How Hospitals Differentiate Health Information Technology Portfolios for Clinical Care Efficiency: Insights from the HITECH Act

Hospitals have implemented health information technology (HIT) for clinical care to address rising operating costs in recent years. We integrate behavioral and institutional perspectives to explain how hospitals differentiate technological search relative to industry peers (i.e., search differentiation) for HIT portfolios. In the context of the U.S. healthcare industry, we theorize that hospitals’ search differentiation for HIT results jointly from idiosyncratic learning in response to cost-based performance shortfalls and isomorphic pressures in relation to changing policy uncertainty as the Health Information Technology for Economic and Clinical Health (HITECH) Act has unfolded. Based on a panel data set from 3,319 hospitals in 2007–2014, we demonstrate that when costs increase relative to aspiration level, a hospital differentiates its search for HIT by exploring more novel technologies for clinical care relative to peers. As policy uncertainty declines from the conceptualization phase to the enactment phase of the HITECH Act, a hospital’s search differentiation for HIT increases to a greater extent in response to cost-based performance shortfalls as lower uncertainty reduces the need to imitate peers’ search. As policy uncertainty further declines from the enactment phase to the enforcement phase of the HITECH Act and reaches its lowest level, however, the hospital’s search differentiation for HIT increases to a smaller extent in response to cost-based performance shortfalls because of policy incentives and professional norms to promote implementation of common technologies. Overall, we provide a more holistic picture of how uncertainty in a dynamic regulatory context intertwines with organizational learning from performance feedback in shaping search differentiation.