I read the book and found it quite enjoyable.

And with all due respect to Eric Ries and all of the VCs out there chasing lean startups, I recognized one simple truth. I still like my startups Phat.

A phat startup aims to solve a very big, very difficult problem that will transform an industry. They typically take many millions, or even tens of millions and 1-3 years to get the first product out the door. They are big ambitious bets on deep technology and market transitions that are difficult to predict. They require invention and problem solving and risk, yes risk. They are a venture in the true sense of the word.

But my goal is not to dismiss the good ideas in the Lean Startup bible. There are many, but some simply don’t apply.

For example, in Phat startups, the challenge is not whether customers will want it (or whether you need to pivot or iterate or some other euphemism). The challenge is whether it can be built in the first place—will it work at all? Will it perform to spec? Will it scale? Will it be reliable? Can it be manufactured? Will it hit the price point?

Very frequently, the last question is whether customers will buy it. I know this sounds “unconventional” and decidedly old-school, but in many of these cases, if you CAN build it, they WILL come.

Why? Because phat startups often address problems that simply can’t be solved any other way, and customers are in dire need of solutions—from cancer treatments to robots for bomb disposal to switches capable of handing exponential growth in mobile data.

And that’s why, once the product is proven, phat startups have been many of our region’s, and our country’s fastest growing and biggest winners. All of these were $1B market cap companies:

*These are my estimates based on VentureSource.

And there’s a new generation of New England companies following in their footsteps:

Demandware (on-demand e-commerce), QD Vision (display color enhancement), 24M (grid storage), 1366 (direct solar wafer), Plexxi (10 GB networks), Affirmed (4G Mobile), Actifio (secondary storage), Qualtre (smartphone components), Xtalic (electronic components), Akiban (scale out databases).

But a key question comes to mind: Are phat startups riskier than lean startups? It depends how you measure risk.

One of the great virtues of lean startups is that they … Next Page »

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In advance of his appearance at Xconomy’s “6×6: Six Cities, Six Big Tech Ideas” conference on Dec. 1 in Boston, I did a live tweet chat with Kabir Shahani, the co-founder and CEO of Seattle-based Appature, yesterday. Thanks to all who tuned in and sent us their thoughts; we had a great audience.

Appature is a four-year-old startup that makes Web software tools to help healthcare, pharma, and medical device companies reach hospitals and doctors and build important relationships with them. The big idea, as I see it, is to allow brands to drill down into a huge customer relationship database and quickly target the right people to sell to—and for the right reasons, namely, patient health. Yes, it’s big data, analytics, cloud, marketing, and healthcare, all wrapped up in one.

Which is why I think Boston-area tech companies like HubSpot, Buzzient, Constant Contact, SocMetrics, Kyruus, Ginger.io, Athenahealth, and others should be interested. And young entrepreneurs, who can really relate to Shahani. Plus I hear there are a few pharma and medical device companies (and hospitals) around town…

While some things don’t necessarily come across in tweets (like Shahani’s youthful charisma and CEO hair), other things do. Here are my top takeaways from the chat:

1. Appature knows more about Boston than Boston knows about Appature. “There are some incredible companies in Boston,” Shahani tweeted. “We have customers there and I absolutely love being out there to spend time with them.” Sure, Appature has customers and partners around town (and soon, employees—see below), but the general Boston tech and health-IT community doesn’t talk about this company very much. I’m telling you to pay attention, because Shahani and his crew are potentially on to something big. Whether they’ll execute and take full advantage, we’ll see.

2. The cutting edge of marketing tech for niches like healthcare is moving fast. “The dynamic has changed dramatically in the past 12-18 months,” Shahani wrote. He was talking about pharma companies trying new ways to reach and target customers, rather than just pursuing traditional approaches with their sales reps. It’s no surprise that cloud-based analytics and social technologies are transforming the way most industries work.

3. Growth is challenging for any startup, especially one based on relationships. Shahani, who bootstrapped Appature to profitability before taking a venture round, tweeted that his biggest mistake was “not getting an [East] coast office sooner.” (The company has employees around the New Jersey/Pennsylvania border, presumably to work with lots of pharma customers. It also has people in San Francisco, San Diego, and Chicago.) And here’s a news flash on its expansion: “Stay tuned on news about a Boston team in [January],” he wrote.

For the record, here’s the full live chat stream, via Storify (thanks to my colleague Lilly O’Flaherty for this).

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For a public company, Athenahealth has kept a fairly low profile. But that’s been changing over the past year—and the trend continues today.

The Watertown, MA-based health IT company (NASDAQ: ATHN) says it is acquiring Proxsys, a care coordination and admitting services firm based in Alabama. The price is $28 million in cash upfront plus up to $8 million in potential milestone payments. The deal is expected to close later this quarter.

Xconomy profiled Athenahealth in 2010 as the firm was ramping up efforts to raise its profile among doctors—the target audience for its Internet cloud-enabled billing and electronic health records services. Now the company plans to integrate Proxsys’s healthcare services such as referral management, patient registration, and care coordination (between doctors and hospitals) into Athena’s service platform, with the goal of improving efficiency and providing better control of patient care for hospitals and healthcare providers. (For more on how this works, check out this company blog post.)

“We have a vision for how health care information exchange ought to work, and Proxsys represents a critical element of achieving that vision,” said Jonathan Bush, CEO and chairman of Athenahealth (and former President George W.’s first cousin), in a statement. “This service will be the latest piece of the national health information backbone we have been steadily constructing.”

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Lexington, MA-based Imprivata is among the software companies that is benefiting from the push in the U.S. and abroad to adopt electronic health records. And the venture-backed company seems to have found its place in the healthcare field by streamlining the way clinicians securely access IT systems.

This year, the U.S. government starts paying out $17 billion in incentives—which were outlined in President Obama’s economic stimulus plan two years ago—for physicians that implement electronic health records according to certain “meaningful use” standards. While most physicians seem to think that the digitization of medical recordkeeping is good for patients, a poll showed last month that 60 percent of 500 physicians from on the doctors-only social network Sermo believed that using the records would prolong exam times. (Watertown, MA-based Athenahealth, which provides an online EHR, paid Cambridge, MA-based Sermo to conduct the poll.)

