Leaked docs reveal extensive noncompete agreements at Epic Systems
Is the largest electronic health record vendor in the United States using restrictive noncompete agreements to kneecap its employees and monopolize the market?
The hack into UnitedHealth’s Change Healthcare system has dominated health-care media the past few weeks. As it should.
UnitedHealth gained such a significant position in the claims integrity business because it bought Change. And the benefits of the deal, which was challenged by the Department of Justice, are now being put into question as UnitedHealth is sitting on weeks’ worth of reimbursements owed to doctors’ offices that don’t have the bandwidth for the delay. UnitedHealth has even been found using the hack to its advantage, trying to push through acquisitions of smaller medical practices as they suffer financially.
The hack itself highlights many of the reasons to avoid such concentration – especially in essential industries like our health care system. The bottlenecked space becomes a target for hackers and can shut down not just one business, but all of the businesses that rely on it. It also introduces a significant risk in exposing sensitive personal health data, something that was raised as a concern when UnitedHealth announced its intent to acquire Change Healthcare.
UnitedHealth is not the only bottleneck to be concerned about in the health care industry. As many know, Wisconsin-based Epic Systems is the largest electronic health record (EHR) vendor in the United States.
EHRs are the digitalized versions of patients’ medical charts. They are now in widespread use across the country, thanks to billions of dollars that the federal government, under a 2009 law signed by former President Barack Obama, offered health care providers to adopt them. The idea behind the policy was to create a more integrated and data-driven health care system. It also drove great profits to Epic and its competitors at the time, Cerner and Allscripts, which lobbied the government for the new law.
Today, Epic holds the EHRs of more than 305 million patients. No other EHR vendor comes close to Epic’s reach in the market. According to KLAS Research, it hosted records for 36% of hospitals and 47% of hospital beds in 2022, a reflection of its use by larger health systems. Among its closest competitors, Cerner, now owned by Oracle, had 25% of hospitals and 26% of beds, while Meditech had 16% and 14%, respectively.
The contrast wasn’t always so stark. In 2017, Epic and Cerner were neck and neck in their market shares before the former surged ahead. Epic was the only vendor to gain hospital beds between then and 2022, adding nearly 95,000 beds to its repertoire, while the others lost.
So, how did Epic Systems come to be the No. 1 EHR vendor in the country? According to Modern Healthcare, Epic is gaining market share as hospitals merge and choose to use its system. Epic may also simply offer superior products, as customers for years have apparently complained about Oracle’s revenue cycle services.
Further, unlike Oracle, Epic is a mostly employee-owned, private company, meaning it can dedicate substantial resources toward product development rather than shareholders. “We’re private. That allows us to avoid the tyranny of the quarter, and to focus on R&D,” Epic CEO Judith Faulkner said in a 2020 interview, adding the company was committed to not being acquired or acquiring any other company. By contrast, Cerner sold to Oracle in 2022.
But as part of its strategy, Epic has also constructed what health care consultant Seth Joseph called “a labyrinthine web of contracts to safeguard its intellectual property” in a Forbes article last month. And a core component of this web is the aggressive noncompetes that Epic enforces on its employees, with cascading effects on its hospital customers and consultants. This allows it to tighten its control over the EHR industry.
Last June, Wisconsin-based publication Isthmus released a sweeping investigation into Epic’s “extensive work restrictions” on former employees. It found that the company’s noncompete chokes off ex-workers from 4,500 companies that have business ties to Epic, its customers, partners and rivals. This “blacklist” of so many companies has driven some people out of the health care industry entirely. A copy of it was shared publicly by former Epic employee Greg Ledray in response to the Federal Trade Commission’s rulemaking to ban noncompete agreements.
New interviews and leaks to HEALTH CARE un-covered reveal that Epic has much greater control over its former employees than the typical company that seeks to enforce a noncompete through arbitration or litigation. As a software provider, if an ex-staffer goes to work for a blacklisted firm that uses Epic’s software, it can – and does – deny them the ability to perform their duties, skirting the legal system entirely.
