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

In the recent times more and more healthcare institutions are consolidating. Consolidation helps in multiple ways which are listed below:

Larger scale - Hospitals and healthcare providers can now operate at a much larger scale with a huge number of consolidated patients, systems and processes.

More leverage - Hospitals can utilize their doctors, nurses, caregivers and other employees across services and facilities which can render the systems much more efficient than before.

More diverse business lines - Various specialist fields like Paediatrics, Neurology, Oncology, Orthopaedics, Paramedics, Radiology departments can be deployed for utilization across facilities

Improve service quality - With increased efficiency and service levels, the service quality of hospitals can be improved in a multihospital system

Reduce costs - Multihospital systems can reduce their costs substantially through greater standardization of care, more negotiating leverage with suppliers, and bigger investments to bolster providers' ability to communicate and coordinate care.

Multi hospital system refers to the coming together of two or more hospitals to join hands to work together, owned and managed and sponsored by a central organization.

Since under this system more than one hospital work together, which includes a mix of urban, suburban and territory care hospitals, they all work towards a common goal. The working together part of this system helps hospitals share the high cost of operations including cost of machines bought, salaries paid to high profile doctors, cost of additional facilities provided along with elimination of any cost incurred because of patients moving from one hospital to another in search of better healthcare services.

In multi hospital system, both patients and doctors are benefitted alike. Patients are able to enjoy better standardized services while hospital owners and doctors experience a fall in cost of operations. Also, since the patient base increases in such hospitals, the cost incurred per person also falls. This helps achieve efficiency as well.

Thus, all these things helps multi hospital system to achieve cost savings as well as efficiency.