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Can private companies really offer us cheaper healthcare?


11:26 am - April 24th 2011

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contribution by Richard Blogger

Recently Deloitte produced a document aimed at Americans who are considering “healthcare tourism” that is, going abroad for elective treatment.

There are two things that struck me: how much it costs to have treatment in the UK, and why more Americans don’t come here for treatment.

The first thing is Figure 5:

This says that the cost of surgery (and the stay in hospital) for a hip replacement is $43,000 in the US and $9,000 in India (there is no indication here of how this “average” figure is calculated, but clearly if the patient has other medical issues – co-morbidity – then the cost will be more).

The document goes to great lengths to say that the foreign hospitals are to US standards, even to point out that they have “partnerships” with US hospitals where the clinicians are trained.

Most of the activity in NHS hospitals is paid through what is known as “payments by results” (this is actually, payment by activity because they are paid for what they do rather than for the outcome of the treatment). The tariff for hip operations are between £716 (“minor hip procedure”) to £8,152 (“major hip procedure” involving a major complication or patient co-morbidity). Using an exchange rate of £1 = US$1.65 the NHS rates are $1,181 to $13,451, ie similar to the rate for India and far lower than the US rate.

The government says that in the new NHS market private providers will be paid the NHS tariff. Clearly this presumes that the private sector can do these procedures for the NHS tariff (and still make a profit!).

So if the UK private hospitals are so cost effective, surely they would be the destination of choice for US healthcare tourists? They’re not.

This is the second thing I noticed when reading the the Deloitte report. The document estimates that 6 million Americans went abroad for treatment in 2010. Six million patients and barely a single one of them comes to the UK for our incredibly cost effective, but high quality treatment, why is that?

The Care Quality Council does not warn UK patients against using private hospitals, so one assumes that quality is good. So perhaps it is cost? Medical Care Direct is essentially a broker of private healthcare in the UK, their website gives a list of “guide prices” for common procedures and for hip operations they list:

Total hip replacement (Primary with or without cement) £6,800 to £10,450

Again, one assumes that this is without any major complications.* In US$ this range is $11,220 to $17,242. Again, it should be cost effective for an American to come to the UK for a hip operation (they’re going to Singapore for the treatment at that price).

There is one other possible reason why Americans are not queuing up to have their hip replacements in the UK: capacity. Capacity is determined by the numbers of surgeons, and if the limited number of surgeons are spending all their time clearing the 18 week NHS waiting lists they are not available for performing the same operation for bargain seeking Americans.

This begs the question: if the UK private healthcare providers are not already exploiting the droves of Americans seeking cheap, high quality elective healthcare, how can they be in any state to provide the NHS with much cheaper, equally high quality elective healthcare?

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Reader comments


1. Rolo Tamasi

Who says there is going to be any significant private supply except where the NHS doesn’t have the capacity (as now)? It does not appear to feature in current NHS plans.

“This begs the question: if the UK private healthcare providers are not already exploiting the droves of Americans seeking cheap, high quality elective healthcare, how can they be in any state to provide the NHS with much cheaper, equally high quality elective healthcare?”

Oh, very good, very clever.

Now let us unravel your points.

As you say, UK private hospitals are to be competing with UK NHS hospitals. We can assume that standards are similar here: for of course many “private” operations take place in NHS hospitals with NHS staff.

However, you then make the leap to asking why UK private isn’t competing with US, Singapore, or even Indian hospitals on these types of operations?

The most obvious answer is that while UK private is competitive in standards with UK NHS, neither are in fact competitive with US, Singapore or India.

That is, the very fact that while cheaper, UK medicine isn’t cheap enough for the standard that it is: it’s shite in fact.

Thus, from the very same set of facts that you present, the absence of foreign health care tourists taking advantage of our low low rates, we can conclude that it’s because our health care system isn’t very good.

@2, then perhaps you would care to explain why health outcomes in this country are better than those in the USA, if the system is, as your superior insights put it, “shite”?

,” then perhaps you would care to explain why health outcomes in this country are better than those in the USA, if the system is, as your superior insights put it, “shite”?”

Because we’re talking about two entirely different things. Health outcomes for the whole population (ie, life expectancy etc) are driven by a complex mix of genetics, diet and precautionary health care.

What is being discussed above is none of those things. What is being discussed above is elective, or discretionary, surgery. A very different kettle of fish altogether.

