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Operational efficiency means getting the most output from your resources (inputs). This includes maximizing employees’ working hours and wage costs while eliminating unnecessary activities.

Many hospital mergers aim to improve access to care through increased service efficiencies and expanding patient choices. 

Patient Care

Hospital mergers are not undertaken solely to lower prices or improve patient care. The prevailing logic is to gain market control, giving hospitals negotiating leverage when dealing with insurance companies.

Hospital mergers and acquisitions have the potential to enhance patient safety and quality of treatment by eliminating duplication of services, streamlining communication among facilities, and implementing best practices.

They also enable a more consolidated management structure, which allows leadership to focus on the overall health of the hospital system.

Additionally, hospital mergers allow the opportunity to centralize and optimize resources, leading to more efficient allocation of medical personnel and advanced technologies.

This consolidation facilitates collaborative efforts in research and development, fostering a culture of continuous improvement in patient care standards across the integrated hospital system.


Hospital mergers and acquisitions can improve patient outcomes by enhancing standardized care through centralized systems and procedures. This may also be accomplished by bringing in more experienced providers who can lead the way.

This unified approach can also facilitate hospitals’ participation in value-based payment programs and help them achieve cost savings by purchasing goods and supplies in greater volume.

Healthcare mergers and acquisitions may provide better service lines by combining expertise, equipment, and facilities across markets. Additionally, reducing administrative costs and freeing up financial resources can help increase access to care through expanding services such as telehealth or specialist appointments.

However, acquisitions that could be better conceived can result in a decline in performance and a lack of synergy. These deals should be analyzed thoroughly, including how the acquirer will create the desired outcome and what cultural and integration practices will be employed post-transaction.

This can be done through a comprehensive, structured approach to M&A, including developing clear financial and non-financial goals, aligning leadership, integrating cultures, and leveraging project management and integration best practices.


Hospital mergers often are based on false claims that they can reduce costs by reaching economies of scale. This resembles two rival universities promising to lower tuition rates and improve educational quality.

This is not to say that hospitals cannot achieve efficiency gains through M&A activity. However, there is a need to be clear about these gains and how they will be achieved.

For example, a merger that allows a health system to spread investments in technology, staffing, and quality improvement among a larger group of patients could improve outcomes by reducing variation.

Likewise, a grander scale gained through M&A may improve clinical outcomes by decreasing unit costs. These gains must be weighed against other factors that influence price and products.

For instance, consolidation in the local insurance market may lead to lower negotiated reimbursement rates for care, reducing the incentive to provide high-quality treatment or worsening clinical outcomes by decreasing incentives to invest in more intensive services.


Hospital mergers and acquisitions create efficiencies by eliminating redundant processes. However, they also reduce competition and raise prices.

This increases costs to consumers who are paying for the higher prices through their health insurance. Economists argue that hospital consolidation leads to higher prices and lower quality because large hospitals can use their monopoly power to force health insurance providers to pay them more for procedures.

They can also negotiate lower reimbursement rates from Medicare and Medicaid, reducing their costs. Using a difference-in-differences approach, the study compares changes in performance on clinical-process measures at acquired hospitals to similar changes in version at non-merging hospitals.

The analysis estimates that a change in ownership leads to a statistically significant differential improvement on these measures but that the difference mainly occurred before the transaction. This suggests that other factors drive gains in process and outcomes rather than just a reduction in competition.