Medsphere Raises $7.5 Million In Latest Round Of Venture Financing And Appoints Larry Augustin As Company Chief Executive Officer

ALISO VIEJO, Calif., Jan. 25 /PRNewswire/ -- Medsphere Systems Corporation, provider of Medsphere OpenVista, a fully integrated Electronic Health Record (EHR) that enhances the quality, safety, and efficacy of health care delivery, today announced the completion of a $7.5M Series B round of venture financing led by Azure Capital Partners. Also participating were existing investors Thomas Weisel Venture Partners and Wasatch Venture Fund. In conjunction with the close of the financing, Medsphere announced the appointment of Larry Augustin as CEO of the company. The new infusion of capital and the recruitment of Mr. Augustin will position the company for rapid growth as it introduces Medsphere OpenVista as a significant Healthcare Information Technology (HIT) innovation.

Medsphere OpenVista provides a single source of information to patient care and administrative departments across the healthcare enterprise -- capturing and organizing all clinical, financial, and administrative patient data into an always-current, comprehensive Electronic Health Record. Medsphere enhanced the Department of Veteran Affairs' (VA's) highly acclaimed, open source VistA EHR to develop Medsphere OpenVista for the commercial market. Over 15,000 physicians and 56,000 nurses in more than 1,300 healthcare organizations, including 160 medical centers and 850 clinics, are currently using VistA.

According to the Institute of Medicine, preventable medical errors result in the deaths of approximately 98,000 annually and cost hospitals up to $29 billion annually. Lack of automation was identified as a critical factor in these errors. One of the recommended solutions to this crisis in healthcare quality is the implementation of advanced EHR systems. The highly acclaimed VistA EHR was singled out as a model system by the Institute of Medicine in their 2002 Leadership by Example report, which states "The VA's integrated health information system, including its framework for using performance measures to improve quality, is considered one of the best in the nation." As noted in the August 2003 Modern Physician article Wired and Ready, while less than 5% of private sector hospitals utilize Computerized Physician Order Entry (CPOE), the VA has exceeded 90% usage with VistA CPOE, and has virtually eliminated all medical errors at the point of administration.

"Medsphere OpenVista is an exciting development in the healthcare IT market," stated General Partner Michael Kwatinetz of Azure Capital Partners. "We see significant opportunity for Medsphere to successfully enter the provider market with an open technology solution that has a proven track record of physician adoption, improved patient safety and enhanced delivery of quality care." Mr. Kwatinetz will join the Medsphere board in conjunction with the round.

Prior to joining Medsphere, Mr. Augustin was a Venture Partner at Azure Capital Partners specializing in software, systems, and related IT infrastructure technologies. Prior to Azure, Mr. Augustin founded VA Linux (now VA Software), where he served as CEO and led VA Linux to an initial public offering (IPO) that set the record for the largest first day gain ever in an IPO. In 2000, Worth Magazine named him one of the Top 50 CEOs in America. Known as one of the early innovators in bringing Open Source technologies to the commercial market, Mr. Augustin helped coin the term "Open Source." Mr. Augustin serves on the boards of directors of VA Software, the Open Source Development Lab (OSDL), Linux International, and Linux Mark Institute. Mr. Augustin holds Ph.D. and M.S. degrees in electrical engineering from Stanford University, and a B.S. in electrical engineering from the University of Notre Dame.

"I am pleased to be joining Medsphere as the company transitions to its go-to-market growth phase," stated Mr. Augustin. "I see many parallels between the opportunities in front of Medsphere and other paradigm-shifting, open source companies such as Red Hat. I look forward to contributing to the successful market entry of Medsphere and OpenVista as a cost-effective, comprehensive and proven solution initially targeting the largely underserved market of small to medium sized hospitals."

"The recently completed financing and our ability to attract someone of Larry's caliber demonstrates our commitment to the success of Medsphere and OpenVista," stated Medsphere's former CEO and co-founder Steve Shreeve. "Larry's demonstrated success in leveraging open source technology to create significant value for customers will greatly accelerate Medsphere's market entry." Mr. Augustin is succeeding Steve Shreeve, who will transition to the role of Chief Technical Officer for the company.

About Medsphere Systems Corporation

Medsphere Systems Corporation is the leading provider of OpenVista, a fully integrated Electronic Health Record (EHR). OpenVista helps healthcare providers deliver better, safer and more consistent care to all patients through a comprehensive suite of clinical, financial, and administrative modules including a fully integrated Electronic Medical Record (EMR), Computerized Physician Order Entry (CPOE), Bar Code Medication Administration (BCMA) and Picture Archiving and Communication (PACS) solutions. Based in Aliso Viejo, CA., Medsphere provides cost-effective, comprehensive and proven software and professional service solutions for healthcare provider organizations nationwide. Medsphere currently has four facilities fully deployed and operational, with an additional six facilities under contract and in various stages of deployment. For more information, please visit http://www.medsphere.com/.

About Azure Capital Partners

Azure Capital Partners is a San Francisco based venture capital firm with an emphasis on innovative companies with the potential to become dominant technology platform providers in major industries. Founded in 2000 by a group of partners who believed that a critical gap existed in identifying, investing in and supporting the next generation infrastructure technology companies, Azure Capital Partners has a successful history and clear focus in funding and supporting winning technologies and business models. Azure's extensive network of relationships with senior executives in key industries provides unique access for business acceleration.

About Thomas Weisel Venture Partners

Thomas Weisel Venture Partners (TWVP) is an early stage venture capital firm that invests in emerging information technology companies. As a partner with a long-term perspective, TWVP plays an active role in helping entrepreneurs turn ideas into sustainable businesses. TWVP portfolio companies benefit from the knowledge, energy and resources of the TWVP team and from TWVP's commitment to working with management to build industry-leading companies. TWVP was founded in 2000 in partnership with Thomas Weisel Partners, a San Francisco-based merchant bank, and is located in Palo Alto, California. For more information, visit http://www.twvp.com/.

About Wasatch Venture Fund

Wasatch Venture Fund is a venture capital firm specializing in early-stage, information technology and life science investments. With headquarters in Salt Lake City, Utah, Wasatch also maintains offices in Phoenix, Arizona and Albuquerque, New Mexico. Since its inception in 1994, Wasatch has focused exclusively on working with driven entrepreneurs to build successful technology companies. In 2002, Wasatch successfully completed its third fund, Wasatch Venture Fund III, and closed on $58 million of private capital. Wasatch manages four funds and has invested $90 million in over 70 companies. Wasatch was formed by Zions First National Bank and is an affiliate fund of Draper Fisher Jurvetson.

Media Contacts: Scott Shreeve, MD Chief Medical Officer Medsphere Systems Corporation (949) 297-4050 Scott.shreeve@medsphere.com Josh Wisham Vice President, Sales and Marketing Medsphere Systems Corporation (949) 297-4050 Josh.wisham@medsphere.com General Inquiries: info@medsphere.com

Medsphere Systems Corporation

CONTACT: Scott Shreeve, MD, Chief Medical Officer,Scott.shreeve@medsphere.com, or Josh Wisham, Vice President, Sales andMarketing, Josh.wisham@medsphere.com, or General Inquiries,info@medsphere.com, all of Medsphere Systems Corporation, +1-949-297-4050

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