Did you notice the double backslashes in front and after SyncedXML (\\SyncedXML\\
)?
This is probably the cause of your error.
Additionally I'd use string.Format in such cases to reduce the inadvertently addition of unwanted characters:
var path = string.Format(@"\\epm-server\penDocuments_LabMeds\{0}\SyncedXML\{1}", dr[mrn], dr[xmlfile]);
var fi = new FileInfo(path);
Edit:
If it's permission-related, then it's very likely that your local system account (in whose context the service is running) isn't allowed to access the epm-server.
The path is accessible if you're opening it directly or if you're running the service in debug mode as this is happening in your user context (e.g. YOURDOMAIN\vickyshazad), and you're allowed to access the ressource, whereas NT AUTHORITY\SYSTEM is not.
It's usually a good practise to have a special service account for your developed windows service and grant this user only and exactly the required permissions (least privilege). Maybe ask your system administrator for a service user.
Local System (NT AUTHORITY\SYSTEM) is a highly privileged account that's not recommended to use in general (see MSDN).
Most services do not need such a high privilege level. If your service does not need these privileges, and it is not an interactive service, consider using the LocalService account or the NetworkService account.