NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Impact of Health Information Technology on Hospital Productivity

Jinhyung Lee, Jeffrey S. McCullough, Robert J. Town

NBER Working Paper No. 18025
Issued in April 2012
NBER Program(s):   HC   PR

The US health care sector is, by most accounts, extraordinarily inefficient. Health information technology (IT) has been championed as a tool that can transform health care delivery. Recently, the federal government has taken an active role in promoting health IT diffusion. There is little systematic analysis of the causal impact of health IT on productivity or whether private and public returns to health IT diverge thereby justifying government intervention. We estimate the parameters of a value-added hospital production function correcting for endogenous input choices in order to assess the private returns hospitals earn from health IT. Despite high marginal products, the potential benefits from expanded IT adoption are modest. Over the span of our data, health IT inputs increased by more than 210% and contributed about 6% to the increase in value-added. Virtually all the increase in value-added is attributable to the increased use of inputs{there was little change in hospital multi-factor productivity. Not-for-profits invested more heavily and differently in IT than for-profit hospitals. Finally, we find no evidence of labor complementarities or network externalities from health IT.

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Document Object Identifier (DOI): 10.3386/w18025

Published: The impact of health information technology on hospital productivity Jinhyung Lee; Jeffrey S. Mccullough; Robert J. Town (Profiled Author: Jeffrey S McCullough) RAND Journal of Economics.‚ÄČ2013;44(3):545-568.

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