When Does Regionalization of Expensive Medical Care save Money?

Regionalization of expensive, high-technology medical care is often proposed as a way to reduce medical costs. Most empirical estimates of the cost implications of regionalization suffer from methodological shortcomings. Here, we discuss all the factors that must be taken into account to produce an accurate assessment of how regionalization changes costs. These factors include the following: (1) The extent of resource sharing among different services; (2) The extent of unused capacity; (3) Whether regionalized facilities have high, low or average costs; (4) Costs of a regionalized system, including transporting patients to the regionalized facilities, coordinating care between the referring and regionalized providers, and out-of-network care; (5) The effect of regionalization on the volume of care; and (6) whether a short- or long-term view is taken.