Where Do Economies of Scale Exist in US Hospitals?

WHERE DO ECONOMIES OF SCALE EXIST IN US HOSPITALS? At the facility level, it's hard to find evidence of economies of scale in US hospitals. We see a different story when we look at more micro and macro perspectives. WHILE LARGER HOSPITALS DON'T HAVE LOWER COSTS, O = HOSPITAL AVERAGE COST PER INPATIENT ADMISSION12 30,000 20,000 $ 10,000 10,000 20,000 30,000 40,000 50,000 ANNUAL INPATIENT ADMISSIONS HIGHER VOLUMES IN CERTAIN PROCEDURES (SUCH AS LEFT HEART CATHETERIZATION) TEND TO HAVE LOWER COSTS... ..AS DO LARGER SYSTEMS AVERAGE COST PER ADJUSTED ADMISSION5 AVERAGE COST PER LEFT HEART CATHETERIZATION PROCEDURE³4 4,000 9,000 3,000 2,000 6,000 1,000 3,000 0.5 1.4 3.6, 2 to 10 11 to 25 26+ AVERAGE NUMBER OF DAILY PROCEDURES NUMBER OF HOSPITALS IN HEALTH SYSTEM SOURCES: 1. Objective Health de-identified client data 2. Premier discharge database 3. CMS cost report 2010 4. American Hospital Directory 5. Objective Health analysis FOOTNOTES: OBJECTIVEHEALTH" 1. Average cost per case calculated using a "DRG market basket" of the top 20 DRGS that hospitals offer (similar to consumer price index method). 2. N= 250 short term acute care hospitals, 2010 3. N= 180 short term acute care hospitals, 2010 4. ICD Principal Procedure code = 00.66 with left heart catheterization. Cost includes cardiology procedures, drugs, and supplies/implants. Inpatient (where surgery was performed on day 1 of encounter) and outpatient are both included. 5. CMI-adjusted cost per AA; N='2100 short term acute care hospitals within 400 health systems, 2010 A MCKINSEY SOLUTION FOR HEALTHCARE PROVIDERS Copyright 2012, Objective Health, a McKinsey Solution for Healthoare Providers. %24 %24