Can Health Innovation be Self-Funding

  • Nov 01st, 2019
  • Guy Paterson

Can Health Innovation be Self-Funding?

Hospitals all over the world hope that investment in innovation will ultimately lead to cost savings.   Self-sustaining innovation is a concrete and immediate need for the hospitals’ bottom lines.

Interesting set of  recent articles on ‘Innovating the Future of Health Care’ include The Ottawa Hospital announcement of an alliance with the Sheba Medical Center, Tel Aviv, Israel to implement the ARC Ecosystem to bring together clinicians, start-ups, leading medical centers and national/international partners  to transform healthcare.

The Ottawa Hospital joined Israel’s Sheba Medical Center to become one of only two hospitals in the world considering an “ARC model” that aims to Accelerate efforts to Redesign healthcare through Collaboration.

The ARC model is unique in its ‘open innovation’ philosophy, which recognizes that health-care challenges cannot be solved unless experts from outside the system – including patients and industry – participate in the process.

The ARC Innovation Center both incubates outside start-ups and spins out internally developed technology.  ARC has four core concepts that underlie its goals: digital health, open innovation, international collaboration and creating an environment in which innovation can thrive.

Dr. Eyal Zimlichman, Sheba Chief Medical Officer and Director of Innovation and Commercialization said; “Many of the big medical centers are focusing internally, because they want to develop intellectual property and commercialize it, but we know so many of the brightest ideas are coming from outside. They’re coming from start-up companies.  If you’re closed to those start-ups, if you’re closed to innovation on the outside, you’re missing a huge opportunity.”

ARC Innovation at Sheba Medical Center run 20 to 30 start-ups through the program each year, giving each one $50,000. They have about a 30 percent commercialization success rate out of the program. The center also houses a $45 million digital health innovation fund operated in tandem with TriVentures (a US-Israeli Venture Funds.)

The biggest benefit for the start-ups however is access to the hospital’s data and physicians, and the opportunity to pilot its technology within the hospital’s walls.

“What we’re hearing from them is what used to take us a year to do outside takes us two months inside,” Zimlichman said. “And for a start-up company, they’re all on a burn rate, they’re all losing money, and if they could cut that down from a year to two months that would help considerably.”

The goal at ARC is sustainable innovation, and the hospital has been successful enough that it’s beginning to export its model to other countries, with ARC Ottawa set to open in Ontario, Canada this summer.

The goal of these hospitals’ support of innovation is to commercialize products and then get a piece of that revenue to help support the hospital.

“We don’t need to be shy, as a not-for-profit health system, about saying we’re looking for a revenue stream to come out from innovation because that revenue stream will push out more innovation, and as you know innovation is difficult to sustain if you do not have the right resources at hand,” Zimlichman said.

In order to do that, most Israeli start-ups aren’t thinking about selling their products in Israel’s 9 million-person healthcare market. Most have set their sights on the United States, as well as other regions like Europe or Canada.

In addition to its work with Israeli start-ups, Sheba works with a number of health systems in North America including the Mayo Clinic, Massachusetts General, and Mount Sinai Medical Center. In these programs, the two hospitals take a joint stake in whatever ideas come out of the projects.

The ARC Innovation Model fits nicely with the Mission and Objectives of our Office of Health Innovation (OHI) at Health Innovation and Economic Development Inc. Saskatchewan, specifically developing a broad, sustainable environment for Health Innovation.


Guy Paterson Director, Health Innovation and Economic Development Inc.

Guy Paterson is a Director and Officer of Health Inovation and Economic Development Inc.  A Saskatchewan based not-for-profit with a misson to create the ecosystem, networks and alliances which support individuals and organizations seeking to conceive, test, develop and market innovative products, services and solutions for health and wellness.

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