We recently interviewed Zachary Edmonds, MD, our chief medical officer, the associate director of PAMF Hospital Medicine and an adjunct professor of medicine at Stanford University, to better understand how hospitals—specifically inpatient facilities* —make purchasing decisions for new medical devices. Edmonds, who coaches companies in our incubation programs and serves as the primary bridge between Fogarty Innovation and El Camino Health, emphasized that hospital purchasing is not a single decision, but a series of interconnected filters—clinical, operational, financial, and organizational. Following are some key observations that help explain how these decisions are made.
Clinical benefit is just the starting point
According to Edmonds, demonstrating clinical benefit is necessary but rarely sufficient. In real-world hospital environments, new technologies must also make sense operationally and financially.
“New technologies often require training, disrupt workflows, or increase staffing needs,” he explained. To offset this, they must provide measurable value beyond clinical outcomes.
This might include reducing length of stay, lowering readmissions, replacing more expensive treatments, or improving throughput and staff efficiency. In some cases, value can also come from helping hospitals meet regulatory or quality benchmarks.
“If a product does not deliver on at least one of these benefits, even a clinically superior device can struggle,” Edmonds said.
The service line advantage
One of the most important—and often overlooked—factors in adoption is the hospital service line where the technology will be used.
Hospitals operate as a portfolio of service lines, each of which has a different financial profile. Procedural specialties like cardiology or orthopedics tend to generate strong margins and effectively subsidize other areas. Other service lines, like emergency medicine or behavioral health, are considered loss-leaders.
This financial reality directly shapes purchasing decisions. Technologies that support profitable service lines are more likely to be adopted because those departments typically have larger budgets, better reimbursement, and greater ability to accommodate learning curves and temporary inefficiencies.
In addition, physician influence is also greater in high-margin service lines, where prominent specialists often drive adoption and new technologies can boost the hospital’s competitive differentiation.
By contrast, technologies aimed at less-profitable service lines within a hospital face a steeper uphill battle.
The Value Analysis Committee
Hospital Value Analysis Committees (VACs) serve as the primary gatekeepers of hospital innovation. While often perceived as cost-focused, VACs evaluate technologies across three key dimensions: immediate operational impact, risk, and near-term budget consequences.
While physicians have influence and can bring the VAC’s attention to a new technology, they are not always the most powerful voices on the committee. VACs typically include supply chain leaders, finance teams, nursing leadership, quality and safety representatives, and sometimes, physicians. “In many cases, nurse leaders and operational stakeholders carry significant weight because they are directly responsible for workflow, staffing, and day-to-day execution,” Edmonds explained.
He noted that there are two keys to success with VACs: internal champions and immediate operational benefits. “First, identify ideal champions – individuals with clinical credibility, operational respect, and willingness to advocate in internal forums,” he advised. “Second, take into account that VACs prioritize near-term, measurable benefits.”
Edmonds explained that VACs tend to discount long-term savings or theoretical downstream benefits. “They focus on what will impact operations and budgets today,” he explained.
Clinical trials as customer discovery
Innovators often view clinical trials primarily as a regulatory step toward FDA approval. Edmonds suggested a broader perspective: treating trial sites as your first customers.
It’s particularly important because many technologies fail after FDA approval, not before. “The gap between clinical efficacy and adoptability is where most companies struggle,” he said.
Edmonds pointed out that trial environments provide a rare opportunity to observe real-world workflows, interact with stakeholders, and gather insights into how the product fits into clinical routines, what operational challenges arise, and which metrics matter most to hospitals.
This approach also supports future adoption by building internal champions who understand the technology deeply, and institutional familiarity – an environment where staff are comfortable with the device and likely to support its rollout.
“A clinical trial is often the only time when hospitals will let you into their workflows, where staff will tolerate disruption, and where you can observe real behavior without purchase pressure,” Edmonds pointed out. “That level of access is incredibly rare.”
The workflow imperative
In real-world hospital settings, how a solution is implemented can matter more than how much value it delivers. “Something that fits seamlessly into workflow but doesn’t provide quite as much value will win every single day of the week over something that provides more value but requires a complete workflow change,” Edmonds said.
He explained that clinical environments are complex, time-constrained, and tightly coordinated, which means that introducing a new device that requires additional steps, new training, or changes in responsibility can be problematic.
“It’s really a paradox for innovators,” Edmonds said. In many industries, disruption is celebrated. In healthcare, however, workflow disruption is an anathema. He clarified, “You want to disrupt the clinical outcome for the problem that you’re solving—not the workflow required to get there.”
The reimbursement landscape
Even when a product fits operationally, financial constraints remain. Hospital purchasing decisions are heavily shaped by reimbursement structures, particularly Diagnosis-Related Group (DRG) payments.
Under this model, hospitals receive a fixed payment for an episode of care based on diagnosis and severity, regardless of actual costs. Any additional expense—such as a new device—comes directly out of the hospital’s margin unless it is offset elsewhere.
This creates a challenging economic constraint. Hospitals need to know not only whether a technology improves outcomes, but whether it fits within a fixed financial framework. A product that adds cost without clearly reducing other expenses (e.g., length of stay, complications, readmissions, staffing burden) is often perceived as financially unattractive—even if it is clinically superior.
The AI/ML challenge
While digital health—particularly artificial intelligence and machine learning—is making headlines daily, Edmonds emphasized that these products may face additional barriers.
One key issue is pricing structure. Many digital products rely on subscription-based models, while hospitals are traditionally oriented toward capital purchases or one-time expenditures. Recurring costs often require different approval processes and compete with operating budgets, making them harder to justify.
Integration is another major hurdle. Incorporating new software into hospital systems—such as electronic health records or imaging platforms—can be complex and resource-intensive. IT teams are often stretched thin, and even straightforward integrations can take months due to security, compliance, and competing priorities.
Finally, trust plays a critical role. Hospitals tend to rely on established vendors with proven track records. Startups, regardless of technical sophistication, must overcome concerns about reliability, long-term support, accountability, and their own chances for longevity.
Timeline expectations
These complex dynamics also explain why hospital adoption timelines are so long. “We advise budgeting 12–18 months from initial engagement to signed purchase order—and that assumes a relatively smooth process with strong alignment across stakeholders,” Edmonds said.
As he described, adoption is not a single event, but a sequence of approvals involving clinical, operational, financial, and technical stakeholders. Each stage introduces potential delays, as institutions carefully evaluate risk and seek alignment across departments.
Importantly, this pace is not simply bureaucratic—it is a function of the high stakes involved. “Hospitals must ensure that new technologies are safe, effective, financially viable, and operationally feasible before committing to adoption,” Edmonds said.
Ultimately, understanding and planning for this timeline is not just about forecasting revenue—it is about designing a commercialization strategy that aligns with how hospitals actually make decisions.
Bringing it all together
Hospital purchasing decisions are shaped by a complex interplay of clinical, operational, and financial factors. “Success requires more than innovation—it requires alignment with how hospitals actually function,” Edmonds said.
Technologies that deliver clear, immediate value, integrate easily into workflows, and fit within existing economic constraints are far more likely to succeed. Those that overlook these realities, no matter how advanced, often struggle to gain traction.
For innovators, the takeaway is straightforward: understanding the hospital environment is not a secondary consideration. It is central to turning a promising technology into a widely adopted solution.
___
- Note: Other facilities associated with hospitals, including outpatient facilities, ambulatory surgery centers, urgent care clinics, and others, may have different decision-making processes. We’ll cover those in future articles.