The holiday weekend didn’t seem to slow New England deals making down.

—MedicalRecords, a Cambridge, MA-based startup connecting doctors with sellers of health record software, is working on raising its first outside funding round. It’s got about 60 percent of a targeted $500,000 round committed, from investors like Ty Danco and Peter Bordes.

—New Haven, CT-based antibiotics developer Rib-X Pharmaceuticals filed federal documents that reveal its plans to go public. The company has raised $208.4 million in venture funding and recently inked a partnership with Sanofi that could be worth as much as $772 million.

—Mundipharma will provide more than $50 million in funding in 2013 to Cambridge-based Infinity Pharmaceuticals as an expansion of a drug development partnership first inked in 2008. The money will go to developing drug candidates from Infinity (NASDAQ: INFI) such as IPI-145, which is being designed to target blood cancers and inflammatory conditions.

—VMTurbo, a Waltham, MA-based virtualization management software developer, announced that it had wrapped up a $10 million Series B investment led by its return backers Bain Capital Ventures and Highland Capital Partners. The new funding will go to product development, customer support, sales, and marketing.

—Skyhook Wireless has inked a deal to get its location-finding technology into the new Norton Anti-Theft Web service, from Mountain View, CA-based Symantec (NASDAQ: SYMC). The Norton service enables people to lock, locate, and, ideally, recover a lost or stolen Windows-based laptop, and Android smartphone or tablet, with Skyhook’s technology that use GPS, WiFi and cellular signals to track a device.

—ChoiceStream, a Cambridge-based developer of software for personalizing e-commerce shopping experiences for consumers, raised $8.7 million of a targeted $12.3 million equity and options offering, an SEC filing showed.

—Boston-based Summit Partners led a $10 million investment LogiXML, a maker of Web-based business intelligence software. Other LogiXML investors include Grotech Ventures and Updata Partners.

—Civitas, a Chelsea, MA-based spinout of the biotech Alkermes (NASDAQ: ALKS), will get an undisclosed grant award from the Michael J. Fox Foundation for Parkinson’s Reseach to put towards development of an inhaled form of the Parkinson’s treatment levodopa (L-dopa).

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What exactly is MedicalRecords.com? A health database? A doctors’ community? An encyclopedia site? Not exactly. It’s a lead generation startup for the electronic medical records sector. Sound boring or cryptic? Here’s why it’s not.

The U.S. government set aside about $27 billion through 2009′s American Recovery and Reinvestment Act to incentivize doctors to move patient medical records to an electronic system. There are about 750,000 doctors, dentists, and chiropractors who qualify for the money, and only 20 percent of the market has adopted electronic medical records (EMR). To top it off, it can be a confusing space: there are about 400 different EMR software makers, many with similar sounding names, says MedicalRecords.com founder Durjoy “Ace” Bhattacharjya.

The startup, which works out of Avalon Ventures’ office in Cambridge, MA, has developed a platform for connecting doctors with EMR providers in a meaningful way. MedicalRecords built a database of all the companies in the sector from the ground up, says Bhattacharjya. On MedicalRecords.com, doctors fill out some information on their practice and what kind of technology they’re looking for, and MedicalRecords.com’s engine finds a few EMR software makers that fit. MedicalRecords.com calls the doctor’s offices to confirm their identities and what it is they’re looking for, and then sells that doctor’s contact information as a sales lead to the software makers.

It’s a pricier sales lead, at $150 to $300 apiece, than what you might see in other software niches, says Bhattacharjya. But “nobody’s figured out how to solve this problem [of selling the software to doctors],” he says. “Some of these guys are GE, and they still can’t figure out how to get a doctor to buy their stuff.” They’re willing to pay to get in front of doctors who have actually started the shopping process, says Bhattacharjya.

Doctors aren’t exactly known for being an early-adopter, tech-savvy population, says Bhattacharjya. (He would know; he comes from a family of them.) Many are reluctant to take their records digital because they’ve gone on for decades with the paper format, says Bhattacharjya. But the incentives are there: the $27 billion in federal funding breaks down to about $44,000 for each practice that has implemented and used the software in patient care—and starting in 2015, the government will dock the Medicare and Medicaid reimbursements of those who haven’t made the switch.

MedicalRecords.com is looking to become a comprehensive, unbiased electronic medical records database, and to … Next Page »

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[Editor's Note: This article is a lightly edited transcript of a talk delivered by Ryan Howard, founder and CEO of Practice Fusion, at Morgenthaler Ventures' DC to VC Healthcare IT Showcase on September 22, 2011.]

At Practice Fusion, it took us three years to get to our first million dollars in revenue. Electronic health records is a hard market to crack and I was incredibly naïve. But here are seven lessons I learned along the way.

Know your rock bottom and know your pain threshold. I was watching The Wire, and a woman at a Narcotics Anonymous meeting was saying, “I set a rock bottom I would never go below,” but she kept going below it. What I’ve learned in this process is that your company will be an addiction. Think up front about how far you are willing to go. Will you sell your house? Your car? Give up time with your friends? Family? In 2008, we were close to going out of business. I’d sold my house and car and had another house in foreclosure. I was in denial a lot. I’d gotten into a motorcycle accident a few years earlier. The settlement check came and I used the check to make payroll. When we got funded I was four years behind on my taxes and needed two root canals. What are you willing to give to pursue your dream? You will most likely have to go beyond that.

