The profits in the new private hospital sector would derive from taxpayers and those citizens who pay very high health insurance, writes Dr Fergus O'Ferrall
The announcement by the Tánaiste and Minister for Health last month of plans to have new "for profit" private hospitals built on the campuses of public hospitals signals a fundamental change in our health services.
This change is not in the interest of patients or taxpayers.
The Government no doubt believes that what Irish healthcare needs is an injection of private capital plus market-style competition to generate additional capacity more cost effectively, to create patient choice, to ensure cost efficiencies and competition within acute hospitals. The difficulty with this belief is that neither the evidence from other health systems nor rational policy-making supports it.
The plan makes neither health policy sense nor economic sense.
The purpose of the initiative by the Tánaiste is to free up to 1,000 public beds by moving 1,000 of the 2,500 "private" beds in our public hospital system into new "for profit" hospitals over the next five years. As it was established over four years ago that we need 3,000 more acute hospital beds, there has been a public welcome for this apparent promise of additional capacity.
There is, however, a fundamental difference between simply building 1,000 new public beds and the plan announced. Perhaps the difference can best be understood by inviting each citizen to ask themselves two fundamental questions:
When you become sick do you want a private investor to make a profit from your treatment for which you will pay the full economic cost?
Or when you become sick do you want your healthcare provider to treat you at whatever cost necessary, and that society as a whole shares the cost of the burden of illness of all patients?
The United States believes in answering yes to the first question. It is the prime example of a society where private "for profit" healthcare predominates: the famous "Boston model". The US spends $5,535 per person a year compared to Ireland's €1,950 per person a year. The US spends 15.3 per cent of its GDP on healthcare while Ireland spends 7.3 per cent of its GDP, well below the OECD average of 8.6 per cent of GDP. Almost 50 per cent of world healthcare expenditure occurs in the US.
In spite of this enormous expenditure on private "for profit" healthcare, US citizens do not get value for money, nor do millions get access to care when they need it. Nearly 45 million Americans are not insured. Many face personal disaster because of illness. When the US health system is benchmarked for health status and health outcomes against 21 other OECD countries it comes out in 22nd place! It is vital in light of the Tánaiste's plan for Irish citizens to ask whether they want more costly and less efficient healthcare on the Boston model.
The private beds in the new "for profit" private hospitals will be quite different from a private bed in the current public hospital system. There are two main differences: cost to patients and quality of care.
A private bed in the current public hospital system is charged at about 60 per cent of the real cost of care. Estimates are that a further 40 per cent would be required to pay the full economic cost of their treatment. Private insured patients who occupy them have, of course, paid like all citizens for their free public hospital care through a health levy and general taxation. The Tánaiste's plan assumes that private patients in both public and private hospitals should pay the economic cost of their healthcare. This will drive their insurance premiums sharply upwards.
Those occupying private beds in the new "for profit" private hospitals, despite the policy to introduce consultant-provided, team-based working arrangements, will not have the same quality of care because they will not have the comprehensive care teams and services available to those in private beds in our public hospital systems. The proposed plan makes it clear that the staff of the private hospital would be employed privately and funded from the private business. The result will be that public patients will get poorer care because the consultants will not be around as much as they are when public and private beds are in the same hospital, and private patients will get poorer care because there will be minimal staffing levels of non-consultant doctors in the private hospital.
What private, "for profit" hospitals do is to treat, as much as possible, the easy routine cases - the straightforward surgical procedures keeping staff costs to a minimum and profits to a maximum. Indeed it is a stated policy assumption in the Tánaiste's plan that public hospitals will provide services to private and public patients in "high-complexity cases". The priority in respect of acute hospital provision ought to be to provide a single standard of care for all patients - the best possible - with uniform ward rounds with all medical staff involved, whether patients are in public or private beds, with a single set of diagnostic facilities.
The profits in the private hospital system are derived from the taxpayer and from citizens who pay very high health insurance. Following changes made in the 2002 and 2003 Finance Acts investors can write off the entire cost of the construction or refurbishment of private hospitals over a seven-year period against their tax bills using accelerated capital allowances.
The profitable operation of "for profit" hospitals depends not only on this very generous tax relief but also on massive indirect public subsidisation involving reliance on the public hospital system in respect of privileged location on the campus of a public hospital, drawing upon consultant and other healthcare professional staff expensively trained, recruited and paid by the public system and availing of a range of expensive diagnostic and other services from the public hospital system.
In addition, private, "for profit" hospitals will depend upon public funding through the National Treatment Purchase Fund (NTPF), which will need to make favourable contracts for the supply of patients at prices which secure the "profitable" provision of their services. The NTPF patients will be those who cannot secure access to a public hospital system kept short of beds.
It appears attractive to regard patients as "customers" who can "shop around" for their preferred healthcare treatment. The problem is that patients do not have the same control as customers usually have in a real market. Generally patients cannot "shop around".
The Government's public capital programme would need to invest €500 million in a phased capital expenditure to provide 1,000 more beds for our public patients. The challenge is to bring Ireland to the OECD average of acute-care hospital beds: the OECD average is four beds per 1,000 population whereas we have three per 1,000 population.
The predominance of the not-for-profit governance model of acute hospitals in European countries is based on the commitment to patient care rather than profit as the supreme value in running hospitals.
There are four key advantages of the Government doing this:
(1) It will be cheaper for the taxpayer. The UK experience of the private sector engaged in building hospitals provides evidence that they are costing more than if the Government had borrowed the capital itself. Privately financed hospitals give the appearance of offering something that is more cost effective by deferring and concealing the ultimate costs of the schemes. This confuses apparent immediate savings on the current public capital account with "public value" in respect of the cost-benefit of the health outcomes achieved for citizens by a proper public investment programme.
(2) It will allow the State to plan the hospital system in the country more effectively without waiting for the development of various proposals from private investors.
(3) It will lead to better care for all patients. The provision of a single, high-quality standard of care provided by the same healthcare teams for all patients, whether in public or private beds, is far more easily achieved and more cost effective within one hospital.
(4) It avoids cementing in the rigid two-tier hospital system through public and private "for profit" hospitals and would make ending our current inequitable system more achievable.
In public capital terms, €500 million is not of such size that the Government is compelled to rely on private capital investment. After all, our roads and transport investment programmes are multiples of that sum: does anyone suggest that the healthcare of our people is of lesser importance?
Dr Fergus O'Ferrall is director of the Adelaide Hospital Society, which recently published a major policy paper entitled Just Caring: Equity and Access in Healthcare, A Prescription for Change, available from the society or on www.adelaide.ie