The spillover e ects of health it investments on regional healthcare costs

Electronic health records (EHR) are often presumed to reduce the significant and accelerating healthcare costs in the United States. However, evidence on the relationship between EHR adoption and costs is mixed, leading to skepticism about the e ectiveness of EHR in decreasing costs. We argue that simply looking at the hospital-level e ects can be misleading because the benefits of EHR can go beyond the adopting hospital by creating regional spillovers via information and patient sharing. When patients move between hospitals, timely and high-quality records received at one hospital can a ect the costs of care at another hospital. We provide evidence that although EHR adoption increases the costs of the adopting hospital, it has significant spillover e ects by reducing the costs of neighboring hospitals. We further show that these spillovers are linked to information and patient sharing. Specifically, the spillovers are stronger when more hospitals in the region are in health information exchange networks and in the same integrated delivery systems, which can share information more easily. Furthermore, utilizing regional characteristics that can a ect the extent of patient sharing such as urban versus rural areas, population density, average distance between hospitals, and hospital density, we find that locations with higher patient and hospital concentration experience stronger regional spillovers. Additionally, spillovers are stronger after the HITECH (Health Information Technology for Economic and Clinical Health) Act that increased EHR adoption and use. Overall, our findings suggest that we need to take into account externalities to understand the benefits of health IT investments and form policy decisions.