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

Count Nuance Communications among the Massachusetts-based providers of software for doctors that could benefit hugely from healthcare reforms and technology initiatives emerging from Washington.

Healthcare customers are the biggest market for the Burlington, MA-based company’s (NASDAQ:NUAN) speech-recognition and phone-based products, accounting for about 40 percent of the firm’s $950.4 million in revenue for fiscal 2009. To grow and protect its top market, the company is advocating for the government to adopt standards that would make its technology a key tool that doctors will need to use when they deal with electronic patient records and order diagnostic imaging tests like CT scans.

Nuance’s foothold in the healthcare arena might be fueling rumors that it’s a potential acquisition target, according to a recent Bloomberg News report. For example, the company says there are more than 100,000 physicians who use the company’s speech-recognition software that enables them to dictate patient information directly into electronic health records, including records systems from most major providers such as Allscripts, eClinicalWorks, and General Electric, according to Nuance. Brent Thill, an analyst for UBS, told Bloomberg this month that Nuance is a good takeover target and the healthcare market will become more important as the government streamlines the healthcare system.

Indeed, the federal stimulus package passed in February 2009 allocated $19 billion in incentives to drive adoption of electronic health records systems, which are expected to reduce medical errors and eliminate some wasteful spending. While the government works out standards and regulations for doctors’ use of the subsidized EHRs, Nuance, not surprisingly, has been advocating for guidelines that would make its speech-recognition software an important component of the systems.

Specifically, Nuance has said it wants standards that make comprehensive physician narratives—like those its speech-recognition software is designed to capture for electronic health records—a requirement for doctors’ to qualify for the government incentives. There were no standards for speech-recognition in proposed rules that require healthcare providers to demonstrate “meaningful use” of the records systems before they can get incentive payments. The “meaningful use” criteria haven’t yet been finalized. But the company is hoping that the final definition, expected in June, addresses the need for detailed physician narratives in electronic health records.

“If you look at the meaningful use requirements, one set of them is that healthcare providers have to report active problems with … Next Page »

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