In some regards I'd almost rather Palantir runs it, since the DoW would force them to implement very strict data isolation features which hospitals could then get for free. I wouldn't imagine Epic Healthcare Systems would be forced to isolate data so aggressively.

That said I also recognize the moral dilemma and understand why they'd pull out. Frankly I'm surprised they did much work with hospitals at all

Most Epic products aggressively isolate data. The majority of instances are run on-premises, and even those hosted on cloud platforms are single-tenant. They have a good record for data security and privacy; afaik all Epic data breaches were actually caused by infiltration of other customer systems.