Longitudinal study links health information technology implementation to improved financial performance in nursing homes

Background: Nursing homes are an important part of the United States (U.S.) healthcare system and serve vulnerable populations. However, nursing homes have lagged in the implementation of health information technology (HIT) systems. As HIT systems are expensive, nursing home leaders often face uncertainty about whether the investment is financially and strategically justifiable. The purpose of this study was to examine the association between nursing home HIT implementation and financial performance. Methods: We merged existing data from five different sources—Health Information and Management Systems Society (HIMSS) annual survey, Long-Term Care Facts of Care in the U.S. (LTCFocus.org), Online Survey Certification and Reporting (OSCAR)/Certification and Survey Provider Enhanced Reporting (CASPER), Area Health Resource Files (AHRF), and Medicare Cost Reports (MCR). The final analytical sample consisted of 2,404 nursing home-year observations for the study period 2009–2013. Financial performance was measured via three variables: operating costs, operating revenues, and operating margin. The independent variable was HIT implementation and was measured using a novel score based upon the HIMSS survey. Panel data analysis was performed using a multivariable regression model with two-way fixed effects (facility and year-level), and with appropriate organizational and market-level control variables. Results: We found that HIT implementation in nursing homes was associated with a 7 percentage points lower operating cost, and 2 percentage points higher operating margin. Conclusions: Our results suggested a positive association between HIT implementation and nursing home financial performance. Despite the costs associated with the implementation of HIT systems; our findings underscore a potential business case for HIT implementation in nursing homes. Nevertheless, stimulating HIT implementation in nursing homes may still require government intervention including financial incentives.