The Importance of External Innovation-Full Transcript

Big hospital systems are embracing startups in more ways than one

Aurora Health Care CEO, Nick Turkal, MD, sits down with Unity Stoakes at the StartUp Health Festival for a fireside chat to discuss the importance of both external and internal innovation in today’s healthcare systems.

(Subscribe: YT, Soundcloud, iTunes)

Key takeaways from this episode of StartUp Health NOW can be found here.

Steve Krein: [0:43] I’m going to introduce, as Ira mentioned, a kind of mindset of a hospital system that’s here to change healthcare. This next fireside chat is with Dr. Nick Turkal, who’s the CEO of Aurora Health Care.

[0:56] He’s the newest board member of StartUp Health. Aurora’s one of our new partners in the mission to transform healthcare.

[1:03] I got to tell you, we spent a lot of time meeting with hospital systems all around the country trying to find the systems being run by people, not just a CEO but an entire leadership team, that thinks a certain way.

[1:18] That certain way is really this mindset of transformation and the importance of really getting in early and working with the entrepreneurs as they’re building their company, as they’re forming the shape and shaping the company at the earliest of stages.

[1:39] When we met Nick, and we met his team, we knew we found a long‑term partner, because it just felt right, and they thought like us and really ‑‑ much like you’ll see over the next half hour, 40 minutes we talk to Nick ‑‑ he thinks like an entrepreneur even though he’s a CEO of a $6 billion hospital system.

[2:03] Please join me in welcoming my partner, Unity Stoakes, and a chat with Dr. Nick Turkal from Aurora Health Care.

[2:12] [applause]

Unity Stoakes: [2:15] Nick, welcome. It’s great to have you here.

Dr. Nick Turkal: [2:15] Thank you.

Unity: [2:16] I thought we’d start the discussion learning a bit about your background. You started as a family physician in rural Illinois. How did that influence your vision in leading one of the nation’s largest integrated delivery networks?

Nick: [2:33] I’ve talked about this occasionally, that this is not what I went to medical school for. It’s not what I signed up for.

[2:38] About two years into private practice in a small community, I began to realize what a gap there was between what patients need and the way we’re trained to provide healthcare. Very little in the way of systems of care at that time. Very little in what we now talk about as consumerism.

[2:58] I began to try to be a little disruptive in that small community, and bring specialty care into the community rather than always sending patients away, and develop a little mini system of care. As I got more and more interested in that, I decided that I wanted at least part of my career to be about reshaping healthcare in some significant way.

Unity: [3:18] Was there an “aha” moment where you sort of felt that shift?

Nick: [3:25] Probably a couple of “aha” moments. I’m a family physician. I had delivered about 100 babies in my last year. Sleep deprivation tends to give you great insights.

[3:37] Two in the morning one day when I was finishing with a couple of deliveries in the hospital and getting ready to go into the office the next day, I thought, “There’s probably got to be a better way to organize this.”

[3:50] It was in the middle of the night in a small hospital. I thought, “Boy, it’s time for some changes.”

Unity: [3:56] One of the interesting things about Aurora ‑‑ and not a lot of hospital systems and healthcare systems think this way ‑‑ is your focus on external innovation and the importance of that. How did you arrive at the perspective that that could be valuable to your strategy moving forward?

Nick: [4:14] Just a couple of words about Aurora. I’ve now been there a number of years. It’s really been great to watch a system develop.

Unity: [4:22] You’re celebrating your 10 year anniversary?

Nick: [4:23] I’m coming up on 10 years as CEO, but I’ve been there a lot longer than that, doing quality work and then chief medical officer. What I think has allowed us to be a fertile ground for innovation is that we’ve transformed from what was a hospital system to a healthcare system.

[4:43] Well over half of our revenue, for example, comes from non‑inpatient settings. When you’re really providing care in the communities ‑‑ whether it is home care, pharmacy care, physician office care ‑‑ it gives you a much better broad‑spectrum view of what your patients need. That’s the fertile ground.

[5:05] Then the innovation part is part of what we hope to do to drive culture change at Aurora. If you think about healthcare, we’ve got this huge monster of a system in our country that was designed not to change at all. Every time we try to disrupt from within, we’re really kind of bucking the trends.

[5:26] You think about healthcare, for a lot of physicians and nurses and pharmacists, they went into it thinking they were going in to really defined field. Now we’re saying, “No, no, we’re going to change everything.” We can do some of that internally, but I think it’s really arrogant if we think we can find all the answers internally with people that have been doing things the same way for years.

