Lab Soft News: The Curtain on Epic Systems Gets Rolled Back a Little Bit

Well, one thing is now certain about Epic. The company seems to be loosening up in terms of the information it reveals to the press, at least to the Wisconsin media and, of course, to the New York Times (see: More on Epic's (Non)-Interoperability and the Recent NYT Puff Piece). A recent article in the Milwaukee Sentinel Journal Online was rich in details that I have never seen in print before (see: Epic Systems’ $300 million expansion tangible sign of success). Below is a set of lengthy excerpts from it:

Epic Systems Corp. will have spent more than $300 million on [its building] complex southwest of Madison when work on the most recent expansion ends late next year. It may be the most tangible sign of the company's success. Epic's revenue jumped from $31 million in 1997 to $500 million last year, and it is one of the state's fastest growing companies. It employs 3,250 people, having hired on average at least one person every weekday for the past decade. Its payroll tops $250 million a year, and all but a few of its employees work in the Madison area....Its customers include some of the most respected health systems in the country - the Cleveland Clinic, Mount Sinai Medical Center in New York and the University of Chicago Medical Center....As much as one-fifth of the U.S. population could be treated at hospitals or clinics that use Epic's software when current customers' systems are rolled out.

Founded in 1979 with an initial investment of $70,000, the company now is conservatively estimated by Wall Street analysts to be worth $1.2 billion....Epic has never done an acquisition, has no debt and has been known to turn away business. Few employees have titles....The company historically has hired only 2% of all applicants. That percentage is likely to drop: Epic now receives 40,000 to 50,000 applications a year....And in an industry in which the payday of a public stock offering is seen as a milestone, if not the ultimate goal, the company is determined to remain privately owned....

Epic was founded by Judy Faulkner, its chief executive, and about a dozen other people to sell and tailor a database management system for health care. Faulkner, who grew up in New Jersey, moved to Madison in the 1960s to study computer science at the University of Wisconsin after earning an undergraduate degree in mathematics....The company's growth, at least initially, wasn't explosive: By 1990, it had sales of $1.7 million and 29 employees. The turning point came in 1992. The power of computers was improving at a stunning rate, and the company had just introduced EpicCare, its first electronic medical record. With the hospital market developing slowly, Epic focused on large physician practices. Sales took off, reaching $18 million in 1995 - a tenfold increase in five years. In the late 1990s, Epic turned its attention to hospitals, a market dominated by much larger competitors, such as Cerner Corp., McKesson Corp. and Eclipsys Corp.

The move to electronic health records was beginning to take hold, and Epic found a market among large hospitals and health systems, particularly academic medical centers. On the company's nearly 400-acre campus, first opened in 2005, is a training center with a 5,300-seat auditorium used for monthly employee meetings and an annual gathering for customers that draws 4,000 people to the Madison area. [Soon to be 13,000 seats; see: Epic Moving into the Meditech-Dominated, Smaller Hospital EMR Market)] The campus itself is called Epic's "Intergalactic Headquarters," and the interconnected buildings have astronomical names such as Andromeda and Fomalhaut....

The décor is quirky....It befits a company with the motto, "Do good, have fun, make money." It added "make money" after some software engineers started giving code to customers for free. The company's motto, after all, said "do good. Faulkner says she came up with the motto, at least in its original version, because this is how she wants to be able to look back on her life.
"I want to be able to say that I contributed," she said, "and that it was a fun life."...

As a generalization, the company's ethos leans liberal. Epic evoked the ire of some conservatives this summer when it announced that it would try not to do business with companies that belong to Wisconsin Manufacturers & Commerce, the state's largest business lobby, because of that group's spending on the state Supreme Court race. Most of its employees were hired straight out of college - a common criticism is that Epic rarely hires anyone over 40 - and the ideal candidate is smart and idealistic....

The only outside stockholders are the initial investors and their families, a few people who bought stock from some of those investors and some outside directors given stock in 1990s - among them Len Mattioli, the former chairman and CEO of American TV and Furniture. Faulkner and her family control about 43% of the company. In all, about 75% of the company is owned by about 200 employees and their families. All other employees are eligible for stock appreciation rights.

Epic won the Kaiser contract in 2003, beating out Cerner Corp., a company seven times its size. The contract's value has not been disclosed. But Kaiser estimates the project, including training and lost productivity, will cost $4 billion in its first 10 years. "Kaiser put them on the map," said...an analyst...."They went into a stretch where they were winning pretty much everything." Some skeptics predicted Epic's Kaiser project would fail. There were setbacks, but Kaiser and Epic worked through the problems....

The company also is known for selecting its customers. "If Judy doesn't feel it is the right thing for Epic, she walks away,"[a spokesperson] said. The company rarely negotiates on price. There is one exception: It has been known to give breaks, such as waiving its annual maintenance fee, to struggling hospitals....

Last year, Epic's revenue increased by roughly $80 million - more than its entire revenue in 2001. It is adding 15 to 18 customers a year. But its potential market also gets a bit smaller each year as large hospitals decide on a system. Epic has no plans to target the market for small and mid-sized hospitals, which is less developed. But the international market holds promise: The company has an office in the Netherlands, and it plans to open offices in the Middle East and the Pacific Rim. It also can expect growth from developing new features.That should keep Epic busy for several years - and possibly mean still more construction at its site in Verona.

This has been a lot for you to read so I don't want to add to your burden. This last paragraph is interesting, though. The "potential market also gets a bit smaller each year as large hospitals decide on a system." That's for darn sure and particularly for a company that has been growing at Epic's rate. I would guess, however, that Epic's Netherlands office is mainly for recruiting bright European students who want to flee from the Eurozone for economic reasons. The European EMR market is also not that attractive -- to regulated, to much penny-pinching, and too much government control. The Pacific Rim, though, is a different case entirely. Look for the expansion of Epic in this part of the world in the quest for both new hospital business as well as new employees.