When IT Creates Legal Vulnerability: Not Just Overutilization but Underprovisioning of Health Care Could be a Consequence

Abstract

We study the potential impact of the legal vulnerability created by ubiquitous information technology (IT) and provide insights into its unintended consequences in a typical healthcare context. Informed by algorithmic predictions based on risk information, screening policies determine the level of care provision (i.e., whether to conduct a test). When such predictions are provided to physicians via IT in the testing stage, follow-up decisions could be more accurate. Yet, physicians may also observe heightened legal risk due to increased information visibility. In this context, we examine the socially optimal screening (based on risk information) and follow-up policies (based on risk and test information) in light of increased visibility of patient data due to health IT and possible litigation risks associated with it.We nd that strategic underprovisioning of health care, therefore a lower utilization of health care services, through screening policies could potentially mitigate the adverse impact of health IT. The underprovisioning of health care is aggravated if the precision of the risk factors relative to that of the medical test increases or the physician becomes more self-interested and less patient-oriented. On the other hand, limits on malpractice damage can alleviate the underprovisioning of health care.