Preparation

“The future belongs to those who seize the opportunities created by innovation.”

—TOBY COSGROVE, CEO and president of Cleveland Clinic

Innovation’s Logical Laboratory

Innovation invokes disciplined practice and results-oriented objectives that can distinguish an institution and deliver a sustainable competitive advantage. At Cleveland Clinic, innovation means putting ideas to work.

There may be no industry more in need of innovative thinking right now than healthcare. Everyone has gotten the memo. A fundamental paradigm shift in business models and relationship structures is demanded. No stakeholder is immune. Whether you’re a provider, consumer, supplier, academic, elected official, or just an observer, you need to strap on your helmet.

What you do after buckling the chin strap will likely determine how your organization emerges from the turmoil. Some will bury their heads in the sand, the ostrich mentality. And there will be plenty of cut-to-prosperity advocates and stay-the-course proponents. But these pages are dedicated to those who intend to innovate to improvement—improvement in quality and outcomes, patient access, and increased fiscal responsibility.

This book is for those who’ve donned a crash helmet and a thinking cap, because you’ll need both to survive and thrive. To think and execute the way out of this—and subsequent—quagmires will require innovation mastery.

Innovation is hard, elusive to achieve, and challenging to sustain. Shortcomings result from misunderstanding the merits of failure, inadequate engagement in disciplined innovation practices, and too little definition regarding why your institution innovates in the first place.

From the very inception of Cleveland Clinic, engaging in innovation wasn’t just a novelty or opportunity, it was a responsibility. Innovation is a practice expressed in the very DNA of Cleveland Clinic. Innovation aligned with, amplified, and enabled our core belief that we’re here to improve and extend human life.

We’re often asked, “When did innovation begin at Cleveland Clinic?” The answer is easy: 1921. That’s the year Cleveland Clinic was founded by four visionary physicians who’d served in U.S. Army hospitals during World War I and came home deeply impressed by the collaborative nature of military medicine. Our founders envisioned specialists with advanced knowledge and skill being deployed to focus on patients with complex problems. This model contradicted the jack-of-all-trades approach that abounded in medicine at the turn of the twentieth century.¹ Today, more physicians are engaged in professional arrangements such as Cleveland Clinic’s than in traditional private practice.²

We’re also often asked how Cleveland Clinic became so accomplished at innovation. Our group practice model is one of the principle catalysts. Our institution is full of clinical entrepreneurs who identify unmet needs, think creatively, share data, and ultimately provide solutions that advance the art and science of medicine. But we’re also the highest-acuity hospital in the nation,³ meaning we have the sickest patients. Our hands and brains became very adept at solving difficult problems.

Structurally and operationally, Cleveland Clinic became an innovation laboratory. Consider some of the medical breakthroughs that have been the result:

Invention of the condenser dosimeter to measure therapeutic radiation (1928)

The isolation and naming of serotonin and synthesis of angiotensin, key factors in hypertension (1940s–1950s)

Development of renovascular surgery for hypertension (1950s)

The first identification of carpal tunnel syndrome and the development of a diagnostic test for the condition (1951)

Improvement of the kidney dialysis machine and first hospital-based dialysis unit (1950s)

Invention of a unique heart-lung machine and its use in pioneering “stopped heart” surgery (1956)

The discovery of coronary angiography, launching the modern age of interventional cardiology and cardiovascular surgery (1958)

Invention of the intra-aortic balloon pump for temporary circulatory support (1962)

Proving the viability of cadaver kidney transplants (1963)

The first published coronary artery bypass surgery (1967)

The discovery of a brain-mapping technique to locate the site of epileptic seizures (1980s)

The first successful larynx transplant (1998)

The first molecular test for thyroid cancer (2008)

The first near-total face transplant (2008)

Advanced endovascular stent graft design allowing expanded use of minimally invasive alternatives to surgery for aortic aneurysms (2009)

Discovery of a microflora link to cardiovascular disease and development of a laboratory assay for risk (2011)

Development of apps to provide portable and objective assessment of concussion and multiple sclerosis (2013)

Creation of a web-based tool to assess individual risk for heritable and genetic disease (2013)

Cleveland Clinic founder George Washington Crile was an innovator on a grand scale. In addition to being the architect for the pioneering model of care for Cleveland Clinic, he also introduced advances as a master surgeon. Tools such as the carotid clamp, needle holder, and Crile forceps remain in use today. He is one of history’s most recognized endocrine surgeons, perfecting procedures for goiter and other thyroid afflictions. In addition, Dr. Crile developed cannulas to conduct blood transfusion and was the first to utilize them successfully in the surgical theater and perform “human to human” transfusion. This gave him a technique to combat shock, to which he dedicated a great deal of his scholarly endeavor. His son, George “Barney” Crile Jr., was a famous physician-innovator in his own right, advocating less invasive surgeries for mastectomy, appendectomy, and drainage of pilonidal cysts and opposing unnecessary surgery, which was controversial at the time but is now widely lauded.

