An Empirical Investigation on the Impact of Healthcare Outsourcing in the U.S. Healthcare Sector
by
Juhee Kwon
Associate Professor
Department of Information Systems
College of Business
City University of Hong Kong
Friday, Feb 25
9:00 am – 10:00 am
Zoom (PWD: 570345)
Abstract:
Competition within healthcare markets has intensified with growing patient expectations for healthcare information, forcing hospitals to provide cutting-edge healthcare services while also continually reducing costs. Given the need for substantial investments in new technologies to remain competitive, outsourcing has become the most compelling approach to reducing costs. Hospitals have been extensively outsourcing across core healthcare services (e.g., patient diagnosis) as well as IT systems. However, in an environment where highly specialized services and IT functions should be seamlessly combined, high dependency on outsourcing has raised concerns about the fiscal and quality impact of coordination failures. Despite increasing levels of outsourcing, there has been little empirical evidence to evaluate how core health-service outsourcing contributes to hospital performance and interacts with IT outsourcing. Thus, this study examines how various outsourcing in healthcare affects quality and fiscal performance. Based on the U.S hospital data, the results indicate that: (1) health-service outsourcing has curvilinear effects. In financial performance, it has an inverse U-shaped relationship with net patient revenue, (2) in care quality, it has a U-shaped relationship with readmission rate while having an inverse-U shaped with patient experience rating, and (3) IT outsourcing affects the effect of health-service outsourcing on quality in a better direction but has no effect on net patient revenue. This study can contribute to the outsourcing and healthcare literature by extending existing theories to a unique healthcare market that is highly dependent on core health-service outsourcing, unlike other industries, and by providing insights on the tradeoff between benefits and hidden costs from outsourcing. The findings also inform practitioners on effective strategies for the need to balance outsourcing in various areas across the flow of healthcare.
Bio:
Juhee Kwon is an associate professor at the IS department, City University of Hong Kong. Before joining City U, she worked in the Tuck School of Business at Dartmouth College as a research fellow. She earned her PhD from the Krannert School at Purdue University and master’s degree from Carnegie Mellon University. Prior to joining the Purdue PhD program, she worked at Samsung, Yahoo, and LG as a software engineer. Her current research has focused on economics of information systems, healthcare information systems, and information security.