The next Nuance to the platform wars

By Sari Kaganoff, General Manager of Consulting

And we’re off to the races again: Microsoft announced plans yesterday to acquire Nuance Communications for $16B. Nuance develops AI speech recognition and medical transcription technology, and currently serves 77% of US hospitals. It’s the biggest digital health acquisition since Teladoc’s $18.5B merger with Livongo last August, according to the Rock Health Digital Health M&A Database. Since that initial starter pistol of the platform wars, in the last month alone we’ve seen Grand Rounds and Doctor on Demand merge to create an integrated virtual healthcare company, insurance provider Bright Health acquire Zipnosis to enter telehealth, and Everlywell expand their at-home lab testing services via acquisitions of PWNHealth and Home Access Health—amongst many others.

While the Microsoft and Nuance deal is big digital health news, it should be considered through the lens of the broader cloud wars raging among Microsoft, Amazon, and Google. (Even IBM is getting in on the game, providing quantum computing via cloud services to the Cleveland Clinic). Healthcare is an attractive battlefront for these cloud giants with mountains of healthcare data still locked up in legacy provider IT systems. The Nuance acquisition will give Microsoft integrated health data capture, transcription, and cloud storage capabilities. This tackles head-on some of the biggest and most persistent pain points in provider workflows (mind-numbing data entry and a computer screen detracting from precious patient interaction time).

Microsoft’s acquisition follows news that Google is expanding the pilot of its EHR search tool with Ascension. The provider workflow-focus of these healthcare cloud players offer a glimpse at the future of provider IT. Microsoft in particular has had success building enterprise software and services in other business units—it seems like they are now looking to replicate that success in healthcare, by adding services on top of the data hosting. Notably, Amazon and Google are both pursuing both cloud/enterprise strategy in addition to a direct-to-consumer strategy, whereas Microsoft appears to be focused more on a pure play enterprise strategy, having discontinued its consumer-oriented healthcare offerings (Band and HealthVault).

Today’s incumbent EHRs create defensible value by being the integrated one-stop-shop for clinical care (e.g., ambulatory, inpatient, specialty, CDS, population health… you name it, they claim to do it). Healthcare’s cloud databases of the future will be API-accessible data stores that compete with differentiated tools and services (such as seamless voice transcription and analytics). We’re entering the next phase of the platform wars where big tech companies are competing to own healthcare’s underlying information infrastructure. We’ll take that over siloed data any day.

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