Artificial intelligence has become the next major battleground in health tech. Many healthcare AI startups were first out of the gate with technologies like AI ambient scribes and clinical AI assistants, but electronic health record giant Epic has aggressively entered the market.
Epic now commands 43.7% of the acute care EHR market, giving the company massive leverage as it expands its AI capabilities. The company claims that its software is installed in more than 3,700 hospitals, and more than 325 million patients now have medical records in Epic.
The company is leveraging its market dominance to weave generative AI directly into its EHR. The company now offers AI Charting, a built-in feature that ambiently listens during patient visits and drafts the clinician’s note. A year ago, as its 2025 Users Group Meeting, the company unveiled its AI scribe solution, called Art for Clinicians, along with a generative AI copilot for revenue cycle, called Penny, to help with coding and denial appeals. It also unveiled an AI solution for patients, called Emmie. Epic also revealed a medical foundation model (initially called Cosmos, now named Curiosity) and a consumer hub MyChart Central.
The EHR company touts growing uptake of its AI tech among clinicians. Back in February, an Epic spokesperson said 85% of the company's customers are live with gen AI across Art, Emmie and Penny.
The AI boom could strengthen Epic's position in the market as the window for competing with the health IT giant is narrowing, according to health system leaders. A recent survey of 112 senior health system leaders, including chief executive officers, chief information officers, chief medical information officers and vice presidents, offers a look at how health systems are navigating technology and AI purchasing in an increasingly Epic-dominated health IT market.
The survey of Epic-based health systems reveals that the market is increasingly consolidating around a single platform. But, the survey results also reveal a paradox as executives appear eager to partner with startups that solve problems Epic is less equipped to address, integrate seamlessly into existing workflows or deliver meaningful improvements in speed, usability and specialized functionality.
The opportunity for startups is shifting, not disappearing, according to the survey report from Redesign Health, a global venture capital and technology firm.
As the adoption of AI in healthcare reaches an inflection point, Redesign Health wanted to get a pulse on the health system market and identify the opportunities for startups, innovators and external vendors, according to Redesign Health Director Kienan O'Brien.
"We partner with health systems across the country in several ways, but a large part of the work we do is identifying and validating venture-backable opportunities for our health system partners. Epic represents one of the biggest players and definitely the one with seemingly largest mindshare in the space. Epic has leaned all the way in on AI and agentic capabilities allowing it to touch more and more of a health systems tech stack. That has a huge impact on whether a new company can scale within health systems, depending on its focus," O'Brien told Fierce Healthcare.
Seventy-one percent of health system leaders describe their organizations as "Epic-first," and 80% of those executives expect that bias to intensify over the next three to five years.
The remaining 29% say they evaluate Epic and external vendors equally on a best-in-breed basis. But even among this group, when asked about the factors driving their purchasing philosophy, “ease of integration and interoperability” was cited by 74% of all respondents. Single-platform value (45%), standardization preference (42%) and available internal resources (42%) round out the top tier.
Currently, about $4 of every $10 goes to external vendors for administrative and clinical solutions: health systems, on average, allocate 57% of their clinical and administrative IS solutions budget to Epic and 43% to external vendors, according to the survey. Non-profit community systems skew more heavily toward Epic with 61% of spend compared to for-profit systems (54%).
And, health system executives seem willing to wait to see what Epic will build as 91% of executives say they have “complete” or “significant” confidence that Epic will execute on its AI roadmap to match best-in-class external solutions.
Yet the survey results also identify meaningful openings for companies that can outperform Epic in specific areas. Among the respondents, 64% said they are likely or very likely to purchase from a net-new startup. That number rises only modestly to 68% for medium-sized startups and 76% for established incumbents. Non-profit community hospital systems are notably more open to startups than for-profit systems (47% very likely vs. 24%, respectively).
The startups that "win" will likely target certain functional areas, demonstrate an outsized return on investment and integrate with limited friction, according to Redesign Health. Ease of integration is the single most-cited factor when external vendors win over Epic, the report found, and health executives also cited faster time to value as a way for vendors to compete.
"I think the survey results show a couple of key themes for the types of capabilities health systems view as being able to compete with Epic. You either need to have a pretty large established incumbent advantage like with AI scribes, although we’ll see how that plays out over the next several years," OBrien said.
Alternatively, O'Brien said, startups need to have some combination of the following capabilities: interaction with outside healthcare organizations whether via data or direct AI-enabled interaction, such as discharge, transitions of care or quality reporting as well as deep clinical expertise, such as imaging or smart intake, or new data types like imaging and computervision that Epic doesn’t have as much exposure to.
Those capabilities give startups "a defensible position, for now," O'Brien noted.
