Everything that can go wrong

Anis Chowdhury | Published: 00:00, Jan 16,2019 | Updated: 14:25, Jan 18,2019


The exterior of Northern Beaches Hospital, a PPP between the New South Wales government and Healthscope. — ABC News

PUBLIC-PRIVATE Partnerships are being promoted as a ‘win-win’ strategy to deliver sustainable development despite all the evidence to the contrary. Public-private hospital partnerships are generally guided by a belief that the private sector will offer much needed efficiency in healthcare provision.
However, any government considering PPPs in healthcare should be aware of dismal Australian experiences, especially after what has happened with its latest project — the Northern Beaches Hospital, a PPP between the New South Wales government and Healthscope.
The A$600m facility was officially opened with much fanfare on November 19, 2018. Under a 20-year A$2.2 billion contract, it was billed as the flagship for the NSW government experiment handing to the private sector the delivery of a much wider range of public services from prisons to technical education to health.

Profits before patients
DESPITE this fanfare, the chief executive officer resigned two days after its official opening, amidst claims of critical staff shortages, medicines and supplies since it opened for its first patients on October 30, 2018. Anaesthetists at the hospital threatened to stop performing elective surgery until the critical problems were sorted out, warning that it was leading to a crisis atmosphere.
The government and hospital authority described the staffing and supply shortages as ‘hiccups’ and ‘teething problems’. But these are not trivial matters; hiccups and teething problems could be a life and death issue. In this particular case, a new mother’s life was placed in danger after undergoing a caesarean section at the hospital. Her treating doctors and nurses were frantically trying to source the blood and equipment to operate safely. Thankfully, that story did not end in any tragedies.
The Sydney Morning Herald reported on complaints that the hospital has been forced to cancel elective surgeries perhaps because of a lack of staff and the hospital suffering from a lack of basic supplies, including syringes, IV lines, medical swabs, saline bags, needles, wash cloths and alcohol rub and maternity pads. It also reported inadequate levels of nursing staff and a large number of locum nurses.
The Australian doctors’ union wrote to the head of NSW Health, warning that junior medical officers were being asked to do ‘unsafe work hours’. For instance, one intern had been assigned 60 patients and junior medical officers were being expected to work up to six hours overtime a day, usually unpaid. One doctor reported working 110 hours in a week.

Costing more to the taxpayers
THIS latest healthcare PPP is also costing the taxpayers more than what the government publicly said earlier. For example, before the 2015 state election, the former health minister said that the hospital would cost only A$1 billion. However, the figure published after the election revealed that the true cost to taxpayers was A$2.14 billion, more than twice the figure publicised. The hospital building itself cost A$600m and road upgrades around the hospital A$400m.
This is not the only instance of healthcare PPPs going wrong since the first such experiment in Australia. In the early 1990s, the NSW government opened the privately-operated Port Macquarie Base Hospital. The government’s savings calculations failed to take into consideration additional administrative and legal costs that the government would incur. According to a subsequent report by the NSW auditor-general, the project ended up costing A$5.5–6.5 million more than a public hospital of an equivalent size. The auditor-general’s report concluded, ‘The government is, in effect, paying for the hospital twice and giving it away.’
Yet the ‘teething problems’ did not go away in 13 years after it had been privatised by the Conservative government. Before its 20-year contract period, the Labor government eventually bought the hospital back for A$80 million.
Similarly, after years of losses, the South Australian government was forced to buy back a privately run hospital opened by Healthscope in 1995 at a cost of A17.5 million to the taxpayer. The Victorian government bought back Latrobe Regional Hospital, opened in 1998 under a similar agreement, two years later, after suffering A$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.

DESPITE these spectacular failures, governments do not seem to learn from past mistakes. They continue to follow the PPP path in the face of substantial opposition from community groups. Therefore, a dogmatic belief that the market will provide health care more efficiently must be behind the push for these partnerships.
The Productivity Commission (Australia) in its 2009 report found that nationwide the efficiency of public and private hospitals is, on average, similar; but public hospitals in NSW and Victoria were more efficient than their private counterparts by more than 3 per cent and 4 per cent respectively. This is despite public hospitals operating in far greater numbers in rural and regional areas (traditionally much more expensive to service) and despite their high-cost responsibility for providing accident and emergency room services.
More recently, an independent think-tank, the McKell Institute, reported similar findings. It also noted a concerning trend that private operators were able to pick and choose only the most profitable services to run, leaving the public sector with the unenviable task of undertaking the more costly and difficult work. This allows private operators to capture a large share of operating revenue while exposing taxpayers to greater risk and higher costs.

Health is a right, not a commodity
HEALTH is a right and the community (and, therefore, government) has a responsibility to ensure that all its members have access to health and social services according to need. Under PPPs, however, the state becomes health service purchaser, not provider. Furthermore, private hospital operators see health as a commodity for which individuals must make their own choices in relation to consumption. The private operators previously relying on patient contributions and health insurance company payments can rely, under PPPs, more heavily on public funds for the financing of profitable patient services.
Making profit a central motive can distort traditional patient-health service provider relationships. To quote a commentary in the New England Journal of Medicine (August 5, 1999), ‘ur main objection to investor-owned care is not that it wastes taxpayers’ money, nor even that it causes modest decrements in quality. The most serious problem with such care is that it embodies a new value system that severs the communal roots and Samaritan traditions of hospitals, makes doctors and nurses the instruments of investors, and views patients as commodities.’

Anis Chowdhury, an adjunct Professor at Western Sydney University and the University of New South Wales (Australia), held senior United Nations positions in New York and Bangkok.

Want stories like this in your inbox?

Sign up to exclusive daily email