International comparisons of healthcare standards are notoriously tricky for all sorts of reasons but comparative infant mortality rates are widely regarded as one of the sensitive benchmarks, which is why the OECD routinely collects the data from its member states. Here is a link to the infant mortality rates in OECD countries in 2008:
http://www.oecd.org/dataoecd/4/36/46796773.pdf

Scrutiny show that the US ranking is abysmal – the US rates better than Turkey, Mexico, Romania, Bulgaria, Latvia and Chile and worse than that of all other OECD countries. As for the UK, we have a marginally higher rate of infant mortality than that of the average for all OECD members – so there is absolutely nothing to be complacent about.

Another OECD benchmark for healthcare outcomes is average life expectancy at birth. This link is to the data for 2007. As usual, Japan has the longest life expectancy. The UK is somehwere near the middle of the rank order while average life expectancy in the US is less than that for the UK and nearer the shorter end. Average life expectancy in west European countries is longer than in the US, which isn’t exactly reassuring about the patient outcomes of the US healthcare system:
http://www.oecd.org/dataoecd/22/36/45270718.pdf

On more international measures of healthcare standards, try this for OECD data on the number of practising physicians per head of population in 2007 – and further indices:
http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=PAC/COM/NEWS(2009)17&docLanguage=En

The UK is nearer the lower end of physicians per head among OECD countries (why is that?) and the US is even lower.

Scrutiny show that the US ranking is abysmal – the US rates better than Turkey, Mexico, Romania, Bulgaria, Latvia and Chile and worse than that of all other OECD countries. As for the UK, we have a marginally higher rate of infant mortality than that of the average for all OECD members – so there is absolutely nothing to be complacent about.

Without context this tells us next to nothing.

“Without context this tells us next to nothing.”

Not so. At the very least it raises implicit questions about why the US reports such a high rate of infant mortality compared with most other OECD countries – and also as to why average life expectancy at birth in the US is lower than in almost all west European countries.

On the face of it, there is nothing reassuring about healthcare outcomes in the US for the average citizen – which isn’t perhaps surprising given that 46 million Americans are reported – in American sources – to have no insurance cover for personal healthcare costs and that failure to pay for healthcare is the most frequent reason for personal bankruptcy in America. What is worse, is that America spends overall a larger percentage of its GDP on healthcare than any other affluent country – a recent FT feature quoted a figure of 17.5% of America’s GDP going on healthcare, which is getting on for double the percentage reported for Britain.

For the last half century I’ve encountered regular glowing endorsements of Britain’s NHS based on the premise that America’s healthcare system is truly awful. It is only in the last decade that comparisons are being made with healthcare systems in other west European countries. By those comparisons, the NHS looks rather mediocre.

Bob,

“Without context this tells us next to nothing.”

Not so. At the very least it raises implicit questions about why the US reports such a high rate of infant mortality compared with most other OECD countries – and also as to why average life expectancy at birth in the US is lower than in almost all west European countries.

Yes, it raises questions like, “are there differences in definitions of infant mortality in those countries?”, “how is infant mortality reported?”, “are there more premature births in the USA?” and so on, i.e. context.

10. dreamingspire

18 months ago under NHS ‘choose and book’ I opted for the local private provider, partly because of shorter waiting time, my own knowledge of the local general hospital (via friends) and partly on the recommendation of not the doctor (who offered no advice) but the receptionists at the Health Centre who knew people working at the local surgical factory. Excellent service and outcome (including in at 0915, general anaesthetic, walked out at 1600) and, of course, eastern European surgeon. But the waiting time was not much shorter, which suggests that there wasn’t much spare capacity 18 months ago.

@8: “Yes, it raises questions like, “are there differences in definitions of infant mortality in those countries?”, “how is infant mortality reported?”, “are there more premature births in the USA?” and so on, i.e. context.”

Why assume that the folk working for OECD are certifiable dumbos?

The OECD goes to great lengths to standardise definitions and clean up the requested national data – as you can easily discover if you dig a little for the OECD data definitions.

Why do you suppose OECD goes on, year after year, collecting these particular data series – plus lots more economic and social data – and publishing it mainly for the consumption of OECD government departments, think-tanks like the NIESR, newspapers like the FT, academics and media pundits? For fun? You are I and helping to pay for this through our taxes – along with taxpayers in other OECD member states.

