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Getting Cross-Industry Collaborations Right, Part 1: A Transactions Perspective

Healthcare is facing an age of disruption from new market entrants and players outside the traditional healthcare paradigm. Unexpected partnerships are bringing fresh solutions to market and changing how business is done and care is delivered.

Many of these new partnerships are arising in conjunction with innovation investments by hospitals and health systems (HHSs). HHSs have always been a source of significant innovation through research and other avenues, but traditionally this work has been largely decentralized. Today, HHSs are formalizing their innovation efforts and finding ways to capitalize on those opportunities—which are abundant, thanks to HHSs’ physician workforce, research infrastructure, and access to patients and their data. These centralized innovation incubators make it easier for non-traditional players, such as tech companies, to pool resources with an HHS and bring game-changing solutions to market in an expedited fashion.

Whether they occur through an innovation center, cross-industry ventures in the healthcare sphere are still in their infancy. As such, they pose a number of challenges that require careful planning and a flexible mindset.

Vet Your Opportunities Thoroughly

In today’s push for value-driven transformation, HHSs and other health industry stakeholders have hundreds if not thousands of opportunities for partnerships knocking on their door. Diverse players, from tech vendors to start-ups to private equity firms, are queuing up for a chance to participate in the burgeoning health sector.

Faced with these abundant—and often novel—opportunities, HHSs have the task of sorting through their options and developing an efficient process to vet, select and pursue them. Too many choices is a good problem to have, but HHSs nonetheless face challenges as they determine the best way to triage potential partnerships and ventures. Key infrastructure components at HHSs include education of and buy-in by governing board, development of investment guidelines that align with mission, and building the innovation structure and team (often with contributors who come from outside of “traditional healthcare”). Once that infrastructure has been established, the HHS will be able to evaluate and pursue innovative ventures better and faster, in turn bringing solutions to market and to patients more quickly.

Get to Know Your Partner

While HHSs and other health players may be comfortable diligencing an established company in the same line of business, diligencing a company outside the health industry can take extra effort, particularly when that business is a start-up. That effort is worth it, however. HHSs that invest the time and energy at the outset of a collaboration to tailor their diligence efforts—whether financial, cultural or legal—will be better positioned to understand their non-traditional partner. Tailored diligence will lay a firm footing for joint efforts going forward and help minimize surprises down the road.

Tips for Tech Companies: Put Yourself in Their Shoes

Because HHSs have so many collaboration options to choose among, players outside of the health industry should also consider how best to approach potential partners and stand out from the competition. Arrangements between health players and non-traditional market entrants are highly complex, and it behooves the non-traditional player to carefully consider the HHS’s perspectives and goals. An HHS knows the industry and the regulatory requirements, but a tech company can offer technology and consumer-facing opportunities that an HHS lacks in addition to bringing new modes of championing innovation. Thinking through the various issues—both obstacles and opportunities to add value—in advance will help a tech company or other business get to the table more quickly and present itself as a valuable partner worth pursuing.

For a deeper dive into navigating the cross-industry collaborations, listen to our latest Of Digital Interest podcast episode, “Culture Clashes: Getting Cross Industry Collaborations Right.”

© 2019 McDermott Will & Emery

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About this Author

Partner

Stephen W. Bernstein is a partner in the law firm of McDermott Will & Emery LLP and is based in the Boston office.  He is head of the Firm’s Health Industry Advisory Practice Group.  He specializes in e-health, deployment of electronic health record systems, health related matters impacted by the Internet and HIPAA, as well as mergers, acquisitions, affiliations and joint ventures in the hospital and physician areas. Stephen has particular experience working with regional electronic health record collaborations as well as pharmaceutical, biotech, device companies,...

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Kerrin Slattery, McDermott, Healthcare Attorney
Partner

Kerrin B. Slattery maintains a diverse transactional practice focused on the representation of hospitals and health systems, as well as other health industry providers and investors across the country.

Kerrin has significant experience in all aspects of health industry transactions, including mergers, acquisitions, affiliations, joint ventures and system restructurings involving nonprofit hospitals and health systems, academic medical centers, post-acute providers, large medical groups and other health care providers. She also advises health industry clients on accountable-care strategies and hospital-physician integration initiatives. Kerrin manages large-scale transactions, often involving experienced practitioners throughout the Firm with unique health industry knowledge, including in antitrust, employee benefits, environmental, executive compensation, information technology and data privacy, certificate of need, real estate, fraud and abuse, and white collar.

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