The Criles set an example for all Cleveland Clinic physicians to follow. For instance, modern cardiac care arose at Cleveland Clinic in the decade between F. Mason Sones’s discovery of coronary angiography in 1958 and cardiac surgeon René Favaloro’s pioneering coronary artery bypass grafting in 1967. Willem Kolff’s work on the artificial kidney in the 1950s, the success of Ralph Straffon and Bruce Hubbard Stewart with cadaver kidney transplant in the 1960s, and Maria Siemionow and her team’s performance of the first near-total face transplant in 2008 are among the achievements that have established Cleveland Clinic’s reputation as one of the world’s most robust clinical innovators.

Vanguard of Mission-Driven Innovation

Whether the invention has its genesis at the laboratory bench or patient bedside, the motivation behind innovation can prove to be the factor critical to success. Mission-driven innovation may sound fundamentally incongruous. Can organizations respond to growing performance pressures and care delivery expectations by pursuing commercialization of their intellectual property (IP) without corrupting their fundamentals? The philosophical underpinnings of academic medical centers (AMCs) and research universities provide motivation, direction, and necessary cohesiveness to some of the most potent creativity in our country. We staunchly maintain that mission is the catalyst, not the barrier, to innovation. Any organization can leverage the power of innovation to go on offense, while being true to its values.

Healthcare is not an industry that can allow others to solve its problems—our ingrained beliefs around the sanctity of human life, patient safety, and community service inform every decision we make. That’s why we must leverage a special brand of innovation to tackle issues critical to our own organizations and the entire system.

As an orthopaedic surgeon and inventor for nearly three decades, innovation once meant coming up with a new device that addressed a specific problem or “fixed” a flaw. Today, the problems innovation seeks to solve seem far more broad and sophisticated. We grapple with acquiring and retaining patients by providing not only superior clinical outcomes but an exceptional patient experience. We strive to optimize point-of-care diagnostic testing, especially for chronic diseases, to support more patient-centered approaches to healthcare delivery. We wrestle with the role of technology as enabler in delivering better access and outcomes, especially in the handling of big data sets.

We continue to innovate on new devices and drugs; those remain part of the solution to improving care for patients and the population. We’ve simply widened the aperture regarding why we innovate and the mechanisms by which we innovate. The overwhelming good news is that the basic practice of innovation is the same, whether addressing improvement of an implant or improvement of an integrated system.

The fundamentals of identifying and resourcing creative minds remain constant. Removing barriers and accepting failure without penalizing the innovator remain relevant in healthcare and every business. Protecting innovation against the impact of wide swings in the market is the mark of commitment.

Mission-driven innovation doesn’t disregard the fundamentals of the marketplace, but it follows a path illuminated by purpose. Cleveland Clinic embraced that concept from its origin and continues to practice it today. We’ve shown that you can do well and do good by staying firmly rooted in mission while demonstrating the adaptability needed to remain a leader in changing times.

Mission-driven innovation can be practiced by all. It is my hope to ignite mission-driven innovation in the individual and the institution alike and to encourage collaboration among practitioners.

Innovations at Cleveland Clinic: Turning Innovation into a Discipline

Cleveland Clinic Innovations (CCI), the commercialization and corporate venturing arm of Cleveland Clinic, is charged with developing creative thought and translating it to the marketplace. Innovation has become one of Cleveland Clinic’s core competencies and touches nearly all of our endeavors. We’ve woven disciplined creativity into the tapestry of our institutional culture and now teach other healthcare systems and commercial partners to do the same.

Cleveland Clinic formalized a process and built a sustainable infrastructure for developing and commercializing IP. In parallel to our clinical and scientific breakthroughs, we were innovating the way innovation itself was practiced.

