Kelsey Moran
Title: Costs of Technological Frictions: Evidence from EHR (Non)-Interoperability
Abstract: Interoperability - the ability of different systems to work together - is an increasingly vital component of product markets, particularly that for Electronic Health Records (EHR) systems. While adoption of EHR systems in US healthcare organizations is high, interoperability remains low particularly across systems built by different EHR vendors. We examine whether this technological friction has an influence on patient flows between providers and patient outcomes. Using event studies, we find that hospitals share 8% more inpatient transfers and 9-10% more referrals after switching to the same EHR vendor. We then show that interoperability affects patient outcomes through two channels: (1) the reallocation across hospitals, and (2) the more direct benefits of improved health information exchange. Allocatively, patients have better health outcomes when their sending hospital switches to a vendor used by better quality hospitals in the market; they have worse outcomes when the opposite occurs. Directly, patient costs, tests, images, and readmission rates decrease when sending and receiving hospitals share the same vendor. Finally, we estimate a demand model of patient flows to quantify the trade-offs between interoperability and other characteristics of receiving hospitals. We show that eliminating all interoperability frictions would result in 4% of patients being sent to different hospitals and would increase joint hospital-patient welfare by the equivalent of a 60-kilometer reduction in travel distance.