Private wards in public hospitals: two tier charging and the allocation of resources in tertiary hospitals in Zambia


Many public hospitals in Zambia are developing two tier charging structures by which private or 'high-cost' services are offered alongside standard or 'low-cost' ones. These are expected to offer higher levels of amenity but comparable levels of clinical quality of care. The common budgetary base of low-cost and high-cost services has given rise to the concern that the public subsidy may be diverted to supporting high-cost services. In other words, instead of the apparently intended consequence that high-cost services subsidise low-cost ones, the reverse might apply. Evidence from other countries suggests that this concern is not confined to Zambia. The research reported in this paper consists of two parts. The first uses a costing exercise that was conducted in Kitwe Central Hospital (KCH) in 1997-8 to derive a comparison of costs and cost structures in high and low-cost wards and to assess the ratio of revenues to costs in order to measure whether high-cost wards generate a net surplus which can be used to subsidise low-cost wards. However, the likelihood that resource allocation patterns reflected in cost structures have clinical significance cannot be judged using cost data alone. The second part of the study examines the extent to which resources of clinical significance are preferentially directed towards high cost patients in two of Zambia's public tertiary hospitals,the University Teaching Hospital (UTH) and KCH. The comparison of costs suggests that high cost patients have better access to hospital inputs. There are problems with the comparison, for example wards are not exactly analogous, but consideration of the sources of bias suggests that the comparison understates rather than overstates the services high-cost patients receive relative to low-cost patients for similar conditions. Comparison of allocation of resources of clinical significance found disproportionate use of resources by high-cost patients in a number of areas of hospital activity, consistently favouring high-cost patients. We have not compared case mix and need across the two groups of patients, and it is possible that, for example, disproportionate use of theatre by high cost patients is explained by a high-cost case mix biased towards surgical cases. However, since instances of disproportionate use arise in each of the areas addressed, a general explanation that high-cost patients are more severely ill or require greater treatment intensity in all respects, rather than disproportionately represented in particular conditions, would be necessary to support this alternative interpretation. This is questionable on a number of bases. A number of explanations of preferential allocation to high-cost patients can be hypothesised. Whichever is dominant, it would seem that the financing policy requires amendment to enable an incentive environment more conducive to the encouragement of high standards in low-cost services.


McPake, B.; Nakamba, P.; Hanson, K.; McLoughlin, B. Private wards in public hospitals: two tier charging and the allocation of resources in tertiary hospitals in Zambia. London School of Hygiene and Tropical Medicine, London, UK (2004) 23 pp. [HEFP working paper 05/04]

Private wards in public hospitals: two tier charging and the allocation of resources in tertiary hospitals in Zambia

Published 4 December 2006