Skip to main content

Scale Effects and Expected Savings from Consolidation Policies of Italian Local Healthcare Authorities

Abstract

Background

Consolidation is often considered by policymakers as a means to reduce service delivery costs and enhance accountability.

Objective

The aim of this study was to estimate the potential cost savings that may be derived from consolidation of local health authorities (LHAs) with specific reference to the Italian setting.

Methods

For our empirical analysis, we use data relating to the costs of the LHAs as reported in the 2012 LHAs’ Income Statements published within the New Health Information System (NSIS) by the Ministry of Health. With respect to the previous literature on the consolidation of local health departments (LHDs), which is based on ex-post-assessments on what has been the impact of the consolidation of LHDs on health spending, we use an ex-ante-evaluation design and simulate the potential cost savings that may arise from the consolidation of LHAs.

Results

Our results show the existence of economies of scale with reference to a particular subset of the production costs of LHAs, i.e. administrative costs together with the purchasing costs of goods (such as drugs and medical devices) as well as non-healthcare-related services.

Conclusions

The research findings of our paper provide practical insight into the concerns and challenges of LHA consolidations and may have important implications for NHS organisation and for the containment of public healthcare expenditure.

This is a preview of subscription content, access via your institution.

Fig. 1
Fig. 2
Fig. 3

Notes

  1. 1.

    According to ISTAT [2], the healthcare expenditure in 2016 was equal to 149,500 million euros, 75% of which was financed by the public sector and the rest by the private sector, mainly in the form of out-of-pocket (OOP) payments. In Italy, healthcare is delivered mainly by public providers. The total amount of the public health expenditure is annually defined according to the national budget constraints: the central level—represented by both the Ministry of Health and the Ministry of Finance—ensures that the regions keep their healthcare expenditure within their budgets and guarantees the essential levels of care. There is not an official target for the ratio of total public health expenditure over GDP.

  2. 2.

    The term ‘accreditation’ was introduced in Italian health legislation in the early 1990s: private hospitals and ambulatory care organisations meeting specific quality requirements may apply for accreditation and may act as providers for the NHS if they obtain ‘accredited’ status.

  3. 3.

    Lombardy was one of the first regions to implement the merging process by redefining the geographical boundaries of 40 local health authorities in 3 years: from 84 LHAs in 1992 to 44 LHAs in 1995. In 2005, Lombardy accounted for 15 LHAs (see Mattei [3] for more details).

  4. 4.

    The values of all explanatory variables of the consolidated LHAs are derived directly from those of the original LHAs. With regard to the number of inhabitants, the lump-sum funding and the number of doctors, for instance, are computed by summing the original values based on the assumption of no variation of services. With regard to density, dependency ratio and foreigner rate are constructed by computing the average of the original data, weighted by population.

References

  1. 1.

    OECD. Health Statistics 2015, FOCUS on Health Spending. 2015. http://www.oecd.org/health/health-systems/Focus-Health-Spending-2015.pdf. Accessed Nov 2016.

  2. 2.

    ISTAT—National Institute of Statistics. Health for All—Italia. 2017. https://www.istat.it/it/archivio/14562. Accessed Nov 2016.

  3. 3.

    Mattei P. From politics to good management? Transforming the local welfare state in Italy. West Eur Politics. 2007;30(3):595–620.

    Article  Google Scholar 

  4. 4.

    France G, Taroni F, Donatini A. The Italian health-care system. Health Econ. 2005;14:S187–202.

    Article  PubMed  Google Scholar 

  5. 5.

    Carbone C, Del Vecchio M, Lega F, Prenestini A. I processi di fusione aziendale nel SSN: evidenze per il management e i policy maker. Cap 7, Rapporto OASI, Milano, EGEA; 2015.

  6. 6.

    Ferrè F, Ricci A. La struttura del SSN. In: Cantù E. (a cura di) L’aziendalizzazione della sanità in Italia. Rapporto OASI 2012, Milano, EGEA; 2012.

