COGNITIVE MEDICAL SYSTEMS INC.
CEO: Mary Lacroix.
Financial data: Not disclosed.
No. of local employees: Four.
Headquarters: Sorrento Valley.
Year founded: 2010.
Company description: Startup IT company aiming to build software that will connect government and military health care computer systems to better track and treat patients.
The computers managing the health care systems at the Department of Defense and Veterans Affairs can’t talk to each other — not unlike the mishmash of networks in the private sector.
But Douglas Burke, newly named president of Cognitive Medical Systems Inc., says he hopes his new employer will get the discrete systems “talking” by developing the software required to meet new federal interoperability standards.
He made the move to his new post the week of May 2, after leaving his position as CEO of DefenseWeb Technologies Inc. on April 15.
“It’s (Cognitive Medical Systems) a small, bootstrapped software development company based here in San Diego, with a grand total of just four people, including me,” Burke said.
Mary Lacroix, who was once in charge of the computer systems at Naval Medical Center San Diego, founded the company in 2010 “with the mission of providing standards-based software solutions to connect organizations in the health care value chain — doctors, clinics, nurses, insurers and the federal government — using an emerging set of standards,” Burke said.
The standards are part of President Barack Obama’s efforts to streamline U.S. health care under the Nationwide Health Information Network, also known as NHIN.
The White House envisions “a network of networks” that can talk to each other.
A Microsoft Corp. study said $85 billion could be saved annually if the various existing legacy systems in the U.S. health care sector communicated with each other.
Cognitive Medical will be competing with the likes of SAIC, a huge defense contractor that started in San Diego in 1969, and consulting firms like Booz Allen Hamilton Inc.
Theo Addo, associate professor of information systems in the business school at San Diego State University, says the special business area of so-called “middleware,” connecting legacy systems with Web-based browser software, is an area dominated by big firms such as Microsoft.
But he said that startups like Cognitive Medical have a shot at breaking into the market if they focus on a particular niche, such as the military.
“Specialization makes it a bit easier to enter the market,” Addo said.
Latching on to System
Peter Schuster, an executive at SAIC and board member of the Association for Corporate Growth in San Diego, said the new business can take advantage of the system that the Obama administration has installed to promote digitalization of paper medical records, as well as linking of systems to serve up those records.
NHIN provides financial incentives if providers make the shift within a couple of years, but levies penalties if they don’t.
The desire to avoid a penalty gives emerging companies like Cognitive Medical an opportunity where none existed.
“The incentives turn into penalties,” Schuster said. “And they get dinged. This is creating room for new companies to enter the market.”
“Health care is where banking was in the early 1970s,” said Burke. “We have lots of independent, disconnected legacy systems, very few of which communicate with each other, and none of which communicate in a standardized fashion. We’re really at the dawn of the IT health care revolution.”
He envisions Cognitive Medical marketing a “suite of products,” as well as related services, to customers.
“What you have right now is a tremendous amount of legacy software and legacy information systems out there, so we’re not expecting the world to adopt all of our products, but we’ll help others connect to this new standardized infrastructure,” he said.
Burke has no plans to seek out professional investors, and he says that he will “bootstrap” the company as it grows, plowing profits back into the company.
“The first order of business for me is the blocking and tackling and getting the company up and running.” Burke said that as soon as the pieces are in place, such as a company website and company collateral, he will start tracking down contracts.
“We’ll use personal services contracts, primarily with the military to fund the company, and grow our professional staff of software engineers,” he said.
According to Burke, he successfully used this method to grow DefenseWeb to $14 million a year in sales before selling the business in 2007 to health care giant Humana Inc. He then doubled sales over the next four years to $30 million.
“Bootstrapping early stage companies is the way to go,” he added. “If it’s your own money on the line, then you make better decisions.”
Lacroix said she is excited to have someone with Burke’s experience on board.
When she was working at the huge Navy medical complex in Balboa Park, Lacroix said the facility’s “stovepipe systems” didn’t communicate with each other, thus, the systems were underutilized.
“Every single one was independent of our health information system,” she said. “It was a very frustrating situation for all concerned.
“All the great technology that we had couldn’t get us where we wanted to go,” she added.
She said potential competitors such as IBM Corp. and Hewlett-Packard Co. aren’t really competitive in the sense they are trying to develop “proprietary, lockdown systems — that’s their business model.”
“There is no one doing what we want to do, not at this scale,” she said.
“Doug has a strong entrepreneurial background with a wealth of experience, which were the skills I wanted,” Lacroix said. “It’s a perfect match for us.”
Tom York is a contributing editor for the San Diego Business Journal.
Editor’s note: A previous version of this story gave incorrect titles for Mary Lacroix and Douglas Burke. This version corrects the error.