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Are Big Tech Firms Angling to Secure More of the Healthcare Tech Market?

Are Big Tech Firms Angling to Secure More of the Healthcare Tech Market?

The healthcare tech industry has grown rapidly in the past few years with the development of new electronic health records, wearables, remote monitoring devices, and more. The enforced social distancing measures of the COVID-19 pandemic were a major driver of this growth. Now, it seems that big tech is looking to cash in on these developments, with a flurry of mergers and acquisitions expected in the coming years.

Top tech companies have already begun to investigate small healthcare tech startups to secure as much of this market as possible, though many of these major tech firms already have major stakes in the healthcare industry to some extent, even if we would not necessarily think of them as a healthcare-focused company. Nevertheless, the competition to stay in the race may become much more heated.

Microsoft Acquires Cloud and AI Startup Focused on Health Care

In early April, Microsoft announced the acquisition of healthcare cloud and artificial intelligence (AI) provider Nuance Communications for a shocking $19.7 billion. Many industry experts think this acquisition will trigger many more to come.

Microsoft’s acquisition was strategic—AI has become one of the largest focuses of tech development, plus it has a wide range of applications in the healthcare field. Alphabet, Amazon, and Apple all have their focuses on AI, especially regarding health care, so it will be interesting to see how these companies react to the acquisition, whether by identifying their own acquisitions or investing more in in-house research and development.

Microsoft has already emerged as a leader in cloud technologies, so it makes sense that the company would acquire a startup that can help the giant move into the healthcare-driven part of this industry. This acquisition could help Microsoft become a bigger player in the AI industry. While AI assistants Alexa and Siri are already household names, Microsoft’s Cortana has struggled to get the same hold. However, if Microsoft can corner the healthcare AI market, that could be an important niche for the company, especially as the application of AI in the healthcare industry continues to expand rapidly. This move may push other companies to find their own niches within the healthcare world.

Apple’s Potential to Get Involved with Health Record Development

One company that seems especially poised to invest more in healthcare tech is Apple. Some industry experts expect that Apple will invest in electronic patient record companies. Apple already has considerable experience with personalized health management through the iPhone and Apple Watch, which have several features that make them relevant to patients and providers. These systems could be integrated into electronic records to give people more access to and control over their health records. In the future, patients may transport their health records to their providers instead of relying on the interoperability of different systems.

Currently, only three companies control about three-quarters of the entire health records industry in the United States. Epic Systems heads this industry with nearly a third of the market. Cerner and Meditech are the other two leading providers. The prospect of Apple acquiring one of these three major companies is not unfounded, however, and has been proposed before.

If Apple acquired Epic, it would likely be able to attract clients from the other two companies with great deals that Epic would not be able to offer by itself. Currently, Apple already has a relationship with Meditech, which supports health records on the iPhone, so the acquisition may be aimed at a company smaller than Epic.

The Future of Tech Giants within the Healthcare Tech Industry

Moving forward, it will be interesting to see the increase in mergers and acquisitions and how these new organizations shape the development of healthcare technologies. The Microsoft Nuance deal is major, but it is unlikely that such a high figure will become the norm. Many companies will want to hold on to cash reserves after the tumultuous year caused by the coronavirus pandemic. However, the valuations among the leading healthcare tech firms remain extremely high as this industry has been less affected by the pandemic. Thus, companies will need to pay a premium to enter the race at this point, and many of them may wait until their finances are on more solid ground.

The cash constraints could put pressure on both big tech and leading healthcare firms to focus on in-house innovation rather than mergers and acquisitions. Plus, even Apple and Amazon do not have a long history of major acquisitions like the one just completed by Microsoft. The largest acquisition to date for Apple was worth only $3 billion, and Amazon’s was $13 billion. Both companies have largely focused on smaller companies that are typically privately held. While these big tech firms may continue to focus on smaller companies, there is also the possibility that the Microsoft acquisition will put pressure on them to make their own major deals and solidify a place in the growing healthcare tech industry.