Scroll Top


Executive Summary:

  • The COVID-19 crisis has led to health systems’ operating portfolios and income statements coming under stress, raising concerns about their ability to continue to fund their investments in innovation.
  • The response to the virus has accelerated the adoption of telemedicine and virtual care, highlighting the need to leverage and embrace new technologies.
  • The approaches employed to drive innovation include direct investments in companies, co-investments, and investments in private equity/venture capital funds utilizing a General Partner as a strategic partner.

Each approach to innovation has its strengths and weaknesses which are explored in this paper, along with our thoughts on the keys to developing a successful program.

Interest in strategic investing has been on the rise going back to the middle of the last decade. In our December 2016 white paper Caution: Construction Ahead – Healthcare Organizations Use Private Equity to Support Innovation, we noted The Affordable Care Act spurred the move from a fee-for-service to a fee-for-value model. In this new world, strategic investing is viewed as a tool to drive innovation and to support objectives, including:

  • New medical advances to improve patient outcomes;
  • Improve the customer (patient) experience;
  • Establish new tools to facilitate revenue management and expense control;
  • Monetize intellectual capital;
  • Boost investment returns to support concerns of contracting margins; and
  • Apply new technologies.

We see strategic investments in different forms. Some of the largest organizations, particularly academic medical centers, focus on developing businesses around their own intellectual property. Certain organizations seek direct investment opportunities in individual companies while others gain access to promising companies and technology through investments in private equity or venture capital funds. It is not uncommon for healthcare systems to pursue more than one of these approaches as part of their innovation program.

To read the full analysis please see: