The role of private hospitals in South Africa

This paper reviews some aspects of present state policy on private hospitals and sets out broad policy guidelines, as well as specific policy options, for the future role of private hospitals in South Africa. Current state policy is reviewed via an examination of the findings and recommendations of the two major Commissions of Inquiry into the role of private hospitals over the last 2 decades, and comparison of these with the present situation. The analysis confirms that existing state policy on private hospitals is inadequate, and suggests some explanations for this. Policy options analysed include the elimination of the private hospital sector through nationalisation; partial integration of private hospitals into a centrally financed health care systeIll (such as a national health insurance system); and the retention of separate, privately owned hospitals that will remain privately financed and outside the system of national health care provision. These options are explained and their merits and the associated problems debated. While it is recognised that, in the long term, public ownership of hospitals may be an effective way of attaining equity and efficiency in hospital services, the paper argues that elimination of private hospitals is not a realistic policy option for the foreseeable future. In this scenario, partial integration of private hospitals under a centrally financed system is argued to be the most effective way of improving the efficiency of the private hospital sector, and of maximising its contribution to national health care resources.S Afr Med J 1993; 83: 324-32

The impact of the fee-for-service reimbursement system on the utilisation of health services: Part II. Comparison of utilisation patterns in medical aid schemes and a local health maintenance organisation

This study reports the results of a retrospective analysis of the use of a range of inpatient and outpatient services by the members of a health maintenance organisation (HMO), in which most providers are salaried, and by the members of three medical aid schemes in which providers are paid on a fee-far-service basis. The analysis shows significantly higher utilisation of all services by medical aid scheme members than by HMO members. Medical aid scheme patients saw all doctors 33% more often than their HMO counterparts. For general practitioners and specialists specifically, the differences were 36% and 18% respectively. Doctors looking after medical aid scheme beneficiaries ordered 133% more radiological procedures and 14% more pathological investigations than did those caring for HMO beneficiaries. Hospital utilisation was also higher for medical aid patients. While quality of care is difficult to measure, there are no reasons to suspect that significant differences in quality exist between the two systems described here.One factor that may contribute to the higher utilisation rates in the medical aid group is the higher average income of this group. However, these results also demonstrate that providers working in the fee-for-service system are likely to increase the supply of services compared with providers who are salaried. The different methods of reimbursement are compounded by the different practice settings in which these groups of doctors work; the HMO generates an awareness of costs that is absent from the independent practice, 'third-party payment' system of the medical aid schemes.These differences in utilisation represent millions of rand in unnecessary expenditure that results from the current organisation of the private health sector. In view of the current shortage of resources for health care, this is unjustifiable. The fee-for-service system, and other structural aspects of the private health sector, require urgent attention

Managing health care market in developing countries : a case-study of selective contracting for hospital services in South Africa

This thesis examines the prospects for market type reforms within the public health systems of developing countries, through a study of the impact of contracting out of the provision of rural district hospital services in South Africa. The research objectives were to assess the impact of these contracts on hospital and local health system efficiency, to analyse the determinants of efficiency, and to determine the necessary conditions for efficiency gains from contracting out. Three contracted out hospitals, under contract to a single for-profit contractor, were each matched with a public and a private for-profit hospital, and the relative efficiency of these hospitals was assessed using step down unit cost analysis, data envelopment analysis, and a multi-dimensional assessment of quality of care. The structure of the contracts and the contracting process, organisational management structures and systems, and the extent of competition for the contracts, were also evaluated. These analyses demonstrate that the contracted out hospitals are able to produce most outputs of comparable quality at lower cost, primarily due to more efficient utilisation of staff resources, and to superior management structures and systems. However, when the government’s total costs are taken into account, including contract prices and transactions costs, contracted out services appear more costly than those produced in public hospitals, indicating that the contractor is able to capture most of its superior production efficiency in profits, and that these contracts result in some efficiency losses. Poor contract design is also shown to result in some systemic efficiency problems. These results are shown to be attributable to the government’s poor ability to design, negotiate and monitor contracts, as well as to the absence of competition or contestability. These findings suggest that contracting out has the potential to generate significant efficiency gains, but only where certain critical conditions are in place, including government capacity to design, negotiate and monitor contracts, and some level of contestability or competition for the contracts. Where these conditions are absent, contracting out of hospital services is unlikely to generate efficiency gains, and may result in efficiency losses

Delivering at the right price - the costs of primary maternity care at the Diepkloof Community Health Centre, Soweto

This paper reports on a study of the costs of primary maternity care services at the Diepkloof Conmmnity Health Centre (DK) in Soweto. DK, the Soweto connnunity health centre system as a whole and nmnerous other non-hospital settings provide a wide range of Illaternal health services to substantial numbers of women, and relieve hospitals of a major potential clinical burden. However, no research has been done in South Africa on the relative costs of the provision of these services in different settings and by different types of health worker. The cost structure of these services at DK is presented and the costs of antenatal care, deliveries in midwife-run labour wards, postnatal care (at the health centre and at home) and family planning services detailed. Some comparisons are made with existing data for another community health centre and with Baragwanath Hospital. These results are relevant to policy and planning of maternal health services. They are also shown to be of relevance to management and several areas of potential improvement of these services are noted

The impact of the fee-for-service reimbursement system on the utilisation of health services: Part I. A review of the determinants of doctors' practice patterns

