Essays on Information Technology and Organizational Form in the Health Care Industry.

Abstract

Employment of physicians by hospitals can confer greater administrative control to hospitals over physicians’ actions and resources and thereby enable efficiency gains, including implementation of enterprise-wide initiatives, such as health information technology (IT), that can improve quality and contain cost growth. It can also reduce other costs, and improve coordination of pricing inpatient and outpatient services. On the other hand, hospital-physician integration, may have anti-competitive and cost increasing effects that harm social welfare. I test for the relationship between hospital employment of physicians and hospitals’ propensity to adopt health IT. I use state laws that prohibit hospital employment of physicians as an instrument to mitigate potential bias from the endogenous relationship with hospital IT adoption. Employment of physicians is associated with significant increases in the probability of hospital health IT adoption. Therefore subsidization of health IT among hospitals not employing physicians may be less beneficial. Furthermore, state laws prohibiting hospitals from employing physicians may inhibit adoption of health IT, thus working against policy initiatives aimed at promoting use of the technology. Participation in health information exchange (HIE), in which unaffiliated providers in a community leverage the capabilities of health IT to share patient data with one another, potentially slows cost growth and improves quality by reducing redundant diagnostic procedures. Emergency departments (ED) are an important test case for the claimed benefits of health IT and HIE since enhanced speed of access to patient information can have great value in EDs. In an analysis of panel data on ED discharges in California and Florida, I find robust evidence of a reduction in repeat diagnostic imaging procedures due to health IT adoption and HIE participation. This dissertation’s final analysis considers competitive and cost effects of hospital-physician integration. Findings of a positive effect of hospital-physician integration on average revenue and average inpatient days among rural hospitals only suggests that integration intensifies inpatient service provision in rural areas but does not adversely impact competition. Given no evidence of price increases in non-rural areas, integration should not raise concern on anti-trust grounds in most markets and may yield benefits like hastening adoption of innovations.