Are bigger hospitals better?

Summary of a HEN network member’s report

The issue

It is tempting to think that larger hospitals are more cost-effective than smaller ones because of the operation of economies of scale. However, the evidence does not back up this belief. While increasing hospital size can cut costs for some specific procedures, such economics are exhausted at a relatively small size.

Many people also believe that patient outcomes improve with hospital size. Unfortunately, most studies of this relationship are poorly controlled for differences in prognosis, if at all. When such differences are taken into account, the correlation between outcomes and size turns out to be relatively minor or even absent.


The literature on hospital economies of scale suggests that they are fully realized in facilities of 100 to 200 beds. Yet, in many countries, the concentration of hospital services continues to be a major policy aim, especially through mergers. In private health care markets, mergers are undertaken primarily to reduce competition and enhance profits.

In public systems, two other justifications predominate. First, when hospitals operate at less than full capacity, mergers are a way of eliminating excess capacity and cutting costs. Second, a merger can address performance issues for particular units or services.

However, concentrating hospital services often reduces patient access because it increases social and economic costs for many patients. Research suggests that these increases have the greatest impact on the use of diagnostic, outpatient and screening services in primary care. Evidence of the impact on secondary and tertiary services is mixed; some studies suggest that patients who live further from a hospital have lower referral and intervention rates, while other studies show no difference.

Policy considerations

Bigger hospitals are not necessarily better. Research shows that they rarely result in lower costs or better patient outcomes. A good deal still needs to be understood about how to achieve better clinical results, and common size indicators, like hospital activity volume, are too crude to be useful in planning clinical services.

Optimal hospital size depends on local health care needs and the availability of complementary services. The burden of proof for any proposed merger ought to lie with its proponents, who should be able to quantify the expected benefits and costs and explain how the benefits will be realized.

The views expressed in this summary are based on a publication of a HEN Network member agency and do not necessarily represent the decisions or stated policy of WHO/Europe.