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Is Private Production of Hospital Services Cheaper than Public Production? A Meta-Regression of Public vs Private Costs and Efficiency for Hospitals

Germà Bel () and Marc Esteve ()
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Marc Esteve: University College London & ESADE.

No 201824, IREA Working Papers from University of Barcelona, Research Institute of Applied Economics

Abstract: The question of whether private organisations can outperform public ones in public service delivery has been a major topic of interest over the last few decades. However, empirical evidence does not systematically support the hypothesis of lower costs and higher efficiency when private organisations deliver public services. To better understand the cost and efficiency differences of public and private organisations, we conduct a metaregression analysis of econometric studies relating to hospital ownership and performance. We analyse 61 estimations extracted from health studies using public versus private hospital costs and efficiency as an independent variable. Our analysis shows a genuine true effect in favour of public sector hospitals. We found evidence that public production of health services may be cheaper if this is provided by the public sector. However, the results show that when technical efficiency is considered, the private sector performs better than the public counterpart. And the opposite happens when instead of considering technical efficiency we consider financial costs. We discuss how the divergence in the results is affected by factors such as country, year, use of panel data in the study, whether performance is measured by examining financial costs, or if the study considers not-for-profit hospitals, among others.

Keywords: Privatization; transaction costs; government regulation; meta- regression analysis JEL classification:L32; L33 I18 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eff
Date: 2018-10, Revised 2018-10
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