Hospitals are one area where private participation at a number of levels can be achieved and where PPPs involving the construction and management of public hospitals can introduce innovative ways to control costs and improve services within existing health systems. Table 5.1 lists the options for private sector involvement from outsourcing arrangements at one end, to privatization by sale at the other end, with a variety of PPP approaches in between. The various
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Option Private sector responsibility Pubic sector responsibility
Outsourcing nonclinical Provides nonclinical services (cleaning, catering, Provides all clinical services (and staff) support services laundry, security, building maintenance) and and hospital management.
employs staff for these services.
Outsourcing clinical Provides clinical support services such as radiology Manages hospital and provides clinical
support services and laboratory services. services.
Outsourcing specialized Provides specialized clinical services (such as Manages hospital and provides most clinical services lithotripsy) or routine procedures (cataract removal). clinical services.
Co-location of private Operates private wing (for private patients). May Manages public hospital for public patients wing within or beside provide only accommodation services or clinical and contracts with private wing for sharing
public hospital services as well. joint costs, staff and equipment.
Private lease and manage- Manages public hospital under contract with Contracts with private firm for provision ment of a public hospital government or public insurance fund and provides of public hospital services, pays private
clinical and nonclinical services. May employ all operator for services provided, and staff. May also be responsible for new capital monitors and regulates services and investment, depending on terms of contract. contract compliance.
Private construction, Constructs, finances and owns a new public Manages hospital and makes phased lease financing and leaseback of hospital and leases it back to government. payments to private developer.
a new public hospital
Private construction, Constructs, finances and operates a new public Reimburses operator annually for capital financing and operation of hospital and provides nonclinical or clinical costs and recurrent costs for services
a new public hospital services, or both. provided.
Sale of public hospital as Purchases facility and continues to operate it as Pays operator for clinical services and
a going concern public hospital under contract. monitors and regulates services and
contract compliance.
Source: Adapted from Taylor and Blair (2002).
possibilities differ according to whether the private firm manages medical services, owns or leases the facility, employs the staff, and finances and manages capital investments. A government’s decision on the most appropri- ate arrangement will depend on hospital service needs and circumstances, the government’s ability to regulate and effectively control the quality of care, and the public’s view on the need for reform and the role of government in health care; that is, what is a ‘core’ government service? An extra dimension is provided by the involvement of mainly religious-based, not-for-profit organi- zations, and governments have long been willing to entrust core health care services to such bodies.
Australia is one market where almost all of these models exist. Health care is provided by individual states and territories, along with the federal govern- ment, and there is now private sector involvement in over 50 public hospitals across the country, including BOO arrangements (in which a private firm builds, owns, and operates a public hospital), conversions (in which a hospital is sold to a private operator as a going concern), concessions (private manage- ment of public hospitals that the government continues to own), build-own- leasebacks (in which a private firm constructs a new public hospital, then leases it back to the government), and co-locations (in which a private wing is located within or beside a public hospital). These initiatives were stimulated by a need for new capital, a desire to transfer operational risk, and by the search for increased efficiency (Taylor and Blair, 2002). A case study is provided later in this chapter of the design, construction, finance and facilities management of a new public hospital in Victoria.
In the UK, the National Health Service is another example of different views about the ‘core’ versus ‘ancillary’ issue in the case of health care. The model that was originally developed under the Private Finance Initiative (PFI) was one in which the NHS Trusts continued to be the employer of clin- ical staff, with the private sector responsible for design, build, ownership, maintenance and delivery of ancillary services. A Trust would tender for a private firm to finance and construct a new hospital, maintain the facility, and provide non-clinical services such as laundry, security, parking and catering. The operator receives annual payments for 15–35 years as reim- bursement for its capital costs and its recurrent costs for maintenance and services. In this way, the private parties ensure that the facilities for clinical staff are as modern, efficient and cost effective as is possible to obtain. This allows the NHS to then concentrate on the provision of health care, its primary function. However, there is still the question of who should actually deliver primary health care, and recent experiments have challenged the traditional allocation of activities within the NHS with the development of PFI ‘diagnostic centres’, which are full service delivery models for elective surgery.