Efficiency of health care institutions in private sector

Review of available literature does not support the hypothesis that private for profit hospitals are more efficient. Contrary to popular belief, administrative costs tend to be slightly higher in forprofit hospitals compared to nonprofit and public HCIs. The overall cost of health care in areas largely served by private forprofit HCIs is generally more compared to areas largely served by nonprofit and public HCIs. Both forprofits and nonprofits responded to incentives of reimbursement policy by maximising their revenue, rather than minimising their cost of providing the services. But forprofit hospitals are usually more aggressive in pricing compared to nonprofits. One such aggressive pricing strategy is to keep the charge for routine services competitive and charge higher prices for ancillary services, which are less easy to compare from hospital to hospital.

The only efficiency related information collected by this study were the utilisation rates like bed occupancy, turnover rate, outpatients per bed, etc. Even these estimates are based on rough data, since the private HCIs do not generate statistics to arrive at accurate estimates of utilisation rates. There was no difference in utilisation rates between private and public HCIs, except for the outpatient load, which was considerably higher in the public HCIs.