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The profit motive would allow us to improve our health care system, says the MEI

Montreal, Thursday, November 6, 2014 – During a talk he gave last week, Finance Minister Carlos Leitao said that certain health care and educational services could be provided more efficiently if they were managed by private companies and other non-governmental entities. A wave of panic quickly set in, with critics crying out that the profit motive does not serve the public interest. Is this concern justified?

According to a new study published today by the MEI, the experiences of other countries show on the contrary that the involvement of the private sector in the administration of hospitals or clinics can lead to substantial efficiency improvements, reduced costs, service improvements and shorter wait times.

Without compromising the principle of universality according to which everyone can receive treatment regardless of income, the MEI suggests that we take inspiration from the experiences of certain European countries in order to expand the supply of services. The solutions to be put in place would be based on market mechanisms, whereby success is achieved by offering patients a superior quality of service.

“Many detractors of private health care claim that it would be more expensive to fund services provided by private companies. Yet the crucial mechanism that has to be kept in mind is precisely the profit motive, which encourages service providers to increase their efficiency and lower costs,” explains Yanick Labrie, author of the study.

Many people believe that the profit motive would encourage hospitals and clinics to cut corners or discourage doctors from treating the more complex cases, all in order to save money. However, the revenues of privately managed medical facilities depend on the number of patients they attract. In a competitive environment where the money follows the patient, hospitals that cut on service quality drive away their clients and cannot make a profit.

In Europe, the Capio Group, which manages some 60 hospitals and clinics, eloquently illustrates the harmonious cohabitation between the private and public sectors. The company has succeeded in greatly improving service quality despite receiving less public funding than comparable public hospitals. The Saint Göran Hospital that it runs in Stockholm is among the best hospitals in Sweden in terms of care quality and safety, and in terms of speed of access. Whereas wait times in Quebec emergency rooms have been a glaring problem for years, the average emergency room wait in Saint Göran lasts 42 minutes, versus 57 minutes in Sweden as a whole.

“The myths and negative beliefs surrounding the role of the private sector in health care are a real obstacle to the improvement of our system. While Canadians devote greater and greater amounts of public funds to health care, they have a system that does not meet their needs. Solutions exist, and we have to stop accepting the unacceptable,” concludes Michel Kelly-Gagnon, President and CEO of the MEI.

The Economic Note entitled “The Positive Role of Profit in the Field of Health Care” was prepared by Yanick Labrie, economist with the Montreal Economic Institute. This publication is available 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 studies and its conferences, the MEI stimulates debate on public policies in Quebec and across Canada by proposing wealth-creating reforms based on market mechanisms.

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Interview requests: Mariam Diaby, Communications Director, Montreal Economic Institute / Tel.: 514-273-0969 ext. 2231 / Cell.: 514-668-3063 / Email: mdiaby@iedm.org

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