Earlier this year, Epic’s founder, and CEO Judy Faulkner said “Epic is still at least two years away from launching an AI component that can listen in on the conversation between the clinician and patient and then draft orders, place a plan of care and close the visit". In order to close a visit within Epic’s electronic medical record, the note must be one hundred percent complete. This means that Epic could be attempting to build a product that competes with DAX.
Epic is the leading electronic medical record provider in the US. The company is incredibly well run and possesses a unique and driven culture. Faulkner has vowed to never go public and never acquire another company. Epic seldom partners with other software companies and generally tries to build software components from scratch, whenever possible. Nuance and M*Modal both currently partner with Epic, which puts both companies in an exclusive club.
Based on a conversation with a knowledgeable health tech product executive, Epic sometimes likes to create competition to prevent adjacent software providers from achieving monopolies. Epic does not have core competencies in speech recognition. This makes constructing a product from scratch to compete with DAX incredibly difficult and time consuming. Since Epic already partners with M*Modal, and M*Modal is a speech recognition company that is being outcompeted by Nuance, it makes sense for M*Modal to take any help that they can get.
It is still too early to tell what Epic’s end game is. One possibility is that this is just a side experiment for Epic. It could also be an attempt to prop up M*Modal to try and prevent a DAX monopoly. A DAX monopoly could shift electronic medical record industry control away from Epic and even put them in a very tough spot if say Nuance merged with Cerner (Epic’s largest competitor). The final possibility that comes to mind is that Epic could be seriously internally attacking the speech recognition market. It is engrained in Epic’s culture to work tirelessly to develop adjacent software inhouse when possible.
If Epic can create a DAX alternative within their electronic medical record, that could harm Nuance, since Nuance’s products must integrate and function on top of the client’s medical record systems. Many of Nuance’s largest clients use Epic. The scenario where Epic is merely assisting M*Modal to create a DAX alternative is significantly less threatening to Nuance since distribution into Epic would not be undercut. Even if Epic and/or M*Modal can create a DAX alternative in two years, DAX will have a strong technological advantage.
DAX uses artificial intelligence (AI) and machine learning (ML) to automate the creation of a medical record. The AI and machine learning rely on data to learn and function correctly. Data is collected each time that DAX is used for a patient encounter. Each at bat that DAX gets, the product improves incrementally with ML. I have read one account of a DAX user receiving instant medical record inputs upon the conclusion of the patient interaction. To my knowledge, DAX is the only current solution for a completely automated note based solely on the patient interaction. This firmly established Nuance as the current market leader. Not only does DAX have a technological moat today, but anyone trying to compete is chasing a moving target that improves itself every single day. Importantly, the scale that Nuance has already won means DAX will improve the fastest because it has the most users and is getting the most at bats.
The moving target moat that DAX has, and will continue to grow, means that anything Epic or M*Modal can build over the next two years will likely be inferior to DAX. Customers are willing to pay a meaningful premium for DMO over M*Modal’s inferior solution, and there is no reason that this behavior will not continue in the next product generation with DAX.
Today, DAX is still not perfect. It is an extremely complicated solution and needs many more at bats. Some DAX medical record outputs still need to be manually reviewed to ensure quality. This will likely not be the case forever. Based on conversations with users over the last year, it is clear to me that DAX is rapidly improving. The accuracy has drastically improved in the initial group of specialties where DAX first launched. These five specialties, including Dermatology and Orthopedics, were selected for their limited relative vocabulary banks. DAX has since expanded to eleven other specialties including primary care, the specialty with the largest vocabulary bank. In the current product state, DAX provides significantly more value to physicians that spend more of their time conversing with patients compared to physicians that spend more of their time in surgery. I expect that incremental product improvements over time, such as machine vision, will help to bridge this gap and justify the pricing of DAX to as many physicians as possible. I am excited to continue to follow the DAX product evolution and hopefully watch DAX survive the Epic Dragon hunt. My money is on the Dragon, literally.