1920s to 1960s

In Dr. Crile’s day, it was not uncommon for surgeons to develop devices to be used for an individual patient. Doctors often used their home workshops to fabricate instruments that facilitated a particular test or treatment, and a professional toolmaker and glassblower were on staff. They were the prototype of today’s prototype shop.

It’s believed that the first Cleveland Clinic staff member to receive and market a patent was Maria Telkes, a pioneering biophysicist and inventor who had a distinguished academic and industrial career. In 1930, she applied for a patent for an “electro-osmotic generator,” possibly for use in Dr. Crile’s research on the conductivity of human tissue.

At least as early as 1931, director of biomedical research D. Roy McCullagh was licensing his inventions for commercialization and directing at least a portion of the proceeds back to Cleveland Clinic. A part of his interests was spun off to found Ben Venue Laboratories, Inc., which researched the manufacture of blood plasma and penicillin.

The period after World War II was an active one for clinical and scientific breakthroughs, but procedures such as coronary angiography and open-heart surgery were not protected from an IP standpoint.

1970s to 1990s

In 1970, a new department called Biomedical Engineering (later changed to Clinical Engineering) was launched to inspire physicians then pioneering the field of electronic medical equipment to concentrate development in-house and inspire commercialization.

This process started to accelerate in 1980 with passage of the University and Small Business Patent Procedures Act, known as the Bayh-Dole Act, authored by U.S. Senators Birch Bayh (D-IN) and Robert Dole (R-KS). Prior to the act, medical discoveries stemming from the billions in government-sponsored research were considered to be federal property; this was a disincentive for innovators and their institutions. Of the 30,000 patents sponsored by federal research accumulated before 1980, only 1,500 were ever licensed to companies, and researchers were never accorded a share of generated proceeds.⁴

The Bayh-Dole Act allowed innovations derived from AMCs and universities to move beyond research results consigned to scientific journals to healthcare products with the power to improve and extend human life. The act required that academic institutions share royalties resulting from the commercial development of taxpayer-supported inventions with those making the discovery.

Coupled with U.S. patent protection law and evolving technology-transfer capabilities on academy campuses, the Bayh-Dole Act has been a major driving force behind medical innovation and economic growth over the past three decades. Technology transfer is the assignment of technology IP from the originator to a secondary user through means such as licensing.

Cleveland Clinic was well positioned to take advantage of the new landscape and was among the first to recognize and embrace the act’s power. In 1984, the Board of Governors initiated a study to determine the commercial feasibility of marketing Cleveland Clinic research efforts. An Office of New Enterprises was formed, with John H. Rogers as its first director.

The charter for the new entity was quite forward-looking—to develop commercially viable products derived from healthcare technologies and research and to identify business opportunities and maximize returns. This statement goes beyond the traditional definition of technology transfer to recognize that the power of innovation is derived from identifying business opportunities. A flurry of technology commercialization activity followed that allowed Cleveland Clinic to assume leadership in innovation.

The remainder of the 1980s saw Cleveland Clinic experiment with different models to optimize structure and maximize impact. Clinitec, Inc., a wholly owned for-profit subsidiary, was established to handle licensing and spin-off revenues. One of the first portfolio companies, Computer Assisted Seating Systems, Inc. (CASSI), made wheelchair seating more comfortable and functional while minimizing complications such as pressure ulcers. Other internal entities, including Clinic Ventures and the Clinic Technology Group, also participated in the patenting and commercialization processes. Outside counsel brought expertise in IP law and transactions.

One of the most important milestones occurred in 1987, when trustees codified a new invention and discovery policy. This demonstrates maturity in thinking that many healthcare systems struggle with today. It’s critical to maintain a clear yet dynamic statement of how institutional rules and individual goals interface regarding IP.

By the end of the 1980s, the first royalties began to trickle in. Most were derived from licensing medical devices, but there was even a cookbook, A Fare for the Heart by Jacques Pepin, published by Clinitec in 1988.

A decade of experience under Bayh-Dole brought increased clarity regarding how Cleveland Clinic would participate in the evolving innovation economy. In the early 1990s, there was considerable trustee and Cleveland Clinic leadership focus on the commercialization of IP. Many of the functions and entities mentioned were gathered within the Office of Technology Transfer, headed by Nayan S. Shah, at the Lerner Research Institute. This reflects thinking that research with development was likely the most fruitful source of commercial activity.

