Is the corporate transformation of hospitals creating a new hybrid health care space? A case study...

Social Science & Medicine 58 (2004) 427444

Case study

Is the corporate transformation of hospitals creating a newhybrid health care space? A case study of the impact ofco-location of public and private hospitals in Australia

Laurie Browna, J. Ross Barnettb,*aNational Centre for Social and Economic Modelling, University of Canberra, Bruce ACT 2601, Australia

bDepartment of Geography, University of Canterbury, Private Bag 4800, Christchurch, New Zealand

Abstract

A common feature of health reforms in western nations has been the transformation or (re)construction of health and

health care as both a commodity and product. In the hospital sector, this transformation has become increasingly

evident in the growth of for-prot involvement in service delivery. Investor-owned hospitals are now prominent

providers of hospital care in Australia. This paper examines the changing nature of health care space through the

changing portrayal and meaning of hospitals as represented by and encoded in the built environment. Public hospitals

once occupied pride of place. In contrast, up to the early 1980s, the private sector was seen as a cottage industry.

However, increased levels of state subsidisation and government incentives and pro-market policies, combined with

market-based opportunities for prot generation, have seen the emergence of large private hospital chains with a new

corporate image to hospital care and the blurring of public and private. A signicant factor in the reconstruction of

hospital space in Australia has been the co-location of private and public hospitals. Co-location is a popular strategy

proffered by State governments and one that has been quickly acted on by corporate providers. Using Mayne Health

Ltd, Australias largest for-prot hospital chain, and four specic case studies, this paper explores four variants of co-

location. Each of these examples represent a different public and private hospital space. The growth of for-prot

hospital chains signies a new phase in the delivery of health care in Australia but also importantly the creation of a

new hybridised health care space. This space is neither private nor public but a reection of the economic, political and

social processes underlying this transformation.

r 2003 Elsevier Science Ltd. All rights reserved.

Keywords: Private hospitals; Health care landscapes; Co-location; Privatisation; Corporatisation; Australia

Introduction

A common feature of health reforms in western

nations has been the transformation or (re)construction

of health and health care as both a commodity and

product (OECD, 1994; Ham, 1997; Raffel, 1997). In the

hospital sector, this transformation has become increas-

ingly evident in the growth of for-prot involvement in

service delivery (Salmon, 1985, 1995; Scarpaci, 1989;

Lindorff, 1992; Brown, 1996; Corrigan, Eden, Gold, &

Pickreign, 1997; Lutz & Gee, 1998; White & Collyer,

1998). To date, such trends have been most visible in the

United States (US) where in Salmons words the

growth of for-prot health corporations has been

remarkable (1995, p. 19). These trends are evident

now also in Australia where investor-owned (corporate

chain) hospitals have become prominent providers of

hospital care. The rapid growth of corporate involve-

ment in the provision of health services, in particular,

private hospitals, signies a new phase in the delivery of

health care in Australia.

Both recent Liberal and Labour federal governments

in Australia have promulgated public policies based on

marketplace competition as the key to social and

ARTICLE IN PRESS

*Corresponding author.

E-mail address: [email protected]

(J.R. Barnett).

0277-9536/03/$ - see front matter r 2003 Elsevier Science Ltd. All rights reserved.

doi:10.1016/S0277-9536(03)00163-1

economic development. Since the turn of the century,

health services in Australia have been provided through

a publicprivate mix. Many of Australias large metro-

politan public hospitals had their early beginnings as

small community hospitals in the late 1800s. Public

hospitals, however, developed into the centre-piece of

Australias health system, particularly following the

emergence of the welfare state and large scale public

social expenditure programs after the second World

War. Public hospitals were seen to occupy pride of

place, often being located on major arterial roads,

central or elevated topographical sites. Analogous to

prominent churches, they created sacred landscapes

giving meaning to local communities and around which

local communities would mobilise. The image produced

by public hospitals, re-inforced by the government and

consumed by the public, was one of a place of prestige,

sophistication, high technology, comfort, care and

safety.

Australias private hospital sector developed as a

cottage industry and which it remained until very

recently. It was established by non-prot1 religious and

charitable organisations and by practising physicians

owning and operating small private hospitals. In

Australia, the private hospital sector has had a long

tradition of state support through the transfer of public

health funds in the form of various subsidies and the

provision of infrastructure (White & Collyer, 1998).

However, increased levels of subsidisation and govern-

ment incentives and pro-market policies, combined with

market-based opportunities for prot generation, have

seen the cottage industry that persisted up to the 1980s,

and which largely comprised small investors working

within their own for-prot hospitals, disappear. While

the state still funds more than two-thirds of health care

expenditure, corporate involvement including foreign

direct investment in the provision of hospital services is

becoming an increasingly important feature of the

Australian health system (AIHW, 1998).

The privatisation of hospital services does confer both

benets and costs. Perceived benets are seen to derive

primarily from cost containment2 and greater consumer

choice (Scarpaci, 1989; Forde & Malley, 1992). Such

issues are important especially as governments have

struggled to nd ways of slowing the growth of health

care expenditure and of relieving nancial and political

pressures on the state. In these respects, Australia is no

different to other countries that have embarked on

structural and evolutionary health care reform. The

costs of corporatisation have been well documented

particularly in the US where considerable controversy

has arisen from the large number of hospital conversions

from public or non-prot to for-prot care (Lindorff,

1992; Miller, 1997; Claxton, Feder, Shactman, &

Altman, 1997). Issues such as impacts of hospital

competition upon overall costs, upon access for the

indigent and on the loss of important teaching and

community functions of hospitals have all received

attention.

While the impacts of globalisation and the rise of

transnational corporations in newly liberalised markets,

characterised by increased mobility and rapid circula-

tion of international nancial capital, are familiar

themes within geography (Amin & Thrift, 1994; Fagan

& Webber, 1994; Dicken, 1998), they have received little

attention from health geographers concerned with

changes in service delivery systems and access to health

services. Furthermore, with few exceptions (e.g. Bohland

& Knox, 1989; Kearns & Barnett, 1999, 2000, 2003),

health geographers have been slow to document the

corporatisation of hospital care and to examine how

such changes are leading to a reconguration of health

care places. This is of particular importance as perhaps

an unforeseen cost of the corporate transformation of

hospitals, as described above, is the change in the nature

of hospital space, and in its consumption. Changes in

the political-economy of hospital provision are being

reected in the built environment, leading to a blurring

of the traditional binary categories of public and

private.

