IBM is looking to enhance the growth of its Watson Health business with the $2.6 billion purchase of Truven Health Analytics, which has data on the cost and treatment of more than 200 million patients.
The planned acquisition of Truven, announced Thursday morning, is the fourth company IBM has purchased since it created the Watson Health unit last April, bringing the total spent to more than $4 billion.
Investors like the deal, pushing IBM shares up 5 percent Thursday.
Two other acquisitions, Explorys, a spinoff from the Cleveland Clinic, and Phytel, a maker of software to manage patient care based in Dallas, also brought with them significant data assets.
The Watson Health business, IBM said, now has health-related data on “approximately 300 million patient lives,” mostly in the United States. The goal is to run the patient data through Watson’s artificial intelligence software, so that it works as a specialized digital assistant to physicians and health administrators to improve care and curb costs.
Watson Health is the first industry-focused unit IBM has set up to try to build the artificial intelligence technology, renowned for beating human champions in the quiz show “Jeopardy!” five years ago, into a large, profitable business.
The sizable Truven purchase is further evidence that IBM’s management, led by Virginia M. Rometty, the company’s chief executive, intends to press ahead with that plan despite declining revenue and disappointing profits.
Some of that decline in revenue is by design, as IBM sheds less profitable businesses like making industry-standard server computers and semiconductor manufacturing. But the financial results also reflect the challenge of reaching the crossover point, when the growth in its new businesses, like data analytics, cloud computing and mobile software applications, more than makes up for the decline in some of its traditional hardware, software and services businesses.
IBM does not disclose Watson revenue, but it is part of the company’s data analytics business, which generated sales of $18 billion last year.
John E. Kelly III, an IBM senior vice president who oversees research and new initiatives, said the Truven purchase showed “we’re serious, and spending serious money to move fast in a whole new industry for IBM,” health care.
The Truven acquisition, Kelly added, rounds out the range of data assets and data management capabilities in health care that IBM had in mind when it established the Watson Health unit. Explorys and Phytel, he said, brought mostly data from patients’ electronic medical records. The $1 billion purchase of Merge Healthcare, a medical-imaging software company, added expertise in managing health image data, which is steadily growing in importance, Kelly said.
Truven, he said, contributes vital payment information on patients. And payment records include detailed coding on disease types, diagnosis, drugs prescribed and clues to outcomes if, say, a patient does not respond to one treatment and is given another.
“It’s a very key cog to give us one of the most complete data sets on patients and health care in the world,” Kelly said.
That will become increasingly important in health care, as the United States and other health systems increasingly shift from fee-for-service payment to reimbursement based on outcomes that keep people healthy and out of hospitals.
Truven, which has its headquarters in Ann Arbor, Michigan, also brings a large base of customers – about 8,500 clients including federal and state government agencies, employers, hospitals and clinics.