Exploring information systems outsourcing in U.S. hospital-based health care delivery systems

The purpose of this study is to explore the factors associated with outsourcing of information systems (IS) in hospital-based health care delivery systems, and to determine if there is a difference in IS outsourcing activity based on the strategic value of the outsourced functions. IS sourcing behavior is conceptualized as a case of vertical integration. A synthesis of strategic management theory (SMT) and transaction cost economics (TCE) serves as the theoretical framework. The sample consists of 1,365 hospital-based health care delivery systems that own 3,452 hospitals operating in 2004. The findings indicate that neither TCE nor SMT predicted outsourcing better than the other did. The findings also suggest that health care delivery system managers may not be considering significant factors when making sourcing decisions, including the relative strategic value of the functions they are outsourcing. It is consistent with previous literature to suggest that the high cost of IS may be the main factor driving the outsourcing decision.