The News From Epic on AI This Week

Documented Big Tech Challenges as AI moves into healthcare

Epic’s Big AI Push: A Game-Changer in Healthcare?

This week, Epic, the EHR giant, made headlines with a series of exciting announcements centered around integrating Artificial Intelligence (AI) into its platform. We knew this was coming as Microsoft announced their partnership with Epic last year and then announced DAX Co-Pilot in early January. I was and remain bullish on the partnership, giving Epic access to a larger group of technical talent along with access to OpenAI. Conversely, it gives Microsoft access to an industry that represents a large portion of the US economy with a distribution mechanism in Epic. The move signals a significant shift in how healthcare providers could leverage AI to improve patient care, streamline operations, and enhance decision-making processes. For an industry often criticized for lagging behind in innovation, this is big news even if it comes with a degree of skepticism that we all will continue to harbor.

Epic’s new AI capabilities are set to be rolled out across its extensive network over the coming months, which includes some of the larger domestic healthcare systems. The AI tools are designed to assist clinicians in everything from identifying high-risk patients to optimizing treatment plans and even predicting patient outcomes. By embedding AI directly into the workflow of healthcare providers, Epic aims to make advanced analytics and predictive insights more accessible and actionable. This is key as one of the largest challenges we have seen in AI over the past 2 years is getting people/workers to integrate the technology into their daily workflows. It has been well documented the struggles of driving high engagement and retention as ChatGPT is great but has difficulty moving the majority of Americans away from their comfort zone (Google). I have often argued that integration should occur without the user even knowing it is augmenting their efforts. This will make it easier for clinicians and staff to realize the potential upside associated with AI.

But as groundbreaking as these AI developments from Epic might be, they also underscore the broader challenges Big Tech has faced in trying to revolutionize healthcare. Despite their best efforts, tech giants like Google, Amazon, Apple, and Microsoft have struggled to make the kind of impact in healthcare that they’ve achieved in other industries. The contrast between Epic’s deep industry roots and Big Tech’s ongoing struggles highlights why healthcare has proven to be such a tough nut to crack.

Why has Big Tech Struggled?

1. The Legacy Systems Problem

One of the biggest hurdles Big Tech faces is the prevalence of legacy systems in healthcare. Epic and Cerner, two of the largest EHR vendors with almost 60% of the market, have been around for decades. These systems were built on older technology stacks and have evolved over time with layers of updates, patches, and customizations. Replacing or even modernizing these systems is not a simple task. 

Unlike in other industries, where legacy systems are more frequently retired or overhauled, healthcare organizations are reluctant to make significant changes due to the high stakes involved. Any disruption to an EHR system can have direct consequences on patient care, making healthcare providers extremely risk-averse. Big Tech’s agile, innovative approach clashes with the healthcare industry’s need for stability and reliability, resulting in a slower pace of change. The Microsoft partnership skirts many of these hurdles and gets them into the driver seat with Epic having the distribution channel in healthcare. Providers and health systems do not have the benefit of down time or an opportunity to put patient care on hold while they institute a new software system then train thousands employees.

 2. A Regulatory Maze

Healthcare is one of the most heavily regulated industries in the world. In the U.S., for example, regulations like the Health Insurance Portability and Accountability Act (HIPAA) impose strict requirements on how patient data is handled. These regulations create a challenging environment for innovation but are necessary as we have seen over the past year with Change Healthcare hack and other larger provider networks facing similar security issues.

Tech companies are used to moving fast and iterating quickly which is the exact opposite of the risk averse healthcare environment. However, in healthcare, any new technology must undergo extensive testing and validation to ensure it complies with regulations. The regulatory process can slow down the adoption of new technologies, making it difficult for Big Tech to implement the rapid, iterative improvements that are common in other industries. 

3. Complexity and Integration Challenges

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The complexity of healthcare IT systems is another major barrier. EHR systems need to integrate with a wide range of other systems within a healthcare organization, including laboratory information systems, pharmacy management systems, billing systems, and more. Each of these systems may also be running on outdated technology, adding layers of complexity. All of this complexity also needs to come with security which can cause additional delays as you move to orchestrate multiple systems safely.

