Essays on the Adoption of Electronic Medical Records (EMR) by U.S. Hospitals

Abstract

A $35 billion program was passed by the federal government to promote the adoption of Electronic Medical Records (EMR). However, billions of incentive payments were flowing out without clear evidence of effective implementation. The dissertation studies the adoption decision of EMR by U.S. hospitals and the consequence of the application of this technology. The first chapter tries to evaluate choosing the locally market-leading vendor by standalone hospitals. I construct a dynamic oligopoly model and apply the methodology developed by Aguirregabiria and Mira (2007) to recover the model primitives with a nationwide sample of U.S. hospitals. The primary finding is that, on average, the per-period profit from choosing the locally market-leading vendor is increased by almost 51% as opposed to that from using any other technology. However, the impact moderates as compared with the sunk cost of implementation. From the counterfactual analysis I find if hospitals were incentivized to choose the locally market-leading vendor, it would help improve the market coordination substantially. The second chapter seeks to understand the incentive of hospital systems in choosing Health IT vendors: using the most-adopted product for coordination or otherwise to differentiate from the local market. I develop a simple discrete-choice model to evaluate the effect of each factor. Using a nationwide sample of affiliated hospitals from 2006 to 2010, I find that on average the system-dominating vendor has much greater advantage over the vendor leading the local market. After addressing the potential endogeneity issue, the impact from choosing the market-leading vendor is even negative. It may imply large systems are likely to create information silos, demonstrating lower propensity for external information exchange. The last chapter examines the impact of adopting EMR on Medicare billing, particularly to understand how the application of Health IT affects hospitals' response to a recent payment reform. Using a nationwide sample of U.S. hospital and claims data, we find, in general, there is no significant difference in billing between hospitals with and without Health IT. However, hospitals behaved quite differently in documenting medical/surgical diagnoses before and after the reform.