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Private hospitals within a public health care system: the German example

Montreal, February 21, 2012 – As headlines in the last few days have again reminded us, emergency room overcrowding and long waiting times for surgery have not diminished in Canada. Other developed countries are doing a better job of managing these problems through use of the private sector.

In the last two decades, many public hospitals have been privatized in Germany, so much so that the share held by private for-profit hospitals has gone from 15% to 33% during this time. Frederik Roeder, a health economist and author of the Economic Note published today by the Montreal Economic Institute (MEI), shows that this change has improved the quality of health care without compromising accessibility.

“Contrary to a widespread fear in Canada, private hospitals do not cut corners in quality of service to reduce their costs,” Mr. Roeder states. “Studies show that the success of private institutions relies on their reputations: higher-quality care is what enables them to attract patients and make profits.” For example, the organization in charge of monitoring the quality of care in Germany has found 9% more problems in public hospitals than in for-profit private hospitals.

Canada and Germany share similar values of universality in health care, and both devote about 12% of GDP to it. But in terms of actual care, the Germans are much better served. “Long waits in emergency rooms are a non-existent phenomenon in Germany,” notes the author.

To fulfil the needs of patients, private institutions have managed, for example, to reduce the number of cases per doctor at a pace five times faster than public hospitals. Ten years later, doctors were thus able to spend 25% more time with their patients. In addition, privatized hospitals have produced efficiency gains exceeding those of public hospitals by 3.2% to 5.4%.

“The German experience proves that the involvement of private actors can have positive effects and poses no threat to the universality of health care,” remarks Michel Kelly-Gagnon, the president and CEO of the MEI. “Germany has integrated a large proportion of private hospitals within its public health care system, yet public financing is still at a level comparable to that of Canada.”

The Economic Note titled The private sector within a public health care system: the German example, prepared by health economist Frederik Cyrus Roeder in collaboration with MEI economist Yanick Labrie, may be consulted free of charge on our website.

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The Montreal Economic Institute is an independent, non-partisan, not-for-profit research and educational organization. Through its publications, its media interventions and its conferences, the MEI stimulates debate on public policies in Quebec and across Canada by proposing wealth-creating reforms based on market mechanisms. It does not accept any government funding.

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