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Inside Penn Medicine's Innovation Center

A Roundtable Discussion of Innovation Managers

It's a curious paradox of health care's current quest for fiscal salvation through "innovation" that a tight focus on new ideas may actually thwart the process of finding new methods for lowering costs, improving patient outcomes and changing ineffective clinical practices.
In some ways, new ideas can be distracting. At a recent gathering of health policy researchers, anecdotes made clear
panel headerDavid Asch

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David Asch, MD, MBA, University of Pennsylvania Wharton School Professor of Health Care Management, Perelman School of Medicine Professor of Medicine, LDI Senior Fellow, and Executive Director of Penn Medicine's Center for Innovation.
Christian Terwiesch

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Christian Terwiesch, PhD, University of Pennsylvania Wharton School Professor of Operations and Information Management, LDI Senior Fellow, and co-author of the book, "Innovation Tournaments: Creating and Selecting Exceptional Opportunities."
Roy rosin

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Roy Rosin, MBA, Chief Innovation Officer at Penn Medicine's Center for Innovation and former Vice President for Innovation at the software company Intuit.
Raina Merchant

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Raina Merchant, MD, MS, University of Pennsylvania Perelman School of Medicine Assistant Professor of Emergency Medicine and LDI Senior Fellow.
that hospital executives who announce their new assignments to manage some aspect of "innovation" are routinely bombarded with ideas at every turn. "I've come to view them like baby pictures," said one. "Everyone has them and tends to push them at you."

In Philadelphia, Dr. David Asch, Executive Director of the new Penn Medicine Center for Innovation concurs that innovation has become a "faddish and very 'Oh, Wow'" concept whose mechanics are not well understood.

Beyond wacky ideas
"Many believe the process of health care innovation is the process of ideation -- of coming up with often-wacky ideas that seem incredibly exciting," said Asch. "But it's really very different from that; innovation in a health care setting is a highly disciplined enterprise involving scientific rigor, testing and implementation. It can seem boring if you think innovation is just about creating trendy smartphone apps."

Asch, the former head of the University of Pennsylvania's Leonard Davis Institute of Health Economics, was one of four Penn experts who participated in a recent roundtable discussion about the management of health care-related innovation programs. Other participants included Roy Rosin, Penn Medicine's Chief Innovation Officer and former Vice President for Innovation at Intuit; Christian Terwiesch, a Wharton School Professor of Operations and Information Management and author of the book "Innovation Tournaments"; and Raina Merchant, an emergency physician and Assistant Professor of Emergency Medicine at Penn's Perelman School of Medicine.

Affordable Care Act
The need for dramatic innovation across all aspects of U.S. health care is a core concept around which the Affordable Care Act was organized. Launched in 2010, the new Center for Medicare and Medicaid Innovation (CMMI) was called the "Jewel in the Crown" by then-Center for Medicare and Medicaid Services (CMS) Administrator Donald Berwick. CMMI Director Richard Gilfillan characterized it as the "trampoline" from which major improvements in cost control, evidence-based medicine and the quality of care would ultimately bounce.

Although the press and the ongoing political debate have given CMMI short shrift, the new agency's $10 billion in funding for innovation grants has seized the attention of health care's academic and business communities.

More services, less money
Meanwhile, mounting financial pressures from both the health reform law's sweeping new requirements and the general economic slump prodded health care facilities of all sizes to explore innovations that might deliver more services for less money. Subsequent media coverage of this trend in health care innovation was effusive, but almost exclusively focused on colorful ideas alone.

So exactly what is innovation and how do you begin to do it inside something as large and complex as the $4.3 billion-a-year Penn Medicine network of health care facilities?

"People are thinking about 'innovation' so many different ways," said Christian Terwiesch. "It's important to define it so we're all clear about what we're trying to accomplish. Innovation is a match between a solution and a need that creates better value than what currently exists. The idea that you begin with is a hypothesis; it has to be scientifically proven."

Can't manage what you can't measure
Terwiesch noted that you can't manage what you don't measure, pointing out that health care institutions with innovation programs have to measure the overall innovation process as well as targeted innovation projects. He said few institutions were currently able to do this.

"These places have all these potential innovations flowing through the system," Terweiesch said. "They should start measuring that overall process just like they'd measure a production process: what are the defect rates, the number of widgets in the system? Where do the ideas come from? How many did we try out and how many then moved to the next step of refinement? Why?

"At the national level," Terwiesch continued, "nobody is thinking of this as a structured innovation process -- it's just all a big mess where, at best, they measure individual innovations but ignore the rigor of defining the process structure. Somebody needs to own the process of innovation management."

"To start with," added Roy Rosin, "understand that 'innovation' is not about executing that first big idea you fell in love with, but rather about establishing a support infrastructure that enables you to systematically figure out what really works. Most innovation fails due to premature scaling -- it's rolled out and pushed big before its managers really know whether or not it works."

