The Spillover Effects of Health IT Investments on Regional Health Care Costs

Management Science (Forthcoming)

Fox School of Business Research Paper No. 14-028

40 Pages Posted: 8 Apr 2014 Last revised: 11 Jan 2017

See all articles by Hilal Atasoy

Hilal Atasoy

Temple University - Department of Accounting; IZA Institute of Labor Economics

Pei-Yu Chen

Arizona State University (ASU) - Department of Information Systems

Kartik K. Ganju

McGill University

Date Written: April 2, 2014

Abstract

Electronic health records (EHR) are often presumed to reduce the significant and accelerating health care costs in the US. However, evidence on the relationship between EHR adoption and costs is mixed, leading to skepticism about the effectiveness of EHR in decreasing costs. We argue that simply looking at the hospital-level effects can be misleading because the benefits of EHR can go beyond the adopting hospital as they can create regional spillovers via information and patient sharing. When patients move between hospitals, timely and high quality records received at one hospital can affect the costs of care at another hospital. We provide evidence that although EHR adoption increases the costs of the adopting hospital, it has significant spillover effects by reducing the costs of neighboring hospitals. We further show that these spillovers are linked to information and patient sharing. Specifically, the spillovers are stronger when more hospitals in the region are in health information exchange (HIE) networks and in the same integrated delivery systems (IDS), which can share information more easily. Furthermore, utilizing regional characteristics that can affect the extent of patient sharing such as urban vs. rural areas, population density, average distance between hospitals, and hospital density, we find that locations with higher patient and hospital concentration experience stronger regional spillovers. Overall, our findings provide evidence that information and patient sharing are related to regional EHR spillovers and suggest that we need to take into account such externalities to understand the benefits of health IT investments and form policy decisions.

Keywords: Network externality, spillover effects, health IT, electronic medical record, IT productivity

Suggested Citation

Atasoy, Hilal and Chen, Pei-Yu and Ganju, Kartik K., The Spillover Effects of Health IT Investments on Regional Health Care Costs (April 2, 2014). Management Science (Forthcoming); Fox School of Business Research Paper No. 14-028. Available at SSRN: https://ssrn.com/abstract=2419690 or http://dx.doi.org/10.2139/ssrn.2419690

Hilal Atasoy (Contact Author)

Temple University - Department of Accounting ( email )

Philadelphia, PA 19122
United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Pei-Yu Chen

Arizona State University (ASU) - Department of Information Systems ( email )

Tempe, AZ
United States

Kartik K. Ganju

McGill University ( email )

1001 Sherbrooke Street
Montréal, H3A 1G5
Canada

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