  7. 7.

    Borcherding TE, Deacon RT. The demand for services of non federal governments. Am Econ Rev. 1972;62(June):891–901.

    Google Scholar 

  8. 8.

    Santerre RE. Spatial differences in the demands for local public goods. Land Econ. 1985;61(May):119–28.

    Article  Google Scholar 

  9. 9.

    Gordon RL, Gerzoff RB, Richards TB. Determinants of US local health department expenditures, 1992 through 1993. Am J Public Health. 1997;87(1):91–5.

    CAS  Article  PubMed  PubMed Central  Google Scholar 

  10. 10.

    Bates LJ, Santerre RE. The demand for local public health: do unified and independent public health departments spend differently. Med Care. 2008;46:590–6.

    Article  PubMed  Google Scholar 

  11. 11.

    Santerre RE. Jurisdiction size and local public health spending. Health Serv Res. 2009;44:2148–66.

    Article  PubMed  PubMed Central  Google Scholar 

  12. 12.

    Mays GP, et al. Institutional and economic determinants of public health system performance. Public Health. 2006;96(3):523–31.

    Google Scholar 

  13. 13.

    Hoornbeek J, Budnik A, Beechey T, Filla J. Consolidating health departments in Summit County, Ohio: a one-year retrospective. Kent: Kent State University, Center for Public Administration and Public Policy; 2012.

    Google Scholar 

  14. 14.

    Hoornbeek J, Morris ME, Stefanak M, Filla J, Prodhan R, Smith SA. The impacts of local health Department consolidation on public health expenditures: evidence from Ohio. Am J Public Health. 2015;105:S174–80.

    Article  PubMed  PubMed Central  Google Scholar 

  15. 15.

    Torbica A, Fattore G. The essential levels of care in Italy: when being explicit serves the devolution of powers. Eur J Health Econ. 2005;6(Suppl):46–52.

    Article  PubMed Central  Google Scholar 

  16. 16.

    Giannoni M, Hitiris T. The regional impact of health care expenditure: the case of Italy. Appl Econ. 2002;34:1829–36.

    Article  Google Scholar 

  17. 17.

    France G, Taroni F. The evolution of health-policy making in Italy. J Health Politics Policy Law. 2005;30:169–88.

    Article  Google Scholar 

  18. 18.

    Ministry of Health. New Health Information System (NSIS), Regional database of the LHA’ balance sheets. 2012. http://www.salute.gov.it/portale/temi/p2_6.jsp?-lingua=italiano&id=1314&area=programmazioneSanitariaLea&menu=vuoto. Accessed Nov 2016.

  19. 19.

    Canta C, Piacenza M, Turati G. Riforme del Servizio Sanitario Nazionale e dinamica dell’efficienza ospedaliera in Piemonte. Politica Economica. 2006;22(2):157–91.

    Google Scholar 

  20. 20.

    Jommi C, Cantù E, Anessi-Pessina E. New funding arrangements in the Italian National Health Service. Int J Health Plann Manag. 2001;16:347–68.

    CAS  Article  Google Scholar 

  21. 21.

    Brenna E. Quasi-market and cost-containment in Beveridge systems: the Lombardy model of Italy. Health Policy. 2011;103:209–18.

    Article  PubMed  Google Scholar 

  22. 22.

    de Belvis AG, Ferrè F, Specchia ML, Valerio L, Fattore G, Ricciardi W. The financial crisis in Italy: implications for the healthcare sector. Health Policy. 2012;10:10–6.

    Article  Google Scholar 

  23. 23.

    Mapelli V. Il Sistema Sanitario Italiano. Il Mulino; 2012.

  24. 24.

    Baldi S, Vannoni D. The impact of centralization on pharmaceutical procurement prices: the role of institutional quality and corruption. Reg Stud. 2017;51(3):426–38. https://doi.org/10.1080/00343404.2015.1101517.

    Article  Google Scholar 

  25. 25.

