Dive Brief:
- Sutter Health unveiled plans on Tuesday to build a new innovation center in San Francisco that aims to serve as a bridge between the regional nonprofit system and technology and venture partners.
- The center, which Sutter hopes to have up and running by early 2024, will be located in the Bay Area and have close ties to Silicon Valley. Along with serving as an office for Sutter’s innovation team, the center will be a space to prototype and test new products, train clinicians and host strategic partners, the Sacramento-based system said in a statement.
- Sutter’s priorities for the new center include research and development for solutions in chronic care management, figuring out ways to assume more risk in value-based arrangements and reducing fragmentation in the patient experience, Sutter CEO Warner Thomas said in an interview at the HLTH conference in Las Vegas. Thomas declined to share how much Sutter is investing in the new build.
Dive Insight:
Sutter’s innovation center will invest in and partner with venture firms and early-stage digital health startups to gestate new products and solutions, according to the health system.
It’s an opportunity for Sutter — a nonprofit more than a century old — to be an innovator, according to Thomas, who joined Sutter late last year after a decade-long stint as Ochsner Health’s CEO.
“We’ll be looking at opportunities to make investments in companies, we are going to look at more formal partnerships with certain companies. We’ll obviously be selective about who we work with,” Thomas said.
A number of nonprofit giants manage venture funds, a practice that has raised eyebrows as lawmakers, market researchers and patient advocates criticize the tax-exempt operators as acting more profit-seeking than their missions might allow.
Sutter does not operate its own venture fund. However, the system has invested in other funds, like Define Ventures, an early-stage VC that focuses on digital health startups. The launch of a dedicated innovation center is a step toward Sutter acting more as a VC itself, according to Thomas.
“To the extent it makes sense, and we think that the fund can help us learn around innovation, can connect us with companies that would be interesting to us. I think we would certainly be open to looking at more of those types of investments,” Thomas said.
Along with investing in Define, Sutter was also an early test site for artificial intelligence-based clinical documentation software owned by Microsoft, and has inked partnerships with tech companies like Ferrum Health, a startup that uses AI for radiology imaging support.
Sutter also recently launched a new app meant to help young adults better manage their mental health, and is looking to expand the product to more age ranges and even its own clinicians to help them handle burnout, Chris Waugh, Sutter’s chief innovation officer, told Healthcare Dive.
Sutter, which serves more than three million patients, is also talking to potential partners outside of the healthcare space. The system is currently collaborating with a “substantial tech from a non-healthcare background” around pulling data from social media and applying it to make health predictions, Waugh said.
Sutter has also had conversations with activewear brand Lululemon and image sharing social network Pinterest around innovation, Waugh said.
Sutter’s move to get more involved in hospital innovation comes one day after VC firm General Catalyst announced plans to acquire a health system, as it aims to test new technology to improve hospital operations and patient care.
The VC firm might find some unexpected stumbling blocks if it acquires a nonprofit, like community care requirements, Waugh said.
But “my reaction is to go for it,” Waugh said. “If there’s a system out there that General Catalyst can get into, it’ll be really fascinating to see how it plays out. And I think there will be some real trial and error in that process.”
Sutter closed out 2022 with a loss of almost $250 million, due in part to a significant drop in investment income, through its operating income improved.
At the time, Thomas said the operating financial performance would set up Sutter to be able to reinvest more within the system around priorities like expanding patient access along with workforce retention.
