PRIVATIZATION OF PUBLIC HOSPITALS IN THE U. S.

Abstract

The article analyses the issues involved in the privatization of public hospitals in
the U. S. Faced with increasing costs, many public hospitals are bleeding red ink and
thus encounter difficulties when making investments necessary to cut costs and increase
performance. Hospital expenditures accounted for almost a third of the $1.6
trillion the United States spent on health care in 2000. According to the U.S. Department
of Health and Human Services, over the ten-year period from 1990 to 2000
the average cost of an inpatient stay at a public hospital increased by nearly 50 percent,
compared to only 20 per cent at private for-profit hospitals. By 2001 the $7,400
cost of a stay at a public hospital was 24 per cent greater than at a private for-profit
($5,972). In the case of public hospitals, a conflicting mix of social, political, and
business objectives results in weak incentives to control costs. Cost burdens come
from inefficient accounting, restrictive government personnel and procurement regulations,
a tangled web of bureaucracy, and a general lack of accountability. Most
public hospitals lack the strategic advantages enjoyed by private hospitals including:
a marketing orientation, volume purchasing systems, state-of-the-art information systems,
standardization of supplies, outcome management systems, computerized case
management systems with cost-per-procedure variables among physicians performing
the same procedures, physician practice management, and technologically advanced
patient care.