Public and Private Hospitals

The average efficiency of public and private hospitals is about 20 per cent below best practice after adjusting for differences in what hospitals do and who they treat, according to the ‘Public and Private Hospitals’ Research Report released by the Productivity Commission. However, the Commission also found that the private sector tends to be slightly more efficient among large hospitals, while the public sector tends to be more efficient among small hospitals. The Report responds to a request by the Australian Government to examine three aspects of the health care system - the relative performance of public and private hospitals; rates of informed financial consent for privately-insured patients; and the most appropriate indexation factor for the Medicare Levy Surcharge income thresholds. Comparing the relative performance of hospitals was challenging. There are major differences within and between public and private hospital systems that make like-for-like comparisons difficult. There was also data limitations, which the Commission sought to address. Future comparisons will be assisted by enhanced data collections for public hospitals already foreshadowed by governments and would be further improved by expanded reporting for private hospitals. Based on available data, the Commission also found that: public and private hospitals have similar overall costs, but there are differences in the composition of costs - medical and diagnostics, and prostheses are more costly in private hospitals; while general hospital costs and capital costs are higher in public hospitals; Private hospitals appear to have lower infection rates than public hospitals (but private hospitals generally treat patients who have a lower risk of infection); private hospitals have higher labour productivity and shorter lengths of stay than public hospitals (partly due to differences between the sectors in what they do and who they treat).