For many doctors, time is money. It might take an extra few minutes to enter login information to view a patient’s electronic record, and that’s not good. Omar Hussain, the chief executive of Imprivata, says that his company has been able to reduce login times to a few seconds. (For certain records systems, the firm provides the option of using a fingerprint scan or the touch of an ID badge swipe for people to access systems.) The key is offering speedy login times while maintaining security. There are strict regulations that guard the privacy of patient information, and hospitals are on the hook for any breaches in security. The need for quick access to health IT systems and the critical need to secure patient information has made so-called “single-sign on” technology like Imprivata’s a hot area.

Sentillion, an Andover, MA-based firm that was acquired by Microsoft last year, has software that addresses some of same access-management challenges. Imprivata has been busy trying to gain new customers in healthcare—in competition with Microsoft/Sentillion—and adding features to its core technology to set itself apart from its rivals. The firm, which also serves clients in multiple sectors (Hussain mentions clothier Neiman Marcus and the Vatican as customers), now gets about 60-65 percent of its business from healthcare, according to Hussain.

Imprivata set up a healthcare division in early 2010 and that segment of its business helped the firm drive 30 percent growth in revenue last year, Hussain says. (The company is private and he declined to release actual sales numbers.) This growth is likely music to the ears of the firm’s investors, which include General Catalyst Partners of Cambridge, MA, Highland Capital Partners in Lexington, Waltham, MA-based Polaris Venture Partners, and SAP Ventures. Hussain says that the company has raised a total of $50 million from investors.

The company says that its technology is now used at 700 … Next Page »

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—Cambridge, MA-based Quanterix partnered up with Novartis Diagnostics, the unit of healthcare giant Novartis that tests the safety of 80 percent of the U.S. blood supply. Novartis will run tests to see how effective Quanterix’s device is at pinpointing a protein biomarker in the blood that is linked to an undisclosed neurological disorder. Terms of the arrangement weren’t disclosed.

—New York pharmaceutical company Forest Laboratories (NYSE: FRX) paid $1.2 billion ($30 per share) upfront to acquire Newton, MA-based Clinical Data (NASDAQ: CLDA), a drug developer that won FDA approval last month for its anti-depressant. Forest could pay another $6 per share to Clinical Data shareholders if the drug, vilazodone, hits certain sales goals over the next seven years.

—Watertown, MA-based Athenahealth (NASDAQ: ATHN) formed an alliance with Microsoft (NASDAQ: MSFT) to make the companies’ systems more compatible and easier for healthcare professionals to use together to get a single view of patient records for hospital and outpatient visits.

—Cambridge-based Vertex Pharmaceuticals (NASDAQ: VRTX) announced it had passed a pivotal clinical trial of 161 cystic fibrosis patients who were randomly assigned to the company’s VX-770 pill or  a placebo. Those who received the Vertex drug showed a 17 percent relative improvement in their ability to force out air from their lungs in one second (a measure of lung function). Vertex’s stock shot up 15 percent the morning of the news, to hit $44.03 per share at 10:14am.

—Greg took a look at iAMscientist, a Brookline, MA-based startup developing a global community and resource site for researchers and institutions in science, technology, and medicine. The company has raised $1 million in seed funding from a group that includes famed Harvard chemist George Whitesides, and more than a dozen companies, such as Genzyme.

—Cambridge-based Metamark Genetics is moving out of stealth mode, wrote my colleague Ryan, who caught up with the company’s relatively new CEO Mark Straley. The startup—which was founded by top scientists at Harvard and elsewhere—is out to release a molecular test to provide prognostic information that will help physicians make better treatment decisions.

—Waltham, MA-based lab instruments and services provider Thermo Fisher Scientific (NYSE: TMO) announced it had sold off its Athena Diagnostics and Lancaster Laboratories units for a total of $940 million in cash, to boost shareholder value. Madison, NJ-based lab testing firm Quest Diagnostics is paying $740 million for Athena, and Eurofins Scientific of Brussels, Belgium, will shell out $200 million to acquire Lancaster, a provider of contract testing and analysis services to pharmaceutical companies.

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This week’s news flow was dominated by a pretty rare event—a lucrative acquisition of a Seattle-based, venture-backed biotech company.

—Calistoga Pharmaceuticals hit the jackpot this week, as it agreed to be acquired by Foster City, CA-based Gilead Sciences (NASDAQ: GILD) for as much as $600 million if certain milestones are reached. The deal is interesting not just locally, but nationally as well, because it represents Gilead’s first serious foray into the cancer drug business. Calistoga CEO Carol Gallagher says she’s hopeful that most of the company’s 23 employees will be retained at Gilead’s new research center along Lake Union. I also had a follow-up conversation with Gilead’s chief scientist, Norbert Bischofberger, about why Gilead is making the move into cancer and inflammatory diseases now.

—Physio-Control, the storied Redmond, WA-based maker of heart defibrillators, could once again become an independent company, through a spinoff being proposed by its parent, Minneapolis, MN-based Medtronic (NYSE: MDT). Physio-Control had about 1,100 employees as of a year ago, with about three-fourths of them in Redmond.

—Bruce Montgomery, the prominent Seattle biotech entrepreneur, has pulled in the first $1 million of financing for a new company he’s working on called Cardeas Pharma. Montgomery has teamed up with Melissa Yaeger, a former colleague at Seattle-based Corus Pharma and Gilead Sciences. No word yet on what Cardeas is doing, but I’m checking.

—Seattle’s best-known biotech company, Dendreon (NASDAQ: DNDN), is apparently scoping out some downtown office space with potential to wow big East Coast portfolio managers coming through town. Dendreon is reportedly in talks to take office space in the Russell Investments Center with a towering view over downtown, Elliott Bay, and the Olympics. No final decision has been made, a company spokeswoman told The Seattle Times.

