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The Trillion Dollar Conundrum: Complementarities and Health Information Technology

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  • David Dranove
  • Christopher Forman
  • Avi Goldfarb
  • Shane Greenstein

Abstract

We examine the relationship between the adoption of EMR and hospital operating costs. We first identify a puzzle that has been seen in prior studies: Adoption of EMR is associated with a slight cost increase. We draw on the literature on IT and productivity to demonstrate that the average effect masks important differences across time, locations, and hospitals. We find: (1) EMR adoption is initially associated with higher costs; (2) At hospitals with access to complementary inputs, EMR adoption leads to a cost decrease after three years; (3) Hospitals in unfavorable conditions experience increased costs even after six years.

Suggested Citation

  • David Dranove & Christopher Forman & Avi Goldfarb & Shane Greenstein, 2012. "The Trillion Dollar Conundrum: Complementarities and Health Information Technology," NBER Working Papers 18281, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:18281
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    More about this item

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • L30 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - General

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