AN OPTIMAL MODEL FOR HEALTH CARE

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An Optimal Model for Health Care

Outline

In this paper, we would be discussing the role of public and private services in the health care services, as well as taking a public-private mix in the context. We would also be analyzing all their services to the public in the health care industry.Introduction

The relative roles of the public and private sectors in healthcare provision have and continue to evolve over time (Culyer, 1971). Reforms stem back to 19th century neoclassical economics that market solutions lead to more efficient allocation of resources, uncertainties over how the healthcare market would respond to these institutions and, more recently, to new public management theories and the influence of multilateral (Hood, 1991). The debate over the relative merits of private and public provision seeks to answer the question “who would more efficiently provide public goods?”

Proponents of private provision cite the duality of profit maximization and efficiency as theoretical evidence of its advantage. The competitive market model is argued for potential gains in efficiency, quality, consumer choice and responsiveness, and transparency and accountability (Hollingsworth, 2008). However, arguments against private provision cite failures inherent in the healthcare market and a mismatch between public health orientation and profit maximization. Ultimately, as Culyer argued, empirical evidence should assist in answering the question of which institution most efficiently provides services (Culyer, 1971). This brief seeks to broadly assess the relative efficiency of public and private delivery in healthcare. It summarises empirical evidence, identifies factors that influence efficiency and outlines policy implications. The evidence-base is limited but growing. Findings are mixed which suggest that efficiency gains in private delivery depend on the context.What is efficiency and why is important?

The World Health Report (2000) called attention to the importance of efficiency in all functions of a health system and in ultimately achieving the goals of health improvement, responsiveness and fairness in financing. Technical efficiency refers to the extent that resources are being wasted. It measures the degree of producing the maximum amount of outputs from a given amount of inputs or, conversely, using the minimum amount of inputs to produce a given output (Filippini & Farsi, 2004). Examples of inefficiencies are excessive hospital length of stay, over-prescribing, over-staffing, use of branded over generic drugs, and wastage of stock. It has thus been analogized to a “torn rice sack” as resources are wasted due to inefficiencies in the system. Measurement of efficiency is especially relevant in settings constrained by scarce resources and given the recent economic downturn and escalating healthcare costs. It allows a system to produce more and better at zero cost (Helmig & Lapsley, 2001).Empirical evidence

The efficiency of the hospital sector merits analysis as it represents the largest proportion of total health expenditure in OECD countries and approximately 45-69% of government health expenditure in sub-Saharan Africa. Frontier efficiency measurements of public and private provision in hospitals and similar healthcare settings are summarized below. This selective review provides insight into how efficiency varies with ownership and highlights the diversity across environments (World development report, ...