Privatization of health services
Private hospitals are claimed to be more efficient than public ones, but the documentation is missing. The authorities know their own costs, while private operators work with unknown figures and profit margins. At the same time, reports show that Norwegian hospitals are already run close to full efficiency — and that major savings are in practice unrealistic.
May 15, 2025
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Are private hospitals more efficient?
Whether private hospitals are more production-efficient than public hospitals is unclear. Although the Norwegian authorities know their own cost price for a health service, the equivalent figures from private health operators are unknown. They price their services with a mark-up, that is, a financial gain, which goes to owners who are often located abroad.
Furthermore, market forces have little influence on the price of private health services, because the industry as such meets few of the conditions that contribute to free competition. Normally, competition drives prices down and subsequently leads to greater efficiency; this mechanism does not underpin private hospital operations. It therefore appears that free competition can be dismissed as an argument for private hospital services.
High efficiency in Norwegian hospitals
Efficiency in Norwegian hospitals lies between 85–95 per cent, according to a 2023 report (Magna). Productivity growth of 0 to 2 per cent per year shows that it is very difficult and unrealistic to extract larger efficiency gains.
Efficiency affects costs, but when there is little to gain on productivity we must look at other costs. We have the most expensive health service in Europe, some of which can be explained by a higher cost level, but the main reason appears to be an oversized and costly bureaucracy, as the Centre Party pointed out in question time yesterday.
More shifts could give better use of resources
The head of the private hospital Volvat, Per Helge Fagermoen, tells VG that the state spends billions of kroner unnecessarily when overtime is paid to bring down waiting times, and claims it would have been cheaper to use Volvat. VG lets Volvat's claims stand without scrutinising them, which is a problem.
The calculation presented is interesting, since using a hospital's facilities and medical equipment during more hours of the day would normally be good economics. But it presupposes that Health Minister Jan Christian Vestre understands that staffing must be arranged for shift work; overtime is too expensive, as the Volvat chief points out. But that does not mean private hospitals are more efficient. Vestre's stated goal is that each professional should become more efficient and treat more patients — which, according to the report mentioned above, is unrealistic.
Furthermore, the health trust model appears costly as a result of a large bureaucracy, but that is a separate issue which does not concern efficiency within the hospital.
SOURCES
Magma Research
Productivity and efficiency analyses in the health sectorThe Norwegian Directorate of Health
Productivity in specialist health servicesThe Norwegian Medical Association
The trust model must be scrappedCentral Norway Regional Health Authority
Needs assessment – purchase of specialist health servicesStatistics Norway
Health accounts
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