The Watson Health operation at International Business Machine (NYSE:IBM) is reportedly cutting back on the portion of its business that sells to hospitals due to a softening market for value-based healthcare offerings.
Managers for IBM Watson Health told workers last week that changes to the Affordable Care Act caused hospitals to spend less on managing outcomes-based contracts, a source who attended the June 13 meeting told Stat News. The meeting followed reports of widespread layoffs that the company later sought to downplay.
Existing hospital contracts will be honored as resources shift to other areas, although the company still plans to develop some products for hospitals, according to the website. IBM Watson Health leaders at the meeting also discussed the integration of recent acquisitions: Cleveland-based Explorys and Dallas-based Phytel, which IBM acquired in April 2015, imaging and clinical systems company Merge Healthcare, acquired for $1 billion in December 2015, and the Truven Health Analytics business acquired for $2.6 billion the following February.
IBM Watson Health was riven by internecine fighting stemming from a dysfunctional organizational structure, Stat News reported in a separate account, citing several former employees. The division missed benchmarks in some of its hospital contracts and was losing business to competitors, according to that report.
An internal memo signed by IBM Watson Health GM Deborah DiSanzo called the Stat reports “speculative,” claiming that it contains “inaccurate information,” but IBM hasn’t asked for any corrections, according to the website.
“Do not be misled by these reports,” DiSanzo wrote, according to Stat. “We know more about analyzing health data than anyone else in the world. We have been doing it longer than anyone else, and we have 13,000 clients who know our strengths first-hand.”
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