Minnesota Data Center Sold For $46M As Epic, Mayo Strike Another Deal

Epic Systems, the healthtech giant based in Verona, WI, is expanding its already sizeable footprint in neighboring Minnesota.

At least nine health systems headquartered in the state use or plan to use Epic’s electronic health records (EHR) software to schedule appointments, document patient information, bill for services, and perform other tasks. One of them is the renowned Mayo Clinic, which a year ago announced it was embarking on a multi-year project to scrap its current record-keeping systems in favor of Epic.

Now comes news that just before 2015 ended, Epic paid $46 million for a Mayo-owned data center about five miles northwest of Mayo’s headquarters in downtown Rochester, MN. In an e-mail to Xconomy Wednesday, Mayo spokesperson Rhoda Madson confirmed that Epic acquired the 62,000-square-foot facility on Dec. 29. The purchase price was first reported by Finance & Commerce.

Mayo will lease space in the building from Epic for at least the next four years, Madson said. The terms of the agreement permit Mayo to extend the lease as long as it wishes, and to adjust the amount of space it’s leasing, she said.

One somewhat surprising aspect of the deal is that Mayo’s Epic records will not be hosted at the data center. Instead, said Madson, they’ll live on servers across state lines.

“The data center today houses a variety of Mayo Clinic systems, not limited to the EHR,” Madson said. “As part of our agreement, Epic will host the Mayo Clinic EHR in their Verona, Wisconsin data center. The Rochester data center sold to Epic will contain Mayo Clinic’s secondary EHR version, other Mayo Clinic systems, and Epic EHRs for other Epic health system clients.”

Starting last year, a project team comprising employees from Epic, Mayo, and third-party organizations has been working to tweak Epic’s core system based in part on how Mayo workers who use computers for their jobs do things today. That work will continue for at least another year, leading up to Mayo’s first “go-live”—when hospital and clinic staff are no longer using Epic’s software for practice, but rather to help care for real patients. Madson said April 1, 2017 is the target date for completing construction on a substation that will help power the data center, and which Epic and Rochester Public Utilities have agreed to finance.

Epic said one reason it made the purchase is that the facility was being underutilized.

“Mayo had a high quality data center in an excellent location that was too large for their needs,” Epic spokesperson Dana Apfel said in an e-mail.

Madson said there’s 12,000 square feet of server space inside the building. It’s possible to triple current capacity, she said, but that would require expanding the entire structure.

Mayo built the data center in 2012, at a reported cost of $33.7 million. It’s not clear whether Epic received electronics or any other assets beyond the building itself, but Apfel said the price Epic paid was fair.

“The terms for the purchase and the terms for Mayo’s portion that they will lease from Epic are at industry standard prices,” she said.

Apfel declined to say how much Mayo is paying Epic to install and license its software.

In addition to that contract and the data center deal, last year Mayo and Epic entered into a partnership with IBM (NYSE: IBM). Epic will embed some capabilities of IBM’s Watson supercomputer in Epic’s medical decision support tools, and could piggyback on an existing Mayo-IBM collaboration aimed at improving how cancer patients are selected for and enrolled in clinical trials.

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