Assessing the Impact of Privatizing Public Hospitals in Three American States: Implications for Universal Health Coverage

Many countries with universal health systems have relied primarily on publicly-owned hospitals to provide acute care services to covered populations; however, many policymakers have experimented with expansion of the private sector for what they hope will yield more cost-effective care. The study provides new insight into the effects of hospital privatization in three American states (California, Florida, and Massachusetts) in the period 1994 to 2003, focusing on three aspects: 1) profitability; 2) productivity and efficiency; and 3) benefits to the community (particularly, scope of services offered, price level, and impact on charity care). For each variable analyzed, we compared the 3-year mean values pre- and postconversion. Pre- and postconversion changes in hospitals’ performance were then compared with a nonequivalent comparison group of American public hospitals.The results of our study indicate that following privatization, hospitals increased operating margins, reduced their length of stay, and enjoyed higher occupancy, but at some possible cost to access to care for their communities in terms of higher price markups and loss of beneficial but unprofitable services.