Thursday, January 17, 2013
Posted by D. Daniel Sokol
David Dranove (Northwestern), Christopher Forman (Georgia Tech), Avi Goldfarb (Toronto), and Shane Greenstein (Northwestern) ask DOES HEALTH INFORMATION TECHNOLOGY REDUCE COSTS?
ABSTRACT: We examine the relationship between the adoption of EMR and hospital operating costs. We first identify a puzzle that has been seen in prior studies: Adoption of EMR is associated with a slight cost increase. We draw on the literature on IT and productivity to demonstrate that the average effect masks important differences across time, locations, and hospitals. We find: (1) EMR adoption is initially associated with higher costs; (2) At hospitals with access to complementary inputs, EMR adoption leads to a cost decrease after three years; (3) Hospitals in unfavorable conditions experience increased costs even after six years.