Monday, 18 March 2013

Merger Mania Four


Now we need to take a look at what the report was studying;

“In our analysis we focus on merger activity between short term general (known as acute in the UK) hospitals. The extent of merger activity was high and took place predominantly in the six years after 1997. Of around 223 acute hospitals in 1997, 112 merged sometime between 1997 and 2006.  There were around 20 mergers per year, rising to a peak in 2001 and falling to zero after 2002……..The median hospital market went from 7 to 5 hospitals.”


The report deals with the period after the election of the last Labour government in 1997 – the scale of closures is incredible (and not what anyone voted for), about half of acute Hospitals and a quarter of the total.

The effect of this slaughter can be seen in the phrase about “median hospital market” – that means choice of local Hospitals – choice went down.



“Using matching, we compare the change in performance of those hospitals that merged with those that did not over a 6 year window, looking at performance from two years before to four years after the merger date.

We examine activity, staffing and financial performance and a large set of measures of clinical quality.”


The report established a control group of Hospitals that hadn’t merged and compared these with those that had, to work out whether it had been a good deal or not.


Why was this happening?



“Drivers for mergers have included facilitating hospital or service closures as a response to a belief there is spare capacity in the short term general (acute) sector, securing financial viability of smaller organisations and increasing their negotiating power with buyers and enlarging the hospital to provide better services for the buyers of services (Garside 1999). While a reduction in average costs by better use of resources (Ferguson and Goddard 1997) is used to justify mergers, in the UK the focus has tended to be on better use of management costs rather than hospital wide economies of scale (McClenahan 1999). This is perhaps because UK hospitals are relatively large (in comparison to the average US hospital). A study of NHS hospital mergers in London in 1999-2000 (the earlier of the mergers we examine here) identified financial pressures as the most important driver of mergers during this period. The need to make savings featured in all consultation documents. More specifically, most of the merging parties had financial deficits and it was argued that mergers would reduce these. The main costs identified as being potentially saveable were management and back office costs, rather than a reduction in clinical costs.”


The aim was to reduce costs – bigger is better, or at least more efficient. The hope was that it would be possible to cut management costs while providing better clinical outcomes.

Health Service Civil Servants thought having fewer, bigger Hospitals would mean less managers and better buying power and therefore more money for Doctors, Nurses and patients.

For some unknown reason in 1997 they also seem to have thought that there were surplus beds to be got rid of?!?

Who thought that one up?

Can we have our beds back, please?

More ice needed, my head hurts!


Neil Harris

(a don’t stop till you drop production)

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