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

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.