This paper examines such trends with specic

reference to hospital co-location in Australia. Hospital

co-locations have become the most popular form of

private sector participation in hospital development in

Australia because they provide a potentially benecial

winwin model that best meets the needs of both public

and private sectors (Bloom, 2000) and, as a result, co-

location agreements have been actively pursued by both

corporate providers and State governments. In examin-

ing such trends, the paper has three specic aims. First,

to identify the important forces underlying the develop-

ment of co-location and to document why it has become

a preferred state and corporate strategy; Second, to

identify the main variants of co-location and the extent

to which it can be represented along a continuum of

forms; Third, given little attention to the concept of

hybrid health care spaces in the social science literature,

we also evaluate the meanings and implications of

co-location and discuss how such developments are

situated within broader academic and policy debates

ARTICLE IN PRESS

1As in New Zealand non-prot hospitals in Australia are

non-prot only in the sense of distributing dividends to

shareholders. They still try to maximise operating surpluses

(for reinvestment) and the surgeons who work within them will

often be private sector specialists as well.2A review of the evidence suggests that it is rare for private

hospital care to be cheaper than public care on a case by case

basis (e.g. see Clayton & Malcolm, 1989). Rather privatisation

tends to result in lower beddage, reduced AloS and in effect a

shift of costs to primary health care and informal carers,

reducing total costs if not unit costs of hospital services (e.g., see

Barnett & Barnett, 1989).

L. Brown, J.R. Barnett / Social Science & Medicine 58 (2004) 427444428

surrounding new hybrid forms of health system organi-

sation. Following Kearns and Barnett (2003), we argue

that more attention needs to be paid to how the location

and design of private hospitals is used to convey

marketing and, at another level, health policy, messages

to patients and public.

To achieve these ends the paper is organised as

follows. First, we provide a contextual analysis and

document the extent to which investor-owned hospitals

have become prominent providers of hospital care in

Australia. Secondly, we examine recent literature on

publicprivate partnerships and place co-location within

the broader context of health sector restructuring. In the

third section of the paper we discuss why co-location has

become the preferred state and corporate strategy in

Australia. Fourthly, given that co-location has taken a

number of different forms, we examine this issue in more

detail by undertaking four detailed case studies of co-

location. In the nal section of the paper, and drawing

on the case studies, we analyse some of the theoretical

and policy implications of co-location and suggest a

number of future avenues for research. This discussion is

set within the conceptual context of the geography of

hybridity of place. Drawing on parallels in cultural

landscapes and environmental thinking, it is argued that

while narratives of purity have their uses, a different

type of conceptualisation is needed to describe and

understand these newly emerging hospital spaces.

The paper is only concerned with acute care hospitals

and does not include psychiatric and free-standing day

hospitals. The private hospital sector can be divided

into: (a) for-prot facilities which are either corporate

(chain or group) owned or independents where the

proprietor, usually a group of doctors, does not own any

other private hospital; and (b) not-for-prot hospitals

which are either owned by religious or charitable

organisations, or by some other body. In Australia,

these other not-for-prot hospitals are bush nursing,

community or memorial hospitals (Productivity Com-

mission, 1999). It is the corporate for-prot private

hospital sector that is the focus of this paper as it this

sector of the market that has grown rapidly, as will be

shown in the following section.

The paper is largely exploratory in nature serving as

an initial investigation into how place is being recreated

through the built environment. As such, the present

research on hospital co-location is the rst step towards

understanding patient perception, attitudes, acceptance,

and utilisation of these health care spaces. The results

will form a solid platform for future research on how

these spaces are being received and consumed by local

communities. While of fundamental importance in terms

of access to and actual utilisation of hospital services,

measuring consumer reaction is beyond the scope of the

current research. While our paper contains little detail

on this point, we nevertheless argue that understanding

the symbolism attached to different forms of hospital

siting and why such decisions were chosen by private

managers and public policy makers remains a fruitful

area for future research.

Methodology

Hospitals from one corporate provider, Mayne

Health Ltd. (formerly Health Care of Australia HCoA)

which is Australias largest for-prot hospital chain were

chosen deliberately for study in order to control for the

corporate environment and potential differences in

business decision-making processes. Mayne Health

dominates the for-prot hospital sector in Australia

and thus is a leading force in determining changing

hospital landscapes. The research used a variety of

archival information and secondary data, including

annual company reports to shareholders, to establish

the main investment patterns of Mayne Health Ltd and

to establish its locational strategies over time. We also

interviewed the Managing Director of Mayne Health in

order to clarify aspects of company records and to

provide an additional perspective on hospital investment

policies. The authors, although having a close knowl-

edge of Mayne Health, have no formal connection with

the company and thus no conict of interest arises in the

research.

Analysis of company records enabled us to identify all

Mayne Health hospitals in the city and their co-located

public hospitals. From this list we were able to identify

four variants of co-location: (1) the traditional model

of locating a for-prot hospital in close proximity to a

public hospital, e.g. across the road; (2) a shared campus

where a private and public hospital occupy the same site;

(3) a shared building with the two hospitals occupying

different space within the building; and (4) where the

public hospital, under contract to a State government,

has been built and is operated and owned by the

corporate hospital chain in return for patient payments

from the State concerned (Productivity Commission,

1999). These hospitals are commonly referred to as BOO

hospitals, this hospital type having parallels in Britain,

Saudi Arabia and elsewhere (Mohan, 2002). Each of

these examples depicts a different type of publicprivate

hospital space.

The three pairs of public and private hospitals, and

one BOO hospital are all located within metropolitan

Sydney and come under the jurisdiction of one local

health authority, the Southeastern Sydney Area Health

Service (SESAHS). Geographically, Southeast Health

extends from Sydney Harbour in the north, through

Botany Bay and Port Hacking, to the Royal National

Park which forms a greenbelt in the south. With a

residential population in 1996 of 746,462 (12% of the

NSW population) Southeast Health is the second most

ARTICLE IN PRESSL. Brown, J.R. Barnett / Social Science & Medicine 58 (2004) 427444 429

populous area health service in NSW. The population is

diverse in its ethnic composition with some 33% of

individuals being born overseas (SESAHS, 2000).

SESAHS has 10 public hospitals within its boundaries

including three of Sydneys major tertiary referral and

teaching and research complexstwo of these, the

Prince of Wales Hospital and St. George Hospital are

included in this study. The third case study, the

Sutherland Hospital, while not operating as a regional

or national tertiary referral center is an associated

teaching hospital with the University of New South

Wales.

Each of the private hospitalsKareena Private

Hospital, St. George Private Hospital and Medical

Centre, Prince of Wales Private Hospital, and Port

Macquarie Base Hospitalare owned and operated by

Mayne Health. Port Macquarie Base Hospital is a BOO

hospital located on the mid-north coast of NSW in the

regional town of Port Macquarie which is approxi-

mately 400 km north of Sydney. It provides services to

the central sector (Hastings and Macleay Valleys) of the

Mid-North Coast Area Health Service (MNCAHS).