Pitchman. Imagine the world five to 10 years from now. Imagine customers using your thing. It’s a reality. Now, come back into the present and sum it all up in a sentence. Know your pitch. Ours is “free, web-based electronic health records.” That sounds super obvious, but it took us years to master it. One old pitch line was “collaborative healthcare solutions”—which is directly from the Dilbert guide on how not do it. My ability or inability to convey the vision and goals of the company and the product was make-or-break for my abilty to close funding, attract press, and build product. Get comfortable pitching. A lot of people aren’t. My poor director of PR, Emily Peters, has to deal with me before every presentation. I don’t like doing this. It’s so far out of my comfort zone. I have to suck it up.

People want to believe the hype. The Catch-22 of being a founder is that you can’t get funded unless you have a product, and you can’t get a product unless you have funding. It’s a terrible thing. One day a journalist from Healthcare IT News called me up and said ‘”I heard you guys are potentially releasing a free EHR.” We told her about it and she wrote it up, and it got into two more articles, and I realized that the value of having something written is tremendous. Investors started calling me. Partners started calling me. It started leading to other press. When you don’t have any other exposure, press is currency. I would download e-mail spiders, put in @wsj.com, scrape everyone at the Wall Street Journal and the New York Times, and spam them with press releases. I couldn’t afford to put it on the wire. I made 100 phone calls a day. When I finally would get another press hit, that was gold. When another party writes about you, everyone accepts it as the truth, somehow. I’d take that article and … Next Page »

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“Healthcare is broken. Insurance companies are innovatively bankrupt. There are huge hurdles to entry. The biggest companies in the world can’t solve this problem; even Google can’t build a good personal health record system. Doctors are frugal. Patients are lazy and don’t care about their health. You guys are choosing a very hard path.”

Such was the litany from Ryan Howard, the CEO of San Francisco-based Practice Fusion, who was trying to give some frank advice to a group of budding healthcare entrepreneurs at an event in Mountain View this September.

So, given those harsh realities, what possessed Howard to spend the last six years building a free electronic health record system for small physician practices?

“If I die tomorrow I don’t want my headstone to say ‘Made more money for Wal-Mart,’” Howard says. “I want to have someone, somewhere benefiting from my work, and healthcare felt very powerful for me.”

The idea of digitizing patient records—and, ultimately, connecting them with lab data, prescription systems, and insurance and reimbursement records—is indeed a powerful one. In fact, it’s been beckoning innovators for nearly half a century. One of the oldest multi-user database-driven computer languages in the world is MUMPS, written at Massachusetts General Hospital in 1966 to store health records. It’s still in use today—which tells you something about the power of tradition in this field.

Practice Fusion CEO Ryan Howard

But the pace of change is finally picking up, thanks in part to a system of carrots and sticks built into the 2009 federal stimulus package to spur adoption of electronic health records (EHRs). Doctors who implement EHRs in their practices before 2015 are eligible for up to $44,000 in extra payments from Medicare; if they don’t convert by then, the reimbursements they get from Medicare will be docked by 1 to 3 percent. Dozens of companies, from giants like General Electric to tiny startups like Y Combinator-backed DrChrono, are jumping into the market created by the incentive scheme.

But Practice Fusion may be the fastest-growing of the whole bunch. The company says its Web-based EHR has more than 100,000 users, with a cumulative 25 million patients under their care. The 110-employee company has raised roughly $34 million in venture support—most of it in a big April round led by Peter Thiel’s Founders Fund—and it has nearly doubled its head count in the last six months. In anticipation of further growth, it’s about to move into a huge, 46,000-square-foot space in San Francisco’s Union Square.

The technology so many practices are snapping up isn’t simply a database for patient records—that would be like repurposing Salesforce.com for doctor’s offices, Howard says. The much harder thing to build, and one of the main benefits emphasized by Practice Fusion in its marketing pitches, is its system’s behind-the-scenes connections to pharmacies, labs, and billing services, meaning doctors can get more done directly from the system’s Web-based interface.

But the biggest selling point for Practice Fusion—and the factor explaining its rocket-like growth—is that it’s completely free to doctors. The startup makes money not in the usual ways for enterprise software companies—subscriptions, consulting, training, support—but by showing ads in the browser alongside patient data.

Most of the ads are from pharmaceutical companies, as you might expect, and doctors who don’t like them can pay $100 per month for an ad-free version. But few bother. It turns out that the right price for an EHR system is no price.

Howard says it took some doing to convince his board and investors that the company should make the service free—but that it turned out to be the best decision the company has ever … Next Page »

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This year’s MassTLC Innovation UnConference, in Boston on Friday, was as overwhelming—and inspiring—as ever. Apart from the “secrets of scaling startups” session, which I recapped in a separate story, there was a lot going on. Far too much for any one person to take in.

There were sessions on picking the right startup accelerator; building the right company culture; choosing board directors; common mistakes startups make; the talent and recruiting crunch; and the interplay between the New York and Boston innovation scenes, as well as sector-focused sessions on gaming, big data, analytics, mobile cloud, social marketing, and so forth.

To keep track of the main themes this year, I benefited from random chats with Lawrence Schwartz of Tokutek; Michael Raybman of WaySavvy; Gus Weber of Dogpatch Labs and Polaris Venture Partners; Semyon Dukach of SMTP; Vineet Sinha of Architexa; Jeremy Levine of StarStreet; Josh Bob from Textaurant; Dharmesh Shah of HubSpot; and many others. My colleagues Erin Kutz and Lilly O’Flaherty roamed the halls and sessions as well, so I will include some of their observations too.

