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Cost effects of hospital mergers in Portugal

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  • Helda Azevedo

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  • Céu Mateus

Abstract

The Portuguese hospital sector has been restructured by wide-ranging hospital mergers, following a conviction among policy makers that bigger hospitals lead to lower average costs. Since the effects of mergers have not been systematically evaluated, the purpose of this article is to contribute to this area of knowledge by assessing potential economies of scale to explore and compare these results with realized cost savings after mergers. Considering the period 2003–2009, we estimate the translog cost function to examine economies of scale in the years preceding restructuring. Additionally, we use the difference-in-differences approach to evaluate hospital centres (HC) that occurred between 2004 and 2007, comparing the years after and before mergers. Our findings suggest that economies of scale are present in the pre-merger configuration with an optimum hospital size of around 230 beds. However, the mergers between two or more hospitals led to statistically significant post-merger cost increases, of about 8 %. This result indicates that some HC become too large to explore economies of scale and suggests the difficulty of achieving efficiencies through combining operations and service specialization. Copyright Springer-Verlag Berlin Heidelberg 2014

Suggested Citation

  • Helda Azevedo & Céu Mateus, 2014. "Cost effects of hospital mergers in Portugal," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 15(9), pages 999-1010, December.
  • Handle: RePEc:spr:eujhec:v:15:y:2014:i:9:p:999-1010
    DOI: 10.1007/s10198-013-0552-6
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    References listed on IDEAS

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    1. repec:eee:hepoli:v:122:y:2018:i:10:p:1093-1100 is not listed on IDEAS
    2. repec:eee:ejores:v:266:y:2018:i:2:p:716-735 is not listed on IDEAS
    3. repec:eee:hepoli:v:121:y:2017:i:5:p:525-533 is not listed on IDEAS
    4. repec:eee:jomega:v:86:y:2019:i:c:p:218-236 is not listed on IDEAS

    More about this item

    Keywords

    Hospital mergers; Economies of scale; Translog cost function; Difference-in-differences approach; C21; D24; I18;

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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