State Privacy Rules Reduce Electronic Medical Sharing by 24%, Warns Management Insights Study

HANOVER, MD, July 13, 2009 – States that have passed privacy laws restricting the ability of hospitals to disclose patient information have seen the sharing of electronic medical records suffer by more than 24%, according to the Management Insights feature in the current issue of Management Science, the flagship journal of the Institute for Operations Research and the Management Sciences (INFORMS®).

The drop is seen most clearly in reduced adoption of electronic medical records (EMRs) through networks of hospitals and medical providers. In states without such statutes, adoption of EMRs by one hospital is a spur to adoption by others, with one hospital’s adoption increasing the likelihood of other hospitals in the local area adopting by 7%.

The authors warn that this effect could hurt the federal government’s goal, set during the previous Administration, of having a national health IT network in place by 2014. According to one estimate, widespread adoption of an EMR system could reduce health care expenses by $34 billion.

Management Insights, a regular feature of the journal, is a digest of important research in business, management, operations research, and management science. It appears in every issue of the monthly journal.

“Privacy Protection and Technology Diffusion: The Case of Electronic Medical Records” is by Amalia R. Miller of the University of Virginia and Catherine Tucker of the MIT Sloan School of Management.

The paper notes that there are many new technologies whose value depends on sharing information. However, the ease with which information can be transferred electronically has led consumers to demand and policy makers to enact privacy protection. This privacy protection may be of benefit to the diffusion of information-sharing technologies if it reassures consumers, or it may inhibit the diffusion of information sharing technologies if it imposes costs on firms who adopt the technology.

The authors investigate these trade-offs for EMRs, which allow medical providers to store and exchange patient information using computers rather than paper records, which are still a strong presence among healthcare providers.

Hospitals may not adopt EMRs if patients withhold health information because they feel their privacy is not safeguarded by regulation. Alternatively, privacy protection may inhibit adoption if such regulation makes it too costly or difficult for hospitals to exchange patient information with one another.

Some states have enacted medical privacy laws that restrict the ability of hospitals to disclose patient information. The authors find that such statutes reduce EMR adoption by 11% per three-year period or 24% overall. The paper presents evidence that this is because of the suppression of the interactive benefit of this technology by privacy laws.

The current issue of Management Insights is available here. The full papers associated with the Insights are available to Management Science subscribers. Individual papers can be purchased at http://institutions.informs.org. Additional issues of Management Insights can be accessed here.

The other Insights in the current issue are:

• Investor Competence, Trading Frequency, and Home Bias by John R. Graham, Campbell R. Harvey, Hai Huang
• Selection Neglect in Mutual Fund Advertisements by Jonathan J. Koehler, Molly Mercer
• Quality Improvement Incentives and Product Recall Cost Sharing Contracts by Gary H. Chao, Seyed M. R. Iravani, R. Canan Savaskan
• Brand and Price Advertising in Online Markets by Michael R. Baye, John Morgan
• Effort, Revenue, and Cost Sharing Mechanisms for Collaborative New Product Developments by Sreekumar R. Bhaskaran, V. Krishnan
• Technological Innovation and Acquisitions by Xinlei Zhao
• Truthful Bundle/Multiunit Double Auctions by Leon Yang Chu
• Momentum and Mean Reversion in Strategic Asset Allocation by Ralph S. J. Koijen, Juan Carlos Rodríguez, Alessandro Sbuelz
• Pioneering Inventors or Thicket Builders: Which U.S. Firms Use Continuations in Patenting? by Deepak Hegde, David C. Mowery, Stuart J. H. Graham
• Defining Bad News: Changes in Return Distributions That Decrease Risky Asset
• Demand by Burton Hollifield, Alan Kraus
• Business Unit Reorganization and Innovation in New Product Markets by Samina Karim
• Testing the APT with the Maximum Sharpe Ratio of Extracted Factors by Chu Zhang

INFORMS journals are strongly cited in Journal Citation Reports, an industry source. In the JCR subject category “operations research and management science,” Management Science ranked in the top 10 along with two other INFORMS journals.

The special MBA issue published by BusinessWeek includes Management Science and three other INFORMS journals in its list of 20 top academic journals that are used to evaluate business school programs. Financial Times includes Management Science and four other INFORMS journals in its list of academic journals used to evaluate MBA programs.

About INFORMS

The Institute for Operations Research and the Management Sciences (INFORMS®) is an international scientific society with 10,000 members, including Nobel Prize laureates, dedicated to applying scientific methods to help improve decision-making, management, and operations. Members of INFORMS work in business, government, and academia. They are represented in fields as diverse as airlines, health care, law enforcement, the military, financial engineering, and telecommunications. The INFORMS website is www.informs.org. More information about operations research is at www.scienceofbetter.org.

###