Market Competition and Hospital Adoption of Advanced Information Technology Capabilities

Hospitals in the US have undergone a dramatic shift toward digitizing health care records. As of 2014, over 80% of hospitals in the US had fully implemented an EHR. Despite widespread adoption, many of the theorized cost and quality benefits of EHRs have not yet been realized. Recently, focus has shifted toward understanding how organizations can use EHRs and the data they store to deliver value to patients and providers. Electronic data sharing, patient engagement, and technology-enabled quality improvement are next-generation functionalities that can help providers leverage EHRs to improve care. To that end, one could reasonably expect competition between hospitals to be positively associated with the adoption of advanced EHR capabilities. Conversely, it is possible that organizations might make strategic decisions regarding IT investments to preserve market share, with hospitals in more competitive markets under-investing in capabilities that facilitate the transfer of patient information to competing providers.

We sought to determine the impact of competition on adoption of advanced EHR functionalities. Using national survey data of 3,582 hospitals in the United States from 2014 - 2016, we identified a set of 20 advanced functionalities, categorized into 10 patient engagement (PE) functions and 10 quality improvement (QI) functions, and tracked their adoption over time. We classified hospitals as those in more-competitive and less-competitive markets—determined by a Herfindahl-Hirschman Index (HHI) of market concentration—and then calculated descriptive statistics comparing adoption of an advanced EHR (a binary indicator defined as a hospital having adopted at least 8 out of 10 of functionalities in both the PE and QI categories) and the mean number of advanced functionalities adopted by level of competition. We then estimated a multivariate logistic regression model controlling for a wide variety of hospital demographics including size, region, teaching status, and year fixed effects to determine the effect of more-competitive markets using our dichotomous measure of advanced EHR adoption as the dependent variable. Finally, we compared adoption by hospitals in more- versus less-competitive markets by functionality.

We found that hospitals in more-competitive markets were more likely to have adopted an advanced EHR (27.6% compared to 23.4% of hospitals in less-competitive markets, p<0.01). Hospitals in more-competitive markets also had a higher mean number of advanced EHR functionalities adopted in 2015 (13.06 compared to 12.54, p=0.01) and 2016 (14.12 compared to 13.74, p=0.04). In our multivariate model, hospitals in more-competitive markets were more likely to have an advanced EHR (OR=1.42, p=0.01). Hospitals in more-competitive markets were more likely to have adopted functionalities allowing patients to schedule appointments, refill prescriptions, and securely message their providers online. There was no difference between by market competition in the adoption of functionalities that allow patients to transmit health records electronically to a third party or download information from their health records.

Our results indicate that competition encourages hospital use of advanced EHR functionalities, especially functions that improve care delivery for current patients. However, competition does not appear to incentivize functionalities to support the electronic sharing of patient data.