Conclusion
This study examined the effects of outsourced IT capital investment on hospital productivity. The study found that IT outsourcing in hospital settings potentially creates value. This study makes some important contributions. First, it provided a better understanding of the economic value of IT outsourcing by focusing on productivity and the comparative effectiveness between outsourced and in-house IT. Second, it found that hospital productivity varied depending on hospital characteristics and time trends. Finally, this study applied a production function using the DPD equation to reflect the outsourcing decision process, which allowed me to estimate the productivity effects of IT outsourcing while controlling for potential endogeneity.
Adoption of IT outsourcing in the healthcare industry is problematic because there has not been clear evidence of an efficiency gain associated with investments in outsourcing IT. I believe that this study’s findings will help managers of healthcare organizations in restoring IT adoption strategies. Smaller hospitals could achieve more productivity gain from IT outsourcing than larger hospitals could. IT outsourcing in the range of 50%–80% may be the best option to achieve meaningful productivity gain. Moreover, the largest gains from IT outsourcing will be seen early on with diminishing returns. Then, client hospitals should focus on in-house IT capital that complements provider capabilities. Because IT vendors may become better positioned to deliver IT services over time, hospitals should periodically evaluate their sourcing strategies.