MNCAHS is a regional and rural area which is serviced

by two other base hospitals (one in the southern and one

in the northern sectors) and several small district

hospitals, community health centers and multiple

purpose services which are located throughout the area.

The total population of MNCAHS as enumerated in the

1996 census was 248,475, with approximately a third of

population living in the central sector. Port Macquarie

has a population of around 27,000 persons. The central

region has one of the fastest growing populations in

NSW, being seen as an attractive low cost retirement

area.

Each of the case study hospitals is critically examined

in terms of its site, catchment population, development

and current service provision and operation, and use of

co-location as a key strategy in its development. The

hospitals may be unique in their histories and place

biographies but they were selected as case studies as they

are representative of more general trends in co-location

and the blending of the public and private hospital

sectors. Each has parallels in other hospital pairings and

in the growing number of BOO hospitals being built and

operated throughout Australian cities.

The corporate transformation of Australian hospitals

Public hospitals are the dominant institutional provi-

der of acute hospital care in Australia. The provision of

public hospitals is a state (and territory) government

responsibility with State governments nancing capital

works and recurrent budgets as well as regulating,

monitoring and planning services (Wall, 1996; Donato

& Scotton, 1999). The Commonwealth government is

also a major funder of public hospitals through federal

universal benets schemes, such as Medicare (Austra-

lias universal system of health insurance) and various

hospital benets as well as the provision of specic

purpose grants to the States (AIHW, 1998; Duckett,

1999). Recurrent health services expenditure in 199798

on public acute hospitals totalled $Aus12,851 million.

The Commonwealth government provided $5786m

(45.0%) of this amount and State governments $6080

(47.3%), the remaining $986m (7.7%) coming from the

non-government sector (health insurance funds $311m,

individuals $79m and other sources such as workers

compensation $595m) as payment for private patients in

public hospital beds (AIHW, 2000).

However, the private sector has been meeting an

increasing share of the total health services bill. For the

same year, the total recurrent expenditure on private

hospitals (all acute and psychiatric facilities) was

$3658m. This represented 21.6% of total recurrent

expenditure on hospitals (both acute and psychiatric)

and 8.3% of Australias total recurrent expenditure on

all health services. This represents almost a doubling in

real terms in private hospital contribution over the last

decade. While the majority of private (for-prot and

non-prot) hospital revenue comes from registered

private health insurance funds (62.7% in 199798) and

direct part-charges to patients (8.8%), 15% ($550m in

199798) comes directly from the public purse in the

form of Commonwealth government subsidies.

While the actual number of private hospitals has

remained stable over the last few years, bed supply

increased by 10.7% between 199192 and 199697 and

patient days by 19.7%. A key feature of the expansion of

the private sector, has been the rise of the corporate for-

prot hospitals in contrast to the independent for-prots

(which actually declined in number) and the non-prot

institutions, both of which traditionally dominated the

private hospital sector in Australia. Over this 5-year

period, the investor-owned chain hospitals increased

their number of available beds by 31.9% with patient

days increasing by a staggering 50.7%. Growth has been

directed at establishing larger institutions with average

hospital size of chain hospitals increasing from 63 to 79

beds. Of the 176 for-prot hospitals operating in 1991

92, 14 (8.0%) had bed supply in excess of 100 beds. By

199899, the total number of for-prots had increased to

183 but now 37% or 20.2% had more than 100 beds.

This growth occurred in the corporate sector. The net

effect is a steady increase in the corporate for-prot

sectors share of the private hospital market and

increasing corporate ownership of the larger private

hospitals, the larger hospitals tending to dominate

landscapes of health care. Also importantly and in stark

contrast, the public acute hospital sector contracted over

the same time period. The number of public acute

hospitals dropped from 713 in 199192 to 704 in

ARTICLE IN PRESSL. Brown, J.R. Barnett / Social Science & Medicine 58 (2004) 427444430

199697, with bed supply decreasing by 6.4% from

57,053 available beds to 53,411 beds.

The largest for-prot private hospital operator in

Australia is Mayne Health. Its scale of operations make

it a major corporate health care provider even in world

terms. Mayne Health owns and operates 47 hospitals (44

private and 3 BOO hospitals) in Australia, has the

majority shareholdings in three private hospitals in

Indonesia and a minority interest in one hospital in Fiji.

With the acquisition of and expansion into diagnostic

services, Mayne Health provides an integrated network

of health services, extending its business operations

beyond its private hospitals to now include medical

centers, pathology practices and diagnostic imaging

services.

Mayne Healths parent company is Mayne Nickless

Limited (MNL), one of Australias oldest, most

experienced and best known service companies. MNL

is listed in Australias top 50 companies. MNL divides

its business into two core service industry sectors:

logistics (formerly transport), its traditional business

activity; and health care which now is the larger of the

two divisions. The company typies the growth of

transnational corporations with the diversication of

their business activities away from poorly performing

traditional areas of investment, in MNLs case the

transport sector, and into new growth areas such as

health. Moves by MNL emulate the strategies under-

taken by large American health investors, such as

Columbia/HCA or Tenet/NME, who were determined

not only to establish themselves in the marketplace but

also increase their market share. MNLs commitment to

and importance placed on its investment in health is

clear from the fact that in 1998 it shifted its listing on the

Australian Stock Exchange from the transport to the

health care index (MNL, 2000a).

Mayne Nickless entered the health care market in the

mid-1980s. In 1986, the company invested in Hospitals

of Australia Trust and in 1989 acquired the Hospital

Corporation of Australia (MacDonald, 1989). From

these two acquisitions, MNL formed Health Care of

Australia (HCoA) in 1991 and was seen to be moving

into hospitals in a big way (MacDonald, 1989, p. 26). In

1995 HCoA further expanded through the acquisition of

the AME group of hospitals, pathology practices and

medical centres (MNL, 1998). In the 199899 nancial

year, HCoA acquired four private hospitals from the

Medical Benets Fund group and commissioned three

new private hospitals (MNL, 1999). In 2000, MNL

merged HCoA with its diagnostic services business

division to form Mayne Health.

By 1999, HCoA had assets of over $Aus1043 million,

representing 43% of MNLs total asset base, MNLs

combined health care business accounting for 56% of its

total assets (MNL, 1999). Annual sales revenue from

Mayne Healths hospitals has increased 10 fold from

$Aus84 million in 1991 to $Aus879.6 million in 2000

(MNL, 2000a). Revenues generated in 19992000

increased by 14.7% over the previous nancial year

although earnings before interest and tax (EBIT) fell by

8.1% to $Aus54.2million. This reected reduced hospi-

tal margins arising from continued pressure on reim-

bursement rates from health funds and higher overhead

costs (MNL, 2000a b). Nevertheless, sales revenue

generated from MNLs hospitals now account for

28.4% of the companys total revenue and 31.8% of

EBIT.

