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What governs the decision to contract out for local hospital services?

J M Ferris1, E Graddy

  • 1School of Public Administration, University of Southern California, Los Angeles 90089-0041.

Insights

Local governments are exploring contracting out hospital services to reduce rising costs. Key factors influencing this decision include supplier availability and potential for economies of scale.

Area of Science:

  • Public Health Policy
  • Health Services Management
  • Government Administration

Background:

  • Rising hospital costs strain local government budgets.
  • Increasing demand for government-funded healthcare services.
  • Need for local governments to reassess their role in hospital service delivery.

Purpose of the Study:

  • To analyze the decision-making process of local governments regarding contracting out hospital services.
  • To identify key factors influencing the choice to contract out for healthcare delivery.

Main Methods:

  • Empirical analysis of local government decisions on hospital service contracting.
  • Examination of cost savings, control trade-offs, and political factors.

Main Results:

  • The availability of external healthcare suppliers is a critical factor.
  • The potential for achieving economies of scale significantly influences the decision.
  • Local officials' willingness to trade control for cost savings plays a role.

Conclusions:

  • Contracting out hospital services is a viable cost-reduction strategy for local governments.
  • External supplier availability and economies of scale are pivotal in the contracting-out decision.
  • Political considerations and the balance of control are important but secondary to economic factors.

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