Here’s a quick sampling of what we all learned about:

1. There are about 100 “big data” companies around Boston. That was the count given at one of several sessions focusing on big data and analytics, led by Steve O’Leary of Aeris Partners and Bob Zurek of Endeca (nice exit). For comparison, earlier this year MassTLC estimated the huge mobile/wireless cluster around Boston to be about 400 companies strong. Big data encompasses big companies like Netezza (part of IBM), Oracle, EMC, ITA Software (Google), Vertica (HP), and Progress Software, as well as upstarts like Hadapt, Jana, Ginger.io, Hopper, Kyruus, and Tokutek. The common thread is technology to help people and companies manage and make sense of tremendous amounts of data so they can make better business decisions.

2. If you’re tired of SoLoMo (social-local-mobile media) as a tech theme, try SoMoClo…the social mobile cloud. In case your eyes just glazed over, think of it this way: Google is mobile plus cloud (see Android). So is Apple (more mobile than cloud, but getting there). Facebook is social plus cloud. Whoever gets all three wins. Beyond consumers, an emerging sector for this technology is healthcare. Jeffrey Tingle of PolyRemedy talked about opportunities in making electronic medical records accessible by patients and doctors—along with the major challenges of privacy, security, and compliance.

3. Web content and advertising are becoming much more interactive—and that interplay leaves an opening for startups. “Traditional church-and-state separation of content and commerce is dying,” says Michael Raybman from travel site WaySavvy. “Sidebar display ads are totally 2005. Commerce and advertising are becoming personalized and contextual, while content is becoming increasingly actionable, where ‘share with friends’ is not the only action. This brings immense opportunities for the travel vertical.”

4. Just when you thought the engineering talent crunch couldn’t get much worse: Undergrads aren’t coming out of school with the right coding experience, and startups can’t afford the time or … Next Page »

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A new health IT startup built around an intriguing idea will begin operating in San Diego next month. What’s the idea? Prescription-based social networking for the chronically ill.

The startup, called Sanitas, was founded in San Diego last year and made its debut yesterday at “Take This Pill and Tweet Me in the Morning,” a half-day conference at The Salk Institute focused on how social media and mobile health are creating consumer-centric healthcare. The conference was organized by the California Healthcare Institute, a La Jolla-based advocate for biomedical policy and research.

Sanitas founder Naser Partovi says the company provides outpatient management software called Wellaho that creates a HIPAA-compliant social media network around the chronically ill, and which is tailored to the needs of that patient. “You can’t just join Wellaho,” Partovi says. “It must be prescribed for you by your doctor.”

The encrypted system ensures patient privacy while also enabling each patient to create a Facebook-like home page that can be shared with his doctors, nurses, friends, family, spiritual advisors, and other patients. The system serves as a collaborative platform for patients and their caregivers, enabling them to share their support online.

Each home page features a calendar that tracks appointments, reminders, and other events, an online journal that enables patients to share their vital signs, and an assortment of other features. The messaging system is encrypted, allowing both private, one-to-one conversations between the patient and a doctor (or between two doctors) as well as the one-to-many messaging more familiar to Facebook users.

“We are not in the business of treating people,” Partovi says. “We are in the business of educating people.” Among other things, the company provides information that has been personalized for each patient’s diagnosis, therapy, and care.

Partovi, who was previously the CEO of San Diego-based SKY MobileMedia and a managing director at San Diego’s Enterprise Partners Venture Capital, tells me that Wellaho had a sad beginning in 2008, when his wife Ioana was diagnosed with breast cancer. “I spent two years trying to save her life,” says Partovi. In the process, he adds, “I learned that from the patient’s perspective, nobody really looks after you. Patients have to do that themselves.”

Partovi, a wireless networking expert, sounded especially disillusioned about his efforts to educate himself about his wife’s disease. Searching the Internet for information about a particular diagnosis or term might yield a million hits, and “It’s up to you to decide what’s relevant,” Partovi says. With Wellaho, Partovi resolved to provide authoritative information for each patient, using doctors and medical students to curate the information based on the patient’s specific diagnosis.

“We connect to patients’ electronic health records through their doctors or the hospital,” Partovi says.

Partovi says he personally funded Wellaho’s initial development, and that friends and family provided another $800,000 for the project. Partovi says he has six people working with him on the project, which already up and running. The startup also has customers, although Partovi says he’s precluded from identifying them except to say they are “three of San Diego’s biggest hospital systems.”

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There’s no such thing as the summer doldrums when it comes to Bay Area technology news—not this summer, anyway. Your recap of last week’s top stories starts here:

—The National Science Foundation unveiled a new “Innovation Corps” program designed to help university researchers get their innovations from the lab bench to the commercial world. 100 I-Corps teams per year will receive $50,000 grants and will go through an intensive entrepreneurship workshop based on startup guru Steve Blank’s Lean LaunchPad course at Stanford University.

—I profiled Instructables, an online community of “makers” and other DIY enthusiasts featuring tens of thousands of crowdsourced how-to articles. Turns out I had pretty good timing: design software giant Autodesk announced yesterday that it has acquired the San Francisco startup and that CEO Eric Wilhelm will help the company build new online communities around its consumer offerings.

—Assistly, a San Francisco startup offering cloud-based system that helps companies provide customer support via social media, scrapped its tiered pricing system and introduced a new free version of its service; we published an in-depth case study of CEO Alex Bard’s risky decision to go “freemium.”

—Innovalight, a Sunnyvale, CA, company whose “silicon ink” technology improves the efficiency of photovoltaic panels at turning sunlight into electricity, was snapped up by DuPont for an undisclosed sum.

—Vacation rental clearinghouse Airbnb said that it had collected a whopping $112 million in Series B funding. Of course, that news got somewhat buried by the storm of bad publicity around a San Francisco-based Airbnb user whose home was vandalized.

