Strategic risk analysis for information technology outsourcing in hospitals

Outsourced IT has a considerable impact on the hospital productivity.The optimal level of IT outsourcing is between 50% and 80% of overall IT spending.Hospital characteristics play an important role on hospital productivity. This study examines the effects of outsourced information technology (IT) on hospital productivity by using California hospital data from 1997 to 2007. I estimated the parameters of a value-added hospital production function, correcting for endogenous input choices. I found that in comparison to in-house IT, outsourced IT has a more considerable impact on hospital productivity in the short run. However, in the long run, in-house IT has a more substantial impact on productivity than outsourced IT. I also found that hospitals that do not engage in too much IT outsourcing have considerable productivity gains from their outsourced IT. Moreover, hospital characteristics play an important role in the effects of outsourced IT on hospital productivity; for example, hospitals with a small number of beds and early adopters experience productivity gains from outsourced IT.

[1]  Suzanne Rivard,et al.  A multi-level investigation of information technology outsourcing , 2012, J. Strateg. Inf. Syst..

[2]  Jing Wang,et al.  The Aftermath of Information Technology Outsourcing: An Empirical Study of Firm Performance Following Outsourcing Decisions , 2008, J. Inf. Syst..

[3]  Stephen D. Oliner,et al.  The Resurgence of Growth in the Late 1990s: Is Information Technology the Story? , 2000 .

[4]  Leslie P. Willcocks,et al.  An Empirical Investigation of Information Technology Sourcing Practices: Lessons From Experience , 1998, MIS Q..

[5]  Mark F. Thouin,et al.  The effect of information technology investment on firm-level performance in the health care industry , 2008, Health care management review.

[6]  Leslie P. Willcocks,et al.  Beyond Transaction Cost Economics: Towards an endogenous theory of Information Technology Outsourcing , 2011, J. Strateg. Inf. Syst..

[7]  Rudy Hirschheim,et al.  REALIZING OUTSOURCING EXPECTATIONS Incredible Expectations, Credible Outcomes , 1994 .

[8]  J. Stock,et al.  Instrumental Variables Regression with Weak Instruments , 1994 .

[9]  R. Coase.  The Nature of the Firm , 1937 .

[10]  Guy David,et al.  The convergence between for-profit and nonprofit hospitals in the United States , 2003, International Journal of Health Care Finance and Economics.

[11]  Vijay Gurbaxani,et al.  Information Technology Outsourcing, Knowledge Transfer, and Firm Productivity: An Empirical Analysis , 2012, MIS Q..

[12]  H. Mcdonald,et al.  Effects of computerized clinical decision support systems on practitioner performance and patient outcomes: a systematic review. , 2005, JAMA.

[13]  Kunsoo Han,et al.  Returns to Information Technology Outsourcing , 2011 .

[14]  Robert J. Kauffman,et al.  Returns to Information Technology Outsourcing , 2011 .

[15]  J. McCullough,et al.  The effect of health information technology on quality in U.S. hospitals. , 2010, Health affairs.

[16]  W. Dugger.  The Economic Institutions of Capitalism , 1987 .

[17]  Alastair Baker,et al.  Crossing the Quality Chasm: A New Health System for the 21st Century , 2001, BMJ : British Medical Journal.

[18]  J. Goodwin,et al.  The effect of electronic medical record adoption on outcomes in US hospitals , 2013, BMC Health Services Research.

[19]  R. Van Horn,et al.  Valuing Hospital Investment in Information Technology: Does Governance Make a Difference? , 2006, Health care financing review.

[20]  M. Arellano,et al.  Another look at the instrumental variable estimation of error-components models , 1995 .

[21]  M. J. Earl,et al.  The Risks of Outsourcing IT , 1996 .

[22]  R. Blundell,et al.  Initial Conditions and Moment Restrictions in Dynamic Panel Data Models , 1998 .

[23]  Suzanne Rivard,et al.  An assessment of the use of Transaction Cost Theory in information technology outsourcing , 2011, J. Strateg. Inf. Syst..

[24]  Paul Windrum,et al.  The outsourcing productivity paradox: total outsourcing, organisational innovation, and long run productivity growth , 2009 .

[25]  Suzanne Rivard,et al.  Managing the Risk of IT Outsourcing , 1999, HICSS.

[26]  G. Kuperman,et al.  Computer Physician Order Entry: Benefits, Costs, and Issues , 2003, Annals of Internal Medicine.

[27]  W. Newey,et al.  Estimating vector autoregressions with panel data , 1988 .

[28]  N. Venkatraman,et al.  Determinants of Information Technology Outsourcing: A Cross-Sectional Analysis , 2011, J. Manag. Inf. Syst..

[29]  Ray Hackney,et al.  IT outsourcing: frameworks for conceptualizing practice and perception , 2000, Inf. Syst. J..

[30]  Narasimhaiah Gorla,et al.  Will Negative Experiences Impact Future it Outsourcing? , 2010, J. Comput. Inf. Syst..

[31]  Jeffrey S McCullough,et al.  Health information technology and patient safety: evidence from panel data. , 2009, Health affairs.

[32]  N. Venkatraman,et al.  An Empirical Study of Information Technology Outsourcing: Benefits, Risks, and Performance Implications , 1995, ICIS.

[33]  Eric Strobl,et al.  Productivity Effects of International Outsourcing: Evidence from Plant-Level Data , 2007 .

