Break-ups of municipal health centre federations: Expenditure and efficiency effects

Empirical evidence on economies of scale in healthcare is mostly based on the cost effects of hospital mergers. In contrast to earlier studies, this paper approaches the economies of scale issue by analysing the break-ups of municipal health centre federations. We use the difference-in-difference models to evaluate the break-up impacts on costs, outputs and efficiency of health centres in Finland between 1990 and 2003. To address potential non-random or endogenous treatment assignment we also utilize propensity score difference-in-difference approach. For cost efficiency estimation we use the non-parametric order-alpha method that is more suitable for small samples than the traditional efficiency estimators. Our results show that healthcare costs have grown considerably faster for the seceded health centres than for the similar non-seceded ones, while outputs have increased more for the former than for the latter group. Interestingly, we find the impact of break-ups to be insignificant on the productive efficiency of health centres.