Saturday, December 20, 2008

Should IJN Be Privatised?

Arguments FOR privatisation of IJN (Institut Jantung Negara)

(1) Budget constraint. Costs of running such privilege health institute are not cheap. A small & yet simple surgery equipments may costs several hundred thousands to millions. The costs of maintaining some of the best heart specialists & other costs such as R&D are increasing every year. At the same time, Malaysian fiscal deficit is widening & there could be limit as to how much government can continuously pump money into IJN

(2) To be more productive efficiency. Ideally, being a privatise institution there will be greater incentive to further reduce costs to achieve productive efficiency. This is a phenomenon where a firm will attempt to produce service at the minimum part of AC curve. Costs cutting will be the main objective as now it attempts to enlarge its supernormal profits

(3) More money for R&D.
Greater supernormal profits in the long run, will always ensure large pool of funds available to conduct R&D. Common field of focus will be on cardiothoracic, cardiology, anesthesiology etc. In the future, the medical team will be able to come out with various modern techniques to cure chronic heart diseases. It is also beneficial to heart patients itself

(4) Better service. Once privatised, IJN is said to be able to provide much better services, run more efficiently than before & meeting the need of heart patients. This is because it may no longer rely on funding from the Ministry of Health. As such, IJN will have to be really customer-oriented so that it can generate more funds for itself. Consumer welfare may be preserved

(5) Able to reduce brain drain. Once privatised, IJN will be able to retain those best doctors. Economically, when someone is being paid & reward handsomely, their productivity will increase. They are willing to work harder, provide better services etc. Sometimes it does make sense to pay someone higher than the market equilibrium wage rate. Arguably, with such high salary the doctors will always be at their best performance, since they may not be able to find similar pay somewhere else

Arguments AGAINST

(1) Basic rights. To provide universal healthcare for the people is utmost important. Furthermore, health is recognised as the basic human right

(2) Allocative inefficiency. Once go private, IJN will gradually charged exorbitantly on any heart surgeries, ward expenses, medical fee etc. Being a profit maximiser, necessarily they will operate where MC = MR. Here the price is the highest (P > MC). Government will have to intervene by then, to bring the price of IJN service down near to their marginal costs (MC) of providing it

(3) Productive inefficiency. IJN may not even attempt to produce at the minimum of AC (average costs) given that it face less competition & the demand for its service (heart related surgery) is highly inelastic. This is strengthened by branding of IJN as the leading heart institute in the region

(4) Reduction in patients’ welfare. Staff meetings will become sessions for discussing how medical procedures could generate revenue, the profitability of various units, how to make patients stay longer in hospital etc. Although patients are said to receive better attention in wards, their welfare is offset by the lust of private entity for profits

(5) IJN is already one of the best. Over the years more people, private sectors & foreign governments have acknowledged the high standards adopted by IJN without the benefit for privatisation. Other top hospitals like Singapore General Hospital & the Queen Mary Hospital in Hong Kong are government-run institutions. So I don’t think there is any need for privatisation for it to achieve excellence

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