Unbiased Analysis of Today's Healthcare Issues

Is Britain’s goal to reduce hospital size beneficial to consumers?

Written By: Jason Shafrin - Jan• 31•06

A 31 January 2006 Times article (“Smaller is better, says minister in hospitals shake-up“) states that the National Health Service (NHS) hopes to increase the number of small in the UK to counter the trend of recent hospital closings. Is this a good policy? Let’s look at the Pros and Cons:


  1. Smaller, more numerous hospitals mean that travel time will be decreased. Patients will waste less time missing work during hospital visits.
  2. Generally, the health care profession’s conventional wisdom is that there should be many primary care centers, fewer secondary care centers, and only a couple of regional tertiary care hospitals for rare diseases. Since most diseases can be treated–or at least diagnosed–by General Practitioners (GP), these would seem to be a more efficient use of resources. The NHS claims that treatment in the primary care hospital will be less costly.
  3. With more hospital options nearby, this proposal should increase consumer choice.
  4. It has been documented in the United States that building expensive secondary care hospitals leads to an increase in treatments that are preformed there. This phenomenon is known as supplier induced demand. Some of this is of course filling a need, but some of the increased demand may be that physicians want to cover the cost of the hospital. With fewer secondary care facilities, there should be less supplier induced demand. This may not be a problem in the UK where there is a single payer system.


  1. If there are significant overhead costs to running a hospital, decreasing the size of each hospital will eliminate efficiencies due to economies of scale.
  2. As more secondary hospitals close in favor the primary care hospitals, it is possible that consumers will have fewer choices in the secondary care market.

Overall what is my conclusion? Since there is a single-payer system in the UK, it is difficult to gage consumer demand for primary, secondary and tertiary care. If there is currently an excess amount of patients treated at acute care hospitals, this proposal may be welfare improving. Further, as technology improves, primary care facilities may have the capabilities to do procedures which previously were only preformed at acute care facilities. As long as costs are not prohibitive, this looks to be a successful strategy.

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