—Menlo Park, CA-based TechShop announced the impending opening of the latest branch in its chain of community fabrication studios. The new location, in Allen Park, MI, outside Detroit, is being readied as part of a partnership with Ford.

—My San Diego colleague Bruce Bigelow sent several stories my way last week. First, San Diego wireless giant Qualcomm acquired a set of gesture recognition technologies from Sunnyvale, CA-based GestureTek. The implication: devices including next-generation version of Qualcomm’s Snapdragon processor could have gesture-recognition capabilities similar to those provided by Microsoft’s Kinect device.

… Next Page »

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San Mateo, CA-based Epocrates, a provider of medical reference apps for mobile devices, has long been working on a full electronic health records system for physicians’ offices. This week the company announced that the “first phase” of its EHR system is available. It’s a Web- and mobile-based system tailored for practices with 10 or fewer physicians and includes features such as patient notes, lab results, e-prescriptions, and drug information. Epocrates said that it plans to add features over time that would allow practices using its system to qualify for government incentive payments under the “meaningful use” provisions of the Health Information Technology for Economic and Clinical Health (HITECH) Act.

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Drchrono, a Y Combinator-backed startup in Mountain View, CA, that offers an iPad-based electronic health record (EHR) system for physicians, said today that its software has been certified by a group responsible for determining whether practices using the software are eligible to collect incentive payments from the Department of Health and Human Services. InfoGard, an HHS-authorized testing body, determined that drchrono’s app meets the “meaningful use” criteria laid out in the 2009 stimulus act to encourage adoption of electronic medical record systems—which means offices using drchrono can apply for up to $44,000 in incentive payments. The company says the drchrono app is now “the first native EHR on the iPad to be certified for Meaningful Use.” Said co-founder and CEO Michael Nusimow in a statement, “This certification transforms our EHR app and the iPad into a potentially affordable platform that could finally drive global usage and adoption of electronic medical record keeping.”

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The big IT event we’re running this spring, Beyond Mobile, is now just two weeks away. We’ve got a trio of big thinkers from big organizations coming in to help us grapple with our big question—namely, what comes after the current wave of smartphones and tablets? What will our computers look like, and how will they act, in the year 2021?

Today, though, we want to announce some exciting additions to the program—the leaders of three Bay Area companies who’ll give us a look at what the future holds in the three specific areas of privacy, robotics, and healthcare. And we’re also kicking off a fun Twitter contest where you, dear reader, get to be the futurist. More details on that below.

First, just as a reminder, the main dish at Beyond Mobile will be an on-stage conversation with three leading thinkers from the West Coast information technology community, including Bill Mark, vice president of the Information and Computing Sciences Division at SRI International (which is hosting the event); Dan Reed, the leader of the eXtreme Computing Group at Microsoft Research and vice president of technology policy and strategy for Microsoft overall; and Larry Smarr, the director of the California Institute of Telecommunications and Information Techology, better known as Calit2.

The organizations that these distinguished speakers lead are each charged, in their own way, with mapping the way from today’s information environments to the smarter, faster, cheaper, more pervasive forms of computing that are surely over the horizon. I got just a taste of what may be coming in an interview last week with Bill Mark, whose own research focuses on “smart spaces” where embedded sensors and processors may take over many of the communications, information-retrieval, and advisory functions mobile devices now provide (and offer many more in addition). SRI is studying how government and military leaders, educators, and businesspeople might make use of such technology, and we’ll go deeper into that—as well as similar ideas being explored at Microsoft and Calit2—at the event.

Then, as a kind of dessert after that hearty meal, we’ll hear the following short “burst” presentations:

Chris Babel, CEO of San Francisco-based TRUSTe, will talk about his organization’s efforts to ensure that publishers, software makers, and advertisers respect consumer privacy on the Web—and about the mounting privacy concerns that will need to be addressed in an era of pervasive mobile and cloud-based computing.

Trevor Blackwell, the founder of Mountain View, CA-based Anybots (and a partner at the Y Combinator venture incubator), will share his vision of the role robots will play in remote presence, teleworking, and collaboration.

Michael Nusimow, CEO and co-founder of the Y Combinator-backed startup DrChrono, will demonstrate his company’s iPad-based electronic medical record platform system for doctors, and will talk about the ways our interactions with doctors may change in a future where most health information will be cloud-based and mobile-accessible.

And we’ll be sure to leave time—as we always do at Xconomy events—for lots of audience questions and networking.

We’re doing our best to make this event affordable for all. Students can register for $10, employees of startups under three years old can register for $30, and others can register at the early-bird rate for $60 (that rate expires tonight, so act fast). But starting today, there’s an even cheaper way to attend.

We’ll be giving away three pairs of tickets to Beyond Mobile to the winners of a special contest on Twitter. All you have to do is tweet your zaniest ideas about the future of computing over the next 10 years and append the hash tag #XconPredicts. For example:

“By 2021 even robots will be collecting unemployment #XconPredicts”

We’ll keep an eye on all of the predictions you share, and we’ll pick the best ones in three separate contest sessions ending Friday May 6, Tuesday May 10, and Friday May 13. Remember, the idea here is to have a little fun and come up with futuristic predictions that include a dose of humor or hilarity, sarcasm or schadenfreude. Have at it, good luck, and see you on May 17!

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You can learn a lot from Wikipedia, despite all its faults—and Jeff Catlin’s company has done just that.

Boston-based Lexalytics said today that its latest text-analysis software incorporates insights from combing through Wikipedia’s entire user-generated online encyclopedia for relationships between words, phrases, and their meanings. The company says its new software, which powers products used by big brands and other organizations to quantify the meaning and sentiment behind conversations on the Web, will be available this summer.

