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Microsoft's Pending Nuance Acquisition Sends Wake Up Call to Health Tech Industry

Analysis  |  By Mandy Roth  
   April 13, 2021

Transaction heralds the significance of voice technology innovations to the future of healthcare.

News about Microsoft's pending $19.7 billion acquisition of Nuance, a pioneering provider of conversational AI and cloud-based ambient clinical intelligence for healthcare providers, has sent a not-so-nuanced ripple through the healthcare technology industry.

“The Nuance acquisition is the largest M&A move yet by Microsoft in the healthcare space," said Paddy Padmanabhan, founder and CEO of Damo Consulting, in a statement to HealthLeaders. This is Microsoft's second-largest acquisition, falling only behind its $26.2 billion deal in 2016 for LinkedIn. "It goes to show not just how important healthcare is to Microsoft, but also how important voice recognition technology is to the future of healthcare."

"Voice-enabled healthcare is still in very, very early stages relative to its potential impact. There is a huge market waiting to be opened up,” Padmanabhan said.

The market opportunity was detailed by Microsoft CEO Satya Nadella during an investor call yesterday. "Together, Nuance's momentum and growth … paired with Microsoft's scale across the enterprise will increase our total addressable market (TAM) and expand our AI leadership." He said that Nuance will double Microsoft's TAM in the healthcare provider space and increase TAM across healthcare to nearly $500 billion.

"This acquisition brings our technology directly into the physician-patient loop which is central to all healthcare delivery," Nadella said. A news release characterized the acquisition as the "latest step in Microsoft’s industry-specific cloud strategy."

"First and foremost, this coming together is about empowering healthcare," Nadella said. "It's about applying the technology, talent, industry expertise and partner mindset of our two companies to this very critical industry in order to empower everyone from ISVs (independent software vendors) to EHR vendors, to physicians, nurses and of course patients. Coming out of the pandemic, we're experiencing digital transformation at a scale never seen before. Entire industries are being reimagined in mere months. This is driving lasting structural change and accelerating digital transformation driven by industry specific cloud solutions. It's now very clear healthcare organizations that accelerate their digital investments can improve patient outcomes and reduce costs at scale."

“There is a growing trend of artificial intelligence moving beyond a back-end tool for the healthcare enterprise to the forefront of the clinician and consumer experience,” said Brian Kalis, managing director, Health Strategy, Accenture. “This trend has the potential to reduce the administrative burden on clinicians that contributes to burnout, improve clinician-patient interactions, and reduce financial pressure on healthcare enterprises through the use of natural language speech and text. This is also part of a broader trend emerging toward industry specific clouds which provide a set of cloud services, tools, and applications tailored to industries like healthcare.”

Nuance's expertise in ambient clinical solution was identified as one of the key drivers behind the acquisition. Nadella said it has "completely redefined clinical documentation by capturing and contextualizing every word of the physician-patient- encounter and automatically documenting it in the electronic health record (EHR)." The ability to automate this process gives time back to physicians to focus on patient care, he said.

"As the market for ambient clinical intelligence (ACI) heats up, expect Microsoft to bring large scale sales and implementation support to drive growth and seize the market," said JEff Becker, MBA, principal analyst, healthcare, with CB Insights in a statement to HealthLeaders. "Microsoft will position ACI as a flagship product in its industry cloud for healthcare."

Becker added that health system CIOs report that integrating AI into existing clinical workflows is their leading AI implementation challenge. "Expect Microsoft to leverage the deeply integrated Nuance virtual assistant as an insight delivery channel for Azure clients." He also cited another advantage the acquisition will offer to Microsoft. "Nuance has trained its natural language processing engines to support dozens of different medical specialties—work that will benefit Microsoft as it works to differentiate its health cloud." 

“Nuance has become the standard in ambient clinical computing and as an essential aid in home-based care," according to Padmanabhan. "As the boundaries break down between virtual and inpatient care, voice technologies will increasingly become a way for patients to engage with their healthcare providers, and the Nuance acquisition will place Microsoft in a stronger position in healthcare in future.”

Padmanabhan also provided context for the growing use of voice technologies in clinical settings. “Conversation AI tools such as that of Nuance have started making a big difference in ambient clinical computing, specifically in the transcription of doctor-patient encounters. That has helped reduce the administrative burden on physicians. The next stage of growth for voice will be in clinical decision support, enabled by stronger integration with EHR systems, that will take the form of AI-enabled functionalities that will improve the quality of the patient experience and outcomes.”

During the past three years, Nuance has undergone a transformation to streamline its portfolio, transition to the cloud, and "reinvigorate our purpose throughout healthcare and enterprise AI to deliver solutions that shape the future of work and care," said Nuance CEO Mark Benjamin, who will remain CEO of Nuance, reporting to Scott Guthrie, executive vice president of Cloud & AI at Microsoft. A partnership between the two companies was announced in October 2019.  

"For healthcare we are in a critical moment where the industry's most pressing needs demand innovative responses and leadership from the marketplace," Benjamin said during the investor call. "The clinicians , administrators, and care teams at health organizations face challenges that multiply and intensify every year making it increasingly difficult for providers to deliver consistently high-quality care. Clinician burnout, declining patient satisfaction, increased financial pressures, administrative demands have profound repercussions on patient care and the pandemic has made finding solutions to these problems even more imperative. Our desire to address these challenges with powerful solutions is what led to the partnership with Microsoft."

Nardella said the symbiotic nature of the two company's solutions will help address some of the most pressing challenges healthcare faces. Advances such as AI will have an enormous impact on augmenting human capability in healthcare. "AI is technology's most important priority and healthcare is its most urgent application."

“It's now very clear healthcare organizations that accelerate their digital investments can improve patient outcomes and reduce costs at scale.”

Mandy Roth is the innovations editor at HealthLeaders.

Photo credit: Photo provided courtesy of Microsoft


The move marks a significant play by Microsoft to claim a share of the healthcare market and a broader emerging trend toward industry specific clouds, according to experts.

Nuance's expertise in ambient clinical solution was identified as one of the key drivers behind the acquisition.

Voice technology are expected to create a new wave of innovation in healthcare.

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