15 April 2021

Microsoft Buys Nuance Communications And Doubles Its Addressable Healthcare Market To $500 Billion

AI Cloud Insights Investors Money

Microsoft Corp bought Nuance Communications last week for $US19.7 Billion, in a move that accelerates the company’s cloud strategy for healthcare and increases its total addressable market in the sector to $500 million. 

The deal is the result of several years of close cooperation where the companies have worked together on product development.

According to Sharon Hakkennes, senior director analyst, healthcare, at research company Gartner, access to Microsoft’s global distribution and the opportunity for even tighter integration between the two companies solutions offers Nuance Communications accelerated growth.

Nuance began as a transcription service for clinicians, but it has ridden a wave of investment in AI in recent years.

“In the US the electronic health records were accepted and developed for billing purposes and to capture encounter information. Documentation for all clinicians, particularly in the US is significant, and there’s high rates of clinical burnout associated with clinical documentation in the health records.  [Clinicians ] spend lots of time working on computers and documenting outside of clinical care, and this solution is really solving the problem of documentation.”

And its expensive. In some settings, clinicians still have scribes who follow them around, taking notes, says Hakkennes.

AI has transformed the transcriptions markets, which were traditionally, slow, manual, expensive and inaccurate. But technology and in particular, AI has increased accuracy and speed, and costs dramatically. However, it remains a difficult problem to solve in a market like healthcare where there is so much specialist information and terminology, and where the cost of making errors is significant in both outcomes for the patients – and fees for lawyers when it goes wrong.

The company, which claims it is an AI software leader providing clinical intelligence to healthcare providers, will provide Microsoft with industry-specific expertise in healthcare, and a suite of products that respond to the needs of varied healthcare verticals. 

According to Satya Nadella, CEO of Microsoft, “AI is technology’s most important priority, and healthcare is its most urgent application.”

Nuance claims that their products and services are used, in the USA, by;

  • More than 55 per cent of physicians
  • 75 per cent of radiologists 
  • In 77 per cent of hospitals 

The Nuance acquisition will allow Microsoft to double their total addressable market (TAM) in healthcare to be valued at close to $500 billion. 

“Together, with our partner ecosystem, we will put advanced AI solutions into the hands of professionals everywhere to drive better decision-making and create more meaningful connections, as we accelerate growth of Microsoft Cloud for Healthcare and Nuance,” Nadella says. 

The all-cash transaction is valued at $19.7 billion and is set to close by the end of the year, subject to shareholder approval. This comes off the back of a partnership between the two companies that was announced in 2019. 

According to Mark Benjamin, CEO of Nuance, “Over the past three years, Nuance has streamlined its portfolio to focus on the healthcare and enterprise AI segments, where there has been accelerated demand for advanced conversational AI and ambient solutions.”

“To seize this opportunity, we need the right platform to bring focus and global scale to our customers and partners to enable more personal, affordable and effective connections to people and care. The path forward is clearly with Microsoft,” he says. 

This story was originally published on Which50 on April 14 2021, republished with permission.