With over 4500 private hospital beds (not counting

public beds in its BOO hospitals) Mayne Health now

controls over 21% of the Australian private hospital

industry. In February 2001, Mayne Health initiated a

takeover of Australian Hospital Care. With the acquisi-

tion of an additional 15 hospitals and 1616 private beds,

Mayne Health will own nearly one-third of Australias

national private hospital bed supply (MNL, 2000b).

More than 400,000 patients are treated each year in

Mayne Health hospitals, which range in size from 45 to

365 beds. With strong patient demand, encouraged by

federal government programs subsidising membership

to private health funds, and the development of new

hospitals, patient admissions to Mayne Health hospitals

increased by 21% 199798 to 199899 and 7% 1999

2000 (MNL, 2000a).

Thus, much of the growth in the for-prot private

hospitals in Australia is attributable to the acquisition

and expansion of facilities and new hospital construc-

tion by MNL. As stated in MNLs 2000 Annual Report

The Companys strategy is to own and operate service

businesses in market segments characterised by high

barriers to entry and high operating margins, and

in which it can achieve substantial market share

(p. 4)yThe health care market in Australia is strategi-cally attractive to Mayne Nickless. HCoA has a strategy

of positioning its private hospitals in the higher

technology and more complex areas of health care so

that it can offer a comprehensive alternative to the

public hospital system (p. 7). Mayne Health hospitals

provide a wide range of services including medical,

surgical, obstetrical and rehabilitative services as well as

more specialised services such as cardiac and neuro-

surgery, intensive care and emergency services which

traditionally were provided only in major public

hospitals.

Explanation for the increasing corporatisation and

privatisation of health services in particular, and social

services more generally, can be sought from a variety of

theoretical perspectives (Scarpaci, 1989; Forde & Mal-

ley, 1992; Sharp, 1994; Kelsey, 1997; Blank, 1994; White

& Collyer, 1998). Regulation theories of economic and

social change are particularly useful for exploring the

impact of politics on the production of space, such as

new health care spaces, as they focus on the nature of


state decision-making in guiding, stabilising and pro-

moting capital accumulation (Low, 1995; Peck &

Miyamachi, 1994; Tickell & Peck, 1995). This theoretical

context will not be reviewed here. Rather, the key

factors underpinning the trends outlined above will be

introduced and the use of co-location as a State and

corporate strategy discussed. It should be noted,

however, that if the corporate transformation of

Australian hospitals is to be understood fully then it is

to changes in the political economy that attention

should turn.

The main forces behind the recent growth in the

corporate hospital sector in Australia include: increased

access to international and domestic capital and shifts in

investment; the emergence of corporate managerialism

with the introduction of private sector management

techniques and information systems; and changes to the

mode of regulation and role of the state as neoliberalism

and economic rationalism emerged as the dominant

political paradigms. This new mode of regulation was

important for the growth of the private hospital sector

for two reasons. First, previous levels of social

expenditure were seen as being unsustainable and

dysfunctional to capital accumulation. Consequently,

Labour and Liberal Governments, at federal and state

level, have been dedicated to a raft of domestic reforms

aimed at reducing state expenditure. Second, inherent in

the economic doctrine of neoliberalism is the govern-

ments belief in and reliance on market mechanisms to

achieve economic and social outcomes. The perception

was the market is more efcient and responsive, and

private sector involvement would lead to higher quality

care and greater consumer satisfaction. In Australia, as

elsewhere, the health sector became deregulated and

private providers encouraged to fund and operate

hospitals. Thus, like other western nations, the Aus-

tralian government, at both Commonwealth and State

level, sought corporate investment in hospital services to

help defray health care costs and overcome funding

constraints which limited the ability of the public sector

to invest in new or expanded health services. Co-

location was accepted as one mechanism that could

relieve pressure on health services provision. However,

before discussing this we will briey place such trends

within the broader context of the rise of new public

management doctrines which have promoted new hybrid

forms of health system organisation.

Publicprivate partnerships and health

Co-location can be seen as a new form of public

private partnership which aims to improve co-ordina-

tion between both sectors to their mutual advantage. As

such it is reective of the evolving interface between

public and private organisations that has occurred in

most developed countries. During the 1980s and 1990s,

health care reform in Australia, as in much of the

developed world, increasingly adopted market mechan-

isms to improve the efciency and effectiveness of

services, improved responsiveness to consumers and

improved accountability. Although a variety of market

mechanisms were used, common themes such as the

desirability of competition and the use of contracts

between purchasers and providers are discernable. One

of the major consequences of the introduction of such

new public management doctrines has been a blurring of

the publicprivate divide and the emergence of increas-

ingly complex relationships between public funders and

private and voluntary organisations.

Ferlie, Ashburner, Fitzgerald, and Pettigrew (1997)

note that this blurring can be identied in a variety of

NPM models each of which moves further away from

traditional hierarchical forms of public administration.

The rst approach, which began in the 1980s, repre-

sented an early efciency drive and an attempt to make

the public sector more business-like and accountable. In

Australia this involved the introduction of various forms

of managerial control (e.g. Health Service Agreements in

Victoria) with a concomitant decline in professional

autonomy and inuence (Stoelwinder & Viney, 2000).

Other mechanisms have included the development of

clinical casemix costing systems and an increased

monitoring of hospital performance.

A second approach adopted in many countries saw

the early focus on public sector managerialism being

succeeded by an increased focus on a more competitive

model involving elements of decentralisation, introduc-

tion of the funder-provider split, and the development of

quasi-markets. This was particularly evident in New

Zealand (Gauld, 2001) but less so in Australia. Here

although decentralisation was gradually adopted by

most states, and most introduced new area or regional

structures, funding, purchasing and provision remained

fused as distinct from the funder-provider split intro-

duced into New Zealand in 1993. In Australia, which

has always incorporated a mix of public and private

purchasing and provision the competitive model pro-

moted has aimed to reduce the barriers for private sector

entry into the health arena and has encouraged greater

colloboration rather than competition as was character-

istic of the 1990s internal market in New Zealand

(Barnett & Barnett, 1999).

The colloborative model thus represents a third

NPM approach. Although in some countries, collobora-

tion can be seen as a recent outcome of the retreat from

neoliberalism in favour of the third way (Powell,

1999), in fact more colloborative publicprivate partner-

ships have been present for some time especially in the

eld of urban regeneration. Regime theory (Stone,

1989), for instance, has emphasised the importance of

entrepreneurial governance whereby cities and business


leaders have formed urban coalitions with the specic

purpose of fostering local economic development (Hall

& Hubbard, 1996). However, Mayer (1995) insists that

there has been no typical publicprivate partnership and

that the concept requires a range of colloboration types

from mere subsidy relations between government and

private rms to joint ventures where the state and rms

share risks on a relatively equal footing. Generally such

partnerships rest on a deal about the reciprocal

responsibilities of both public and private participants.

