Epic Systems Files for IPO Despite Decades-Long Stance Against Going Public

After celebrating her 78th birthday, she became the wealthiest woman in the U.S. healthcare sector.

On September 1, 2021, Forbes released its “2021 List of America’s 100 Richest Self-Made Women.” Judith Faulkner, CEO and founder of Epic Systems, the largest electronic health records company in the United States, topped the healthcare sector with a net worth of $6.5 billion.

Judith Faulkner is remarkably low-profile and rarely grants media interviews. Nevertheless, from the few interviews she has given, it is evident that Judith Faulkner is a person with a distinct personality.

For instance, playing the "Wedding March" throughout the campus to celebrate partnerships secured with clients; appearing at the company’s annual user group conference in cosplay as characters like wizards and the Mad Hatter; and transforming the campus into an “adult version of Disneyland,” featuring a Hogwarts-style great hall, elevators leading to “hell,” massive treehouses, and countless other whimsical and dreamlike buildings and sculptures...

But we believe that the most characteristic thing she has done since its founding in 1979 is to firmly reject external investment, financing, and acquisitions. During this period, both Kaiser Permanente and Apple expressed interest in acquiring the company, but were rejected. “No deals, never go public”—these rules are visible everywhere on the Epic campus in Verona, Wisconsin, including in restrooms and break rooms.

Why did Judith Faulkner make such a decision? Under this principle, how did she grow Epic into the largest electronic health record (EHR) vendor in the United States? VCBeat seeks to answer these questions by examining Judith Faulkner’s personal journey and the rise of Epic.

Judith Faulkner’s interest in healthcare originated with her parents. Her father was a pharmacist, and her mother served as the director of Physicians for Social Responsibility in Oregon. Inspired by her mathematics teacher, she developed a fascination with mathematics and logic.

Later, she majored in mathematics at Dickinson College in Carlisle, Pennsylvania, and spent her summers conducting research on particle physics at the University of Rochester. It was also there that Judith Falkner began to engage with computer programming and the Fortran language.

In 1965, Judith Faulkner was pursuing a Ph.D. in Computer Science at the University of Wisconsin. There, introduced by psychiatrist and professor Warner Slack, she met chief resident John Greist, and they later co-founded Epic.

Before embarking on her entrepreneurial journey, Judith Faulkner spent several years accumulating capital and technical expertise. In 1969, to address John Greist’s challenge of finding a better way to schedule on-call physicians, she developed a system capable of generating an entire year’s physician on-call roster in just 18 seconds at a cost of only $5. In the early 1970s, she worked with a group of physicians at the University of Wisconsin and developed a database to track patient information in real time.

In 1979, Judith Faulkner raised $6,000 through loans, mortgages, and with the help of a few part-time employees, establishing Human Services Computing, the predecessor of Epic, in a basement in Madison.

Epic is a privately held information technology company that provides customers with innovative medical systems technology solutions. Judith Faulkner has firmly maintained control over the company, refusing external financing. In 1983, partner John Greist disagreed with Faulkner over financing ideas and withdrew from the board of directors.

Over the first two decades, Epic achieved slow but steady growth, acquiring a small number of new clients each year as its service offerings expanded. In the late 1980s, Epic added billing software; in the early 1990s, it developed a graphical user interface for outpatient clinics.

In 2004, Epic partnered with Kaiser Permanente to customize a $4 billion electronic health record (EHR) system: KP HealthConnect. This system covered multiple business scenarios, including inpatient care, oncology specialty services, outpatient care, appointment scheduling and registration, and physician scheduling. It was deployed across 36 hospitals and 431 clinics under Kaiser Permanente, achieving data integration for the entire health system’s 16,000 healthcare professionals.

One year after signing an agreement with Kaiser Permanente, Epic’s new campus, dubbed “a Disney World for adults,” opened in southern Wisconsin. Faulkner’s distinctiveness is also reflected in her understanding of customer relationships.

A detail emerged in Forbes’ media coverage. In February 2020, a Baroque-style wedding march echoed through the Epic campus, prompting tens of thousands of employees to pause and listen. At the same time, a new client agreement arrived as scheduled: AdventHealth, headquartered in Florida, signed a $650 million contract with Epic for remote build and installation services, planning to deploy Epic’s electronic health record (EHR) system across its 37 hospitals.

This idea originated from Mayo Clinic. At Mayo, a lullaby plays whenever a baby is born. Judith Faulkner describes the relationship between Epic and its clients as a long-term courtship, with the completion of each collaboration marking the beginning of an engagement.

These “marriages” appear remarkably stable at present. Judith Faulkner stated that Epic has never lost a single hospital client. Its clientele includes nearly 2,400 hospitals worldwide, such as the Cleveland Clinic, Johns Hopkins Hospital, and Boston Children’s Hospital, covering 225 million patients in the United States (approximately two-thirds of the U.S. population).

Epic Systems has built an integrated platform across nearly all care domains. Whenever Epic identifies the need to advance technology in a new specialty area, it promptly develops the corresponding module and integrates it with its other products at the platform and database levels. The following is a breakdown of Epic Systems’ modules:

Epic's Business Layout

Epic was initially centered on the Chronicles database management system, supporting patient care–related functions, including clinical systems for registering and scheduling physicians, nurses, paramedics, and other care providers; systems for laboratory technicians, pharmacists, and radiologists; and billing systems for insurance companies.

