The opening of a shiny new hospital on Sydney’s Northern Beaches this month has been a nothing short of shambolic. Despite boasting panoramic ocean views and swanky facilities, the hospital repeatedly ran out of vital drugs, wheelchairs and body bags.
According to the hospital’s former CEO Deborah Latta, who resigned just two days after its opening, the initial struggles were merely “inevitable teething problems”. There may indeed be a sense of inevitability about the chaos at Northern Beaches Hospital. The hospital is run under a partnership between the state government and Healthscope, a private medical provider, the latest in a line of hospitals to be opened under such an agreement. History suggests such partnerships frequently cause problems like those seen at Northern Beaches — but the NSW government does not seem to have learnt from past mistakes.
A chequered history
Private-public hospital partnerships are generally guided by a belief that the private sector will offer much needed efficiency in healthcare provision. But, according to Stephen Duckett, program director of health at the Grattan Institute, “by and large, this has not been a good story”.
“The idea of public-private partnerships is that risk will be transferred from the public sector to the private sector”, Duckett said. “This generally has not happened [and] we’ve had a number of cases where the public sector has had to step in.”
Although there has been some success — Duckett cites Joondalup Health Campus in Western Australia as an instance where such a partnership went well — most evidence points the other way.
In the early 1990s, the NSW government opened the privately-operated Port Macquarie Base Hospital, the first such experiment in Australia, despite substantial opposition from community groups and unions. The government’s savings calculations failed to take into consideration additional administrative and legal costs the government would incur, and according to a subsequent report by the NSW Auditor-General, it ended up costing $5.5-6.5 million more than a public hospital of an equivalent size.
Still, despite the failures at Port Macquarie, other states continued to follow suit. In 1995, Healthscope opened a privately run public hospital in South Australia, which, after years of losses, was bought back by the state government at a cost of $17.5 million to the taxpayer. Victoria’s Latrobe Regional Hospital, opened in 1998 under a similar agreement, was bought back by the state two years later, after suffering $8.9 million worth of losses. And in 2013, the Victorian government announced plans to buy back Mildura Base Hospital, the last remaining privately run hospital in the state.
Ten years of “teething problems”
Port Macquarie also suffered “teething problems” — similar to those documented at the Northern Beaches Hospital — which happened to last over a decade. While privately run, Port Macquarie was the worst performing hospital in the state according to the NSW Department of Health, with waiting times for elective surgeries double the state average. In 2005, the hospital was brought back under state control, after sustained pressure from disgruntled community groups.
Often, this dysfunction had other, unintended consequences. A report by the McKell Institute, for example, found that privatisation in NSW and Victoria was accompanied by a slump in staff morale, and a decline in patient satisfaction.
According to Duckett, one of the key reasons for these chronic problems is the difficulty of creating an adequate contractual agreement between the government and a private provider, which accounts for various unforeseen risks which may arise when running a hospital.
“One of the problems with writing the contract of this kind is specifying what services are to be delivered,” he said.
Duckett says the early struggles at Northern Beaches, where the hospital repeatedly ran low on vital supplies, were a result of the failure of the contract to provide adequate specifications about supplies.
Why do we keep doing it?
The history of public-private partnerships does not point to a particularly positive future for Northern Beaches. So why do governments keep pushing a losing policy?
Usually, much of the discourse surrounding these partnerships is one of efficiency. Yet the efficiency argument does not necessarily stand up to scrutiny. A 2009 report from the Productivity Commission found that public hospitals in NSW and Victoria were more efficient than their private counterparts.
There may, therefore, be something more ideological behind the push for these partnerships. The McKell Institute report argues that the resurgence of public-private health partnerships, which did largely fall out of vogue following the disasters in the 1990s, is down to a dogmatic belief that the market will provide healthcare more efficiently.
According to Duckett, there has been a preference among governments over the past 20 years to deliver services through the private sector where possible.
But the debacle at Northern Beaches, and at Port Macquarie before it, indicates that governments’ unerring faith in the private sector might just be compounding patients’ pain.
Should governments pursue public-private hospital projects in the future? Let us know by writing to boss@crikey.com.au.
PPP’s, like Austerity & trickle-down, are nothing but inventions of the Far Right elite to justify stealing money from the general public.
Anyone who has worked in the health system for more than five minutes knows that a public private partnership does not work if universal health service provision is the aim. Follow the money and the game of mates theory in all this to see why the model persists and the rip offs continue.
State Govt has exacerbated problem by virtually closing Mona Vale hospital at a time when population in the region is growing. Getting to Frenchs Forest hospital (the hospital is NOT on the Northern beaches) from northern beach towns like Avalon and Palm Beach and Mona Vale via congested Wakehurst Parkway is a nightmare. This isn’t just about privatisation. But of life and death. Don’t get sick on northern beaches. It’s too far to a shambles of a hospital anyway.
The more I read about the Frenchs Forest hospital, the more I realise what a major stuff up this whole project is. Who could possibly think closing two well spaced major public hospitals actually on the northern beaches could be replaced by a mega private hospital NOT on the northern beaches. Both Wakehurst Parkway and Monavale Roads are nightmares in (and often out of) peak hours and during holidays.
In my mind there can only be one reason. Money! Bags of it. Independent newsroom investigative journalism being what it is these days, we will probably have to wait for Four Corners to get their teeth into it before we find out about all the backroom dealings.
The most galling thing is that the government buys them back!
Classic case of socialising your losses.
You made that point before I could.
Still, at least the shareholders didn’t lose, that’s the important thing.
Pity about the patients & taxpayers but when have they ever mattered?
Why so coy about the push for these arrangements being ideological? Blind Freddy could see that it is!
Yes. Blind Freddy can indeed see it. Perhaps the history of this ideology is less well known than it should be. Back in 1957, two economists constructed a model of an economy in which government was responsible for the least activities as possible. In this world, there was perfect competition – prices were set by the most efficient firm – buyers knew what they were buying and sellers knew what they were selling. In this world, Adam Smith’s idea that competing private owners could do most for the public good was true. With a suitable delay, ideologists, starting with Reagan and Thatcher, came to believe that it is as if the real world economy works best of it is as like it can be to the theoretical model economy in which you could show that competition was best for society.
Now this was nonsense and economists and bureaucrats should have known it. Sellers do not know all about what they are selling, buyers do not know much at all about what they are buying and competition is limited. Private owners are interest in profit and only in efficiency if they have to be efficient to make a profit. This is rarely necessary. World trade is distorted by cartels that carve up markets that set aribitrary price levels in different markets, in which prices are least in the US and to a lesser extent, the UK.
You can only rarely get private firms to run businesses efficiently and only where the contracts can specify what is to be provided. To some extent, private firms can run buses efficiently. But hospitals??? That’s nonsense.
It is all ideological nonsense and we should kick out governments one after the other until this ridiculous ideology is dropped from political programs and by the public service.