An Analysis of the Adoption of Digital Health Records Under Switching Costs

Abstract

We investigate the incentive issues that surround the adoption and sharing of electronic health records (EHR) and the potential role of a personal health record (PHR) platform in facilitating data sharing. Through our analysis, we find evidence that health-care providers may not have an incentive to share patients' records electronically even though EHR systems will increase consumer surplus, especially in the presence of provider heterogeneity and myopic consumers. In this context, we find that an independent PHR platform can create incentives for the providers to share their patients' records electronically with other providers by selectively subsidizing them. In a pluralistic health-care system like that in the United States, where health-care providers have varying incentives to implement electronic health records, an online PHR platform can provide a proxy for a “national health information network,”' wherein consumers can freely exchange their health records among competing providers.