Public hospitals versus private hospitals - some reflections

The Minister of Health, Mr Kwaku Agyemang Manu, is reported to have wondered why private hospitals are more efficient than public hospitals in Ghana during his interaction with heads of public health institutions in the Western Region recently.

He reportedly queried why government paid salaries, built facilities, supplied equipment, medicines, carried out maintenance, in some cases paid utilities, but some public hospitals were still cash strapped and moribund.

In management parlance, an organisation is said to be efficient when it uses less resources to achieve more outputs. As asserted by the minister, public health institutions use more resources for what they attain, and are therefore not efficient, compared to their private counterparts.

Causes of inefficiencies

Indeed, it is an open secret that among the four categories of hospitals in Ghana, namely public, quasi-government, faith-based/mission and private hospitals, the public hospitals are the least efficient. The reasons for this are not far-fetched.

One of such reasons is that hire and fire decisions regarding human resource for healthcare delivery are centralised in the Ghana’s public health sector.

The authority to hire and fire permanent staff solely rests with regional and central levels of the Ghana Health Service, in particular.

If the medical superintendent of a public hospital cannot fire even a hospital labourer, who is troublesome and counterproductive, how can that hospital be efficient? 

Moreover, undue political and societal interference makes matters worse for managers of public hospitals as far as hiring and firing decisions are concerned. It is often said that public/civil servants are like headless nails; easy to drive in but difficult to remove.

Weak management

Weak management and leadership skills, as well as poor orientation in managing public hospitals, probably account for the main causes of the perceived inefficiencies in some public hospitals in the country.

It is noteworthy that hospitals in this era are business entities and must be managed with that orientation in view.

Therefore, managers and leaders must be well grounded in, at least, four core areas of managing any business entity.

These are planning and budgeting, people/human resource management, financial management and information management.

Managers of health facilities must regularly update their knowledge and skills in these areas to be abreast of current trends and techniques.

Being a professor of nephrology does not necessarily make one an equivalent professor of strategic management. They are totally different fields of endeavour and anybody being appointed as a manager or a leader of a hospital should be trained in management, preferably hospital management.

The person must have in-depth knowledge 0f in managing and motivating people.

The current four-week Health Administration and Management (HAM) Programme being organised by the Ghana Institute of Management and Public Administration (GIMPA) for most hospital managers is commendable but very inadequate to prepare managers or leaders of public hospitals for this enormous responsibility if the health sector solely relies on this programme.

It is, therefore, not surprising that a medical director in a specialist public hospital in Ghana was recently directed to go for re-training in People Skills Management.

It is worth stating that people skills management, planning, information management, business/financial management and leadership skills are so crucial that any manager of a hospital; be it private or public, who lacks them may only be managing fortuitously.

In the United Kingdom now, one cannot even head a department of a hospital without a master’s degree in business management, let alone the entire hospital.

Public procurement and tax requirements, ironically in some respects, also cause inefficiencies in public hospitals.

The minister in his comments alluded to corrupt practices as a cause of inefficiencies in public hospitals.

Corruption may be one of such causes but not alone.

Taxation requirements increase the cost of public procurements in public hospitals by at least 20.5 per cent; made up of 17.5 per cent Value Added Tax/National Health Insurance Levy (VAT/NHIL) and three per cent income tax.

Weak mechanisms in the tax administration of this country is, therefore, another cause for this public discourse.

A private vendor or supplier can easily waive off the VAT/NHIL and income tax for private hospitals, but that cannot be done in the public hospitals.

For government hospitals, it is a sine qua non to deduct taxes for government but that is not the case for private hospitals.

Also, because of the prolonged delay in reimbursing hospitals for services provided to the National Health Insurance clients, which sometimes takes about 10 months, suppliers of medicines and non-medicines have the penchant to pass on the cost of borrowing to hospitals.

This will certainly not be less than 20 per cent.
Private hospitals, because of their greater efficiency, are able to take advantage of both cash and trade discounts, thereby making them more efficient.

In management, what gets measured and inspected gets done.

Currently, there is no direct output or performance measurement, which is seriously and stringently enforced for public hospitals, such that their managers’ existence or superintendence over these hospitals is contingent on the attainment of such stated targets, objectives or goals.

The “carrot and stick” approach in management is virtually non-existent in the management of public hospitals. Managers do not see their survival or existence dependent on how efficient or successful their hospitals become.

This is because monthly salaries and other benefits are guaranteed.

This is not the case for the private hospital managers, whose stay as managers depends to, a large extent, on the profitability of such hospitals.