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Privacy Protection and Technology Diffusion: The Case of Electronic Medical Records

  • Amalia R. Miller

    ()

    (Department of Economics, University of Virginia, Charlottesville, Virginia 22904)

  • Catherine Tucker

    ()

    (MIT Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts 02142)

This paper quantifies the effect of state privacy regulation on the diffusion of electronic medical records (EMRs). EMRs allow medical providers to store and exchange patient information using computers rather than paper records. Hospitals may be more likely to adopt EMRs if they can reassure patients that their confidentiality is legally protected. Alternatively, privacy protection may inhibit adoption if hospitals cannot benefit from easily exchanging patient information. We find that state privacy regulation restricting hospital release of health information reduces aggregate EMR adoption by hospitals by more than 24%. We present evidence that suggests that this is due to the suppression of network externalities.

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File URL: http://dx.doi.org/10.1287/mnsc.1090.1014
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Article provided by INFORMS in its journal Management Science.

Volume (Year): 55 (2009)
Issue (Month): 7 (July)
Pages: 1077-1093

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Handle: RePEc:inm:ormnsc:v:55:y:2009:i:7:p:1077-1093
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Web page: http://www.informs.org/
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  1. Leemore S. Dafny, 2005. "How Do Hospitals Respond to Price Changes?," American Economic Review, American Economic Association, vol. 95(5), pages 1525-1547, December.
  2. Daron Acemoglu & Amy Finkelstein, 2008. "Input and Technology Choices in Regulated Industries: Evidence from the Health Care Sector," Journal of Political Economy, University of Chicago Press, vol. 116(5), pages 837-880, October.
  3. Philipp Schmidt-Dengler, 2006. "The Timing of New Technology Adoption: The Case of MRI," 2006 Meeting Papers 3, Society for Economic Dynamics.
  4. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
  5. Gautam Gowrisankaran & Joanna Stavins, 2004. "Network Externalities and Technology Adoption: Lessons from Electronic Payments," RAND Journal of Economics, The RAND Corporation, vol. 35(2), pages 260-276, Summer.
  6. Joseph Farrell & Garth Saloner, 1984. "Standardization, Compatibility and Innovation," Working papers 345, Massachusetts Institute of Technology (MIT), Department of Economics.
  7. Posner, Richard A, 1981. "The Economics of Privacy," American Economic Review, American Economic Association, vol. 71(2), pages 405-09, May.
  8. Marc Rysman, 2004. "Competition Between Networks: A�Study of the Market for Yellow�Pages," Review of Economic Studies, Wiley Blackwell, vol. 71(2), pages 483-512, 04.
  9. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
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