Government hospitals: Overpaid ?

Public hospitals “charge” tax payers as much as top private hospitals. Due to lack of competition, they are far less accountable.  ...

Public hospitals “charge” tax payers as much as top private hospitals. Due to lack of competition, they are far less accountable.

I am an eye witness to this real story. A terminally ill cancer patient was admitted to a top rated private hospital in Amman. The room was sparkling clean, the furniture top notch and the nursing staff fully attentive, with round the clock attendance to the patient. The panel of specialist doctors decided that the patient cannot be treated and was in her final days, so they advised that she better be transferred to the top rated government hospital in Amman –where she was insured. 

At the government hospital, the family faced the massive contrast in nursing care between the private and government hospitals. Nurses at the government hospital never visited the room for regular checks, they came only when urged to come. They never administered the medicine: They insisted that each patient’s family companion should administer the medicine to their patient by themselves! Same applied to nasal feeding, and helping in personal hygiene of the patient. The family eventually had to hire a professional nurse, at their own expense, to help them since the nursing staff at the government hospital were quite useless.

Yet government hospitals are indeed very well funded. The Ministry of Health public hospitals across Jordan had 4468 beds in 2013. Their operational budget amounted to 283 million JDs and the budget for capital expenditure totaled 111 million JDs in 2013 resulting in the total budget for government hospitals reaching 394 million JDs.

In 2013, government hospitals admitted 347,929 patients who spent 1.1 million nights at the hospitals. The average stay per patient was 3.2 days and the utilization rate of hospital beds was 68%. The average operational cost of treating each patient at a government hospital thus amounted to 256 JDs per day (356 JDs per day when CAPEX budget is taken into account).

How does this compare to private hospital costs? Two private hospitals – publicly traded at the ASE – offer insights. One has 200 beds and the second has 220 beds. Both generated combined revenues of 32.2 million JDs in 2013, of which around 5 million JDs was operational profit. Conservatively, assuming a bed utilization rate 10% lower than average government hospitals (i.e. 61%), the two private hospitals charged 336 JDs per patient per night. Their costs stood at 284 JDs per patient per night. If we assume a similar bed utilization rate as that in Government hospitals, the revenues per patient per night drop to 303 JDs. And costs drop to 255 JDs per patient per night.

In summary, government hospitals across Jordan collected 356 JDs per patient per day in 2013. In the same year, profit seeking private hospitals in Amman charged 303 JDs per patient per night, 15% lower than government hospitals. Granted, specialist doctors in the private sector bill separately so the total in private hospitals would be the same or a bit higher than government hospitals.
The conclusions readily lend themselves:

-      Government health care is far from “free”. It is as expensive as care in state-of-the-art private hospitals in Amman.

-      If a private hospital’s nursing staff acted like the nursing staff in a government hospital, and had the same hygiene standards, a private hospital will go out of business. Because choice and competition exist for consumers of private health care services.

-      The main difference is not public sector management vs. private sector management. Rather the difference is lack of competition for government hospitals which makes them far less accountable than private ones. Patients in government hospitals do not have a choice, and the government hospital is guaranteed its operating budget every year regardless of its level of service. There is no risk of losing paying customers or going out of business. If private sector hospitals were monopolies, one can expect the same dismal result.

-      So long as the care providers think they are offering a free service to the patients, and so long as patients in government hospitals believe they are getting free health care, government hospitals will remain unaccountable and will not offer cost effective nor excellent care.

Health Policies in Jordan should change. They should aim at maintaining free health coverage to large swathes of the population, while holding the care providers accountable through some level of competition that makes their funding contingent on the level of service provided. Offering patients covered by public health coverage much needed choice – by offering them the option of choosing the hospital with a cap on expenses- would help massively as well.  

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