Let’s invest in private hospitals as they are more efficient compared to other hospitals, right?

My co-authors and I recently published a paper in which assess whether the efficiency of a hospital is affected by its type of ownership. Interestingly, in parallel unrelated efforts, the US think tank Centre for Global Development is also currently publishing a series of papers and blogs that seek to re-examine the role of hospitals in emerging markets. They have also convened a study group to advise on a direction for change and to conceptualize a Collaborative for Hospital Performance in Emerging Economies.

In our paper, using Ghana as a case study, we measured and analysed the technical efficiency of district hospitals in that country. According to a World Bank working paper, the distribution of hospital ownership types in Ghana, just like Kenya, is close to the African regional average. In the first stage of our study, we used data envelopment analysis (DEA) to estimate the technical efficiency of 128 hospitals comprising of 73 government hospitals, 42 mission hospitals, 7 quasi-government hospitals and 6 private hospitals. In the second stage, the estimated DEA efficiency scores are regressed against hospital ownership variable using a Tobit model.

The results of our study suggest that ownership does affect efficiency. Quasi-government hospitals were found to be the most efficient with efficiency scores of 83.9% followed by public hospitals (70.4%), mission hospitals (68.59%) and private hospitals (55.8%). Quasi-government facilities included institutions like the Kwame Nkrumah University of Science and Technology Hospital and the Police Hospital, which are owned by the government but are managed autonomously. This provides clues as to why they are the most efficient hospitals.

It is often argued that the private sector is more efficient than the public sector in the production of health services, especially in low and middle income countries. This is based on the assumption that public sector hospitals, which are not-for-profit, do not provide the right incentives for managers to optimize the use of resources. However, similar to other studies like that by Hollingsworth in his meta-analysis of 317 publications, we found the opposite to be true. Private for profit hospitals exhibited the highest levels of inefficiency compared to public, mission and quasi-government health facilities.

What do private hospitals have to do to increase their efficiency? Our findings demonstrate that to be efficient, private facilities would have to increase their outputs two to three-fold, while holding inputs constant. Managers of private hospitals will therefore have to find innovative ways of generating demand for their services, capitalizing on the fact that patients may prefer private hospitals to public hospitals.

The African Development Bank, in its recently-released and first-ever Human Capital Development Strategy for Africa, proposes what it calls a New Hospital Model for Africa. This model focuses on promoting the deployment of modern technology (e-health) to transform service delivery; supporting private sector engagement and participation; and improving the quality of care and hospital performance. This would work well in a number of contexts in Africa.

Our study has limitations, which we point out in the text of the paper, but it will hopefully add to the debate about the best way to run hospitals in low and middle income countries and who should run them.

By Serufusa Sekidde – Consultant at Oxford Policy Management

Serufusa can be followed on twitter: @Serufusa 

This post was originally featured on The Global Health Hub, which is a volunteer-run site that aims to provide an online gateway to news, commentary and resources related to global health.

One comment on “Let’s invest in private hospitals as they are more efficient compared to other hospitals, right?

  • October 31, 2015 at 11:20 am
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    Your quasi-public, public, missionary and private findings suggest that the real issue seems to be “efficiency in whose eyes”? Without reading your study, I suppose you have defined efficiency in terms outputs (numbers of patients seen) given certain inputs. But what if the output is – as must surely be the private practitioner’s concern – profit?

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