—Microsoft (NASDAQ: MSFT) has joined forces with Watertown, MA Athenahealth (NASDAQ: ATHN) to make their electronic medical record offerings more compatible and easier for healthcare professionals to use.

—We also had two biotech-themed guest editorials this week. Chris Rivera, the president of the Washington Biotechnology & Biomedical Association, offered his take on how the local innovation community can play a key role in sparking a broader economic recovery. And David Miller, president of Seattle-based Biotech Stock Research, talked about how health insurance costs are becoming a much more serious impediment to new company creation than ever before.

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Athenahealth (NASDAQ:ATHN) says it has formed a new alliance with Microsoft (NASDAQ:MSFT) to develop software to make their systems more compatible and easier for healthcare professionals to use together.

The new collaboration, Athena says, will enable healthcare providers to use the companies’ existing products to get a single view of patient records from hospitals and outpatient visits. The collaboration builds on the two companies’ previous efforts to connect each firm’s systems for common customers such as Cook Children’s Health Care System in Texas.

Teaming up in this way might make Athena and Microsoft together more competitive than they are on their own in their attempts to serve healthcare groups that are compensated based on the quality of care they deliver rather than volume of care provided—outfits known as accountable care organizations or ACOs. To measure quality of care, however, these groups are going to need to pull together data on each patient from disparate sources such as diagnostic labs, doctors’ offices, hospitals, and pharmacies. While Microsoft offers its Amalga software that enables large healthcare provides to assemble information on patients from multiple software formats, Athenahealth has built a Web-based network for delivering its electronic health record and other services such as billing management/collections to thousands of doctors across the country.

The companies are developing connector software that aims to streamline how health organizations make linkages between Athena’s system and Microsoft’s Amalga technology. Cook Children’s and Steward Health Care System in Massachusetts are supposed to be the first groups to begin using the connector technology in the second half of this year, according to Athena. Athena officials told me last year that Cook Children’s was becoming a great example of integrating its Web-based software with Microsoft’s technology. So this news today, which was announced at the big HIMSS health IT conference in Orlando, appears to build on the work the two companies have done together before.

Still, it’s tough to gauge how important this collaboration is for either Athena or Microsoft. Microsoft, in an effort to make Amalga more attractive to big hospitals, has been forming collaborations with other healthcare software vendors focuses on various aspects of the market such as Royal Philips Electronics (NYSE:PHG) in the radiology field and Dell (NASDAQ:DELL) for providing analytics and business intelligence for community hospitals. Early last year, Microsoft completed its buyout of Andover, MA-based Sentillion, a firm that offers software that is supposed to make it easier to access large health information systems while maintaining security.

For Athena’s part, this partnership could provide a new entry point into the market of large hospitals. Athena has been trying to make inroads with the large hospital market after first establishing its sweet spot among small- and medium-sized medical groups. John Moore, a health IT analyst and blogger at Chilmark Research in Cambridge, MA, said in an e-mail that he thinks that Microsoft and Athena are joining forces largely to appeal to large healthcare organizations. Microsoft hasn’t captured much of the large hospital market with its Amalga technology, Moore says.

Athena, meanwhile, has been rapidly expanding its (still relatively modest) share of the U.S. electronic health records market. The firm says that it had 3,348 medical providers using its EHR as of December 31, 2010, more than double the 1,471 providers using its software at the same time a year earlier. The company has been promoting the fact that its EHR is provided over the Internet and does not require doctors to invest as much in their own computer servers as they would to adopt client/server records software.

Athena investors appeared uninspired by the news about the firm’s Microsoft collaboration. Athena’s stock traded at $46.12 per share as of 1:29 pm Eastern time, down 2.76 percent on the day. The firm’s stock is trading close to its 52-week high of $50.56 per share, according to Google Finance.

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I learned a bunch during Wednesday’s Xconomy Xchange, which featured Todd Park, chief technology officer of the U.S Department of Health and Human Services, and other luminaries discussing the future of health IT. The sold-out event in Cambridge, MA, brought to light lots of intriguing ideas about how to improve the healthcare system. Below are some of the sights and insights from the event.

Park, our keynote speaker, emphasized that nationwide adoption of electronic health records is just a start, but real progress in the healthcare system depends on reforming the way this country pays doctors. “We cannot keep paying for healthcare by the yard, we have to pay for value,” he said.

Park, a (fully divested) co-founder and former business chief of Watertown, MA-based Athenahealth (NASDAQ:ATHN), says that his title at HHS is a bit of a misnomer and he considers himself an entrepreneur-in-residence in the agency. True to his entrepreneurial roots, Park has been working for the past year and a half at HHS as an agent of change, and he shared some of the his latest projects with the large audience at Microsoft’s New England Research & Development Center.

Here are some highlights from Park’s talk (view slides from his presentation here):

—Last year the government launched the Center for Medicare & Medicaid Innovation, which Park says will be able to explore new ways of paying for healthcare that can improve the quality and value of care to patients. The kicker is that the new payment models tested at the new innovation center can be implemented without an act of Congress, according to Park.

—The HHS is becoming a clearinghouse of electronic health data, spurring businesses to create applications that derive value from the data—much like the National Oceanic and Atmospheric Administration has done with online weather data to support Weather.com and other products.

—Along those lines, later this year HHS plans to release APIs or tools for software developers to use the agency’s health insurance data to create new applications. Some companies have already developed new applications through the HHS’s Community Health Data Initiative.

—Next week the agency plans to go live with a new website called Healthdata.gov that will be used to support the community of developers and entrepreneurs that are making use of the information.

Park also participated in a fascinating discussion with Dana Callow, founder and managing general partner of Boston Millennia Partners, Bob Higgins, co-founder and general partner of Highland Capital Partners, and Rob Seliger, a general manager in charge of product development in the Health Solutions Group at Microsoft.

