Dissertation: Public and privatised primary health care services homogeneous – tools needed to identify invisible costs

Posted on 02/12/19.

Jaakko Hallila will defend his doctoral dissertation on Wednesday, 11th of December.

Customers found the quality of services outsourced to private health centres and of those provided by public-sector health centres to be homogenous, reveals a new doctoral dissertation from the University of Vaasa. However, local authorities are unable to estimate the amount of invisible costs associated with public provision of health care services or with their outsourcing.

M.Sc. (Admin) Jaakko Hallila’s doctoral dissertation in Social and Health Management examined primary health care services in four Finnish localities: Alavus, Alajärvi, Orimattila, and Hollola. According to customer experience, services provided by both public and private health centres were homogeneous and of high quality. The research showed that customers did not always even know whether the health care services they were using were outsourced to a private service provider or provided by a public service provider.

– Services exceeded customers' expectations. As a general rule, expectations of private health care services were slightly higher than expectations of public services. Public services, on the other hand, exceeded expectations more clearly than private services, says Jaakko Hallila.

Among the research localities, Alavus and Orimattila were using private service providers – Alavus used Kuusiolinna and Orimattila used Attendo. Alajärvi was using the host municipality model, with Järvi-Pohjanmaan Perusturva as the service provider, whereas Hollola's services were provided by the Päijät-Häme Joint Authority for Health and Wellbeing. Customers were asked about the services before and after availing of the services.

Evaluation of the costs of tendering and other transaction costs is difficult

The dissertation's theoretical assumption was that municipalities should arrange the provision of health care services themselves or procure the services from the private sector, whichever was more cost-efficient in each case.  According to the research, this was indeed what the local authorities that chose privatisation were trying to achieve. The objective of outsourcing in Alavus, for example, was to put a stop to cost increases and, in Orimattila, it was the successful recruitment of medical staff.

The research highlighted the fact that, in addition to these visible costs, private and public services entail invisible, indirect transaction costs. These invisible costs are incurred as a result of searching for a service provider, the tendering process, concluding an agreement, supervising the provider, and measuring results.

– Local authorities and joint municipal authorities were interested in estimating transaction costs but had no in-house tools to do it. A key research finding was that none of the research localities were able to estimate realistic transaction costs, says Hallila.

Hallila points out that transaction costs or similar expenses do not only occur when services are outsourced – costs also occur with public provision models. Transaction costs were assessed through interviews with decision makers.

– The transition to the new provision model requires careful planning. If the schedule is too tight, this could lead to administrative challenges and costs at a later stage.

Transaction-related challenges in the research localities did not manifest themselves as quality issues experienced by customers.

Hallila recommends that sufficient time be reserved for the planning and tendering related to the provision of health care services.

– When services are provided for a sufficiently large customer base, transaction costs will remain at a reasonable level for individual local authorities or citizens.

Public defence

The public examination of M.Sc. (Admin) Jaakko Hallila’s doctoral dissertation ”Transaktiokustannukset ja laatu. Vertaileva tapaustutkimus yksityisistä ja julkisista perusterveydenhuoltopalveluista neljällä suomalaispaikkakunnalla will be held on Wednesday 11 December 2019 at 12 o’clock in auditorium Nissi (Tritonia). The field of dissertation is Social and Health Management The defence will be held in Finnish.

Professor Johanna Lammintakanen (University of Eastern Finland) will act as opponent and Professor Pirkko Vartiainen as a custos.

Further information

Jaakko Hallila, tel +358 40 868 0621, email: jaakko.hallila(at)seamk.fi

Hallila, Jaakko (2019) Transaktiokustannukset ja laatu. Vertaileva tapaustutkimus yksityisistä ja julkisista perusterveydenhuoltopalveluista neljällä suomalaispaikkakunnalla. Acta Wasaensia 434. Doctoral Dissertation. Vaasan yliopisto. University of Vaasa.

Publication pdf: http://urn.fi/URN:ISBN:978-952-476-890-0

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