When you think of Epic, you hardly imagine a company which is running out of customers to exploit. But according to Frost & Sullivan’s connected health analyst, Shruthi Parakkal, Epic has reached the point where its target market is almost completely saturated.
Sure, Epic may have only (!) 15% to 20% market share in both hospital and ambulatory enterprise EMR sector, it can’t go much further operating as-is. After all, there’s only so many large hospital systems and academic medical centers out there that can afford its extremely pricey product.
That’s almost certainly why Epic has just announced that it was launching a cloud-based offering, after refusing to go there for quite some time. If it makes a cloud offering available, note analysts like Parakkal, Epic suddenly becomes an option for smaller hospitals with less than 200 beds. Also, offering cloud services may also net Epic a few large hospitals that want to create a hybrid cloud model with some of its application infrastructure on site and some in the cloud.
But unlike in its core market, where Epic has enjoyed incredible success, it’s not a lock that the EMR giant will lead the pack just for showing up. For one thing, it’s late to the party, with cloud competitors including Cerner, Allscripts, MEDITECH, CPSI, and many more already well established in the smaller hospital space. Moreover, these are well-funded competitors, not tiny startups it can brush away with a flyswatter.
Another issue is price. While Epic’s cloud offering may be far less expensive than its on-site option, my guess is that it will be more expensive than other comparable offerings. (Of course, one could get into an argument over what “comparable” really means, but that’s another story.)
And then there’s the problem of trust. I’d hate to have to depend completely on a powerful company that generally gets what it wants to have access to such a mission-critical application. Trust is always an issue when relying on a SaaS-based vendor, of course, but it’s a particularly significant issue here.
Why? Realistically, the smaller hospitals that are likely to consider an Epic cloud product are just dots on the map to a company Epic’s size. Such hospitals don’t have much practical leverage if things don’t go their way.
And while I’m not suggesting that Epic would deliberately target smaller hospitals for indifferent service, giant institutions are likely to be its bread and butter for quite some time. It’s inevitable that when push comes to shove, Epic will have to prioritize companies that have spent hundreds of millions of dollars on its on-site product. Any vendor would.
All that being said, smaller hospitals are likely to overlook some of these problems if they can get their hands on such a popular EMR. Also, as rockstar CIO John Halamka, MD of Beth Israel Deaconess Medical Center notes, Epic seems to be able to provide a product that gets clinicians to buy in. That alone will be worth the price of admission for many.
Certainly, vendors like MEDITECH and Cerner aren’t going to cede this market gracefully. But even as a Johnny-come-lately, I expect Epic’s cloud product do well in 2015.
I think Epic will command a premium over the likes of Meditech, CPSI, Allscripts, and it will gain market share at their expense. This is because many of the regional systems will like to align with the major systems in their area who would already be on Epic. And in a valuation game that many of these hospitals would get into, having Epic would make them more attractive than a hospital that today decided to implement a non-Epic system. Of course, Cerner has a realistic chance to compete.