ProfitMore4

Private, For-profit Alternatives

Although it may be counter intuitive, private, for profit alternatives don’t seem to work very well in health care.

Privatizing finance tends to increase overhead costs. Each health insurance company needs actuaries, managers, clerks, computer systems and lots of marketing and sales people. That’s one of the main reasons why public insurance costs so much less to administer than a system of private insurance. There’s less overhead. In fact, that’s one of the main reasons Supreme Court Justice Emmett Hall recommended public medical insurance in his 1964 Royal Commission.†

And, a single purchaser can negotiate lower prices with suppliers than many small purchasers. That’s one of the main reasons why Canadian health care costs are lower than US costs (Anderson et al., 2003).

Some claim that as long as the public pays, it doesn’t matter who delivers a medical service. Why shouldn’t governments put the delivery of health care (cataract surgery, MRI clinics etc) up for bidding? This option sounds intuitively appealing because competitive delivery does lead to efficiencies in some other sectors. However, the evidence is clear that this policy doesn’t work in health care.

In the US, kidney dialysis has been run for many years using a competitive model. The US Medicare program, which provides coverage for people over 65, also covers all Americans with kidney failure regardless of their age. The Medicare program decides which dialysis centres to fund by using a competitive bidding process. Roughly three-quarters of dialysis is conducted in for-profit facilities and one-quarter in non-profits.

In 2002, a large Canadian group collated the evidence on the quality of dialysis care in the United States (Devereaux PJ, Schunemann HJ, Ravindran N, et al., 2002). They found that patients attending for-profit dialysis clinics had 8 per cent higher death rates than those who got their care at non-profits. For-profit clinics had fewer staff and less well trained staff. They also dialyzed patients for less time and used lower doses of key medications. These results suggest that in the US there are 2,000 premature deaths every year among people on dialysis because their care is being provided by for-profit clinics.

In another study, Dr. P.J. Devereaux’s group found that adults have 2 per cent higher death rates in for-profit hospitals, while the newborn mortality rate was 10 per cent higher (Devereaux PJ, Choi PTL, Lacchetti C, et al., 2002). The investigators found that for-profit hospitals tended to have fewer staff and less well trained staff. These factors have been found to be associated with higher death rates in other studies of quality care in hospitals. Dr. Devereaux’s group also found that American for-profit hospitals are 20 per cent more expensive than non-profit facilities on a case-adjusted basis (Devereaux et al, 2004).

Finally, studies from both BC and Manitoba have found better patient outcomes in not for profit long term care facilities than in for profit homes (McGrail et al., 2007). For profit facilities in BC and Ontario have lower levels of staffing despite the same funding. Because of the tremendous needs for physical assistance for residents, staffing levels have been found to be strongly related to care outcomes (McGregor et al., 2005).

† “Hence, the decision which Canadians have to make…is whether they wish to pay $1.020 million…in 1971 for a programme administered by the insurance industry, or $837 million for a programme administered by government agencies” “In our opinion it would be…uneconomic…to spend an extra $193 million. We must choose the most frugal method.”Royal Commission on Health Services. 1964.

References

Anderson GF, Reinhardt UE, Hussey PS, Petrosyan V. It’s the prices, stupid: Why the United States is so different from other countries. Health Affairs 2003;22(3):89-105.

Devereaux PJ, Schunemann HJ, Ravindran N, et al. Comparison of mortality between private for-profit and private not-for-profit hemodialysis centers: A systematic review and meta-analysis. JAMA 2002;288(19):2449–57.

Devereaux PJ, Choi PTL, Lacchetti C, et al. A systematic review and meta-analysis of studies comparing mortality rates of private for-profit and private not-for-profit hospitals. CMAJ 2002;166(11):1399–1406.

Devereaux PJ, Ansdell-Heels D, Lacchetti C, et al. Payments for care at private for-profit and private not-for-profit hospitals: A systematic review and meta-analysis. CMAJ 2004;170(12):1817–24.

McGrail KM, McGregor MJ, Cohen M, et al. For-profit versus not-for-profit delivery of long-term care. CMAJ 2007;176(1):57-8.

McGregor MJ, Cohen M, McGrail K, et al. Staffing levels in not-for-profit and for-profit long-term care facilities: Does type of ownership matter? CMAJ 2005;172(5):645-9.

« Back to ‘Private, For-profit Solutions to Funding and Delivery’ Topic