Before diving into the technology, here are some business metrics. Lexalytics is “quite profitable this year,” according to Catlin, the firm’s CEO. It saw 65 percent revenue growth last year, and is continuing to grow in 2011 in a number of new markets, he says (more on that in a minute). The company currently has 18 employees in the U.S. and U.K. Catlin himself splits time between offices in Boston and Amherst, MA.

About a year ago, my colleague Wade profiled Lexalytics and its humble beginnings in 2003, when Catlin was running an engineering group at LightSpeed Software, a Woburn, MA-based content management startup. LightSpeed was consolidating and closing its East Coast operation, but Catlin convinced the firm’s investors to let him run his division as a separate company (which became Lexalytics).

Lexalytics has gone on to provide “sentiment analysis” technology for companies that help brands and organizations monitor and manage their reputations online, such as Cymfony, ScoutLabs, and social-media firms like Bit.ly. Lexalytics recently landed Newton, MA-based TripAdvisor as a customer and partner; TripAdvisor (which is being spun out of Expedia as a separate public company) uses Lexalytics’ software to understand user sentiment—what people like and don’t like—in their online reviews of hotels, restaurants, cruises, and other attractions.

But the opportunity for Lexalytics goes far beyond understanding sentiment in blogs, tweets, and other social media. As I see it, the technology is really about getting a computer to understand the meaning of sentences and the deeper relationships between words and phrases in documents. So it’s about classifying “wonderful day” as positive and “horrible disaster” as negative, sure, but it’s also about identifying names and acronyms; detecting sarcasm or hype amidst praise or insults; and being able to classify things like “cabin” as a type of room on a ship, “chicken tikka masala” as Indian food, “golf club” as having to do with outdoor recreation, and “Red Sox” as a (currently bad) baseball team.

The technologies behind such “semantic” analysis of text—natural language processing, machine learning, and statistical modeling techniques—have been around for more than a decade. But they have continued to improve in recent years, enhanced in part by the availability of big, user-generated databases, like Wikipedia. And, crucially, the market for these … Next Page »

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The state budget is a mess, but that isn’t stopping the folks in Spokane, WA from thinking big about planting seeds today for biotech.

I’ve been in Spokane the past couple days to give a keynote talk on the Northwest biotech industry at an event organized by an entrepreneurial networking group called LaunchPad Inland Northwest. Quite a few of the 120 or so people in the audience, at Washington State University’s Riverpoint Campus, were buzzing about getting a fully-integrated four-year medical school curriculum based in Spokane.

The idea of medical training in Spokane isn’t new. Aspiring physicians have long been able to get least part of their four years of instruction and clinical rotations in Spokane through the University of Washington’s program which serves five states in the Pacific Northwest. But slots in this Wyoming, Washington, Alaska, Montana, and Idaho (WWAMI) program are limited, and many rural areas constantly struggle to get enough medical care.

Instead of always having students converge in Seattle for the second critical year of study, the Inland Northwest contingent wants to make some slots of the WWAMI program available to accommodate students in Spokane. If students could get all the medical training for an MD in Spokane, before starting their residency years, then the thinking goes, many will put down roots in the community and help attract more of their bright young peers. Over time, the hope is that an established Spokane medical school could play the same kind of catalytic role for a biotech industry that the University of Washington and Fred Hutchinson Cancer Research Center have throughout history in Seattle.

This idea isn’t funded yet, and in the current budget environment, it wouldn’t be a surprise if it never was. But I do think many Seattleites would be surprised by how much activity there already is in Spokane’s hospital cluster, and with some small businesses doing interesting things in medical devices, imaging technologies, telemedicine, electronic health records, and genetic testing.

The local NBC-TV affiliate, KHQ, interviewed me at the event to ask about how important a medical school is to the formation of a biotech hub. The whole thing kind of stunned me—a TV station wants to talk about the biotech industry, and to some guy from a Web publication most in Spokane haven’t heard of? Not only did KHQ want to talk about it, they ran the segment in the second spot at the top of the evening newscast. To me, that’s a pretty clear indication that this is a town that’s taking innovation very seriously.

I have no idea whether the medical school will get funded, much less whether it will spawn more innovative products, companies, and jobs. But there’s certainly a strong will in the community to try to make it happen.

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Practice Fusion, a San Francisco startup that claims to be the fastest-growing maker of electronic medical records systems for physicians’ practices, may be able to supercharge that growth now, thanks to a $23 million infusion from Peter Thiel’s Founders Fund and a posse of other investors.

The Series B investment, announced today, brings Practice Fusion’s total venture backing to $30 million and will help the company “reach every doctor and practice in the country in our market,” says founder and CEO Ryan Howard.

Founders Fund, started in 2005 by Thiel and fellow PayPal alums Ken Howery and Luke Nosek, is a first-time investor in Practice Fusion, as are syndicate partners Artis Capital Management and Glynn Capital Management. Series A investors Morgenthaler Ventures and Felicis Ventures also participated in the round.

With billions in dollars in federal incentives awaiting medical practices that adopt electronic recordkeeping systems, there’s a veritable gold rush underway, with dozens of startups and established companies vying to supply doctors with systems for digitizing patient records, reviewing test results, ordering electronic prescriptions, and the like. Practice Fusion, with its free, easy-to-adopt Web-based system, is seen as one of the leaders in the field.

