John Duggan. The effect of healthcare privatisation on patient outcomes

Dec 19, 2015

Recent actions by the Federal Minister of Health and her predecessors indicate the government’s aim to shift hospital care from the public to the private sector. Associated with this is the   developing perception that private hospitals are superior just as private schooling is increasingly held to be superior to publicly funded schooling.

However, while there are massive data available comparing standards and outcomes in the school system, public, private and Catholic, there are virtually no Australian data comparing the two hospital systems; the only study found is a Productivity Commission report outlining the equal inefficiency of both systems.

The Federal, State and Territory Health Departments are treasuries of relevant data awaiting the will, finance and logistics to convert data to information and information into knowledge.. The absence of such  data comparing quality of care and outcomes in the two healthcare systems, contrasting with educational data may be attributed to apathy or to the power of vested interests ,.However, studies from the US and , Canada indicate that it can be done,. recognising that in Australia, as the Productivity Commission reported,, the data sources are multiple and ill-coordinated. and that both systems function at 20 % below best practice,.,

To interpret the US data, it is necessary to understand that, at least until the Obama legislation, there were several hospital systems and funding mechanisms. There were the not-for-profit hospitals often run by religious or community//civic groups , for- profit institutions, generally investor owned and part of a chain, and thirdly, those owned by cities or universities.

A detailed analysis of 14 studies in the US, totalling 36 million admissions to 26,399 US hospitals 1982 – 1995 .compared  for-profit versus not-for-profit hospitals .It showed  a small but statistically significant 2% elevation in mortality in for-profit hospitals. Six of the component studies showed a statistically significant advantage for not-for- profit institutions; while only one study           showed a similar advantage in for-profit hospitals. The only obstetric study, that of 1,642,002 patients in 241 hospitals showed a highly significant 9.5% increase in mortality rates for babies in for-profit hospitals.

In another study the U.S. Health Care Financing Administration studied data on 3100 hospitals, adjusting for differing patient characteristics. Lower mortality rates were associated with teaching hospitals, a higher proportion of board-certified medical staff (specialist qualifications), a higher proportion of registered nurses and higher payroll expenses i.e. staffing levels. A higher mortality rate was associated with for profit and public (in Australian parlance state-owned) hospitals compared with not-for-profit hospitals .

The U.S. Joint Commission on Accreditation of Healthcare Organisations and the Centers for Medicare and Medicaid Services studied data submitted in 2004 to the American Hospitals Association on coronary occlusion, heart failure and pneumonia. Detailed statistical analysis showed that “for-profit hospitals consistently underperformed not- for-profit hospitals”. The conclusion reached was that “Patients are more likely to receive high quality care in not-for -profit hospitals and in hospitals with high registered nurse staffing ratios and more investment in technology”.

Of several studies of specific conditions, one of the largest compared outcomes in for-profit and not-for-profit renal dialysis centres in the U.S In a review based on 500,000 patient years from 1973 to 1997 in 1342 facilities, six of the eight studies showed a statistically significant increase in mortality in for-profit facilities, one only suggested the same and one suggested lower mortality in for- profit institutions. The authors conclude that “there are annually 2500 (with a plausible range of 1200-4000) excess deaths in U.S. for-profit centres”.

Another study examined the evidence for performance differences between for-profit and not-for-profit psychiatric inpatient facilities since 1980. All but one of these

studies found that not- for- profits performed as well as or better than the for-profit psychiatric organisations.

In view of the Federal government’s push for cost savings through efficiency we should compare health care administration costs in the U.S. and Canada ( .While the two countries share many social characteristics with excellent databases, their health care systems are quite different. Canada had a centrally funded health care system and a single payer – the government, while the U.S, .like Australia, had a multitude of health insurance systems with multiple payers. In 1999, health administration costs were at least   $1059 per head in the US compared with $307 per head in Canada. Thus, administration accounted for 31% of health care expenditure in the US but only 16.7% in Canada. In the 30 years to 1999 administration’s share of healthcare labour force expenditure went from18.2% to 27.3% in the US whereas in Canada it rose from 16.0% to 19.1%.

Privatization also uses more doctor’s time. A recent study of treating doctors in the U.S. showed that they devote an average of one sixth of their time to administration; psychiatrists top the bill at 20% whereas paediatricians only spend 14%.

Only one study comparing Quality of Care issues in investor owned and not-for-profit Health Maintenance Organisations in the U.S. has been found. Data from the National Committee for Quality Assurance’s Quality Compass on 329 HM0 plans showed that the 248 investor owned plans had lower scores for all the quality of care indices than the 81 not- for- profit plans.

There is, however, one aspect of the U.S. studies relevant to Australia. A recurrent theme there is the association of better outcomes with medium and large size hospitals, and for procedures performed by experienced doctors with specialist qualifications.

Whether there is significance in the fact that there are in NSW 380 public hospitals but more than 600private hospitals remains speculative.

Overall, while the U.S. findings are relevant to the U.S,  their application to Australia is debatable; unfortunately we lack any data to indicate that the deplorable US system is replicated here. With the enormous and growing cost of Healthcare in Australia, surely the time has come to consider an analysis of the costs and patient benefits of the various healthcare systems in Australia , such as has been done in North America..

Conjoint Professor John Duggan, School of Medicine and Public Health, University of Newcastle.


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