“That's the official policy for how Epic enforces the noncompete,” an ex-employee, who spoke to HEALTH CARE un-covered on the condition of anonymity, wrote. “Denying access to training, support materials & community discussion board (log-in credentials to the UserWeb).”
“Without UserWeb access, employee's ability to perform job tasks in Epic-related hospital IT is degraded to the point where they are unemployable by these organizations,” former Epic employee Greg Ledray explained in a comment last year responding to the Federal Trade Commission’s rulemaking to ban noncompete agreements.
This power has led Ledray to recommend that the FTC broaden its definition of a noncompete clause to make it clear that it not only has the effect of prohibiting the worker from seeking or gaining employment but also “executing job duties associated with employment.”
HEALTH CARE un-covered obtained a copy of Epic’s 2021 noncompete, which does not state that the company will and has enforced its noncompete through its support materials and platform credentialing process.
Epic also strongarms its customers and consulting firms, the ex-employee said: It “denies the customer access to discounted software maintenance…. Consulting companies will get blacklisted and lose their accreditation.”
These tactics align with the comments of another anonymous commenter, who told the FTC that Epic wields “power by threatening to harm companies that hire ex-Epic employees by increasing costs of licensing their software or removing a company's access to their software, which could put hundreds of the business's employees out of a job.”
This grip creates an environment in which EHR consulting firms are walking away from potential recruits.
Screenshots shared with HEALTH CARE un-covered of conversations with recruiters at Nordic and HCI Group, both EHR consulting firms, show them walking away from a potential hire when they learn that a noncompete may still be in effect:
The FTC is slated to vote on a final noncompete ban in April, estimating it would impact about 30 million Americans and increase wages by nearly $300 billion per year. The new rule was a signature part of President Biden’s Executive Order on Competition, which bemoaned that the clauses make “it harder for [workers] to switch to better-paying options.”
Commenters attested to these harms in their submissions to the FTC.
“I am certain that Epic's noncompetition policy severely limits former employees from obtaining jobs that they would otherwise be highly qualified for,” said an anonymous person last year.
“Additionally, I believe that Epic leverages the noncompete, along with their EHR market dominance to reduce the compensation of current Epic employees, which would otherwise be higher. I believe that this negatively affects current and former Epic employees, as well as harms competition on the EHR market.”
In Epic’s home state of Wisconsin, law firms that represent employers using noncompete agreements have critiqued the new FTC rule, portraying it as excessive and unnecessary because the state already has “a longstanding pro-employee legal standard” that renders an overly broad clause unenforceable. The Wisconsin Hospital Association, which represents more than 135 member hospitals and integrated health systems, also opposed the new rule in a letter last year, complaining that it uses a “one-size-fits-all” approach to replace state laws like those enacted in Wisconsin to safeguard workers from contracts that impose “an unreasonable restraint.”
Wisconsin Republican Scott Fitzgerald, a member of the House Judiciary Committee, also joined a letter blasting the proposed ban as a “power grab” that regulates a part of the U.S. economy that should be governed by state law.
In addition to its limitations on noncompetes, Wisconsin also has a law that fines employers for blacklisting former workers. If Epic’s policies are any indication, however, Wisconsin’s measures have not succeeded in preventing employers from enforcing overly excessive noncompete agreements on their workers and using them to restrict competition within the industry.
Epic is an extremely abusive employer. I graduated from nearby UW-Madison from the Computer Science department and this is well known among students there. The smart ones know to stay away from Epic.
They require 50-60 hour work weeks with seemingly large salaries, although per hour it's much less than the average software developer salary in the area. You're pretty much a slave until you inevitably burn out after a year or two. Their model is preying on young undergrads who don't have much money yet, so I'm not surprised they have such an insane non-compete agreement.
I've personally known many former Epic employees at jobs I've had, so it's alarming that these people may be still barred from so many jobs in the area.
I think Epic is known for average salary but then you work there for a while and get some Epic certifications and then you leave to make 3x as an “Epic consultant” charging through the nose for implementations in hospitals.