Hospitals could provide better care by innovating like businesses

It’s time to look outside the hospital walls.
It’s time to look outside the hospital walls.
Image: Reuters/Carlos Barria
We may earn a commission from links on this page.

US hospitals find innovation increasingly difficult. At a time when so many voices are calling for new models of what it means to be “a hospital,” there are few examples of success. As is often the case, some of the most innovative organizations are found in unexpected places.

The only hospital to make the FastCompany list of the most innovative companies recently is India’s Narayana Hrudayalaya Hospital. Founded by Dr. Devi Shetty just 12 years ago, this system has turned the hospital paradigm on its head by focusing first on treating the poor, and second, on treating the rich. For example, in its cardiac hospital (the world’s largest), the average cost for open-heart surgery is less than $2,000—a third of what it costs elsewhere in India.

It is not surprising that such a radically different model was spurred by a startup rather than a well-established system. The more established an organization, the harder it is to marshal the different perspectives, priorities, and approaches needed to innovate new ways of doing business. The reassuring news is that similarly tough challenges exist in many other industries and companies. Orchestrating innovation at GE, Cisco or Intuit means breaking through a host of hurdles that are every bit as strong as those faced by hospital systems.

While barriers to innovation abound, hospital system leaders, C-suite executives, board members, and hospital administrators interviewed by Schaffer Consulting, highlight four obstacles as particularly tough to overcome.

Barrier: A lack of external focus

When innovation opportunities are developed through internal lenses instead of starting with customers’ needs, a major driver of innovation is missed. One chief medical officer at a major university hospital responded to the call for a stronger focus on customer views by saying, “we have more important things to do than give patients fluffier pillows.

Barrier: The case for change is unclear

One of the striking differences between hospitals and other organizations is that so many more groups play important leadership or stakeholder roles in hospitals: administrators, hospitalists (doctors in health care systems), specialists, nurses, regulators, insurers and many more. Unless these groups can learn to work together, innovation gets lost.

For example, an attempt by a leading hospital to build innovative teams driving better cost control at the unit level initially foundered as four different leaders gave countermanding directions to the teams. Only when these four sponsors learned how to speak with one voice could the teams deliver. In the end, is it worth pointing out who has the most pull or which groups battle for what?

Solution: Devote resources to innovation

Both of the first two barriers can be addressed by dedicating people, time, funds, and support. A number of hospital systems—Intermountain and University of Pennsylvania Medical Center—hired Chief Transformation Officers from outside, GE and Intuit, respectively. While senior appointments provide an important focus at the top of the hospital, other resource shifts are equally important. Freeing people at various levels to pursue innovation opportunities sends powerful signals that innovation is a priority. It also increases the probability that these early efforts will advance.

Barrier: Innovation is postponed

Hospital systems are in the midst of a dizzying amount of change: mergers, cost cutting, partnerships, electronic health records migration, major expansion projects, etc. The result is often a focus only on short-term or immediate priorities that push aside longer horizon efforts, including business model innovation. Mountainside Hospital in New Jersey is a good example of this challenge. In the few years between 2007 and 2010, the hospital was sold twice and carried out a major financial turnaround, stalling efforts to innovate process and service. 

Solution: Make innovation a business imperative

For innovation to gain traction, it must directly connect to the organization’s future success. Hospital leaders’ first step should be establishing longer-term goals that are such a stretch people wonder, “How will we ever achieve them?” The CEO of Swedish Health challenged his organization to plan for a future where its least profitable customer group—Medicaid—would be considered its most reliable.

Barrier: We don’t know how to innovate

Most hospitals lack the capabilities to nurture innovation in ways that are “loaded for success.” This runs the gamut of the innovation cycle from how ideas are generated, resources are dedicated, and new ideas are supported, to the ways that opportunities are tested, failed or scaled.

Solution: Create a process for innovation

For innovation to deliver impact and become part of the modus operandi, hospital leaders need to customize a process to align with the organization’s priorities and culture. Common elements essential for success include building a strong external focus, promoting ideation and testing innovation ideas. At UPenn Hospital, staff, customers and suppliers were recently asked to submit their innovation ideas. Today, hundreds of creative suggestions are moving through the ideation process.

Shetty’s innovation journey started when he agreed to make a house call. The patient was Mother Theresa. Hospital leaders in the US can start their own journey toward innovation in less dramatic but equally significant ways.