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Why Did 3M Acquire Semfinder?

3M ( MMM ) recently announced the acquisition of Semfinder , a Switzerland-based medical coding technology company. It is a leading developer of precise semantic coding of medical services, which will enable 3M to accelerate the availability of its 3M 360 Encompass System in countries adopting electronic medical records. While the financial details of the deal remain undisclosed, it will help the company to expand its healthcare portfolio, and enhance its revenues going forward.

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Semfinder currently provides its services to over 400 hospitals across Germany, Austria, and Switzerland, and was developed by physicians, who understand the medical language. Meanwhile, the 3M 360 Encompass System has been selected by more than 1,600 healthcare organizations across the US, to unite their documentation and coding workflows. This system provides deeper integration and increased automation, which enables greater workflow efficiency.

3M 360

The computer-assisted physician documentation market is a $4 billion opportunity, which the 3M 360 Encompass System serves. It involves the creation of documentation to support the transition to value-based care, and ensuring the documentation accurately reflects the quality of care provided. Hospital miscoding results in $11 billion in costs, while missing diagnosis details causes a cost of $5 billion. Hence, this is an important market for the company.

According to JaeLynn Williams, vice president and general manager, 3M Health Information Systems division, the acquisition will build on 3M's expertise in healthcare records coding and applied population analytics, and accelerate the development of next generation solutions for healthcare records coding. The company's Health Information Systems is an industry leader in health care coding software, services, and analytics.

3M's Health Care segment is expected to be a big revenue generator for the company in the long run. The company has witnessed historically higher growth rate in this segment, as compared to its other segments, and has taken a number of steps to bolster growth in the future. The company made a decision to invest and further grow its Health Information Systems (HIS) business, instead of selling or spinning it off. This will be beneficial to the company in the long term due to the high growth expected from the Health Care IT market in the future. In 2015, the company's revenue from its Health Information Systems division was $0.8 billion, with the addressable market size being $11 billion. This market is expected to grow at a compound annual growth rate of between 5% and 8% during the 2015 to 2020 period, and will be an important revenue generator in the years to come.

HIS Opportunity

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Notes:

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2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for 3M .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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