Patient-centricity was the sole consideration when Judith Faulkner first wrote the code. For instance, when Epic Systems developed its diagnostic system, it reserved certain open-source components and made them available to clients, facilitating subsequent integration with other hospital systems.

Epic states that a database management system must have the capability to be adjusted and modified at any time to meet customer needs. Meanwhile, Epic’s electronic health record (EHR) system integrates speech recognition, medical imaging, medical devices, clinical laboratories, patient education, user authentication, and hundreds of different third-party systems.

In the 21st century, U.S. healthcare policies such as the Patient Protection and Affordable Care Act and Accountable Care Organizations (ACOs) were successively implemented. The establishment of ACOs was designed not only to reimburse providers for services rendered but also to tie payments to the health outcomes of patients enrolled in the ACO. Healthy Planet provides a suite of reporting, dashboard, and workflow tools that enable care managers to manage patient populations both within and outside the ACO.

Had it not been for the impetus of cost-containment policies, hospitals would not have been so strongly motivated to outsource information technology services, nor would the market potential for cloud-based services have expanded so rapidly. Following the expansion of cloud operations by competitors such as Cerner, Epic Systems officially announced its entry into the cloud services sector in 2015. It began providing cloud storage solutions for hospital systems and smaller healthcare providers using its software, helping these clients reduce the costs associated with the use and storage of electronic health records (EHRs) to alleviate financial pressures.

Epic has historically provided users with standalone software applications, including ambulance care systems, inpatient electronic medical record (EMR) systems, scheduling software, and examination arrangement tools, as well as web portals for patients and physicians. A key characteristic of these software solutions is that data can only be stored on local computers or on the hospital’s own servers. In contrast, cloud computing technology enables operations within a hosted, shared environment, which is conducive to the long-term development of hospitals.

In 2017, Epic partnered with the University of California San Diego (UCSD) Medical Center to migrate its electronic health record (EHR) system to the cloud hosted by Epic. This initiative aimed to transfer the medical center’s data from traditional data centers to a more cost-effective, reliable, and secure EHR repository.

In 2018, Epic launched One Virtual System Worldwide, enabling its customers to exchange health data with electronic health record platforms from other vendors.

This system comprises three components: Come Together, Happy Together, and Working Together.

Come Together enables Epic to locate individual patients’ health records across various institutions (such as Epic customers, hospitals using other electronic health record vendors, and government agencies) and integrate the data; Happy Together presents the integrated patient data in a single, consolidated format, facilitating physicians’ review of medication histories and providing a better understanding of patient care, while patients can also access their records via MyChart (the patient portal); Working Together achieves interoperability across health systems through message exchange and data access, thereby strengthening the relationship between providers and patients.

One Virtual System Worldwide leverages Epic’s Care Everywhere tool to provide secure access to electronic health information for healthcare providers from other institutions.

With the widespread application of big data, AI, and machine learning, Epic is also making corresponding strategic moves.

In 2018, Epic and speech recognition vendor Nuance announced a partnership to integrate the latter’s AI-driven virtual assistant into electronic health records. This collaboration encompassed innovations in three products:

First, Epic Haiku will create virtual assistant-driven workflows, such as querying patient information and laboratory results;

Second, through Epic Rover, nurses can interact with virtual assistants and flowcharts to enter and confirm patient vital signs;

Third, Epic Cadence will provide rehabilitation staff with a platform to converse with a virtual assistant to check patient schedules and create, locate, and cancel patient appointments through voice and natural conversation.

In 2019, Epic launched Cosmos, aiming to extract “de-identified” medical data from patient records across various health systems. In an interview on January 15, 2022, Phil Lindemann, Vice President of Business Intelligence and Analytics at Epic, stated that Cosmos was then being used by approximately 800 hospitals and 10,000 clinics, covering data for about 120 million patients, making it the largest single electronic health record dataset in the United States and even worldwide.

Amid the COVID-19 pandemic, Epic rapidly launched “EDI,” a clinical decision support tool designed to predict which patients are at risk of clinical deterioration requiring transfer to the intensive care unit by analyzing their vital signs. However, it is important to note that although this tool has been deployed in dozens of hospitals, its effectiveness remains debatable.

According to 2020 data, the U.S. healthcare IT infrastructure market was dominated by four companies—Epic, Cerner, Allscripts, and MEDITECH—which collectively held more than 85% of the market share. In December 2021, Oracle, the world’s largest software vendor, acquired Cerner, one of the largest electronic health record (EHR) companies in the United States, for $28.3 billion. Allscripts and MEDITECH are also in a period of adjustment under the new industry leadership. Since its founding, Epic has been led by Judith Faulkner. Although she is little more than ten months away from her 80th birthday, she continues to manage an EHR empire comprising tens of thousands of employees. In an interview, she stated, “I love my work. As long as I remain efficient and can bring value to my role, I am willing to keep going.”

Reference link:

《The Billionaire Who Controls Your Medical Records》

Epic’s Product Modules:https://healthcareitskills.com/epic-systems-modules/

“Epic vs. Cerner vs. Allscripts vs. Meditech: 12 Key Comparisons”