    Dimitri N, Dini F, Piga G. When procurement should be centralized? In: Dimitri N, Piga G, Spagnolo G, editors. Handbook of procurement. Cambridge: Cambridge University Press; 2006.

    Chapter  Google Scholar 

  26. 26.

    Maddala GS. Introduction to econometrics. 2nd ed. New York: Macmillan; 1992.

    Google Scholar 

  27. 27.

    Harrison TD. Do mergers really reduce costs? Evidence from hospitals. Econ Inq. 2011;49:1054–69.

    Article  PubMed  Google Scholar 

  28. 28.

    Rizzi D, Zanette M. A procedure for the ex-ante assessment of compulsory municipal amalgamation policies. Public Finance Manag. 2017;17:170–201.

    Google Scholar 

  29. 29.

    Kristensen T, Olsen KR, Kilsmark J, Lauridsen JT, Pedersen KM. Economies of scale and scope in the Danish hospital sector prior to radical restructuring plans. Health Policy. 2012;106:120–6.

    Article  PubMed  Google Scholar 

  30. 30.

    ISTAT—National Institute of Statistics. Database I.Stat. 2012. http://dati.istat.it/. Accessed Nov 2016.

  31. 31.

    ISTAT—National Institute of Statistics. Database Demo. 2012. http://demo.istat.it/. Accessed Nov 2016.

  32. 32.

    Ministry of Economy and Finance. Distribution by municipality of the tax base of personal income tax, Statistical analysis, Open Data Tax returns. Department of Finance. 2012. http://www1.finanze.gov.it/finanze2/analisi_stat/index.php?search_class[0]=-cCOMUNE&opendata=yes. Accessed Nov 2016.

  33. 33.

    Ministry of Health. Italian National Health Services’ database on facilities and employees. 2012. http://www.salute.gov.it/portale/temi/p2_2_0.jsp?lingua=italiano&id=927. Accessed Nov 2016.

  34. 34.

    Ministry of Health. Open Data, Bridging Table LHAs-Municipalities. 2012. http://www.dati.salute.gov.it/dati/dettaglioDataset.jsp?menu=dati&idPag=3. Accessed Nov 2016.

Download references

Acknowledgements

An earlier draft of this paper was presented at the annual meeting of the Italian Health Economics Association, Alghero, Italy. The authors thank the conference participants for their detailed and helpful comments. The authors also thank Vincenzo Rebba, Francesca Zantomio and two anonymous referees for helpful comments on earlier drafts of the manuscript. The authors also gratefully acknowledge the staff of the Regione Veneto for research assistance.

Author information

Affiliations

Authors

Contributions

DR and MZ conceived the presented idea. CD, DR and MZ developed the theory and performed the computations. All authors discussed the results and contributed to the final manuscript.

Corresponding author

Correspondence to Cinzia Di Novi.

Ethics declarations

Data availability statement

All data used for this project are publicly available and accessible online. We have annotated the entire data-building process and empirical techniques presented in the paper.

Funding

This research received no specific grant from any funding agency in the public, commercial or not-for-profit sectors.

Conflict of interest

C.D., D.R and M.Z. declare no conflicts of interest.

Electronic supplementary material

Below is the link to the electronic supplementary material.

Supplementary material 1 (DTA 73 kb)

Supplementary material 2 (DO 6 kb)

Appendix

Appendix

See Tables 5, 6 and 7.

Table 5 Dimensions of local healthcare authorities (LHAs) (number of LHAs per region and descriptive statistics about their population and area, 2012)
Table 6 Descriptive statistics (with regard to the local healthcare authorities (LHAs) of Ordinary Statute Regions)
Table 7 Average per capita costs by organizational model

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Di Novi, C., Rizzi, D. & Zanette, M. Scale Effects and Expected Savings from Consolidation Policies of Italian Local Healthcare Authorities. Appl Health Econ Health Policy 16, 107–122 (2018). https://doi.org/10.1007/s40258-017-0359-1

Download citation