Does Competition Lead to Agglomeration or Dispersion in EMR Vendor Decisions?

We examine hospital Electronic Medical Record (EMR) vendor adoption patterns and how they relate to market structure. Hospitals have incentives to both coordinate with, and differentiate from, local competitors in their choice of vendors, with some of these incentives even linked to receipt of government subsidies through the HITECH Act of 2009. We find that hospitals tend to agglomerate in their vendor choices, and the level of agglomeration grows stronger with competition. These findings suggest that incentives to coordinate dominate incentives to differentiate overall, and the relative balance grows stronger in favor of coordination as markets become more competitive. Hence, a potential downside of hospital competition, i.e., increased difficulty in information sharing due to increased incentive to differentiate, does not appear to materialize in this market.