Lessons From a Health System That Disrupts Itself

Providence Health & Services, a powerhouse in the Western states, has entered an agreement to merge with St. Joseph Health, creating a $20 billion-plus health care system with more than 50 hospitals in seven states. The two organizations — based in Renton, Wash., and Irvine, Calif., respectively — share a common Catholic heritage, but they also share a focus on innovation. Providence, in particular, has been a pioneer, drawing in talent and leadership from companies like Amazon and Salesforce.com to help transform both the consumer experience and core clinical operations. Leaders from both Providence and St. Joseph highlight a health system committed to innovation at scale.

Innovation prowess

Professor George Day of the Wharton School of the University of Pennsylvania is a leading authority on innovation prowess, which he defines as the “discipline times ability” to innovate. Day has identified through a lifetime of research the key traits of companies (in all industries) that consistently out-innovate the competition. Leading innovators distinguish themselves by:

• Demonstrating leadership commitment to innovation talent.
• Adopting an “outside in” mindset.
• Encouraging risk-taking.
• Aligning innovation metrics and incentives.

At a recent HX360 conference in Las Vegas (sponsored by the Healthcare Information and Management Systems Society and AVIA, a leading technology accelerator), Day described the lessons learned to an audience of more than 200 health care system leaders.

In a series of panels with system CEOs and their innovation leaders these lessons were made apparent. In a panel I moderated, I remarked to Providence CEO Rod Hochman, M.D., that Day's traits sounded a lot like the Providence game plan. Hochman agreed.

Providence is not alone in its commitment to innovation. Many leaders who were at the HX360 meeting share the passion for innovation, from Cedars-Sinai and Dignity Health in California to Memorial Hermann in Texas to OSF HealthCare in Illinois to Northwell Health in New York. All have important stories to tell, but I have had an opportunity to interact with Providence’s leaders several times over the last few months and have become convinced that Providence is a system to watch because of its deep commitment to innovation at scale.

Major player

The merger between Providence and St. Joseph Health would give the new system a strong position in many markets in the West, including Washington, Oregon and Southern California. The combined entity would be the third largest system in the United States behind Kaiser Permanente and Ascension, would be a major force in health care transformation in the West and would become a key competitor to the other West Coast giant, Kaiser.

The two systems’ focus on innovation was part of the rationale for the intended merger. As my old friend Bill Noce, board chair of St. Joseph Health, told me in an interview, “The forward-looking innovation culture at Providence was an attraction to us.” St. Joseph’s innovation initiatives are complementary to those of Providence, Noce said, with many new development opportunities ahead in care innovation, patient experience and life sciences.

Why innovate?

The HX360 conference highlighted that leading health care systems are pursuing innovation at scale, aimed at meaningful targets to improve patient care, patient and provider experience and population health.

That statement comes almost verbatim from Hochman's description of the rationale for Providence’s innovation program to the HX360 audience.

In particular Hochman highlighted initiatives in three key areas:

• Developing population health innovations (such as supportive housing) aimed at the broader community as well as at large self-insured employers such as Boeing through their accountable care organization arrangements.
• Creating digital platforms for providers and consumers.
• Simultaneously strengthening core operations (clinical and nonclinical) through innovation.

Providence is not alone. AVIA research has found that many health care systems are focusing digital innovation on consumer applications, chronic care and behavioral health applications, post–acute care transitions, population health initiatives and core clinical systems (what they term "operations 2.0"). But while Providence is not unique in its interest in innovation, it is impressive in its strategic commitment and to following Day’s principles of innovation prowess.

In my travels through American health care, I have observed what I call the "Scout badge problem" when it comes to innovation. Like proud young Boy Scouts, almost every hospital can point to the merit badges it has accumulated: ACOs, telehealth, patient portals, electronic disease registries and so on. But when you ask the CEOs what percentage of patients get this routinely, the answer is the square root of zero. Sure, it is happening, but a lot of this stuff is pilots. Scout badges you can brag to the board about.

Not so for Providence. “Innovation is not a hobby for us,” Hochman said.

Hochman is committed not only to match or exceed the performance in terms of innovation of tough regional competitors like Kaiser but also, and perhaps even more important, believes, “We need to disrupt ourselves or have it done to us by someone outside of the health care industry.”

A key rationale for Providence’s innovation agenda is purposeful “customer acquisition” of loyal consumers who will sustain the mission of the enterprise. Like many faith-based systems, service to the whole population is a fundamental goal at Providence. But Hochman also frames the Providence strategy of customer acquisition (including millennial consumers and self-insured employers) as a counterbalance to the inevitable growth in Medicaid and Medicare that all hospitals are experiencing.

The purposeful focus on customer growth and retention helps explain why Providence has reached out to bring in talent from the ultimate customer-focused retailer (and its Seattle neighbor): Amazon.

