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Electronic Health Information Exchange, Competition, and Network Effects

Author

Listed:
  • Sunita Desai

    (The Wharton School University of Pennsylvania, Health Care Management & Economics, 3640 Locust Walk, 19104 Philadelphia, PA)

Abstract
As in most industries, in health care, information is a competitive asset, and we expect that health care providers may have incentive to protect their information from competitors. This study aims to understand how this incentive to protect information may be a barrier to the development of a health information network. Health information networks are designed to facilitate electronic information sharing across health care providers. The electronic exchange of health information is widely considered a promising tool to improve quality, costs, and efficiency of health care. Federal and state governments have invested over $30 billion to support the development of health information networks and electronic health information sharing. However, uptake has been slow suggesting that barriers to adoption exist. We first develop a model of firms' decisions to enter a health information network given this potential loss of competitive advantage. Guided by implications of the model, we conduct a two part empirical analysis to test for evidence that providers may be reluctant to join a health information network out of competitive concern. First, we conduct a national hospital-level analysis. Second, we construct a novel data set to conduct a physician-level analysis focused on New York State. In both analyses, we find supporting evidence that competitive pressure may be a barrier to entry by health care firms. We discuss implications for policy and network design given our findings.

Suggested Citation

  • Sunita Desai, 2014. "Electronic Health Information Exchange, Competition, and Network Effects," Working Papers 14-23, NET Institute.
    • Handle: RePEc:net:wpaper:1423
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    File URL: http://www.netinst.org/desai_14-23.pdf
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    References listed on IDEAS

    as
    1. Joseph Farrell & Garth Saloner, 1985. "Standardization, Compatibility, and Innovation," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 70-83, Spring.
    2. Nicholas Economides, 1997. "The Economics of Networks," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco, vol. 1(0), December.
    3. Farrell, Joseph & Saloner, Garth, 1992. "Converters, Compatibility, and the Control of Interfaces," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 9-35, March.
    4. Farrell, Joseph & Saloner, Garth, 1986. "Standardization and variety," Economics Letters, Elsevier, vol. 20(1), pages 71-74.
    5. repec:mpr:mprres:7285 is not listed on IDEAS
    6. Gautam Gowrisankaran & Joanna Stavins, 2004. "Network Externalities and Technology Adoption: Lessons from Electronic Payments," RAND Journal of Economics, The RAND Corporation, vol. 35(2), pages 260-276, Summer.
    7. Farrell, Joseph & Klemperer, Paul, 2007. "Coordination and Lock-In: Competition with Switching Costs and Network Effects," Handbook of Industrial Organization, Elsevier.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Seth Freedman & Haizhen Lin & Jeffrey Prince, 2018. "Does Competition Lead to Agglomeration or Dispersion in EMR Vendor Decisions?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 53(1), pages 57-79, August.

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    More about this item

    Keywords

    health; technology; networks;
    All these keywords.

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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