[5:47] We know we don’t have all the ideas ourselves, so we want to harvest the best ideas that are developing out there, and see if we can be a good testing ground for them.

[5:57] Second thing is that if we’re going to change our culture internally, we need some external stimulus to push us along and get some new ideas going. As our doctors work with people from the organizations that we’re working with from StartUp Health, the lightbulbs go on.

[6:14] They begin to think about different ways of doing things. External innovation stimulates internal innovation, and that’s part of how we change what we’re doing in healthcare.

Unity: [6:25] You know this concept of innovator’s dilemma, and trying to determine the right moment to start disrupting yourself? You’re in a very interesting position because you guys are doing so well.

[6:37] There’s so many things going right with what you do. Why is it important to focus on innovation at that moment when so much is working?

Nick: [6:46] If you look at what we’re doing, we have about 15 hospitals, 1,700 employed physicians, 70 pharmacies, so we kind of cover the spectrum of things. We’re doing very well from a quality perspective, financial perspective, service perspective.

[7:01] If you look at the healthcare industry, even if we’re doing really well, I don’t think there is one patient you could find in this country who would say healthcare is simple.

[7:13] Until we flip the model on its head and really make it consumer‑centric, we’re not doing that well. We have a long way to go to change our model.

[7:22] Second thing would be, I think it’s the best time in the world to be innovative when you’re successful. When people are stressed, if they’re worrying about if they’re going to be there in a year, they’re going to get absorbed by somebody else, or if they’re worried their system isn’t going to do well financially, it’s very hard to bring out creativity.

[7:40] A flip side is it’s a little tough to get people to change when things are going well. But I think with this external stimulus and some of the innovative programs we’re working on, it’s the very, very best time for us to change.

[7:56] It’s culture change. It’s process change. It’s flipping it around to be more about consumers.

Unity: [8:01] There’s a lot of entrepreneurs here at the StartUp Health Festival. If you could wave a magic wand and get this army of entrepreneurs solving some of your challenges, what would they be doing? What would they be focusing on? What would you ask for?

Nick: [8:17] I’ll go back to the comment I just made, that if you ask patients, they don’t think healthcare is simple. Anything that can help us truly simplify the care that’s provided, so it’s either easier, more patient‑friendly, more cost‑effective, those are the things that are going to make a difference.

[8:36] Let me talk about two examples of the pilots we have going on now with companies that are part of StartUp Health ‑‑ Babyscripts and Caremerge. Both of these companies are solving a real problem for both health system and patients.

[8:52] Babyscripts is great. The idea is that healthy women who are pregnant do not need to come in for 15 prenatal visits if we can do some of the monitoring and education and so on at home. In fact, I would tell you I think every time we engage patients and have them take more ownership of their care, we get better outcomes.

[9:13] So we’re working with Babyscripts on saying, “Can we reduce the number of prenatal visits while we educate patients and end up with better birth outcomes?” That’s great. We get paid a global fee for obstetrical care. If we can reduce visits, it’s more efficient for us and certainly better for the expectant moms.

[9:32] We’re starting this pilot with Caremerge to collect data from patients that leave our system. For example, somebody goes to a rehab hospital that’s not part of Aurora. The odds are we’re going to lose track of that patient.

[9:48] We may not manage them anymore. The risk of readmission to the hospital is very high, is very costly, and we’re now being penalized for that. Caremerge helps us to collect the data, stay connected to the patient, prevent those readmissions.

[10:04] If we can demonstrate that these two work, they are just great examples of how you take what was an idea, put it into practice, and affect a population.

[10:20] There’s a lot of talk this week about Moonshot 20‑20 for cancer. That is a great big hairy audacious goal, and it’s great. But for entrepreneurs, you got to start somewhere.

[10:30] If you start by solving a problem for either patients or the healthcare system, in a very real way, that’s laying the groundwork for what I think of as the Moonshot, which is much more simplified care for our patients.

Unity: [10:45] You’re looking for very practical, pragmatic solutions today that can solve a challenge for your organization today?

Nick: [10:56] Absolutely. Everybody knows I think in this room that healthcare expenses have been way too high for the outcomes that we get. I think it’s pretty foolish to think that we’re going to have simple solutions.

[11:06] We have to work our way through a lot of trials to figure out what is going to work best for better care and taking cost out. We’re anxious to work with companies that have those real solutions for us.

Unity: [11:20] We talked a little bit about external innovation. I know one of your core philosophies is also internal innovation, or working from the inside out to develop your organization. Could you talk a little bit about the importance of that, and why that’s important?

