Economies Of Scale 101

Economy of scale. We may not use the term much, but it is the concept that is driving many mergers in the health and human service field. By definition, economies of scale are “the increase in efficiency of production as the number of goods being produced increases...” The assumption being that if an organization can produce more of something, the cost per unit of that something will go down. This would be due to ‘scale’ – lower amount of overhead in proportion to direct costs and the effect of volume in getting maximum yield from infrastructure and staffing.

Larger organizations can . . .