Unique Business Model

The Innovation Institute is authorized to have seven non-profit health systems as equity investors or “Member Owners.” Each investor holds a seat on the Members Committee. The day-to-day operations are managed by a Board of Managers. Launched in January 2013 as a for-profit LLC, The Innovation Institute has three major elements:

The Lab is the heart of the Innovation Institute. It is the incubator / accelerator that works with clinicians to incubate their ideas and help take them to market. The Lab is also a physical space where we will bring leaders together to advance innovation. Located in Newport Beach, California, the Lab has onsite tech-transfer experts that work with inventors. Through a strategic alliance with Cleveland Clinic the Lab is able to provide great depth and subject matter expertise when needed. The Lab also has social ideation software (Brightidea) through which it conducts targeted innovation challenges.

The Enterprise Development Group is the “economic engine” that drives the cash flow to support innovation. The Innovation Institute owns a portfolio of profitable companies that provide services to hospitals across the country. The profits from these companies are invested in innovation and support the Lab. Each of the companies are for-profit LLC’s that have their own leadership teams. There is no requirement that the “Member Owner” health systems use the portfolio companies, though it is often advantageous for them to do so.

The Fund will be established to invest in companies that have innovative products. Once the Institute seeds the Fund, most of its future capital will come from private investors. While the Lab is primarily focused internally on Member Systems to advance innovation, the Fund will be focused externally on what other organizations are doing. The Fund will bring market intelligence and provide significant synergies with the Lab.

Research & Features


Before the Innovation Institute was formed, significant research was done to determine what others have tried and what drove long-term success in their business models. What was successful and what was not? Some of the findings from the research were intriguing:

  • Most healthcare innovation centers are embedded in a health system and are not free-standing.
  • Many standalone incubators fail in their first three (3) years due to lack of funding.
  • There is significant need for lower cost solutions for the underserved community.
  • Most healthcare providers have difficulty agreeing on the definition of innovation.
  • Academic healthcare institutions are good at research but not at commercialization.
  • Most community-based hospitals and health systems do not have innovation centers.
  • To be successful, innovators need to embrace risk and failure in order to ultimately succeed.
  • Hospital cultures are very risk-averse.
  • Hospital governance tends not to be nimble.
  • Health systems have not been successful at collaborating in the innovation space.
  • Physicians are innovators at heart, and need a vehicle to facilitate innovation.
  • There is a tremendous opportunity to find new ways to deliver more cost-effective care by tapping into the ideas of physicians, nurses, clinicians and employees.
  • To be successful, true innovation requires significant resources, not just a Chief Innovation Officer.

Key Model Features:

The Innovation Institute was formed with the intent to address many of the above issues discovered by the research. The model is intended to be:

  1. Independent / a standalone business
  2. Self-sustaining and financially viable
  3. A Collaborative connecting health systems, industry and others community sectors
  4. Nimble in its governance
  5. Intelligently risk-taking / rewarding of failures
  6. Perpetual – the Institute has no planned exit strategy or liquidity event
  7. A balanced approach, focusing on the community and providing a strong ROI