The Joint Use of RFID and EDI: Implications for Hospital Performance

Hospitals in the United States (U.S.), and the healthcare industry as a whole, are experiencing major transformations that will likely affect every facet of our society. One such example is a federal regulation known as the Value‐based Purchasing (VBP) program, which shifts hospital reimbursements for services rendered away from a fee‐for‐service model to a value‐based model. This change requires hospitals to more accurately track and document resources/assets utilized in the delivery of care, in addition to appropriate health outcomes. Hence, the focus of this study is on assessing the effect of the joint use of RFID and EDI on hospital performance, namely supply chain cost efficiency, personnel expenses, and hospital readmission rates. The findings, based on secondary, longitudinal data on more than 3300 US hospitals spanning eight years, suggest that hospitals bundling RFID and EDI experience an initial decrease in supply chain cost efficiency and increase in personnel expenses, with no immediate impact on readmission rates. However, over time, better supply chain cost efficiency, lower personnel expenses, and a consistent reduction in readmission rates accrue from the long‐term and consistent leveraging of the RFID‐EDI bundle. Thus, the overarching contribution of this study is the elucidation of how and along what measures the bundled leveraging of RFID and EDI improves hospital performance, as well as which measures of hospital performance are time (in)variant. We round out this study with a discussion of our findings, their implications, and offer directions for future research.