Seliger said that his group is making its most significant investment in “classic, Microsoft-style enterprise software,” noting the company’s flagship product Amalga for aggregating and analyzing health data for hospitals and a separate version of the product for life sciences research. Seliger, as many know, took his job for Microsoft after the software giant’s December 2009 purchase of his Andover, MA-based provider of health data access software, Sentillion, where he had been chief executive. Sentillion’s operation in Andover has become part of Microsoft.

Both Higgins and Callow noted that there’s a shortage of capital facing new health IT businesses. At Highland, however, Higgins said that the firm has been providing seed investments in new startups in this sector such as Boston-based Kyruus and Generation Health. He said that Generation Health, a provider of genetic testing benefits management, was still using some space in the basement of his firm’s Lexington, MA, office when pharmacy giant CVS Caremark acquired the startup).

Thanks go to Microsoft NERD for hosting and sponsoring this event at its slick digs in Kendall Square. (I was particularly fond of the seating built into the stairs leading from the lobby to the conference area). We also received support for the main event from Athenahealth, Cisco Systems, and EMC. And while I wish could individually thank all the entrepreneurs, investors, clinicians and other folks who came to the event, at least I can mention a few who were there and tweeting with our event hashtag, #xhit—@1charleshuang, @PearlF, @cjaustin, @DrDannySands, @Rgreenglass, and @jacquimiller.

Here are some photos (all of them courtesy of Kendall Press) of the speakers and attendees at Microsoft NERD:

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Bring an open mind and an extra business card or two. That’s what I’m planning to do as I gear up for today’s Xconony Xchange: HHS CTO Todd Park and Friends on the Future of Health IT. Xconomy is fortunate that the event is sold out, and there’s little doubt in my mind that the big reason for the sell-out is the terrific speakers we have lined up (not to mention the great venue at Microsoft’s New England Research & Development Center in Cambridge, MA).

For starters, we’re pumped to have Todd Park, the chief technology officer of the U.S. Department of Health Human Services, back here in the Hub to be our keynote speaker. And he has an invaluable insider’s perspective on the multibillion-dollar effort afoot to digitize patient health records in this country. Park brings a unique perspective to the hot-button topic of the role of government in healthcare. He and Jonathan Bush co-founded Watertown, MA-based Athenahealth (NASDAQ:ATHN) in 1998 after learning that there was a great need for a Web-enabled service to help doctors manage their billing—and actually get reimbursed by insurance companies for taking care of patients.

Now Park, having taken his big job at HHS in August 2009, is applying what he learned as an entrepreneur at a great big government agency. If you’re a health IT executive who’s always dreamed of going to Washington as an agent of change, Park’s living that sort of dream (though I’m guessing that the cutthroat politics in the capital can be a real nightmare sometimes). For example, Park has taken the lead in efforts to make data such as details on health insurers more transparent and searchable online for the public.

While Park is going to spur our minds into motion with his opening remarks, things will start getting more interactive when he joins our other stellar speakers on a panel about the future of health IT. Dana Callow, founder and general managing partner of Boston Millennia Partners, is moderating the panel. The panel also features Bob Higgins, co-founder and general partner at Highland Capital Partners, and Rob Seliger, a general manager at the Microsoft Health Solutions Group and a founder and former CEO of Sentillion. All the panelists have experience building health IT companies from the ground up and providing successful exits for investors—Park at Athenahealth (2007 initial public offering), Higgins at Generation Health (majority acquired by CVS Caremark in 2009), and Seliger at Sentillion (sold to Microsoft, also in 2009).

I also took the liberty of looking at who has registered for this event. I don’t want to ruin the surprise, but I think you’ll find that there will be an awesome representation of the most exciting new health IT startups, corporate venture investors (think Internet giants with deep pockets), traditional VCs, health IT executives, and members of the healthcare provider community in the Boston area. Doors open for the event at around 4:15 pm today, and I’m planning on getting there as early as I can to catch up with as many people as possible before we get the program started at around 5 pm. See you there!

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New England’s life sciences companies and investors are wasting no time this new year. We saw headlines of financings, clinical trial results, acquisitions, and executive moves at biotech and pharma companies this week.

—Genocea Biosciences of Cambridge, MA, wrapped up $35 million in Series B financing from new investors Johnson & Johnson Development Corporation, MP Healthcare Venture Management, and Skyline Ventures. Previous Genocea backers Auriga Partners, Cycad Group, Lux Capital Management, Morningside Ventures, Polaris Venture Partners, and SR One also participated in the deal for the vaccine discovery and development firm.

—Year-old biotech venture firm Longwood Founders Management announced it had raised its first fund, with help from Cambridge-based Genzyme (NASDAQ: GENZ) and GlaxoSmithKline (NYSE: GSK), which employs two of the fund’s founders, Christoph Westphal and Michelle Dipp. The fund raise totaled to $86.9 million, according to an SEC filing. Ryan caught up with the other founder, biotech investor Rich Aldrich, for a look at Longwood’s strategy.

—Boston-based Relay Technology Management is ready to launch its search and analytics engine for biotech business development groups early this year, Ryan wrote. The startup was formed by a duo of Tufts University researchers in 2008.

—George Cotsarelis, co-founder of baldness treatment developer Follica, was part of a team that released research this week showing that men with pattern baldness have plenty of hair follicle stem cells in their scalps. Follica CEO William Ju said the findings fit with the rationale behind the experimental drug and device under development at the mostly virtual biotech firm, which was founded and incubated at PureTech Ventures in Boston.

—Cambridge weight loss drug developer Zafgen announced that its experimental treatment for severe obesity was well-tolerated and helped patients lose about 1 kilogram (2.2 pounds) of body weight per week in its first human study, which lasted one month. The biotech still has more to prove—obesity drugs must show sustained benefits for at least a year—but the first 24 people tested saw better weight loss effects than those with placebo.

—Ryan previewed our upcoming Xconomy Xchange: HHS CTO Todd Park and Friends on the Future of Health IT. Park, who co-founded Watertown, MA-based Athenahealth (NASDAQ: ATHN) before working in Washington, will dish on how the government can help innovate in the health IT space.

