New Zealand Institute for the study of competition and regulation inc.

Abstract

Rhema Vaithianathan's article The Failure of Corporatisation: Public Hospitals in New Zealand (Agenda 6(4) 1999 325-338) argues that corporatisation of New Zealand's public hospitals failed to yield the expected efficiency results due to the failure to recognise that the change in formal authority from an executive team comprised of medical staff to one comprised of professional managers belied the unchanged nature of real authority, which remained with medical staff, and in particular, with doctors.

However, this explanation fails to recognise that the model on which it was based has been applied successfully for many years in New Zealand's private nonprofit hospitals. These nonprofit hospitals are managed by professional managers, are staffed in most instances by the same medical personnel as the state-owned hospitals, and are constrained by essentially the same "political ownership" issues of separation of legal and beneficial ownership, and real and formal control, as the public system. Hence, the issue is not one of failure of corporatisation per se, but a fundamental failure by policy-makers to sufficiently scope and fully understand the range of stakeholders' rights impacted by the change.