The big jump in funding for the five-year-old startup—from a $7 million A round in early 2010 to the current $23 million B round—is in part a recognition of how quickly its system seems to be catching on with doctors. “Last year was a tremendous year. We had 500 percent growth in users and patients,” says Howard. And the plan is to double again in 2011. “We will do more marketing, we will bring on new doctors, we will have more account managers assigned to doctors, more support people to help them with their issues, additional developers to build new features and improve capacity, more servers to handle that capacity. So we have additional overhead that needs to be serviced.”

Such rapid growth may be necessary right now if, as Morgenthaler partner Rebecca Lynn believes, the electronic medical records industry turns out to be a winner-take-all business. “There will be one eventual winner and it will boil down to how good the product is,” Lynn says. “This team has really figured out the recipe for a very easy-to-use, intuitive process that doctors can get up to speed on in five minutes. I think they have the formula down, and it’s all about [customer] acquisition at this point, and that’s what the money is for.”

The Practice Fusion model is to offer doctors a full suite of electronic health records tools over the Web, meaning practices don’t have to install or maintain on-premises software. The whole package is free to doctors, and the company makes money by … Next Page »

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The annual Healthcare Information Management Systems Society (HIMSS) just concluded the largest healthcare technology conference of the year with a record-breaking 31,225 attendees in Orlando, FL. The annual event includes the leading technology innovators and healthcare executives in the country. This year there were several distinct themes that will have an effect on any company or investor involved in healthcare. While themes like security and Accountable Care Organizations (ACOs) are staples, the following three represent significant and newer market opportunities.

Meaningful Use: The Health Information Technology for Economic and Clinical Health (HITECH) Act provides the U.S. Department of Health and Human Services with the authority to establish or promote IT initiatives and it’s well underway. The most visible initiatives are those involving cash reimbursements for adoption of electronic health records and efforts promoting health information exchanges—which was really sparked by the $19 billion set aside for this purpose in President Obama’s stimulus package two years ago. Under HITECH, eligible health care professionals and hospitals can qualify for Medicare and Medicaid incentive payments (and eventually penalties for lack of adoption) when they adopt certified electronic health record (EHR) technology and use it to achieve specified objectives (“Meaningful Use”).

It was clear at the conference in Orlando that the angst over Stage 1 Meaningful Use has subsided since the stimulus package created the opportunity two years ago. But there is plenty of uncertainty going forward. There is both a transition from Stage 1 to Stage 2 of the federal EHR incentive program and uncertainty about direction, as national health IT coordinator Dr. David Blumenthal prepares to return to Harvard in April

EHR vendors in particular are anxious given they will have to begin modifying and recertifying their products to meet the next round of requirements. (All products certified under Stage 1 will have to be recertified to meet Stage 2 criteria.)

mHealth – Mobile: The ubiquitous presence of smart phones in clinical settings and now the onslaught of tablet computing has brought mobile health front and center. Among many mobile-focused events at the Orlando conference, FierceHealthIT held a packed breakfast panel presentation entirely focused on the use of mobile devices and applications by leading organizations such as MD Anderson Cancer Center and the U.S. Navy. The general consensus seems to be that providers are demanding access to their applications on mobile platforms and IT organizations must meet the demand. Concerns around security are very addressable as explained by Captain Robert Marshall, MD, the chief medical information officer of the Navy.

Cloud Computing: Cloud computing represents a growing shift in market attitudes about the increasing confidence in the Internet as the platform, versus traditional software installations and sizeable hardware management issues. Not only are several of the giant EHR vendors now offering a subscription-based cloud solution (General Electric, Emdeon) but companies like eMix and LifeImage continue to build traction in delivering medical imaging through the cloud.

2011 will see the vast majority of healthcare IT expenditures flow toward the three categories mentioned above. Meaningful Use and the chasing of federal dollars will eventually fade away, but the second two categories are likely going to have a strong market influence for the foreseeable future.

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San Mateo, CA-based mobile medical reference company Epocrates priced its initial public offering and began trading on the Nasdaq exchange yesterday under the ticker symbol EPOC. Shares began trading at $16, bringing in about $57 million in working capital for the company and $29 million for selling shareholders. Xconomy profiled Epocrates and its push into electronic medical records on January 25.

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It’s the beginning of the year—an opportune time to forecast how 2011 will unfold in healthcare. We are likely to see some surprises, such as the sharply rising importance of primary care physicians.

Here are some predictions about the new year:

• More consolidation is on its way in healthcare under Obamacare, which heightens the pressure to improve the efficiency of healthcare delivery. As part of this, more and more healthcare provider groups, even the small ones, will feel compelled to go electronic once and for all.

• Valuable new, cost-effective medical tools will begin to be widely embraced. One is telemedicine. Just imagine how much more effective doctors can be if they interact with patients remotely via cameras. The technology exists now, has been successfully used in a number of situations, and is not expensive. Soon insurance reimbursement models will permit and remunerate physicians for telemedicine “visits,” and then this will take off.

• The use of genetic testing to segment patient populations and better target therapies will be one of the fastest growing segments of healthcare as a new wave of accurate, clinically actionable tests hits the market.

• As health reform increasingly kicks in, there will be heightened emphasis on the importance of primary care physicians—a sharp contrast to the elevated importance of specialists for so many years. They will become the lynchpins of health care and make more pivotal care decisions as more than 30 million more people enter the healthcare system and require access to them.

• Time-saving technologies that lead to measurably better outcomes—such as shorter hospital stays, faster surgeries, and fewer complications—will fare well in 2011.

• Contrary to the opinion of countless skeptics, new California Governor Jerry Brown will be surprisingly effective and will fix many of the state’s woes. Under Brown, taxes will rise and spending will be far more controlled, and much of the crisis will finally be resolved. Why? Brown has been governor before and knows the ropes. And at the age of 72, he cares primarily about his legacy. What better legacy could he leave than being the man who fixed California’s seemingly insurmountable problems?

