Working Paper: NBER ID: w18025
Authors: Jinhyung Lee; Jeffery S. McCullough; Robert J. Town
Abstract: 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.
Keywords: Health Information Technology; Hospital Productivity; Econometrics
JEL Codes: D24; L31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| health IT investments (I11) | hospital value-added (I11) |
| health IT inputs (I11) | hospital productivity (D24) |
| health IT investments (I11) | productivity gains (O49) |
| health IT adoption by neighboring hospitals (I11) | productivity gains (O49) |
| for-profit hospitals (L39) | health IT investments (I11) |
| not-for-profit hospitals (L39) | health IT investments (I11) |
| health IT adoption (I11) | hospital productivity (D24) |