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IBM Watson Pays $2.6B for Health Analytics Firm

IBM has continued to expand its presence in healthcare through a series of acquisitions. The company has spent more than $4 billion in the past year on a handful of healthcare companies.

Brian Buntz

Watson
IBM is making significant investments in its Waston unit. Its Truven acquisition will double the business segment.

IBM has agreed to purchase Truven Health Analytics Inc. in a $2.6 billion deal that doubles the size of its Watson Health business division. Truven offers healthcare data services targeted at employers, hospitals, and drug companies. The company makes software that can parse through millions of records to identify, for instance, patients who were given unnecessary treatments.

The company's Watson technology, which gained notoriety after handily beating human opponents in Jeopardy in 2011, could be used for an array of healthcare applications, including assisting with diagnostics and analyzing clinical trial data. One of Watson's strengths is parsing through enormous datasets to identify patterns and make recommendations.

The Truven acquisition will give IBM access to valuable healthcare data that could be used to "reduce costs and improve outcomes," as John Kelly, IBM's senior vice president of solutions portfolio and research told the Wall Street Journal.

Truven's data will give Watson the opportunity to use its computing prowess to sort through medical spending data. The acquisition will give it access to what the company terms "200 million lives" or data assets. "We can combine our data sets together, including one of the largest democratized health records with electronic health records from Phytel, Truven, claims data, imaging data, genetics, medical health data--and from all of that we can run analysis," Watson Health general manager Deborah DiSanzo told Forbes.

Truven's technology is also used to produce a list of the "100 Top Hospitals" based on public data metrics in the United States related to performance and improvement according to Forbes.

Last year, the company's technology was used by the state of Delaware to identify why healthcare spending had been rapidly increasing.

The acquisition is one of the largest under the leadership of the company's CEO Virginia Rometty, who assumed the role in 2012.

Truven had been partnering with IBM's Watson division for the past roughly 15 months.

Truven had some 2500 employees, many of whom were based in Cambridge, MA, which also happens to be where Watson Health is based.

The deal will likely close in a matter of months.

In the past year, IBM has also acquired Phytel and Explorys, both of which had maintained clinical trial data of 50 million patients. The company has also acquired medical imaging firm Merge Healthcare Inc. for $1 billion.

IBM's stock jumped 5% to $132.45 on February 18 and ticked up to $133.11 by 1:20 p.m. on February 19.

Truven's data will allow Watson to turn its artificial intelligence on the often- opaque world of medical costs and pricing. That information has already proven valuable to nearly every part of the health-care system, from hospitals to pharmacies to employers and insurers.

The purchase price of $2.6 billion was more than double Truven's sale price four years ago. Truven had been a division of Thomson Reuters' healthcare division, which sold it to the private-equity fund Veritas Capital Fund Management for $1.25 billion.

Learn more about cutting-edge medical devices at BIOMEDevice Boston, April 13-14, 2016.

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