Startups are no longer just for tech bros in Silicon Valley—they’re playing an increasingly important role in the US healthcare system, experts say.
Health systems are looking for solutions to complex issues, including financial strain, healthcare inequities, and widespread staffing shortages. Startups have the potential to provide systems with resources they wouldn’t otherwise have to tackle such challenges, as well as some much-needed revenue, according to Joseph Moscola, EVP of enterprise services at Northwell Health, New York’s largest health system.
“Without [startups], it puts us at very much a disadvantage for our patients and even our revenue diversification,” he told Healthcare Brew. “Ultimately, we’re looking for these opportunities to invest in these ideas—one, because we need them, and then, two, the amount of revenue we get from just patient care continues to decline each year.”
How Northwell Health works with startups
Health systems work with startups in a variety of capacities, from investments to program pilots to direct partnerships.
At Northwell Health, Moscola said the system partners with existing startups and develops its own from scratch to help the health system save costs, boost efficiency, and increase opportunities for innovation.
When deciding to partner with a startup, Northwell is “almost always looking for a way to get to market quicker,” Moscola said.
For example, the health system partnered with a startup called Start, which handles the administrative work for Phase 1 cancer clinical trials. Northwell wants to conduct more cancer clinical trials, and working with Start can help the health system get into that market sooner, according to Moscola. Currently, the health system does about five cancer trials per year, but with Start, the system should be able to “be near that 100 trial mark within a three-year time period,” he said.
In addition to getting to market quicker, Moscola added that Northwell looks to startups to make workflows and processes easier. The health system partnered with startup LeanTaaS, founded in 2010, which uses artificial intelligence (AI) to streamline operating room scheduling. The startup “allows us to coordinate the operating room along with staffing in a way that will increase the number of cases we can put through the operating room, while at the same time increasing the satisfaction of the surgeons,” he said.
Northwell also develops its own startups when it sees a good opportunity, according to Moscola. So far, the company has created three startups, and “each one of them was to ultimately fill a gap, provide a service, or disrupt a marketplace,” he said.
The first startup Northwell developed was FlexStaff, which is an internal staffing company that has saved the health system $200 million in staffing fees over five years, Moscola said. The second is Northwell Direct, an employer health benefits provider that the health system created in 2020.
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The third is a construction company called Northwell Construction. Moscola said the health system decided to launch it because the health system spends “a ton of money” on building projects, and found that starting its own construction company could get projects done in half the time and cut costs in half.
A look at Memorial Hermann’s strategy
Memorial Hermann, a 17-hospital system in Houston, takes a similar approach when it comes to leveraging startups.
The health system has investments in about 45 startups, as well as 25 joint ventures and partnerships and 20 “innovation hub pilots,” according to Feby Abraham, Memorial Hermann’s EVP and chief strategy and innovations officer. The goal for the startups is to “improve consumer access to healthcare and reduce total cost of care,” he said.
For example, Memorial Hermann partnered with GoHealth Urgent Care, a private equity-backed startup founded in 2014 that builds urgent cares at scale. Memorial Hermann tripled its urgent care footprint from 10 to 30 locations since partnering with GoHealth in 2022, Abraham said.
The cost of care is lower when patients go to urgent cares instead of emergency rooms, so expanding access to these facilities also helps Memorial Hermann reduce costs. An average urgent care visit comes out to $185 compared to $2,600 at the emergency room, according to data from insurer UnitedHealthcare.
“What that has meant is that we’ve been able to provide access to consumers throughout the communities for several lower acuity needs so they don’t have to spend hours waiting in an [emergency room] waiting room,” Abraham said.
Memorial Hermann has also partnered with startup Ambience Healthcare, founded in 2020, which uses AI for clinical note-taking. Abraham said the technology allows clinicians to be more present when working with patients and reduces burnout, as the clinicians spend less time on administrative tasks.
Ultimately, he said, startups are a crucial way for health systems to accomplish goals they wouldn’t be able to do on their own.
“Startups are playing a critical role in how healthcare is accessed, experienced, and delivered,” he said. “They’re solving the right problems, and they have a set of talent that is working on the right product and technology that matters as we try to bring some of these innovations to our customers.”