Question

There is a new trend among companies in healthcare fields: Mergers and acquisitions to cut costs of delivering healthcare. These M & As are among health insurance companies, hospitals, retail pharmacy companies, pharmaceutical companies, and other companies in the healthcare field. Will these M & As succeed in reducing the costs of healthcare delivery in the United States? Why or why not?

Answer 1

Due to economies of scale, the mergers and acquisitions may lower healthcare costs. There would be reduction in overheads because the same facilities would be used by multiple healthcare companies. The common facilities can be shared such as administration costs and management costs and hence these are lowered. If the hospitals are closely located, even the physical facilities can be shared thus reducing costs.