When doctors noticed that their patients were feeling worse because of existing arm slings, they thought they could make a better product.
They turned to Newport Beach-based Innovation Lab, which helped the doctors test their ideas and bring their new product to market. The result was the “elevating arm sling” licensed since 2018 to CVS which sells it for $17.79.
“They wanted an elevated arm sling after surgery, or injury, but there was nothing on the market,” recalled Ryan Kelly, general manager of the Innovation Lab. “We worked with our clinician innovator to create a better sling that addresses this need and also saw the opportunity to sell into the consumer market through CVS. Although we do stand-up companies around certain products, we typically incubate products, not companies.”
Innovation Lab is a subsidiary of La Palma-based Innovation Institute, a for-profit limited liability company spun off in 2013 by St. Joseph Health.
It now works with seven health systems nationwide, including Providence St. Joseph Health and Children’s Hospital of Orange County (CHOC).
Besides the lab, the institute also has a $100 million venture capital fund and a shared services unit of 18 portfolio companies that provide services to its member hospitals such as construction, furniture and equipment dealerships.
The institute, which employs more than 700 people, reported $270 million in revenue in 2020.
Incubate the Product
The basic idea for the Innovation Lab is to encourage 200,000 doctors, nurses and other professionals across the owners’ health systems in 21 states to think of ways to improve healthcare.
“We work with innovators on the front lines of healthcare across our seven health system owners,” Executive Director Ganesh Laxminarayan said. “We identify unmet needs, create new products and bring them out to market.
“The goal is to bring innovation to health system investors.”
Laxminarayan is an information technology expert who focused on startups in fintech before switching to healthcare in the past decade.
“I wanted to do something more impactful with my skills,” he told the Business Journal.
The lab can arrange investments from as low as $10,000 to the millions.
For instance, in 2019, the lab helped launched Newport Beach-based Koazie, a website to help navigate the complexities of hospices. The website was begun by Michelle Thai, co-medical director at Providence St. Jude’s Centers for Rehabilitation, who had experienced difficulties trying to find accurate information for hospice care for her mother.
The website provides reviews of facilities, including government issued rankings. Revenue is provided by more than 60 nursing facilities.
“She brought that to us to take to a broader market,” Laxminarayan said. “It’s like a Trip Advisor for hotels but instead it’s for nursing facilities, long-term care, home health and hospices. It also allows hospitals and post-acute care providers to collaborate to optimize placement and care.”
Olive
Last month, Innovation Lab entered a strategic alliance with Olive, a Columbus, Ohio-based company that says it’s creating the “Internet of Healthcare.”
“Our partnership with Innovation Lab gives us access to a team of innovation professionals, as well as forward-thinking health system partners that will help us evaluate and select new products for co-development,” Mike Biselli, VP of Partnerships at Olive, said in a statement.
Olive makes AI software that connects patients, providers and payers to automate burdensome workflows and support human workforces. Last month, it raised $400 million, bringing the company’s valuation to $4 billion.
Innovation Lab and Olive are already evaluating a half dozen ideas for co-development and will share revenue from co-developed solutions that are brought to market.
Olive could improve the speed of health-related bureaucracy, such reducing the need for 20 minutes to fill out insurance papers, Kelly said.
“Small things like that tend to add up, saving a lot of time, a lot of money.”
Future
It’s no coincidence that the lab is located on the seventh floor of 620 Newport Center Drive, an area where there are many venture capitalists and other influential investors, including neighbor Pimco, one of the world’s largest money managers.
Investors from other venture firms often come by their office to exchange ideas. The lab has set up a subscription service so people outside their hospital system owners can access some of their information as well.
Investors looking for the next big thing in healthcare should focus on “hospital at home or care at home.”
“If I get a cold and sneeze, I don’t want to go into a hospital,” Laxminarayan said. “I should be able to beam someone up and they should be able to prescribe and have the medication delivered at home.”
However, the pandemic caught many health systems flat-footed about telehealth and grasping for solutions. For example, many older patients often have flip phones and are unable to do video calls. How to provide hospital-type services in the home and price those services accordingly are big challenges.
“Telehealth could morph into a blend where you can get primary care at your home,” Laxminarayan said.
Profits from their work are given back to the member owner hospitals as well as their employees who come up with ideas.
“There is a reward for them to have a positive impact.”