• I gleaned additional insight into Jerry Brown shortly after he was elected mayor of Oakland. He came to a reception hosted by Nat Goldhaber and to celebrate the IPO of startup Cybergold. Nat is another founder of Claremont Creek Ventures. I brought one of my children, then a baby, and asked Brown to pose with him for a picture. “I don’t do babies,” he responded. That was telling, and in a very good way. Brown is iron-willed man who does what he wants and what he thinks is best, not what he is told. He won’t be dissuaded from fixing California.

[Editor's Note: This is part of a series of posts from Xconomists and other technology and life sciences leaders from around the U.S. who are weighing in with the top surprises they've seen in their respective fields in the past year, or the major things to watch for in 2011.]

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Troy, MI-based gloStream calls itself the Microsoft Office of medical practice software. Yet in addition to emulating the business strategy behind Microsoft’s dominant desktop applications franchise, gloStream has actually built its software for doctors’ offices on the Redmond, WA-based software giant’s (NASDAQ:MSFT) technology.

There are thousands of companies that embed Microsoft technology into their software—and many that do this for healthcare applications. Yet I’m having trouble finding an electronic medical records provider whose fortunes are as extensively tied to Redmond as gloStream’s. A doctor can only buy the firm’s software from Microsoft resellers and partners, Mike Sappington, the firm’s CEO, says. And built on Microsoft Office, the company’s EMR and practice management software actually have Microsoft Word embedded in them.

GloStream certainly isn’t the first tech firm to hitch itself to Microsoft. The software behemoth owes much of its success to a network of thousands of companies that build applications on Microsoft technology platforms or provide sales and IT support of Microsoft products. But gloStream’s part in this network is worth noting because the firm is providing a way for Microsoft partners to become involved in a major surge in technology adoption among U.S. physicians.

The vast majority of doctors in this country rely on paper-based records to store and manage patient data. The federal stimulus last year included $19 billion to help spur adoption of electronic health records systems among physicians and hospitals. While the stimulus subsidizes doctors’ purchases of the software, the money itself doesn’t solve some bugaboos that have caused doctors to balk at electronic health records in the past. For one, the software can pose challenges to staff members who need to learn how to use it, and it can interrupt an office’s workflow, Sappington says. And doctors themselves are obviously busy people, who didn’t go to medical school because they wanted to spend a lot of time learning how to use new software that isn’t intuitive.

At gloStream, he says, the firm wanted to build easy-to-use software based on Microsoft Office, with which millions of people are already quite familiar. And the five-year-old company decided early on that it would use the thousands of Microsoft partners around the country to sell and support its technology rather than trying to do these things on its own. The firm also believes its strategy allows it to benefit from the billions of dollars that Microsoft spends on Office-related research and development, Sappington says.

The firm says that it is the only provider of EMRs and practice management software that has … Next Page »

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I have been intrigued by numerous articles written recently on how hospital administrators are looking to other industries to learn how to adopt processes to reduce errors and improve quality of care. One recent example is that of hospitals learning from the manufacturing sector and adopting their lean manufacturing techniques to improve the efficient flow of patients through their systems and to cut down on errors. Another article, following the publication of an Oxford University study in the British medical journal Quality and Safety in Health Care, says hospitals are looking to learn new tricks from the auto racing industry to improve operations and patient safety. Then there’s Atul Gawande’s new book The Checklist Manifesto, which shows how straightforward checklists like those used by airline pilots can reduce errors in the operating room, at the bedside, and in many other situations.

As I have come across these instances of hospitals trying to learn from outside industries, I couldn’t help but be reminded of that old poem by Robert Fulghum called “All I Really Need to Know I Learned in Kindergarten.” Here is an excerpt:

All I Really Need To Know about how to live and what to do
and how to be I learned in kindergarten. These are the things I learned:
Share everything.
Play fair.
Don’t hit people.
Put things back where you found them.
Clean up your own mess.
Don’t take things that aren’t yours.
Say you’re sorry when you hurt somebody.
Wash your hands before you eat.
Flush.
Warm cookies and cold milk are good for you.

The poem ends with:

And it is still true, no matter how old you
are—when you go out into the world, it is best
to hold hands and stick together.

In thinking about this classic of 1990s pop psychology, it struck me that while high technology fields such as auto racing, airlines, and manufacturing can offer some important ideas about process management to America’s hospitals, many of the ideas for how to run a high quality hospital were first learned in kindergarten—but just didn’t stick.

For instance:

1) Share everything. If hospitals did a better job of sharing data between caregivers, departments, and families, the process of care delivery would be vastly improved. Yes, this can be done with the electronic medical records (EMR) systems that everyone is talking about, but if kindergarteners know the importance of sharing, why is it so controversial for hospitals, many of which are still noodling about whether they need to adopt technology to manage patient information? According to the 21st Annual 2010 HIMSS Leadership Survey, only 22 percent of hospitals have EMR systems fully implemented across their entire organization and another 26 percent have EMRs implemented in one facility of their hospital system. That means that more than 50 percent aren’t in a position to effectively share data about patients to maximize quality of care and eliminate redundancies and error.

2) Put things back where you found them. This is a good one for the surgical suite, where there is a terrible problem of surgical sponges and other accoutrements accidentally being left inside of patients. Estimates have varied as to whether this happens in 1 out of every 1000 surgeries or 1 out of every 18,000 surgeries, but with about 50 million surgeries occurring each year in the U.S., … Next Page »

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It was a lighter life sciences news week, but we did see a new biotech company surface, while a major pharma continued its pursuit of a local biotech giant.

