Private health patients costing public system $11.5m a year

Taxpayers are footing an annual bill of up to $11.5 million – the cost of 760 hip replacements – for patients who need public hospital care after private inpatient treatment, a new University of Otago study reveals.

Published in the international journal Health Policy, the study used 2013/2014 data from the Ministry of Health and examined the frequency of public hospital admissions within seven days of a patient receiving privately funded health care.

Dr Erin Penno.

Lead author Dr Erin Penno, of the Department of Preventive and Social Medicine and Centre for Health Systems, says about two per cent of private inpatient events had a subsequent admission to a public hospital.

“That's the equivalent of 1800 patients moving from the private to the public health care system.

“Given the billions of dollars spent on health care in New Zealand annually, $11.5 million could be interpreted as having a minimal impact, but to put that into perspective it's the equivalent to the average total annual costs of health care for a small town in New Zealand, or it would fund 760 hip replacements.”

Health care in New Zealand is publicly funded and provided, and available privately for those who have health insurance or can pay for it themselves. According to the health and disability system review, about five per cent of health spending in New Zealand comes from private health insurance and about 14 per cent from out of pocket. Just over a third of New Zealanders hold private health insurance.

“We might expect the cost of private hospital care be borne entirely privately, but our study suggests that is not always the case. Millions of dollars of public money is being spent on providing acute follow-up care for patients who have received care privately,” Dr Penno says.

“While we should provide health care to those who need it, our study highlights that the financial boundaries between the private and public health sectors are blurred. Our findings also suggest there is a risk that increasing use of the private sector may put more pressure on stretched public hospitals, crowding out those less able to afford private care and, in effect, increasing existing inequities in access and outcomes of care.”

The study is the first of its kind for New Zealand.

“Until relatively recently we haven't had the data available to be able to look at private sector activity and the flow of patients between the private to public health systems. However, in recent years, the number of private hospitals submitting data to the Ministry of Health has increased substantially, so we were able to use that to evaluate whether the issue of cost-shifting from the private to public health systems was a significant issue here in New Zealand.

“The private sector has argued that privately funded care comes at no cost to taxpayers and enables the public sector to focus limited resources on those most in need. This analysis challenges that preconception, highlighting the small, but significant flow of costs from the private to public health sectors and further illustrating the blurred boundaries between public and private provision in New Zealand.”

The most common reason for patients seeking public health care after a private healthcare treatment was after elective procedures such as hip knee replacements, for haemorrhage, infection and disorders of the circulatory and digestive system.

It is important to acknowledge that some readmissions are unavoidable. However, international evidence suggests up to a third are preventable, she says.

“Evidence suggests that improving discharge planning, care co-ordination and supporting patient self-management can reduce hospital readmissions. Using data to provide a clearer picture of readmission events would support this.

“We should be capitalising on joined up data across the private and public health sectors to improve visibility to district health boards and private providers around the extent and potentially the drivers of readmissions.”

For more information, contact:

Dr Erin Penno
Research Fellow
Preventive and Social Medicine, University of Otago
Tel +64 3 479 5765
Email erin.penno@otago.ac.nz

Lea Jones
Communications Adviser, Media Engagement
University of Otago
Tel +64 3 479 4969
Mob +64 21 279 4969
Email lea.jones@otago.ac.nz