Formation of Cleveland Clinic’s Contemporary Commercialization Model

Around this time, I worked with J. Frederick Cornhill, administrative director of the Office of Technology Transfer, on my first clinically derived patents. Shortly after arriving, my peers and I learned how senior clinicians were engaged in product development with industry partners. In my specialty, Lester S. Borden capitalized on Cleveland Clinic’s early U.S. Food and Drug Administration license to use polymethyl-methacrylate (bone cement) and pioneered implants for hip and knee replacement.

Orthopaedics is a highly technical specialty and a nexus for creative people in adjacent disciplines like biomedical engineering and material science. In addition, advances in metallurgy or polymer chemistry can translate almost directly and with amazing speed into new solutions for patient care.

And orthopaedists love to tinker. Conversations at the scrub sink or in the surgical locker room often revolve around how to improve strength, performance, or longevity of the plates and prostheses we use on a daily basis.

These conversations frequently spilled over to the ubiquitous industry “detail men.” Whether within our own walls or at meetings of professional societies, we were very free with our ideas. Twelve to twenty-four months later, the same reps would appear in the surgical lounge and present us with some literature or even the trinket we’d described.

At first, this was exciting, because we’d contributed something to help patients and advance the specialty. But it didn’t take long to realize that there was a disconnect in the process from a commercial standpoint, the flow of dollars. I don’t wish to infer that our ideas were misappropriated. We offered them up freely and frequently. But our own ignorance regarding the process of product development ultimately became our penalty.

Several years before my arrival, Toby Cosgrove, a world-renowned cardiac surgeon before becoming Cleveland Clinic CEO and president, had developed a closed-loop system for drug administration to improve arterial blood pressure following cardiac surgery. He found an outside patent attorney and some external engineers, and he convinced a company to manufacture his invention. Dr. Cosgrove never forgot the pride he felt handing over a check for a $50,000 donation from his royalty payments to then–chief executive William Kiser. Here was monetary proof that clinical innovation mattered. Dr. Cosgrove opened the door to technology transfer as a surrogate for translational research, the application of basic research findings to enhance human health. Our talented clinicians could be the source for IP that could be commercialized in ways in which both the inventor and the institution could benefit.

Dr. Cosgrove remains one of the most prolific inventors in Cleveland Clinic history, with his “Cosgrove ring” for mitral valve repair being among the most lucrative royalty-producing patents in the organization’s portfolio. The fact that he has taken the journey as an inventor undoubtedly fuels his continued support of the innovation function and his vision of how it can be a difference-maker for an individual and an institution. More important, he understands and embraces that ultimately innovation serves patients.

It doesn’t take a business degree to deduce that the longer individuals or institutions maintain control of their IP, the more valuable and remunerative it becomes to the originator. One of the hardest concepts to communicate to inventors remains protection of IP and how licensing and syndicated investing works. Logically, if you invent something, you should own it, but that is not always so. The disconnect between what our inventors believed to be true and the practices of the “real world” was permitting a great deal of IP to leak out of Cleveland Clinic and result in inferior deals for our creative staff.

Sensing that I was not the only staff member reluctant to let my ideas go over the transom directly to industry without participation, I approached then-CEO Floyd D. Loop about how we could use the formal process that was evolving under the Office of Technology Transfer to partner the institution and the individual and share the proceeds. Dr. Loop referred me to my supervisor and personal mentor, Dr. Joseph F. Hahn, an accomplished neurosurgeon and inventor who was chairman of the Division of Surgery.

As he has been throughout my career, Dr. Hahn was a great navigator. Two aspects were pioneering about our accessing Cleveland Clinic’s emerging technology-transfer function: (1) Despite having so many clinical breakthroughs throughout our history, the technology-transfer apparatus was thought to be largely about commercializing scientific research; and (2) this effort was the first to rely on a completely internal process for development and a codified revenue sharing arrangement between the inventor and the institution.

We enlisted general counsel Michael J. Meehan to act as our original patent attorney to safeguard the IP. At that time, Cleveland Clinic maintained a small biomechanical engineering group under Dr. Cornhill’s tutelage. The group modified surgical implants for research purposes and made some devices to employ in patient care, just like back in Dr. Crile’s day. This became our original prototype lab.

We were able to take advantage of Cleveland Clinic’s pioneering concept of uniting under one roof all the elements necessary to operate a full-scale technology-transfer and commercialization apparatus. Combining the intellectual, technical, legal, regulatory, and transactional components for the purpose of controlling and transacting on IP was a departure in the practice of innovation. Instead of simply being a set of “bookends,” originating the ideas and then purchasing the finished products from industry to employ them on behalf of patients, Cleveland Clinic became a full-service innovation development engine.

