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IBM’s new health care prescription: A standalone business unit

April 13, 2015, 9:01 PM UTC

IBM is taking a far more holistic approach to health care.

Its data analytics software already figures in prominent medical research trials with the Cleveland Clinic, Mayo Clinic, and Sloan Kettering. Now, IBM is turning the underlying Watson technology into a cloud service, Watson Health Cloud, it will sell to doctors, hospitals, insurers and patients. That offering will be the centerpiece of a new dedicated, Boston-area business unit, IBM Watson Health.

“We are going into the health care business in a big way,” IBM Senior Vice President John Kelly told Fortune. “We all recognize that outcomes aren’t what we hope for. Costs are skyrocketing. On the other side, so much data is collected. … We want to provide better insights, for better outcomes.”

IBM estimates that between electronic medical records, digitized diagnostics, and wearable medical devices, the average person will leave a trail of more than 1 million gigabytes of health-related data in their lifetime. The goal of IBM’s new business unit is to turn that information into something useful.

“This platform, in the not so distant future, will become the largest site of health care data in the world,” Kelly said.

Apple, Johnson & Johnson, and Medtronic are three prominent early partners that will use Watson Health Cloud as the foundation for their own medical intelligence services. The platform will underlie Apple’s HealthKit and REsearchKit applications; J&J will use it to create mobile apps that coach caregivers on pre-operative and post-operative procedures; and Medtronic will create a service for diabetes patients.

“We have a line at the door,” Kelly said, hinting that additional partnerships are soon to come.

IBM’s new division will quickly grow to 2,000 people, led by senior vice president Michael Rhodin. That includes consulting experts and up to 200 researchers who will move from other business units, Kelly said. One thing that won’t be moved (at least not yet): IBM systems and hardware for health care records.

The company is also staffing up through acquisitions. Among those disclosed this week: Explorys, a cloud services spinoff from the Cleveland Clinic that serves 26 health care systems; and Phytel, which sells patient management software.

More doctors than ever consider themselves proficient with electronic medical records, but find their existing options difficult to use, according to an Accenture survey of more than 2,600 physicians released Monday. The number who recommend gadgets for collecting personal health data has tripled; more than 80% encourage patients to take a role in updating their medical records.

“The industry needs to adapt to a new generation of patients who are taking proactive roles in their health care and expect to have real-time data at their fingertips,” said Kaveh Safavi, an Accenture consultant.

IBM’s revelation coincides with the health care industry’s biggest annual technology conference, taking place this week in Chicago. The sector spent approximately $60 billion on information technology in 2014. One notable investment area is cognitive computing to automate diagnostics and patient care decisions. “Because the stakes are so high to improve health care outcomes and economics, Forrester [Research] believes it will be the first industry to benefit from cognitive solutions,” notes the research firm in a February report about artificial intelligence.

Three major areas of focus for the next five years:

  1. Applications for clinical automation
  2. Software that helps eliminate medical fraud and waste
  3. Personal solutions that help patients manage their own health

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