Intermountain Ventures: A look inside a healthcare venture fund

Intermountain Healthcare has launched a new ventures division that operates under its own set of governance models and policies. Its mission is to bring innovation to the healthcare setting.

Intermountain Healthcare is taking a page from the corporate world. In an effort to find and develop innovative digital health technologies that can address pain points in healthcare, the company has established a new division called Intermountain Ventures.

George Hamilton and Nickolas Mark, managing directors of Intermountain Ventures, said venture arms are atypical in healthcare and are difficult to establish. After years of planning, the duo's vision came to fruition in January, but only with backing from one of the largest healthcare systems in the U.S.

"Intermountain Ventures is similar to a corporate development function in a large, nonhealthcare organization," Hamilton said. "It's the organization that identifies new technologies both internally and from outside that we can bring in to Intermountain to help maximize our mission."

Hamilton and Mark have big plans for Intermountain Ventures this year, but they also caution other healthcare organizations that establishing a venture fund in healthcare isn't easy, and it's not something every organization should do.

Creating Intermountain Ventures

Healthcare organizations are organized differently than corporate organizations and often make business decisions based on consensus from multiple parties rather than a top-down approach, according to Mark. He said that establishing a ventures arm in healthcare took "figuring out the magic" of an operating model that could behave like a venture capital organization -- inside of a healthcare organization.

Intermountain Ventures wasn't Intermountain Healthcare's first foray into business ventures. The newly formed division grew out of the Intermountain Innovations division, which included a $35 million ventures fund to invest in healthcare technology companies that aligned with the healthcare organization's mission.

One of the most challenging concepts they encountered is that most ventures fail in the startup world, Hamilton said, and failure isn't an option in healthcare.

"Taking that risk profile in the venture space where most things fail and trying to convince an organization that says nothing should fail, zero harm, and getting comfort around that takes a lot of time," he said.

Intermountain Ventures is a separate entity from Intermountain Healthcare, a nonprofit healthcare system of 23 hospitals and 170 clinics based in Utah. The ventures division has its own set of governance models and processes so that it can act at market speed, a pace healthcare organizations don't generally keep up with.

The ventures fund is also set up for long-term investment, Hamilton said, and is committed to working with their investments beyond the shorter timelines of other venture funds.

Intermountain Ventures is similar to a corporate development function in a large, nonhealthcare organization.
George HamiltonManaging director and partner, Intermountain Ventures

"A lot of these companies are going to take more than one or two years to generate value and if you're not patient with your venture fund, you're not in it for the long run," he said.

The Intermountain Ventures team interacts closely with Intermountain Healthcare's clinical programs to identify where the medical staff is hitting a wall before going and seeking out startups to invest in.

Intermountain Ventures then brings those technologies into the organization so the clinical staff can try them out. Doing so gives startups an opportunity to see how their technology works in an actual clinical setting, and it helps Intermountain Ventures determine the value of that new technology in healthcare and its ability to generate ROI, according to Mark.

"We have this active, living laboratory that allows us to engage and say, yes, this really works in a community-based care organization," Mark said.

But innovation doesn't just come from the outside-in at Intermountain. Take Alluceo, a startup that Intermountain spun out last year. The company provides a digital platform that integrates mental, behavioral and physical health services together, which enables a care team to keep tabs on and participate in treating the patient. The product is based on a program developed by Intermountain primary care clinicians called Mental Health Integration.

Hamilton said the Mental Health Integration program facilitated by the digital framework resulted in a 23% reduction in ER visits, demonstrating the value of the technology.

Not for all healthcare orgs

But neither Mark nor Hamilton believe that a venture arm is a good fit for every healthcare system. Mark said an organization needs to be in a position to experiment to ensure technology investments will be impactful in a clinical setting and generate a return on investment.

Healthcare organizations that can't use a clinical organization to test out potential investments should consider becoming a limited partner in another organization's fund as a way to get into the industry, according to Hamilton.

"It almost killed us to try and get through all the mechanics of how this should work, with tons of advice from external organizations to make sure we're as buttoned up as we possibly can be," Hamilton said. "At the end of the day, you have to manage a lot of people with different sets of goals."

Intermountain Ventures plans to measure impact  

This year, the ventures division has established performance indicators to determine the best framework for measuring an investment's clinical, strategic and financial impact on the organization, Mark said.

The framework will enable Intermountain Ventures to better manage the investments by reporting on the exact financial and clinical impact of those investments, he said.

The idea is to constantly disrupt how Intermountain Healthcare operates, delivers care and provides benefit to the community, according to Mark.

"It's all about how do you make Intermountain a forever company," he said. "You have to continually expose that organization to new ideas and new ways of doing things."

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