Judy Faulkner is founder and CEO of Epic Systems Corp., which she launched in 1979 with a $70,000 bank loan secured against her house and the sweat equity of a few programming customers. Privately held Epic, based in Verona, Wis., is now one of the leading electronic health-record vendors in the country, with 2014 revenue of $1.77 billion and clients that include Kaiser Permanente, Cleveland Clinic, Johns Hopkins and CVS Health. It dominates the key market niche of complete EHRs sold to hospitals and physician practices. Last August, facing congressional criticism that Epic's products weren't interoperable with other EHR systems, Epic hired a prominent Washington lobbying firm to discuss the issue with lawmakers. Faulkner counters that Epic's EHRs are interoperable and that the number of patient records its customers share with others is increasing. She just announced plans to donate most of her shares of Epic stock to a charitable foundation that will keep Epic privately owned. Modern Healthcare reporter Joseph Conn recently spoke with her about the origins of her company, the reason for its continued reliance on the MUMPS programming language and why she has kept her company private. This is an edited transcript.
Modern Healthcare: Please describe your early days at Epic Systems Corp.
Judy Faulkner: In 1979, we were located in the basement of an apartment building that was rented out for small businesses as an incubator. The company initially was called Human Services Computing. I was working part time for the University of Wisconsin and part time for the company. It probably added up to 90 hours a week.
MH: As a University of Wisconsin graduate student in computer science, you studied with Dr. Warner Slack, who is the co-founder of the division of clinical informatics at the Harvard Medical Faculty Physicians.
Faulkner: In the early 1970s, Warner was one of my professors and asked me to work with him. They gave a course on computers in medicine in graduate school. That was what got me into computers in medicine.
Math, in my mind, is truth. Computer science and engineering are what works. It's very interesting to put the two together.
MH: Describe how you first came into contact with the Massachusetts General Hospital Utility Multi-Programming System (MUMPS) programming language and database.
Faulkner: I came into contact with MUMPS after Warner left Wisconsin and went to Beth Israel in Boston. I visited him in Boston occasionally. He met Neil Pappalardo and thought Neil's proprietary version of MUMPS, called the Meditech Interpretive Information System (MIIS), was a good thing. I met with Neil, who had co-developed MUMPS and co-founded his own health IT company, Meditech. I thought MUMPS was a good thing, and we took it on here at Epic.
MH: Why did MUMPS catch on the way it did in healthcare information technology?
Faulkner: It was a very easy language to learn. Because it was easy to learn, that's why people didn't think it was good enough. A lot of people could pick it up, which caused it to lose credibility with computer programmers. It was easier than COBOL and FORTRAN. You could write code almost as fast as you could think.
MH: People now say MUMPS is old technology.
Faulkner: The analogy is Panasonic. People will say, “old, no good,” because people are looking at their old 1960 Panasonic TVs with rabbit ears. MUMPS has changed over the years, and it has kept up and more than that, it has led. Epic uses Cache, a proprietary upgrade of MUMPS developed by Intersystems in Cambridge, Mass. People recognize that their cellphone is not the same as 10 years ago. Why do they think a computer language hasn't made the same kind of changes? It has.
MH: How did you get your business started?
Faulkner: We did on-call schedules. Doctors had complained they weren't being treated fairly. The client said the complaints stopped the week that our computerized scheduling went into place.
Then Dr. John Greist (at the University of Wisconsin) asked me to build a system that would keep track of information over time. They wanted to be able to define their own data elements, define their own data screens and collect clinical information. That's how I got started creating Epic.
I went into one department where they had 20 simple questions and they had money for a programmer for six months. After I put those 20 data elements in, I taught them how to do it. I charged them for 45 minutes and they were done.
MH: Why have you been so insistent all these years that your company not do an IPO and go public?
Faulkner: Have you ever worked for a publicly traded company? Have you ever worked for one that's privately held? Which is the best if you want to do a good job for your customers? That's why. You don't have the tyranny of the quarterly earnings. When you're public, you can never forget that your fiduciary duty is to increase shareholder value. When you're private, your shareholders are your employees and you want to do the best you can, but you look at it a different way. If we make a large sale one year, we don't have to make a larger sale the next year to keep up with analysts' forecasts. I like being private.
If we allowed ourselves to be bought by a public company, we wouldn't exist right now. They would say we had to sell EHR systems to everyone.
We had a New York hospital customer that experienced damage from Superstorm Sandy. We told them they didn't have to pay us. If we were public, I couldn't put programmers in individual offices like we do to get better programming. It would be just, “Sorry, put them all in one room.”
MH: Is the Epic employee stock distribution plan like a Silicon Valley company, where equity is a standard part of employee compensation?
Faulkner: Everybody who's here for certain period—now it's three years—gets stock. We have both employee stock option plans and stock appreciation rights. The benefit of these plans is that employees are interested in how the company does. I don't want our staff here to be bottom-line thinking. Our sales staff doesn't have commissions.
MH: Do you have a succession plan?
Faulkner: Carl Dvorak is the president, so he would be the next in line. Carl and I, our jobs overlap a lot.
MH: Forbes has listed you as one of the wealthiest people in America, with a net worth of $2.8 billion. Are they close to being accurate?
Faulkner: I don't even know, how do they know? Forbes says I'm a billionaire. But I'm the worst billionaire ever. That's what one of my staff said.
MH: Why the worst?
Faulkner: My car is about 5 years old—an Audi station wagon. The previous car, also an Audi, was about 11 years old.