think big... or better not: what the evidence says to hospitals' scale?

One important source of potential inefficiency in the hospital sector relates to hospitals’ scale and scope.

• Big Hospitals: It might make good economic sense to enlarge the size and scope of a hospital to make better use of available expertise, infrastructure and equipment. However, at some point, a hospital departs from its optimal level of efficiency and begins to exhibit diseconomies of scale. Bigger organizations are harder to manage.
• Small Hospitals: At the other end of the scale, small hospitals might also be inefficient because the fixed infrastructural and administrative costs are shared across too small a caseload, thereby pushing up the cost of an average hospital visit.

Monica Giancotti, Annamaria Guglielmo, and Marianna Mauro did a huge systematic review from the last 50 years (1964-2014) of research "published in peer-reviewed scientific journals" to try to answer some of these questions:

• Have mergers contributed to enhance hospitals efficiency?
• Which is the optimal size of hospitals in terms of beds?
• Which factors influenced the hospitals scale efficiency?

According to the evidence the main conclusions are:

1. Studies analysed that economies of scale are present for merging hospitals. Results supported the current policy of expanding larger hospitals and restructuring/closing smaller hospitals
2. In terms of beds, studies reported consistent evidence of economies of scale for hospitals with 200–300 beds. Diseconomies of scale can be expected to occur below 200 beds and above 600 beds.
3. There is no evidence that the increase in size may lead to outcome improvements.
4. Teaching activities are an important cost-driving factor,
5. Hospitals that have a broader range of specialization are relatively more costly.
6. According to ownership, public hospitals are more efficiently than other types.
7. According to location, urban hospitals used resources more efficiently.

Access to the Article (free): (2017) Hospital Size: Systematic Review

photo: 1957. Chicago The LIFE Picture Collection
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