Epic Systems CEO Judith Faulkner doesn’t typically have much to say to the media. That’s why it caused a stir when the website Healthcare IT News ran a series of articles based on an exclusive interview with Forbes’ 3rd-richest self-made woman in the country last month.
Perhaps the most eyebrow-raising finding from the coverage related to how the Verona-based electronic health records company spends its money: According to Faulkner, Epic invests 50 percent of its operating budget into research and development.
It’s a striking figure compared to what other tech companies spend on R&D. HIT’s Bernie Monegain reported that based on SEC filings, 50 percent is higher than the R&D spending levels of some of Epic’s biggest competitors. For example, the Chicago-based Allscripts spent about 34 percent of its budget last year on R&D. The Kansas City-based company Cerner, which is currently the EHR market leader, clocked in at 19 percent.
Even tech companies that have outsized reputations for digital innovation don’t come close to a 50% spending rate: In the last year, Google reported spending 45 percent of its operating budget on R&D, while Apple and Amazon reported 36 and 18 percent, respectively.
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Since Epic is a private company, it does not formally report its finances to the federal government and Faulkner’s assertion could not be independently confirmed. However, Faulkner assured HIT that the number is accurate.
“I know what we spend,” said Faulkner in the interview.
According to Epic’s vice president for client success Eric Helsher, there’s a wide range of projects that fall under the R&D umbrella. The company is constantly working on tweaking and expanding on its existing software, adding new interfaces and modules for clients to work with. There are also more ambitious software updates for example, Epic is working on an initiative to incorporate data from non-Epic-based health systems into its patient portal.
Then there are big data and machine learning projects like the Cosmos Research Network an effort to create sophisticated models that can predict health outcomes based on enormous pools of health records data.
Helsher wrote in an emailed statement that the projects that the majority of Epic’s R&D expenses go toward are its “population health software, our data warehouse and reporting tools, developments in predictive analytics and cognitive computing a growing number of specialty-specific modules,” and “social and community care.”
All told, about 65 percent of Epic employees are actively working on R&D projects in some form, he said.
When asked why Epic spends so much on R&D compared to other companies, Helsher said that it has to do with the fact that both Faulkner and Carl Dvorak, Epic’s president, are computer scientists.
“Plus, we’re not publicly traded,” wrote Helsher. “As a result, our focus, culture and values are different.”
To exemplify that unique culture, Helsher pointed to the fact that Epic develops all its software in-house. It’s a point of pride for Faulkner and the Epic executive team: At the company’s annual Users Group Meeting last month, she showed off some charts comparing the number of software acquisitions various electronic health record companies have made over the past decade.
Epic’s software acquisition total? Zero.
Date: October 07, 2016