Intended for healthcare professionals

Education And Debate The hospital of the future

Is bigger better? Concentration in the provision of secondary care

BMJ 1999; 319 doi: (Published 16 October 1999) Cite this as: BMJ 1999;319:1063
  1. John Posnett, director (yhec{at}
  1. York Health Economics Consortium, University of York, York YO1 5DD

    A close observer of the NHS over the past 10 years might be forgiven for thinking that the debate about the concentration of acute hospital services has been driven more by the needs of NHS managers and the medical professions than by the needs of the local populations that they are supposed to serve. Managers have faced pressures to reduce unit costs and, in particular, the “wasteful” costs of management itself. The medical professions, through their respective royal colleges, have encouraged the closure or rationalisation of smaller units through pressures for greater subspecialisation.

    The result has been pressure for further concentration in the provision of hospital services through rationalisation and trust mergers. The logic is inescapable: larger units reduce average costs through the operation of economies of scale and larger units improve patient outcomes by increasing average volumes of activity by clinicians. Unfortunately, this logic is not supported by the evidence.

    Summary points

    NHS managers have been subject in recent years to considerable pressure to increase concentration and trust mergers

    This pressure has been justified by a belief that larger hospitals lead to lower average costs and better clinical outcomes

    Evidence from research does not support any general presumption that larger hospitals benefit from economies of scale or that service concentration leads to improved outcomes for patients

    Service planners would do well to give more prominence to the importance of ensuring that hospital services are local and easily accessible

    Optimal hospital size

    Even the most committed believers accept that there is a limit to the operation of economies of scale. Otherwise, the most efficient solution would be to concentrate all acute hospital services for the United Kingdom at a new mega-hospital somewhere around Leeds.

    The empirical literature on economies of scale is extensive, reflecting different methods and covering many different countries. Despite this diversity, the results are remarkably consistent1:

    • Economies of scale are evident only for small hospitals (less than 200 beds)

    • The optimal size for acute hospitals ranges from 200 to 400 beds (table 1 shows the distribution of English acute hospitals by size)

    • Above 400-600 beds, average costs increase.

    Table 1.

    Distribution of English acute hospitals by size2

    View this table:

    Despite the evidence, the belief in the power of concentration as a force for improvements in efficiency remains strong. It is important to try to understand this act of faith by considering some of the arguments.

    Empirical evidence is not relevant

    Empirical evidence is not relevant because it relates to hospitals with a single site and is not directly relevant to the merger of separate trusts. This is true. The evidence shows that two small single site hospitals (of 400 beds) will be more efficient than one large single site hospital (of 800 beds). In view of this evidence, however, how confident can we be that the creation of a multisite hospital trust with 800 beds will be more efficient than two separate single site hospital trusts of 400 beds each?

    An analysis of mergers of hospitals in the United States offers no support for the hypothesis that costs are lower in multihospital systems or that mergers lead to reduced costs through efficiency gains.12 The results of empirical studies remain unconvincing, implying that the predicted efficiency gains of mergers do not always materialise and that unexpected costs often arise.2

    Mergers of hospital trusts must reduce management costs

    Trust mergers will reduce management costs by eliminating the costs associated with one of the trust boards. This is also true, but irrelevant. The relevant questions to ask are, firstly, what will be the impact on overall management costs resulting from the merger, and, secondly, what will be the impact on the total costs of providing health care?

    The empirical evidence shows that total costs will either increase or remain unchanged, depending on the size of the new organisation. The impact on overall management costs is uncertain, but one of the sources of diseconomies of scale observed in the literature is the additional cost associated with managing a larger organisation. If the additional costs of managing more than one site are added, management costs will not be reduced.

    Embedded Image

    Greenwich Hospital from the Thames, circa 1840


    Mergers of hospital trusts will eliminate excess capacity and duplication

    If total capacity is reduced as a result of mergers, total costs may indeed be reduced. Unfortunately, this is nothing to do with economies of scale but simply with eliminating duplication and excess capacity. The extent to which mergers are necessary for this to happen is a moot point.

    Hospital organisation

    The evidence on economies of scale is consistent with general hospitals of 200-400 beds, much as in the traditional model of the district general hospital. However, the royal colleges and others have argued for greater concentration of secondary services on the basis that clinical outcomes for patients are better in larger units. This may be true, but here also the evidence is lacking.3

    The literature shows quite conclusively that there can be no general presumption that larger units produce better outcomes for patients. The evidence of a positive relation between volume and outcome for a small number of defined procedures is reliable, but these effects operate at comparatively low levels of activity, certainly not large enough to justify notable concentration (table 2).

    The reluctance among many professionals to accept this conclusion is understandable. The literature in this area is extensive, and most published papers report a positive association between the volume of activity of hospitals or clinicians and patient outcomes. However, this is misleading. Much of the published evidence is unreliable.45 Most studies adjust inadequately for differences in case mix and prognosis between centres. If smaller centres attract a higher proportion of urgent or emergency cases, observed differences in outcome may be confounded by differences in severity. This is illustrated in the United Kingdom in studies of adult intensive care. Higher mortality found in smaller intensive care units using unadjusted data is no longer significant after adjustment for severity (using APACHE II, the acute physiological and chronic health evaluation II scale) because the average severity is higher in smaller units.6 The same is true in studies of coronary artery bypass graft surgery.7

    The process by which outcomes are determined is poorly understood. The current preoccupation with the experience of clinicians (proxied by volume of activity) may prove to be misguided. Equal importance needs to be given to understanding the impact of differences in the availability of support services (such as imaging or intensive care), in the skills and training of individual clinicians, in the quality of medical or surgical support teams, and in the extent of cooperation between clinicians and between clinicians and hospital managers.

    Table 2.

    Volume thresholds from best quality studies and current activity in NHS trusts4

    View this table:

    No degree of concentration can guarantee better or more efficient services unless hospitals are managed in such a way that the importance of cost effectiveness, agreed protocols for treatment and diagnosis, and open audit of clinical outcomes are accepted as part of the culture.

    Patient access

    Even if a case could be proved on grounds of clinical quality, the indirect cost of concentration in terms of patient access should not be ignored. Patients are assumed not to be deterred from seeking health care by reduced access. The evidence shows that this is largely true.8

    Evidence of the effects of distance on use of acute services or on health outcomes is not consistent with a large deterrent effect except in particular circumstances. However, there is evidence of distance decay (reduced use with increased distance) for consultations with general practitioners, for self referral to accident and emergency departments, and for attendance at screening for breast and cervical cancer.

    This evidence shows that, with the exception of diagnostic or screening services, decreased access is associated with a shift in costs from the NHS to patients rather than with a reduction in use. This effect is unlikely to be uniform across different sections of the population, and the evidence is consistent with large deterrent effects for particular groups, such as those with low personal mobility or those in particular socioeconomic groups.9

    Is bigger better?

    On the basis of available research evidence, bigger is not better: at present there is no reason to believe that further concentration in the provision of hospitals will lead to any automatic gains in efficiency or patient outcomes. Maybe the research base is inadequate, but the onus is on those who advocate the benefits of concentration to prove their case.

    In the future, as general practitioners (through primary care groups) assume an increasingly influential role in planning the provision of health services, the perceived benefits of accessible local services may begin to turn the tide of professional opinion.


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