Does the private sector build hospitals for less?

The U.S. Department of Veterans Affairs (VA) wound up building a hospital in Denver that went hundreds of millions of dollars over budget, while the replacement facility for Parkland Hospital in Dallas came in on budget.

The suggestion, according to a report issued by the Libertarian think tank National Center for Policy Analysis (NCPA), is that a non-government hospital project is much more efficiently executed than its counterpart in the government sector.

The Parkland project included $747 million publicly-financed bonds. The VA project was funded entirely with taxpayer funds. In addition, the VA had the option of renovating the medical facilities of the Fitzsimons Army Medical Center at a cost of $30 million, or enter into a joint venture with the University of Colorado Hospital for $200 million--but passed on both due to cost concerns, according to the brief.

The Denver VA construction project now carries a pricetag of about $1.7 million, despite cutting out some services in order to reduce costs, according to the NCPA. In a report issued earlier this year, the U.S. Army Corps of Engineers said the VA had fundamentally mismanaged all of its hospital construction projects. Moreover, the VA had engaged in these projects while many patients had been waiting for badly needed care.

"How much hospital can be built with $1.5 billion? That depends on who controls the money," the report said. "The construction projects in Aurora, Colorado, and Dallas, Texas, highlight how government construction projects can flounder in the absence of accountability." 

However, other private sector hospital construction projects have also seen costs zoom in recent years. For example, the replacement facility for Long Island (New York) College Hospital could cost as much as $1.1 billion just to construct, with another $550 million in so-called "soft costs" or equipment for the facility.

To learn more:
- read the issue brief 

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