Private Care Could Unlock Value From Health Budget

Media Release
15 May 2007

Private Hospital Capacity Could Unlock Value From Budget Health Spend On Elective Surgery

Increased use of private hospital capacity for publicly-funded operations would see New Zealanders get improved access to elective surgery from the expected additional health funding in Thursday’s Budget, Southern Cross Healthcare Group Chief Executive, Dr Ian McPherson, said today.

“Throwing money at the health system does not always result in a corresponding increase in levels of care.”

The Government has signalled that the health package for Budget 2007 will be $750 million per annum, over a third of its total new operational spending, including $200 million more applied to funding elective procedures over the next four years. But Dr McPherson said that while funding increases were a positive move, experience showed that increasing budgets hadn’t always increased patients’ access to elective services.

“Extra allocations for elective surgery always seem to start with the premise that DHBs can deliver the operations, but a far more effective approach would be to call for competitive tenders from private providers. Especially so, with the public sector under so much strain.

“We’d almost certainly see a lift in the number of people getting timely access to surgery and a robust and competitive tendering process would also ensure services were provided at the best price.

“The Government has a duty to ensure it is getting the best price, quality and access. These are scarce health dollars.”

Dr McPherson said while DHBs can and do contract with the private sector, spot purchasing was not the most efficient way to do it, nor did it get the best value for money.

“It is an effort to clear lists at the end of the year, but it is far from satisfactory. We have had situations in our own hospitals network where we have been called on at short notice to help clear waiting lists in a region, but have been unable to make capacity available.

“A tendering process would not only ensure capacity is made available, but could also be attractively priced. Better planning means better prices, access improves and everyone’s happy.”

Dr McPherson said DHBs were able to contract electives out and while some were proactive, tendering work well in advance for completion by a set date, others only considered tendering “when there is panic stations”. This was in comparison to ACC which was an active purchaser, with the private sector undertaking around 80% of ACC-funded electives.

“A shift from ad hoc purchasing to a competitive tender would not only encourage pricing efficiencies, but also encourage the private sector to increase capacity as a result of the certainty inherent in a transparent and regular tendering regime.”

Dr McPherson said the NHS in the United Kingdom had shifted from spot purchasing to a tender-based system in 2002 on the basis that access to care was more important than who provided the care. After a successful first round of tendering, further contracts were let in 2005 to secure treatment for 250,000 NHS patients each year. Ultimately half a million procedures, or 10% of all electives, will be provided by the private sector in the UK.

“Private hospitals in the UK have responded to the certainty offered by tendering by investing in capacity, staff and innovative delivery models. There is every reason to be confident the private sector would do the same in New Zealand.

The public health system needed to focus on clearing the backlogs in the health system by emphasising access rather than ideology, Dr McPherson said.

-End-

© Scoop Media