Nuance to Acquire eScription

Nuance Communications announced today a deal to acquire Needham, Mass.-based computer-aided medical transcription technology company eScription. The $363 million deal has been in the works for about a year, with the two companies operating as a single entity in the coming weeks. The company will join Nuance's Dictaphone Healthcare Solutions division.

According to Bob Wise, president of Nuance's healthcare division, eScription was a smart choice because of its business model, with its products marketed as an on-demand software as a service (SaaS). In recent years, Nuance's hosted healthcare solution iChart grew at a range of 35 percent to 40 percent, and the company expects on-demand transcription and documentation to raise a combined revenue of $175 million to $200 million in the 2009 fiscal year.

"We've seen a number of market forces coming together over the past couple years that have convinced us that investment in the software service space is what our investors and customers are looking for," Wise notes. "Software acquisition was the fastest-growing field in our medical division. It's been the success of that business model and the significant focus on the healthcare space that led us to make this decision."

And while eScription comes with a patent portfolio, Nuance's primary interest lies in the company's existing customer base. Though Dictaphone has secured a number of deals with small- or medium-sized healthcare facilities, eScription comes with a host of large hospitals and chain healthcare providers. Wise says Nuance has been "very broad" in its market penetration of nationwide hospitals and clinics, and that the acquisition gives the company access to eScription's existing clients, such as Boston's Beth Israel-Deaconess Medical Center and Cincinnati's HealthAlliance.

Throughout 2007, Nuance acquired a host of healthcare solutions, including Vocada (November), Commissure (October), and Focus Infomatics( March). But while many of these acquisitions focused within radiology and clinical communication, the eScription acquisition (which is Dictaphone's largest investment to date) is the "largest in terms of potential earnings."

And though speech-aided transcription and documentation helps lower total operational costs, Wise believes the field is not yet ready for an entirely automated process. "I can't see at this period of time the technology maturing to the point where I would be comfortable with the independent transcription of the document," Wise states. "I don't see it in the foreseeable future. We believe that while the technology greatly enhances productivity, it's not a replacement for the medical transcription industry. It sounds great on paper or in theory, but I don't think we're at that point where we can look for that."