Evidence-based experiments
Rosin noted that a well-controlled innovation process feeds on lots of new ideas, but discards almost all of them as failed elements of an ongoing, evidence-based experiment.

"In other areas of business in recent years, most of the innovations that became successful started out in the wrong direction," Rosin said. "The best venture capitalists tell you that most business plans they invest in -- even those involving entrepreneurs with the best track records -- initially fail and are saved by the right innovation technique: that means the ability of mangers to learn, pivot and adjust quickly enough to enable success to rise from the ashes of those initial failures. The same thing is true for health care innovation."

Increasingly in both government and industry, the game-like format of "innovation tournaments" is being used to generate the initial wave of ideas that are fed into the innovation evaluation process. This trend was accelerated by the 2009 Harvard Business Book "Innovation Tournaments," co-authored by Terwiesch and fellow Wharton School Professor and Vice Dean of Innovation Karl Ulrich. These tournaments are contests that use crowdsourcing methods to rapidly compile large numbers of ideas for improving business policies, practices or products. A tournament committee reviews the thousands of incoming ideas and selects a few that are granted a reward or developmental funding.

Billion dollar innovation tournament
Thus far, the innovation tournament offering the largest prizes has been the CMS innovation center's 2012 Health Care Innovation Awards program, which pushed out nearly a billion dollars in innovation grants to 106 various health care and academic groups.

Terwiesch wonders if grants that gamble so much money on a single concept represent the most effective strategy for initiating and managing broad scale innovation.

"When you're thinking of the billions of dollars that are going out through health care innovation tournaments," he said, "you have to ask, 'which form of that process would work best?' If you have a billion dollars, do you fund ten $100 million projects or do you fund a thousand projects with much smaller amounts but require them to send in intermediate results of ideas that have tested out in a promising way? Do you go for a few big ideas or do you use the whole process as a way to validate much larger numbers of promising ideas?

More money follows good results
"It's an interesting alternative to give large numbers of researchers small amounts of money," said Terwiesch. "Just get them started on problem solving and integration and, when you've seen which ideas survive the first round of validation, you give those researchers more money. This is how it works in drug development, for instance."

No matter what system is used to generate the front-end ideas, establishing a validation process within a health care institution is neither simple nor cheap.

"A lot of discipline is required," said Asch. "The costs of getting information, evaluating process and identifying and separating successes from failures are quite high, socially and monetarily. If you can't identify a way to lower these costs it's going to be very challenging to move things forward."

Rosin explained that one the biggest changes in innovation management seen in other business fields is the emergence of "rapid validation" techniques that facilitate the scientifically-sound testing of an idea in a matter of days or weeks, rather than months or years.

Apply scientific method faster
"In health care, that ability to apply scientific method faster; to be able to test lots of concepts quickly and cheaply, is going to be very important for getting a good return on innovation investment," Rosin said. "We need to constantly generate good evidence that tells us we've learned something new and should change direction."

The drive to innovate is also forcing health care to rethink its traditional silos and professional boundaries. For instance, aside from the health policy researchers that make up its core, Penn Medicine's innovation center has recruited faculty from the University's schools of business, engineering and design.

"In many ways," said Asch, "we're trading on the idea of doing something a lot of academic medical centers ought to be able to do, but are really very ineffective at doing -- which is connecting the academic enterprise with the clinical enterprise."

Rosin is of the same mind. "I come from a Stanford background, which makes me love interdisciplinary approaches," he explained. "There, we have the business, law, medical and engineering schools all bunched together in this frenetic mash-up that can be focused on any given problem. If you look at the most successful corporations in other fields, you see the same thing. Proctor & Gamble brings in biologists and zoologists to figure out how to solve a clothes washing problem; it's fascinating to see how unique insights and big breakthroughs can come from these different perspectives."

Big thoughts vs. front lines
But Terwiesch cautioned that academic traditions themselves can get in the way of such efforts. "It's naïve to think we could sit an interdisciplinary crew in an office and actually solve anything. Smart academics like to think big thoughts as opposed to going out on the front lines -- and, in this case, 'front lines' means where the patients are. You cannot fully understand or improve the overall process unless you form empathy with the end customers. The more we are facing the patients, the more we will learn about their needs and how to meet them in some better way."

Health care innovation projects aimed at those patients can take many forms. Some are as simple as designing an electronically tethered pill bottle to increase medication adherence. Others, like accountable care organizations or medical homes, represent a disrupting reinvention of the entire institutional business model. There are a seemingly infinite number of other innovation targets in between these extremes.

Asch's vision for the Penn Medicine center begins with a focus on how proven techniques from other fields may offer solutions not obvious to traditional clinical thinking.

Beyond the biomedical model
"Think about our typical approach to something like colon cancer," he said. "The goal is to reduce the burden of colon cancer mortality on a population. Conventional approaches treat it with surgery, chemotherapy and radiation. But when you apply disciplines from elsewhere, you realize that we could probably completely eliminate colon cancer mortality if we were able to deploy the screening technologies we currently have in a much broader way. That might involve marketing and business disciplines that we never thought of as belonging within a hospital system. But they might be very successful at delivering a service toward a clinical problem that would otherwise have been seen only through the lens of a biomedical model of health care delivery."

