Nuance Sees Opportunity in Health IT Reform, New Frontiers With iPhone Software

3/29/10

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medications, allergies, et cetera on every patient,” says Peter Durlach, a senior vice president in the healthcare division of Nuance. While the use standards don’t call for speech-recognition specifically, he says that software like Nuance’s that helps providers put this required patient information into EHRs enables doctors to be compliant with the federal guidelines.

The company could get an even bigger boost in demand for its healthcare software if the government adopts certain reforms to regulate how physicians order imaging exams to reduce wasteful procedures, Durlach said. One of the company’s software products helps radiologists determine whether certain imaging tests such as CT scans are appropriate for specific patients before they are ordered. Radiologists are already major adopters of the company’s speech recognition software, he said.

Nuance—which also provides its speech software for law firms, call centers, and customers in other industries—has fueled its rapid growth in the healthcare market with a series of major acquisitions in recent years. Its $357 million takeover of Stratford, CT-based Dictaphone in February 2006, for example, provided Nuance with a customer base of about 4,000 hospitals and medical groups using its speech software. Nuance’s later $363 million purchase of Needham, MA-based eScription gave the company another big moneymaker in eScription’s software for automating medical transcription.

By integrating those technologies, Nuance has grown into the dominant player in the fast-growing healthcare speech-recognition software business, which was worth an estimated $170 million in 2008 and expected to double in size by 2013, according to Datamonitor, a market research firm. In 2008, the company also scooped up Royal Philips Electronics’s speech recognition unit for $96.1 million, primarily to strengthen its presence in the healthcare segment of the speech recognition market in Western Europe. That deal actually raised some question about whether Nuance is getting too big, as it touched off a U.S. Department of Justice antitrust inquiry last year. (The investigation ended in December after justice officials found that Nuance had enough competition, according to the company.) Perhaps the company’s biggest competitor in medical transcription and speech-recognition technology is Mount Laurel, NJ-based MediQuist (NASDAQ:MEDQ), although that company actually licenses some of the speech technology it uses from Nuance.

Later this year Nuance plans to begin providing doctors with the ability to use their iPhones to dictate patient information into electronic health records, among other capabilities. The company is also advancing the use of “natural language processing” technology, which automatically organizes information culled from people’s natural speaking, to make it easier for doctors to update electronic health records without having to manually add data to various parts of the records, Durlach said.

We’ll keep an eye on Nuance to see whether it continues to buy other medical software companies or becomes an acquisition target itself.

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