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Increased use of private hospitals

Partner Institute: 
The University of Auckland
Survey no: 
(14) 2009
Toni Ashton, CHSRP
Health Policy Issues: 
Rolle Privatwirtschaft, Organisation/Integration des Systems, Zugang
Current Process Stages
Idee Pilotprojekt Strategiepapier Gesetzgebung Umsetzung Evaluation Veränderung/Richtungswechsel
Implemented in this survey? nein nein ja nein nein nein nein


On 24 June 2009, the government amended protocols which set out the circumstances under which District Health Boards might purchase publicly-funded medical and surgical services from private sector providers. The objective is to encourage greater collaboration between the public and private sectors in the planning and provision of services, thereby maximizing use of available capacity and improving access for patients.

Purpose of health policy or idea

District Health Boards (DHBs) are responsible for either purchasing or providing services for the population living within their district. Because DHBs own the public hospitals, most publicly-funded hospital services are provided in these public hospitals. Around 6% of planned (non-urgent) publicly-funded operations are currently purchased from private hospitals. However, these are usually purchased through short term, spot contracts, often as a means of spending excess funds towards the end of the financial year. The government now wishes to encourage "smarter use" of the private sector by encouraging DHBs to engage with private providers in planning services and in developing longer term contracts. The overall aims are to improve the use of available hospital capacity, to improve efficiency of service delivery, and to reduce waiting times by increasing access for patients.

Main points

Main objectives

Improve access to and efficiency of hospital services.

Type of incentives

The policy does not include any special financial or non-financial incentives for DHBs to increase their use of private hospitals.

Groups affected

District Health Boards, Private hospitals, Surgeons and other specialists


Characteristics of this policy

Innovationsgrad traditionell recht traditionell innovativ
Kontroversität unumstritten recht kontrovers kontrovers
Strukturelle Wirkung marginal recht marginal fundamental
Medienpräsenz sehr gering sehr gering sehr hoch
Übertragbarkeit sehr systemabhängig recht systemneutral systemneutral


Political and economic background

A new center-right government came into power in November 2008 following 9 years of government by a center-left coalition. A key plank of the health policy of the senior coalition partner, the National Party, was to "Support the smart use of the private sector to increase the number of people getting timely access to vitally needed surgery, and reduce hospital waiting lists" (National Party, 2008). Towards this end, the government changed the protocols which provide guidance to DHBs about the circumstances under which they might purchase services from private sector providers. The new protocols remove a requirement that: "in respect of hospital-based services, publicly-provided services are preferred, all other things being equal". It also releases DHBs from requirements to (a) include any proposals for a significant shift of services from a public to a private provider in their annual and strategic plans, and (b) consult with the relevant health professionals about the proposed change. Any significant shifts to a private provider will, however, still be subject to approval by Ministers. DHBs must also ensure that such shifts do not threaten the long-term viability of their remaining services.

Change of government

In November 2008, a center-left government was replaced by a center-right government which has a stronger belief in the potential efficiencies associated with markets and private sector provision.

Purpose and process analysis

Current Process Stages

Idee Pilotprojekt Strategiepapier Gesetzgebung Umsetzung Evaluation Veränderung/Richtungswechsel
Implemented in this survey? nein nein ja nein nein nein nein

Origins of health policy idea

During the 1990s, a purchaser-provider split (or an internal market as it was called in the UK) was introduced into the New Zealand health system. Under these arrangements, in theory at least, public and provider providers would be treated equally, with the most efficient providers being awarded contracts to provide services. In practice, the incumbents won most of the contracts. This meant that public hospitals continued to provide most publicly-funded hospital services as they had done prior to the reforms. There were a number of reasons for this, including the fact that many private hospitals were not interested in providing services to public patients and so did not bid for contracts.

In 2000, the New Zealand health system was once again restructured, with 21 DHBs being established to undertake the roles of both purchaser and provider. The center-left government of the day indicated that, under this regime, public provision was preferred whenever possible.

The re-election of a center-right government in 2009 means that private hospitals are once again viewed as an acceptable alternative to public hospitals. It remains to be seen whether or not this policy will lead to a greater use of private hospitals than it did in the 1990s.

Initiators of idea/main actors

  • Regierung: This policy was part of the National Party's 2008 election manifesto.
  • Leistungserbringer
  • Kostenträger
  • Politische Parteien

Approach of idea

The approach of the idea is described as:
renewed: Freedom of choice of providers was central to the quasi-market system that was in place in New Zealand from 1993 to 2000.

Stakeholder positions

Anecdotal evidence suggests that District Health Boards are generally pleased to be given more flexibility in their purchasing decisions. However they have some concerns about the lack of data available about, for example, relative prices and private sector capacity. They are also acutely aware of the need to prioritise elective surgical procedures with other, more pressing, demands on their budgets.

