Monday, January 21, 2013

Building a Health Incubator within a Hospital: Social vs Commercial Value

[This is part 4 of a 4 part series of posts based on the following:]

The goal of a typical health incubator is to produce revenue-generating health IT companies. Revenue generation from the diaspora of a hospital-based incubator would likely be very welcome by that hospital, particularly as reimbursement is shifting away from fee-for-service and toward quality-based payments. In addition to commercial value, health care institutions also embrace the creation of social value. I believe that the two types of value sit on the same spectrum. The difference between the two lies in the market determination of worth of the intervention that is produced.

The product of a hospital-based incubator could be a new app, a new device, or a new care delivery model. Regardless the type of deliverable, that product or service should be tested in the marketplace to see if anyone is willing to pay for it. If no one is willing to pay cash for the incubator innovation, that product or service may not be well suited for scaling as a commercial product. However, the deliverable may still have social value and dissemination of that intervention may need to be financed by grants rather than by reinvestment of profits. The ideal deliverable has substantial social value and is self-sustaining and self-scaling through revenue generation.

In conclusion to this series of blog posts, I would like to solicit input on my hypothesis that a hospital-based incubator will lead to faster identification of problem-solution fit than the traditional health IT incubator that is external the hospital. If and when validation for this type of incubator is realized, a good next step would be to explore the value of internalizing the investment machinery for a startup to assess if there are benefits to internally financing home grown solutions rather than seeking external funding to scale innovations beyond the hospital walls.

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