Privatization reform in public healthcare system: Competition vs. collaboration

Abstract

Privatization reform is increasingly considered as an efficient mechanism to reduce waiting time in the public healthcare system. This article focuses on two popular privatization reform formats: (i) the competition format, under which the private hospital is allowed to enter the market and compete with the public hospital, and (ii) the collaboration format, under which the public hospital and private hospital collaborate toward a common goal. We investigate the adverse impacts of the two formats on patients and social welfare, which depend on two key factors: (i) the reimbursement rate that determines to what extent the government can provide capital support to the public hospital, and (ii) the privatization level that reflects to what extent the joint public–private hospital provides care for its own profit. When both the reimbursement rate and privatization level are relatively high, the private hospital prefers the collaboration format. We also identify two separate regions wherein the private hospital’s interest can be aligned with patients and social welfare: (i) the competition format arises when the reimbursement rate is high and the privatization level is low, and (ii) the collaboration format arises when the reimbursement rate is moderate and the privatization level is high.

Keywords:

• Healthcare
• privatization reform
• competition
• collaboration

Acknowledgments

We are grateful to the department editor, Mariel Lavieri, an anonymous associate editor, and two anonymous referees for their constructive comments and suggestions that improved the study.

Additional information

Funding

This research is supported in part by the National Natural Science Foundation of China (71922010, 7191101004, 71821001 and 72073083), Shandong University Multidisciplinary Research and Innovation Team of Young Scholars (2020QNQT017). The authors are ranked alphabetically.

Notes on contributors

Xu Guan

Xu Guan is currently a professor in the School of Management at Huazhong University of Science and Technology, Wuhan. His current research interests include the operations-marketing interface, and supply chain management. His work has appeared in several leading journals in the fields of operations management like Production and Operations Management, Information Systems Research and others.

Hao Wu

Hao Wu is a PhD candidate in the School of Management at Huazhong University of Science and Technology, Wuhan. His current research interests include healthcare operation management and supply chain management.

Jin Xu

Jin Xu is an associate professor in the School of Mathematics and a postdoctoral scholar in the School of Management, Shandong University, China. His research interests include game theory, social network, and contest theory.

Jianghua Zhang

Jianghua Zhang is a professor in the School of Management, Shandong University. His research focuses on supply chain management, healthcare operation management, and humanitarian logistics.