Out-sourcing hospital services

Considerable literature finds greater cost efficiency under private provision of cleaning services in hospitals. Since the 1980’s the private sector has increasingly provided public services based on the argument that this would increase efficiency through competition.

Dr Shimaa Elkomy
Dr Shimaa Elkomy

At the University of Surrey, Research Fellow at the Department of Healthcare Management & Policy, Faculty of Business, Economics and Law, Dr Shimaa Elkomy and her colleagues carried out a study to assess the effect of out-sourcing cleaning services in the UK’s healthcare sector. ‘Mainly, we were focusing on acute hospitals in 2011 and 2012 and the effects of out-sourcing cleaning services on microbiological and non-microbiological cleaning standards, as well as to examine whether the hospitals that are contracting out are cost-efficient and exhibit high-labour productivity compared to hospitals with in-house cleaning teams, Dr Elkomy points out.

The study was divided into a theo­retical review of previous empirical papers and an empirical section. The study, involving 167 UK acute National Health Service (NHS) hospital trusts, had to eliminate 27 due to their mixed cleaning modes, so it worked with 140 acute hospitals. In 2011, 37% of acute NHS trusts were out-sourcing their cleaning services, while 60% depend on in-house teams.

In 2012, the contracting out of services reached 40% while hospitals with in-house services decreased to 58%. Therefore, the majority of acute hospitals still have in-house cleaning services, although the number had slightly decreased from 60% in the observed period.

The importance of hospital cleanliness

In the UK alone, the number of deaths link MRSA and Clostridium difficile incidents – two of the most widely spread nosocomial infections affected by the level of cleanliness – increased by 41% between 2003-2006 for Clostridium difficile and 28% between 2006-2007 for MRSA, according to the Official National Statistic.

This legacy indicates the low quality of microbiological and non-microbiological cleaning, unskilled labour with less knowledge of optimum cleaning methods and the lack of the right equipment and materials. These factors are deemed to be the main reasons for the spread of hospital acquired infections.

The pros and cons of out-sourcing

The purpose of contracting out is mainly cost reduction, as supported by previous literature. There is widespread acceptance that labour intensive activities that require less skill and that is auxiliary to the basic activity and specialisation as a whole, is suitable for out-sourcing.

Since the 1980’s, privatisation and contracting out were conceived as the main tenets for structured reforms due to the benefits of specialisation. Public institutions attempted to focus on providing core service to enhance the healthcare delivery system and quality standards, while out-sourcing other activities. ‘Actually, we have the idea of contestability, which implies the possibility of displacing the supplier for the contracted services by another provider with a lower price or higher quality, and this creates a competitive environment with discernible efficiency effects,’ the research fellow explains. Another reason for the expected efficiency gains of contracting out is the high-powered incentives of private firms to maximise profit and enhance productivity.

The argument against contracting out is mainly because private providers are also motivated to be involved in quality shading activities with incentives of cost savings. So the previous study dislike is that the success of contracting out depends on the relative importance of two investments: Either to make innovative investments to enhance quality or to be endorsed into some quality shading investments. Conversely to the aims and motivations for contracting out, such as efficiency gains and specialisation, the high-powered incentive of profits and competition effects, there are some challenges to face. Above all are the non-contractibility of quality and the difficulties of quality measurability and the high costs of monitoring.

Findings

‘Basically the results show that contracting out is not attaining the aimed for exposed quality performance,’ Dr Elkomy points out. ‘The empirical findings support the quality shading hypothesis examined by previous literature. Using different microbiological criteria, based on visual assessment of patients, our results show that hospitals that out-source display significantly lower cleaning standards of wards and bathrooms.’

In terms of microbial criteria, out-sourcing is significantly associated with higher levels of MRSA rates. These results imply that contracted service providers cannot effectively apply the optimum methods of cleaning and sterilisation and lack the required physical capitals and materials. ‘So, the cost savings of contracting out could not be supported by our analysis. On the contrary: the empirical findings show that hospitals with out-sourced cleaning services have significantly higher costs and less labour productivity. According to our preliminary results, out-sourcing hospitals have on average £474,000 higher costs compared to hospitals with in-house cleaning teams.’

Profile:
Dr Shimaa Elkomy received an MSc and undergraduate degree in Economics from the School of Economics and Political Sciences at Cairo University. She gained her PhD on ‘The impact of internalisation on economic growth of developing countries’ at Lancaster University, and is currently a research fellow in the Department of Healthcare and Policy at Surrey Business School in Guildford, United Kingdom.

04.09.2014

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