Big Tech companies often excel at creating new systems from scratch, but integrating new technologies into a fragmented and complex environment like healthcare is a different challenge altogether. The need for seamless integration across multiple systems, many of which are highly customized to individual healthcare providers, makes it difficult for Big Tech to deploy their solutions effectively.

4. Customization and Fragmentation

Healthcare providers often customize their EHR systems to suit their specific workflows. While this customization allows for more tailored solutions, it also leads to fragmentation. Each healthcare provider might have a unique version of Epic or Cerner, with specific features and workflows that make it difficult to standardize updates or implement new technologies.

For Big Tech, which thrives on creating scalable solutions that can be broadly applied across multiple use cases, this level of customization presents a significant challenge. The fragmented nature of healthcare IT means that even the most advanced technologies may require extensive customization to fit within the existing infrastructure of each healthcare provider.

5. Vendor Lock-In and Market Dynamics

The concept of vendor lock-in is another obstacle for Big Tech in healthcare. Once a healthcare organization has committed to a particular EHR system, switching to a new vendor can be prohibitively expensive and complex. This creates a significant barrier to entry for new technologies, as healthcare providers are often reluctant to change systems, even if a better solution is available.

Moreover, the healthcare IT market is dominated by a few major players, like Epic and Cerner, who have established deep relationships with healthcare providers. These incumbents have little incentive to innovate rapidly, as their customers are locked into long-term contracts and heavily customized systems. This dynamic makes it difficult for Big Tech to gain a foothold in the market.

 6. The Relentless Focus on Security and Privacy

In healthcare, the security and privacy of patient data are paramount. Healthcare data is highly sensitive, and any breach can have severe legal and ethical consequences. As a result, healthcare organizations take a conservative approach to adopting new technologies, prioritizing security and privacy over innovation.

While Big Tech companies are certainly capable of developing secure systems, the heightened focus on data protection in healthcare can slow down the adoption of new technologies. Implementing new solutions requires rigorous testing and validation to ensure they meet stringent security and privacy standards, further delaying progress.

7. Financial and Cultural Barriers

Financial and cultural barriers play a significant role in why Big Tech is struggling to fix healthcare. Many healthcare organizations operate on tight budgets, especially in the public sector, where investment in IT must be balanced with other critical spending areas. This limits the resources available for adopting new technologies.

Culturally, there is also significant resistance to change within healthcare organizations. Clinicians and other healthcare professionals are often accustomed to their existing systems and workflows, and there is a natural reluctance to adopt new technologies that may disrupt their day-to-day operations. Even when new systems promise long-term benefits, the short-term disruption they cause can lead to resistance from users.

8. The Rising Power of Health Plans

The dynamics within the healthcare industry have also shifted post-Obamacare, with health plans increasingly buying up care networks, PBMs, home health and becoming more powerful. This consolidation has given health plans greater control over the financial aspects of healthcare, often squeezing the margins of hospitals and providers.

As health plans continue to grow in power and influence as they control more of the healthcare dollar, hospitals and providers find themselves with less disposable income to invest in new technology. The focus has shifted to cost containment and efficiency, rather than innovation. This financial pressure further constrains the ability of healthcare providers to adopt the advanced technologies that Big Tech offers, making it even harder for transformative change to take hold.

Conclusion: A Unique Challenge

Epic’s recent AI announcements show that there’s still room for innovation within the traditional healthcare IT landscape, but I think it was a great start to the Microsoft partnership. The healthcare industry presents a unique set of challenges that have proven difficult to overcome, even for the most powerful and resource-rich companies in the world. That being said, the stakes are high as any incremental improvement in healthcare with AI can drive significant growth to the US economy. As one of the largest expenses for the US government or US employers, both entities would severely benefit from being able to invest that capital into higher returning activities.  The potential rewards are enormous for all stakeholders to continue to drive AI efficiency and technology into healthcare while respecting the challenges outlined. Epic’s move into AI might be a step forward, but for Big Tech, the path to truly transforming healthcare will continue to be a slow moving project that we all need to pay off to drive GDP growth for the US in the next decades.