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

As healthcare technology grows increasingly important in our everyday lives—from the software that manages our medical records to the explosion of health and fitness-monitoring devices and apps—different cities around the country are trying to claim the mantle of “America’s healthtech capital.”

Madison, WI, is among the places vying for that title. And while it can thank Epic Systems for even putting it in the conversation, there are also rumbles of discontent that Epic could do more to bolster the nascent local healthtech industry.

Founded in 1979 by the ambitious but media-shy Judy Faulkner, Epic has enjoyed an incredible growth spurt over the past decade. Capitalizing on the healthcare industry’s federally subsidized shift to digitized medical records, Epic has grown from about $500 million in annual revenue in 2007, according to Forbes, to $1.8 billion in revenue last year. Epic’s rapidly growing corporate campus in the Madison suburb of Verona is the home base for about 8,000 employees, up from 5,200 just three years ago.

That makes Epic one of Wisconsin’s largest private employers and the undisputed anchor of Madison’s burgeoning healthtech cluster. Locals have compared Epic with the likes of Microsoft (NASDAQ: MSFT) in Seattle and Dell in Austin, TX, two tech titans that formed the roots from which their respective tech communities sprouted.

Those hubs took time to grow, and Madison has its work cut out to ascend the national healthtech throne. But Greater Madison Chamber of Commerce president Zach Brandon believes the region has the requisite strengths in biotech, healthcare, and software to churn out more healthtech winners.

“Epic happened to be the first of them,” Brandon says. “But the argument I’m making is it won’t be the last.”

But as Madison’s healthtech cluster picks up steam, where does Epic fit in? Does its status as the region’s anchor healthtech company mean it has a responsibility to support the local ecosystem?

So far, Epic has basically been an “indirect or unwitting contributor” to the local sector’s growth, says James Dias, co-founder and CEO of Madison-based Wellbe, which makes cloud-based software that helps guide patients through the process of medical treatments and surgeries.

Epic is a magnet for recent college graduates from around the country who are wowed by its massive, whimsical headquarters that seems like it belongs in Silicon Valley, rather than rural Wisconsin. The campus certainly worked its magic on Dan Wilson, a Detroit-area native who had never been to Madison or heard of Epic before the company recruited him in 2007, right after graduating from the University of Michigan with degrees in economics and German. Wilson was “blown away by the campus” and impressed enough with the company’s pitch that he turned down a job offer in Europe and moved to Wisconsin instead.

Wilson says he “learned a ton” over the next four years managing teams that installed the company’s software in hospitals. “I got exposed to some of the biggest institutions around the country, got to learn what they’re looking for, how they function,” he says. “I learned a lot of valuable lessons you wouldn’t get in other settings.”

Wilson quit Epic in 2011 because he was “looking for a new challenge,” he says. He’s not alone—hundreds reportedly quit the company each year.

But instead of abandoning Madison for a city like San Francisco, he decided to stay and form his own healthtech company, Moxe Health. He chose Madison partly because it’s cheaper to build a business here than in Silicon Valley, but the presence of Epic was key. It’s an abundant source of talented people that have experience with enterprise healthcare software, he says.

“I have remained because I continue to believe that if this business is going to be successful, it’s going to be successful from Madison, Wisconsin,” Wilson says.

He’s not the only one who has come to that conclusion. It’s tough to pinpoint exactly how many Epic ex-pats have stayed and launched startups, but other recent examples include software companies like Redox and Branch2, as well as a cadre of consulting companies that have sprung up to help hospitals and clinics optimize their Epic software. Those include Nordic Consulting Partners, Vonlay (since acquired by Huron Consulting Group), BlueTree Network, and others.

All this is to say, the mere presence of Epic has spawned related companies and helped grow the local healthtech cluster. “Other companies have benefited from being in the orbit of Epic,” Brandon says.

Still, it’s reasonable for local advocates to hope for Epic to contribute more directly to the local scene, say by forming a venture capital arm or an incubator. Dell’s investment unit, Dell Ventures, announced a $300 million fund in 2013 to invest in tech startups. And Microsoft launched a home automation startup accelerator last year, housed in its headquarters located outside Seattle. That program is a partnership with one of Epic’s neighbors, Madison-based American Family Insurance, which also has a VC fund to invest in startups.

But the chances of Epic providing direct support to local startups are unlikely, observers say. That would run counter to Epic’s “ethos,” Brandon says. Faulkner never took venture capital, and it’s well known that two of her core rules are never to sell the company or take it public.

“The argument is if they weren’t a venture-backed company, it’s not part of how they operate, you’re asking them to sort of change their culture” by investing in startups, Brandon says. “I don’t think that’s a fair expectation.”

Epic isn’t “obligated to lend a hand or make a handout,” says Michael Barbouche, founder and CEO of Forward Health Group, a Madison company that makes Web-based software that can gather and analyze data about large groups of patients. Epic has “created a huge groundswell of energy about the space of health IT,” Barbouche says. By “that, in and of itself, they’ve already given a huge gift to many of us.”

And perhaps that’s enough to … Next Page »

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Jeff Engel is a senior editor at Xconomy. Email: jengel@xconomy.com Follow @JeffEngelXcon

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