy in existing healthcare companies wasn’t conducive to innovation, so she encouraged Randolph to create an independent venture.
St. Joseph Health was the first investor, providing the seed money to launch the institute. Other investors that shared the vision followed. Maryland-based Bon Secours Health System was next. Children’s Hospital of Orange County in Orange was the third, and last year Louisiana based Franciscan Missionaries of Our Lady Health System signed on. Avera Health System, based in South Dakota, joined the list late last month.
All pitched in the required minimum $10 million investment, except for CHOC, which invested $5 million as a stand-alone children’s hospital.
The institute was authorized to have seven health-system investors, one of them a children’s hospital, according to Randolph.
The effort includes the Innovation Lab and an “enterprise development group.”
Randolph said he views innovation through the lens of problem solving.
“A lot of organizations look at research or setting up a venture fund to invest in cool tech and bring them back as innovation,” he said. “I define it as finding a problem that you’re dealing with and identifying a solution you can commercialize and replicate.”
Profitable From Start
The institute has made money since early on in its brief history, Randolph said.
The venture, unlike typical incubators that need a lot of time to capitalize on their initial investment, formed a development group to expedite the process. The portfolio of companies that sell services to health systems and hospitals invest their profits in innovation—a unique process, Randolph said.
The portfolio has grown steadily, he said, and was on target to yield $150 million in revenue last year and $15 million in earnings before interest, taxes, depreciation and amortization. The portfolio yielded $130 million in revenue and $10 million in earnings in 2014.
The institute’s three industry partners are Boston Scientific Corp.; Dell Services, a unit of Round Rock, Texas-based Dell Inc.; and Deloitte & Touche LLP, a New-York based consulting firm.
“These are reciprocal relationships where these companies may want to incubate something the institute is working on, or alternatively, the institute can codevelop products with these companies,” Randolph said.
There’s potential with Dell Services, for example, to apply big data to emerging areas, such as genomics, to more specifically control and prevent disease, Randolph said.
The institute hopes to tap Boston Scientific’s expertise in developing medical products and technologies that address a wide range of conditions, including heart, vascular and pulmonary disease.
He said the institute plans to translate Deloitte research and healthcare data into clinical practice.
The first license agreement was reached for a software enhancement called VisuFlow.
Vinh Ton, a St. Joseph Health employee, created the software to make it easier and more intuitive for healthcare staff to document complicated processes by using a collection of stencils, shapes, and templates for use in Microsoft Visio. ■
Excerpt from: www.ocbj.com