Hospitals and Health Systems like other organizations in almost every industry depend on a regular flow of new enhancements to their existing programs and services and a regular flow of new technologies and advancements. Hospitals are beginning to experience many of the same competitive problems that plague other industries;

• a lack of differentiation of programs and services
• a shrinking operating margin due to many new technologies and entrepreneurial ventures
• an increasing shortage of talent in almost every clinical area.

Nearly every industry relies on a vital Research and Development (R & D) function to continuously invent new products and services for the future. R & D is not currently a regular part of America's hospital industry, but Memorial intends to develop this important business strategy for:

• improved health of its community
• to better understand and meet customer needs
• to protect long term financial viability

After studying various industries and many models from some of the most innovative and successful companies around the country, Memorial has identified a set of core principles, defined processes for innovation and idea flow, tools that assist in the creative process, and major elements in the organization's culture that need to be in place. Concomitantly, a dedicated staff focused on R & D and new business start-ups will be necessary as well as financial resources and physical space. Such a new R & D function will necessarily carry a higher risk of financial and customer failure and will require more years of experimentation than many traditional and existing new programs and services.

Therefore, it is the policy of Memorial Health System to establish a new Research and Development function (R&D) to boldly begin the process of innovatively creating new enhancements in community health, a regular flow of innovation in all clinical product lines, and involvement in new related business start-ups. In order to support this vital new investment in Memorial's future, an investment of up to 1% of Memorial Health System's net operating revenues will be targeted to finance all of these activities. Regular reports on outcomes and progress will become a regular part of management's reporting to the Board.

Approved by Finance Committee - 8/28/02
Approved by Executive Committee of the Board - 8/29/02