TeraMEDICA offers seamless sharing of digital medical images

TeraMEDICA offers seamless sharing of digital medical images

WAUWATOSA, Wis. — Since the late 1970s, the problem of storing film from medical images such as CT scans and ultrasounds has proved an elusive challenge for the medical industry. With some medical studies involving 2,000 pictures per procedure, old methods of storing, sharing and archiving medical images on film are fast becoming outdated as the use of digital medical images proliferates.
TeraMEDICA Inc., a Wauwatosa-based startup with roots in the Mayo Clinic, offers a solution to a growing problem in the medical industry. TeraMEDICA’s software is billed as an enterprise solution that enables instantaneous delivery of digital images, whenever and wherever they are needed, without the delays and costs associated with traditional film-based systems.
The company’s unique origins, as well as how the company ended up in the Milwaukee area, provide a glimpse into how a technology-based startup company is staged for funding and growth.

Where it began

For the better part of the 1990s, the Mayo Clinic in Rochester, Minnesota, had studied the problem of storage and distribution of medical images across the health-care system. With the exponential growth of medical images in patient care, Mayo officials were growing increasingly concerned that they didn’t have the scale of technologies to match that growth, said Steve Swensen, chairman of Mayo Clinic’s radiology department.
“The fundamental challenge we face in a large medical center with 1,500 staff physicians is that the film can only be at one place at one time,” Swensen said. “If the patient was seeing an orthopedic surgeon, and also a rheumatologist, and then going to surgery the next day, it would have to be moved all over the campus via the ‘sneakernet.’”
The challenge was to develop an archive that could match the size of Mayo’s practice — one of the largest in country — with the ability to make an image available for viewing wherever and whenever it was needed, Swensen said.
When Mayo issued a request for proposals in the late 1990s, all they received were new twists on the existing picture archiving and communications systems (PACS), a technology for sharing and storing medical images.
None of the big players like GE Medical Systems and Seimens could meet the requirements of Mayo’s radiology department, which has 1,200 employees and performs over one million patient exams every year, Swenson said.
“We thought about building it ourselves,” he said. “We had a brilliant Ph.D., Chris Hanna, who came up with this technology that we ended up commercializing.”
Before coming to Mayo, Hanna did research on the technology for ALI Technologies in Vancouver, British Columbia, a medical software company specializing in ultrasound and archiving systems. The Mayo Foundation liked Hanna’s background in the medical and digital imaging field, and the fact that he had already grown a new company.
In November 2000, Mayo’s radiology department received institutional approval to develop the technology. The venture was started by the Mayo Foundation and the Radiology Informatics Laboratory. Hanna worked on the digital imaging archiving problem for three years at Mayo. When Mayo Ventures realized the commercial viability of the technology Hanna was developing, it searched for outside venture capital investment and successfully found the Milwaukee venture capital firm Mason Wells.
“The best way to have this capability was to not work with it ourselves, but to work with Mayo Medical Ventures in partnership with Mason Wells in order to commercialize it,” Swensen said.
Mason Wells funded TeraMEDICA in 2001 through its biomedical fund and moved the company to the Medical College of Wisconsin Innovation Park in Wauwatosa.
“Milwaukee is a hotbed for medical imaging, with GE Medical Systems, Merge and a lot of other smaller companies,” said Trevor D’Souza, managing director for Mason Wells.
Hanna was signed on to lead the company as CEO. Mason Wells re-worked the business plan and signed an agreement with Mayo to license their technological know-how, D’Souza said. Two other investors entered the picture: Beecken Petty, a Chicago-based health-care venture capital firm, and the State of Wisconsin Investment Board. (To date, the company has raised over $10 million from management and institutional investors.)
“We think [digital] medical imaging holds a tremendous amount of promise for many reasons,” D’Souza said. “The imaging/radiology part of hospitals tends to be very profitable. Despite what we hear about health care costs rising, this is an area where health care is going to grow.”
Following the move, prototyping of the digital imaging system began and staff was added. By 2002, the first version of the software was prototyped, and Mayo deployed it in the summer of the following year.
“The archive is up and running, and it’s working beautifully,” Swensen said. “We need to store enough months of data so that we have comparisons. So, we are hanging on to the film. Next year, we plan to go filmless throughout our whole practice area.”
Getting out of the film business represents an annual savings of $15 million for Mayo Clinic, Swensen noted. “There is no printing, storing, moving it around and no chemicals, so that cost goes away,” he said. “So, for the practice, it’s been a great success — it’s secure, and it’s reliable.”

Managing through tough times

Following the terrorist attacks on September 11, 2001, money dried up in the venture capital community, and TeraMEDICA reduced its staff of 30 down to 20 people, then later to 14 people, all within a year’s time.
“That was a very tough thing to do,” Hanna says. “We had a choice: manage through these tough economic times or disappear. It’s just part of the process of growing a company through its early years. There is also the very emotional issue of letting people go. It’s not just about the money. It’s the people that make the whole thing go forward. The company came through the tough times, and we are hiring back some of the people that we had to give up.”
In March, TeraMEDICA benchmarked its latest version at Sun Labs in California, and the results were impressive, demonstrating that the system could store and retrieve up to 6 million images per year. The second version of TeraMEDICA’s Intelligent Image Management system was delivered to Mayo in April 2004. It was the first commercially viable version, D’Souza said.
“It’s a very exciting story,” he said. “It takes a lot of hard work, and a lot of sleepless nights, but eventually you get there. The company is still pretty lean. We have only 17 people. But this is a high-energy, high-productivity startup.”
John Byrnes, Mason Wells’ executive managing director, favors TeraMEDICA because the company works with mass data storage and targets health care and life-science applications.
“We think enterprise-level archiving of digital images is going to be a growing market, and it’s coming on fast,” he said. “We feel very good about it and think it will be a huge success over the next two to three years.”
TeraMEDICA hopes to add a significant number of employees and reach $15 million in revenue by 2006, said Paul Schmelzer, the company’s chief operating officer. That’s up from a projected $6.9 million in revenue with 40 employees for 2005.

Passion and a good team

Hanna said that passion for the business, and maintaining a consistent desire to reach its target, is critical in overcoming the emotional roller coaster that leaders of a fledgling company face when confronting swings in the economy and shifts in the marketplace.
“The VCs and angels can see that, when there is passion,” he said. “So, it’s the passion that helps get you past the low points.”
Having a good team in place is absolutely essential, he added: “If you don’t have a good team, there’s not a chance that it will get to market. With a good management team in place, you can manage around issues, problems and mistakes.”
Mayo has also signed on for the next version of the software, and TeraMEDICA’s new president, Jim Prekop, who joined the company from PeopleSoft, is selling the product at trade shows and talking it up to the outside world.
Swenson says having the success story of Mayo’s experience, which has very strong demands for security and quality, should be very helpful in marketing the product to large, integrated health-delivery networks.
“They are right on the cusp of breaking out, and pretty soon, we are going to have an entirely different problem,” D’Souza says. “And that is how to deliver this to a bunch of different customers.”