Abstract
We examine hospital Electronic Medical Record (EMR) vendor adoption patterns and how they relate to hospital market structure. As in many network technology adoption decisions, hospitals face countervailing incentives to coordinate or differentiate in their choice of vendors. We find evidence of substantial agglomeration on EMR vendors, which increases as hospital markets become more competitive. These findings suggest that incentives to coordinate dominate incentives to differentiate overall, and the relative balance grows stronger in favor of coordination as markets become more competitive. Our findings also have important implications regarding antitrust policy. A potential downside of hospital consolidation—increased obstacles in information sharing due to vendor differentiation—should be taken into account in evaluation of hospital mergers.
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Notes
These same network externalities may dampen the rate at which hospitals adopt the technology. Here we focus specifically on which vendor a hospital chooses, conditional on already having chosen to adopt EMR.
Certainly EMR vendor choices are determined by other factors beyond incentives to coordinate or differentiate with other local hospitals. For example, in surveys of hospital administrators on the barriers to EMR adoption, hospital managers cite internal barriers (e.g. overcoming physician resistance, training costs), high cost, and perceived quality of products currently available (Doolan and Bates 2002; Poon et al. 2004). These factors are all likely related to vendor choice as well, but do not generate clear predictions with regard to agglomeration/dispersion.
93% of hospitals that have adopted CPOE in 2012 had the same vendor for both their CPOE and CDR systems.
A full discussion of the details behind MTAD is in Rysman and Greenstein (2005).
Note that, with a sufficient number of markets, MTAD converges to a standard normal distribution no matter the number of firms or range of HHI; hence any relationship between MTAD and number of firms, or HHI, is not due to the construction of the statistic. We verify this fact empirically via Monte Carlo simulations, where we establish that, under the null of random vendor choice, MTAD does not correlate with the number of firms or HHI.
While the inclusion of these controls has little impact on the estimate, we note that in results not reported in the table the fraction of hospitals with a system affiliation has a strong negative impact on MTAD. As expected, many hospitals in a market with system ownership leads to agglomeration; however, our results imply that this is independent of the market competition channel.
This regression includes the 274 HRRs for which we observe hospitals in the HIMSS data in both 2005 and 2012.
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Acknowledgements
This work was supported by a NET Institute (www.netinst.org) research grant. We thank seminar participants at the School of Public and Environmental Affairs and the Department of Business Economics and Public Policy at Indiana University for helpful comments. We also acknowledge the Health Information Management Systems Society (HIMSS) for providing access and assistance to their data and Jean Roth for assistance with the AHA data. We are responsible for all remaining errors.
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Freedman, S., Lin, H. & Prince, J. Does Competition Lead to Agglomeration or Dispersion in EMR Vendor Decisions?. Rev Ind Organ 53, 57–79 (2018). https://doi.org/10.1007/s11151-018-9624-1
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DOI: https://doi.org/10.1007/s11151-018-9624-1