Epic Systems – Too Big to Crush?
Epic Systems, a leader in health care information technology, has set established itself as a giant in the HCIT industry. Their strategic choices have almost guaranteed that their dominance will be preserved for the next several years, leaving smaller players in the space with few opportunities to move ahead.
Epic Systems is the undisputed leader within healthcare information technology. Expectations for digitization and modernization have pressured the healthcare industry to catch up with both consumer demands and current technology, and Epic presented itself as the first player to address these needs. The most widely used electronic healthcare record (EHR) system nationwide, Epic has attracted some of the largest and most prestigious healthcare players such as Partners Healthcare, Mount Sinai Health Systems, UCSF, and several others. Nearly 40% of US citizens have their healthcare records stored within the Epic System, and that number will only increase in the near future. As the saying goes, no CIO will ever get fired for implementing Epic. In other words, Epic is – at least for the moment – winning.
The first “Epic win” stemmed from its ability to predict and meet healthcare industry trends before any other player in the space. Epic established itself as an early leader in aiding hospitals update their technology systems in the pre-internet era, and they quickly caught onto the push towards coordinated health information exchange. To do so, they established a client-server based system and created a product that supported information sharing, clinical coordination, lab results sharing, and pharmacy applications. They forecasted industry needs for interoperability and became proficient in both inpatient and outpatient services. They met the need, and they did so both well-enough and early-enough. As providers and physicians began to feel the pressure to find answers to these challenges on their ends, Epic emerged as the best solution.
The truth is, however, Epic’s client-server system is far from ideal for the flexibility and usability demands of the healthcare system; cloud-based models, such as those offered by competitor Athena, could solve these problems far better while also promoting more rapid innovation. But Epic circumvents these threats, and they do so by selling a product that meets another major challenge – adoption. They differentiate themselves by providing the staffing, governance, processes, and methodology needed to win physicians over and make them want to standardize their work practices with the Epic system. They address the operational component, and this differentiates them from competitors that offer superior technology and capacity solutions.
Epic also chooses to be a closed system, preventing other systems from sharing information with Epic. As the clear market leader, they are able to set the standards; healthcare systems are ultimately pressured into adopting Epic. This is well illustrated by the fact that they spend approximately $0 on marketing – customers come to them, and not the other way around. If 3rd parties cannot plug into the commonly used Epic information databases, healthcare systems will have no reason to move away from Epic.
Epic is also excellent at using external factors to its advantage. For example, EHR systems, unlike many consumer products, are extremely sticky. Epic knew this, and they made sure they were the first player to come to market – even if their product was not perfect. Additionally, government regulations regarding patient health information (PHI) makes it difficult for other firms to have a chance at obtaining market share. A large player like Epic could affect legislation, but they have no motivation to do so (for obvious reasons).
Recently, however, Epic’s dominance has been equated with general stifling of innovation within the field. They have begun to face pressure to open up their doors to 3rd party vendors so that they can integrate other firms. The pace by which this happens is up to Epic and is unlikely to move quickly. It is highly unlikely other players even pose a marginal threat – Epic has wisely chosen the strongest of partners who are unlikely to waste millions in investments to switch to a lesser-used EHR system. In a space where technology and innovation are slow moving, Epic finds itself in a prime position to keep dominating market share – they are simply too big to crush…for now.
Interesting topic! I have friends working/worked for Epic, and it is indeed such a dominant company in its field! The joke we often shared was that Epic was the quintessential example that in order to succeed, you don’t have to be good, you just need to be better than everyone else, even if you are also terrible at it. The most intriguing thing here is a their strategy to adopt a closed system and the pressure for them to open up. To make an not 100% applicable analogy, a closed system reminds me of Apple and an more open ecosystem reminds me of Android. Both have been quite successful in the mobile operating systems world. Of course, healthcare is inherently different from operating systems, and I’d be very curious to follow the Epic’s development.
Great topic choice. One of my best buddies from undergrad works at an SF-based start-up called Medisas that is seeking to disrupt Epic. Because Epic has such dominant market share, much of their work consists of trying to convince individual hospitals or hospital networks to switch from Epic to them. The problem is that while nobody really likes Epic, they are unwilling to switch (it is the devil they know). Many doctors are hostile to electronic records in the first place, and they are very reluctant to have to learn another platform once they have already learned Epic. However, Medisas (and others, I assume) are making progress, even if it is incremental. If I were Epic, I would monitor these start-ups closely, but not making any drastic changes as of yet (a la SAP and the cloud). But I would be concerned once younger doctors enter the workforce, since they will demand a more user-friendly product like Medisas as opposed to Epic.