In New Zealand, specialists can choose to share their time between working in the public and private sectors. This provides them with an opportunity to supplement their public sector salaries with private, fee-for-service payments. Thus it seems likely that specialists who split their time between the two sectors are likely to support this policy. However, the Association of Salaried Medical Specialists, which represents specialists working in public hospitals, has expressed concerns about the policy on the grounds that it will increase the demand for specialists in the private sector and so may further limit the supply of specialists for the public system where retention of senior medical staff is already problematic.

The Green Party, which is currently in opposition, has also criticised the policy on the same grounds. In addition, they argue that contracting out of services by DHBs ignores opportunities for greater collaboration among DHBs to better utilise existing spare capacity.

The Private Surgical Hospitals Association has expressed its support of this policy (Private Surgical Hospitals Association, 2009). However it's primary interest appears to be in opportunities for increased private financing of health services, rather than increased private provision of services that are publicy funded.

Actors and positions

Description of actors and their positions
National Partysehr unterstützendsehr unterstützend stark dagegen
District Health Boardssehr unterstützendunterstützend stark dagegen
Private Hospitalssehr unterstützendunterstützend stark dagegen
Association of Salaried Medical Specialistssehr unterstützenddagegen stark dagegen
Specialistssehr unterstützendunterstützend stark dagegen
District Health Boardssehr unterstützendunterstützend stark dagegen
Politische Parteien
The Green Partysehr unterstützendstark dagegen stark dagegen

Influences in policy making and legislation


Actors and influence

Description of actors and their influence

National Partysehr großsehr groß kein
District Health Boardssehr großsehr groß kein
Private Hospitalssehr großneutral kein
Association of Salaried Medical Specialistssehr großneutral kein
Specialistssehr großgering kein
District Health Boardssehr großsehr groß kein
Politische Parteien
The Green Partysehr großgering kein
National PartySpecialistsPrivate HospitalsDistrict Health Boards, District Health BoardsAssociation of Salaried Medical SpecialistsThe Green Party

Positions and Influences at a glance

Graphical actors vs. influence map representing the above actors vs. influences table.

Adoption and implementation

The extent to which DHBs purchase more services from private hospitals as a result of this policy announcement depends on many factors such as: their capacity to supply adequate services in their own public hospitals, the price that they are able to negotiate with private providers, their relationship with private providers, and the impact of outsourcing on their training needs. The policy is likely to be more relevant to DHBs in the larger urban areas where (a) there is more pressure on the public hospitals and (b) there are more choices of private providers.

Monitoring and evaluation


Results of evaluation


Expected outcome

The potential benefits associated with DHBs purchasing more elective surgical services from private providers include: increasing the number of people treated, reducing public hospital waiting times, improved utilisation of existing spare capacity across the two sectors, greater collaboration between the two sectors, and reduced prices. At the same time the policy carries a number of risks. These include the possibility that the private sector will be more costly than the public sector; the size and nature of any additional transaction costs associated with contracting out; increased pressure on the public sector workforce if health professionals spend more time working in private hospitals; the effects of different pricing mechanisms on access to services; and potential impact on the financial viability of services provided by some of the smaller public hospitals. If the policy is to be successful, the DHBs will need to be alert to these - and other - potential risks. They will also need to be willing and able to withdraw from the process if the risks are considered to outweigh the benefits.  

Impact of this policy

Qualität kaum Einfluss neutral starker Einfluss
Gerechtigkeit System weniger gerecht two System gerechter
Kosteneffizienz sehr gering neutral sehr hoch

While this policy may secure more timely access to services, there is some concern that the easier, less costly patients would be treated privately, leaving the more complex and more costly cases for treatment in the public hospitals. If this occurs, it could make the system less equitable.


Sources of Information

  • National Party. 2008 Health: Waiting lists. Accessed 30 August 2009.
  • Ryall, T. Public Hospitals to Make Smarter Use of the Private Sector. Press Release. June 29 2009.
  • Association of Salaried Medical Specialists. Repairing the 'Leaking Bucket'. A paper to the Commission on Competitive and Sustainable Terms and Conditions of Employment for Senior Medical and Dental Officers employed by the DHBs. January 2009.
  • Private Surgical Hospitals Association. A Balanced Healthcare System for New Zealand: Public and Private Sectors Working Together Cooperatively and Collaboratively. Press Release. 24 June 2009.
  • Hague, K. Ryall Undermining Public Health for Private Gain. Press Release. July 28 2009.

Author/s and/or contributors to this survey

Toni Ashton, CHSRP


Empfohlene Zitierweise für diesen Online-Artikel:

Toni Ashton. "Increased use of private hospitals". Health Policy Monitor, October 2009. Available at