NCPA - National Center for Policy Analysis

Bringing Competition To Canadian Health Care

February 8, 2000

Alberta Premier Ralph Klein has proposed contracting with private hospitals for surgical services to reduce the time patients must wait for surgery at public hospitals in the province. A survey of the academic literature on private hospitals published by Canada's Fraser Institute finds there is a strong case for the superiority of private hospitals compared to government-run ones, and suggests that competition with private hospitals improves the performance of public hospitals.

  • Of the 15 studies reviewed, eight showed that private hospitals performed better, three found that public hospitals performed better and four revealed no difference in performance.
  • The research suggests that the benefits of enhanced hospital competition are actually greater in areas where the hospital market was less competitive to begin with -- which is the case with hospital competition now in Canada.
  • "The economics literature on the effects of hospital competition in the U.S. reveals that, over the last 10 years, competition has been unambiguously beneficial, lowering cost and increasing quality," notes study author Martin Zelder.

U.S. studies comparing for-profit and nonprofit hospitals have generally detected no difference between them because physicians in nonprofit hospitals have been able to increase their incomes by effectively operating those institutions like for-profit entities. But clear and significant differences in private and public (i.e., government-owned) hospital performance remain, says Zelder, as public hospitals are consistently found to be less efficient than private ones.

Source: Martin Zelder, "How Private Hospital Competition Can Improve Canadian Health Care", Public Policy Sources No. 35, January 28, 2000, Fraser Institute, 4th Floor, 1770 Burrard Street, Vancouver, B.C. V6J 3G7, Canada, (604) 688-0221.


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