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Outsourcing day surgery to private for-profit hospitals: the price effects of competitive tendering

Published online by Cambridge University Press:  06 April 2017

Terje P. Hagen ,
Geir Hiller Holom  and
Kebebew N. Amayu
Terje P. Hagen*
Affiliation:
Department of Health Management and Health Economics, University of Oslo, Oslo, Norway
Geir Hiller Holom
Affiliation:
Department of Health Management and Health Economics, University of Oslo, Oslo, Norway
Kebebew N. Amayu
Affiliation:
Department of Health Management and Health Economics, University of Oslo, Oslo, Norway
*
*Correspondence to: Terje P. Hagen, Department of Health Management and Health Economics, University of Oslo, P.O. Box 1098, 0317 Oslo, Norway. Email: t.p.hagen@medisin.uio.no
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Abstract

Setting prices for elective patient treatments in private for-profit (PFP) hospitals in traditional tax-funded health systems is challenging since both the organisation of these hospitals and the tasks they perform differ considerably from what we find in public hospitals. From the year 2000, Norway became one of a few countries to gradually implement a procurement system based on competitive tendering when outsourcing elective surgery. In this study we analyse the effect of introducing competitive tendering on the prices paid to PFP hospitals. Pricing data were collected from the formal contracts awarded to PFP hospitals and defined in terms of both absolute and relative prices. We found that PFP hospitals performed day surgeries at markedly lower prices than public hospitals and that competitive tendering triggered the price reduction. We speculate that the PFP hospitals’ lack of acute services, less severe patient population, reduced teaching responsibilities and ability to streamline production, as well as other factors, explain the lower prices at PFP hospitals.

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Health Economics, Policy and Law , Volume 13 , Issue 1 , January 2018 , pp. 50 - 67
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© Cambridge University Press 2017 

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