—Medical device maker Boston Scientific (NYSE: BSX) of Natick, MA, announced it had bought Intelect Medical, a maker of neuromodulation technologies for deep brain stimulation, for about $60 million in cash. Boston Scientific, which already had an equity stake in the company, said it will complement its existing technology to help physicians better visualize brain stimulation fields.

—Weston, MA-based Biogen Idec (NASDAQ: BIIB) enlisted former ZymoGenetics CEO Doug Williams to lead its R&D group. It also brought on a new vice president of corporate development: Steve Holtzman, the former chief executive of Cambridge-based Infinity Pharmaceuticals (NASDAQ: INFI). Both new hires will report to George Scangos, who joined Biogen as CEO in summer of 2010.

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Got plans for the evening of February 9? If you’re involved or deeply interested in health IT, and how the digitization of medicine could improve the healthcare system, then join us and sign up here for Xconomy Xchange: HHS CTO Todd Park and Friends on the Future of Health IT.

Park, who is the keynote speaker of the event at the Microsoft New England R&D Center in Cambridge, MA, needs very little introduction in healthcare circles. The co-founder of Watertown, MA-based Athenahealth (NASDAQ:ATHN), Park helped build one of the largest and most successful health IT companies in the region before he took his talents to the beltway area and became chief technology officer of Health and Human Services in August 2009. He appears to be relishing his new role; he’s behind efforts to boost transparency of health insurance data for Americans and to advocate for the federal government innovating its own role to serve as a better catalyst (and not a hindrance) to businesses.

The truth is that entrepreneurs and the feds are often marching down different paths. Yet the future vitality of the nation’s healthcare system has demanded that those separate paths converge (we’ve seen this to a certain extent with the billions of dollars in government incentives for electronic health records), and Park’s background as an entrepreneur appears to be the right fit for understanding how the government can work with business interests to foster innovation. Moreover, we expect to hear from Park about the concept of “Government 2.0″ and how the government itself can innovate its practices.

In addition to Park, who will give a short overview talk to kick things off before joining an intimate, interactive panel discussion (read on), we’re extremely fortunate to have a lineup of fellow participants who will surely inject their own unique insights into this conversation about the future of health IT and where the government fits into the equation. In fact, we were able to recruit as a speaker Bob Higgins, a co-founder and general partner of Highland Capital Partners, who has experience both as a health IT investor and in government. (Early in his career, Higgins did stints in the Department of Commerce and the U.S. Treasury.) He’ll share the stage during our leaders’ panel with Rob Seliger, a general manager in the Microsoft Health Solutions Group. He took the job after selling Sentillion, a health IT firm he co-founded and led as CEO, to Microsoft in December 2009.

To moderate and guide the discussion among Park, Higgins, and Seliger, we’ve tapped Dana Callow, founder and managing general partner of Boston Millennia Partners and an experienced healthcare investor himself. We’re also leaving some open time in our agenda for quick looks at some new and exciting startup businesses and ideas in the Boston area’s health IT scene. And as always, there will be ample time for networking.

There should be plenty of money, brains, and power at this forum. We’re expecting this event to draw a lot of interest from entrepreneurs and innovators from around the region, so we encourage those who are interested to get their tickets here as soon as possible to reserve a seat. And those who grab tickets by end of day tomorrow can still get the special holiday discount, good for half off the regular price.

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Boston is a great place for bumping into people who are pushing the envelope in healthcare. In fact, the city’s leadership in health IT factored into Jacob Buckley-Fortin’s decision to expand his software firm eHana from its original home of Honolulu, HI, to Boston in 2006. Now Buckley-Fortin, the co-founder and CEO of eHana, is one of those people who you’ll bump into here in the Hub.

I met Buckley-Fortin at our Xconomy Xchange event in Boston in late September, after we had just watched a debate of sorts between Athenahealth CEO Jonathan Bush and eClinicalWorks CEO Girish Navani about the evolution of electronic health records. Buckley-Fortin, 31, knows a lot about this topic because his firm provides EHRs to human services and behavioral health providers—albeit at a smaller scale than what Watertown, MA-based Athena (NASDAQ:ATHN) and Westborough, MA-based eClinicalWorks do for hospitals and doctors’ practices.

In fact, it was interesting to learn more about how Buckley-Fortin and his co-founder Marcus Lum have carved out a successful niche in providing technology for behavioral health and human services organizations at Boston-based eHana (which still has an office in Hawaii too). For one, this segment of the healthcare market is largely ineligible for the $19 billion in stimulus funding designed to encourage U.S. doctors and hospitals to adopt EHR systems. Also, human services and behavioral health firms often operate with tight budgets that don’t leave a ton of room to spend on fancy IT systems.

Nevertheless, eHana has managed to grow profitably by serving the behavioral health and human services market, Buckley-Fortin says. While large companies such as Athena and eClinicalWorks chase after large deals with medical groups that are eligible for the stimulus funds, eHana is picking up new business from clinics and agencies that are overlooked by those bigger outfits. The firm, founded in 2000, also has a decade of experience in addressing the specific IT challenges that its bread-and-butter clients face.

“Behavioral health is a challenging niche,” Buckley-Fortin says. “I love challenging niches as an entrepreneur because it creates some natural barriers for my competition.”

Buckley-Fortin tells an interesting story about how his firm found its specialty. For starters, the CEO grew up in a family of social and human services professionals. His mother, Diana Buckley, ran a human services agency, PACT Hawaii, for children and families. And Fred Fortin, his father, has an advanced degree in social work and is a senior vice president of the Hawaii Medical Services Association. (Fred Fortin was instrumental in HMSA/Blue Cross Blue Shield Plan of Hawaii becoming the first health insurance provider to adopt Boston-based … Next Page »

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A few weeks ago, we hosted an Xconomy Xchange evening featuring Jonathan Bush, CEO of Watertown, MA-based Athenahealth (NASDAQ: ATHN), and Girish Navani, his counterpart at Westborough, MA-based eClinicalWorks. With Pam McNamara, president of Cambridge Consultants, wielding a gavel to moderate, the two competitors discussed and debated the future of health IT. You can read our summary of the Faceoff on the Future of Healthcare IT here. Now we’ve got some video.