Private investors expect to gain from such a deal

because local government resources offer them attractive

ways to expand their activities, whereas city govern-

ments expect to gain because, in the context of resource

contraints arising from the withdrawal or hollowing

out of central government (Jessop, 1994), it allows them

to attract more nancial resources to urban develop-

ment and increase their effectiveness in achieving

development goals.

Within health studies, the concern with publicprivate

partnerships has been more recent. To date most of the

focus has focused on the developing world especially in

terms of partnerships between international organisa-

tions, such as the WHO, and pharmaceutical companies

(Buse & Walt, 2000a, b; Buse & Waxman, 2001; Widdus,

2001). Again an important theme in such relationships is

public agencies can potentially benet in areas where

they lack expertise, such as in product development

marketing and distribution of drugs and vaccines for

diseases, such as malaria and AIDS, affecting the

worlds poor. On the other hand, the commercial sector,

through an improved corporate image, among other

things, may attract new investors and establish new

markets. According to Widdus (2001) partnerships

appear to be most justied where (i) traditional ways of

working independently have a limited impact on a

problem; (ii) the specic desired goals can be agreed by

potential collaborators; (iii) there is relevant complimen-

tary expertise in both sectors; (iv) the long-term interests

of each sector are fullled and (v) the contributions of

expertise and resources are reasonably balanced. How-

ever, given that these conditions have not always been

fullled publicprivate partnerships have been subject to

repeated critiques (e.g., see Buse & Waxman, 2001), a

theme we will return to in the nal section of the paper.

Despite certain concerns, with few exceptions (Bazzo-

li, 1997; Nelson, Rashid, Galvin, Essien, & Levine, 1999;

Rom, 1999; Mohan, 2002) publicprivate partnerships

have received little attention in other areas of health

policy. Ovretveit (1996) nevertheless notes that in the

UK, despite the beginnings of increased co-operation via

joint ventures (which were certainly evident in urban

policy), private investment in public hospitals up until

this date had been small. This situation has largely

resulted from a lack of strong incentives and continued

controls over the ability of NHS Trusts to sell land, their

inability to draw on private nance, and to pay for the

running costs of units built and operated by the private

sector. Although some tentatitive moves were made by

the Conservative Party to use private nance to meet the

cost of new capital developments in the NHS, it has been

under Labour that private BOO developments, part of

the Private Finance Initiative (PFI), have been pursued

more enthusiastically (Mohan, 2002). Similarly, in New

Zealand, Kearns and Barnett (1999, 2000) have similarly

noted that public hospitals, faced with increasing

decits, have engaged in a variety of nancial and

marketing strategies, including some attempts at co-

location, in order to boost their income. But it has been

in Australia where this strategy has been most actively

pursued, so it is to a more detailed examination of this

trend that we will now turn.

Hospital co-location in Australia

Co-location has become a popular strategy pursued

by private hospitals and State governments alike, co-

located hospitals being rare in Australia 10 years ago.

Nevertheless, as in Britain, public hospitals have

commonly provided separate accommodation, some-

times in a separate building, for privately insured

patients. Such arrangements received high levels of

public subsidy, up to 75% scheduled fee, with the

balance covered by private insurance or paid out-of-

pocket (Scott, 2001, p. 93). By contrast the new wave of

co-locations are characterised by greater independence

of public and private sectors with any relationships now

having to be negotiated and formalised in commercial

contracts (Bloom, 2000).

A co-located private hospital has been dened as a

private hospital located on the premises of a public

hospital to form a joint medical facility or precinct. The

two hospitals may sometimes share infrastructure and

services (Productivity Commission, 1999, p. VII), but

usually operate as separate facilities with limited or no

involvement of the private sector in providing any public

hospital services. In simple terms, co-location is the

location of (major) public and private hospitals along-

side each other. State governments have sought and

offered investor-owned corporations the opportunity of

purchasing land and/or constructing buildings on the

grounds of public hospitals. Many of these public

hospitals have been large tertiary teaching and research

hospitals, co-location allowing private hospitals to take

advantage of locating immediately adjacent to these

prestigious and premier public hospitals. In short, co-

location illuminates how both the public and private

sectors seek to gain mutual advantage and minimise

risks in the course of forging new relationships.

More general reasons for the development of co-

location as a corporate and state strategy include the


advantages of: reduction in the duplication of services

with some cost-sharing particularly with respect to

expensive medical equipment and support services such

as laundry and maintenance; co-location may confer

various benets to medical specialists (in Australia as in

the UK or New Zealand for example, medical specialists

tend to work in both the public and private sectors) such

as creating a more attractive working environment by

allowing doctors to work in both co-located hospitals

increasing their interaction with colleagues and provid-

ing them with greater access to a wider range of patients;

by providing doctors with access to private patients, the

public sector may increase its retention and ability to

attract medical specialists, with ow-on effects in terms

of quality of care, teaching and research activities;

further co-location also provides medical specialists

working in the private sector a back-up service in a

public hospital if complications arise; the private

hospital may become more attractive to potential

patients who are re-assured with the knowledge that

back-up facilities are close-at-hand and that they can

select their doctor from a wider choice of highly skilled

specialists (Productivity Commission, 1999; Mayne

Health, 2001a). In addition, co-location also offers the

promise of limiting state expenditure on public hospital

infrastucture. Under Medicare, the Commonwealth

Government reimburses state governments for public

hospital operating expenses only with the latter being

responsible for any capital expenditure. Thus tapping

private sources of capital effectively shifts the burden

from public to private sectors.

A private hospital must be licensed and approved by

the relevant State government, but a co-located private

hospital also must meet various Commonwealth govern-

ment regulations and guidelines. A declaration by the

Minister for Health and Aged Care under a subsection

of the Health Insurance Act 1973 is necessary before a

hospital provider number can be issued to a new co-

located private hospital (Commonwealth Department of

Health and Aged Care, 1999). This declaration essen-

tially facilitates the payment of health insurance rebates

to the private hospital operator for services provided to

its patients.

