Two dimensions of information technology sourcing strategies and hospital performance: Vendor turnover and application concentration

Background: Health information technology (HIT) investments are on the rise, yet research on the impact of HIT sourcing strategies on hospital performance is limited. Purposes: This study defines a two-dimensional framework for assessing a hospital’s IT sourcing strategy using vendor turnover and concentration of applications among vendors. We study the impact of these dimensions on hospital performance metrics, including costs and quality outcomes. Methodology/Approach: We analyze HIT sourcing patterns using a data setof over 2,500 U.S. hospitals from the Healthcare Information and Management Systems Society database, the Centers for Medicare and Medicaid Services Hospital Compare Data, and the American Hospital Association Annual Survey Database. We apply ordinary least squares and two-stage least squares analysis to evaluate the effects of vendor turnover and application concentration on hospital ratings, readmission rates, IT operating expenses, and total operating costs. Findings: Greater application concentration among fewer vendors and reductions in the number of vendors are associated with lower readmission rates and lower operating costs. In contrast, adding vendors is associated with higher operating expenses. The findings suggest that vendor consolidation can improve efficiency and selected quality outcomes, whereas frequent vendor expansion may increase financial and operational burdens. Practice Implications: Managers should adopt strategic approaches to HIT sourcing. Prioritizing application concentration and managing vendor turnover effectively can boost quality and efficiency. Although multisourcing offers flexibility, evidence favors concentration for performance gains. Future research should explore the broader impact of sourcing strategies on innovation, patient outcomes, and HIT adaptability in evolving health care environments.