Privatization Issues

Privatizing Public Hospitals

Community hospitals, many built during the Great Depression, are relics of a bygone era and should be privatized. That is the conclusion of a new study by Richard Tradewell, published by the Reason Public Policy Institute.

There are a number of benefits to be derived by going private -- among them less bureaucracy, increased accountability and better service at lower cost. Privatization agreements typically provide up to 25 percent more care for the indigent than their publicly funded counterparts.

There are several options open to governments exploring privatization of hospitals and health clinics.

• Selling the facility could produce a large cash payment up front -- which could be used to retire debts and establish a trust fund for community health care.

• Hospitals, clinics and their equipment could be leased to management firms.

• A local government might decide to operate the facility jointly with a private firm, or it could sell a portion of the assets for cash -- retaining power to appoint a portion of board members.

• Rather than operating a hospital, a government could purchase the number of bed days it needs for indigent care.

Source: Richard L. Tradewell, "Privatizing Public Hospitals: Strategic Options in an Era of Industry-wide Consolidation," August 1998; Policy Study 242, Reason Public Policy Institute, 3415 S. Sepulveda Boulevard, Suite 400, Los Angeles, Calif. 90034, (310) 391-2245.