Hospital PPPs Undermine Healthcare

By Anis Chowdhury and Jomo Kwame SundaramReprint | |

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SYDNEY & KUALA LUMPUR, Jan 22 2019 (IPS) - Despite all the evidence to the contrary, and substantial opposition from community groups, public-private partnerships (PPPs) are still being promoted to deliver sustainable development.

Public-private hospital partnerships are supposed to ensure that the private sector will offer much needed efficiency in healthcare provision.

Anis Chowdhury

However, any government considering healthcare PPPs should be aware of the Australian experience, especially after what has happened with the Northern Beaches Hospital, a PPP between the New South Wales government and Healthscope.

The A$600m facility was officially opened with much fanfare on 19 November 2018. With a A$2.2 billion 20-year contract, it was billed as the flagship project for the NSW government to hand over to the private sector delivery of a wide range of public services from prisons to technical education to health.

Profits before patients
The chief executive officer resigned two days after the official opening amidst claims of critical shortages of staff, medicines and supplies since it opened to its first patients on 30 October. Anaesthetists at the hospital have threatened to stop performing elective surgery until critical problems are addressed, leading to a crisis atmosphere.

The government and hospital authority describe the staffing and supply shortages as ‘hiccups’ and ‘teething problems’. But these are not trivial, often involving life and death issues. In one particular case, a new mother’s life was put in danger after undergoing a caesarean section at the hospital. Her attending doctors and nurses had to frantically try to source blood and equipment to operate safely. Thankfully, that episode did not end in any tragedies.

The Sydney Morning Herald has reported on complaints that the hospital has been forced to cancel elective surgery perhaps due to lack of staff. The facility suffers from a lack of basic supplies including syringes, intravenous lines, medical swabs, saline bags, needles, wash cloths, rubbing alcohol and maternity pads. It also reported inadequate nursing staff and a large number of locum nurses.

Jomo Kwame Sundaram

The Australian doctors’ union has warned the head of NSW Health that junior medical officers were required to do ‘unsafe work hours’. For instance, one intern was assigned 60 patients while junior medical officers were expected to work up to six hours of overtime daily, usually unpaid. One doctor reported working 110 hours in a week.

Costing taxpayers more
This latest healthcare PPP is also costing taxpayers more than what the government announced before. For example, before the 2015 state election, the former health minister said that the hospital would cost only A$1 billion. However, the true cost to taxpayers was A$2.14 billion.

This is not the only instance of healthcare PPPs going wrong. In the early 1990s, the NSW government opened the privately-operated Port Macquarie Base Hospital. The authorities announced savings by ignoring additional administrative and legal costs; it ended up costing about A$6 million more than a public hospital of an equivalent size. The Auditor-General’s report concluded, “The government is, in effect, paying for the hospital twice and giving it away”.

Yet, the ‘teething problems’ had not gone away 13 years after it was privatised by the Conservative Government. Before its 20-year contract period ended, the Labour Government felt compelled to buy back the hospital for A$80 million.

Similarly, after years of losses, the South Australian government was forced to buy back a privately run hospital opened by Healthscope in 1995 at a cost of A$17.5 million to the taxpayer. The Victorian government bought back Latrobe Regional Hospital, opened in 1998 under a similar agreement, two years later, after suffering A$8.9 million worth of losses. Years later, the Victorian government announced plans to buy back Mildura Base Hospital, the last remaining privately run hospital in the state.

Private operators not more efficient
Despite these spectacular failures, governments do not seem to learn from past mistakes, instead continuing with more PPPs. Therefore, a dogmatic belief that the market will provide healthcare more efficiently must be behind the push for these partnerships.

The Australian Productivity Commission’s 2009 report found that, on average, the efficiency of public and private hospitals is similar nationwide. Public hospitals in NSW and Victoria were more efficient than their private counterparts by more than 3% and 4% respectively despite operating far more in rural areas (generally much more costly), and their high-cost responsibility to provide accident and emergency services.

More recently, the independent McKell Institute reported similar findings, and noted a disconcerting trend of private operators only picking the most profitable services to run, leaving the public sector with the more costly, less profitable and onerous work. This allows private operators to capture more profits while leaving the government, and taxpayers, with more risks and costs.

Health rights undermined
Health is a right, and society (and therefore government) has a responsibility to ensure that everyone has access to health services. But with PPPs, the state becomes health service purchaser, instead of provider. Under PPPs, private operators, previously earning patient fees and health insurance payments, can profitably earn public funds meant to finance patient services.

Profit-seeking is ‘distorting’ patient-health service provider relations. As noted by the New England Journal of Medicine, “Our main objection to investor-owned care is not that it wastes taxpayers’ money, nor even that it causes modest decrements in quality. The most serious problem with such care is that it embodies a new value system that severs the communal roots and Samaritan traditions of hospitals, makes doctors and nurses the instruments of investors, and views patients as commodities.’’

Anis Chowdhury, Adjunct Professor at Western Sydney University & University of New South Wales (Australia), held senior United Nations positions in New York and Bangkok.
Jomo Kwame Sundaram, a former economics professor, was Assistant Director-General for Economic and Social Development, Food and Agriculture Organization, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought in 2007.