Hospital Concessions: Flexibility in Practice

Over the last decade hospitals concessions have been increasingly implemented around the world. Nonetheless, concession arrangements are subject to many criticisms, which are to a large extent related to the issue of flexibility. Several authors have expressed concerns as to whether concession arrangements are able to provide the flexibility these need in order to secure optimal qualitative hospital facilities and services in the future. This research is on how flexibility is actually perceived in operational hospital concessions. In a case study, an assessment is made on the extent to which English and Australian hospital concessions incorporate the ability to respond to changing demand patterns for clinical services, i.e. mechanisms that provide the flexibility. The outcomes of the case study analysis show that hospital concessions are difficult or expensive to change during their operational phase. However, this appears not to be a consequence of implementing the concession model in its own, but rather the result of sub-optimally designed contracts and/or procurement processes. It is argued that in order to build hospitals that are able to deliver optimal outcomes over time, in addition to a financial focus, health providers should stress flexibility by setting flexible output specifications. Besides, the contract should incorporate the right incentive structures to make both contract partners responsible for flexibility issues that might arise in the future. These outcomes can be used by future hospital boards willing to implement a concession arrangement for their (partly) new hospital building.