Providence Health & Services, a powerhouse in the Western states, has entered an agreement to merge with St. Joseph Health, creating a $20 billion-plus health care system with more than 50 hospitals in seven states. The two organizations — based in Renton, Wash., and Irvine, Calif., respectively — share a common Catholic heritage, but they also share a focus on innovation. Providence, in particular, has been a pioneer, drawing in talent and leadership from companies like Amazon and to help transform both the consumer experience and core clinical operations. Leaders from both Providence and St. Joseph highlight a health system committed to innovation at scale.

Innovation prowess

Professor George Day of the Wharton School of the University of Pennsylvania is a leading authority on innovation prowess, which he defines as the “discipline times ability” to innovate. Day has identified through a lifetime of research the key traits of companies (in all industries) that consistently out-innovate the competition. Leading innovators distinguish themselves by:

  • Demonstrating leadership commitment to innovation talent.
  • Adopting an “outside in” mindset.
  • Encouraging risk-taking.
  • Aligning innovation metrics and incentives.

At a recent HX360 conference in Las Vegas (sponsored by the Healthcare Information and Management Systems Society and AVIA, a leading technology accelerator), Day described the lessons learned to an audience of more than 200 health care system leaders.

In a series of panels with system CEOs and their innovation leaders these lessons were made apparent. In a panel I moderated, I remarked to Providence CEO Rod Hochman, M.D., that Day's traits sounded a lot like the Providence game plan. Hochman agreed.

Providence is not alone in its commitment to innovation. Many leaders who were at the HX360 meeting share the passion for innovation, from Cedars-Sinai and Dignity Health in California to Memorial Hermann in Texas to OSF HealthCare in Illinois to Northwell Health in New York. All have important stories to tell, but I have had an opportunity to interact with Providence’s leaders several times over the last few months and have become convinced that Providence is a system to watch because of its deep commitment to innovation at scale.

Major player

The merger between Providence and St. Joseph Health would give the new system a strong position in many markets in the West, including Washington, Oregon and Southern California. The combined entity would be the third largest system in the United States behind Kaiser Permanente and Ascension, would be a major force in health care transformation in the West and would become a key competitor to the other West Coast giant, Kaiser.

The two systems’ focus on innovation was part of the rationale for the intended merger. As my old friend Bill Noce, board chair of St. Joseph Health, told me in an interview, “The forward-looking innovation culture at Providence was an attraction to us.” St. Joseph’s innovation initiatives are complementary to those of Providence, Noce said, with many new development opportunities ahead in care innovation, patient experience and life sciences.

Why innovate?

The HX360 conference highlighted that leading health care systems are pursuing innovation at scale, aimed at meaningful targets to improve patient care, patient and provider experience and population health.

That statement comes almost verbatim from Hochman's description of the rationale for Providence’s innovation program to the HX360 audience.

In particular Hochman highlighted initiatives in three key areas:

  • Developing population health innovations (such as supportive housing) aimed at the broader community as well as at large self-insured employers such as Boeing through their accountable care organization arrangements.
  • Creating digital platforms for providers and consumers.
  • Simultaneously strengthening core operations (clinical and nonclinical) through innovation.

Providence is not alone. AVIA research has found that many health care systems are focusing digital innovation on consumer applications, chronic care and behavioral health applications, post–acute care transitions, population health initiatives and core clinical systems (what they term "operations 2.0"). But while Providence is not unique in its interest in innovation, it is impressive in its strategic commitment and to following Day’s principles of innovation prowess.

In my travels through American health care, I have observed what I call the "Scout badge problem" when it comes to innovation. Like proud young Boy Scouts, almost every hospital can point to the merit badges it has accumulated: ACOs, telehealth, patient portals, electronic disease registries and so on. But when you ask the CEOs what percentage of patients get this routinely, the answer is the square root of zero. Sure, it is happening, but a lot of this stuff is pilots. Scout badges you can brag to the board about.

Not so for Providence. “Innovation is not a hobby for us,” Hochman said.

Hochman is committed not only to match or exceed the performance in terms of innovation of tough regional competitors like Kaiser but also, and perhaps even more important, believes, “We need to disrupt ourselves or have it done to us by someone outside of the health care industry.”

A key rationale for Providence’s innovation agenda is purposeful “customer acquisition” of loyal consumers who will sustain the mission of the enterprise. Like many faith-based systems, service to the whole population is a fundamental goal at Providence. But Hochman also frames the Providence strategy of customer acquisition (including millennial consumers and self-insured employers) as a counterbalance to the inevitable growth in Medicaid and Medicare that all hospitals are experiencing.

The purposeful focus on customer growth and retention helps explain why Providence has reached out to bring in talent from the ultimate customer-focused retailer (and its Seattle neighbor): Amazon.