Reducing Medicare Spending Through Electronic Health Information Exchange: The Role of Incentives and Exchange Maturity

Idris Adjerid (), Julia Adler-Milstein () and Corey Angst ()
Additional contact information
Idris Adjerid: Mendoza College of Business, University of Notre Dame, Notre Dame, Indiana 46556
Julia Adler-Milstein: School of Information and School of Public Health, University of Michigan, Ann Arbor, Michigan 48109
Corey Angst: Mendoza College of Business, University of Notre Dame, Notre Dame, Indiana 46556

Information Systems Research, 2018, vol. 29, issue 2, 341-361

Abstract: Health information exchanges (HIEs) are entities that have emerged in healthcare delivery markets across the United States. By providing an interorganizational information system (IOIS) and governance over use of this system and the information exchanged through it, HIEs enable more routine and efficient electronic sharing of patient information between disparate and fragmented healthcare providers. This should result in improved quality and efficiency of care. However, significant questions persist about the extent to which HIEs produce these benefits in practice, particularly in terms of reducing healthcare spending. We use transaction cost economics (TCE) to theorize that HIEs establish a quasi-hierarchy that decreases frictions associated with information sharing in ways that reduce healthcare spending, and that the magnitude of reductions is greater when (1) insurer and provider incentives align, and (2) HIE capabilities mature. We can test these conjectures because HIEs, unlike other efforts that provide IOIS, are typically confined to regional markets and develop heterogeneously between these markets, introducing variation in insurer-provider incentive alignment and HIE maturity. Leveraging a unique national panel data set, we evaluate whether HIEs reduce spending for the largest insurer in the United States, i.e., Medicare, and whether incentives and HIE maturity modify the magnitude of reductions. We find significant spending reductions in healthcare markets that have established operational HIEs, with an average reduction of $139 per Medicare beneficiary per year (1.4% decrease) or a $3.12 billion annual reduction in spending if HIEs were nationally implemented in 2015. We also find that these reductions occur disproportionately in healthcare markets where providers have financial incentives to use an HIE to reduce spending and when HIEs are more mature. Our results inform an important open empirical question in the healthcare domain related to the value of HIEs, while also joining perspectives from TCE with the IOIS literature to understand the factors that may be relevant to IOIS value creation more generally.

Keywords: interorganizational information systems; transaction cost economics; business value of IT; IT and new organizational forms; economics of IS; health information exchange; Medicare; friction (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://doi.org/isre.2017.0745 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:orisre:v:29:y:2018:i:2:p:341-361

Access Statistics for this article

More articles in Information Systems Research from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().