Productivity Commission: Public and private hospitals on a par

Our public hospitals take a lot of flack but a new report by the Productivity Commission shows they hold their own with private hospitals.

A discussion paper released by the Productivity Commission has found public and private hospitals have similar total costs.

The study found that both sectors had relative strengths and weaknesses based on their differing and often complementary roles in Australia’s health system.

The report was commissioned by the Federal Government to examine three aspects of the health-care system: the relative performance of public and private hospitals, the rates of informed financial consent for privately-insured patients and the most appropriate indexation factor for the Medicare Levy Surcharge income thresholds.

The Commission voiced a frustration over the inadequacy of data that would allow meaningful comparisons between the public and private sectors. For this reason, it said its cost estimates should be regarded as experimental.

Comparing apples with pears

The Commission admitted that making like-for-like comparisons between the public and private sectors was difficult.

Public hospitals are required to provide free treatment to public patients and have service obligations under the National Health Agreement to provide emergency services, clinical teaching and research and equity of access. Public hospitals also face growing community expectations.

In this context, the Commission’s finding that public and private hospitals have similar total costs is noteworthy.

The Commission did find differences in the composition of costs between the two sectors, with medical and diagnostics and prostheses more costly in private hospitals, and general hospital costs and capital costs higher in public hospitals.

The Commission said the rate at which patients are seen within emergency department triage benchmarks has improved nationally. The proportion of emergency patients who were seen on time increased from 75% to 78% between 2003 and 2008. The number of semi-urgent patients who were seen on time increased from 61% to 66% during the same period.

The Commission looked at several safety and quality indicators and found there is little difference between public and private hospitals in rates of readmission to hospital within 28 days, and rates of return to operating theatre or intensive care units. It said there was no discernible difference for patient falls, pressure ulcers, adverse transfusion and adverse drug events, intentional self-harm and obstetric indicators.

Snapshot of public and private hospital systems

  • Australia spends about 9% of its GDP on healthcare, and hospital services account for about one third of this.
  • There are currently 768 public hospitals and 556 private hospitals that provided 4.7 and 3.1 million episodes of care respectively for admitted patients in 2007–2008.
  • Around half of Australia’s hospitals have 50 beds or fewer. Almost three-quarters of public hospitals have 50 beds or fewer.

Public vs private hospitals: different but complementary

Public and private hospitals complement each other by specialising in the provision of different services and treating different types of patients:

  • public hospitals handle around 75% of all episodes of care;
  • private hospitals perform around 60% of all surgery and 70% of other procedures;
  • around 95% of outpatient services are handled by public hospitals (including emergency department presentations);
  • two-thirds of elective surgery is performed by private hospitals;
  • patients treated in public hospitals are, on average, older, from lower socioeconomic groups and have more complex medical conditions.