The guidelines indicate that Minister of Health and

Aged Care must take into consideration a number of

factors before making a declaration. These include:

would declaring the private hospital result in a transfer

of costs from the State or Territory to any other party;

would the private premises materially affect reasonable

access by public patients to a reasonable range of

services; are there adequate arrangements in the public

hospital to ensure that patients presenting for treatment

are able to exercise freely their right to elect to be treated

as a public patient in that facility (similarly, where the

State has contracted the private hospital to supply

services to public patients, are there adequate arrange-

ments specied within the agreement to ensure that

patients presenting for treatment are able to exercise

freely their right to elect to be treated as a public patient

in that hospital); and do the State or Territory and the

licensee (operator) of the private hospital agree to

supply information to the Commonwealth to allow it to

monitor access by public patients to a reasonable range

of services, the adequacy of arrangements for patient

election, costs to the State/Territory and any other

party, and the extent to which costs incurred by other

parties are increasing or decreasing (Commonwealth

Department of Health and Aged Care, 1999). Thus, the

Commonwealth government perceives two possible

negative impacts of co-location on the public sector-

cost shifting and reduction in patient access and

choicewhich it wishes to monitor and limit through

its policies and regulations on co-location.

Although not strictly co-location, State governments

have embarked on various management and leasing

arrangements with the private sector. Contracts have

been let to private companies to manage and operate

public hospitals, or investors have been able to lease

public hospitals and run these as private facilities in for-

prot contract arrangements (Collyer & White, 1997).

Mayne Health, like other corporate providers, believes it

has the knowledge base, skills and expertise to manage

and operate public hospitals on behalf of the state. The

tradition of the company as a service-oriented company

that routinely competed against the public sector is

important in this respect. Mayne Health has played a

leading role in developing this privatepublic partner-

ship and was the rst private health group to undertake

the management of a public hospital in Australia

(Mayne Health, 2001a).

BOO hospitals are an extension of this outsourcing

strategy. They are not strictly co-located hospitals.

Mayne Health argues that the hospitals are built faster

than could be achieved by a State government working

alone and are operated on the same high standards as

their private hospitals (Mayne Health, 2001a). Under

service agreements negotiated with the State govern-

ments, the private hospital corporation provides a

comprehensive range of services to public patients,

although as part of the contractual arrangements, these

hospitals may also include a proportion of private beds.

Most service agreements are for a 20-year period and

specify the price and volumes of inpatient services as

well as the parameters for the range, level, standard and

quality of services that are provided (MNL, 1999).

Co-location has been a policy adopted throughout

Australia and by most of the for-prot hospital chains in

a variety of settings, with over 22 major co-location

projects starting since 1995 (Foley, 2000). For example,

in Victoria, Mayne Health opened their 120 bed

Melbourne Private Hospital in 1995 on the campus of

Royal Melbourne Hospital, Melbourne; in New South


Wales, Southern Highlands Private Hospital (64 beds)

was opened by Alpha Healthcare Ltd in 1996 in the

rural township of Bowral, being co-located with Bowral

District Hospital; in South Australia, the 100 bed

Flinders Private Hospital was opened by Ramsay

Health Care in 1999, co-locating with Flinders Medical

Centre; in Queensland, Mayne Health opened Cabool-

ture Private (50 beds) in 1999, Caboolture Hospital

being the co-located public hospital (Productivity

Commission, 1999). These are just a random selection

of co-located hospitals. There are many more including

the case studies presented below.

The rst co-located shared campus hospitals con-

structed by Mayne Health were Melbourne Private,

alongside the Royal Melbourne Hospital, and the St.

George Private Hospital and Medical Centre on the St.

George Hospital Campus in southeastern Sydney, both

hospitals being built in 1995. The success of these

ventures led Mayne Health to develop more co-located

hospitals, either alongside or within public hospitals in

Victoria, New South Wales and Queensland. MNL

attributes part of the growth in the companys health

care business to its successful tendering for co-location

ventures and the privatisation of hospitals made

available by State governments (MNL, 2001a). A key

corporate strategy in expanding its presence in both

health care and logistics is for the company to provide

effective outsourcing solutions to the public sector.

Acquisition of public hospitals, co-location, and the

private management of public hospitals all t within this

corporate policy.

Despite some attention to the causes and impacts of

co-location (Bloom, 2000), no work has focused on the

different ways in which these publicprivate partner-

ships have manifested themselves on the urban land-

scape. With this in mind, it is to an examination of the

four case studies that we will now turn before making a

nal assessment of the implications and cultural

signicance of these new urban forms.

Changing hospital landscapes: case studies

The following discussion presents the four case

studies, each representing a different health care land-

scape in terms of the impact of co-location on the

merging of public and private space.

Traditional model: the Sutherland hospital and Kareena

private hospital

These two hospitals represent the traditional model of

hospital location where a private and public hospital are

located in close proximity to each other, e.g. across the

road which is the case here, on adjacent lots or just down

the street, deriving some synergy from each other but

remaining clear distinct entities in the landscape.

Sutherland and Kareena hospitals are located on a

major east-west thoroughfare, the Kingsway, which is

a main trafc route into central Sydney through the

southeastern suburbs. The two hospitals principally

serve residents of the Sutherland Shire, which with a

population of nearly 200,000, is the largest local

government authority area in the SESAHS region, and

second largest in Sydney. The Kingsway bisects the

Shire, the hospitals location making them readily

accessible and prominent features in the local landscape.

In fact, HcoA purchased and demolished two street

corner properties not only to increase available space

but also to deliberately increase the visibility of Kareena

Hospital from the Kingsway.

The Sutherland Hospital was founded in 1958 as a

general medical, surgical and obstetric hospital to

provide services to the rapidly expanding population

of the southeastern suburbs. Although the hospital has

undergone various redevelopments, its initial construc-

tion was typical of hospital design of the times

modern multi-storey rectangular brick buildings. As a

new suburban development, it was sited, however, on a

relatively large open space although this has been

crowded out to some extent with more recent construc-

tion and expansion. Sutherland Hospital has 324 beds

and over 20,000 admissions per year. In addition to its

general medical services, it provides psychiatric, rehabi-

litation, oncology, paediatric and day surgery services,

as well as operating a busy emergency department

(SESAHS, 2000; UNSW, 2001). Sutherland Hospitals

built environment is much larger and more prominent

than Kareena Private. Nevertheless, Kareenas premises

portray a much newer hospital image and one that is

more humanistic in scale and more attractive in

appearance. Kareena was one of rst hospitals acquired

by HCoA in 1991, and has continued to expand despite

HCoA opening St. Georges Private Hospital in the

neighbouring local government area in 1995. Kareena

was established in 1964 as a 76 bed independent private

hospital, owned and operated by a local physician. This

doctor wanted to provide an alternative service to local

medical practitioners and the local community from

those offered at Sutherland hospital.

Kareena currently has 104 beds and offers medical,

surgical, obstetric care, as well as day only surgery.

HCoA also expanded services at Kareena into more

complex and demanding services such as cardio-thoracic

surgery and intensive care, and more recently opened a

24 h accident and emergency service (Mayne Health,

2001a). Kareena now admits over 10,000 patients a year.

