The economics of integrated electronic medical record systems

The decision to adopt electronic medical record systems in private practices is usually based on factors specific to the practice--the cost, cost and timesaving, and impact on quality of care. As evident by the low adoption rates, providers have not found these evaluations compelling. However, it is recognized that the widespread adoption of EMR systems would greatly benefit the health care system as a whole. One explanation for the lack of adoption is that there is a misalignment of the costs and benefits of EMR systems across the health care system. In this paper we present an economic model of the adoption of EMR systems that explicitly represents the distribution of costs and benefits across stakeholders (physicians, hospitals, insurers, etc.). We discuss incentive systems for balancing the costs and benefits and, thus, promoting the faster adoption of EMR systems. Finally, we describe our plan to extend the model and to use real-world data to evaluate our model.