The event took place on Sept. 29 at WilmerHale’s offices in downtown Boston, overlooking Boston harbor. Our partners at Schwartz Communications were able to lure Bush, McNamara, and a few attendees away from the view to get their takes on the subject on camera. It was a small but diverse group that (besides Bush and McNamara) included Jeff Livingstone, industry strategist for healthcare and life science at Akamai, Caleb Stowell, a medical student at Harvard Medical School, and myself.

This video, introduced by Schwartz senior vice president Helen Shik of the firm’s healthcare practice, is especially nice because it is easily navigable and allows you to select just the speakers you want to hear—skipping non-experts like me if you so choose. Thanks to the Schwartz video team for putting it together. I hope you enjoy it.

Some of my favorite takes:

—Livingstone on how the healthcare industry has been late to the cloud.

—McNamara on how technology is enabling more focus on improving the patient experience, versus its original implementation almost as an afterthought to improve back office efficiency.

—Med student Stowell on why so many doctors are slow to adopt health IT technology—and why students don’t have that problem.

—Jonathan Bush on how successful adoption of new technology comes down to one thing: “cash.”

Again, you can view the whole video here (scroll down a bit on the page after following the link).

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It was an experiment. Put two rivals in the health IT game—Jonathan Bush, CEO of Watertown, MA-based Athenahealth (NASDAQ:ATHN), and Girish Navani, CEO of Westborough, MA-based eClinicalWorks—on the same stage to talk frankly about the future of their industry. Pam McNamara, president of Cambridge Consultants, showed up to moderate with a wooden gavel, if that’s any indication of the kind of exchange she expected.

So did the experiment, which was our inaugural “Xconomy Xchange,” work? If shedding real light on a key industry without (too much) verbal bloodshed is any measure, then the answer’s a decided yes. Bush and Navani lead companies with profoundly different approaches to enabling the expanded use of electronic health records in the U.S. The CEOs did an admirable job of explaining those differences, with great questions from McNamara and only a little help from her gavel.

From the outset, it was easy to see how Bush and Navani have grown their companies into enterprises with more than $100 million in annual revenue and hundreds of employees in the Bay State. They both showed themselves to be thoughtful leaders—and skillful debaters when the discussion turned to what makes their companies stand out from others.

What follows are some of the highlights from the Xchange, which was hosted in the Boston offices of the law firm WilmerHale. Keep your eyes peeled for Bush’s and Navani’s comments on the U.S. government’s recently heightened role in their industry, as it is about the only issue on which they appeared to come close to seeing eye-to-eye.

From left: Girish Navani, Pam McNamara, and Jonathan Bush.

On Getting Paid

Athenahealth makes most of its money by taking a small cut of revenues from doctor’s offices that use its software—rather than charging a fee to use the software or some other billing scheme. EClinicalWorks charges doctors a relatively low monthly subscription fee, set at $250 per doctor, for use of its electronic health records software.

“We are a cloud-based service. We give away the software, and we change it eight times a year,” Bush said. “The reason for that is partly because we can move through the innovation curve faster. As a new entrant, we had to be able to bust through all the different features that the established software companies had. More importantly, you have to have a totally different set of economics.”

For doctors paying $250 per month for its software, Navani said, “it’s something that you’re not going to … Next Page »

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There are literally billions of dollars at stake in this contest: Across the U.S., electronic health records (EHR) vendors are hustling to get physicians to buy their products as the federal government forges ahead with a multibillion-dollar effort to increase usage of the records.

The race was ignited by the February 2009 passage of the Health Information Technology for Economic and Clinical Health (HITECH) Act, which provides $19.2 billion to fund electronic health records adoption in the U.S.. Competition has been fierce, with many software providers stepping in to get a piece of the action. Because the vast majority of the country’s doctors are still using paper records, there’s a large market for these electronic health record outfits to tap. In this intensely competitive market, Watertown, MA-based Athenahealth (NASDAQ: ATHN) and Westborough, MA-based eClinicalWorks have been aggressively making the case for their respective health record systems. They represent the state’s two leading firms in the race to gain EHR customers.

Now, Athenahealth CEO Jonathan Bush and eClinicalWorks chief executive Girish Navani are meeting at the next Xconomy Xchange in Boston for an intimate, up close and personal chat about their companies’ efforts to gain new customers during this unprecedented time of change in their industry. This unique event is taking place on September 29 at WilmerHale in downtown Boston (register here for one of the remaining tickets). Pamela McNamara, president of Cambridge Consultants and a healthcare innovator in her own right, has taken up the task of moderating what is likely to be a colorful exchange between two health IT chiefs who aren’t afraid to speak their minds.

Athenahealth and eClinicalWorks are great examples of the rapid growth in the health IT sector, particularly in the electronic health records business. Athenahealth doubled the number of medical providers who use its Web-based electronic health records in a year, from 1,046 at the end of June 2009 to 2,256 at the end of this past June, according to the company. Meanwhile, eClinicalWorks says that it now has more than 40,000 providers who use its software. Both companies also provide revenue management software for doctor’s offices, so they compete in multiple categories in the healthcare software market. In fact, healthcare reform is expected to bring major changes to the ways some doctors get paid, from fee-for-service to pay-for-performance models, creating opportunities for Athenahealth and eClinicalWorks to further expand their revenue management businesses.

Widespread adoption of electronic health records in doctors’ offices is presumably a step toward democratizing the healthcare system in a way that gives patients greater control of their health information—and, ideally, their actual care. We’ll find out where Athenahealth and eClinicalWorks see themselves playing a role in improving the portability of electronic health data for the benefit of patients as well as doctors—and where they see the biggest future payoffs, not just for their own companies, but for consumers. McNamara, whose Cambridge Consultants has done extensive work in health product development, brings an expert perspective that will help guide this sure-to-be-fascinating discussion.