Health system executives see some of the greatest opportunities for external vendors in enterprise imaging and AI add-ons, quality reporting and registries, discharge and care transitions and care access tools, such as scheduling, intake and navigation, the survey found. This suggests there are still significant parts of the healthcare technology stack where health systems are willing to look beyond their core EHR. Other identified areas for opportunities include provider data management, revenue cycle AI and patient AI assistant.
"The survey is fairly clear in that if you can show how easy this is to integrate with a health system both technically and resource-wise, you will stand out. Emphasizing your ability to deploy quickly is hugely important, followed by having a faster speed to ROI. Not lower cost, but speed to value," O'Brien said.
The areas where Epic has the strongest market position include bed management, OR optimization, interoperability, clinical decision support and population health as these are areas where the company's existing data position and workflow integration give it a structural advantage, according to the report.
Among new startups, the most promising areas to make headway in the market include clinician-facing AI or scribes, imaging AI, patient AI assistant, clinical decision support and care access tools, the report said. The interest in scribe technology may be the result of health system executives "kicking the tires" or already deploying other scribing solutions prior to Epic’s announcement, the report noted.
However, the feedback from health system leaders indicates that startups and non-Epic vendors will have to meet a high bar. About half of respondents said external vendors must demonstrate a "significantly higher" ROI or target outcome improvement over Epic solutions. Another 29% require "somewhat higher" ROI. Only 18% apply the same evaluation criteria to both.
Products will need to be demonstrably and measurably superior, and ideally compete in areas where health system leaders don’t expect Epic to eventually catch up, the report authors noted.
When asked why they’ve selected Epic over other available external solutions, health system executives cited ease of integration, superior capabilities, cost effectiveness, less workflow complexity and clinician/user preference. It's worth noting that nearly half of executives (48%) said that Epic having "good enough" capabilities sways them to choose the company over other alternatives.
As AI evolves into agents that help with prior authorization, coding, claims appeals, care navigation and scheduling across multiple systems, this could make the landscape more competitive as Epic may struggle to catch up.
But O'Brien noted there is a clear perception today that Epic is still the default first choice, "even if it is early days in their capability development, over potentially more sophisticated agentic solutions."
"You could argue that over time Epic would look more like a pure 'system of record' that agents interact with as health systems invest in agentic-enabling data infrastructure and regulation continues to move towards greater accessibility like with TEFCA (the Trusted Exchange Framework and Common Agreement) and other regulatory pressures on Epic," he said. "But they’ve done a great job of combating that future perception by leveraging their current perception as an application builder, releasing features earlier and faster than before, and expanding into things like ERP (enterprise resource planning) to further increase their data advantage."
Health systems also are shifting how AI solutions are budgeted compared to legacy software which could present opportunities for startups. Among the respondents, 43% said AI solutions are more likely to hit department or service-line budgets first before eventually transitioning to central IT budget. Another 33% said AI will stay in department budgets permanently. Only 18% said AI would be completely centralized under IT from the start.
"Startups selling AI solutions may find more receptive buyers at the department level, service-line leaders with autonomy and urgency, than through traditional IT procurement channels," the report authors wrote.
Following Epic's User Group Meeting last August, 66% of health system executives reported increased interest in Epic solutions, with another 17% waiting to see real-world performance before forming an opinion. Only 4% reported decreased interest. Looking at specific solutions announced at the 2025 UGM, 52% of health system executives are interested in Epic's native AI ambient scribe, 40% are interested in its Epic Ops healthcare ERP and around a quarter of respondents are interested in Epic's patient AI assistant tool as well as AI-enabled credentialing and Art, the clinician AI assistant.
Epic's 2026 UGM meeting is coming up August 17 and it's expected the company will highlight new AI innovations. But, the company is facing a major leadership shakeup with a wave of executive departures and staff reshuffling. In early July, President Sumit Rana announced he was stepping down for personal reasons after 28 years at the company. Rana was long considered to be CEO Judy Faulkner's successor.
The company then announced that four executive leaders would take on expanded responsibilities to fill Rana's shoes when he leaves—Seth Howard, executive vice president of research and development as well as Mark Lipsky, Erv Walter and Garrett Adams, all with the titles of senior vice president of R&D.
In the ensuing weeks, Second Opinion reported that Seth Hain, who was leading AI efforts, is leaving the company. Other long-tenured employees also have recently left including Drew McCombs, Epic's former VP of Nebula Cloud Platform, Cogito Analytics and AI; Mark Morris, head of technical services, who posted on LinkedIn in July about leaving Epic for a "mid-career break"; and Nick Marzotto, former head of AI and product at Epic, who left in June, according to his LinkedIn profile.
O'Brien surmises these leadership changes may have little impact on health system leaders' "Epic-first" approach. "I think you see from the survey the very high level of confidence that health systems have in Epic’s ability to execute on their AI priorities. That’s pretty rare from what is in theory a 'legacy' incumbent platform that has consumed so much investment from healthcare leaders over the years," he said.