Hospital mergers lose money

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Bundling Norway’s public hospitals together into larger organizations in the 1990s was supposed to save taxpayers’ money. The result has been the opposite. Costs per patient have increased in six out of seven mergers.

The process took years of planning and entailed uncertainty for patients and employees alike,  as further economies were sought by concentrating specialist functions.

“The advantages of large hospitals are exaggerated,” Professor Terje P Hagen from the Institute of Health and Society at the University of Oslo told newspaper Aftenposten.

He and his colleague Lars-Erik Kjekshus made a study of the wave of such reorganizations that took place in the 1990s. He thinks the results are relevant in the ongoing debate about further hospital mergers.

Efficiency declined
“Joining hospitals together led to rising costs per patient in all but one case,” Hagen said. “The average increase was 2-3 per cent. Similar studies from abroad reach the same conclusion; efficiency falls after such reorganizations.”

The studies compare how many patients were treated with the resources that were available. The results were negative both three and five years after small hospitals were taken over.

“The leaders of regional health organizations think ‘the bigger, the better,’ but this is often not the case,” Hagen told Aftenposten. “International studies show that once hospitals have more than 180-200 beds, economies of scale lose out to the increasing costs of administration.”

Languishing in limbo
Sometimes, however, money can be saved by closing hospitals, he allowed. “In such cases the owners have to be resolute and close all emergency services at these hospitals,” he said. “What happens today is that these small hospitals are  kept in limbo, starved of resources. This causes great frustration and probably makes employees less willing to make an effort.” He adds that joining hospitals together often leads to wage increases among employees.

During the 1990s, healthcare  planners joined five hospitals in Østfold county into one organization, closing accident and emergency functions at three of them.

“This was a radical reorganization and the only one that resulted in savings,” says Hagen. “For very specialized functions, centralization can be advantageous, and the need for investment may be smaller when operating from fewer locations, but  generally I would say that the advantages of big hospitals are exaggerated.”

Lower growth in health budgets in recent years mean that regional health organizations are eager to save money.

“Local hospitals in Rjukan, Mosjøen, Odda, Røros and Lærdal are the most at risk when the regional health organizations are looking for new spending cuts,” says Hagen.

Views and News from Norway/Sven Goll
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