Answer to Question #140785 in Macroeconomics for Aijaz Khan

Question

Do you think there are economies of scale and economies of scope in healthcare markets? Give 3 examples.

Answer 1

Achieving economies of scale is a key strategy for larger healthcare organizations to reduce and control their costs. Economies of scope allows providers to leverage their scale to create non-traditional revenue streams, such as direct-to-employer offerings.

Once a health system decides on the scale model, the organization can use four methods for implementation.

1. Health systems can engage in inorganic scale, which encompasses healthcare merger and acquisition activities.
2. Health systems can opt for virtual hospital integration. Examples include co-provision, outsourcing of shared services, and joint development of knowledge and innovation.
3. Horizontal organic scale involves a health system stretching its footprint across the care spectrum. A health system may choose to get involved with physician practices or outpatient facilities to grow the hospital setting.
4. Health systems can use the vertical organic scale method to directly develop relationships with payers, employers, or both to increase patient volume. 

Source:

https://revcycleintelligence.com/news/key-strategies-for-health-systems-to-achieve-economies-of-scale