David Michael Miller
Dane County's fledgling health IT industry has dodged a bullet, but more may be headed its way.
The usual Epic paradox was at work: The Verona-based worldwide leader in electronic health records looms over Dane County as both creator/nurturer and sometimes potential killer of the local health IT scene.
In this case, Epic briefly upped its one-year noncompete clause to two years for former employees wanting to consult on Epic software for a local company, Vonlay, that was being sold to a much larger diversified consulting company, Huron Consulting Group, in Chicago.
That caused fear to ripple through the local IT community. Sitting on the sidelines for two years in the fast-evolving health IT industry would leave the Epic expats in the dust, their value greatly diminished despite a lucrative market for their talents.
"People track their exit dates like it's a birthday," says a prominent former Epic employee, who like many other sources for this story, would only speak if not identified. (The respect that former employees have for Epic is often tempered by equal fear of publicly crossing the company.)
Consulting is a rewarding next step when Epic staffers tire of the software company's fast-paced life. Epic-focused consulting companies like Nordic, BlueTree and Sagacious gobble up former Epic installers to consult to the 300-plus mega-sized health systems that deploy Epic's integrated suite of healthcare software programs.
"You can make $180,000 to $200,000 a year," says a consulting executive, compared to the $100,000 that same employee might have made back at Epic. "And for us, it's 40 hours billable, maybe 50 total including travel."
Losing talent
For some former Epic employees, cooling their heels in a cool town like Madison for a year has proved attractive. They wind up populating downtown coffee shops, brainstorming their own startups, doing pro bono work at the 100 State tech collective, fixing bikes or taking jobs with American Family or CUNA Mutual.
But even the one-year cooling off period causes Madison to lose a ton of tech talent that might otherwise stay and juice up the local economy, complains a tech scene leader. As for the talk of a two-year noncompete, fuhgeddaboudit.
That tech leader said it would spur an exodus of Epic veterans to larger markets like Seattle, the Bay Area and Boston, where good, six-figure tech jobs could be found in fields other than health IT.
There is, in fact, compelling evidence that broad no-compete clauses suppress economic activity and damage wage levels, according to the Ewing Marion Kauffman Foundation, which promotes entrepreneurialism. It reports that "job creation and economic growth will be hindered" by the clauses, and workers subject to strict noncompete terms suffer "lower compensation in their next job, skill atrophy and a degradation of professional networks."
But Epic has its own case to make, observers say. Epic has grown and prospered over the past 35 years because it's zealously protected its intellectual property (IP) and recruited and heavily trained the smartest young people it can identify. The workforce today hovers around 8,000.
"It's understandable they want to protect themselves," Sagacious founder Shane Adams says of the Epic noncompete requirement.
"I think the one year is reasonable. I really do," says Stephen Fiehler, a cardiology IT consultant, citing his former company's need to recoup its heavy investment in training new employees.
Peter Robichau, who consults and writes about healthcare information security, says Epic's great success is a product of "the Epic way" of doing things, from staff recruitment to project management to tight control of its IP.
"This is what has made the company a huge success, and people who know this 'way' are a very valuable commodity," he says.
Market power
The Huron Consulting Group's announcement in April that it was buying Vonlay, a 130-person Epic-specialty consulting company, set off alarms locally when it became known than Epic had successfully intervened at the 11th hour to insist that Huron not hire Epic employees within two years of them leaving the company.
The one-year separation that Vonlay leaders observed in their hiring would be doubled for the acquiring firm. It also seemingly meant that former Epic employees who had signed an employment contract with a one-year noncompete clause when they had started at Epic would now be subject to a two-year stipulation they hadn't agreed to.
Huron and Vonlay officials did not respond to queries, but Epic spokesman Brian Spranger confirmed that Huron had agreed to a two-year noncompete term. And then the shocker: "This is being reverted to a one-year term." Spranger offered no explanation in his email for the reversal. "We'd rather not comment on the policy as a whole."
There is no shortage of speculation. Most of it circles around Epic fearing it might be treading on federal antitrust laws and being accused of anti-competitive business practices.
Madison attorneys Mike Erhard and Elizabeth Mackey, of Erhard & Payette LLC, say they see legal grounds on which Epic and the consulting companies could be sued, as well as different grounds for the consulting companies suing Epic.
Gwendolyn Leachman, a UW-Madison Law School professor, says that noncompete agreements are disfavored by the law because they are potential restraints on trade. But the courts will uphold them, including two-year terms, she says, "if they are reasonably necessary for the protection of the employer."
Epic recently threw in the towel on another personnel dispute. It settled a class action lawsuit alleging that it had failed to pay overtime to around 1,000 past and present quality assurance workers. The company, while admitting no guilt, offered $5.4 million to resolve the claim.
Weighing on the minds of the Epic expats is a high-profile class action filed by software engineers against Silicon Valley giants Google, Apple, Intel and others for allegedly conspiring to not hire one another's code writers. Steve Jobs himself is said to be the instigator of the no-poaching accord.
A federal judge rejected a proposed $324 million settlement in August, saying it was not nearly sufficient for the 64,000 member class. They originally claimed damages of $3 billion.
Some former Epic employees see a comparison to their situation in Madison, namely, that Epic enforces its no-hire clause through "conspiring" with its customers, which include all of the hospitals and major physician practices, and through the third-party consulting companies. One tech observer calls this an Epic "stranglehold" on the job market.
Epic does have extraordinary market power in Dane County. It effectively dictates job terms and other matters to the consulting companies, whose business is augmenting staff and fine-tuning software for Epic clients once their system is up and running. If those consulting firms fail to toe the Epic line, the company can deny them access to the technical documentation for a health system's Epic software. And that means the consultants can't do their job.
Clients, on the other hand, are rewarded for agreeing to honor Epic's noncompete clause in their own hiring -- in the form of receiving substantial "preferred customer" discounts to their yearly maintenance fees.
In the end, this means a hospital can't turn around and hire the young Epic whiz kid who just spent two years installing its Epic software. Nor can that Epic wiz kid quit her job and walk across the street to work for an Epic consultant who might have a contract with that hospital.
That one-year cooling-off period has to be honored first.
Seeking new business
Figuring out what Epic is up to is never an easy task. But it's clear that the software giant, after triumphing in the federally subsidized race to install electronic health records across the nation, has begun seeking new business opportunities.
This includes offering for the first time its own consulting services, which seemingly will put it in competition with Nordic, Huron and all the other third-party consulting firms.
Some of Epic's recent moves seem designed to squeeze these consultants. This includes limiting consultants' ability to use the word "Epic" in their advertising and frowning on billboards placed near Verona's Epic campus. It's known that one of the third-party consultants has even been told it can't advertise within 50 miles of Verona.
All this gets complicated. Most everyone recognizes that the health IT ecosystem in Dane County is both self-reinforcing and competitive. That is, while everybody is trying to eat somebody else's lunch, there is mutual benefit in growing the industry.
One would think that having a ready supply of smart Epic-trained technicians benefits everyone. But at this point it's not known if the Epic employees who jump ship, who seem so vital to this town's future, will be among the winners or the losers in the latest twists and turns of Dane County's most important industry.
