Innovative IT keeps costs lower at larger health systems

Health systems who have uniform IT platforms across member hospitals have an upper hand in keeping service prices above competitive levels, according to a study from the University of Texas at Austin.

Researchers analyzed data on 195 multihospital health systems' IT setups, as well as their finance and operations information, quality of care delivery processes and medical service offerings, and found that "tacit collusion" is most prominent among health systems that have standardized IT platforms and for those that have member hospitals that overlap in multiple patient markets.

"The more you overlap, the more likely you are to achieve that sphere of influence with each other and force the other party into tacit compliance," Hüseyin Tanriverdi, an associate professor of information, risk and operations management at the McCombs School of Business, said in a July 20 news release from the university.

Researchers also found correlation between higher per-patient costs and overlapping health systems with standardized IT platforms, stating that these systems had "daily costs per patient on average $432 higher than competitive prices."

This differed from health systems whose member hospitals used more advanced IT systems, in which daily costs per patient were only $171 higher.

"Innovative IT helped hospitals reduce costs, a benefit they used to compete with local rivals and passed on to customers by lowering prices and keeping them low," the researchers wrote. 

The full study was published in MIS Quarterly.

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