By reducing time consumed in detailed activities, the management in a large organization has
more time to spend on managing external relations and building an effective organization. For
instance, the management can focus on planning and providing hospital services that are needed by
people in the area as well as designing and implementing policies to enhance the organizational
performance. Consequently, large organizations tend to operate at higher efficiency level compared
with the smaller ones.
The empirical evidence of size effect on hospital efficiency from previous studies is mixed. Eakin
(1991) found positive relationship between size and efficiency in the utilization of inputs for U.S. shortterm
hospitals. Vogel, Langland-Orban, and Gapenski (1993) discovered that there is no relationship
between size and profitability for acute care hospitals in Florida. Hsing and Bond (1995), using
employee productivity as a proxy to hospital productivity, found that when a hospital reaches a particular
size, an increase in size results in an increase in productivity. However, when a hospital is too small or
too large, an inverse relationship between size and productivity becomes evident.