Economic Shocks and Healthcare Capital Investments

Information technology (IT) can enhance firms’ long-run performance but is a risky investment with uneven take-up. The drivers of and impediments to IT adoption are also not well-understood. We leverage the healthcare context to empirically examine hospitals’ IT investments following three distinct industry shocks. We find novel, consistent, and economically important responses. Recessions restrain investments while insurance expansions stimulate them. A hospital-specific and policy-driven financial shock also spurs IT adoption. The IT margin appears more sensitive to market conditions than other spending decisions. Supplementary analyses further suggest that perceptions of uncertainty about future revenue influence these specific capital investments.