PRIVATE VS PUBLIC HEALTHCARE
What can be done?
For government hospitals, you would expect costs to be lower than in the private sector as it is able to benefit from economies of scale and to negotiate better prices for equipment and drugs.
But is it really the case? There are some surprising results when comparing public and private sector prices.
For example, for some tests, the prices of which are available in catalogues at doctor clinics and online, government prices before subsidy are higher than those from private providers.
For testing of Vitamin D levels in blood, it costs S$106 at the specialist outpatient clinics at government hospitals compared to S$95 at private specialists.
For flu jabs, it is S$33 at polyclinics and S$32 at Raffles Hospital, both prices before the Goods and Services Tax (GST).
A 2D echocardiography (non-invasive imaging test to analyse the heart) is also higher at government compared to private hospitals.
These private sector prices include mark-ups that might be as high as 50 per cent, which means that their actual costs are probably much lower.
Managing costs in the public sector is challenging because there is a major difference in the motivation to do so compared to private hospitals.
The latter is driven by the profit motive which provides a powerful incentive because any reduction you can achieve shows in the bottom line. The mantra in private practice is to cut down waste and improve efficiency. Hence a private practitioner will try to see as many patients as possible, which results in a lower cost per patient.
A public doctor is unlikely to be driven by the same motivation but might prefer to do other things such as research or other medical-related activities, but which will not improve his unit cost per patient.
There is nothing wrong with this behaviour and the point isn’t who is the better doctor. They are driven by different motivations concerning costs that explain why public sector costs may not be lower than that in the private sector.
This being the case, it is critical that the public sector implements effective measures to manage costs because individual players in the system may not.
The government has started, in Healthier SG, with budget allocations for hospitals based on the population being managed rather than the number and type of cases treated.
With a fixed budget, hospitals should hopefully be more cost conscious.
But it should do more to learn from private sector practices, in the way staff are deployed, their job scope and the way work is organised to bring down costs to comparable levels.
It should be noted that the discussion above is about the cost of providing medical services.
What is charged to the patient is a completely different matter, and there is, similarly, a world of a difference between the two sectors.
While private hospitals may be relentless about cutting costs, they will charge whatever the market can bear, regardless of their actual costs. Hence patients may end up paying sky high prices, even as costs are managed, as might have been the case mentioned at the beginning of this article. There may be a need for some form of price control in the private sector, to prevent them from running away uncontrollably.