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Posts Tagged ‘information failure’

A private healthcare system?

In the UK, we have a dominant public healthcare sector and a small private sector. In the blog Is an education monopoly efficient? we looked at the idea of an education monopoly and why that may create inefficiencies in the system in comparison with competitive private markets. Does the same argument hold for the market for healthcare? The NHS is largely a state monopoly, although market forces are used in certain areas, which does bring some benefits of competition. However, was the NHS to be privatized, would we see further efficiency gains? As we stated in the previously mentioned blog: ‘the more competition there is, the more of an incentive firms have to provide consumers with the best deal, in terms of quality, efficiency and hence price.’

Privatisation of the NHS has always been regarded with skepticism – of all the British welfare state institutions, the NHS is the most symbolic. However, we have recently seen a takeover of a NHS hospital by a private firm. It’s not privatisation, but it is a step towards a more privately run healthcare system.

Hinchingbrooke hospital in Cambridge is only small, but has a history of large debts – £40m and yet only a turnover of about £105m. This new strategy will still see the NHS owning the hospitals, but the private firm becoming liable for the hospital’s debts and essentially taking over the running of it. However, Circle aims to repay all the debts within 10 years and make a profit. There are many skeptics of this bold new approach, suggesting that Circle’s numbers don’t add up, especially with the flat NHS spending we’re going to see. However, the firm does have a positive track record in terms of making efficiency savings and whilst success will undoubtedly be a good thing – it may bring up some pertinent questions for the way in which the NHS is and should be run.

Hinchingbrooke hospital deal shakes up NHS Financial Times, Nicholas Timmins (10/11/11)
Failing NHS hospital is taken over by private firm for the first time in history Mail Online, Jenny Hope (11/11/11)
Andrew Lansley’s NHS is all about private sector hype Guardian, John Lister (11/11/11)
Circle clinches hospital management deal Reuters, Tim Castle (11/11/11)
Will profits come before patients in a hospital run by a private company? Independent, Oliver Wright (11/11/11)
Hospital group’s liabilities capped at £7m Financial Times, Sarah Neville and Gill Plimmer (10/11/11)
First privately run NHS hospital ‘is accident waiting to happen’ Guardian, Randeep Ramesh (10/11/11)
Government rejects hospital privatisation claims BBC News, Democracy Live (10/11/11)

Questions

  1. What are the benefits of competition?
  2. What are the market failures within the healthcare market? To what extent do you think that public sector provision (in the form of the NHS) is the most effective type of intervention?
  3. Is this just the first step towards privatisation of healthcare?
  4. Do you think private ownership of hospitals with significant debts is a good strategy?
  5. Why do you think Unison have argued that Circle’s takeover is ‘an accident waiting to happen’?
  6. Does privatisation mean that profits will be more important than patient care?
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