The impact of different methods of reimbursement on the practice patterns of doctors has received little attention in the local literature. This series of three papers attempts to address this gap.Here the international evidence on this issue is reviewed. The 'information gap' between doctors and their patients allows doctors to induce demand for their services. This leads to the potential for doctors to increase the supply of services when they stand to gain financially from doing so, as is the case in the fee-for-service system.There is extensive international evidence, at both national and micro levels, of the link between increased utilisation and the fee-for-service payment system. This is in contrast with the pattern noted in the salary system, used in some health maintenance organisations (HMOs) in the USA, or in the capitation system, used in the British National Health Service.The 'practice setting' in which doctors operate also affects patterns of practice. In the local fee-for-service sector, 'third-party payment' means that both doctors and patients have little awareness of the direct costs of services. In other systems, such as HMOs, there is a strong cost consciousness on the part of practitioners. These differences in practice setting account in part for the different patterns of utilisation in these systems.The fee-for-service system, as it is structured in South Africa, thus leads to extreme inefficiency, and the development of alternatives is becoming an urgent necessity. All systems of reimbursement have certain problems, and some combination may be the best solution

The private health sector in South Africa - current trends and future developments

The private health sector is experiencing a crisis of spiralling costs, with average annual cost increases of between 13% and 32% over the decade 1978 - 1988. This trend is partly explained by the high utilisation rates that result from the combination of the 'fee-for-service' system and the 'third-party' payment structure of the sector.Medical schemes have responded by promoting the idea of 'flexible packages', and have won the right to 'risk-rate' prospective members. It is argued that these measures will undermine the principle of equity in health care, and will not solve the problems of the private sector. Instead, a more significant restructuring of the sector is likely to emerge. This may take the form of 'managed care' structures, along the lines of the health maintenance organisation model from the USA.The principles, advantages and problems of 'managed care' structures are described. These are shown to be potentially more rational and efficient than the current structure of the private sector. Although some resistance to 'managed care' structures can be expected, the convergence of interests of large employers and trade unions in containing health care costs suggests that their emergence is a likely development

Comparing public and private hospitals in China: Evidence from Guangdong

<p>Abstract</p> <p>Background</p> <p>The literature comparing private not-for-profit, for-profit, and government providers mostly relies on empirical evidence from high-income and established market economies. Studies from developing and transitional economies remain scarce, especially regarding patient case-mix and quality of care in public and private hospitals, even though countries such as China have expanded a mixed-ownership approach to service delivery. The purpose of this study is to compare the operations and performance of public and private hospitals in Guangdong Province, China, focusing on differences in patient case-mix and quality of care.</p> <p>Methods</p> <p>We analyze survey data collected from 362 government-owned and private hospitals in Guangdong Province in 2005, combining mandatorily reported administrative data with a survey instrument designed for this study. We use univariate and multi-variate regression analyses to compare hospital characteristics and to identify factors associated with simple measures of structural quality and patient outcomes.</p> <p>Results</p> <p>Compared to private hospitals, government hospitals have a higher average value of total assets, more pieces of expensive medical equipment, more employees, and more physicians (controlling for hospital beds, urban location, insurance network, and university affiliation). Government and for-profit private hospitals do not statistically differ in total staffing, although for-profits have proportionally more support staff and fewer medical professionals. Mortality rates for non-government non-profit and for-profit hospitals do not statistically differ from those of government hospitals of similar size, accreditation level, and patient mix.</p> <p>Conclusions</p> <p>In combination with other evidence on health service delivery in China, our results suggest that changes in ownership type alone are unlikely to dramatically improve or harm overall quality. System incentives need to be designed to reward desired hospital performance and protect vulnerable patients, regardless of hospital ownership type.</p

Can working with the private for-profit sector improve utilization of quality health services by the poor? A systematic review of the literature

BACKGROUND: There has been a growing interest in the role of the private for-profit sector in health service provision in low- and middle-income countries. The private sector represents an important source of care for all socioeconomic groups, including the poorest and substantial concerns have been raised about the quality of care it provides. Interventions have been developed to address these technical failures and simultaneously take advantage of the potential for involving private providers to achieve public health goals. Limited information is available on the extent to which these interventions have successfully expanded access to quality health services for poor and disadvantaged populations. This paper addresses this knowledge gap by presenting the results of a systematic literature review on the effectiveness of working with private for-profit providers to reach the poor. METHODS: The search topic of the systematic literature review was the effectiveness of interventions working with the private for-profit sector to improve utilization of quality health services by the poor. Interventions included social marketing, use of vouchers, pre-packaging of drugs, franchising, training, regulation, accreditation and contracting-out. The search for published literature used a series of electronic databases including PubMed, Popline, HMIC and CabHealth Global Health. The search for grey and unpublished literature used documents available on the World Wide Web. We focused on studies which evaluated the impact of interventions on utilization and/or quality of services and which provided information on the socioeconomic status of the beneficiary populations. RESULTS: A total of 2483 references were retrieved, of which 52 qualified as impact evaluations. Data were available on the average socioeconomic status of recipient communities for 5 interventions, and on the distribution of benefits across socioeconomic groups for 5 interventions. CONCLUSION: Few studies provided evidence on the impact of private sector interventions on quality and/or utilization of care by the poor. It was, however, evident that many interventions have worked successfully in poor communities and positive equity impacts can be inferred from interventions that work with types of providers predominantly used by poor people. Better evidence of the equity impact of interventions working with the private sector is needed for more robust conclusions to be drawn

Comparative Performance of Private and Public Healthcare Systems in Low- and Middle-Income Countries: A Systematic Review

A systematic review conducted by Sanjay Basu and colleagues reevaluates the evidence relating to comparative performance of public versus private sector healthcare delivery in low- and middle-income countries