Academic journal article Journal of Healthcare Management

Payer Mix and EHR Adoption in Hospitals/PRACTITIONER APPLICATION

Academic journal article Journal of Healthcare Management

Payer Mix and EHR Adoption in Hospitals/PRACTITIONER APPLICATION

Article excerpt

Dong Yeong Shin, doctoral student, Department of Health Services Administration, University of Alabama at Birmingham; Nir Menachemi, PhD, professor, health care organization and policy, University of Alabama at Birmingham; Mark Diana, PhD, assistant professor, School of Public Health, Tulane University, New Orleans; Abby Swanson Kazley, PhD, associate professor, Medical University of South Carolina, Charleston; and Eric W. Ford, PhD, dutinguished professor of healthcare, Bryan School of Business, University of North Carolina at Greensboro


Payers are known to influence the adoption of health information technology (HIT) among hospitals. However, previous studies examining the relationship between payer mix and HIT have not focused specifically on electronic health record systems (EHRs). Using data from the Nationwide Inpatient Sample and the American Hospital Association Annual Survey, we examine how Medicare, Medicaid, commercial insurance, and managed care caseloads are associated with EHR adoption in hospitals. Overall, we found a weak relationship between payer mix and EHR adoption. Medicare and, separately, Medicaid volumes were not associated with EHR adoption. Furthermore, commercial insurance volume was not associated with EHR adoption; however, a hospital located in the third quartile of managed care caseloads had a decreased likelihood of EHR adoption. We did not find empirical evidence to support the hypothesis that payer generosity and other indirect mechanisms influence EHR adoption in hospitals. The direct incentives embedded in the Health Information Technology for Economic and Clinical Health Act may have a positive influence on EHR adoption - especially for hospitals with high Medicare and/or Medicaid caseloads. However, it is still uncertain whether the available incentives will offset the barriers many hospitals face in achieving meaningful use of EHRs.

For more information about the concepts in this article, contact Dr. Menachemi at


Research has shown that payer mix, defined as the combination of thirdparty payers that makes up a hospital's book of business, can influence hospitals' strategic behaviors. Studies have found that higher percentages of Medicaid (Cleverley and Harvey 1992; McKay and Deily 2005) or Medicare patients (Rosko 2001) are negatively associated with financial performance. Furthermore, given that varying reimbursement rates are negotiated in the private insurance book of business, hospital revenue per admission has been demonstrated to predict operational efficiency (Dor and Farley 1996; McKay and Deily 2005) and clinical performance (Clement and Grazier 2001; Menachemi et al. 2007). Attempting to leverage the influence that the public insurance programs have on hospitals, the federal government, through the Health Information Technology for Economic and Clinical Health (HITECH) Act of 2009, aims to increase the adoption and "meaningful use" of electronic health record systems (EHRs) by providing incentives and penalties to hospitals through the Medicare and Medicaid programs (CMS 2010).

The HITECH Act, part of federal stimulus legislation, allocated billions of dollars in incentive payments to providers to facilitate the adoption and use of EHR technology (Blumenthal and Tavenner 2010). The incentive payments, made to hospitals that adopt, implement, upgrade, or successfully demonstrate their meaningful use of certified EHRs, are available as of fiscal year 2011. Hospitals that do not achieve meaningful use by 2015 are potentially subject to Medicare and Medicaid payment penalties of up to 2 percent in later years (CMS 2010).

The relationship between hospitals' EHR adoption rates and payer mix is not fully understood. However, several researchers have found that payer mix is correlated with health information technology (HIT) adoption. Based on 2004 data, Furukawa and colleagues (2008) found that the adoption of computerized physician order entry systems, but not EHR systems, was associated with an increased rate of Medicare patients as a percentage of all discharges. …

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