The startup's Smart Sponge system aims to eliminate the problem of sponges left inside a patient, a mistake that occurs as often as once in every 1,000 surgeries according to some studies. Hospital errors such as infections add an estimated $30.5 billion nationwide to the costs of running the institutions, said another report.

ClearCount is one of at least three companies trying to address the problem. One uses bar codes to keep a count of sponges. Another uses the type of resonant-marker technology used to prevent shoplifting in retail stores.

Neither technology has the combined capabilities of RFID to keep a count of sponges and track the position and number of any sponges left in a patient. In addition, only RFID can include data programmed by the vendor and the hospital.

"Our system handles both the counting and the detection," said David Palmer, chief executive of ClearCount. "That combination is very important in medical applications."

The system has passed inspections from the U.S. FDA as well as the FCC. It officially debuted in April at a conference for operating room nurses.

"Nurses in the operating room tend to be slow adopting new technology, but we have made RFID very seamless so they don't have to understand how it works," said Steven Fleck, chief technology officer and co-founder of ClearCount.

Although the startup designed custom boards for its RFID programmer and reader, "the hardest part of the design was getting the user requirements down," said Fleck.

Currently, two nurses inventory and check by hand every sponge used in a procedure using a handwritten log. "Anyone who has spent a day in the OR knows what a pain this is," said Fleck.

But getting a solution right was no slam dunk, he added.

"It was not until we got into the OR with prototypes using different implementations that we were able to figure out how to make RFID a part of the work flow to address the problem without making things harder," he said.

The Smart Sponge system places all its components on one cart. Nurses waive a package of sponges past a reader built into display device on the cart to create an inventory. A waste bin on the cart continuously counts any disposed sponges.

If the system shows missing sponges after a surgery, nurses can waive over the patient a wand kept in a holster on the cart. A mat or sticky RFID tags can be placed on the table below the patient to insure the wand is correctly reading through the patient.

The system uses 13.56 MHz passive RFID tags with 2 Kbytes programmable memory. The tags which are smaller in diameter but thicker than a dime are purchased from a variety of vendors including NXP and Texas Instruments.

ClearCount struck a deal with a provider of surgical sponges that sews the tags into its sponges before they ship. Using tagged sponges typically adds about $35-50 on to the cost of a surgery. The ClearCount system cost about $19,000.

In October new regulations kick in for U.S. Medicare and Medicaid systems that will end or limit insurance reimbursement for procedures related to hospital errors, a factor that could drive demand for the ClearCount system. "We think there's a very large market," said Palmer.

The company got its start when Fleck, a biomedical engineering graduate at Carnegie Mellon University, was doing some research while pursuing an MBA in early 2004.

"I came across the patents for this system and talked to the inventors," he said. "I realized this was a serious problem and proposed [to a patent holder who later became a board member] we form a company around it."

To date the company has taken in about $4.3 million, mainly in angel funding. It also got a grant from the National Institutes of Health for another $1.1 million.