The financial health and strategic goals of Epic are of great interest to those large healthcare systems that are totally dependent on the company for their EMR software (see: How to Avoid Software Vendor Lock-in and Account Control). Mr. HIStalk alerted me in a recent blog note to coverage of the company in a Milwaukee newspaper (see: Monday Morning Update 10/18/10). Here's his take on the company:
The Milwaukee newspaper profiles Epic with some interesting facts, with the most interesting one being confirmation of our June report that Aurora is dumping its $150 million Cerner system for Epic, which will cost them an additional $100 million. A quarter billion dollars seems like a lot for an EMR considering that Aurora showed a $50 million loss two years ago and a $116 million loss last year....That article about Epic values the company at $2.6 billion, or just 3.3 times revenues. That seems about right given that Cerner’s market cap is just over 4x sales and is better diversified, although Cerner is probably less profitable for the same reason (see: Why Does Epic Keep Hammering Cerner? Mr. HIStalk's Opinion.).
Below is an excerpt from the Milwaukee article (see: Epic Systems rides wave of records upgrades):
"Right now, Epic is winning three to four times more [hospital contracts] than anyone else," said Kent Gale, chairman of KLAS Enterprises LLC, a research firm known in the industry for its customer surveys....Epic is projected to end the year with roughly $780 million in revenue. That's up from $650 million last year and $47 million in 2000. Its workforce has grown from 396 people in 2000 to about 4,000 today. It has added 500 people this year alone. All but a few dozen of them work in Verona, and its Wisconsin payroll this year will top $300 million. Started in 1979 with an initial investment of $70,000, privately held Epic now has an estimated market value of $2.6 billion....Epic's market is large health care systems and hospitals. It's particularly strong in academic medical centers....As recently as a few years ago, the conventional view was that nearly all of the market for large health systems had been claimed and that no one would want to go through the ordeal of "ripping and replacing" their existing systems.That hasn't been the case. One of Epic's strengths is the company has grown organically and patiently, steadily adding new features and applications to its software. That has enabled it to offer customers an integrated system that links hospitals, clinics and home health care as well as handles billing and other tasks. In contrast, many of its competitors have grown partly through acquisitions, stitching different features or applications into their systems over the years....Epic also has a strong following among doctors based in clinics. And they can have considerable influence when a health care system is weighing whether to move to one system for both its hospitals and clinics."The docs have the power," said [a] financial] analyst ....Epic's system isn't for everyone. Epic doesn't sell its software to small hospitals or to independent physician practices. And its system is more complex and costly. Making full use of all its features requires more training, Gale said. And some of its specialized products, such as those for oncology and radiology, still need work.
A year ago, I would have laughed at the notion that hospital physicians had any power whatsoever regarding the choice of an EMR vis-a-vis the CEO and CIO. I now agree with the financial analyst quoted above that the tables have turned to some degree. Hospital executives are anxious to put a user-friendly EMR tool into the hands of their physicians, particularly the hospitalists and house officers who are hospital employees. I also agree that many physicians favor the Epic EMR over rival systems, some of which are clunky and not very functional.
With regard to physician influence over the deployment and use of hospital EMRs, however, we are fast approaching an interesting turning point. Most physicians are extremely enthusiastic about iPads (see: iPad health care use by doctors, a comprehensive infographic). They are demanding that these tablet devices, or emerging equivalent models, be interfaced with the hospital EMR for their use as input-output devices. I hold the opinion that neither Epic nor hospital executives will ever allow iPads into hospitals for technical, political, and economic reasons. For Apple, the business model is all about control and vertical integration. This would be an anathema to both Epic and hospital execs. However, a tech blogger recently had an interesting insight into this issue (see: Apple iPad EMR):
[W]ill the iPad be a game changer for EMR. My prediction is that we really won’t see many iPad’s in healthcare much at all. Sure, there will be one here or there, but it won’t be widespread and we won’t see an “iPad EMR” that was designed to leverage the interface and technology of the iPad....Well, I don’t see the iPad EMR coming to fruition I do see the input technology that’s in the iPad and that will come out of the iPad having an effect on future input interfaces. Apple’s making a huge bet on touch interfaces with the iPad. the adpoption of touch interfaces and the technology that comes out of it is likely to have a huge influence on future EMR interfaces. One of the biggest complaints doctors have about the various EMR systems is the challenge of inputting the data. Don’t be surprised if the future EMR input methods are heavily influenced by the introduction of the iPad and the technologies that develop around it.
Epic is currently developing and testing an IPad version of EpicCare, their EMR. It will be called Canto...google it.
Posted by: Erick | December 05, 2010 at 02:32 PM