Epic Systems: Madison Healthtech’s “Unwitting” Anchor Company

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spark a thriving healthtech hub in Madison.

Seattle startups and their supporters have at times grumbled that Microsoft doesn’t do enough to directly support the local sector, but the fact is that the tech behemoth, much like Epic, helps attract both talented employees and other companies that believe they’ll have strategic advantages by setting up shop nearby. In fact, one of the reasons Jeff Bezos put Amazon in Seattle was so he could tap into the pool of Microsoft software developers for his staff, Xconomy reported in 2010. Amazon has become a key driver of Seattle’s tech community in its own right.

Wellbe’s Dias even argues that Madison startups might be better off without Epic’s assistance. For all its recent growth, Epic isn’t seen as innovative, he says. As Forbes noted in 2012, Epic’s electronic health record software is based on a programming language developed in the late 1960s. Epic usually does quite well in industry rankings by independent researcher KLAS, but some doctors and industry observers criticize Epic’s software as “costly,” “clunky,” and “complicated,” Dias says.

“Like many of the other dominant [electronic medical records] players, Epic developed their technology and business model in the 80s—the Paleolithic technology era when main frames roamed the planet—way before the cloud or mobile or user-centered design took hold,” Dias says in an e-mail message. “That makes them the old guard, fossil fuel, incumbent part of the healthcare industry. Would we want them incubating new innovators and entrepreneurs? Would they know how?”

But while it might not be fair to criticize Epic for not actively nurturing the local healthtech scene, the company is coming under more legitimate fire for playing what critics say is a negative role—by actually putting up barriers to the local industry. Those critics contend that Epic has hindered the growth of startups and stymied industry innovation. An Epic spokesman declined to comment for this article.

One barrier, critics say, is the non-compete agreement Epic requires employees to sign. The document, in part, forbids them from working for an Epic customer for one year after leaving the company, or from working for a direct Epic competitor, such as Cerner (NASDAQ: CERN) or McKesson (NYSE: MCK), for two years, according to one former Epic employee who went on to launch a local startup. (This person requested anonymity because publicly criticizing Epic could have repercussions for his company.) In addition, when third-party software developers or consulting companies sign agreements that Epic requires in order for them to work with Epic’s software, those agreements also stipulate they can’t hire ex-Epic employees for one year after those people leave the company, this source says.

The source acknowledges that prospective employees agree to the restrictions when they sign on the dotted line, but he doesn’t think most of them realize how much it limits their options for working in healthcare after leaving Epic. There are now hundreds of companies that have signed Epic agreements and are forbidden from hiring ex-Epic workers during their non-compete period, the source says. “This has a major dampening effect on innovation for the industry and the startup community locally,” he says in an e-mail message.

Some leave Madison after quitting Epic. Others stick around and wait for their non-compete restrictions to expire—perhaps taking a job in another industry or working on projects at the 100state co-working space, for example—before getting back in the healthtech game locally.

Taking the glass-half-full view, Brandon simply sees this as a window of opportunity to convince these people to stay in Madison. “The non-compete actually creates a runway where people, because they don’t have portability of their knowledge immediately, they actually kind of cool their heels here and stick around,” he says.

Critics also complain about the roadblocks Epic puts up for other healthtech companies. When a company wishes to do work for a hospital that involves interacting with Epic software, Epic won’t grant access to its systems unless the company signs an agreement that forbids it from subsequently creating proprietary software that it would go out and sell to more hospitals.That “effectively shuts down your ability to create any tools that the clients might want because Epic sees them as derivative works,” says the former Epic employee. “Seems fair until you realize that Epic is now the Microsoft Windows equivalent in the healthcare IT space,” he says. “It is effectively an operating system for the healthcare industry. Can you imagine a world where no one was allowed to make a software program for Windows, except Microsoft? That is where we are today in healthcare.”

Companies certainly can, and do, develop healthcare software that can … Next Page »

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Jeff Engel is Deputy Editor, Tech at Xconomy. Email: jengel@xconomy.com Follow @JeffEngelXcon

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