To survive current pressures, hospitals must shift from passive investment to active value creation.
Academic Medical Centers (AMC) face unprecedented financial pressure. Operating margins have compressed to a median of 1.5%, while federal research funding continues to decline. In their recent New England Journal of Medicine Perspective article, Uppal and Song diagnose this challenge, and they propose venture capital as a solution.
It’s an attractive answer. With analysts forecasting 2026 as one of the best healthcare investing opportunities in decades, AMCs worldwide are adopting VC activities: Cleveland Clinic Abu Dhabi has integrated into Mubadala’s life sciences platform, for example, and Singapore’s SingHealth operates the HealthTech Innovation Fund.
But corporate VC funds run by AMCs typically generate average returns with limited impact. Simply writing checks is not enough. If AMCs want to thrive, they must see themselves as engines of creation—an interconnected concentration of investors, industry partners, mentors, and clinicians with AMCs as the nucleus—capable of shaping the future of healthcare.
This approach serves two vital functions. First, it creates “more shots on goal.” Because most early-stage companies fail, volume matters. So, an AMC generating hundreds of concepts increases the probability of commercializing innovations that drive financial returns and clinical improvements.
The most effective AMCs focus on rapidly creating new ventures, sometimes launching up to 20 annually. By incubating these companies from inception rather than making small investments in established companies, they can retain substantial equity stakes without the heavy financial burdens of later-stage investing.
Second, an AMC-centered ecosystem actively de-risks and accelerates the innovation cycle. Unlike standard VC firms, AMCs can clinically validate technology, access patient data, and rapidly pilot solutions on site. This dramatically increases startup success rates by empowering investments in companies that hospitals have already battle-tested.
The goal is to leverage AMCs unique abilities to foster a “virtuous cycle” of innovation, not a manage-portfolio approach. This involves two essential engines: organic innovation (where ideas come from internal staff) and open innovation (where partnerships are formed with external entrepreneurs). The technologies emerging from these ecosystems not only boost clinical efficiency but also lead to better patient outcomes.
One key example in the U.S. is Cedars-Sinai, who adopted this strategy via its Digital Innovation Platform and Accelerator. Acting as a “venture builder,” Cedars-Sinai collaborates with both external entrepreneurs and its own clinicians to identify pressing healthcare challenges. By being the initial funder, customer, and pilot site for new solutions, they ensure that these new companies are both clinically viable and operationally scalable before launching them into the broader healthcare market.
Another example is the ARC Innovation platform at our medical center. This initiative has integrated innovation within the organization and built a global network to enhance scalability. As highlighted in NEJM Catalyst, ARC has operationalized this by focusing on digital health, embedding innovation within the institution, and building a global ecosystem to ensure scalability.
We further partnered with global firm Deloitte to implement eight other major health systems around the world with this methodology. One example is Charité – Universitätsmedizin Berlin in Germany, where an ARC Innovation Center will open soon. Innovation is no longer treated as a side activity; venture creation is being embedded directly into Charité’s clinical and research infrastructure, using frontline insight to systematically build and scale new companies. This strategic shift is reinforced by strong public-sector backing, including support from the City of Berlin and the Einstein Foundation.
Since its inception, ARC has built an ecosystem of 125 startups, achieved six exits over four years, and, in 2024 alone, closed two exits totaling over $750 million, including Innovalve and Belkin, in addition to the success of the AI diagnostics unicorn, AIDOC. The value of these exits also extends beyond just serving as a hub for startups and investors; they are a catalyst for regional growth and job creation. For example, the ARC ecosystem has generated around 3,500 jobs and created approximately $6 billion in economic value, positioning it as a regional development leader.
While some critics may voice concerns about balancing traditional profit with nonprofit goals, viewing innovation as an interconnected ecosystem reconciles both. This model not only combines commercial success with clinical advancements but also empowers startups to thrive by addressing fundamental challenges in patient care.
The path forward is to build the future of healthcare, not just to invest in it. Transitioning from a VC mindset to an ecosystem approach allows AMCs to harness their clinical expertise and data, fulfilling their mission to advance human health with confidence and purpose.
The checkbook is one tool, but the ecosystem is the strategy.
Avner Halperin, M.Sc. MBA
Avner Halperin is a Senior Fellow at the Middle East Initiative. He is an entrepreneur, executive and researcher in AI, health, and technology policy. He serves as CEO of Sheba Impact – the commercialization and entrepreneurship arm of Sheba Medical Center. In this position, he leads the creation of dozens of breakthrough medical technology startups and the building of a vibrant startup ecosystem valued at over $5 Billion. In addition, he is the Chairman of the Board of EyeControl Ltd. - an AI based medical device company that won the Genesis Award for contribution to the battle again COVID-19.
Previously, he was the founding CEO of EarlySense, that developed a contactless sensor which became the standard of care in over 1,000 US hospitals. Earlier, he was VP Marketing at Radcom (NASDAQ: RDCM) and R&D leader at Eldat Communications (acquired by Pricer).
Avner earned a M.Sc. in Applied Physics from Tel Aviv University and a MBA from MIT where he researched the operations of globally dispersed teams. He is a lecturer at Tel Aviv University where he teaches a course on AI Economics. In 2019, he gave a TED talk on AI in Healthcare. He is also an inventor with 34 US Patents.
Surjo R. Soekadar, MD
Professor Surjo R. Soekadar, MD, is the Einstein Professor of Clinical Neurotechnology at Charité – University Medicine Berlin, where he leads groundbreaking research in neural-machine interfaces aimed at restoring brain function. He and his team made history by demonstrating that a non-invasive brain-hand-exoskeleton could enable quadriplegic individuals with complete finger paralysis to independently eat and drink in a restaurant setting. Prof. Soekadar’s pioneering work is focused on developing advanced technologies such as brain-computer interfaces (BCIs) that allow patients to control exoskeletons and other devices solely with their thoughts. His research is supported by prestigious funding agencies, including the European Research Council (ERC) and the Federal Ministry of Research and Education. His mission is to improve the quality of life for individuals with neurological and psychiatric disorders through innovative neurotechnological interventions.
Eyal Zimlichman, MD, MBA
Eyal Zimlichman is an internal medicine physician, a health care executive, and a researcher focused on assessing and improving health care quality and value, patient engagement, and patient safety. Eyal is currently a chief medical officer and chief innovation officer at Sheba Medical Center, a top 10 hospital on Newsweek's list of best hospitals worldwide (2019). Before this, Eyal held the position of lead researcher at the Partners Health Care Clinical Affairs Department in Boston, where he was involved in the efforts to bring about a strategic care redesign initiative. Eyal is a founding member of the International Academy of Quality and Safety in Health Care. Eyal is a graduate of the Harvard School of Public Health Executive Health Care Management Master of Science Program and has earned his M.D. at the Technion Israel Institute of Technology in Haifa, Israel.
