Is Private Production of Hospital Services Cheaper than Public Production? A Meta-Regression of Public Versus Private Costs and Efficiency for Hospitals

ABSTRACT:

The question of whether private organizations can outperform public ones in public service delivery has been a major topic of interest over the last few decades. However, the empirical evidence does not systematically support the hypothesis of lower costs and higher efficiency when private organizations deliver public services. To better understand the cost and efficiency differences between public and private organizations, we have conducted a meta-regression analysis of econometric studies relating to hospital ownership and performance. We have analyzed 61 estimates extracted from health studies, using public versus private hospital costs and efficiency as an independent variable. Our analysis shows a genuine true effect in favor of public sector hospitals. Although we found evidence that the public sector may provide public health services more cheaply than the private sector, the latter achieves better productive efficiency. We discuss how this divergence in results is affected by factors such as country, year, the use of panel data in a study, the extent to which performance is measured by examining financial costs, and the inclusion of not-for-profit hospitals.

Notes

1 Other authors have identified five main approaches to the public/private distinction: generic, economic core, political core, normative, and dimensional (see Pesch 2008 for a full description).

Additional information

Funding

This research has enjoyed financial support from the Spanish Ministry of Economy and Competitiveness (ECO2016-76866-R and CSO2016-80823-P) and the Government of Catalonia (2017 SGR644 and 2017-SGR-1556).

Notes on contributors

GermÀ Bel

Germà Bel ([email protected]) is Professor of Economics and Public Policy at Universitat de Barcelona, and director of the UB Observatory of Analysis and Evaluation of Public Policies (OAP_UB). In addition, he is Honorary Senior Researcher Associate at University College London. His main research interests are public sector reform, local government, privatization and cooperation, infrastructure and transportation.

Marc Esteve

Marc Esteve ([email protected]) is an Associate Professor in International Public Management in the School of Public Policy at University College London, and a Visiting Professor at ESADE Business School. His primary research interests focus on understanding how individual characteristics influence decision making, specifically in collaborations. He has published widely in journals such as Journal of Public Administration Research and Theory, Public Administration Review, International Public Management Journal, and Public Administration.