Discussion Papers
Innovation and Entrepreneurship Research
Innovation and Entrepreneurship Research
Health IT Diffusion and Physician Labor Supply
(2025). Health IT Diffusion and Physician Labor Supply.
This paper examines how the diffusion of advanced health information technology (HIT) affects the aggregate supply of hospital-based (HB) physicians, who deliver direct patient care under hospital contracts. Leveraging sharp increases in county-level HIT adoption rates driven by federal incentives, we compare physician supply per 100k population in counties with rapid diffusion (treatment group) to those with slower or no uptake during our sample period (control group). Using an event-study framework, we find that HIT diffusion led to a 10.3% increase in HB physician rate in treated counties relative to control counties, and medical and surgical specialties account for most of the increase. This growth is further concentrated among earlycareer physicians and in physician shortage areas. Mechanism tests suggest that physicians benefit financially from practicing in treated counties, with higher Medicare reimbursement, more Medicare patients, and increases in hospital profits. Counties with moderate pre-period surgical volumes see the largest increases in physician supply and outpatient surgeries, suggesting greater capacity for demand expansion post-treatment. Various robustness checks support the validity of our results. Our findings suggest that strategic HIT investments can attract physicians, expand care capacity, and reduce geographic disparities in access to health care.