Private Practice in Public Hospitals: Should Senior Consultants Be Prioritized?

This paper proposes a normative analysis which investigates the optimal management of private practices within a public hospital. Private income supplementation induces consultants to attend to more patients which reduces waiting lists and the public cost of healthcare. It is however optimal to cap the consultants’ private income, regardless of seniority. When first-degree discrimination is possible, the more productive (senior) consultants receive a higher private income than their junior counterparts when priority is given to shortening waiting lists. However, they must charge a lower fee when priority is given to protecting the private patient's consumer surplus. When discrimination is not possible, the design of envy-free contracts enables senior consultants to extract rents and these rents increase with the private fee charged by their junior colleagues. As a result, and in this situation, junior consultants systematically get a lower private supplemental income when working alongside senior consultants.