Private Provision of Publicly Funded Health Care: The Economics of Ownership

A new OHE Briefing by Martin Chalkley (University of York) and Jon Sussex (RAND Europe) provides a view of the NHS ownership debate through the lens of economics.

Googling “private ownership in the NHS” provides a host of links that reveal antipathy in the UK towards privately owned health care providers. The increase in non-NHS bodies providing health care is described in terms such as “creeping privatisation” or a “sell-off”.

There are strongly stated concerns regarding the increasing use of non-publicly owned, especially for-profit, firms to provide services: concerns that the NHS is being undermined, that future services will be at risk, or even that health care that is free at the point of delivery – a key tenet of the NHS – is about to be abandoned.

There are, however, also staunch defenders of the role of the private sector in health care who argue that private providers increase patient choice, reduce waiting times and drive innovation and efficiency improvements. Depending on the viewpoint, private ownership is either a disaster or a salvation for the NHS.

A new OHE Briefing, by authors Professor Martin Chalkley and Jon Sussex, outlines the NHS ownership debate through the lens of economics. The aim of the Briefing is to improve understanding of how economics can or cannot help to resolve the question of whether the private ownership of health care provision is good or bad. The economics literature that informs this overview includes the theory of the organisation of production; theories of behaviour and motivation and the role of incentives and payments in influencing decisions.

The authors conclude overall that when considering the ownership of health care providers in a publicly funded health care system, statements such as “public good, private bad”, or the other way about, are misplaced. All health care providers, both public and private, require regulation. The collective nature of health care purchasing provides the means for achieving this. All health care providers require carefully thought out contractual arrangements that recognise the incentives and constraints they operate with – and these do differ between ownership types.

Citation

Chalkley, M. and Sussex, J. (2018). Private Provision of Publicly Funded Health Care: The Economics of Ownership. OHE Briefing, London: Office of Health Economics. RePEc

Related research

Office of Health Economics Commission on Competition in the NHS. (2012). Report of the Office of Health Economics Commission on Competition in the NHS. OHE Commission, London: Office of Health Economics. RePEc

Sussex, J. (2001). The Economics of the Private Finance Initiative in the NHS. OHE Monograph, London: Office of Health Economics. RePEc

Sussex, J. (2009). How Fair? Competition between Independent and NHS Providers to Supply Non-Emergency Hospital Care to the NHS Patients in England. OHE Briefing, London: Office of Health Economics. RePEc

Posted in Competition, Health Care Systems, Other Public Policy | Tagged Briefing