The Effects of Health IT Adoption on Hospital Readmission Reduction: Evidence from U.S. Panel Data

AbstractU.S. government subsidies under the HITECH Act of 2009 have boosted hospitals’ IT investments, which are expected to improve the quality of care as well as the effectiveness of healthcare management. Given the rush to adopt health information technology (HIT) throughout the continuum of care across healthcare providers, this study tries to identify the spillover effects of HIT adoption on quality of care. Using 1,965 U.S. hospital data in 232 health referral regions (HRRs), we examine how a hospital’s and its neighboring hospitals’ HIT adoptions interact with each other and how they impact readmission rates. We find that a hospital’s readmission rate is reduced by both its own and neighbors’ HIT adoption. Such effects become greater along with the focal hospital’s own adoption. We further investigate how spillover effects vary with HRRs’ different market structures and hospitals’ meaningful-use status. Our findings offer theoretical and managerial insights for both healthcare researchers and practitioners.

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