STAT: IBM Watson Health was crumbling long before layoff announcements — 10 things to know

Internal competition and a disorganized operating structure have plagued IBM Watson Health since its inception three years ago — ultimately leading to a series of recent layoffs, according to a STAT report.

When IBM introduced Watson Health , it already had a group of employees working with healthcare clients using its own secure cloud to store data, two former employees told STAT. The Watson division, though, began marketing another cloud, which not only appeared duplicative of IBM's existing offerings, but created competition from within.

"There was a lot of internal friction," one of the former employees told STAT. "There were two products that did exactly the same thing, that were being sold by two different parts of the company, that had two different development roadmaps."

STAT spoke with a number of former IBM Watson Health employees, who revealed the company's faulty structure fostered systemic problems including internal competition and redundancies, and also set unrealistic expectations for developing data analytics in healthcare.

Here are 10 things to know:

1. Watson Health recently confirmed it laid off a number of employees — particularly from Explorys, Phytel and Truven, the three health data companies IBM acquired — though it did not disclose how many jobs had been cut.

2. Although IBM claimed Watson Health was performing fine and the layoffs were attributed to normal post-acquisition restructuring, the former employees tell a different story.

3. IBM's plan for Watson Health was to grow it from a $244 million business in 2015 to $5 billion by 2020. However, market competition got in the way when EHR giant Epic started to block access to patient databases that IBM needed to fulfill its hospital contracts. Epic claimed IBM was infringing on its intellectual property by leveraging those databases.

4. Eventually, one of Watson's companies, Explorys, found a way to get behind Epic's firewall and use patient data to fulfill its contractual obligations with its client hospitals. However, Epic claimed that even if the hospital OK'ed the effort, IBM was exposing  proprietary information about its database design.

5. Then came the ACA that incentivized value over volume, which drove up the demand for analytics tools — or, tools that can evaluate patient data and glean insights into improved patient outcomes — and IBM faced heightened competition from other health technology vendors like Cerner and Epic, who began developing their own analytics solutions.

6. A spokeswoman for IBM said the company has maintained a "strong, collaborative relationship with Epic," and Epic noted IBM joined an Epic data service that helps third parties develop applications via its data models.

7. Other obstacles arose from within the company. The former employees claimed IBM leadership failed to foresee the challenges of aggregating data from hospitals, and Watson Health couldn't meet the promised deadlines on a number of client projects.

8. Some of IBM Watson Health's products, like Watson for Oncology, failed to live up to the hype. Nearly three years after its launch, hospitals using Watson for Oncology said it was biased toward American treatments and struggled with learning different types of cancer. The tool had only been adopted at a handful of hospitals around the world.

9. The former employees also claimed Watson Health's various business units were too focused on their own growth, which discouraged collaboration. Coupled with the company's failure to combine their newly acquired companies and align their cultures and operations, IBM was laden with duplicative products and services in a way that was all but cost efficient.

10. "It was another example of not working together," one former employee told STAT, noting  the projects' complexities would have benefitted from such oversight. "This is really hard … When you're bringing terabytes of data into an environment and standardizing it, and curating it, and then standing up hundreds of measures against it — that's incredibly hard and it take [sic] a lot of time. They totally underestimated that."

Click here to access the complete STAT report.

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