Kareena continues to compete directly against Suther-

land Hospital and there are no formal contracts between

the two institutions. When obstetrics were rst intro-

duced in 1993, Kareena captured 7% of births in the

area. By 1995, this number had increased to 750 births


per year representing 41% of the market. Cardiac

surgery was established at Kareena in 1995, with HCoA

securing 42% of the market within 1 year. While much

of the success of Kareena can be explained by the

aggressive strategies of Mayne Health, the character-

istics of its catchment population are also very favour-

able to private sector involvement, a fact not missed by

HCoA in its initial decision to purchase Kareena and to

invest in its expansion. For example, over 15% of

Sutherland Shires population is aged over 65 years with

ongoing growth in the elderly population; there are also

large numbers of families and females in childbearing

ages; it is a wealthy area with 26% of the workforce in

managerial, administrative and professional occupa-

tions; and importantly, the incidence of private health

insurance is extremely high with 65% of the population

being covered compared to NSW state average of 34%

(Milton, 1997).

Shared hospital campus: St. George hospital and

community health service and St. George private hospital

and medical centre

The St. George Hospital was established in 1894 as a

cottage hospital on the outskirts of the city, across the

Cooks River. It subsequently developed into a District

Hospital (in 1918 with 120 beds), then a teaching

hospital, initially with the University of Sydney (in 1963)

and as a principal teaching and research hospital with

the University of New South Wales in 1967 (UNSW,

2001; SESAHS, 2001). Today, St. George Hospital is

one of Sydneys largest and busiest principal referral

centers. It has the second busiest Emergency Depart-

ment in NSW, on a case-weighted basis, and is the

busiest in metropolitan Sydney (UNSW, 2001). Also, it

is designated as a major trauma service, the Hospital

accepting referrals from throughout the state. In 1999

2000, there were a total of 43,497 admissions to the

Hospital (SESAHS, 2000). St. George Hospital has a

current bed capacity of approximately 600 beds but

numbers uctuate depending on seasonal demand.

With 100 years of outward metropolitan develop-

ment, the city has well and truly encompassed St.

George Hospital within its middle zone. The Hospital,

and St. George Private, are now located in a heavily

suburbanised, mixed residential and light commercial

zone of the city. St. George Hospital, and St. George

Private are located on the principal arterial road into the

city centre from the south, the Princes Highway. They

are also situated on the South Coast commuter railway

line and are only a 15min drive from Sydneys airport.

The St. George campus is extensive. A major

redevelopment program was undertaken during the

1990s, resulting in a state-of-the-art public hospital. A

new Research and Education Center, a joint venture

between St. George (SESAHS) and University of New

South Wales, was opened in May 2000. The building

provides the infrastructure to attract researchers and

clinicians from all over the world to St. George (and St.

George Private) (SESAHS, 2000, p. 42). The $10m four

storey purpose-built building was funded through the

sale of surplus hospital land, contributions by UNSW

and the Area Health Service (UNSW, 2001). The

Centre is located adjacent to both the St. George

Public and Private Hospitals, set just back from

the Princes Highway. The construction this building

and its inclusion in the landscape adds to and strength-

ens the image of this campus as a center of medical

excellence.

St. George Private Hospital and Medical Centre also

benets from this co-located development for the

reasons outlined earlier. St. George Private Hospital

was completed in November 1995, being constructed

similarly on surplus land acquired from and adjacent to

St. George Hospital. The hospital is a free-standing self-

contained 200-bed private hospital with a large asso-

ciated medical centre. St. George Private, in keeping

with its co-located public hospital, provides advanced

high technology, highly specialised and sophisticated

medical care. It has 14 operating theatres and day

surgery procedure facilities, fully integrated intensive

care and coronary care units, a complete range of

hospital, medical and diagnostic services, and has on-site

pharmacy, pathology, radiology, nuclear medicine, and

cardiac angiography. However, in contrast to Kareena,

service integration is more of a feature of St. George

Private and Public as the management in both hospitals

now works closely together to rationalise clinical

services across the two institutions.

St. George Private has, through co-location, secured

not only a prime geographical site but also an enviable

reputation and consumer image. While St. George

Public Hospital occupies most of the campus, St. George

Private is highly visible as it is located directly on Princes

Highway with daily commuter travellers being con-

stantly reminded of its presence. Further, St. George

Private has been built and operates like a luxurious rst

class hotel. One could be easily mistaken on entering the

main foyer to think they had just entered a major tourist

hotel, with reception, cafe, and variety of shops. Private

or two-bed rooms are all air conditioned and luxur-

iously appointed (HCoA, 1998a). At the same time, St.

George Private offers a level of affordability not often

encountered in similar facilities. Mayne Health has

negotiated contracts with all health funds so that

patients who carry top table private health insurance

will generally be admitted for no out-of-pocket expenses

for either theatre or accommodation costs (HCoA,

1998a b). Thus, St. George Private, as an outcome of co-

location, has created a landscape of accessibility and

consumer desirability based on luxury, affordability,

safety and medical excellence.


Shared built environment: the Prince of Wales public

hospital and Prince of Wales private hospital

This third case study illustrates further merging of

hospital space where the two hospitals are co-located

within a shared building. The NSW State government,

and SESAHS, initiated a major redevelopment of the

Prince of Wales Randwick Campus in the mid-1990s to

provide a new network of hospital services for Eastern

Sydney, with all acute services being accommodated on

the one site. HCoA was able to take advantage of this

(re-)construction and expansion program by part fund-

ing a joint venture to construct a new acute care services

building. This building would house existing Prince of

Wales acute hospital facilities plus a new private

hospital.

Favourable to the proposal were the history of the site

and the corporate attitudes of the public sector hospital

managers. The Randwick Campus had a history of co-

location with two other hospitals, the Sydney Childrens

Hospital and the Royal Hospital for Women, also being

located on the site. The former is a 139 bed paediatric

tertiary referral hospital, which as an integral part of a

statewide paediatric service, provides a comprehensive

range of paediatric care to children throughout the

State. The hospital comprises purpose-built childrens

facilities, and has occupied its current site since 1976. It

opened in 1964 at the Prince of Wales Hospital as a 48

bed Paediatric Unit (POWH, 1997). The Childrens

Hospital was refurbished and expanded as part of the

Campus redevelopment. Also in the redevelopment

program was the relocation of the Royal Hospital for

Women from Paddington (a neighbouring suburb) to

Randwick with a new womens hospital being con-

structed on the Randwick campus. Originally estab-

lished by the Benevolent Society of NSW in 1866, the

new Royal Hospital for Women is a 170 bed, tertiary

referral centre for women and babies (POWH, 1997). It

provides comprehensive obstetric, neotology, gynaecol-

ogy and oncology services (SESAHS, 2000). Like the

Prince of Wales and Sydney Childrens Hospital, it is a

major teaching and research hospital. In addition, a

third hospital, the Prince Henry Hospital, is adminis-

tratively part of this complex. However, in this case it is

not part of the site, being located at Little Bay,

approximately 8 km to the south (its history dating

back to the establishment of a coast hospital at a safe

distance from the city following an outbreak of smallpox

in Sydney in 1881) (POWH, 1997). The Sydney

Childrens Hospital, the Prince of Wales and the afliated

Prince Henry Hospital, form an integrated hospital

group. Together this group comprises one of the largest

medical facilities in the state with over 1000 beds. The

hospitals are promoted as having a local, state wide,

national and international reputation for excellence in

research, teaching and patient care (POWH, 1997).

