The Performance of Merging Hospitals

The primary aim of this paper is to examine the impact of mergers on the performance of hospitals. The study tests the null hypothesis that no significant differences exist in efficiency and effectiveness between hospitals that merge and those which remain independent entities. The performance evaluation model follows closely similar models used to study the performance of merging banks. The findings of the study suggest that 1) large urban hospitals contemplating merger should view carefully the trade-offs involved between efficiency and effectiveness as indicated by the measures employed in this study, since the evidence indicates that the increased service capability achieved in merging hospitals is accompanied by a significant increase in costs; and 2) the concept appears very promising for small rural hospitals, especially in veiw of evidence that various benefits extend over the short-, intermediate-, and long-range time frames employed in the study.