Health Systems In North Texas Look To Enter Startup Investment Market, Beginning With Big Hires

The largest health systems in Dallas-Fort Worth have created teams to hunt down innovative solutions that will help their organizations appeal to consumers and eliminate waste and variation in the delivery of care. It’s among the first large-scale entrepreneurial efforts seen among North Texas’ dominant providers, who have historically built new products and developed services in-house.

Representatives from Baylor Scott & White Health, Texas Health Resources, and Children’s Health System of Texas participated in a panel Wednesday afternoon as part of Dallas Startup Week to share how their employers are fostering innovation.

“They’re putting people in charge of that officially; it’s not just the IT guy who has to troubleshoot IT all day and then source solutions at night,” says Dr. Hubert Zajicek, the CEO of the Health Wildcatters startup accelerator, who moderated the panel. “They’ve put a nuclear team together to make things happen along those lines. That’s a major step.”

Participating were Dr. Carl Couch, the vice president of innovation for Baylor Scott & White’s Innovation Center; Dr. Tricia Nguyen, the president of Texas Health Resource’s Population Health, Education, and Innovation Center; and Shawn Lovelady, the senior director of strategic development at Children’s Health.

Couch and Nguyen both mapped similar paths for Baylor and Texas Health. Both entered into innovation through value-based care initiatives, launching accountable care organizations, or ACOs, which track the health of patients once they leave the hospital and reimburse doctors for positive outcomes. ACOs make sure patients are taking medicine properly, that they’re following up with specialists, that they’re adhering to their diets. Texas Health tackled Medicare Shared Savings. Baylor Scott & White launched the Quality Alliance ACO (and, for the record, joined the Shared Savings program in 2015), which has grown to include more than 4,700 physicians and covers 450,000 patient lives.

Couch led that initiative, serving as the Quality Alliance’s president for three years before turning his sights to innovation. Both systems have since begun huge population health initiatives, aligning with more doctors and partnering (Texas Health with UT Southwestern) or merging (Baylor with Scott & White) with other health systems to expand their patient base and discover ways to keep it healthy.

“We are very focused on population health and what that means, we are focused on clinically integrating what historically in most healthcare systems has been a disintegrated approach to care,” Couch said. “I often tell people if you don’t think healthcare is disintegrated, try getting three to four different diseases going at the same time and see how well integrated the system really is. Generally speaking, it’s not. We have a lot of opportunity there.”

Those two, the largest health systems in North Texas by market share, say they’re searching for solutions rather than investments—meaning, they’re more interested in harnessing an established technology rather than invest in it and watch it grow. Both are mired in data that doesn’t necessarily make sense to the doctor when he or she is seeing patients. And both have processes that could use some standardization—the more variation, Nguyen said, the more likely that health systems have errors and waste. Too, the tech will need to interact with the electronic health record system, whether that be EPIC or Cerner. Each asked the entrepreneurs in the room to consider those strategies when pitching the health systems.

“If you are in the technology space, IT, you should probably be talking to big electronic health record companies—Epic, Cerner, Allscripts, Athena now—and think about how you’re going to fit inside that health system,” Nguyen said. “It’s got to fit inside the physician’s workflow.”

Children’s has gone about it a bit differently. The largest pediatric health system in North Texas is actively seeking startups to invest in and partner with. They’ve already formed relationships with three: The Dallas-based on demand urgent care provider Mend; the data nonprofit Pieces, which spun out of Parkland’s Center for Clinical Innovation; and Nashville’s GoNoodle, which drums up physical activities for children in the classroom. As Lovelady explained, Children’s has a strategic plan that involves expanding its services beyond its walls, reaching kids and parents in their homes and, yes, even their schools. Last year, for instance, saw the provider pairing with school nurses to provide telemedicine. Its current investments in startups have helped build out their infrastructure as well as tackle the Herculean challenge of making sense out of all of its data—something nearly every health system in the country is attempting to do.

Says Lovelady of Children’s approach to investments: “We believe there are opportunities for both organizations in how (the startup) fits into our strategic plan.”

Zajicek says this is a major dedication of resources for these systems. He says it signals to healthcare entrepreneurs locally that there is an audience looking for their products, but it also means that they’re not resting on their laurels. He says it tells him that the systems are looking to lead, desiring more to set the tone itself instead of looking to larger, more historically innovative systems like California’s Kaiser Permanente and Cedar’s Sinai.

“They’re aiming much, much higher. That’s what you’re seeing,” Zajicek says. “These systems are saying we need to innovate and reinvent ourselves like other businesses do, and drive value out of patients who are not at the hospital. That’s what ACOs do. They’re definitely making big plays.”

But there’s still room to grow. As Hal Rose, a startup investor and CEO of the Morphosis Group, noted during a panel Tuesday, the investment scene in Dallas-Fort Worth is still dominated by local investment groups and outside partners. The health systems are beginning to toe the water, but the real money is coming from independent venture capitalists like Green Park & Golf, which has steered more than $20 million to 15 startups in the past half-decade.

“There are more family offices and alternative investment vehicles that are interested in healthcare and the health space than other markets,” Rose said. “I continue to believe that the universities and the medical organizations, or hospitals, can be more active in venture capital investing … there is activity there, but I don’t find it nearly as active as some of the other markets that we look at investments in.”


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