All three of these experts will be around for a networking reception after the Xchange.

So please secure your tickets to this unique event and networking opportunity here—they’re going fast. We look forward to seeing you on Sep. 29.

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John Glaser, chief information officer of Partners HealthCare, sits atop one of the largest health IT organizations in New England. Yet beneath his corporate shell lives a scorching wit and perhaps a somewhat reformed hell-raiser. He was kicked out of his Jesuit high school in the Bay Area during his junior year for his part in an underground newspaper that, in his words, was “all about drinking beer and [dating] 16-year-old girls.” (Read on for his stories about answering to a Jesuit tribunal at his school and hitchhiking to the Panama Canal.)

Glaser, 55, has been part of the brain trust of hospital IT experts that has advised President Barack Obama’s administration on its plan to pump $19 billion over the next several years to speed the country’s transition from paper-based health records to electronic health records (EHRs). But Glaser is not afraid to point out the failings as well as the merits of the President’s plan.

Glaser (pronounced Glass-er) understands the huge challenges of Obama’s health IT plan. Only about 6 percent of U.S. doctors actually use electronic health records for their practices today, he says. And the President has set a very bold goal of having full electronic health record adoption in this country by 2014. The vision is to eventually have networks in place so that hospitals and physician practices can access and share every American’s electronic health record.

People listen to Glaser about these big topics in health IT because he’s been thinking about them at a high level for a long time. He took over as chief information officer of Partners in 1995. The health information systems group he leads includes seven CIOs who report to him, a total of 1,500 people, and an annual budget of about $270 million, according to Glaser. (To put the size of that organization in perspective, consider that one of the largest public health IT companies in Massachusetts, Phase Forward (NASDAQ: PFWD), had a total of 939 employees at the end of last year.)

So I was thrilled to listen to Glaser’s views on the torrent of change across the health IT landscape during our brief interview at the Convergence Forum on Cape Cod earlier this month. Here are some excerpts from that interview:

Xconomy: What are the big business opportunities in health IT, in your opinion?

John Glaser: I don’t know how well they are being exploited. There are a couple of threads here. One is that there is incentive federal money that will be amplified by other money for EHR adoption, particularly in the small- and medium-sized physician practices and hospitals. The bigger places like Kaiser Permanente, Partners, and Boston Medical Center have already made lots of … Next Page »

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It’s a classic principle in economics: markets don’t work very well when there’s no price transparency. If the airlines refused to quote you a price for a transcontinental ticket and then sent you a bill for an unpredictable amount six months after your flight, you probably wouldn’t fly much. But this is exactly how most consumers experience the U.S. medical care payment system. Under the complex web of reimbursement rates negotiated in secret between providers and insurers, insured patients are usually charged directly only for their premiums, deductibles, and copayments, and have no way to compare the actual costs of treatments from different providers, even if they want to.

San Francisco startup Castlight Health, true to its name, wants to cast a light on the opaque, shadowy world of medical costs. If you give consumers the tools to make more informed decisions about where to get care, argues Castlight founder and CEO Giovanni Colella, they’ll end up saving themselves, their employers, and their employers’ health plans serious money.

“We are asking people to shop, but providing them with an experience where there is no price,” says Colella. “We figured that if we can figure out what the prices are, we can provide a portal, a Travelocity for healthcare, that allows us to display prices online and really create a shopping experience for medical care.”

Figuring out those prices is the tricky part. Since many healthcare providers and insurers won’t or can’t disclose their rates, Castlight has to reconstruct them through a laborious process of what Colella calls “reverse engineering”—analyzing data from millions of explanation-of-benefits forms sent by insurers to employees at the companies that use Castlight’s services. Exactly how that works is part of the startup’s secret sauce, but the result is a personalized portal where employees can gauge their true out-of-pocket medical costs, compare what they paid to averages for their region, and find opportunities to save.

At a time when health-insurance reforms are making everyone more price-sensitive—both by forcing consumers to share more of the costs of their care, and by capping the premiums insurers can charge—Castlight’s vision is one that seems to intrigue employers mightily, not to mention investors. Colella says that Castlight, which already serves big companies like Safeway, is meeting with eight new potential customers, mostly big employers around the U.S., every day.

And the two-year-old startup announced last week that it had closed a massive $60 million Series C venture financing round, from a group that included new investors Morgan Stanley, U.S. Venture Partners, the Wellcome Trust, and the Cleveland Clinic, as well as previous investors Maverick Capital, Oak Investment Partners, and Venrock. In two previous rounds of financing, the company had raised only $20 million; the huge up round was a signpost of the widespread investor interest in the company, as well as a “very high” valuation that left some investors “saying they wished they’d come in 6 months ago,” in Colella’s words.

Venrock was one of the firms that got in early. In fact, Colella says he considers Venrock partner Bryan Roberts (an Xconomist) to be one of the company’s co-founders, along with himself and Todd Park, the Athenahealth co-founder who was tapped last year to be chief technology officer at the Department of Health and Human Services.

Neither Colella nor Roberts claims that there’s anything original about Castlight’s vision. Indeed, healthcare analysts have been bemoaning the lack of price transparency for decades, and there is a minor movement underway in places like New Hampshire to take the wraps off the fees charged by providers for various procedures.

But no one before Castlight, formerly known as Ventana Health Services, has been ambitious (or foolhardy) enough to go after cost data on a massive scale, with the goal of exposing the huge variations in the prices that providers charge for common procedures. The company has discovered, for example, that some gastroenterologists in the San Francisco Bay Area charge as little as $1,500 for a colonoscopy, while others charge as much as … Next Page »

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1. Focus on real innovation to solve hard problems in needy markets. True innovation is all that matters. Unique products and ideas will always be able to find funding and are less likely to fall victim to boom/bust cycles. Too often, the “incremental, downside protection” or “me too” mentality takes over and you see features masquerading as products trying to be companies, or eight companies going after the same market. Then chances of survival and success drop dramatically. This phenomenon, especially after the tough last 10 years, is fueled at least as much by investors as entrepreneurs.

