For-profit vs. non-profit delivery of health services

In 2004, Stephen Harper said that, “It does not matter who delivers health care, it matters that everyone can receive it.” In his 2006 Speech from the Throne, B.C. Premier Gordon Campbell asked rhetorically, “Does it really matter to patients where or how they obtain their surgical treatment if it is paid for with public funds?”

This is part of the new rationale from governments sympathetic to privatization, which is normally expanded to include the following “logical” statements: (1) Private, for-profit care is fine, as long as the patient does not receive an invoice; (2) Private, for-profit care is necessary because it will decrease waiting times; and (3) Private, for-profit care will shorten waiting times at a cheaper rate than public, or non-profit care could have.

The problem with these statements is that evidence from around the world proves that their logic is completely backwards – that private, for-profit care ends up costing governments more, and that it ends up lengthening waiting times. The way health services are delivered does matter to patients and citizens.

1) Private, for profit care costs more
In Canada and in the United States, there is no evidence that for-profit care costs less. Every piece of evidence shows the opposite. (All dollar figures are Canadian unless otherwise noted.)

Exhibit A: According to the New England Journal of Medicine, between 1990 and 1994, private, for-profit hospitals in the U.S. had higher costs ($8,115 US) for every discharged patient than private, non-profit hospitals ($7,490 US) and public hospitals ($6,507 US)¹.

Exhibit B: According to a 2004 analysis of eight U.S. studies, which looked at an average of 324 hospitals each and 350,000 patients altogether, payment for care at private, for-profit hospitals in the U.S. was 19 per cent higher than in non-profit hospitals².

Exhibit C: Canada’s public health insurance plan pays doctors between $700 and $900 per full hip or total knee replacement. Adding the cost of consultations, other payments to the anaesthesiologist and nurses, as well as the maintenance and capital costs associated with health facilities, we reach a total cost of about $8,000³ per operation. The same hip or knee replacement at a private facility like B.C.’s Cambie Surgery Centre, owned by Dr. Brian Day, or Mark Godley’s Maples Surgical Centre in Winnipeg would cost between $14,000 and $18,000⁴.

Exhibit D: A cataract surgery at Winnipeg’s public Pan-Am Clinic now costs $700. When the clinic was under for-profit management, the same operation cost $1,000⁵. At the for-profit Maples Surgical Centre the price doubles to $2,000⁶.

Exhibit E: The cost of for-profit care is just as high in the United Kingdom, where a hip replacement in a private hospital or clinic varies in price from £6,000 to £15,000⁷ (or $14,000 to $35,000), including private hospital charges and consultant’s fees. In the U.K.’s non-profit hospitals, the cost of a hip replacement averages around £5,000 (or $11,000). Similarly, a coronary bypass in a non-profit setting cost the U.K.’s public insurance plan £6,320 (about $14,000) in 2002-03. The same procedure cost the public insurance plan an average of £12,060 (or CAN$27,000) in a for-profit setting⁸.

Simply put, relying on for-profit clinics and hospitals to provide health care under any type of insurance plan (public, mixed, or private) is poor public policy and ends up costing society more than it has to pay.

2) Private, for-profit care does not reduce waiting times
Health care resources cannot be created out of thin air. This is especially true of human resources such as doctors, nurses and other health care professionals.

For a for-profit clinic to open, it needs to hire professional staff. It does so by poaching doctors and other health professionals from the non-profit sector. As some people pay to use for-profit clinics, the waiting list will shorten for those who can’t afford to pay.

But remember – The non-profit sector now has fewer doctors and health professionals to work with as many have departed to work in for-profit clinics. Even though the waiting list might decrease, the waiting times would stay the same and could even increase for those who can’t pay the for-profit rates.

This is exactly what happened in the U.K. and New Zealand. Both have a public and a significant parallel private hospital system, and both have longer waiting times than Canada or other countries with only a single-payer, universal health insurance program⁹.

Canada has already spent millions on a strategy to address waiting times. It’s called the Final Report of the Federal Advisor on Wait Times, released in June 2006¹⁰. It proves that the long waiting list problem can and should be solved in the public, non-profit system.

3) Private, for-profit care exposes us to trade challenges
There is another strong argument against private, for-profit clinics: NAFTA. The health care sector is only weakly protected by Annex II (c) of the free trade agreement, which stipulates that:

Canada reserves the right to adopt or maintain any measure with respect to the provision of public law enforcement and correctional services, and the following services to the extent that they are social services established or maintained for a public purpose: income security or insurance, social security or insurance, social welfare, public education, public training, health, and child care. (Emphasis ours)

In a widely respected legal opinion written in March 2000¹¹, trade lawyer Steven Shrybman showed that under the current rules of NAFTA, Canada’s health care system could be challenged. As provincial governments tolerate and even fund private, for-profit medicine, the probability of such a challenge increases dramatically.

A U.S. for-profit health corporation could claim that they are prevented from accessing this emerging Canadian for-profit health care market. According to NAFTA’s national treatment clause, Canada must give U.S. companies the same treatment it gives its own businesses. If Canadian for-profit health care providers can charge us for care, U.S. companies should also be able to.

A successful U.S. NAFTA challenge to our health care system would create parallel private care in Canada. But this isn’t even the worst of it. U.S. corporations could also then challenge Canada’s public system as having an unfair advantage by virtue of the fact it is subsidized.

1. Woolhandler S and Himmelstein DU. 1997. “Costs of care and administration at for-profit and other hospitals in the United States.” New England Journal of Medicine; 336(11): 769-774.
2. Devereaux, P.J. et al. (2004). “Payments for care at private for-profit and private not-for-profit hospitals: a systematic review and meta-analysis”, CMAJ 170: 1817-1824.
3. Canadian Institute for Health information
4. Shimo, Alexandra, “Private Medical Care: Medical travel agents - Sun, sea, sand and a new set of knees”, MacLean’s, April 25, 2006.
5. Rachlis, Dr. Michael M., Public Solutions to Health Care Wait Lists. Ottawa: Canadian Centre for Policy Alternatives, 2005.
6. Shimo, Alexandra, “Private Medical Care: Medical travel agents - Sun, sea, sand and a new set of knees”, MacLean’s, April 25, 2006.
7. Private Healthcare UK, “Private hip replacement costs in the UK and abroad”, Accessed January 31, 2007.
8. Dyer, Owen, “NHS overcharged for private surgery”, British Medical Journal, 2004;328:1158 (15 May).
9. Dyer, Owen, “NHS overcharged for private surgery”, British Medical Journal, 2004;328:1158 (15 May).
10. Hughes Tuohy C et al. 2004. “How does private financing affect public health care systems? Marshaling the evidence from OECD nations.” Journal of Health Politics, Policy and Law; 29(3): 359-396.
Postl, Brian D., MD, “Final Report of the Federal Advisor on Wait Times”, June 2006.
11. Link