Nick: [11:37] Sure. During the discussions of Affordable Care Act, we started talking about having a strong preference for transformation from the inside out, that we would rather not let the market or the government or insurers determine our fate and how we work.

[11:55] We would rather reshape the organization proactively, so we have set about doing that in some pretty deliberate ways ‑‑ partly how we get paid to go at risk for populations, partly how we manage our costs.

[12:13] We’ve come to a really good place, but it depends on engaging people across the system to say, “If we’re going to transform from inside, we’ve got to do it with people on the front lines who know how to do it.”

[12:27] We have very deep engagement in our medical group with physician leadership, in our nursing leadership to say, “We’re going to figure out better ways at each one of our sites to do care.”

[12:40] When I look at other industries, outside of healthcare, the ones that tend to get into trouble and die are the organizations that think they’re successful, and they’re at the top of their game, and fail to recreate themselves at that point. We’re trying to stay ahead of that curve on transformation.

Unity: [12:59] Do you think of that as a process that happens…How quickly? Is it years, decades? How quickly can you move the ship so to speak?

Nick: [13:10] Here’s what one of the things that keeps me up at night is, “What are the disrupters that are going to happen to this industry that maybe we’re not seeing yet?” I don’t think we have 10 years to change the way we work.

[13:26] We have to do continue to do it very quickly over the next couple of years. The more we get challenged now, the more likely we are to stay one step ahead of the curve.

[13:38] When we talk about consumerism, I should really explain what I mean by that, because for 10 years, I’ve heard people talk about consumerism in healthcare. I don’t think as healthcare providers we have felt that until the last two years.

[13:57] The reason I say we feel it now, is in talking to the folks that register patients, the folks that are physicians and are nurses and pharmacists, what I hear consistently from them is, “Our patients are asking better and different questions than they asked a few years ago.

Unity: [14:18] Why do you think that is?

Nick: [14:19] I think there are a number of reasons. First of all, the Affordable Care Act discussion started to shine a light on healthcare. All of a sudden, people are interested in it. They know there’s a cost problem. They know there’s sometimes a quality problem. Patients are asking questions.

[14:34] The phone that’s sitting in my pocket has connected our patients to each other and to information in a way that they didn’t have before. They are searching for information. Either we can be a source of it or they will find it somewhere else. What’s happened in the digital world has been huge.

[14:54] Along with that, think about the expectations. I’ve talked about the difference in banking and airline and healthcare. I don’t want to be like the airline industry, by the way.

[15:06] But I think about, and maybe I’m dating myself, but I actually used to go to banks to get money out and deposit things. I never go to a bank anymore. That world has changed so much.

Unity: [15:21] What’s crazy is there’s more even advanced systems outside of the US, in other places. There’s just amazing innovation going on there. We’re just catching up still.

Nick: [15:31] We’re catching up. I think healthcare has consistently been 10, 15 years behind. If we think that this digital world isn’t going to affect us tremendously, I think we have our heads in the sand.

[15:45] That helped with consumerism, but when we talk about consumerism, we’re really talking about engaged patients who are partnering with us, taking more responsibility, making more decisions. That’s part of how we’re going to get to a better healthcare system.

Unity: [16:01] What’s the role of the entrepreneurs, of the innovators, that are bringing new solutions to you in solving that challenge? It seems like, and I think one of the complaints industry‑wide, is that a lot of things out there are features or point solutions.

[16:17] Is that just a function of where we are in the innovation cycle, and things are shifting, or are you at a moment where you’re ready for different types of solutions to come to you?

Nick: [16:32] As an organization, if you look at our five year strategic plan going forward, it’s around consumerism and population health management. We’re looking for solutions that match with our strategy, and we’re looking to partner with as many organizations as we think makes sense and that we can manage.

[16:51] If I could talk just a little bit about why we got involved with StartUp Health, why I’m committed to it, and why I think this model is important, let me go back two years. My colleagues who are in the room with me, we began to notice a couple of years ago that we were getting inundated with new ideas, new companies, requests for meetings.

[17:13] We began to understand that we did not have the appropriate filtering system. What the StartUp Health platform brings is sort of a ready‑made filter where we know that we can follow companies over time, work with them over time, and the likelihood of success in this model is so much higher.

[17:34] For us, this is part of the solution to how we filter all of what begins to feel like noise. There are many, many solutions. Many are expensive. Many are not fully cooked or ready for prime time.

