Health information technology and its effects on hospital costs, outcomes, and patient safety

Underlying many reforms in the Patient Protection and Affordable Care Act (ACA) is the use of electronic medical records (EMRs) to help contain costs. We use MarketScan claims data and American Hospital Association information technology (IT) data to examine whether EMRs can contain costs in the ACA's reforms to reduce patient safety events. We find EMRs do not reduce the rate of patient safety events. However, once an event occurs, EMRs reduce death by 34%, readmissions by 39%, and spending by $4,850 (16%), a cost offset of $1.75 per $1 spent on IT capital. Thus, EMRs contain costs by better coordinating care to rescue patients from medical errors once they occur.