US Lessons For New Zealand’s Health System: Profiteering, Hospital Adverse Events And Patient Outcomes

Monday, 15 January 2024, 4:48 pm
Opinion: Ian Powell

Although not guaranteed it is likely that the ugly head of ‘Public Private Partnerships’ (PPPs) will be raised again in Aotearoa New Zealand’s public hospitals following last year’s election of a new National-led coalition government.

Profit maximisation of public healthcare

The practical impact of PPPs is that the power of the drive of the private partners to maximise profits gets to be exercised not only in the hefty annual rate of returns that they become entitled to receive but also in the design and control over capacity and capabilities that they are able to exercise.

The United Kingdom where PPPs have been most prevalent, especially England, is riddled with disastrous outcomes as a consequence. More recently this has also emerging in Australia. The main political driver has been ideology.

New Zealand has not had PPPs in its health system. But it had two close calls in the early to mid-2010s in the Canterbury and West Coast District Health Boards. At that time there was strong government pressure for PPPs.

But, fortunately, both DHBs (they shared the same chief executive, David Meates) put the interests of their defined populations first and mounted strong inter-related healthcare quality and fiscal arguments why PPPs were a bad idea. Eventually their vigilance and perseverance prevailed, although not without personal cost.

Unfortunately the more vertically centralised health system that we now have, thanks to the restructuring by the previous Labour government, means that this important local statutory voice has been lost. The system is now more vulnerable to the threats PPPs pose to it.

PPPs are a means to an end. That is, profit maximisation or extraction from what is supposed to be an accessible comprehensive and indispensable public good. We are already experiencing the harsh reality of this with the privatisation of hospital laboratories in the South and lower North Islands.

PPPs are targeted at universal health systems. In developed economies without universal health systems, specifically the United States, other means are used. One such means is private  equity acquisition.

The American health system is not universal and largely private. Access is dependent on private health insurance. There are two main publicly funded schemes – Medicare for those 65 years and older and Medicaid for those on very low incomes.

Private equity firms pool investor funds to invest in or acquire companies that are not publicly traded on a stock exchange. They own around 30% of the predominant for-profit hospitals in the United States. 

Increased adverse events and poorer patient outcomes

The detrimental impact of private equity acquisition on hospital adverse events and patient outcomes is revealed in a recent (26 December) article published in the respected medical journal JAMA: Private equity acquisition impact on hospital adverse events and patient outcomes.

The authors are Drs Sneha Kannan, Joseph Dov Bruch (PhD) and Zirui Song. The first is a physician specialising in pulmonary (lung disease)/critical care medicine; the second is an assistant professor of public health sciences); while the third specialises in internal medicine as well as a Harvard associate professor of health policy and medicine.

The objective of the research by the three co-authors that became the basis of their published article was to find out how the quality of care and patient outcomes change after private equity acquisition of hospitals.

The study involved examination of 662,095 hospitalisations at 51 private equity-acquired hospitals and 4,160,720 hospitalisations at 259 matched control hospitals, both of which are Medicare funded.

The critical finding was that private equity acquisition was associated with a 25.4% increase in hospital-acquired conditions, which was driven by falls and central line—associated bloodstream infections. This compares with the 4.6% increase in the control hospitals.

The health statuses of the two groups of hospitals was different. Medicare beneficiaries at private equity hospitals were mostly younger (closer to 65 years) and less likely to have dual eligibility for Medicare and Medicaid. In other words, these patients were a lower-risk population compared with those in the control hospitals.

Consequently Dr Kannan and her two colleagues concluded that:

Private equity acquisition was associated with increased hospital-acquired adverse events, including falls and central line—associated bloodstream infections, along with a larger but less statistically precise increase in surgical site infections. Shifts in patient mix toward younger and fewer dually eligible beneficiaries admitted and increased transfers to other hospitals may explain the small decrease in in-hospital mortality at private equity hospitals relative to the control hospitals, which was no longer evident 30 days after discharge. These findings heighten concerns about the implications of private equity on health care delivery.

Take-home point

The JAMA co-authors’ take-home meaning of these results was that:

Private equity acquisition of hospitals, on average, was associated with increased hospital-acquired adverse events despite a likely lower-risk pool of admitted Medicare beneficiaries, suggesting poorer quality of inpatient care.

While not in disagreement, my take-home point is different. When profit-maximisation becomes a driver of essential healthcare, then both its accessibility and quality become compromised. Profit-maximisation occurs in different forms in part due to health system differences.

Private equity acquisition of hospitals, as in the United States, is but one form of profit-maximisation including in the United States.

The take-home point for New Zealand’s health system is that compromising accessibility and quality of healthcare by creating the opportunity for the extractive profiteering should not be allowed.

This is already happening with many of our hospital laboratories and it should be brought to an end. Further, it should not be allowed to reappear in a more extensive form, as Public Private Partnerships.  

© Scoop Media

Ian Powell

Otaihanga Second Opinion is a regular health systems blog in New Zealand.

Ian Powell is the editor of the health systems blog 'Otaihanga Second Opinion.' He is also a columnist for New Zealand Doctor, occasional columnist for the Sunday Star Times, and contributor to the Victoria University hosted Democracy Project. For over 30 years , until December 2019, he was the Executive Director of Salaried Medical Salaried Medical Specialists, the union representing senior doctors and dentists in New Zealand.

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