[17:52] We’re looking to make sure that what we invest in or the people we depend on on behalf of our patients are really ready to work with us. That’s what’s great about the model, and the ability to match companies with organizations is great.

Unity: [18:11] Shifting gears just a little, what are your thoughts about all the new entrants that are coming into healthcare? Do you view these entrants as potential partners, competitors?

[18:25] I think of companies ‑‑ like Under Armour is all of a sudden getting into consumer health, Apple as an example, there’s Google, etc. What does this mean for your future? How do you view those new entrants?

Nick: [18:40] Let me go back to my roots as a family doctor, because I always say it’s been the best training I could have for my job as a CEO. I always thought my role as a family doctor was half around data and analysis and diagnosis and half about the relationship with patients.

[19:03] If you cut out either one of those, and if it gets out of balance, I think we won’t be doing a good job in healthcare. When I look at new entrants, and I look at the data that’s being collected, and the apps that are available for patients, one of the roles that we have, hopefully, as a trusted partner to our patients is to help them sort through what can get them healthier.

[19:28] Collecting data on a Fitbit may be helpful, but we have to filter it and say, “How are we going to use it to make that patient healthier?”

[19:39] The flip side, there are a lot of apps right now that are telling people how to manage diet and how to manage blood pressure, and they’re not all based on anything real. We have to help our patients filter those and make good decisions.

[19:54] I think it will sort out over time, but I do think there is a real role for discipline around looking at where new entrants actually affect healthcare in a positive way and where they just seem to be the next new bright, shiny object. There really is a difference.

Unity: [20:15] What would your recommendations be, maybe some words of wisdom, to innovators, early stage companies, startups that are building today, just getting going? Really, what would you like them to be focusing on, and other general wisdom that would be helpful to them?

Nick: [20:35] I don’t know if I have wisdom, but I’ll throw out some ideas.

[20:39] The first thing is to pair an idea with who might be the real end customer. Kind of, “Know thy customers.” Are you creating something that is truly going to be useful to groups of patients or healthcare systems or insurers?

[20:54] It’s an important early test to say, “Is what I am creating going to simplify? Is it going to help in the issues around cost? What is it going to do of substance for the people that I’m going to ask to buy it in the future?” That’s one thing.

[21:10] The second thing, I think the whole concept of tenacity and sticking with it. It’s probably easy for me to say because I’m not running a startup right now, but I think it’s incredibly important that people know that there is a market out there for real solutions, that there are people who want to test things, want to buy things, and sticking at it over a period of time is incredibly important.

[21:37] Again, I think the StartUp Health model encourages that and provides a platform for people to…

Unity: [21:43] That’s really why we decided to do a multi‑year lifetime program because it can take months just to get a meeting, a year or more to get a pilot going, maybe two years, and then to really validate that can take years.

[22:00] I think that perseverance and persistence and tenacity is absolutely fundamental.

Nick: [22:07] Then the last piece of advice might be around, “Is your product scalable?” This is a very important question. If you look at healthcare systems nationally, they’re getting more consolidated and larger. We’re a medium sized company now. We used to be considered a large company.

[22:28] We’re a medium sized healthcare company. We take care of about a million and a half patients. If we’re looking at a product, we have to know that we can scale it in an affordable way to take care of that whole population.

[22:44] Things that might have been great ideas a decade ago for individual hospitals, now people are going to be faced with saying, “Can we scale it to multiple hospitals, multiple clinics?” That scalability issue, I remember with talking with our friends from Babyscripts two years ago when we first met about how very important that is.

[23:07] We do 13, 14 thousand deliveries a year. A product, in the end for us if it’s good, we want to be able to rapidly deploy it across that whole population.

Unity: [23:18] A startup should really be prepared to address that scalability issue if they’re going to…

Nick: [23:24] Right. In fairness, it’s not that a startup company needs to know how they’re going to scale it, but they need to know that they’re going to have a financial model that doesn’t make it extraordinarily unaffordable as you scale it up.

[23:40] Nobody wants to do a pilot on 100 patients and then find out we can’t afford it for our entire population.

Unity: [23:46] Right. Wonderful. I know you have to rush. I just want to thank you so much for all that you do to support the ecosystem, all that you do to help StartUp Health, and for being a doctor‑preneur and a healthcare transformer. So thank you.

Nick: [24:00] Thank you. Thanks to everybody for being here.

[24:04] [applause]

[24:07] Chime

A single golf clap? Or a long standing ovation?

By clapping more or less, you can signal to us which stories really stand out.