The Impact of Health Information Technology on Hospital Productivity

Health information technology (IT) has been championed as a tool that can transform health care delivery. We estimate the parameters of a value-added hospital production function correcting for endogenous input choices to assess the private returns hospitals earn from health IT. Despite high marginal products, the total benefits from expanded IT adoption are modest. Over the span of our data, health IT inputs increased by more than 210% and contributed about 6% to the increase in value-added. Not-for-profits invested more heavily and differently in IT. Finally, we find no compelling evidence of labor complementarities or network externalities from competitors’ IT investment.