Three of the nation's top hospital companies and two major hospital systems – together representing more than 400 hospitals across the country – have invested in the Heritage Healthcare Innovation Fund L.P., a venture fund focused on investments in businesses that improve the delivery of healthcare services.
The partners will make individual investments of up to $10 million in new businesses.
"Hospitals must be the leaders and incubators of healthcare innovation in this era of fundamental change," said Wayne T. Smith, chairman, president and CEO of Community Health Systems, the largest publicly traded hospital company in the nation with 126 affiliated hospitals in 29 states. "This fund allows our industry to champion real and practical innovation that will improve the quality of care, service and efficiency."
Affiliates of Community Health Systems, the Iowa Health System, LifePoint Hospitals, Trinity Health and Vanguard Health Systems are limited partners in the fund.
With sweeping changes in healthcare anticipated, the investors in the Heritage Healthcare Innovation Fund say they expect that healthcare delivery systems will be the real-world laboratory for developing solutions in a rapidly changing environment.
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"Healthcare reform will require dramatic changes in strategy and operations for America's hospitals," said Bill Leaver, president and CEO of the Des Moines-based Iowa Health System, the nation's sixth largest nondenominational health system. "It is both a challenge and an opportunity. Now more than ever, hospitals must create enduring solutions to the challenges they face. We believe the innovation fund will unlock these solutions and accelerate their adoption across the industry."
"With the advent of bundled payments, accountable care organizations and comparative effectiveness, we have new financial incentives to deliver care at a lower cost with higher quality," said William F. Carpenter III, chairman and CEO of LifePoint Hospitals, which operates 52 hospital campuses in 17 states. "Every participant in the healthcare delivery system must evolve or face an uncertain future."
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The opportunity to launch new healthcare delivery approaches is a particular strength of the Heritage Healthcare Innovation Fund, said Joseph R. Swedish, president and CEO of Novi, Mich.-based Trinity Health, the nation's fourth largest Catholic hospital system.
"The structure of the fund is designed to create a close working relationship with innovators, offering them real-time feedback and mentoring to develop truly practical solutions to the real challenges we face today," he said.
The Heritage Healthcare Innovation Fund is designed to:
- Seek, fund and mentor businesses that look to deliver improved quality, service and efficiency for healthcare delivery systems;
- Develop "purpose-built" companies specifically focused on solving problems that are identified by hospitals and that are broadly applicable to healthcare delivery systems, especially issues associated with healthcare reform;
- Allow healthcare delivery systems the opportunity to benefit from the commercialization of innovative solutions they have developed internally through the development and launch of new companies; and
- Make individual investments of up to $10 million in early and growth-stage healthcare businesses.
Founded in 1986, the Heritage Group is a privately held investment and advisory firm led by Rock Morphis and David McClellan that has formed and led multiple healthcare companies.