Resolution
Recognizing the important role of government stewardship in regulation of contractual arrangements in the health sector:
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Urges Member States
(3) to share their experiences on contractual arrangements involving the public and private sectors and nongovernmental organizations in the provision of health care service
Discussion paper
The concept of privatization
At first sight, privatization seems a simple concept. According to the conventional dictionary definition, privatization refers to the transfer of ownership of a public-sector entity to the private sector. Its antonym is nationalization.
In ordinary usage, privatization has only this meaning. In this context, it is impossible to interpret contracting as a form of privatization. This is because privatization supposes a change in ownership whereas contracting starts with the existing situation in terms of the actors present and seeks to establish relations between them.
However, in the specialized literature on the reform of the State, the concept of privatization has taken on a wider meaning: privatization also encompasses the adoption of a management model that draws on the rules of the market. If we apply the rationale developed by D. Rondinelli and M. Iacono12, privatization of this sort may be achieved in several ways:
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By transferring ownership: as in the case of a public enterprise whose ownership is transferred to the private sector, what is involved here is transfer of the ownership of certain public entities (hospitals, health centres, a laboratory, a drug distribution service, etc) to the private sector. This is described by some authors as State "disinvestment": the structure's assets are partly or completely sold;
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While preserving public ownership, ensure that public entities adopt the managerial practices of the private sector: suppression of arbitrary subsidies and public monopoly status, institution of a status under which the entity is autonomous, possibility of outsourcing certain tasks, use of non public-sector work contracts. The public entity adopts private-sector managerial techniques: it becomes an independent enterprise and is less and less part of a larger whole as in the case of an administration;
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While preserving public-sector ownership, entrusting the management of public entities to the private sector: delegated management;
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While preserving control over public funding, purchasing services from private providers, regardless of whether they operate from health facilities;
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Persuading the private sector to take the place of the public sector: in this case, ownership is and remains private, but the private entity takes the place of the public actor which previously performed the activity.
We can thus say that in each of the above five situations, the health system will be increasingly privatized because it will operate more in line with the rules of the market.
However, some strategies may limit privatization: for example, persuading the private sector to collaborate with the public sector: in this case, ownership is and remains private, but the entity agrees to align its activity on national health policy. This could be described as greater State intervention.
There are thus three factors that allow us to assess privatization in terms of:
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ownership of the structure: as generally understood, this involves transfer of the ownership of the structure from the public to the private sector;
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management of the structure: the structure is managed in accordance with the rules of the market and the private sector. In other words i) users are considered to be clients, ii) services are defined on the basis of demand from clients, iii) the production process is determined by this demand and production costs must be controlled. One corollary of this is the need for the actor to give up the hierarchical administrative rationale and acquire a degree of autonomy;
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the structure's mission or objectives: this involves determining whether there are no constraints affecting the providers' mission (laissez-faire) or whether the State intervenes to define their mission (through contractual arrangements or regulation), and consequently influences the definition of the products.
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