Comparing international data is the best way of testing the credibility of often chauvinistic or ideologically motivated claims made about this or that welfare support system being the best – or disgracefully bad. The American healthcare system doesn’t withstand this preliminary test for exemplary proficiency – and nor does the NHS. Understandably, those who find their particular prejudices trampled get upset. That is to be expected. Concerted efforts to discredit such data are predictable. For bigots, it is better that there were no comparable international data at all – as Orwell put the Party slogan in 1984: Ignorance is strength.

Mounting criticisms of national healthcare systems has resulted in many more international comparisons being made during the last decade, arguably starting with a report of the World Health Organisation in 2000 – here is a link to a relating report in the Guardian:
http://www.guardian.co.uk/society/2003/nov/14/politics.medicineandhealth

It makes much sense IMO for private healthcare providers to treat NHS patients if they can do so at the same tariff and with a shorter waiting time.

The market pressure of the American healthcare system are very different. By common observation of many reporters, healthcare services in America are very costly, hence the increasing pressures there for healthcare tourism. That also explains why hospitalised patients in America seek ways of reducing costs.

Personal experience last year of (successful) elective NHS orthopaedic surgery led me to seek out reports of what happens in America and I soon came upon this very recent report:

TUESDAY, April 19 (HealthDay News) — People who have hip replacement surgery now spend far shorter recovery time in hospital than they did almost two decades ago, but discharges to nursing facilities and readmissions to hospitals have soared as a result, Iowa researchers report.
http://www.nlm.nih.gov/medlineplus/news/fullstory_111148.html

The possibility of readmission complications with healthcare tourism would certainly worry me.

13. Charlieman

@12 Bob B: “The possibility of readmission complications with healthcare tourism would certainly worry me.”

That is certainly a good reason why a health tourist might choose to pick India or Thailand. If you have received serious surgery, you may be immobile or unable to fly or seek the comfort of being close to the staff who performed the operation. An American couple may be able to afford to spend three months in a developing country but not in the UK.

Bob B,

Why assume that the folk working for OECD are certifiable dumbos?

Who is making such an assumption. Certainly not me.

Bob, you wrote 248 words in reply to me but not one of them addressed my point.

15. Charlieman

@OP, Richard Blogger: “…and why more Americans don’t come here for treatment.”

One of the reasons that Americans do not wish to use UK health facilities is their belief that all UK hospitals are Victorian institutions with Victorian standards of care. This misapprehension was on display in the protests against Obama’s health reforms and echoed by fools like Daniel Hannan. Don’t forget Madonna’s delusion that it was unsafe for a (physically) healthy woman to deliver a baby in a UK hospital.

Bob,

the first OECD document you linked to briefly discusses the points I made at 9, which for some reason you seem to have an issue with:

With an increasing number of women deferring childbearing (SF2.3) and the rise in multiple births linked with fertility treatments, the number of pre-term births has tended to increase (see indicator CO1.3) leading to a rising number of babies born with low birth weights. As a result, there is an increased risk of neonatal deaths which has contributed in some countries to a leveling-off of the downward trend in infant mortality rates. Indeed, the increase in the birth of very small infants was cited as the main reason for the first increase since the 1950s in infant mortality rates in the United States between 2001 and 2002

Some of the international variation in infant and neonatal mortality rates may be due to variations among countries in the registration of premature deaths of infants (whether they are reported as live births or fetal deaths). In several countries, such as in Canada, Japan, the Nordic countries and the United States, very premature babies with relatively low odds of survival are registered as live births. This increases mortality rates compared with other countries that register them as foetal deaths instead of live births.

That’s context.

“Bob, you wrote 248 words in reply to me but not one of them addressed my point.”

Rubbish. You evidently haven’t taken in my post at all – I’ve nothing more to say. As far as I’m concerned, you can go on ignoring comparative OECD international data – but I suspect the regular consumers of the data that I mentioned @11 will continue to use it to benchmark national performance.

Bob,

As far as I’m concerned, you can go on ignoring comparative OECD international data …

I’m not ignoring it at all – it would help if you don’t assume things not in evidence.

“it would help if you don’t assume things not in evidence.”

I don’t – which is why I take OECD international data seriously, as do its regular consumers in government, think-tanks, the financial press, academia etc.

The whole point of OECD collecting comparative international data on behalf of its member states is to standardise definitions to ensure comparability and clean up the data as best it can.

Governments use the regular data series to benchmark national performance. Predictably, those who find their preconceived prejudices outraged try to discredit the data.

