Report: Louisiana hospital privatization boosted quality of care, prosperity, jobs

By Joshua Paladino / Heartland Institute

Former Louisiana Gov. Bobby Jindal’s (R) efforts to privatize government-run hospitals resulted in increased economic prosperity and better access to health care in the state, according to a recent study by Louisiana State University economics professor Loren Scott.

In 2013, Louisiana shifted to the private sector the operation of state-run hospitals providing health care to low-income citizens.

Scott’s study, published in May, found patient wait times for referrals and services decreased and hospitals’ spending on capital improvement increased, as did overall incomes in the state, because of Jindal’s efforts to get the government out of the health care industry.

Scott attributes about $400 million in household earnings increases and the annual creation of almost 3,000 new jobs to Jindal’s privatization.

Crunched the Numbers

Scott says he focused on quantifying the economic effect of Jindal’s privatization push.

“The thing that I focused on in my report was the very significant amount of money that started flowing into the state treasury because of the hospital privatization,” Scott said. “The biggest parts of those moneys came from two sources. The private sector took some of the government-owned buildings and paid the state a lease payment for the use of those facilities. Because of some odd rules of the federal government, those lease payments became eligible for federal matching payments.

“By the fourth year of privatization, these lease payments, plus the federal match, brought in half a billion [dollars] to the state treasury that wasn’t there before,” Scott said. “When the hospitals were privatized, payments to doctors also became eligible for a federal match.”

More Efficient, Effective

Scott says privatizing government hospitals also paid off for Louisiana consumers.

“The private sector runs things more efficiently than the government does,” Scott said. “You saw things like wait times dropping dramatically in emergency rooms. You found that they started setting up urgent care centers to handle people so they wouldn’t go to the really expensive emergency rooms, and the lower-income strata had access in their region of the state to specialty services—like radiology, mental health, and cardiology—that weren’t really available to them [previously] unless they traveled all the way to New Orleans.”

Aligning Incentives

Michael Hamilton, a research fellow with The Heartland Institute, which publishes Budget & Tax News, says allowing Louisiana private operators’ profit motives to align with consumers’ health care needs was a win for both parties.

“Although it appears Federal Medical Assistance Percentages funding padded the bottom line, the Louisiana hospital privatization effort demonstrates how the prospect of making a profit motivates private operators to create value—in this case, expanding access for patients,” Hamilton said.

 

 

Joshua Paladino writes from Hillsdale, Michigan.

 

 

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