ProtoHIT Lands Investments, Industry Partners

Brains behind ProtoHIT’s medical software: UNM Ass’t. Professor Phillip Wagner, M.D.

April 23, 2010 | New Mexico Business Weekly, by Kevin Robinson-Avila

ProtoHIT Inc. is a few steps closer to market, thanks to a fresh venture capital investment and new industry partnerships.

New Mexico Community Capital committed $250,000 to the Albuquerque startup to help it fully develop and beta test medical software that it licensed from the University of New Mexico last year. The software could substantially lower operating costs at workers’ compensation clinics, while simultaneously improving care for patients.

ProtoHIT also negotiated an agreement with an international auto supplier to start beta testing the software at in-house clinics.

NMCC Managing Director Michael Schafer said he approved funding for ProtoHIT because the company offers a simple plug-and-play solution to rising health care costs.

“Past efforts to lower costs have focused on displacing personnel or changing physicians’ behavior, and that’s led to a lot of failures,” Schafer said. “ProtoHIT does neither of those things. It offers a simple, but comprehensive management solution.”

The software, developed by Dr. Phillip Wagner, an assistant professor at UNM’s School of Medicine, aims to standardize patient care while improving communication among doctors, employers, insurance adjusters and patients. If successful, the software management system could cut the number of visits needed to treat most patients, allowing doctors to focus instead on individuals who require more medical attention.

Wagner used the software for years at his private practice for workers’ comp in California. He managed to cut patient visits by more than half, generating substantial savings and a sharp increase in employers using his clinic.

Wagner compiled data on 12,000 cases and 50,000 encounters with patients, which caught Schafer’s attention.

“What struck me is this is not really a startup,” Schafer said. “Dr. Wagner used the software for nearly 10 years. The product doesn’t really require development, but rather adjustments to adapt it for easy use in clinics.”

ProtoHIT CEO Bruce Fryer, a serial entrepreneur and software expert from Utah, licensed the software from UNM last year. He raised $90,000 in July in a syndicated deal that included vSpring Capital and three other investors.

NMCC joined the investors in October with a $100,000 commitment. That allowed ProtoHIT to contract POD Inc., an Albuquerque information technology firm, to upgrade the software.

POD redeveloped the ProtoHIT system for “cloud computing” through Amazon Web Services. That will allow ProtoHIT to rapidly roll out new features and scale up services as needed, Fryer said.

NMCC invested another $150,000 in March to carry the company through beta testing this spring.

To do that, ProtoHIT signed up a global auto supply firm that manages in-house workers’ comp clinics. The company will test the system at manufacturing locations in the inter-Mountain West, but the firm’s identity is confidential.

ProtoHIT originally intended to work with independent workers’ compensation clinics, but changed its strategy to focus on self-insured operations because they’re more immediately receptive to cutting costs, Fryer said.

“A lot of clinics are less interested in saving money, because they get reimbursed for health care services either way,” Fryer said. “But self-insured employers with private clinics want workers back on the line as quickly as possible.”

Gavin Christensen, a vSpring principal and manager of the KickStart Seed Fund, which put $25,000 into ProtoHIT, said the auto supplier is a global powerhouse that can influence management decisions at other firms.

“They’re known throughout the world as an innovator in lean manufacturing,” Christensen said. “They have a lot of market pull.”

Wagner said ProtoHIT is attracting interest from key players in the health care industry.

Dr. Barry P. Chaiken, vice chair of the Healthcare Information and Management Systems Society, has joined ProtoHIT’s board of advisers.

HIMSS has 23,000 individual members and nearly 400 corporate members nationwide.

“Dr. Chaiken is considered to be the national expert on the direction that health care information technology is taking,” Wagner said.

Once beta testing concludes in two to three months, NMCC will help raise a much bigger round of financing to initiate sales and marketing, Schafer said.

This is NMCC’s second investment since last fall. It also put money into IntelliCyt Corp.