Information Technology Payoff in the Health-Care Industry: A Longitudinal Study

With the enormous investments in Information Technology (IT), the question of payoffs from IT has become increasingly important. Organizations continue to question the benefits from IT investments especially in conjunction with corporate initiatives such as business process reengineering (BPR). Furthermore, the impact of technology on nonfmancial outcomes such as customer satisfaction and quality is gaining interest. However, studies examining the IT-^erformance relationship have been far from conclusive. The difficulty in identifying impacts from technology has been the isolation of benefits of IT from other factors that may also contribute to organizational performance. Furthermore, benefits from technology investments may be realized over an extended period of time. Finally, IT benefits may accrue when they are done in concert with other organizational initiatives such as business process reengineering. This calls for studies that take into account control variables as well as data that span time periods. In this study, we examine monthly data collected from eight hospitals over a recent three-year time period. We specify propositions that relate investments in IT to performance, and the combined effect of technology and BPR on performance. We draw Journal of Management Informalion Systems I Spring 2000, Vol. 16. No. 4. pp. A1-67. ©2000 M.ESha(pe, Inc. vi/a-xm 12000 $9.56 + 0.00. 42 DEVARAJ AND KOHLI upon the literature in health-care management to incorporate appropriate control variables in the analyses. Our results provide support for the IT-^erfonnance relationship that is observed after certain time lags. Such a relationship may not be evident in cross-sectional or snapshot data analyses. Also, results indicate support for the impact of technology contingent on BPR practiced by hospitals.