The guy from Amazon

Providence has intentionally recruited about 30 percent of its current management team from outside of health care. One of them is Aaron Martin, senior vice president of innovation at Providence. Prior to joining Providence, he led self-publishing at Amazon and was on the Kindle team.

Aaron is a former Amazonian with a self-deprecating sense of humor. In describing some of his early experiences at Providence trying to develop innovations at scale and at speed (just like at Amazon), he recounts that he was initially told by some older health care hands, “OK, Amazon guy, but it doesn’t work that way in health care.”

With Hochman’s unwavering support, Martin’s team (including many former Amazonians and some hotshots from Salesforce) brings to Providence the sensibilities of the world’s largest online retailer, including the ability to learn from online experiences with big data and to run sophisticated customer- and provider-facing online pilots in real time. It launched a new member website for its Boeing ACO in weeks, not millennia, as we normally do in health care.

Martin’s team follows many of the principles he learned at Amazon. For example, he told an HX360 audience, “We write the press release first.” This means they get very clear on what they are trying to achieve and what would constitute success, then they specify how it will be achieved. Afterward, they write an internal “working backward press release” that explains to customers or clinicians why the product will be valuable to them.

Another Martin aphorism: “There are no extra points for originality.” Martin described his unit as the “pay attention team,” a group that works within the many ministries and regions in the Providence system and looks for solutions, identifying those worth diffusing. This is a key insight about successful innovators: Innovation is about solving meaningful problems, not novelty. Great innovators understand that.

Way too much health care innovation is about pride of novelty rather than successful problem solving. (That applies to much clinical innovation, too: It may be novel and have statistically significant effects, but it really doesn’t make much of a difference that is detectible to human beings. Some, but not all, of the new crop of specialty pharmaceuticals are pricey exceptions to that rule.)

Focusing in

While the overall strategic focus for innovation at Providence is on population health, digital health and core clinical operations, there are a number of specific initiatives that are worth highlighting:

Platform strategy. Martin described three platform strategies that have topped the agenda this year:

• Clinical collaboration platform for Providence clinicians via secure telehealth and an internal social network, allowing medical staff to treat patients at a distance, provide expert consults and trade clinical best practices.
• On-demand health care platform to help consumers access information (through email and telehealth) as well as support consumers receiving home care, retail care or care in alternate sites.
• Consumer engagement platform to enable communication and connection across episodes of care with software such as Providence’s Mom and Well Baby app.

Patient experience. Amazon sensibilities are being brought to bear across Providence as it in innovates to enhance the consumer experience — whether for patients, healthy people or health plan members. A key challenge is to make the health system easier to use and relevant in people's daily lives. All of us who use Amazon, Uber or OpenTable yearn for their simplicity in health care.

The Boeing accountable care organization. Providence, along with Presbyterian Healthcare Services in New Mexico, is an early pioneer in direct-contact ACOs with employers. Boeing and Intel are tough, sophisticated, data-driven and demanding enterprises that expect extremely high performance from their suppliers, and health care is no different. Providence is winning the business and trust of Boeing employees in part through its digital innovation agenda.

“We own a high school. … We can learn from them.” With a wry smile, Hochman pointed to the fact that Providence owns and runs a Catholic high school in Burbank, Calif., and suggested there is no better way to understand the behavior of future patients and health care workers than to understand the digital behavior of teenagers.

Walgreens partnership. Recognizing the retail revolution in health care, Providence has partnered with Walgreen Co. and in a first for the retailer, will own and operate clinics in Oregon and Washington Walgreens stores with plans to open in 25 of them over the next 18 months.

Migration to risk. Providence has operated a health plan in Oregon for nearly 30 years. With more than half a million at-risk lives, mostly in that state, Providence can use its expanded geographic footprint through its merger with St. Joseph to offer an ACO and direct health contracting to many more self-insured employers in the West. Providence’s commitment to migrating toward risk was evident when Hochman told HX360 attendees that the health system tries to “disconnect reimbursement from delivery” and work with “[primary care providers] and clinics to create compensation models as if we are under risk.”

Genomics, too. Providence just announced that the Institute for Systems Biology is joining the health care system and that noted genomics researcher Leroy Hood, M.D., who leads the institute, will become Providence's chief scientific officer. Hood’s pioneering focus on scientific wellness based on personalized medicine using genomics and big data will provide Providence and St. Joseph with exciting new avenues for their innovation agenda.

Looking ahead

There are a few key health systems in the country that are market makers, not market takers. They shape the future through their strategies and the big bets they make. You know who you are. When it comes to innovation at scale, Providence is a system to watch, especially as it enters its proposed partnership with St. Joseph. The Washington-based system will be a major and growing force in the health care market and will teach us all how to bring in fresh, innovative thinking from outside the health system. We need innovation at scale.

Ian Morrison, Ph.D., is an author, consultant and futurist based in Menlo Park, Calif. He is also a regular contributor to H&HN Daily and a member of Health Forum's Speakers Express.