Effect of Health Information Technology Expenditure on Patient Level Cost

OBJECTIVES: This study investigate the effect of health information technology (IT) expenditure on individual patient-level cost using California Office of Statewide Health Planning and Development (OSHPD) data obtained from 2000 to 2007. METHODS: We used a traditional cost function and applied hospital fixed effect and clustered error within hospitals. RESULTS: We found that a quadratic function of IT expenditure best fit the data. The quadratic function in IT expenditure predicts a decrease in cost of up to US$1,550 of IT labor per bed, US$27,909 of IT capital per bed, and US$28,695 of all IT expenditure per bed. Moreover, we found that IT expenditure reduced costs more quickly in medical conditions than surgical diseases. CONCLUSIONS: Interest in health IT is increasing more than ever before. Many studies examined the effect of health IT on hospital level cost. However, there have been few studies to examine the relationship between health IT expenditure and individual patient-level cost. We found that IT expenditure was associated with patient cost. In particular, we found a quadratic relationship between IT expenditure and patient-level cost. In other word, patient-level cost is non-linearly (or a polynomial of second-order degree) related to IT expenditure.