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Monday, 4 February 2013

Private health care facility goes bankrupt - what does it mean for public health care system?

The public private debate in Canada hit another hurdle this past week, when one of the flagship private hospitals in Calgary went belly-up, leaving Alberta tax payers with the debt, costs, and embarrassment.   Bankruptcy notice

Not that private health care can’t work in Canada, there are examples of successes across the country and standard option for operations such as home care and long term care.  Just that private health care is not going to thrive as a source of profit.  Firstly, the public payer has such purchasing power that margins will be razor thin as the community care sector demonstrates, secondly, that  while some members of the public might be willing to pay for hotel services, it is just not part of the equitable social fabric we try to weave, thirdly, the Canada Health Act requirements for universality and public accountability limit diversification options in the private sector, and finally, the public health care sector administrative margins have been driven so thin that private operators must try to shave profit margins within administrative costs while most operational costs and expectations are comparable.

In some jurisdictions that run parallel private and public systems (eg New Zealand, Australia and to some extent the US), a major criticism is that the private system pays better wages and hence attracts better staff.  The cost of providing care is greater.  Given that in Canada, the funding is still provided from the public purse, the quality gains to be made for elite staffing are not affordable within the established allocations.  Hence, while the hospital may have been private, it was still bound by public funding and the reason why private facilities will unlikely flourish within Canada. 

Perhaps a nicer way to say it, in the US, the costs for profit and administration total over  17% of health care spending.  In Canada, the public cries unfair at comparable administrative costs that are below 4%.

Of course, one could argue the economic stimulation benefits of that additional 13% spending would place Canada on much sturdier financial territory as an integral part of public spending. There’s a hypothesis to intrigue economists who were more concerned with ensuring the financial sector remained afloat during the ’09 recession. 

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