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A number of studies have documented the potential benefits of Health Information Technology (IT).The adoption of health IT can improve health care quality, prevent medical errors, reduce health care costs, increase administrative efficiencies, decrease paperwork and expand access to affordable care (Evans et al., 1998; Tierney et al., 1993; Mekhjian et al., 2002; Kuperman and Gibson, 2003, Furukawa et al., 2008; McCullough et al, 2010).
Despite these potential benefits, the adoption rate of health IT has been low in the United States. Only 37 percent of community hospitals reported moderate or high use of health IT in 2005 (AHA, 2007). Only 20-25 percent of hospitals had adopted some version of an electronic medical record (EMR) system (Health Affairs, 2005). About 7 percent of hospitals had installed Computerized Physician Order Entry (CPOE) and another 9 percent had contracted for it, implying that only 16 percent had fully implemented CPOE systems (Fonkych and Taylor, 2005). The American Society of Health-System Pharmacists (AHSP) annual survey shows that fewer than 5 percent of hospitals surveyed have adopted CPOE systems (Pedersen, Schneider, & Scheckelhoff, 2005). More recent study showed that only 1.5 percent of US hospitals had a comprehensive electronic record system and an additional 7.6% had a basic system (Jha et al., 2009). Moreover, the gross revenues of health IT comprise only 2% of health care industry spending, which is scant compared with other information intensive industries, which spend up to 10% (Dold and Raymond, 2001).In general, the U.S. is behind other countries by as much as a dozen years in the adoption of health IT. In 2004, the Office of the National Coordinator (ONC) for Health Information Technology was established in the US, which several organization for economic co-operation and development (OECD) nations such as Germany, Canada, England, Norway and Australia preceded by at least several years (Gerald et al, 2006).
Thus, to improve health IT adoption, the factors affecting health IT adoption need to be investigated. This study identifies factors affecting health information technology (IT) investment decision in hospitals using California Hospital and Patient level data of the Office of Statewide Health Planning and Development (OSHPD) from 2000 to 2006.
This study contributes to the literature on health IT adoption in a couple of ways. First, health IT was calculated to include the dollar amount which included all the expenditure related to IT. This measure may be more representative one. Second, the generalized linear model (GLM) with clustering error within hospitals was employed.