How Cleveland Clinic Sifts Ideas and Spins Out New Ventures

By Pamela Bump |  June 4, 2018

With more than 52,000 employees generating about 300 inventions a year, the Cleveland Clinic doesn’t want for innovation.

But the tough task facing Cleveland Clinic Innovations, a group founded in 2000, is to help as many of those inventions as possible find their way into the health care system. Sometimes that may be through licensing them to established companies or startups, and in other instances it involves forming new startups. And CCI also serves as a “conduit,” explains Executive Director Peter O’Neill, for “external innovations that can benefit the Cleveland Clinic.” The Clinic, with $8.4 billion in 2017 revenue, treats about 7.5 million patients in a typical year.

Peter O’Neill, Executive Director of Cleveland Clinic Innovations

In a recent interview with InnoLead, O’Neill, who has been with Cleveland Clinic for the past 13 years, explained how the organization’s strategies have evolved.During our Cleveland Field Study, taking place June 20-21, we’ll visit the Cleveland Clinic and hear from O’Neill.

Innovating from the Caregiver’s Perspective

At our core, we are about commercializing ideas from the employees of Cleveland Clinic. At Cleveland Clinic, everybody calls themselves a caregiver, so I call myself a caregiver even though I don’t see patients.

… To find internal innovations, we have 15 [people, out of 50 Cleveland Clinic Innovations staff members] whose primary job is to interact with our caregivers. They’re meeting with caregivers all the time, learning about what they’re working on, helping them identify potentially commercially valuable inventions. We then interact with a lot of companies, a lot of entrepreneurs, and a lot of investors. A lot of those conversations are where we get a lens into external innovations and external technology solutions.

I report to the Chief of Staff today, [but eventually] I’m going to report to our Chief Strategy Officer. What’s interesting is that I do not report to our Head of Research. In almost any university, and in lots of other hospitals, the technology commercialization group, or the people called the “transfer group,” reports to research. The reason it has evolved that way is because research groups are prolific sources of inventions. The difference here at the Cleveland Clinic is that we commercialize technology only with a focus on translating those inventions into products that help patients. We want to maintain that clinician, patient-service, caregiver perspective. We don’t want to be pulled into an early academic research direction. So that’s why I report to the Chief of Staff, who’s the same person that all the senior clinical leaders report to.

Criteria for Screening Ideas

We receive over 300 invention disclosures a year [from Cleveland Clinic employees]. Many are situations where we were talking with a clinic person before they submitted an invention disclosure. Sometimes, the first interaction we have with the person is when they know about our office and they submit an invention disclosure.

We historically do about 40 deals, or some form of license agreement, a year. We’re going to say “no” 260 times a year. Since we’re primarily focused on doing those 40 deals, we have to be efficient about positioning those other 260 things in a respectful way. Many of the inventors there are Cleveland Clinic doctors who are significant people in their field.

We look at patentability, market potential, and we look at clinical effectiveness. More and more, we look at the ability to [improve] the value of health care delivery, which is a combination of cost and improving outcomes. Those are the evaluation criteria that guide our decision making. [Then] we do some patent protection and some IP protection. We don’t employ patent attorneys, but we work with them a lot. We do some prototyping work, then we do some more advanced product development work. It’s all case-by-case, and it’s all driven by business decisions based on what we think has commercial potential.

… We have a lot of other internal activity. We host an innovation summit every year. We had over 2,600 attendees [in 2017], we’re expecting over 3,000 this year [in 2018]. There’s also a hackathon attached to that.

Cleveland Clinic is the largest employer in Northeast Ohio… And our office gets involved in economic development because inventions lead to products, products lead to companies, and companies lead to jobs. Our story frequently intersects with economic development activities.

New Partnerships

What we’re doing more and more of is being a conduit and a source of identifying external innovations that can benefit the Cleveland Clinic.

A lot of the types of external innovation are IT and operational kinds of solutions. I’m sure you’ve heard about artificial intelligence, machine learning, blockchain… I understand some of those in a very superficial way, and some of them I understand not at all. Cleveland Clinic is not an expert in artificial intelligence, but we know that there are AI types of algorithms that can help radiologists do a better job of screening our imaging to identify problems. We could try to develop that stuff internally, but we’re not good at AI. So we would look to partner with people who have AI solutions that have already been vetted — maybe even radiology and analytics kinds of algorithms — and bring those kinds of solutions into the Cleveland Clinic.

We have some other activities that are specific to help us [with external innovation]. We recently formed a collaboration with this accelerator called Plug and Play. Plug and Play is all about identifying startup companies and introducing them to big corporate partners to help facilitate the adoption of the startup company’s products. We began working with them in October, but kicked off the program in January. They opened up an office in Cleveland in partnership with the Cleveland Clinic, mostly in partnership with our office, and the reason Cleveland Clinic wanted to do that partnership was to increase our visibility and exposure to external solutions.

One of the main reasons we collaborated with them was that their services are free to startup companies. That’s important to us, because many of the other accelerators seemed to have some kind of a fee, whether it’s equity or cash… We didn’t want that because we want the best quality startup companies. We don’t want people who are obligated to pay, or feel desperate and have to pay. Plug and Play also has an international footprint. They have a significant presence in Europe and Asia.

Other Outside Networks

We’ve formed some of our own startups. We create three to five startups of our own each year. I think of [partnerships that lead to startups] as concentric rings of influence or interaction. We have a lot of local collaborations — for example with the university systems, like Case Western Reserve University. There’s some regional economic facilitator groups. Jumpstart is one. BioEnterprise is one… The midwest is one level of the ring. Then we have national interactions with JP Morgan and GE Ventures. Then, internationally. I was in Finland last month to talk with a group of about 20 companies about how to do business in the United States more efficiently. My current boss is moving into the role of being the president of Cleveland Clinic in London… We also have activities in China and other parts of Asia, and we have a hospital in Abu Dhabi… We think of it as rings of expanding a geographic scope of influence.

Success Metrics

Our two metrics that we measure are dollars to the institution and service. You might say, “Dollars is a little bit mercenary for a hospital. I thought you were a caregiver.” Yes, we are about translating inventions into products that help patients. My belief is that there are no products that help a lot of patients where somebody’s not making money. It’s not a perfect score, but dollars are a pretty good way of measuring how impactful an invention is. If we negotiate the business terms correctly so we’re getting treated fairly, there should be a reasonable way of measuring our contribution to that product getting to the marketplace.

…Then our service is the reason we exist. It’s the reason I report to Chief of Staff. We’re very much a service group and need to make sure we’re being responsive and [maintaining] good communication with our employees….

Explorys at the Cleveland Heart Lab was a company we spun out, grew here in town, and late last year was acquired by Quest Diagnostics. [Quest] made the decision that they weren’t going to strip it from Cleveland. Those are stories that look like a win on multiple levels. There was a financial metric about how impactful it will it be. Both companies employ hundreds of employees in northeastern Ohio. Those turn into additional regional assets.

Advice for Health Care Industry Innovators

Come to Cleveland. I think lots of health care entrepreneurs think the only place you can be successful is Boston or San Francisco… Especially for early-stage companies, Cleveland has three significant hospital systems. There are [also academic] university systems…that are much more representative of health care in the United States [than other universities outside of Northern Ohio]. There’s really genuine and convenient access. There’s a lower cost of living… There’s plenty of talent in Cleveland.