The Effect of Information Technology Investments in Healthcare: A Longitudinal Study of its Lag, Duration, and Economic Value

Abstract

This research develops a framework that disaggregates investments in IT in the healthcare industry into four distinct categories: investments in patient management IT (PMIT), transactional support IT (TSIT), communications IT (CIT), and administrative IT (AIT). In a longitudinal study, financial and operational data from several hospitals spanning 26 years are analyzed to examine the lag as well as duration of the effect of these IT investments on hospital costs and labor productivity. The results reveal that TSIT capital has an immediate effect on medical labor and administrative labor productivities, and a lagged but durable effect on operating costs. CIT capital has an immediate but short-term effect on medical labor and administrative labor productivities. AIT capital has an immediate but short-term effect on medical labor productivity. PMIT capital, on the other hand, increases operating costs, an effect that is immediate but short-term. Finally, post hoc marginal analysis reveals that among the four types of IT investments, CIT has the maximum economic value effect on hospital productivity, followed by TSIT, and then AIT; with PMIT having a minimal economic value effect.

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