Private ownership of public hospitals: proven failure

The new Northern Beaches hospital will not be the first such public-private partnership in the public health sector. A previous experiment at Port Macquarie Hospital proved to be a fiasco at great expense to the public purse.

In 1994, a Coalition government led by Nick Greiner entered into a 20-year agreement with a private operator for the Port Macquarie Hospital to be built, owned and operated.

The initial operator was HCOA. It was taken over by Mayne Health, which in turn eventually sold its hospitals to Affinity Health.

The state government took legal action against Mayne for breach of contract in relation to the proposed transfer of the hospital to Affinity.

Under the privatisation contract, the government paid the private operator to treat public patients.

The New South Wales Department of Health had to pay a monthly “availability” charge to the hospital over 20 years, estimated to total more than $243 million, plus capital servicing and other service charges.

Unlike other public-private partnerships, the hospital would have continued to be owned by the company after the 20-year contract expired.

In 1996, the NSW auditor-general cited the hospital as an example of the public sector being left to shoulder burden and risk, saying: “The government is, in effect, paying for the hospital twice and giving it away.”

Problems that plagued the Port Macquarie hospital under private ownership included funding for elective surgery running out before the end of the financial year, and very long waiting lists for surgery.

At the time a Buy Us Back campaign run by a community-based action group and nurses lobbied strongly for a return to public ownership, which eventually happened in February 2005.