The purchaser-provider split

Interesting article from the Economist on "post ideological" Sweden's increasing use of private companies to provide public services:

Sweden has gone further than any other European country in embracing the purchaser-provider split—that is, in using government money to buy public services from whichever providers, public or private, offer the best combination of price and quality. Private firms provide 20% of public hospital care in Sweden and 30% of public primary care. Both the public and private sectors are obsessed with lean management; they realise that a high-cost country such as Sweden must make the best use of its resources...

Saint Goran's hospital is one of the glories of the Swedish welfare state. It is also a laboratory for applying business principles to the public sector. The hospital is run by a private company, Capio, which in turn is run by a consortium of private-equity funds, including Nordic Capital and Apax Partners. The doctors and nurses are Capio employees, answerable to a boss and a board. Doctors talk enthusiastically about “the Toyota model of production” and “harnessing innovation” to cut costs.

St Goran’s is the medical equivalent of a budget airline. There are four to six patients to a room. The decor is institutional. Everything is done to “maximise throughput”. The aim is to give taxpayers value for money. Hospitals should not be in the hotel business, the argument goes. St Goran’s has reduced waiting times by increasing throughput. It has also reduced each patient’s likelihood of picking up an infection. However, scrimping on hotel services means that it has to invest in preparing patients for admission and providing support after they are released.

St Goran’s also acts as a hare for Capio, one of Europe’s largest health-care companies, with 11,000 employees across the continent and 2.9m visits from patients in 2012. Sweden is Capio’s biggest market, accounting for 48.2% of its sales (France comes second with 37.6%). The firm performs 10% of all Swedish cataract operations, and much more besides. Capio thinks it can make huge savings in other countries by transferring the lessons it has learned in Sweden. The average length of a hospital stay in Sweden is 4.5 days, compared with 5.2 days in France and 7.5 days in Germany. Sweden has 2.8 hospital beds per 1,000 citizens. France has 6.6; Germany, 8.2. Yet Swedes live slightly longer.

These public-private partnerships suggest the importance of context and culture in policymaking.  Such an arrangement seems to work well in Sweden, but it works largely because they have terrific levels of social capital and trust.  I would be more reluctant to recommend such an arrangement in a country with poor social capital.