Tim Parke: Private healthcare threatens public

Private hospitals are an expensive way to deliver healthcare, writes Tim Parke. Photo / Thinkstock
Private hospitals are an expensive way to deliver healthcare, writes Tim Parke. Photo / Thinkstock

Expanding the pay-for-treatment sector may wreck the free one, writes Tim Parke

New Zealand's world-class hospital care depends on extremely well motivated senior medical staff.

The solution to rising healthcare costs in tough economic times is not, as some vested interests would increasingly have you believe, to maximise the number of people using the private health sector. As a public hospital emergency specialist, I fear that expanding private healthcare may instead fragment and irretrievably damage an effective public system, resulting in the country as a whole paying more for potentially worse healthcare.

There is clear evidence from independent data such as the Commonwealth Fund and the OECD that First World countries (including New Zealand) with a high proportion of publicly funded healthcare generally provide healthcare that is as good or better than countries with a high proportion of private healthcare. This is often at much lower cost and with much greater equity.

Why should this be?

Firstly, private hospitals are an expensive way to deliver healthcare. The itemised billing demanded by private healthcare represents a significant additional administration cost (estimated at 10 per cent of the total cost in the US).

More importantly, most healthcare costs are wrapped up in staff, and private hospitals pay their staff way in excess of the market rate set by the public sector. It costs around $2500 for the hour it takes a surgeon to remove a gallbladder in a private hospital, but only maybe $200 for the same amount of the same surgeon's expert time in a public hospital for the same procedure.

In fact the only way the private hospitals can contain costs to anything approaching affordable levels is to avoid or discourage treating elderly, high-risk or complex cases. When complications occur (and sometimes even when they don't) patients are quickly transferred into public hospitals to prevent the additional cost being borne by the patient or insurer.

Secondly, the sheer size of public hospitals produces some significant economies of scale in terms of administration, staff costs, bulk purchase and overheads. In addition, the public system facilitates the ready flow of clinical information between medical teams.

Conversely, a lack of centralised patient data poses a real risk of medical error, wasted staff time and the potentially harmful duplication of tests such as x-rays if care is fragmented into multiple unconnected private providers. Even now, patients treated in private hospitals do not have any medical notes that are readily accessible when they arrive unannounced in the emergency department with complications in their test, treatment or operation. Trying to chase up medical histories from their specialist in such cases can waste a lot of valuable clinical time.

Thirdly, public systems try very hard to standardise healthcare based on available medical evidence and proven cost-effectiveness. Groups of specialists co-operate to design safe protocols and pathways for a range of medical conditions so that patients can have suitable medication, scans, tests, endoscopies and operations at the appropriate point in their illness. This is done to balance the risks with the benefits and to consider the best use of available resources.

Although sometimes in the public system certain patients wait longer for treatment than is ideal due to resource constraints, the push to standardise treatment produces safe and highly economic healthcare in general. In private practice there is a danger of too much or too little.

On one hand, important treatments may be limited by lack of funds to pay or insufficient insurance cover. On the other hand, there is a financial incentive to provide (within broad medical indications) as many tests, scans, surgeries, consultations and endoscopies as can be tolerated and afforded by the patient. Private hospitals are also not included in the annual publication of critical events and are subject to much less external scrutiny than public hospitals.

For these reasons, the more healthcare that is provided privately, the more healthcare costs there are for the country as a whole.

But surely, individuals opting to pay for their own healthcare directly or through insurance premiums is freeing public hospital resources for those who cannot afford to.

Unfortunately, increasing the amount of private sector input also risks damaging quality of care in the public sector through a complex inter-relationship. The more healthcare is provided in the private sector, the fewer citizens will feel connected with the public system and the fewer medical staff will want to work within it.

The removal of the wealthy, vocal and influential patients damages standards through loss of effective consumer pressure. For the specialist medical staff, the private sector already offers better pay, easier patients, and more salubrious surroundings compared to the more demanding and worse paid public hospital work.

If further opportunities are created for them in the private hospitals, it will worsen the very constraint that produces public hospital waiting lists: a lack of sufficiently skilled senior medical staff. As these lists drive much of the demand for the private sector, a vicious circle is created.

The remaining public hospital staff risk becoming frustrated and demoralised through dealing increasingly with the more difficult and disadvantaged patients who cannot "go private". The remaining patients on the non-urgent lists in the public hospitals also start waiting longer and longer for treatment. This creates a major health inequality that may prove highly socially divisive, not to mention highly wasteful in terms of returning patients quickly to productive work, and caring for themselves and their families after illness or injury.

At a certain tipping point, a burgeoning private sector may have removed sufficient staff, patients, public support, money and morale from the public hospitals to compromise outcomes from illness and injury. This means that when anyone (fully insured, independently wealthy or otherwise) has an unexpected acute illness or a serious accident that is of no commercial interest to the private providers, they will experience sub-optimal care in the public hospital to which they will be taken.

Currently, the public hospital care provided in New Zealand is world-class for conditions such as major trauma and heart attacks, but such services require a properly functioning and funded hospital with extremely well motivated senior medical staff.

So, if a mainly public hospital healthcare system is cheaper, fairer, less divisive, and produces good outcomes on international comparisons, why encourage the use of alternatives? Instead of spending money on private health insurance, perhaps a lesser sum invested in the public system through taxation could make up for some of its current deficiencies and protect it for the future. It certainly has the best chance of delivering comprehensive health protection to all - even if they get old, lose their job or get sick with something unprofitable.

* Tim Parke is clinical director, Adult Emergency Department, Auckland City Hospital.

- NZ Herald

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