Research just published in Public Administration Review, co-authored by OHE’s Professor Graham Cookson, demonstrates that contracting out auxiliary public services may lower the quality of the core service as well as the auxiliary service. Studying NHS cleaning services, the research shows that contracted out cleaning is cheaper but lower quality, and leads to worse health outcomes including higher rates of hospital-acquired infections.
Contracting out of public services, especially auxiliary services, is a key component of New Public Management because of the belief that it will lower costs and possibly increase quality. As a result, by 2014 over £100 billion a year of UK public services were contracted out. Yet contracting out has received much criticism in recent years.
Several recent high‐profile contract failures – including G4S's poor performance in supplying security guards for the London 2020 Olympics, Serco's misreporting of GP out‐of‐hours services, and the overcharging for electronic offender tags by Serco and G4S – have raised questions about the principle of contracting out public services both in terms of value for money and quality of provision.
To date, most of the public and political criticism of contracting out has focused on lower quality when core public services are contracted out to the private sector — so‐called quality shading. In contrast, we present and test a new hypothesis that contracting out of ancillary services may also lower the quality of patients’ health outcomes even when the core service remains under public provision.
Cleaning was one of the first services to be contracted out in the National Health Service (NHS) in the 1980s. Cleaning is manual and low‐skilled work that is not considered a core part of health care provision. However, during the 1990s, there was an increased incidence of hospital‐acquired infections, such as methicillin‐resistant Staphylococcus aureus (MRSA). This had an impact on the quality of patient care and the costs of treatment in the acute sector, with an estimated 300,000 cases in the NHS each year costing over £1 billion. An international study has since established links between cleaning quality and hospital‐acquired infections. The contracting out of cleaning services in the NHS therefore provides an interesting context in which to test the theory of quality shading.
Contracting out has been particularly popular for ancillary or noncore public services, such as cleaning. Core services are the primary activities that the service provider specializes in and is able to allocate resources to in order to generate value, while auxiliary services complement the primary services but do not depend on the core services. Examples of core services include health care and education, while their accompanying auxiliary services are, respectively, hospital cleaning and school meals. Atkinson (1984) argues that cleaning in health care is an auxiliary service and not necessarily connected to the core function of the health care unit. Accordingly, it can be safely outsourced. However, this may not be the case if the quality of a secondary service affects the quality outcome of the main activity; this is known as coupling. Katzan (2008) argues that coupling is low in the case of auxiliary services. However, there is no empirical evidence to support this claim, and we test it in our new paper.
The article studies the effectiveness (quality) and cost savings of the contracting out of health care cleaning services across 130 English NHS acute trusts from (fiscal year) 2010–11 to 2013–14. First, the effectiveness of contracting out of health care cleaning is examined using two patient‐reported indicators for the (nonmicrobiological) perceived cleanliness of wards and bathrooms (quality shading hypothesis). Second, we empirically evaluate the cost savings of contracted‐out cleaning services compared with in‐house cleaners (contestability hypothesis). Third, we study the effect of contracted‐out cleaning (an auxiliary service) on one aspect of patient health outcomes by using the MRSA rate, one of the most widely spread hospital‐associated infections that is affected by the level of cleanliness.
While this article adds to the empirical literature on the effectiveness and cost‐saving of contracting out, it is the first study to test the impact of contracting out of auxiliary services on one aspect of the quality of patient outcomes—what we term the coupling hypothesis. Health and social care commissioners placed hospital‐acquired infection control at the top of the NHS agenda to reinforce safe clinical practices and ensure better patient outcomes. We focus on hospital‐associated infections (MRSA rate) as an objective measurement of patient health outcomes that are closely related to cleaning.
Using panel analysis techniques that control for hospital trust and time‐specific effects, we find that contracted‐out cleaning services are, all else being equal, cheaper than in‐house cleaning. However, we also find that hospitals that have contracted‐out cleaning also have lower cleaning quality, which confirms the quality shading hypothesis. We go beyond the quality shading theory and demonstrate that contracting out of an auxiliary service also lowers the quality of patient health outcomes (higher hospital‐acquired infection rates). In summary, contracted‐out cleaning is “cheaper but dirtier.”
Elkomy, S., Cookson, G. and Jones, S., 2019. Cheap and Dirty: The Effect of Contracting Out Cleaning on Efficiency and Effectiveness. Public Admin Rev, 79: 193-202. DOI.
Posted in Health Care Systems, Other Public Policy, Research | Tagged External publications