Consolidating units in hospitals

30-Sep-2017 14:57

Chief among the benefits touted is the promise of economies of scale.

Economies of scale derive from a fall in unit costs as volumes grow.

Quietly but pervasively, a shift toward new structures, not based on consolidation of assets, is occurring.

Major efforts are under way among providers in several states, including Colorado, Georgia, Iowa, Missouri, North Carolina, South Carolina, Tennessee and Wisconsin.

Another argument for mergers has been savings associated with consolidating administrative functions.

The opportunities to concentrate volume through merger are relatively rare in health care.

A situation in which concentration of volume might be possible would involve two hospitals located across the street from one another.

In such a case, one of the hospitals could be closed and its volume shifted to the other.

Thus, they are increasingly recognized for what they are: empty vessels connected by meaningless brand identities.

The problem with the merger model was the problem with dinosaurs and extinction. If the parents weren't well-fitted to their environments, the offspring are just as likely to be misfits not long for the world.

Those are dollars that could have been invested in other important strategic initiatives.

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