Inside Microsoft’s strategy as it doubles down on healthcare ambitions

While ambulance chasing is typically associated with the legal profession, now, between a cohort of medically minded copilots and new tools for doctors and nurses, Big Tech companies seem to be racing toward hospitals.

A top player in this sprint is Microsoft, which has edged into health systems already with its enterprise and cloud chops coupled with key partnerships and acquisitions. Meanwhile, the company sees patient-facing health use cases as a chance to differentiate its comparatively fledgling consumer AI business in a crowded space.

As part of a new series on Big Tech’s encroachment into healthcare, we’re taking a look at Microsoft’s strategy and what it means for both the tech and the healthcare industries.

A longtime priority

Since the early days of AI invading the public consciousness, Microsoft has been clear that healthcare was a critical focus for its AI ambitions. “AI is technology’s most important priority, and healthcare is its most urgent application,” Microsoft CEO Satya Nadella said in a statement announcing the 2021 purchase of Nuance, a medical transcription company that remains Microsoft’s third biggest acquisition ever at around $16 billion.

More recently, Microsoft AI CEO Mustafa Suleyman has cited “medical superintelligence” as a major focus area for his research lab, whether that means doctors consulting with AI on diagnostics or consumers asking chatbots about health directly, which they already do in greater numbers than any other kind of query, according to Microsoft.

Microsoft health execs fleshed out details of that lofty vision at a recent press briefing, where they discussed further ways to bring AI to the health industry on both the patient and provider sides. Dominic King, VP of health at Microsoft AI, told us that the company’s mission is about turning advancements in model capabilities into responsibly vetted tools for health settings.

“People have seen the remarkable progress in the last couple of years—mainly in the research or academic environment more than the real world—the performance of these models on things that we couldn’t have imagined a few years ago,” King told us at the briefing. “[There’s an] opportunity to think of new ways of delivering medical expertise and health support at scale in a way that has not been possible before.”

Why now?

Aside from healthcare being a huge part of the US economy, experts said what makes the industry attractive to Big Tech right now is the amount of outdated software in need of automation, an overworked and overstretched workforce, and the sums of money dedicated to addressing both.

“We have a lot of documents that people spend a lot of time reading. You’ve got some trillion dollars in administrative costs throughout the system that can be—most of it—automated today with the tools that AI can provide, if you can do it in a safe and secure and understand-the-process way,” Andy Fanning, co-founder and CEO of healthcare company Optura, told us. “It’s just a big market that they need to get to.”

A combination of pandemic activity and the generative AI explosion has broken health providers out of a history of inertia when it comes to new technologies, and tech companies have seized on that, according to Carri Chan, faculty director of Columbia Business School’s healthcare and pharmaceutical management program, who is also leading the school’s new AI+Healthcare initiative. The market for AI in healthcare is expected to grow by 44% annually through 2034 to reach more than $1 trillion, according to a report from Fortune Business Insights.

“This openness to try more pilots to explore is different than it has been historically,” Chan said. “That’s a large reason why these tech companies are starting to try to make a bigger push.”

Already entrenched

Microsoft already has a significant foothold; many hospitals rely on its workplace software and its Azure cloud services. Microsoft’s 2021 purchase of Nuance absorbed the dominant player in the ambient scribe market at the time, which would evolve into its DAX Copilot tool. Microsoft also has a longstanding strategic partnership with electronic health records (EHRs) giant Epic Systems that integrates the tech company’s AI models directly into clinical workflows.

Joe Petro, Microsoft’s corporate VP of health and life sciences solutions and platforms, said at the recent press briefing that 170,000 health and life sciences companies use Microsoft’s tech. More than 600 health systems, including Boston-based Mass General Brigham, New York-based Mount Sinai, and Nashville-based Vanderbilt University Medical Center, have adopted DAX Copilot in the past 18 months, he said.

The entrenchment in healthcare back-offices and the AI integration with an entity as ubiquitous as Epic give Microsoft a significant built-in advantage, according to Chan.

“The existing data infrastructures have largely been incredibly siloed, and there is a massive setup cost to switch,” Chan said. “Even if there is a system that is better, it has to be so much better that it is worth the cost of development to integrate into the system, rather than just using the off-the-shelf version that Epic might provide. And so those barriers are very, very real.”

But Gartner Senior Principal Analyst Robert Potts said non-platform players in the space, like clinical AI startup Abridge, can offer more flexibility with different systems and can be more dynamic in rolling out new features, like a recent move into handling prior authorizations.

“Whereas Microsoft, yes, they’ve done some changes to the ambient digital scribe solution that they have, but not as fluidly and…not as agile as some of the other single, standalone players in that area,” Potts said.

Microsoft seems particularly focused on automating clinical workflows and connecting backend office functions, eventually with agentic technology, according to James Barlow, professor and chair of technology and innovation management in healthcare at London’s Imperial College Business School. But there are plenty of compliance, ethics, and governance challenges in that vision, too, he said.

“[Microsoft’s] trying to move more into deploying AI tools in areas where it’s much more about healthcare agents and supporting decision-making that way, and capturing record-keeping more effectively and integrating it with medical imaging and patient health records and so on,” Barlow said. “So build[ing] out that deep connectivity between different functions.”

With these initiatives, Microsoft is playing to its enterprise software strengths, Chan said, while Amazon is tapping its distribution might for its healthcare ambitions and Apple is focused more on hardware.

“What I think has been helpful for these tech companies is leveraging what they are really good at,” Chan said. “So Microsoft is like a software-as-a-service type of company, and so the Azure cloud infrastructure and then providing AI support on top of that, that’s their bread and butter.”