Does EMR Adoption by Nursing Homes Decrease Hospitalization Costs?

Abstract

Electronic Medical Records (EMR) have the potential to decrease medical expenditures by
increasing communication between healthcare providers and reducing the incidence of unnecessary tests and medical errors. Using a three-year panel of out-of-home Medicaid spending for long-term care patients in nursing homes, we analyze the effect of nursing home EMR adoption on out-of-home healthcare expenditures for their residents. First, we find evidence that EMR adoption by nursing homes reduces out-of-home healthcare costs for residents by 3.5%-14%. Second, beyond this direct effect, we find a further reduction of hospitalization costs for residents when hospitals and nursing homes both adopt EMR, which is an average savings of 13% of Medicaid expenditure and as much as 35% for hospitals that are part of a system. Given the interdependent nature of healthcare delivery for long-term care patients or patients with chronic conditions, our findings underscore the importance of looking outside the adopting institution when accounting for health IT (HIT) value.

Keywords: EMR, EHR, Electronic Medical Records, Health IT, HIT, Complementarities