Asch and the other panelists agree that, ultimately, the holy grail of health care innovation will be changing the traditional behavior and daily culture of clinical communities -- something that will be difficult to achieve.

"There are no easy fixes and no low-hanging fruit when you're talking about that," said Raina Merchant. "It's really complicated, but can sound easy at first. Like, let's reward everyone who washes their hands after they take care of a patient. But actually, there are so many different things that have to happen just to get to the point of trying to do that implementation. And then you have the issue of how to sustain it on the scale of an entire hospital."

'Continually humbled'
"In my work on projects that try to change smaller systems, I have been continually humbled by how tough the process of altering behavior can be," Merchant said.

Rosin, who comes from a software industry renowned for its ability to re-envision and re-engineer corporate cultures, notes that "fundamental change management" is a discipline that institutions are "systematically under-invested in."

"The basic principles are that you change what you can measure. You change what you make visible and you change what you celebrate," he said. "Ultimately, cultures are made of the stories you tell and the heroes you celebrate. For instance, when a hospital staff is asked to reduce infections and their performance on that is measured and posted, you actually start to see infection rates go down. Same thing happens when you give patients pedometers -- they tend to walk more. So, what gets measured is what gets focused on and that's how you begin."

"Your actions and rewards and story telling are all consistent with the thing you're saying is important: health outcomes, infection rates, readmissions," Rosin said. "You get your entire system aligned behind measures that are really material and you can start to make a tremendous difference in how large bodies of people are thinking and behaving on a day-to-day basis."

Experiments on human subjects
Another big hurdle for health care innovation efforts are the strict rules and approval process required to conduct any type of experiment involving human subjects, including in-hospital, randomized, controlled trials aimed at determining how to improve the quality or lower the cost of patient care.

"There are historical reasons for the way our system of protecting human subjects is set up the way it is but, to put a sharp edge on it, I think a lot of those ideas need to change," said Asch. "For example, imagine that we have a great new way to improve the adherence to medication in patients discharged from the hospital. We could implement that today for all our patients by just applying that rule as part of our clinical operations. There would be no Institutional Review Board (IRB), no scientific review for that."

"But today," he continued, "if we decided to test the same medication adherence concept, randomized patients, and just did it for half of them to see if it actually works, a whole bunch of regulations suddenly come into play that might potentially grind the project to a halt. It's an interesting paradox: why is it the case that we could do it for everybody but we can't do it for half the people and actually evaluate along the way?"

'Need some new regulations'
"IRBs play a critically important function," Asch said. "They are fundamentally there to protect human subjects. But we actually need some new regulations and a new approach because I think when most people hear the example I just gave, they would nod their head and say 'you know, you're right, that doesn't make any sense.'"

Also crucially important to the success of in-hospital innovation programs are the IT systems whose functions are targets for cost-saving and care-improving innovations. But throughout much of health care, IT operations are rigid and inflexible in ways that present major obstacles to innovation researchers and managers.

"Right now," said Rosin. "We're not architected to facilitate rapid, frequent and low-cost changes. Often, you want to create foundational sandboxes or other experimental capacities that will allow people to turn ideas into some kind of action that can be studied. So, in many places, there's a whole enabling bucket needed for innovative IT use."

A related and equally important agent of innovational change are the tablets, smartphones, wireless body monitoring devices, electronic records systems and other digital utilities that offer dramatic new ways to communicate and gather clinical data.

A new electronic 'nervous system'
"The general tendency is to focus on the individual devices and see those items of hardware and software as the innovations," said Merchant. "But from the 30,000-foot view, it's the evolving matrix of connections linking all these devices that could be the ultimate innovation. Think of it as an electronic 'nervous system' whose digital tentacles are rapidly spreading in all directions in a way that could connect everything to everything else."

"Others have found there are a lot of current opportunities to link existing systems better -- but few places are taking advantage of that," said Merchant. "So, in terms of innovation, we're really at the very beginning of harnessing the full power of digital interconnectedness within a health care system setting."

"One thing driving this," Merchant continued, "is public sentiment. Consumers are starting to realize that when they tweet about being sick, researchers are gathering and using that data to track regional health events. That's an innovation with muscle and the public likes it. There's a lot of emerging data about the management of chronic medical conditions in this same space and with networks of providers, friends and colleagues who can help with preventive maintenance."

"So," said Merchant, "there's a lot to learn in these social media environments that could lead to new insights and potential breakthrough innovations that could improve outcomes and the quality of care. That's what makes it so exciting that a facility as large as Penn Medicine is becoming so systematically involved in innovative thinking."

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Hoag Levins is a journalist and managing editor of The LDI Health Economist. hoagl@wharton.upenn.edu

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