Strategic risk analysis for information technology outsourcing in hospitals

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.