—French drug giant Sanofi-Aventis made another move in its quest to acquire Cambridge, MA-based Genzyme (NASDAQ: GENZ), with a $18.5 billion hostile takeover bid. It was the same price—$69 per share—as an earlier offer from Sanofi that the Genzyme’s board had unanimously rejected.

—Biotech startup ModeRNA Therapeutics, launched out of Cambridge, MA-based Flagship VentureLabs, announced that it has developed technology that uses synthetic RNA to reprogram adult stem cells to function like embryonic stem cells, while avoiding detection by cells’ anti-viral defense systems. ModeRNA, whose technology comes out of Children’s Hospital Boston, has also received an undisclosed amount of funding from Flagship and another unnamed investor.

—Luke introduced readers to some of the cancer-fighting biotech companies we’ll be featuring in our “Xconomy Forum: Boston’s War on Cancer” event later this month. Going beyond chemotherapy and other targeted treatments, speakers will cover how RNA interference, epigenetics, and molecular diagnostics are playing their part. The event will also feature a panel on the process of garnering FDA approval for cancer drugs, moderated by our life sciences columnist Sylvia Pagán Westphal.

—In case you missed it, Ryan wrote a recap of the inaugural Xconomy Xchange, featuring Jonathan Bush, CEO of Watertown, MA-based Athenahealth (NASDAQ: ATHN) and Westborough, MA-based eClinicalWorks CEO Girish Navani. Cambridge Consultants president Pam McNamara moderated as the two executives dished on their firms’ approach to electronic medical records, their respective business models, and what to make of the government’s incentives for physicians to adopt the technology.

—Speaking of health IT, Boston-based mobile app company FitnessKeeper added some features to its run-tracking app to simulate the group workout class experience, says CEO Jason Jacobs. The RunKeeper app is now integrating race training plans designed by running experts and tools for searching for upcoming events and connecting with other RunKeeper users who are planning to run the same race.

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“In the Obama Administration, entrepreneurs are welcome.” So said Aneesh Chopra, chief technology officer of the United States, in a keynote speech yesterday at “DC to VC,” a summit on healthcare IT investing organized by Morgenthaler Ventures partner Rebecca Lynn in San Francisco and co-sponsored by Silicon Valley Bank and Venrock. Speaking to a group of venture capital partners, entrepreneurs, and media representatives at the posh St. Francis Yacht Club, Chopra argued that under Barack Obama’s leadership, the federal government is doing more than ever before to adopt the latest infotech innovations coming out of Silicon Valley, and to shape federal regulation to encourage entrepreneurial solutions to big challenges like improving public health and nutrition.

I had a chance to delve into the specifics of the administration’s pro-entrepreneurship policies with Chopra in a one-on-one interview after his speech (see below). But the big picture, for the charismatic New Jersey-born son of Indian immigrants, is that the government sorely needs the ideas of its citizens—especially programmers—and that it can best stimulate those ideas by making the government’s vast troves of data more accessible to outside developers, and then getting out of the way to see what they build.

As a case in point, he cited the story of Dave Augustine, Bob Burbach, and Andrew Carpenter, three developers from San Francisco-based non-profit WestEd Interactive who came up with a new way to search the antiquated Federal Register as part of the Sunlight Foundation’s “Apps for America” contest. “The Archivist of the United States found out about Bob and Dave and Andrew in March, and said, ‘You guys have built the best killer app I’ve seen, can you rebuild the Federal Register website?’ and they said, ‘Sure,’” Chopra recounted. The new FederalRegister.gov, launched this summer, makes it easy to browse the once-impenetrable collection of government notices, rules, procedures, and documents by topic or date. “These were just random dudes who didn’t have lobbyists or procurement departments, but just smart ideas—’cognitive surplus,’ as Clay Shirky would say.’”

President Obama named Chopra as the nation’s first CTO in April 2009. As an associate director within the Office of Science & Technology Policy, Chopra’s formal assignment was to work with chief information officer Vivek Kundra to set federal technology policies that would make government more efficient and more transparent. “The goal is to give all Americans a voice in their government and ensure that they know exactly how we’re spending their money,” the President said when he appointed Chopra.

But Chopra has gone far beyond that initial charge, becoming known as an outspoken advocate for making government databases more accessible to developers of consumer software applications, using open source software more widely within government, and spurring innovation through prize-based competitions. Obviously, those are all causes dear to the hearts of most private-sector innovators and entrepreneurs, and Chopra has become a popular figure in Silicon Valley and other innovation hubs. Even before joining the Obama Administration, Chopra, the former secretary of technology for former Virginia Governor Tim Kaine, had been labeled a “venture governmentalist” for his efforts to invest in high-risk internal technology projects. Bay Area technology guru Tim O’Reilly has gone so far as to call Chopra a “rock star,” saying that he “understands that government technologists need to act more like their counterparts in Silicon Valley.”

In his speech at the Morgenthaler summit, Chopra gave numerous examples of the way the Obama Administration is opening government data to entrepreneurial uses. One was the Apps for Healthy Kids competition, a part of First Lady Michelle Obama’s campaign to reduce childhood obesity; the winners of the contest, which challenged entrants to create computer games or tools that make “fun and engaging” use of USDA nutrition data on 1,000 commonly eaten foods, were announced by the White House last month. Chopra said the developer of “Smash Your Food,” one of the winners of the $60,000 competition, got so excited about the power of software to help people eat better that he … Next Page »

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