Larger is Better: The Scale Effects of the Italian Local Healthcare Authorities Amalgamation Program

Consolidation is often considered as a means to lower service delivery costs and enhance accountability. This paper uses a prospective evaluation design to derive estimates of the potential cost savings that may arise from Local Healthcare Authorities (LHAs) amalgamation process, which is concerning the Itali an National Health System. We focus specifically on cost savings due to scale economies with reference to a particular subset of the production costs of the LHAs, i.e. the administrative costs together with the purchasing costs of both goods as well as non-healthcare related services. Our results demonstrate the existence of economies of scale linked to the size of the LHA population. Hence, the decision to reduce the number of LHAs may result in larger local health authorities that are more cost efficient, especially when the consolidation process concerns merging a large number of LHA.