Private Pathways are Best for Public Health Care Delivery

Wednesday, September 23, 2009

By Temba A. Nolutshungu

Temba A. NolutshunguAs governments around the world stagger to provide health care for their citizens,  our South African colleague, Temba
Nolutshungu urges a simple, but common sensical approach to managing public health care delivery; the profit and loss principle by transferring ownership and control in state institutions (hospitals, clinics, laboratories etc) to public health sector workers on a preferential basis. 

Throughout South Africa there is a cry for improved public health care services. The government is proposing NHI to meet this demand. However, this need will not be fulfilled until it is recognised that the key ingredients which produce the efficiencies found in private service delivery and which impel owners to care for their customers and patients, and to keep their buildings clean and attractive and their equipment in good working order, are the drive for profit and the fear of loss,

Government should use the profit and loss principle to its advantage by transferring ownership and control in state institutions (hospitals, clinics, laboratories etc) to public health sector workers on a preferential basis. This would empower the thousands of employees in the public health care sector on an unprecedented scale. It would also introduce positive incentives for the delivery of healthcare to low- income patients, help those facilities to keep staff, and, if correctly structured, even lure former staff members back from overseas.

Government could at the same time respond to the criticism that the favoured few are being unjustly enriched by selling shares in hospitals and clinics to interested residents in surrounding ‘catchment’ areas at nominal prices. Residents would then have an interest in providing voluntary support to staff members in these facilities.

Very large facilities, such as major hospitals, could be split according to their functional divisions into separate companies to make them more manageable and efficient. The facilities, under contract to the government, would continue to carry out the same functions and serve the same people. Such a process would provide equity in the asset empowerment process between private and public employees, and surrounding communities, and deliver other substantial advantages. What better motivation for the workers than to be part owners?

Many public health care employees are lured away by high-paying jobs and other inducements in foreign countries. Locally, private firms in the health sector have been required to rapidly increase the number of black executives and other staff members as a percentage of their total workforce. In order to fulfil these regulatory requirements with suitably qualified employees, private firms under pressure to fill their BEE quotas are hiring people away from the public sector, which is already short-staffed.

Regulatory requirements are driving salaries of black executives up higher and higher.

Some black executives exploit the situation to the utmost, creating the phenomenon of the ‘two month executive’; one month spent looking for an even higher paid job and the next serving notice. Giving ownership rights to public health sector employees in the facilities in which they are employed will encourage them to stay to reap the rewards of their efforts.

As owners, state health sector employees would have very different incentives compared to those they have as mere employees. At the outset, every facility transferred to worker-owners would be accompanied by reasonably long-term government contracts as preferred providers to supply services to existing patients. Thereafter, contract renewals would be subject to performance and normal tender procedures or depend on patient choice. In hiring contractors, the Department of Health (DOH) would set strict requirements for the quality of care, insert provisions for the cancellation of contracts if requirements are not met, and carefully monitor compliance. The dynamics within the facilities would change substantially. Each facility would be competing with similar facilities for government contracts or medical scheme patients.

Employees as shareholders would not be enticed away as easily as workers who have no ownership rights. Salaries within the new companies would be dependent on profitability and it would be in the interests of owner-employees to reduce waste, increase efficiency and quality of care. In addition to their contract patients, owner-employees would need also to attract additional medical scheme members and other paying patients in an effort to increase turnover and profitability.

Competition for retention and acquisition of contracts and to attract paying patients would achieve what threats and pleas do not: improved facilities and quality of service provided by healthcare workers. By transferring assets to public health care employees, government would bring about economic empowerment, improved access, equity and quality.

Temba A. Nolutshungu is a director of the Free Market Foundation an ally of