HIT and Hospital Productivity

Any objective assessment of hospital management would conclude that it is poor and that productivity and efficiency could be greatly improved.  More use of health information technology is supposed to assist in achieving those productivity and efficiency gains, but most users of the technology know that it can in some ways hinder productivity and that it rarely performs as advertised.  A new study published under the auspices of the National Bureau of Economic Research looks at the effects of health information technology on hospital productivity.   (NBER Report)   The researchers used a data set from California which gave details about hospital IT and other spending over a decade.  They used a variety of econometric functions to tease out the effect of health IT, compared to other hospital cost factors such as labor.  They also examined whether organizational differences might affect the impact of HIT on a hospital.  Productivity and efficiency are basically measures of whether the a change in inputs (labor and capital) can produce a corresponding change in output and hopefully can actually have a multiplier effect on output.  Productivity gains may benefit the producer (hospital in this case) by lowering costs or allowing for larger price increases or generating more sales, and/or the public, by improving quality, or lowering price, or in general by providing the public with more value for the same dollar unit.

The researchers find that while health IT as used by hospitals has a high marginal value to the hospital, that is, it provides a good return on investment, it is not a significant enough factor among all inputs to drive significant productivity gains, in fact, it appears to result in only about a 6% contribution to productivity gains.  It also does not appear to add significant clinical value to patients or the public, and does not result in revenue gains, partly since much hospital revenue is from highly regulated government payments.  While not-for-profit hospitals invest more in HIT, they do not appear to get greater gains from their increased investment compared to for-profit hospitals.  Hospital information technology investment also does not seem to lead to network externalities, another form of potential public benefit.  The authors found that in the decade under study, HIT capital inputs increased by over 200%.  It appears that the net result was some internal cost reduction, not necessarily reflected in price reductions to the public, and little other public benefit.