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Why it’s so hard for health systems to innovate: Fixing health system’s innovation stagnation

Jenine Alves


How can health systems improve their capacity for innovation? There are three fundamentals that health systems must have in place to better enable decision-making and realize innovation.


“[Selling technology to health systems] was one of the most bewildering, confusing, and, ultimately, unsuccessful experiences I have ever endured.” So said an experienced technology sales executive reflecting on his thirty years of sales experience. And unfortunately, these or similar sentiments are often echoed not only from those selling innovation into health systems, but also from those trying to drive innovation within their own organizations.


Faced with shrinking margins, increased pressure from patients, payers and regulators to improve quality, and coming out of a pandemic that has driven clinician burnout, innovation in health systems is needed now more than ever. And the industry is finally facing real potential for disruption from the outside. “The complexity of health care may have slowed potential disruption, but we are now seeing evidence from numerous directions that large, well-capitalized entrants are developing innovative strategies to draw volume and revenue from traditional players.”


While most health systems would agree that innovation is a top priority, making that priority a reality can feel impossible; a seemingly never-ending evaluation, procurement and contracting cycle, usually punctuated by a complex integration and roll out. To combat these challenges and put a more formal framework in place, some health systems have created innovation centers, while others have developed formal incubator programs.


But before developing a formal strategic model for innovation, health systems must first ensure they have a foundation capable of driving innovation.



The house won’t fall if the bones are good


There are three fundamental elements that health systems must have in place to make any innovation model work and stick – which are the same that tend to thwart innovation at every turn, if not accounted for properly:


First: establish and document the decision-making hierarchy


The decision-making hierarchy is different for every health system. It is rarely documented, and something that typically requires years of experience within the organization to truly understand. The structure often includes leaders from multiple layers (e.g., local physician practice/hospital/lab/etc as well as the regional or national health system), and from separate organizations (e.g., the medical group as well as the business/administrative group) – each often with matrixed responsibilities (both functionally and geographically). These complexities are only increasing as the industry consolidates.


Due to the multiple layers and matrices, many decisions are made (either formally or informally) by a committee, where the value of an idea must be demonstrated across multiple fronts: ROI, strategic priorities, quality of care, patient experience, employee experience, etc. And if there is no clear and agreed upon decision-making hierarchy, organizations enter decision paralysis, waiting for a near-unanimous consensus to make a decision – which is an extremely tall and unlikely order, given such diverse interests and priorities at play.


When the decision-making hierarchy and criteria are not documented or consistently adhered to, stakeholders can become frustrated, disillusioned, and lose agency, minimizing the potential of an organization's greatest assets. And even in the rare instance the decision-maker hierarchy is known, there is often no clear and standardized process to actually get decisions made.


When this level of process detail is not clearly laid out, there are significant delays as teams scramble to identify next steps. Oftentimes organizations don’t have a point-person in charge of shepherding an idea through from generation to decision, which means each hand-off can breed disruption and inaction.


For each of these reasons, health systems must invest the time and energy to properly define their decision-making hierarchies.


Second: ask the right questions


Because decisions on innovation require so many different roles and departments, health systems should strive to consistently answer the following questions during the assessment and decision-making process:

  • How does this innovation align with the corporate strategy?

  • What is the operational impact? How much will it change current workflows? How challenging will the change management process be?

  • What is the financial impact (upfront capital costs, ongoing operational costs, etc.)?

  • What is the impact on the technology team? Will it require their support to implement? What about providing ongoing user support?


It takes significant coordination to ensure all of these questions are answered – in the right order, by the right people, and in a timely manner. But doing so will assuredly save time, costs, and frustration, and can be the difference between success or failure.


Third: Conduct a culture check, i.e., risk vs. reward


Another foundational area that health systems must assess is whether their organization’s culture is set-up to truly enable (let alone foster) innovation. Healthcare, unsurprisingly, is fairly risk averse – which makes sense, when patient lives, protected health information, clinician licenses and millions of dollars can all be on the line at any time.


Clinicians have also been trained to be risk averse. They are “trained to follow protocols, use evidence-based medicine, standardize processes and eliminate variation. Any variation in care delivery that results in a bad outcome increases the risk of malpractice litigation. New products that are introduced must be approved by the FDA and new medications must go through clinical trials and be closely monitored before being accepted for general use.”.


There has also historically been a lack of trust between clinicians and their administrative partners. “The ‘white coats vs. blue suits’ disconnect stems from differences in perspective and priorities [and often] manifests as lack of understanding, lack of cooperation, lack of engagement, anger, frustration and, sometimes, disrespectful behavior.”


This cultural divide is often reinforced by federal and state laws that regulate physician-hospital relations. “California explicitly prohibits the direct employment of physicians by hospitals [in order to] prevent corporate entities from providing incentives that may unduly influence physicians’ independent medical judgment.” Health system organizations are often made up of two completely separate entities, so physicians do not report into the same organization as administrators.


When there is this level of risk aversion and lack of trust, combined with a lack of structured hierarchies and processes, decision-making on innovation becomes extremely sensitive and time-consuming, resulting in the frustrating scenarios described above. Worse, if not addressed, each of these factors can create an innovation stalemate, analysis paralysis, and a decision-making vortex that innovation has no chance of escaping.


Moving innovation forward, step by step


Given the foundational challenges health systems often face on the innovation front, it may seem like a daunting task to “fix” an organization’s foundation before embarking on a full-fledged innovation strategy. However, by breaking down the problem and tackling it piece by piece, step by step, the countermeasures become much more clear and manageable.


Step 1: Map out your decision-making hierarchy and process


It is critical that every organization first establish their decision-making hierarchy and process, then document it and distribute it to all within the organization.





How should health systems go about establishing the decision-making hierarchy and process? Start by first mapping out how decisions are made today (even if it is not consistent). Take a couple of recent key decisions as examples and interview those involved with them to understand what process was followed, how the decision was ultimately made, what information was needed, and what pain points the teams encountered along the way.


Each individual tends to understand their part of the puzzle very well, but rarely does a team see the entire process laid out on one page. When this is mapped out for all to see, an ideal “future state” can be more easily designed together.


Step 2: Remember that culture follows process


Next, how can health systems assess their culture and its tolerance for innovation? Many leaders fear that culture can be nearly impossible to change, but that’s not the case. Culture follows process. When structure and processes around decision-making are established and followed, there is less frustration, trust builds, and the culture begins to evolve.


Organizations should be sure to openly acknowledge the cultural challenges and specifically develop communications addressing those factors. When leaders do this, they are meeting the problem head-on and addressing the specific root causes, which will continue to evolve the culture.


Only once these foundational challenges are accounted for and addressed should health systems then determine which formal innovation model to pursue.


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