After debating online since December 1995, I’m well used to this hoop. The fruitful course of discussion is to reflect on the implications of America’s relatively miserable persistent rankings on average life expectancy at birth and infant mortality compared with other affluent countries.

I post links to the data so more can appreciate what information is in the public domain.

You can disregard the OECD data and its implications at your choice but then there is no point in continuing the discussion.

20. Jonathan Phillips

@12 “It makes much sense IMO for private healthcare providers to treat NHS patients if they can do so at the same tariff and with a shorter waiting time.”

If the private providers get a steady supply of patients requiring the more straightforward kinds of procedure and have no responsibility for training the next generation of surgeons, nurses etc. – but receive the same tariff as NHS hospitals which have both to deal with fluctuating inflows and complex procedures and to train future medical staff – then they are riding on a gravy train, with all the difficult and more expensive jobs are being left to the NHS. The use of private providers in this way will end up wrecking the NHS.

That’s not to say that a state health service of the UK type is the best way of delivering comprehensive care, free at the point of use – there are other and perhaps more effective models across Europe – but it’s the system we’ve got, and if it is to be reformed (as distinct from merely “shaken up”) this can’t be done by bleeding it to death.

Bob B,

“it would help if you don’t assume things not in evidence.”

I don’t

You wrote to me, “Why assume that the folk working for OECD are certifiable dumbos?”

There is nothing in my comments to suggest that I made such an assumption.

Predictably, those who find their preconceived prejudices outraged try to discredit the data.

Who are you talking about? I haven’t discredited or disregarded the data, I criticised the use you made of it @5.

You can disregard the OECD data and its implications at your choice but then there is no point in continuing the discussion.

Huh? I cited an OECD report you linked to in support of the point I made earlier – I’m not disregarding it at all! You are quite odd sometimes.

The fruitful course of discussion is to reflect on the implications of America’s relatively miserable persistent rankings on average life expectancy at birth and infant mortality compared with other affluent countries.

Some of the international variation in infant and neonatal mortality rates may be due to variations among countries in the registration of premature deaths of infants (whether they are reported as live births or fetal deaths). In several countries, such as in Canada, Japan, the Nordic countries and the United States, very premature babies with relatively low odds of survival are registered as live births. This increases mortality rates compared with other countries that register them as foetal deaths instead of live births.”

@15 Charliman: “One of the reasons that Americans do not wish to use UK health facilities is their belief that all UK hospitals are Victorian institutions with Victorian standards of care”

Both from online discussion and news reports, some Americans, including some surprising celebrities, choose to reside or retire in the UK, very likely because of access to lower cost healthcare services compared with America.

“[Ava] Gardner died in her London home in 1990, from pneumonia, following several years of declining health. Gardner was buried in the Sunset Memorial Park, Smithfield, North Carolina, next to her brothers and their parents, Jonah (1878–1938) and Mollie Gardner (1883–1943). The town of Smithfield now has an Ava Gardner Museum.”
http://en.wikipedia.org/wiki/Ava_Gardner

See also the account of Gloria Grahame in Liverpool:
http://en.wikipedia.org/wiki/Gloria_Grahame

There is a long history of American film people living here, including Carl Foreman and Sam Wanamaker although to an extent they were political refugees for a time. I joke not – they were victims of McCarthyism

23. Charlieman

@20. Jonathan Phillips: “If the private providers get a steady supply of patients requiring the more straightforward kinds of procedure and have no responsibility for training the next generation of surgeons, nurses etc…”

If private companies deliver straightforward surgery to NHS standards for the NHS at equal price, by definition there is no additional cost. Some operations will require subsequent intervention in an NHS hospital by more proficient doctors; if private and public providers meet equal standards, the number of patients will be equal.

“no responsibility for training the next generation of surgeons, nurses etc…” Why assume that up and coming practitioners will not work in private hospitals alongside the experienced? And given that critical care will be delivered by NHS doctors and nurses, there is an imperative for those who wish to be trained to the highest standard remain in the NHS system.

@20: Jonathan: “If the private providers get a steady supply of patients requiring the more straightforward kinds of procedure and have no responsibility for training the next generation of surgeons, nurses etc. ”

I accept your point except that the NHS has been notoriously deficient in training up sufficient nurses and doctors to meet out national needs, which is why we have become so dependent on recruiting both from abroad in large numbers.

