Investment Subsidies and the Adoption of Electronic Medical Records in Hospitals (WP-14-12)


IPR-WP-14-12

David Dranove, Craig Garthwaite, Christopher Ody, and Bingyang Li

In February 2009 the U.S. Congress unexpectedly passed the Health Information Technology for Economic and Clinical Health Act (HITECH). HITECH provides up to $27 billion to promote adoption and appropriate use of Electronic Medical Records (EMR) by hospitals. Dranove, Garthwaite, Ody, and Li measure the extent to which HITECH incentive payments spurred EMR adoption by independent hospitals. Adoption rates for all independent hospitals grew from 48 percent in 2008 to 77 percent by 2011. Absent HITECH incentives, the researchers estimate that the adoption rate would have instead been 67 percent in 2011. When they consider that HITECH funds were available for all hospitals and not just marginal adopters, they estimate that the cost of generating an additional adoption was $48 million. The researchers also estimate that in the absence of HITECH incentives, the 77 percent adoption rate would have been realized by 2013, just 2 years after the date achieved due to HITECH.

David Dranove, Walter J. McNerney Professor of Health Industry Management, Kellogg School of Management, Faculty Associate, Institute for Policy Research, Northwestern University

Craig Garthwaite, Assistant Professor of Strategy, Kellogg School of Management, Northwestern University

Christopher Ody, Research Assistant Professor of Strategy, Kellogg School of Management, Northwestern University

Bingyang Li, Associate, Cornerstone Research, San Francisco, California

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