Fraser Institute Says Private Hospital Competition Can Benefit Health Care Consumers
Contact:
Martin Zelder, Director of Health Policy Research,
The Fraser Institute, (604) 714-4548 Email: martinz@fraserinstitute.caRelease Date: 21 January 2000
VANCOUVER,BC>>> The Alberta government, in a forthcoming bill, has proposed permitting the provision of surgical services by private hospitals. Will this proposal improve health care delivery? A thorough review of the medical economics literature suggests that it will, says a new study released today by The Fraser Institute, How Private Hospital Competition Can Improve Canadian Health Care.
"In the face of the public debate over the Alberta proposal, the central issue remains unconfronted: does the plan have substantive merit? In other words, should we expect it to work, based on the evidence?" asks Martin Zelder, the Institute's Director of Health Policy Research, and author of the paper.
The Alberta proposal raises three important issues. First, do for-profit hospitals perform better than non-profit ones? Second, do private hospitals (either for-profit or non-profit) perform better than government-run ("public") ones? Third, does intensified competition among hospitals enhance or diminish medical care?
Although most of the evidence on these three central questions comes from the United States, that evidence is directly relevant for assessing the Alberta proposal. A thorough review of those findings provides a strong case for the superiority of private, compared to government-run, hospitals. Of the 15 studies reviewed, 8 showed that private hospitals performed better, 3 found that public hospitals performed better, and 4 revealed no difference in performance.
These private-hospital advantages are not confined to the US; studies also find successful hospital privatizations in third-world nations such as South Africa and Zimbabwe.
"As well, the economics literature on the effects of hospital competition in the US reveals that, over the last 10 years, competition has been unambiguously beneficial, lowering cost and increasing quality," notes Zelder.
Differences in performance between for-profits and non-profits, and private and public firms, exist because of the different incentives found in each type of organization. These different incentives have been illustrated by the evidence that private hospitals are more efficient than public hospitals.
For example, private hospitals can lower costs by avoiding the high wages associated with unionized public hospital employees in non-health care positions, such as cleaners, painters, or cooks. Recent data from British Columbia showed that in one hospital, unionized non-medical employees received from 25 to 63 percent more in wages than comparable private-union employees at hotels.
In addition, US analysis of the effects of competition finds that the desirable consequences from enhanced hospital competition are actually greater in settings where the hospital market was the least competitive to begin with. Given the extreme limits on hospital competition now found in Canada, which the Alberta proposal would modestly reverse, this finding augurs well for that proposal.
Some critics have raised concerns of the potential for a "medical arms race," like that found to have occurred at times in the United States. However, this is highly unlikely due to Canada's woefully low stock of medical technology.
The evidence presented in this paper provides substantial confidence that the Alberta proposal to contract out surgeries to private hospitals will work. The evidence from the United States and abroad reveals the advantages to private provision of hospital services: lower costs and higher quality, enabling more and better health care to be provided to Canadians, and enhancing health outcomes.
"Taken together, all of these factors provide a substantial and encouraging base of evidence that the Alberta plan will lower hospital costs and benefit consumers by making their tax dollars go farther, and as a result, increasing their access to medical care," says Zelder.
Established in 1974, The Fraser Institute is an independent public policy organization based in Vancouver.
For further information contact:
Suzanne Walters, Director of Communications,
The Fraser Institute, (604) 714-4582,
Email suzannew@fraserinstitute.ca
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