2. Brace for a long ride. Building great companies takes time. You still need to work like heck to get your first mover/best product out as quickly as possible, but expect it to take 10 years to build a really valuable company. Companies that are successfully going public today, like Ironwood Pharmaceuticals and Athenahealth, have spent the last decade building towards an IPO.

3. It is how you deal with adversity, not avoiding it, that matters. Great success stories rarely evolve in a linear fashion. There will be undoubtedly bumps along the way: realization that the original product concept was not viable, unexpected disruptions in the industry, cycles of boom and bust, and limited availability of capital. It is the difficult times that separate the wheat from the chaff, and the survivors – companies that embrace adversity, press through challenges, learn and adapt to be stronger in the face of the next set of challenges – become large, lasting successes.

[[Editor's Note: Roberts' essay is part of a series of guest editorials we are running as part of the launch of Xconomy San Francisco. It was based on the following question, which we posed to technology leaders: "What 3 things can San Francisco and Silicon Valley entrepreneurs and VCs do to foster a more stable environment for innovation in IT, life sciences, and energy, and become less wedded to cycles of boom and bust?"]]

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News surrounding Genzyme’s ongoing battle with billionaire investor Carl Icahn cropped up this week, alongside headlines from other big biotechs and in-depth profiles on newer life sciences names in the New England area.

—Luke caught up with the chief scientist and the co-founder of Cambridge, MA-based Proteostasis Therapeutics, which was built around research from the Scripps Research Institute, the Salk Institute for Biological Studies, and Northwestern University. The company, which launched with a massive $45 million venture capital round in 2008, is out to make drugs that alter the protein pathways that break down as people age, contributing to conditions like Alzheimer’s disease and Parkinson’s.

—Ryan took a look at Ligon Discovery, a spinoff of MIT and Harvard’s Broad Institute that develops small-molecule technology that could have applications in identifying potential disease proteins and finding drugs to home in on those targets.

—Link Medicine, a Cambridge developer of drugs to treat neurodegenerative diseases, exceeded its original expectations for its Series C round of funding by $5 million, the company’s CEO told Ryan. A third closing of the Series C, at $20 million, brought the round’s total to $45 million, money that will go to testing Link’s drug for treating mild Alzheimer’s, which went into its first human clinical trial in November 2009.

—Activist investor Carl Icahn continued his campaign for greater influence on the board of Cambridge-based Genzyme (NASDAQ: GENZ), filing a proxy statement with the SEC in which he called the drugmaker’s manufacturing system “broken,” and advised shareholders not to reelect chairman and CEO Henri Termeer to the board. Icahn, who controls 4.9 percent of Genzyme’s common stock, is vying to get himself and three associates on the board, which has 10 seats up for reelection in mid June. On Thursday, the Genzyme board of directors also announced plans for a $2 billion stock repurchase aimed at increasing shareholder value

—I profiled Beverly, MA-based Eliza, a company that employs intelligent speech-recognition technology in a system of automated phone calls that communicate to patients about their healthcare, on behalf of insurers, employers, and prescription benefit managers. The company has made more than 400 million phone calls in ten years, encouraging patients to do everything from lose weight to schedule preventative screenings.

—Cambridge’s Ariad Pharmaceuticals (NASDAQ: ARIA) revised a 2007 agreement with Merck & Co, giving the pharma giant exclusive license to develop, produce, and sell Ariad’s cancer drug, ridaforolimus—activities that Merck (NYSE: MRK) will also cover the costs of. Initially, the two companies were sharing the marketing rights and the responsibilities of funding the development of the drug, which is designed to treat certain soft tissue and bone sarcomas. Ariad nabbed $69 million for the revised deal, which comes on top of … Next Page »

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Athenahealth is a high-flier in the Boston business community, led by the outspoken and forceful Jonathan Bush. Bush, however, openly admits that his Watertown, MA-based company (NASDAQ:ATHN) is relatively unknown outside of local business and technology circles—including among most U.S. physicians. Athena has been ramping up efforts to raise its profile among doctors, the target audience for its Internet-enabled billing and electronic health records services. Yet the company has been criticized for the relatively high price of the push.

Athena’s stock price dropped more than 18 percent after it disclosed on April 29 that its first-quarter profits slid 80 percent, from $1.5 million in the first three months of 2009 to $300,000 in the same quarter of this year. Despite a 33 percent jump in revenue during the first quarter, the company said, profits were down partially because of its increased spending on efforts to gain more customers. Some analysts on Wall Street have slammed the firm’s spending, but company officials are forging ahead with the strategy despite the criticism.

About 16,400 physicians currently use Athena’s Internet software and services to manage their billing, and a goal of the company’s marketing is to grow its customer base to 100,000 doctors. To reach that target number, Athena is spending money on measures to get doctors to warm up to the firm’s relatively new concept of charging customers at a rate that fluctuates depending on how well its billing system performs for them. The company gets a cut of its customers’ revenue, based in part on how much the firm collects from health insurance companies, rather than making most of its money from software sales and licensing fees, as some its competitors do. Athena is also making the case that its software, which is delivered over the Internet, reduces doctors’ need to invest in servers to handle the workloads and operation of its technology.

Nevertheless, Athena appears to be fighting against at least a few currents in healthcare. Doctors are notoriously hesitant to adopt new technologies like Athena’s. Also, the company will have trouble matching the marketing might of its larger competitors such as GE Healthcare, Allscripts-Misys Healthcare, and Siemens Medical Solutions. Allscripts, for example, has about 10 times as many physician customers as Athena and more salespeople beating the pavement to grow that user base further still, says George Hill, an analyst for Leerink Swann, a Boston-based investment bank and equities research firm.

“The problem here is that Athena now has to increase its … Next Page »

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