Epic shift: Demand for cloud EHR service is soaring

As providers change IT strategies to embrace the use of the cloud, Epic finds rising demand for hosted applications.

When Epic Systems announced that it was buying a Mayo Clinic data center for $46 million, it put the health IT vendor’s growing data hosting business into the spotlight.

The electronic health record giant offers both on-premise and hosted data solutions for its customers. That type of hybrid business model is an absolute necessity in today’s demanding health data management environment, says Epic President Carl Dvorak.

Epic's strategy is to provide healthcare organizations with the most flexible and cost-effective options, regardless of whether Epic or customers themselves manage their IT infrastructure.

"There is not just one way to do healthcare, and there is not just one way to do an EHR," contends Dvorak. "We provide options for our customers, be it on premise, hosted, backup hosted, or hosting data for an ACO or other consortium."

"Our hosting interests had really grown a lot faster than even we had anticipated," says Dvorak, who reveals that about 250,000 end users are currently using the company’s hosted data center solution.

As part of Epic’s strategy, the Mayo Clinic’s 62,000-square-foot facility in Rochester, Minn., is being transformed into a disaster recovery data center to serve as backup infrastructure for the company’s production data center located in Verona, Wis.

"From a managed services standpoint, we want to make sure that our customers have all of the same flexibility with the software that they would have if they were doing it on premise," adds Stirling Martin, president of Epic Hosting. "We’ve designed the hosting offering to allow all the same configurability they would have if they were running it themselves. We’re just taking care of the infrastructure for them."

The movement to hosted services is an ironic development for Epic, which started in 1979 as a hosting company, Dvorak says. At that time, it was called “time share”—a term that has evolved over the years from remote computing to application service provider to software-as-a-service (SaaS). Now, the approach is primarily known as the cloud.

"Cloud is a new name, but it’s a time-tested concept," argues Dvorak, although he acknowledges that most of Epic's implementations from the 1980s until now have been for customers who operate their own data centers. "As investment in telecommunications increased and telecom capabilities dramatically improved in the early 2000s, high-speed wide area networks enabled [us to offer] a high-quality graphical user interface experience when hosted in a remote data center by a third party."

Consequently, Epic made the decision about four years ago to not only host data but also provide a higher level of application management for its customers. The renewed focus on its hosting business led it to build its on-campus production data center, which Dvorak claims is impervious to tornadoes—a potential risk in central Wisconsin. The data center’s backup generators can power the facility in the case of a blackout for several weeks, he adds.

The availability of the Mayo Clinic’s data center in Minnesota was “fortuitous” because of its close proximity to the company’s Wisconsin headquarters and the fact that Epic was considering either building or buying a second data center to support its hosting business, according to Dvorak. The Mayo Clinic will lease back from the vendor a portion of the data center for four years, after which the parties will decide whether to extend the arrangement.

We think the best economics come through the most flexible offerings.While hosting is a viable option for many of Epic’s customers, Dvorak concedes that a significant number of large healthcare providers have made major investments in their own data centers—which they own and operate. In those cases, Epic installs its systems on premises in both customer data centers and backup sites. Another option for those customers who choose to host at their own facility is using Epic services for disaster recovery only.

However, according to Frost & Sullivan research analyst Koustav Chatterjee, vendors such as Epic are focusing on SaaS-based EHRs because of increasing cost pressures on providers, as well as the low productivity and return on investment that providers are experiencing with on-premise solutions.

In addition, he asserts that not only are cloud EHRs less expensive than on-premise solutions, they are also easily implemented, interoperable, auto-scalable, remotely accessible and compatible with disparate healthcare systems.

"We think the best economics come through the most flexible offerings," Dvorak says. "There certainly are management aspects of the technical cloud infrastructure that are beneficial. But whether it’s cloud-hosted or not actually doesn’t really have any material bearing on the EHR itself."

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