To SaaS or Not to SaaS: An Epic Dilemma

Bill Russell , I appreciate your insightful response and the depth of this discussion. The idea of transitioning Epic to a fully SaaS-based model is certainly compelling—drawing from the successes of Salesforce, ServiceNow, and Workday in enterprise #SaaS. However, as we move toward healthcare’s digital transformation, we must consider not just technological possibilities but also economic realities, regulatory constraints, and the financial viability of healthcare institutions already under immense pressure.

The question isn’t if healthcare will embrace SaaS—it’s how we can navigate this transition responsibly and sustainably without compromising financial stability, regulatory compliance, or patient care.

1. The Real Cost of Transition: The Business Case for Healthcare Organizations

A move to Epic SaaS isn’t just a technical migration—it’s a massive financial transformation for hundreds of hospitals, many of which are still paying off the financial debt of their initial Epic implementations.

Projected Migration and Operating Costs for Epic SaaS Adoption (5 Years)

?For a 500-bed hospital:

• Total cost of transition: ~$57M to $85M
• Recurring SaaS subscription fees: $80M
• Savings from infrastructure & IT reductions: -$30M

?For a large health system (multi-hospital):

• Total cost of transition: ~$160M to $280M
• Recurring SaaS subscription fees: $250M
• Savings from infrastructure & IT reductions: -$80M

?The estimates show that while SaaS eliminates CapEx, it significantly increases OpEx—creating a new financial burden on hospitals already facing budget constraints.

For smaller hospitals and rural providers, these costs could be financially crippling. For large health systems, the total five-year spend could exceed $250M, with no immediate financial return.

The financial reality is that many health systems are still carrying debt from their initial Epic investments. Forcing another massive investment cycle in the middle of workforce shortages, operational cost increases, and reimbursement pressures could push some health systems into unsustainable financial positions.

SaaS is not just a technology decision—it’s a business transformation that requires a careful financial strategy.

2. The Technical Debt vs. Financial Debt Dilemma

Bill, you rightly point out that maintaining thousands of individual Epic instances creates inefficiencies and mounting technical debt. However, for many hospitals, the bigger concern isn’t technical debt—it’s financial debt.

• Many health systems financed their Epic implementations through long-term capital investments, leveraging bonds, grants, and capital depreciation benefits.
• Moving to a SaaS model shifts those costs to recurring OpEx, which hospitals cannot easily absorb under current reimbursement models.
• While SaaS would eventually reduce some IT overhead, those savings wouldn’t be immediate, making it financially difficult to justify the transition.

The Hidden Financial Risks of SaaS Transition

• Unpredictable Cost Growth: Unlike CapEx investments that hospitals can plan for, SaaS shifts IT spending to subscription-based OpEx models, which can increase unpredictably over time.
• Vendor Lock-in Risks: Once health systems migrate to Epic SaaS, they are fully dependent on Epic’s pricing structure, with little leverage to control future costs.
• Payer Misalignment: Medicare, Medi-Cal, and private insurers do not adjust reimbursements to accommodate IT cost increases, leaving hospitals with the full financial burden of SaaS migration.

Without a financial model that accounts for these realities, forcing a full SaaS transition could destabilize health systems rather than modernize them.

3. Beyond Salesforce Comparisons: Healthcare’s Unique Regulatory & Compliance Barriers

The success of Salesforce, Workday, and ServiceNow in multi-tenant SaaS is impressive, but healthcare does not operate under the same regulatory and liability models.

?? HIPAA, HITECH, and Patient Data Security Risks

• Unlike financial transactions or HR data, patient data is deeply sensitive and subject to both federal and state-specific compliance rules.
• A multi-tenant SaaS model introduces complex liability concerns, where a breach in one hospital could expose patient data across multiple organizations.

?? State-Specific Data Residency & Privacy Laws

• In California, the CCPA (California Consumer Privacy Act) requires strict patient data controls, which may not be fully enforceable under a single-instance SaaS model.
• International health systems (e.g., Mayo Clinic’s overseas operations) face conflicting data sovereignty laws that could make a full Epic SaaS deployment legally impractical.

?? Customization & Clinical Workflow Variability

• Unlike enterprise SaaS platforms, health systems heavily customize Epic to fit specialty care needs, compliance requirements, and operational workflows.
• A single-instance SaaS limits customization and could reduce clinical efficiency, leading to clinician pushback.

This is?not to say that SaaS cannot work in healthcare, but?it first requires solving these compliance, customization, and security issues.

4. A Progressive Path Forward: How Epic Can Transition to SaaS Responsibly

Rather than forcing an all-or-nothing SaaS transformation, Epic could develop a phased transition strategy that delivers SaaS benefits without putting health systems at financial risk.

? Step 1: Build a Cloud-Native Foundation with Hybrid Flexibility

• Standardize core Epic functions in a cloud-native architecture, while allowing mission-critical clinical workflows to remain customizable.
• Containerization & microservices can improve scalability without sacrificing security.

? Step 2: Offer a Phased Migration Path to Reduce Cost Shock

• Instead of a one-time migration, hospitals can transition specific components (e.g., analytics) first, spreading costs over time.
• This allows health systems to evaluate the benefits of SaaS without risking financial instability.

? Step 3: Establish Regional Shared Services Models

• Create regional Epic SaaS hubs that allow health systems to pool resources, reducing cost burdens for smaller hospitals while maintaining local compliance controls.
• This is already happening in some states, and a formalized shared-service SaaS model could accelerate adoption without financial distress.

? Step 4: Work with Insurers & Regulators to Align SaaS Costs with Reimbursement Models

• If SaaS is the future, Medicare, Medicaid, and private insurers must adjust reimbursement models to account for the shift from CapEx to OpEx spending.
• Epic should advocate for payer-backed IT funding models to ensure hospitals are not shouldering these costs alone.

5. The Future of Healthcare SaaS: Innovation with Financial Viability

Bill, I fully agree that maintaining parallel Epic instances is not sustainable in the long run. However, forcing a full-scale SaaS transition too quickly could cause unintended financial and operational harm to the very institutions that rely on Epic the most.

The answer isn’t “SaaS or not SaaS”—it’s how we build a sustainable transition strategy that ensures financial viability, compliance, and operational stability while embracing the benefits of SaaS.

?? A hybrid SaaS model that evolves is not a compromise—it’s a pragmatic approach that allows healthcare organizations to modernize without jeopardizing their financial and operational stability.

Let’s move healthcare forward intelligently, sustainably, and responsibly.

?? What are your thoughts on this balanced path forward? I encourage others to join this conversation!

?? Bill’s original article, Dear Judy, can be found here.

?? My earlier response, From Kuiper to Kubernetes, is available on Wisdom@Work.

?? Bill’s latest counterargument, The False Phe False Promise of Hybrid SaaS, can be found here

Best, Khalid Turk