At Epic System’s annual meeting in August, founder and CEO Judy Faulkner announced four new customers. Rather than the typical hospitals that use Epic’s electronic health records software for 280 million U.S. patients, these customers were health insurers: Healthfirst, Highmark, Independence and Molina.
Epic’s move into the health insurance market is now at the center of an antitrust lawsuit filed this week in federal court in the Southern District of New York. Particle Health, a startup that helps retrieve and analyze medical records with $39 million in venture-backing, has alleged Epic is a “monopolist” in the electronic health records market, according to the complaint. It claims Epic is using “its position of dominance to worm its way to the core of the U.S. healthcare system and stamp out competition.”
While healthcare industry folks love to grumble about Epic’s dominance, this is the first public and reported antitrust lawsuit. Rob Klootwyk, director of interoperability at Epic, dismissed the lawsuit as “baseless” in a statement and said the company would “vigorously defend itself against Particle’s meritless claims.”
Epic, which generated $4.9 billion in revenue in 2023, is the dominant player in the hospital EHR market with its software used by 51.5% of the 890,000 hospital beds in the U.S., according to the health IT consultancy KLAS; it was the only EHR vendor to “achieve a net increase in market share” in 2023. The next closest competitor Oracle, through its acquisition of Cerner, holds 23.8% of hospital beds and Meditech has 13.4%.
Thanks to federal rules requiring hospitals to adopt electronic records, the market to administer them has become saturated over the past decade. For years, the only way to win new customers has been to poach them from competitors. But new federal regulations going into effect in 2026 require health insurers to also share records with patients, providers and other insurers. And that will significantly open up the market to new business. Particle is arguing that Epic will use its broad market power as a gatekeeper for patient records to unfairly dominate this burgeoning market.
“It’s not bad or even wrong to look for new sources of revenue,” Barak Richman, a professor of business law at George Washington University, told Forbes. “The question is how you do it. And what this lawsuit is saying is that Epic is using its monopoly power in the EHR market to give it an unfair advantage or to preclude competition in this new market.”
Particle is alleging violations of Section 2 of the antitrust doctrine known as the Sherman Act. Richman said it’s similar to the lawsuit the Department of Justice brought against Microsoft in the 1990s, saying it was using its monopoly power in operating systems to quash the nascent market of internet browsers.
There are no hard and fast rules for what percentage of market control constitutes a monopoly. These types of cases are “hard to win,” said Richman. It’s not enough to prove that Epic is hurting Particle, he said. The startup needs to prove that Epic is using monopoly power to harm the interests of the customer in the marketplace by stifling competition, raising prices and restricting innovation. Richman said it’s much more difficult than, say, a price fixing case, where there are emails between two parties agreeing to a price. “For Section 2 cases, there are no smoking guns,” he said. “It’s always a data intensive and analytical intensive kind of case.”
Given that nowadays people can instantaneously send money from one bank account to another via an app, it’s hard to comprehend why doctors and insurers need to fax records and patients are forced to pick up MRI scans on CD-ROMs. To understand the context for Particle’s case, we have to go back to the late aughts when the federal government was trying to convince doctors to use electronic records in favor of paper. The regulators didn’t want to be too prescriptive, said David Blumenthal, the federal National Coordinator for Health Information Technology at the time. “You’ve got smart buyers and you’ve got sophisticated suppliers, and there was no reason to expect the market would fail,” Blumenthal told Forbes.
But there was one crucial misstep in the early years. Hospitals and doctors wanted to be able to share data within their own hospital system, but there was no requirement to share with outside systems – and no hospital wants their patients to go elsewhere. “I think very few people anticipated the economic and political disincentives to sharing,” said Blumenthal. Now, more than a decade later, the federal government is trying to retroactively impose data-sharing requirements, which gets to the heart of Particle’s case: who controls the spigot when it comes to the flow of medical record data.
Particle alleges that Epic, with 280 million patient records across its hospital customers, controls more than 80% of the market for data exchange. That’s because companies like Particle, who act as data exchange intermediaries, need to ask Epic – and not the hospital – to turn the data faucet “on,” according to the complaint.
Each time Particle’s customers want to turn the faucet “on” from a particular hospital or doctor’s office, it needs to submit confirmation that the purpose of the data exchange is related to treating a patient. Particle started working with health insurance customers who are both healthcare providers and payers, so it was able to receive the patient data under the “treatment” rules. But the company’s business model was to then turn around and use it for the insurance side of its business, which is known as “secondary use.”
This is where Particle’s initial dust-up with Epic began: Epic determined that three of Particle’s customers had misrepresented the “treatment” certification. Instead of cutting off just those three customers, the complaint alleges that Epic began a “ a multi-pronged campaign to destroy Particle and actively snuff out competition” by slow-walking tens of thousands of data-sharing requests from Particle customers via a network called Carequality. The result was that Particle saw such a precipitous decline in revenue that Epic’s alleged monopoly over the data spigot is threatening Particle’s “very existence,” per the complaint.
Epic says that Particle’s version of events “mischaracterizes” what actually happened. “Particle’s unlawful actions on the Carequality health information exchange network violated HIPAA privacy regulations,” Epic’s Klootwyk statement said. “Epic’s software is open and interoperable, allowing healthcare organizations to easily share data under HIPAA and all relevant regulations.”
Antitrust litigation is complicated and expensive. Particle’s CEO Jason Prestinario declined to disclose how the lawsuit was being financed, though the company’s lawyer Adam Wolfson of Quinn Emanuel is no stranger to taking on the giants. He’s currently representing a medical device startup called AliveCor in an ongoing dispute with Apple. “We felt like we needed to take a stand,” Prestinario told Forbes, “in ensuring that competition and that ability to share information is happening.”
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