Orange County Business Journal | Innovation Institute Reaches Beyond Healthcare

Vita Reed Monday, August 24, 2015

The La Palma-based Innovation Institute LLC continues to rack up partners in its second year of existence.

The institute is an independent corporation that aims to foster the development of healthcare-related products and services intended to reduce costs and promote quality.OCBJ-JR

It currently has four owners—Irvine-based St. Joseph Health; Children’s Hospital of Orange County in Orange; Marriottsville, Md.-based Bon Secours Health System; and Baton Rouge, La.-based Franciscan Missionaries of Our Lady Health System—each of which have made minimum investments of $10 million. The operation includes an innovation laboratory for medical devices and technology, an investment fund, and an “enterprise development group” that brings in revenue through various companies, such as those in healthcare construction, staffing, and medical office design and equipment.

Institute executives recently said that New York-based consulting firm Deloitte & Touche LLP agreed to become a sponsor and collaborator.

Deloitte will advise the institute’s Newport Beach-based innovation laboratory in “navigating the complexities of the U.S. and global health care systems, drawing upon research and reports” from its Center for Health Solutions, the institute said in a news release.

“We will collaborate with the [laboratory] to develop and adopt strategies and approaches that improve the effectiveness of our healthcare system,” said Kevin Wijayawickrama, a Deloitte principal. “We are pleased to have the opportunity to work with the Innovation Institute, whose values reflect those of Deloitte.”


The Deloitte announcement came a week after the Innovation Institute announced that Dell Services, a unit of Round Rock, Texas-based Dell Inc., would serve as the lab’s founding healthcare information technology partner.

Dell’s “offering us some technology as part of their [industry partnership] and working with us in terms of some of the big data things we’re focusing on,” Innovation Institute Chief Executive Joe Randolph said.

Dell and the institute are going to work on a number of pilot programs, such as cloud-computing-enabled analytics and efforts to turn healthcare data “into actionable knowledge and insights for better decision-making;” engaging with patients in order to better connect and deepen relationships; and the Dell Internet of Things program, which is designed to reduce the time and cost associated with transferring nonessential data to the cloud.

Working with the institute “gives Dell access to its members’ expertise, which will help us mature our capabilities and ultimately create better outcomes for our customers and the industry as a whole,” said Sid Nair, vice president and global general manager of Dell Services’ healthcare and life sciences business.

Another new collaborator is Natick, Mass.-based device maker Boston Scientific Corp., which will work with the innovation laboratory. Other partners already on board include Cleveland Clinic Innovations, the California Institute of Technology in Pasadena, Tustin-based Toshiba America Medical Systems, and the University of San Diego.

“With our [laboratory], we have what we call industry partners or underwriters,” Randolph said.OCBJ-lab

Such underwriters make at least a six-figure financial commitment under multiyear deals and may provide other things as part of the arrangement.

Industry partners participate in the institute “not as an equity investment but as an underwriter,” according to Randolph.

“The reason why they’re interested is that we develop concepts, products and ideas—they can co-develop things with us,” he said.

Established in 2013

The Innovation Institute was established in 2013 with an investment from St. Joseph Health. Bon Secours and CHOC followed as investor-owners.

About a month ago, the Franciscan Missionaries of Our Lady became the fourth of what’s expected to be a final roster of seven investor-owners. The Catholic hospital operator invested in the institute in order to maximize the potential of ideas generated by doctors and its team members, said its chief executive, John Finan.

The institute is close to announcing a fifth investor-owner—a large Midwestern hospital operator—and expects to add a sixth before December, Randolph said last week.

“Each one of these systems that are coming in [is] putting in $10 million. I’ll have enough capital when I have the seventh system, but I’ll still work with other systems” under a different model than investor-owners, he said.

One consideration would be a subscription model by which­ a health system can pay for participating in the institute’s offerings.

Innovation Institute is on track to have $180 million in revenue this year and $15 million in earnings before interest, taxes, depreciation and amortization, up from $130 million and $10 million, respectively, at the end of 2014, Randolph said, adding that it has over 200 ideas under various stages of development, as well as its first licensing agreement.

Randolph said he believed that the institute’s model is a draw for partners because of its external focus and design for collaboration.

“[There are] a lot of organizations focused on innovation, but they’re more internally focused,” he said. “The reason that some of these other organizations are interested is because they don’t have vehicles out there where they could bring organizations together to collaborate on advancing and transforming the care delivery system.”

Excerpt from OCBJ