Why Does Epic Keep Hammering Cerner? Mr. HIStalk's Opinion.

Mr. HIStalk addresses the ongoing Cerner-Epic competition in a comprehensive and insightful manner. Here's the complete text of a question and his response from a recent blog note:

Question from reader: “Re: Epic. They’re winning deals like Cerner did 15 years ago when they were small. Cerner seems to be a revenue-churning machine that the public can participate in by buying stock. The only people who benefit from Epic are the owners and/or Judy. Which company has made more millionaires? Which company will change the face of HIT for the long run?”

Answer from Mr. HIStalk: Here’s the real question: why can’t Cerner, with all its billions in market capitalization and name recognition, compete with Epic for new sales? As has been asked of other Goliaths (Microsoft, GM, Dell, GE, etc.) how could Cerner, given its ample lead time and resources, let the once-tiny David called Epic beat them year after year? My theory is threefold: (a) even entrepreneurial big companies naturally evolve into highly ineffective corporate bureaucracies that are motivated by fear and executive entitlement, the antithesis of innovation; (b) publicly traded companies let their numbers drive their business instead of vice versa, and (c) corporate Darwinism would have Cerner just buying Epic outright, but Judy throws a wrench into that evolution by refusing to sell the company.

But all is not lost: we don’t know Epic’s profitability, so Cerner may be beating them where it counts. And we know that Cerner has built a business that could weather Neal’s transition or sale to another organization, but we don’t know that with Epic. What I care about most is why Epic beats Cerner for every important deal, which would seem to indicate that Millennium isn’t up to the task. In other words, a $6 billion market cap company with a single, fairly low-rated product line that’s getting hammered by a smaller and much higher-rated competitor should think about developing a better product. Here’s another way to look at the value of ongoing R&D: the only company that beats Cerner consistently in new sales is also the only one with a newer product.

Excuse me, Mr. HIStalk, but I think that the profitability of Epic is largely irrelevant to this discussion. In many ways and for many companies, quarterly earnings are just a charade to satisfy market analysts. Acceptable profits for Epic are whatever Judith Faulkner and her close associates peg them to be. With all of this pent-up demand for their product, the value of the company keeps increasing anyway as a multiple of gross revenue. As a near-monopoly in the EMR market, the company can also set its prices almost wherever it wants them to be. Quite similar to IBM in the 70's and 80's. At any rate, and like all of the others bloggers including Mr. HIStalk, I am sure that the company is not for sale. Also, any other healthcare company, itching to get its hands on Epic, would probably break it if they touched it because of its unique culture.

Forget what's in Cerner's advertising slicks. Forget the promises of the Cerner salespeople. The market has decided, at least for now, on the preferred enterprise-wide EMR product for large, complex health systems. The Epic solution has been judged to be superior. Capital-flush CEOs/CIOs (see: Are You an Enterprise or Best-of-Breed CIO? Access to Cash May Make the Difference.) will continue to buy it unless there is a radical change in the market, which is probably not about to happen. Transition issues may come to be important in the near future (see: Comments About Mergers and Acquisitions by Healthcare Software Companies). Cerner can't/won't change its ponderous, complex product and why should Judith Faulkner change anything when willing buyers are lined up at her door? The new governmental regulatory requirements will only solidify the current EMR hierarchy.

Comments

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The Epic solution for EMR has has indeed been judged to be superior. And for those searching for a superior LIS, one with a seamless integration to this EMR would be epic! or, at least...superior. A recent peek into the EPIC LIS entry - Beaker, reveals that the search is far from over. This LIS newcomer is certainly not ready for prime time. Whereas several basic workfolows are in place and appear to be well designed, in my humble opinion, the Beaker is half-empty as a product for large, complex health systems. The search goes on...