Even so, as the link posted @6 shows, we are relatively low on the number of practising physicians per head of population compared with most other OECD countries – although America is even worse.

Public spending on healthcare in America, as a percentage of America’s national GDP, is about the same as overall spend on healthcare as a percentage of Britain’s GDP. But America spends about as much again on private healthcare services – which includes cosmetic surgery – whereas private spending on healthcare here is relatively small.

Try this on health care expenditures in OECD countries as a share of GDP in 2008
http://www.oecd.org/dataoecd/45/55/38979836.pdf

If the NHS has relatively longer waiting lists for a procedure that suggests it is working against capacity constraints and it makes good sense for the NHS to buy in services from the private sector to treat patients.

In a few areas, yes. Generally, no.

26. Charlieman

@24 Bob B

“Even so, as the link posted @6 shows, we are relatively low on the number of practising physicians per head of population compared with most other OECD countries – although America is even worse.”

Quality of healthcare is not dependent on number of doctors and nurses. Occupational health, public health, social service substitution, all need to be considered.

“Public spending on healthcare in America, as a percentage of America’s national GDP, is about the same as overall spend on healthcare as a percentage of Britain’s GDP.”

That is a remarkable result. If their system worked as well as the NHS some people might own a few more teeth or their diabetes might have been controlled.

27. alienfromzog

Bob B,

For the last half century I’ve encountered regular glowing endorsements of Britain’s NHS based on the premise that America’s healthcare system is truly awful. It is only in the last decade that comparisons are being made with healthcare systems in other west European countries. By those comparisons, the NHS looks rather mediocre.

That’s not entirely accurate. Simply because it is only in the last decade that UK healthcare spending has got anywhere close to other European countries.

AFZ

@26: “Quality of healthcare is not dependent on number of doctors and nurses.”

In which case why does the NHS strive to import so many doctors and nurses from abroad? Would it matter at all if we had many thousands less of costly doctors and nurses? What of those places which complain that they don’t have enough GPs and practises to meet recommended standards?

“That is a remarkable result. If their system worked as well as the NHS some people might own a few more teeth or their diabetes might have been controlled.”

America’s high spending on healthcare as a percentage of its national GDP – at 17.5% according to a feature in the FT a month or so back – gives a lie to claims that Britain’s healthcare would be much better if only we spent more on it. Some Americans worry about their system inflating healthcare costs.

The reason is that of Americans who have insurance cover for healthcare costs, that cover is often through group insurance schemes paid for by employers. With that and the pervasive threat of negligence litigation against medical practitioners in America, any reported symptions tend to be subject to exhaustive tests and treatments. Also, there is a often a significant price differential for drugs between America and Canada – I used to get streams of unsolicited and unwelcome spam from Canadian online suppliers offering prescription drugs – and Viagra – by postal delivery at discount prices without quibble. This was a discussion issue when I used to frequent American online forums. Of course, buying medication online is wide open to the possibility of fraud as well as medical dangers from contaminated products.

As for healthcare systems to emulate, we would be better to look to the social insurance systems for healthcare costs in other west European countries IMO.

“Simply because it is only in the last decade that UK healthcare spending has got anywhere close to other European countries. ”

As the example of America shows, there isn’t a straight forward translation from total spending on healthcare to patient outcomes.

NHS protagonists have long claimed that the NHS is a more efficient way financially to run a national healthcare system because it does not have to carry the overhead costs to cover administration of charging, payments and insurance systems, whereas west European healthcare systems do, as does the American way. There is also the matter of how much healthcare professionals were/are paid. It was sometimes quipped that the NHS provided a second rate healthcare service at the cost of a third rate country.

A thread to which the answer is always going to be no.

The Private Sector cannot provide the kind of universal coverage required in public service provision any cheaper than government.

Its cost of capital and general debt financing costs make the Private Sector THE expensive option in delivery of services.

PFI is the greatest and most ludicrous example.

31. Martin Young

Of course they can. They take no part in training Student Doctors and Nurses, they don’t train GP’s they don’t train lab staff – stop me if I’m boring you but I could go on for hours – no really. Private hospitals claim to have intensive care back up but I would not fancy your chances in a 1 bed storeroom with poorly trained staff. I’ve yet to see a private hospital in the UK open up an A&E. Not contributing to the vast expense of what makes comprehensive health of course care makes them as cheap as chips. Even bribing Lansley was a bit on the cheap side for the returns.


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