Private for-profit healthcare seems to lead to lower staffing, higher death rates, and worse care overall. But is that so bad as long as it generates a handsome profit for its owners?

When your politicians tell you healthcare is a business, pick up your crutches and run the other way.

Ten years ago a study came out that seemed to turn common knowledge on its head. At the time everyone assumed that private hospitals gave better care. They were more efficient, and the doctors had an incentive to provide better service.

But then a group of Chilean researchers looked at 6,000 studies on healthcare, and winnowed them down to a handful of high-quality studies which they analysed in a systematic review.

Internationally, it seemed that contrary to common opinion, private healthcare actually provided a lower quality of care than non-profit care, which in turn was lower quality than public healthcare. If you could choose, you wouldn’t knowingly choose private. Why?

No one can say for certain which is the most important factor, but there seems to be a few important factors at play:

1. The profit motive is not necessarily aligned with good patient outcomes. The benefit of not having to wait so long was overshadowed by the number and scale of inappropriate and unnecessary tests and interventions.

2. Understaffing was commonplace in private institutions, which makes sense, since employee costs (especially nursing costs) are the single biggest item in most healthcare budgets. Cutting back on staff is an easy way to score a quick win.

3. Charges were billed at inflated rates: “whatever the market can bear” isn’t just a saying.

As someone who has worked in a myriad of healthcare systems, from “eat what you kill” private practice to being a flat salaried worker in a ‘socialised medicine’ public system, I can say that these factors pass the ‘sniff test’. They fit with what I’ve seen and experienced.

In the private systems I’ve worked in, there was an obvious financial incentive to overdo it. To order too many studies, to do too many procedures, and to up-code one’s bills to generate more income. It felt like good care to the patients, always getting as much as possible. But it reality, it translated into worse patient outcomes. Even under the best of circumstances medicine can be hard to practice. When inappropriately and injudiciously used in the pursuit of profit, medicine can become a danger. The numbers bear out this risk: more complications, and higher death rates.

You don’t want your hospital looking at you as a walking dollar sign.

When your politican tells you healthcare is a business, be worried. “Profits before patients” doesn’t help you as a patient, or society. But it is profitable.

Another consideration is understaffing. Private hospitals have boards of directors that are always seeking to maximise profits and minimise costs. And staff are a large cost to be minimised.

This wouldn’t be a problem is healthcare was a perfect market. In practice, healthcare is about as diseased a market as you can get: very high barriers to entry, very opaque practices, and very poor measures of outcomes. Its hard to know what you’re getting when you go private. Is faster care better, even if it’s unnecessary? Are flash surroundings and doctors better, even if they’re trying to maximise profits?

No one would know that answer to these questions without big data and some number crunching. And in 2014, when they crunched the numbers, they found significantly worse outcomes for private healthcare.

More expensive, more understaffed, and with more medical harms, including deaths.

It’s not reassuring.

But was that still the case in 2024.

A huge Lancet article looked at whether privatisation has an association with increased rates of death. It was fascinating.

I’ll put that piece up on Substack next week.

—Dr Gary Payinda