Presenter:

Jeffrey McCullough

Authors:

Jeffrey S. McCullough

Chair: Stephen T. Parente; Discussant: Yunwei Gai Wed June 7, 2006 8:00-9:30 Room 313

Health information technology (IT) holds the promise of improved clinical outcomes at lower costs. The benefits of health information technology, however, may not be fully realized through the simple adoption of new technologies. Rather, health systems may need to simultaneously reorganize their operations to complement information technology. This study estimates the clinical and financial value of both monitoring technologies and integration as well as complementarities between these inputs; furthermore, this study allows for both adoption and integration decisions to be endogenously determined… Monitoring technologies present a particularly interesting case for understanding the relationship between technology and firm boundaries. Monitoring technologies might allow for more complete contracts, thus being complementary to less integration between physicians and hospitals—a decrease in firm boundaries. Conversely, monitoring might improve the efficiency of hierarchical management structures thus being complementary to greater physician-hospital integration—an increase in the boundaries of the firm. By estimating the complementarity between monitoring IT and integration, I test these competing hypotheses. This study utilizes data from the Dorenfest IHDS+ and 3000+ databases for the years 1994 through 2003. Together, these databases provide a nearly complete census of U.S. nongovernmental, acute-care hospitals with more than 100 beds for the years 1994 through 2003. These data provide detailed descriptions of the nature and timing of hospitals’ adoption of monitoring information system. Furthermore, the Dorenfest data have been combined with five additional sources of hospital and physician data for the years 1994 through 2003; specifically, American Hospital Association’s (AHA) database of hospital characteristics, the Medicare Cost Reports which provide hospital cost and case-mix-adjustment data, the HCUP data which provide further detail of hospital output and clinical outcomes, the Area Resource File, and Interstudy’s HMO and managed care data. Additional data regarding the hedonic price of hardware and technology worker wages have been obtained from the Bureau of Labor Statistics. This study will estimate models of hospital costs and quality as a function of technology adoption and organizational design. A system of simultaneous equations for hospital performance, vertical integration, and technology adoption will produce consistent estimates of complementarities while allowing for endogenous choices regarding both integration and adoption. Two sets of instruments will be utilized to identify the model: physician labor market conditions for the integration equation and hardware and IT labor costs for the technology adoption component. This approach is adapted from Athey and Stern’s (1998) framework for testing complementarity in organizational design.