Organizational Innovation in Health Care

This dissertation investigates whether differences in organizational innovation amongst health care providers can explain the huge variation in costs and outcomes. I specifically consider two facets of organizational innovation: the deployment of information technology and the relationships between hospitals and physicians. In the first chapter, I investigate IT adoption in a service setting by considering the impact of electronic medical records (EMRs) on the length of stay and clinical outcomes of patients in US hospitals. To uncover the distinct impacts of EMRs on operational efficiency and care coordination, I present evidence of heterogeneous effects by patient complexity. I find that EMRs have the largest impact for relatively less complex patients. Admission to a hospital with an EMR is associated with a 2\% reduction in length of stay and a 9\% reduction in thirty-day mortality for such patients. In contrast, there is no statistically significant benefit for more complex patients. However, I present three additional results for complex cases. First, patients returning to the same hospital benefit relative to those who previously went to a different hospital, which could be due to easier access to past electronic records. Second, computerized order entry is associated with higher billed charges. Finally, hospitals that have a high share of publicly insured patients, and hence a bigger incentive to curb resource use, achieve a greater reduction in length of stay for complex patients after EMR adoption. In the second chapter, co-authored with Robert Huckman, I investigate the role of process specialists in guiding customers through such complex service transactions by considering the management of patients admitted to U.S hospitals. Traditionally, a patient's primary care physician has been in charge of his or her hospital admission. Over the past decade, however, there has been a steady rise in the use of hospitalists - physicians who spend all their professional time at the hospital - in managing inpatient care. Using data from the American Hospital Association and the Agency for Healthcare Research and Quality's Nationwide Inpatient Sample (NIS) database, we find that hospitals with hospitalist programs achieve reductions in the risk-adjusted length of stay of inpatients over the time period 2003 to 2010. The effect is strongest for complex patients who have a higher number of comorbidities. Our findings support the view that process specialists such as hospitalists are particularly beneficial for complex transactions that entail a greater degree of coordination. In the final chapter, I document the positive relationship between consolidation in the health care industry and technology adoption. I propose several mechanisms that could explain the association between the adoption of electronic medical records and greater hospital-physician integration. I show that the positive correlation between technology adoption and hospital consolidation has been increasing over time. I show that hospitals located in concentrated markets are more likely to adopt electronic medical records and to use hospitalists. Moreover, for a limited set of hospitals, the quality of management is positively associated with the adoption of electronic medical records and the use of hospitalists.Business Economic