Hospital Ownership Type and Innovation: The Case of Electronic Medical Records Adoption

Abstract

Nonprofit and for-profit firms coexist in many industries, with the hospital sector being one of the most predominant examples. This article explores whether nonprofit hospitals are more likely to make expensive investments with uncertain returns and potential public good value. Specifically, we estimate differences in the adoption of electronic medical records (EMRs) by ownership structure. We find that nonprofit hospitals are 11 to 18 percentage points more likely to have installed advanced EMR systems than for-profit hospitals by 2012. Although we find little difference in the likelihood of meeting initial government requirements for the “meaningful use” of EMRs, we find that nonprofits are 12 percentage points more likely to reach more stringent meaningful use standards that began in 2014. That being said, nonprofit adoption rates decrease as for-profit market penetration rates increase, suggesting nonprofits are less likely to adopt an uncertain technology when facing more direct competition from for-profit hospitals.