As the millennium approached, we used my early patents to pilot the full-service or one-stop-shop concept of technology development and commercialization. We had negotiated a license with Biomet, Inc. for the first product on which Cleveland Clinic and I partnered, the BioSymMetRic™ External Fixator, a device used to treat complex fracture-dislocations of the knuckles. To this day, Cleveland Clinic and I receive royalties on its sales.

As 2000 approached, Cleveland Clinic became increasingly sophisticated regarding IP-related business opportunities and aware of how important it could be for recruitment, retention, and reward. From our more rudimentary technology-transfer beginnings, our contemporary innovation function was developing. We’d demonstrated that creative ideas weren’t limited to the laboratory bench. We recognized that capital infusion at critical times could be just as influential on successful IP development as the quality of the idea itself. In 1997, Cleveland Clinic established NovaMedics, Inc., for the express purpose of creating spin-off companies and managing the venture investing functions of the enterprise.

By 1999, Cleveland Clinic had committed to its present-day commercialization model. To have in place the technical architecture, funding mechanisms, and industry relationships was of considerable appeal to all at Cleveland Clinic who wished to engage in the development of new solutions. We were enthusiastic to be part of a culture that embraced innovation and valued intellectual contributions.

2000 to the Present

In early 2000, Dr. Loop charged Dr. Hahn and Chris Coburn to develop and manage the commercialization arm of Cleveland Clinic. Chris had just been recruited from Battelle Institute. He had spent the previous year as a consultant evaluating the commercialization effort at Cleveland Clinic, which was still under the Office of Technology Transfer.

Together, Chris and Dr. Hahn built Cleveland Clinic Innovations from the ground up. The name covered all innovation efforts. CCI had virtually all the resources it needed: space for small spin-off companies, project incubators with labs, engineers to develop drawings and prototypes, patent attorneys, licensing experts, legal experts, government agency experts, and other inventors. This arrangement was the commercialization model to fulfill the mantra of “bench to bedside” in an efficient way.

Understanding the capital requirements of emerging technologies, Cleveland Clinic supported a venture capital fund in which it was a significant investor, Foundation Medical Partners. The fund operated at arm’s length but benefited from the market insight and reputation of Cleveland Clinic. Now called Flare Capital Partners, it has raised subsequent funds and continues to work cooperatively with Cleveland Clinic.

The period since 2000 marked the exceptional growth of Cleveland Clinic as a leader in mission-driven innovation. We’ve invested millions of dollars and countless hours in developing a core competency in commercial development of IP. We’ve concentrated on process, developed proprietary instruments to evaluate ideas for clinical or scientific merit, and invited experienced advisory experts from industry and the investment sector to evaluate market feasibility.

In 2001, a major new event was launched, the Cleveland Clinic Medical Innovation Summit. Chris and Dr. Hahn started this as a national showcase for the latest developments in healthcare technology and delivery. It brought together clinical experts, inventors, government agencies (including the Centers for Medicare & Medicaid Services), venture investors, and marketing experts. CEOs from major companies presented their strategies and plans for the future of healthcare. The summit has become the Super Bowl of medical innovation, attracting nearly 2,000 colleagues to Cleveland each autumn.

After a 10-year period as director of the Curtis National Hand Center in Baltimore, I returned to Cleveland Clinic in 2010 to witness what decades of dedication to advancing creative thought can accomplish. The hard work and vision of so many talented individuals, amplified by their desire to assist humankind, had resulted in a robust operating platform already distinguishing itself as a pioneer in the field of mission-driven innovation. I had the privilege to work with Chris until his departure to assume innovation leadership responsibilities at Partners HealthCare in Boston.

Along with Cleveland Clinic trustee and key Innovation Advisory Board member Harry T. Rein, we sought to build on the foundation that was established in the first decade of CCI’s existence by optimizing our organizational design and operational platform. CCI has learned to balance company creation with technology licensing to develop a billion-dollar portfolio of holdings. We’ve spun off more than 70 companies, managed some 600 royalty-bearing licenses, attracted almost $1 billion in equity investment and commercialization grants, and created over 1,500 jobs. And we’ve made what we’ve learned over the decades scalable and transferable to other organizations through our Global Healthcare Innovations Alliance.

This book tells you exactly how we’ve done it.