The Effect of Health Information Technology on Quality and Productivity



The Effect of Health Information Technology on Quality and Productivity

Clinical error reduction is among the most pressing issues facing the US healthcare system. Information technology holds the potential to improve hospital quality while reducing costs. Computerized physician order entry (CPOE) systems may remedy communication problems while facilitating clinical guideline implementation. CPOE also captures information for both clinical and management purposes. Numerous case studies have documented successful CPOE implementations. Effective CPOE implementation is not as simple as installing hardware and software; rather, hospitals must make complementary technological and organizational investments. CPOE must interoperate with electronic medical record and medication administration record systems. These technologies must also penetrate the organization, providing access to staff throughout the hospital. Finally, physicians must invest their own time to learn and use health information technology (HIT).


This project measures the effect of HIT on both quality and costs and will build on the existing CPOE literature. First, the researchers use national patient level data in conjunction with hospitals’ IT adoption decisions for the 1997-2007 time period. These data and a difference-in-differences strategy that exploits CPOE’s rapid diffusion during this period will provide more generalizable measures of CPOE value. Second, they measure the value of hospitals’ complementary technological and organizational investments. Although the importance of these investments has been recognized, their value has not previously been estimated. Third, they measure the effect of health IT on upcoding behavior. HIT value is measured in two steps. First, the effect of HIT and its organizational complements on medical errors is measured. Second, the researchers combine these measures with previous research deriving the financial cost of medical errors; thus, they estimate the financial value of CPOE-driven error reductions. They will also employ a set of identification tests based on different patient safety outcomes that should, and should not, be affected by HIT. Overall, this study will provide new insight into how HIT creates both financial and clinical value while enhancing the empirical rigor with which that value is measured.


Preliminary estimates suggest that the effect of health IT on quality is extremely small. The researchers do not detect reductions in length of stay, mortality, or readmissions; however, we do find some evidence that IT reduces errors. While IT improves quality at the margin, health gains and resultant cost savings are minimal. Furthermore, the researchers have found evidence that health IT enhances upcoding. Thus, IT may, in effect, raise the prices paid by Medicare.

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