Pay-for-performance schemes and hospital HIT adoption

Abstract

Pay-for-performance (P4P) schemes are implemented to incentivize or penalize hospitals for their safe caregiving. Given that health information technology (HIT) results in better healthcare outcomes, P4P schemes are expected to promote hospital HIT adoption. However, P4P schemes could also discourage hospitals from adopting HIT because they may take away resources initially allocated for HIT adoption. This paper is one of the first to empirically investigate the double-edged role of P4P schemes in HIT adoption. We leverage a natural experiment in the US healthcare system, which introduced P4P schemes in 2013. Our empirical analysis reveals an unintended side effect of P4P schemes that could potentially impede HIT adoption. We also find that P4P schemes have a negative spillover effect on nonparticipating hospitals in the same multihospital system (MHS) as participating hospitals, particularly for small nonparticipating hospitals. Our findings provide important implications for health policy design and MHS management.