is at its most competitive and provision is dominated by the private sector, there are excellent hospitals to be sure. But costs are higher than ever and still rising although the inflation in cost cannot be explained by reciprocal improvements in quality of care. A great deal of care in the United States is delivered through health plans which, it is argued, create bureaucracy, increase administrative costs and restrict choice and decision making, and limit services. The American system requires
huge levels of administration which sucks funding away from direct care. By way of comparison, UK administration constitutes only 2.6% of NHS costs compared with 26% for private hospitals in the United States. Competition between private providers in the United States, it could be argued, certainly generates innovation but not affordable, accessible care for all. Many also fear that private competition can sometimes lead to a ‘race to the bottom’ if regulation is weak and the influence and strength of the public sector is diluted. In such a situation, private providers cut prices
to attract business while preserving margins by cutting costs that are essential to maintain safe and effective healthcare. Private providers often become experts at ’cream skimming’ – accepting patients who are cheaper to treat. This is at the cost of those who are sicker than average or who present with complications. In such cases, the role of a strong
regulator is critical in mitigating these risks, as is the presence of a strong, reliable public healthcare provider sector. Both will keep profit makers honest by preserving acceptable minimum standards at affordable cost and preventing market failure caused by a provider’s scramble for the least sick and most profitable patients in the community. Indeed, perhaps sensibly regulated competition is more important than who the players are. That is to say, it’s the structures within the market that are critically important rather than whether public or private providers are dominant. In bringing about successful reforms,
governments need to proceed with considerable caution by bolstering regulation before liberating the market too much, particularly if they are
considering allowing public money to go to profit-making organisations. Particular emphasis needs to be placed on regulator strategies for intervention in cases where providers fail to meet their statutory obligations. This means closing the worst offenders but also preserving public confidence by assisting some organizations with advice and support to help them get back on track and continue delivering. Public hospitals need to be
strengthened too in order to create the right conditions for private hospitals to operate to the high standards necessary. Without this careful coordination, there is a risk of temporary or even long-term market failure which will place patients in danger of being treated by cavalier, unscrupulous providers of healthcare. ■
AH
MORE INFO Philip Leonard is a Director with Ernst & Young and the Sector Leader for Healthcare Advisory Services in the Middle East & North Africa. He can be contacted by email:
philip.leonard@bh.ey. com. References are available on request (
magazine@informa.com)
Arab Health Show Issue 2012 23
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