[34]  José L. Gascó,et al.  Information systems outsourcing reasons and risks: a new assessment , 2010, Ind. Manag. Data Syst..

[35]  Soon Ang,et al.  Employment outsourcing in information systems , 1996, CACM.

[36]  Leslie P. Willcocks,et al.  It Outsourcing and Core is Capabilities: Challenges and Lessons at Dupont , 2005, Inf. Syst. Manag..

[37]  T. S. Raghu,et al.  Electronic medical records, nurse staffing, and nurse-sensitive patient outcomes: evidence from California hospitals, 1998-2007. , 2010, Health services research.

[38]  Jeffrey S McCullough,et al.  The adoption of hospital information systems. , 2008, Health economics.

[39]  E. Brynjolfsson,et al.  Paradox Lost? Firm-Level Evidence on the Returns to Information Systems Spending , 1996 .

[40]  A. Bhalla,et al.  Is more IT offshoring better? An exploratory study of western companies offshoring to South East Asia , 2008 .

[41]  Bandula Jayatilaka,et al.  Information systems outsourcing: a survey and analysis of the literature , 2004, DATB.

[42]  Ranjan B. Kini.  Vendor availability: a key factor for outsourcing in Chilean ICT sector , 2007, Inf. Manag. Comput. Secur..

[43]  David Gefen,et al.  Business Familiarity as Risk Mitigation in Software Development Outsourcing Contracts , 2008, MIS Q..

[44]  Leslie P. Willcocks,et al.  The Relationship Advantage: Information Technologies, Sourcing, and Management , 2002 .

[45]  Ron Borzekowski.  Measuring the Cost Impact of Hospital Information Systems: 1987-1994 , 2002, Journal of health economics.

[46]  Anthony DiRomualdo,et al.  Strategic Intent for IT Outsourcing , 1998 .

[47]  Feliciano B. Yu,et al.  Full Implementation of Computerized Physician Order Entry and Medication-Related Quality Outcomes: A Study of 3364 Hospitals , 2009, American journal of medical quality : the official journal of the American College of Medical Quality.

[48]  Steffie Woolhandler,et al.  Hospital computing and the costs and quality of care: a national study. , 2010, The American journal of medicine.

[49]  Detmar W. Straub,et al.  Production and Transaction Economies and IS Outsourcing: A Study of the U.S. Banking Industry , 1998, MIS Q..

[50]  Kweku-Muata Osei-Bryson,et al.  Using regression splines to assess the impact of information technology investments on productivity in the health care industry , 2004, Inf. Syst. J..

[51]  Wonseok Oh,et al.  The Market's Perception of the Transactional Risks of Information Technology Outsourcing Announcements , 2006, J. Manag. Inf. Syst..

[52]  Peter B. Seddon.  The Australian Federal Government's Clustered-Agency IT Outsourcing Experiment , 2001, Commun. Assoc. Inf. Syst..

[53]  Leslie P. Willcocks,et al.  A review of the IT outsourcing literature: Insights for practice , 2009, J. Strateg. Inf. Syst..

[54]  Jinhyung Lee,et al.  The Impact of Health Information Technology on Hospital Productivity , 2012 .

[55]  Barrie R. Nault,et al.  Industry Level Supplier-Driven it Spillovers , 2006, Manag. Sci..

[56]  V. Roberts,et al.  Managing strategic outsourcing in the healthcare industry. , 2001, Journal of healthcare management / American College of Healthcare Executives.

[57]  Eric W. Ford,et al.  Electronic health record implementation and hospitals' total factor productivity , 2013, Decis. Support Syst..

[58]  M. Arellano,et al.  Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations , 1991 .

[59]  Lawrence J. Christiano,et al.  Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy , 2005 .

[60]  James T. C. Teng,et al.  Theoretical perspectives on the outsourcing of information systems , 1995, J. Inf. Technol..

[61]  K. Kraemer,et al.  : Evidence from , 2022 .

[62]  Helmut Krcmar,et al.  The role of Transaction Cost Economics in Information Technology Outsourcing research: A meta-analysis of the choice of contract type , 2016, J. Strateg. Inf. Syst..

[63]  J. Barthélemy.  The Hidden Costs of IT Outsourcing , 2001 .

[64]  E. Brynjolfsson,et al.  Information Technology As A Factor Of Production: The Role Of Differences Among Firms , 1995 .

[65]  C. Saunders,et al.  Achieving Success in Information Systems Outsourcing , 1997 .

[66]  Wendy L. Currie,et al.  Using multiple suppliers to mitigate the risk of IT outsourcing at ICI and Wessex Water , 1998, J. Inf. Technol..

[67]  Selçuk Perçin,et al.  Fuzzy multi-criteria risk-benefit analysis of business process outsourcing (BPO) , 2008, Inf. Manag. Comput. Secur..

[68]  Rajiv Kishore,et al.  Market reactions to E-business outsourcing announcements: An event study , 2006, Inf. Manag..

[69]  William R. King,et al.  Developing a framework for analyzing IS sourcing , 2000, Inf. Manag..

[70]  Marianne Bradford,et al.  Information technology outsourcing and organizational restructuring: An explanation of their effects on firm value , 2005 .

[71]  P. Shekelle,et al.  Systematic Review: Impact of Health Information Technology on Quality, Efficiency, and Costs of Medical Care , 2006, Annals of Internal Medicine.

[72]  Heinz K. Klein,et al.  On the Theoretical Foundations of Current Outsourcing Research , 2002 .