Question

Current activity in the hospital industry shows that hospitals are consolidating to form multihospital systems. Based upon your reading in the text, what do empirical studies indicate concerning cost savings of multihospital systems over single hospital systems? Why are multihospital systems expected to be cost saving? Why would we continue to see multihospital systems forming even if cost savings is not as evident as expected?

Answer 1

Studies indicate that multi-hospital system achieves efficient utilization of resources that increase the productivity in the hospitals. Besides, overhead costs are distributed upon more number of profit centers. It causes the overall cost of operations to come down and cost savings takes place. There is a presence of economy of scope when multihospital system takes place.
Multi-hospital systems are expected to make cost savings, because this system caters to the bigger audience, have more specialty services and diversified portfolio of services that can be offered to the patients and at different locations. It increases the operational efficiency and wastes are eliminated. As a result, cost saving takes place.
A multi-hospital system involves consolidation of different hospitals and different hospitals complement each other in this system. Here, each hospital helps others to grow and support business development. So, a synergy is developed and patients in one hospital are recommended to another hospital for a service that is not delivered to the hospital. As a result, these units continue to sustain with the help of each other, even if the cost savings are not so evident.