Myth: Bigger is always better when it comes to hospital mergers

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Myth busted September 2002

More efficiency. Less duplication. Better safety. Many claims are made about the benefits of hospital mergers. Supporters say larger institutions can reduce management and administration costs while maintaining or even increasing service levels. They also argue that patients at larger hospitals have better outcomes, and merged hospitals do a better job of attracting and keeping staff.

To achieve these goals, governments and health authorities from Victoria to St. John's have been consolidating hospitals. Between 1990 and 1999 - the peak of "merger madness" - the number of Canadian hospitals declined from 1,231 to 929, a drop of almost 25 percent i (though mergers were certainly not the only factor contributing to this change). This urge to merge is not just a Canadian phenomenon - in the U.K., some 99 trust mergers have taken place since 1997, 14 in London alone. ii

But the popularity of mergers doesn't mean that research shows they are a good idea. While evidence of greater efficiency can sometimes be found when smaller facilities merge, research shows this is more difficult in larger facilities. iii Better patient safety hasn't been proven either, and mergers may have surprising and unintended consequences when it comes to staff morale.

The dollars

In Canada, the evidence on cost savings from mergers is largely anecdotal and inconclusive. For example, one report suggests that Canadian hospitals would save four percent of operating costs through mergers, but provides no evidence. iv And managers in Victoria, B.C. reported their staffing requirements dropped significantly following amalgamation, but without comparing it to similar hospitals that didn't merge, it is difficult to know whether this would have happened anyway. v

In other cases, the literature on the subject is mixed. The 1979 merger of Chedoke-McMaster Hospitals in Ontario is reported to have saved an estimated $1 million in operating costs, vi but a hypothetical merger of St. Joseph's General Hospital and Peterborough Civic Hospital showed neither savings nor losses. vii

Some research has found that there is actually an optimal size for a hospital, and it's not a mega-facility. Studies in many countries have shown that the best size for acute hospitals is actually between 200 and 400 beds - above that, management and administration costs tend to increase. iii Studies in the U.S. have also shown mega-mergers can drive costs up. And in the U.K., a study of four newly-merged National Health Service trusts found that, two years after the mergers, the new institutions had not achieved the predicted management cost savings. ii

The sense

Though mergers in Canada were primarily a response to the financial crunch of the 1990s, proponents also claim they are better for patients and staff. Not so, according to research.

Few empirical studies have been done on the effect of mergers on quality of service. However, some research suggests larger bureaucracies create certain disadvantages, such as less responsiveness to the patient. viii Other studies found mergers can disrupt services and absorb more management attention during the transition period than expected, thus affecting patient care. ii As well, one study showed that people with low incomes are less likely to travel extra distances for certain types of healthcare. iii

We do know a positive link exists between volume and quality in some specialized units, ix and that having a group of surgeons perform more complicated surgeries can mean fewer complications. x But these factors do not support a broader argument that larger institutions produce better patient outcomes and while some research papers may appear to demonstrate such a link, they often fail to adjust sufficiently for differences in the groups of patients being treated, or the severity of their illness. iii Other times, perceptions of improvements are broadly described and evaluation methods are weak or nonexistent. viii

Research neither supports nor refutes claims of more efficient use of employees following mergers. In addition, no empirical evidence has been found to conclude that mergers lead to improved recruitment or retention of caregivers or management. ii Some researchers note the more impersonal nature of larger institutions could lead to higher staff turnover, xi xii and in some cases, managers have taken jobs elsewhere to avoid organizational disruption. ii One study suggests the educational experience at teaching hospitals may be diluted due to the need to travel between institutions, and that curriculum planning is more complicated. xiii

The changes involved with mergers can also have a devastating effect on staff morale, and this can affect quality of care. One study examining the effects of restructuring in a large Canadian teaching hospital found that morale and trust in the institution plummeted as the changes took effect. xiv

There's also the challenge of managing a massive culture shift. Many of the Canadian hospitals that have been amalgamated are more than 100 years old, with deeply entrenched institutional cultures. Yet, in a merger, old cultures must be retired and a new one forged - a lengthy, delicate and challenging process, but key to a hospital's success and the performance of its staff. xv

Curb the urge

While the intuitive appeal of "bigger is better" in hospital mergers is powerful, it's clear the empirical evidence is weak and the potential for negative outcomes significant. The urge to merge is an astounding, run-away phenomenon given the weak research base to support it, and those who champion mergers should be called upon to prove their case.

References:

i. Canadian Healthcare Association. 2002. "Guide to Canadian Healthcare Facilities, 2001-2002." Vol. 9.

ii. Fulop N et al. 2002. "The process and impact of NHS trust mergers: a multi-centre organisational study and management cost analysis." British Medical Journal; 325: 246.

iii. Posnett J. 1999. "Is bigger better? Concentration in the provision of secondary care." British Medical Journal; 319: 1063-1065.

iv. Bain W. 1987 "Why hospitals choose the merger route." Health Care; Feb.: 48-49.

v. Cutt J and R Ritter. 1986. "The Amalgamation of Hospitals in Victoria, British Columbia: A Historical Perspective." (unpublished).

vi. Zalot GN and E Jodoin. 1992. "Multi-Hospital Arrangements: Review of the Literature." Font Hill, Ontario, Niagara District Health Council.

vii. Doiron LB. 1985. "Is one hospital better than two?" Hospital Trustee; July/Aug. 21-22.

viii. Markham B and J Lomas. 1995. "Review of the Multi-Hospital Arrangements Literature: Benefits, Disadvantages and Lessons for Implementation." Healthcare Management Forum. 8(3): 24-35.

ix. Tilford JM et al. 2000. "Volume-Outcome Relationships in Pediatric Intensive Care Units." Pediatrics, 106 (2): 292.

x. Luft HS et al. 1979. "Should operations be regionalized? The empirical relation between surgical volume and mortality." New England Journal of Medicine; 301(25): 1364-9.

xi. Fried B and S Gelmon. 1987. "Multi-institutional arrangements: the Canadian experience." Dimensions in Health Service; 64(2): 14-19.

xii. Coyne JS and LC Young. 1983. "Multi-hospital bed transfers: a strategic approach for multi-institutional planners and managers." Health Care Management Review; 8: 25-37.

xiii. Gelmon S and JT Marotta. 1986. "Hospital merger: the Toronto experience." Healthcare Management Forum; 7(2): 24-35.

xiv. Woodward C et al. 1999. "The Impact of Re-Engineering and Other Cost Reduction Strategies on the Staff of a Large Teaching Hospital: a Longitudinal Study." Medical Care; 37(6): 556-569.

xv. "The Merger Decade: What have we learned from Canadian health-care mergers in the 1990s?" A Report on the Conference on Health Care Mergers in Canada, organized by the Ottawa Hospital and the Association of Canadian Teaching Hospitals, Ottawa, March 2000.

Disclaimer:

Mythbusters are prepared by staff at the Canadian Health Services Research Foundation and published only after review by experts on the topic. The Foundation is an independent, not-for-profit corporation. Interests and views expressed by those who distribute this document may not reflect those of the Foundation.