Epic Systems Corp. founder and CEO Judith Faulkner has decided to leave much of her holdings in her privately held company to a specially created charitable foundation that will operate and fund not-for-profit organizations in healthcare and other areas.
“Nearly every share of stock that I own will be put in there,” said Faulkner, who launched Verona, Wis.-based Epic in 1979 and maintains a controlling interest in the electronic health-record systems vendor.
The donation will come following Faulkner’s death. “It could be triggered before that, if I wish, or when I die, which could be hundreds of years from now,” Faulkner joked in an exclusive interview with Modern Healthcare about her foundation plans. “I am, fortunately, healthy,” said Faulkner, 71.
The foundation also will help Faulkner keep Epic in private hands, a goal she has long cherished.
“My stock will go to the foundation,” Faulkner said. “The foundation will control the stock. This plan is designed to preserve the company as a private company forever.”
Exactly how much her share of the company is worth is not publicly known, so neither is the value of the bequest. Epic’s gross revenue in 2014 was $1.77 billon, Faulkner acknowledged.
Publicly traded EHR competitor Cerner Corp., Kansas City, Mo., reported revenue of $3.4 billion in 2014 and, with a share price of $70.14 at the market close Monday, had a market capitalization of $24.08 billion. Calculating a straight comparison of revenue to market cap, Epic would be worth about $12.5 billion.
Last year, Forbes placed Faulkner at 239th on its list of the 400 wealthiest Americans at $2.4 billion. It has since upgraded her wealth to $2.8 billion.
Asked whether the Forbes estimate was in the ballpark, Faulkner said, “My reaction is, how do they know? If I don’t even know, how do they know?”
The trust is being called the Epic Heritage Foundation, for the time being, but the name will likely be changed.
Why give it all away?
“One, I didn’t want the money, personally, or for my family,” Faulkner said. “What would you want with all that money? It doesn’t seem right and I can’t tell you why. (We’re) putting it into a trust that can be used for the benefit of healthcare organizations, other exempt organizations and our communities. We can use it to (help) other charitable organizations that have contributed to our success. Because that’s where it came from.”
Faulkner served four years on the federal Health IT Policy Committee, representing the health IT industry on the key advisory panel to the Office of the National Coordinator for Health Information Technology at HHS.
She was named by Modern Healthcare readers last year, for the fourth year in a row, as one of the 100 Most Influential People in Healthcare, her fifth appearance on the list since 2008.
Her company has consistently ranked at the top of the list of vendors of “complete” EHRs for both hospitals and office-based physicians whose customers have been paid as “meaningful users” under the federal EHR incentive payment program, according to federal data.
Faulkner has been thinking about setting up a charity and giving most of it away for about 15 years, she said.
In that time, Microsoft founder Bill Gates and billionaire stock wizard Warren Buffett have famously pledged to give away much of their wealth. But Faulkner said her inspiration came from those who have put their wealth into trusts. “But I do admire what Warren Buffett and Bill Gates have done,” she said.
Unlike either of them, however, Faulkner has been adamant about the company she leads remaining privately held.
When a company is private, “You don’t have to have the tyranny of the quarter,” Faulkner said. “When you’re public, you can never forget your fiduciary duty is to increase shareholder value. When you’re private, your shareholders are your employees and you will want to do the best you can, but you look at it a different way.”
Faulkner’s husband, Dr. Gordon Faulkner, is a pediatrician practicing at a federally qualified health center in Madison. Their older daughter is a veterinarian in Wisconsin. A son, a former programmer with Microsoft, builds furniture in Washington state. A younger daughter, a former Peace Corps volunteer, who also lives in Washington, has a master’s degree in foundation management.
Their children’s inheritance will come from wealth created through their parents’ income, not their stock, Faulkner said.
And their reaction to her decision?
“I don’t think that they have had one,” she said. No one said, ‘Oh wow, this is our future and that’s our money.’ I actually would have been surprised if they had thought any different.”