Dynamic capabilities in home health: IT-enabled transformation of post-acute care

Home health care can enable shorter hospital stays, reduce re-hospitalization, and contribute to lowered out-of-hospital morbidity and mortality. However, recent changes in Medicare payments and regulations in the US have challenged home health care providers' business models. Against this backdrop, we draw on the dynamic capability perspective to examine how one home health care provider responded to this challenge over the period 2000-2009 by combining adaptive organization principles and information technology (IT) to transform its post-acute care delivery. The transformation leveraged the organization's existing dynamic capabilities; improved nursing practices; engaged physicians, nurses, managers, and patients; and implemented remote patient monitoring and other IT-enabled innovations. Integrating information systems and health services literatures, we identify the processes targeted by the transformation, analyze how the provider built adaptive care delivery capability enabled by IT, and demonstrate how the transformation led to improved clinical and financial outcomes. In addition, we offer new insights into the micro-foundations of dynamic capabilities by distinguishing between capabilities at the transactional and transformational levels, and explaining how different types of IT-enabled capabilities shaped, and were shaped by, the home health care provider's responses to environmental changes.