Outsourcing day surgery to private for-profit hospitals: the price effects of competitive tendering

Abstract

Abstract:Setting prices for elective patient treatments in private for-profit (PFP) hospitals in traditional tax-funded health systems is challenging since both the organisation of these hospitals and the tasks they perform differ considerably from what we find in public hospitals. From the year 2000, Norway became one of a few countries to gradually implement a procurement system based on competitive tendering when outsourcing elective surgery. In this study we analyse the effect of introducing competitive tendering on the prices paid to PFP hospitals. Pricing data were collected from the formal contracts awarded to PFP hospitals and defined in terms of both absolute and relative prices. We found that PFP hospitals performed day surgeries at markedly lower prices than public hospitals and that competitive tendering triggered the price reduction. We speculate that the PFP hospitals' lack of acute services, less severe patient population, reduced teaching responsibilities and ability to streamline production, as well as other factors, explain the lower prices at PFP hospitals. Cambridge University Press AbstractSetting prices for elective patient treatments in private for-profit (PFP) hospitals in traditional tax-funded health systems is challenging since both the organisation of these hospitals and the tasks they perform differ considerably from what we find in public hospitals. From the year 2000, Norway became one of a few countries to gradually implement a procurement system based on competitive tendering when outsourcing elective surgery. In this study we analyse the effect of introducing competitive tendering on the prices paid to PFP hospitals. Pricing data were collected from the formal contracts awarded to PFP hospitals and defined in terms of both absolute and relative prices. We found that PFP hospitals performed day surgeries at markedly lower prices than public hospitals and that competitive tendering triggered the price reduction. We speculate that the PFP hospitals' lack of acute services, less severe patient population, reduced teaching responsibilities and ability to streamline production, as well as other factors, explain the lower prices at PFP hospitals.

Quality differences between private for-profit, private non-profit and public hospitals in Norway: a retrospective national register-based study of acute readmission rates following total hip and knee arthroplasties

“…In recent decades, countries with tax-based universal healthcare systems have experienced increasing attention from private healthcare providers. 1 This trend is a result of growing policy challenges centred around containing healthcare costs while retaining universal access to health services and further improving quality of care. 2 However, knowledge about the effects of the expansion of private hospitals in universal health systems is limited.…”

“…In contrast, the first Norwegian PFP was established in 1985, and PFPs had only modest activity until early 2000. Three major changes in Norwegian secondary care services led to an expansion in the number of PFPs and PFP activity 1 : the introduction of ABF in 1997, the Hospital Reform of 2002 and the Patients’ Rights Act (implemented in 2001 and expanded in 2004). In this new system, a patient with a referral for secondary care services from a general practitioner had a right to choose any hospital owned by, or under contract with, the RHAs for the same copay.…”

Factors Affecting Decision-Making in Outsourcing Health Services Using a Structural Equation Modeling Approach

“…Outsourcing of government hospitals began with noncore sectors and support services, but clinical services such as outpatient surgeries, labs, and imaging are now included in this area. [7] The researches show that half of the outsourcing contracts fail due to failure of performance of pre-assignment analysis and not being able to reach the pre-set goals. [7,8] For instance, in a study that was done by Jamal Bata in US.…”

“…[7] The researches show that half of the outsourcing contracts fail due to failure of performance of pre-assignment analysis and not being able to reach the pre-set goals. [7,8] For instance, in a study that was done by Jamal Bata in US. Public hospitals, he determined some consequences such as conflicts between stakeholders and beneficiaries, increased coordination costs, poor monitoring, and control and outsourcing of core competencies of hospitals as the negative outcomes of some changes.…”

“…[12] The organization's decision to outsource certain sectors and perform some activities by itself is the perfect way to get out of the challenges of outsourcing and to succeed in its strategy. [7,9,13] The issue that senior executives are faced with is not the use of outsourcing, but a service that needs to be outsourced, and this requires that outsourcing strategies be clearly identified. Therefore, decisions for outsourcing are issues that are affected by various and contradictory factors.…”