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The Evaluation of a Merged Hospital System

Application of the Interrupted Time Series Design

University of South Florida

The growing concern over rising costs and prices for hospital services threatens the viability of many hospitals. The advocates of hospital reform have suggested merger as u cost-containment endeavor. Among other benefits, this solution visualizes the attain ment of economies of scale in operations, an improvement in the quality of services offered, the obtaining of capital more readily, the taking of a monopolistic or monop sonistic position in the market area, and the seeking of complements or substitutes for the resources of a hospital. This study seeks to verify empirically the achievement of the professed goals of one such merger. It examines six hospital cost indicators in the frame work of an Interrupted Time Series Design. Inferences are then made regarding the changes in the level and slope of the series, following the methods outlined by Box and Tiao. From an analysis of the cost indicators of this case study, the view that mergers lower per-unit costs is not supported.

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