How Epic took over the hospital EHR market

Since the federal government pushed the use of electronic health records in 2009, vendors have been in a race to sell the software solutions to health systems.

The cost of EHR installation varies by hospital and health system, but it can be run more than a $1 billion for larger organizations. For example, Boston-based Mass General Brigham, formerly known as Partners Healthcare, and Rochester, Minnesota-based Mayo Clinic both reportedly spent more than $1 billion to install Epic Systems' product.

Read more: Epic rolls out app market replacement

Oracle Health, formerly known as Cerner, is the second biggest EHR vendor by market share behind Epic. The company signed a $10 billion, 10-year deal with the Veterans Affairs Department in 2018 to install its EHR across the VA health system.

The high price tags for the technology haven't slowed organizations' adoption of EHR systems. Here’s a look at how the leading EHR companies are doing.

How big is Epic’s market share?

In 2017, Cerner and Epic were used by approximately the same percentage of acute-care hospitals. By the end of 2022, Epic was in 35.9% of hospitals compared with 24.9% for Cerner/Oracle Health, according to KLAS Research. Those statistics underscore Epic’s dominance inside the biggest hospitals. Some 47% of acute-care hospital beds were affiliated with Epic in 2022, compared with 25.8% of beds linked to the Cerner/Oracle Health system, KLAS found.

Epic has gained 434 hospital customers representing 94,656 beds since 2017. Oracle Health has added 99 hospitals in that time frame and another competitor, Meditech, has added 14.

The numbers are likely to tip more in Epic’s favor. Earlier this month, Salt Lake City, Utah-based Intermountain and Pittsburgh-based UPMC each announced they would migrate their hospital EHR systems to Epic. Each previously used Oracle Health.

What's Epic's secret for success?

Health systems that acquired hospitals and clinics in the 2000s and 2010s are consolidating the various EHRs to one health records system. In 2022 alone, 15% of wins for Epic came from the result of EHR standardization after a merger and acquisition, said Alexander Lennox-Miller, an analyst at CB Insights.

“I think what we're seeing fundamentally is these large hospital systems are finally pulling the trigger on unification of their IT infrastructure,” Lennox-Miller said.

Also, the company speaks the language that hospital executives want to hear, Lennox-Miller said. “Epic has built a lot of its reputation on being a healthcare-focused company,” he said. "Whereas with Cerner it feels like a tech vendor that’s trying to sell you a product.”

Analysts say Epic's biggest challenge to its growth is offering affordable solutions to smaller hospitals.

Epic did not respond to a request for comment.

Where does that leave Oracle Health?

Oracle acquired Cerner in June 2022 for $28.4 billion. Since then, the combined Oracle/Cerner has faced a delay with its massive VA Department EHR project, renegotiated its contract with the VA at the agency’s request from a five-year deal to five one-year deals, and laid off employees in June. The uncertainty has rattled some nerves.

Cerner also had challenges before the acquisition, analysts say.

“With Oracle Health/Cerner, one of the big things that's been a complaint for customers for years and years has been around revenue cycle, where their customers have said, ‘It’s not working the way we need to, we're losing lots of money,’" said Tyson Blauer, KLAS's research director. “Epic has not had that issue.”

Oracle gained 22 customers in 2022, mostly comprising small, community-based hospitals. Because they were smaller hospitals, the company ended up losing 4,658 beds for the year.

What do Oracle Health’s financial results look like?

On an earnings call last week, Oracle CEO Safra Catz said Cerner was facing near-term headwinds as customers move from licensed purchases to cloud subscriptions. She said the company was working to drive Cerner’s profitability to Oracle’s standards.

After earnings were announced, Oracle’s stock fell 13%.

Despite the challenges, Oracle Health has loyal customers, Blauer said. Lennox-Miller said Oracle Health’s VA and Defense Department EHR installation project could help it gain international customers. In 2022, the company added customers in Canada, the United Kingdom, the United Arab Emirates and Germany.

Oracle Health did not respond to a request for comment.

What about other EHR vendors?

Other players in the space are Meditech, Computer Programs and Systems (CPSI), and Altera Digital Health, formerly known as Allscripts.

Meditech has 16.3% of the market of acute-care hospitals and 14% of acute-care beds, according to KLAS. Since 2017, the company has lost 670 beds.

Altera has lost 105 hospitals and 26,608 beds since 2017, according to KLAS. The company’s hospital business was sold to Constellation Software subsidiary Harris Healthcare for $670 million in March 2022. The hospital EHR part of the company rebranded itself Altera Digital Health in May 2022. The remaining part of Allscripts focuses on data analytics and renamed itself Veradigm in January.

CPSI's focus is community hospitals and it has a market share of 8.2% of hospitals and 2.5% of acute-care beds, both of which have fallen since 2017. In the second quarter of 2023, CPSI posted a net loss for the first time in a while. In a call with analysts, CEO Chris Fowler said the company was facing economic headwinds but its EHR customer base had stabilized. 

Meditech said KLAS’ market share data reflected consolidation among larger hospital systems. Altera and CPSI did not respond to a request for comment. 

What about small practice EHR vendors? 

Several EHR companies primarily serve clinicians outside the hospital. NextGen Healthcare and Athenahealth serve medical groups and physician practices.

Private equity firm Thoma Bravo acquired NextGen for $1.8 billion earlier this month while Bain Capital and Hellman & Friedman paid $17 billion for Athenahealth in February 2022.

Many of the smaller EHR companies lack the resources to compete with Epic. As such, private equity buyout could be the future for other smaller EHR companies, Lennox-Miller said.