eMJA: Brooks, Privatisation of teaching hospitals

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Privatisation of teaching hospitals

Training and research may be poorly served by privatisation and commercial management of hospitals

Peter M Brooks

MJA 1999; 170: 321-322

Introduction - Private money - Public costs - References - Authors' details
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Introduction

Australia's major academic health centres not only provide excellent healthcare, but are also involved in one of the most important aspects of the healthcare system -- the training of our future health professionals.¹ Most teaching hospitals are also involved in basic and clinical research, and many have major research institutes on their campuses. This symbiosis of healthcare, research and training has served us well, but is now under considerable threat from the fiscal constraints within the healthcare system (particularly in Victoria, where, despite the increase in throughput and reduction in waiting lists as a consequence of casemix funding, there has been a decline in funding to hospitals in real terms).² For NIH awards to medical schools see figure.

Recently, the Victorian State government has moved to amalgamate and privatise several public health institutions, including one of Australia's most prestigious teaching hospitals, the Austin and Repatriation Medical Centre. Whatever contractual arrangements are finally determined for these privatisations, they must preserve the high standards and broad range of teaching, research and healthcare that the institutions currently provide, or else the saving of public money will eventually be to the detriment of the health of the community.

Private money

As economic rationalism has gripped the world over the past decade, governments of all persuasions have moved to privatise public utilities.³ In healthcare, governments have seen this as a way to inject much-needed capital into the system in order to keep pace with community expectations. The private sector has responded with willingness to invest in many aspects of the healthcare system. Some private hospitals have established research foundations which provide for research (primarily clinical) within their institutions or within universities or public hospitals. With private hospital collocation projects that have been developed in most states, including New South Wales and Victoria (and are being introduced in Queensland), the collocating private partners have provided funds for research and for academic/research/service positions.

It is important to continue developing relationships between the private and public healthcare sectors in Australia, but both economic outcomes and the impact on the delivery of service, research and education need to be carefully monitored and evaluated. The "build-own-operate" projects which have been developed in Western Australia (Joondalup) and New South Wales (Port Macquarie) have already raised concerns as to whether the developments have led to real savings to the public sector.⁴ Similar concerns have been raised in Britain in relation to the Private Finance Initiative Program introduced in 1992, under which a National Health Service Trust enters into a contract with a private sector consortium that will design, build, own and manage a hospital and the Trust provides clinical services. Evaluation of these arrangements suggests that they lead to inefficient and inequitable allocation of scarce National Health Service resources.⁵ These arrangements also affect rational healthcare planning at a "macro" level and will make strategic planning more difficult, because commercial considerations (and commercial confidentiality) will intervene.⁶

Other risks of "privatisation" are that teaching and research may not be as well supported and that the privatised facility will concentrate on the high-return services at the expense of looking after the elderly and chronically ill.

Public costs

Healthcare reforms in the United States with the emergence of health maintenance organisations and managed care have led to significant problems for American academic centres.⁷ As pointed out by Blumenthal et al,⁸ academic health centres have a social mission to provide an integrated healthcare system for the community. Exposing these institutions to market forces has a significant impact on the stability of the three pillars of academic health centres -- training, research and patient care. There are now data available to suggest that medical schools in communities with a high level of managed care receive less National Institutes of Health funding than those in communities with low levels of managed care.⁹ Similarly, young clinical researchers in hospitals serving communities with a high level of managed care published fewer scientific articles and perceived greater levels of departmental conflict and decreased cooperation.¹⁰

In Australia, our internationally recognised high standards of health professional training are maintained to a large extent by the undergraduate, graduate and postgraduate training within our major teaching hospitals. Providing young health professionals with the necessary clinical environment for learning significantly increases the institutional costs because of the extra time expended in routine clinical tasks, the requirements of supervision and the use of more diagnostic and therapeutic services by trainee health professionals. In the competitive market place of the United States, academic medical institutions have found it very difficult to maintain all their activities, as the healthcare purchasers tend to favour the lower-cost suppliers of services. Increasingly, American academics have to spend more time in direct clinical care and less in teaching and research.¹¹

In Victoria, the "teaching, training and research" component of casemix definitions does provide additional funding to the teaching hospitals.¹² Although this formula will be used in the contracts developed with the private sector organisations, it will be important to make sure that they actually deliver on their commitment to teaching and research.¹³ Private hospitals have a responsibility to their shareholders and have naturally concentrated their activities on those healthcare "products" that are profitable. This has seen a concentration in the private sector of diagnostic facilities and provision of elective surgical procedures such as total joint replacement. These private units provide excellent healthcare services, but do not contribute as much to research or teaching as their public counterparts.

Basic research may be more adversely affected by a transition to privatised healthcare. Competitive healthcare markets fail to support significant amounts of basic research because the economic benefits of such work are uncertain, often long term and can rarely be fully realised by those who pay for them.¹⁴ Experience in the United States demonstrates that basic research is more likely to produce knowledge that has practical benefits when potential users are participating in the research or interacting with the investigators conducting the research.¹⁵ The Australian medical research community (albeit underfunded) has produced significant advances in our understanding of disease flowing from its basic research activities. Around the country, the most successful institutes have fostered a close association between clinicians and basic researchers.

Private enterprise (particularly pharmaceutical companies) provides significant funds to public Australian research institutes, although this funding needs to be encouraged and increased.¹⁶ Whether privately funded institutes would succeed in raising more research funding is yet to be seen, but little or no basic research is conducted at Australian private hospitals.

As Blake points out "economics should discipline, but not control, academic medicine and medical practice".¹⁷ Few people working within teaching hospitals or medical research institutes could fail to realise the importance of fiscal responsibility in the light of the economic rationalisation that has gone on within the Australian healthcare system over the past two decades. It is a little surprising that the academic institutions, health professionals and the general public have not been more vocal in their questioning of the Austin and Repatriation Medical Centre privatisation decision. I believe that our community is interested in the excellence of medical care, in training the medical workforce of the future and in seeing the continuing development of advances in healthcare through research. These values, however, do have to be voiced, and this should be done through persistent and persuasive academic leadership.¹⁷

The process currently in train in Victoria must be seen as an experiment. Like all clinical trials, it should be closely monitored, and terminated if it seems to be doing harm. If it continues, it must be evaluated to make sure that the result is a positive one -- for all parties.

References

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Gaffney D, Pollock AM. Can the NHS afford the private finance initiative? London: British Medical Association Health Policy and Economic Research Unit, 1997.
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Moy E, Mazzaschi AJ, Levin RJ, et al. Relationship between National Institutes of Health research awards to US medical schools and managed care market penetration. JAMA 1997; 278: 217-221.
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Phillips PA. Teaching and research in a casemix funding environment. Med J Aust 1998; 169 Suppl: S53-S55.
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Blumenthal D, Causino N, Campbell E, Louis KS. Relationships between academic institutions and industry in the life sciences -- an industry survey. N Engl J Med 1996; 334: 368-373.
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Authors' details

Faculty of Health Sciences, University of Queensland, Brisbane, QLD.
Peter M Brooks, MD, FAFPHM, FRACP, Executive Dean.

Reprints will not be available from the author.
Correspondence: Professor P M Brooks, Edith Cavell Building, Royal Brisbane Hospital, Herston, QLD 4029.
Email: p.brooksATmailbox.uq.edu.au

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