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Conference guide: News and analysis from HIMSS 2014

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Epic's Faulkner: Large customers not buying into health IT cloud

At HIMSS 2014, cloud vendors abound. But who's buying? Epic Systems Corp. founder Judy Faulkner discusses health IT cloud's prospects moving forward.

This an installment of 'HIT Happens,' a regular opinion column on health IT trends.

ORLANDO, Fla. -- Over the last few months, it has been clear that health IT cloud vendors are becoming more viable choices for enough healthcare providers that the market will grow into a $50 billion global market by 2018. Vendors of all stripes are charging hard into the marketplace.

Not all providers are buying in to the idea of the health IT cloud, however. Small providers are handing over various aspects of IT infrastructure or services, such as clinical data security monitoring or virtual desktop management, to third-party vendors. These cloud providers tell us they're also slowly signing up bigger accounts one by one, but their meat and potatoes remains to be small groups, hospitals and specialty practices up to medium-sized hospitals.

Epic may, at some point, have a larger cloud play in mind. Judging from Faulkner's words, it won't be coming in the near term.

And all those smaller providers add up: athenahealth Inc. surprised Epic Systems Corp. by winning the 2013 Best in KLAS Overall Software Vendor award, announced last month. It was the first time since the award category was created in 2007 that a company other than Epic had won. It will be the last, too, because KLAS Enterprises is discontinuing it.

"We decided a year ago to discontinue the Overall Software Vendor Best in KLAS category after 2013," Larry Salazar, KLAS marketing director, said in an email to SearchHealthIT. He added that his firm determined that provider interest and buying decisions are typically based on individual products or suites, so  it was no longer helpful to rate vendors in an overall manner. "Our decision was based on how we best align our data with the needs of the providers."

But that win, even if she might find it anomalous, didn't escape the notice of Epic CEO Judy Faulkner. "They won fair and square and it's relevant for their market," she wrote in an email Monday, following up a casual conversation the previous day at the College of Healthcare Management Executives CIO Forum. "However, Epic came in first in almost all the categories relevant to our target market."

For the bigger health systems, old-guard EHR vendors such as Epic still rule the day, and their customers do the hosting in their own data centers. One would think that even Epic, if the market demanded more cloud services, would accommodate the needs of their customers. That day could come sooner than later.

Epic's big triumph here at HIMSS 2014 was bagging CVS Caremark Corp. as its latest customer. CVS said it will use EpicCare in its MinuteClinic retail healthcare locations. If it would be possible to be more on top of the world than it was before that announcement, Epic is there.

Yet health IT cloud vendors like athenahealth, which provides Software as a Service (Saas), and infrastructure vendors AT&T Inc., Verizon Communications Inc. and Integra Telecom Inc., are forcing healthcare providers, especially those in rural areas, to reconsider traditional data center setups. Dell Inc. and Toshiba America Inc. offer the one-two punch of discounted hardware and custom cloud services to healthcare providers.

For Faulkner, cloud as a concept isn't anything new. It has been around since 1979 when she founded Epic. IT people, she said, have simply renamed it different things through the years, such as application service provider, SaaS, colocation and a number of other terms.

The bottom line is that her customers, for the most part, don't yet want the cloud. They want to keep Epic and their other data systems on their own property, Faulkner said, adding that for the most part, health IT cloud services are far too expensive when taking into account return on investment.

Faulkner said Epic has met some success with independent physicians through Epic Community Connect, a model in which a local hospital sets up its own cloud and, in effect, resells Epic to local docs looking to outsource its EHR system. Baptist Health in Birmingham, Ala. is one such provider. Its sophisticated Epic resale strategy includes service-level agreements outlining performance guarantees for those docs.

Epic may, at some point, have a larger cloud play in mind. Judging from Faulkner's words, it won't be coming in the near term. That's despite a changing of the Best in KLAS guard, in which the cloud David slayed Goliath.

Let us know what you think about the story; email Don Fluckinger, news director, or contact @DonFluckinger on Twitter.

This was first published in February 2014

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