One-Woman Show
Forbes India|May 07, 2021
Judy Faulkner, the billionaire founder of Epic Systems, pioneered—then dominated—electronic medical records. She’s been the industry’s leading actor for decades, but now the pandemic is fuelling a digital health care race that may finally cost her the spotlight
KATIE JENNINGS

A victorious swell of brass instruments reverberates across the 1,100-acre Epic Systems campus in Verona, Wisconsin, a sleepy suburb just outside Madison. It’s February 2020, and except for China and a couple of ill-fated cruise ships, there are few signs of the coronavirus pandemic that’s about to envelop the world. It’s certainly business as usual at Epic: The familiar strains of a baroque wedding march fill the hallways, stopping the health care software company’s 10,700 employees in their tracks. On cue, a new customer announcement follows: Florida-based AdventHealth plans to deploy Epic’s electronic health record system across 37 of its hospitals. The full installation will take over three years and cost around $650 million, not counting ongoing maintenance, which will cost millions more annually. “It’s a very long relationship for many of our customers,” says Epic’s founder and CEO Judy Faulkner in a rare interview. She got the idea for the wedding theme from a visit to the Mayo Clinic several decades earlier, where she heard lullabies play whenever a new baby was born. A new customer “didn’t feel like a new baby”, she says. “It felt more like a wedding.”

Indeed, hospital executives are often more committed to Epic than most Americans are to their marriages. Epic’s average customer has been using its software for 10 years, and Faulkner claims the company has never lost an in-patient hospital client, except in the case of an acquisition. Partly that’s because it’s so hard to leave. Epic’s software helps manage a patient’s entire journey, starting with scheduling an appointment, moving into the clinic or operating room as the doctor records allergies or X-rays, and then to the back office for billing and follow-ups. It’s a proprietary system that infamously doesn’t play nicely with others. The company’s product is generally referred to as an electronic health record, but its reach is far broader, including revenue cycle management, customer retention tools, and data analytics.

Epic’s suite of offerings has proven particularly popular among large academic medical centers and children’s hospitals, such as the Cleveland Clinic, Johns Hopkins, and Boston Children’s Hospital. The company’s 564 customers represent nearly 2,400 hospitals worldwide and 225 million patients in the US, or about two-thirds of the country’s population. This translated into more than $3.3 billion in revenue in 2020, despite what Faulkner estimates to be around $500 million in foregone revenue for Covid-related software it provided free of charge, including infection management tools and extensions for pop-up hospitals. “It never seemed right to me to make money off Ovid,” she says.

Her success has been decades in the making. Since Epic’s founding in 1979, the 77-year-old Faulkner has steadfastly rejected outside investors, Wall Street financing, and acquisitions. Epic was still just a $500 million (sales) company in 2007. Ten years ago, it hit $1 billion in revenue, and growth has compounded at an annual rate of 15 percent every year since. It’s highly profitable: Estimated cash flow as measured by Ebitda is north of 30 percent, and the company has no debt. Forbes estimates Faulkner’s 47 percent stake in Epic to be worth $6 billion, which makes her the second-richest self-made woman in America. Employees and around a dozen other co-founders and initial investors own the other 53 percent.

In 2019, Epic had a 39 percent share of the more than 880,000 hospital beds in the US, the health care IT firm KLAS Research estimates. The rest of the market is fragmented among publicly traded Cerner, the Massachusetts-based Medi tech, and a few other firms, including Allscripts and CPSI. Epic’s dominance has made it an industry target, with critics and competitors accusing the company of being a closed network that makes it difficult to exchange data with other systems. Faulkner contends Epic does share data but puts patient privacy above all.

Epic’s biggest strength, this buildit-alone mentality, could become its biggest liability in the post-Covid world. The pandemic is forcing fast change in the US health care system. Doctors and other providers have rapidly adopted new technology over the last year as patients suddenly took a strong interest in staying as far away from the hospital as possible.

Venture capitalists were already gunning for Epic before the pandemic struck. After all, the company’s big system mindset and hundred-million-dollar installations seem out of step in the era of cloud computing and cheap, ubiquitous mobile apps. Then, shortly before lockdown, the US government finalized new federal data-sharing rules empowering patients to have ownership over their own digital medical records—potentially further eroding what has historically been a health-data oligopoly dominated by Epic and Cerner.

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