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Are private hospitals more efficient?

18/02/2010
Which way for the NHS?
Image by Paul8032

It’s in the news today that Hinchingbrooke hospital in Cambridge is to be run by a private company. But in basic terms, are privately run hospitals actually better than public? Not necessarily…

Since neo-liberalism took hold, market mechanisms, from competition between service providers (encouraged through introducing school and hospital choice) to full privatisation of public services have been thought to increase efficiency, productivity and innovation. The implicit picture here is that public run services are so strictly controlled by the government that their employees do not have enough flexibility to suggest better ways of doing things – either to tailor services to local needs or to tackle inefficiencies. It is not in the interests of such organisations to find solutions, especially when they would entail losing jobs because of the high level of Unionisation. But surely public managers still want to provide as much service as possible on their budgets, and workers want to feel their jobs are worth something?

There have been quite a few studies into whether private or public hospitals are more efficient, with varied results. In the 1990s, German public sector hospitals were shown to use fewer resources and provide care more efficiently than private hospitals. A study in Senegal found that private hospitals provided better quality care and hence should be encouraged but were not necessarily more efficient (in fact Catholic health posts were better than both at providing effective services). In Canada it was found that private for-profit ownership meant a higher risk of death for patients. A study from 1990 found that public hospitals in the US were more productive, but that this was likely to be because of government constraints on their funding. An old study of managerial efficiency from 1980s North America finds that there is no evidence it is higher in private firms than public firms. Indeed, in the provision of some public goods such as electricity, private firms are discernibly less efficient, and this is unlikely to be simply because of overbearing regulation in this sector. Public firms do make less profits and are more open to being used as a tool in elections. However, the conclusion to this book, written in 2000, finds that privatisation has often proved its worth and has only failed where it has been too speedily introduced, and that it is unstoppable anyway.

Perhaps, then, if this trend is unstoppable, it doesn’t matter which is more efficient since privately run NHS hospitals are coming whether we like it or not? Nonetheless it’s important to scrutinise the reasoning behind policy. The few pieces I’ve quoted above are simply the result of a little while spent searching academic journals, and I don’t pretend to understand all the techniques used – if anyone can improve on these or give me a systematic analysis let me know. However, it certainly seems that the scholarship is not conclusive, and better justifications, backed up by solid research, need to be given for the running of hospitals by private companies.

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