The Randwick Campus is located approximately

15min drive from the central business district and is

even closer to some of Sydneys most famous beaches

(e.g. Bondi). Its local catchments residential population

is relatively stable at approximately 313,000 people

(E5.6% of the NSW population), although it also catersfor workers and visitors to Sydneys central business

district, a large student body attending the neighbouring

University of New South Wales (UNSW), the industrial

areas of Botany and South Sydney, and many sporting,

recreational, tourist venues and sites. Further, as a

major tertiary referral center, the Prince of Wales also

provides medical care to patients living in other parts of

metropolitan Sydney and regional and rural NSW, with

a small number of patients travelling inter-state.

Approximately 46% of the Groups patients live outside

the local catchment area (POWH, 1997).

A key factor in the creation of the Randwick hospital

landscape are the layers of past developmentremnant

spaces. The area has a long association with hospitals

beginning in 1870 with an asylum, military and

repatriation hospitals occupying the site. The last of

these, the Fourth Australian Hospital was converted

and renamed the Prince of Wales Hospital in 1953. In

the 1960s the Prince of Wales became a teaching hospital

when a medical school was established at the UNSW.

This provided the impetus for the upgrading of facilities

and introduction of many new services and amenities

within the hospital.

In the mid-1990s, the Groups vision was to forge a

coalition of knowledge, expertise, commitment and

personal attitudes which will continually evolve to meet

the ever changing social and professional expectations

and possibilities (POWH, 1997). This vision was in

reference to the Faculty of Medicine, UNSW and other

academic organisations, but this corporate view helps

to explain the willingness of the hospitals adminis-

trators to accept a co-location with HCoA. Further, the

mission statement included the two following declara-

tions: The hospitals will maintain a leadership position

in providing high quality, efcient medical and health

care services to the community; and we will use the

available nancial resources to meet the operational

needs of our services and will actively plan for capital

needs, technological advancements, research, teaching

and delivery system enhancements (POWH, 1997). A

specic objective of the redevelopment plan was to

provide modern facilities and optimise improvements to

physical amenities with respect to acute care services,

research and teaching. Today, the Prince of Wales

Hospital has over 420 available beds.

The Prince of Wales Private Hospital was opened in

October 1997. It occupies the west wing of the new acute

services block. Although funded and operated by Mayne

Health, it was developed and is seen as being integrated

with the existing public facilities. In this case study,


co-location has fostered the partnership not only

between the private and public health sectors but also

with medical education and research institutions

through the close afliation with the University of

New South Wales.

The redevelopment of the Randwick campus, together

with the co-location of the Prince of Wales Private

Hospital, has created a health environment that would

rival any health complex in the world. In terms of the

built environment, a physical component of the redeve-

lopment plan was a revised entrance and exit to the

Campus. The main entrance was changed to allow

patients travelling by car to arrive at the front door of

the new acute services building. This entrance-way is

shared jointly by the Prince of Wales public and the

Prince of Wales Private Hospitals. A landscaped

forecourt is supposed to form a central focus of the

site, and the building was designed to provide an

attractive, user-friendly complex which focuses on the

needs and expectations of people (POWH, 1997).

Signicantly, patients and visitors cannot miss, at the

front door, the hospitals co-location policy and

practice. Both hospital names are displayed in large

and bold lettering above the front entrancePrince of

Wales Private on the top left and Prince of Wales Public

on the top right.

Two other factors were important in HCoAs decision

to construct a private hospital on this campus. First, the

population of the Eastern suburbs is aging. Over 14% of

the catchments local population are aged over 65 years,

and this will increase over the next few decades. Second,

there is a trend for the local community to increasingly

use private health services. In 199293, 27% of patients

received treatment at private hospitals. Two years later,

this had increased to 33% (POWH, 1997), and continues

to increase.

The Prince of Wales Private Hospital has approxi-

mately 190 beds with 100 private suites and a number of

twin share suites. It provides medical, surgical, obste-

trics, day only, cardiac surgery and intensive care

services (MNL, 2001a) as well as allied health services

such as pathology and radiology. Unlike most other

private hospitals, but in keeping with the nature of the

Randwick Campus, it also operates a 14 bed childrens

ward. In February 2001, the Prince of Wales Private

Hospital completed its 1000th heart bypass operation

(MNL, 2001b). In the press release, Mayne Health states

it strives to attract pre-eminent surgeons from around

Australia and overseas to its national network of

hospitalsythe keys to Prince of Waless pre-eminencein the cardiac eld are its excellence both in terms of the

facilities it offers surgeons and patients alike, and its

operating room staff (MNL, 2001b). Co-location has

been marketed to potential clients using such phrases as:

the co-location of Prince of Wales Private on the campus

of the Prince of Wales Public, Prince Henry, Sydney

Childrens Hospital and the Royal Hospital for women

is assurance that you will receive the highest calibre of

medical care from our specialist medical staff; Prince of

Wales provides a unique opportunity for collaborative

treatment programmes and advanced medical and

surgical care not usually available in smaller private

facilities; and we specialise in providing care for patients

who need the most complex types of medical and

surgical care up to now only available in public teaching

hospitals (HCoA, 1998b).

Merged hybrid space: port Macquarie Base Hospital

This case study, while not strictly co-location,

illustrates an almost total blurring of the boundaries

between public and private, particularly in relation to

the physical and social landscape (the duality remains in

the administrative and economic realms). Port

Macquarie Base Hospital is perhaps the most well-

known public/private BOO venture, being the rst of its

type and the rst prominent move by the NSW

government to directly seek private investment

in the provision of public health services (Neville,

1992). The Port Macquarie model has been adopted

by most of the other States as a cheap way of providing

hospital care to their populations. For instance,

in 1996 for example, HCoA won the contract with

the Western Australian Government to privatise

and redevelop the existing Wanneroo Hospital

(an 80 bed community hospital) which is located in

one of the most rapidly growing areas in Perth. The

proposal was to expand the hospital to over 300 beds,

integrating 250 public beds and 70 private beds into a

single health campus which would become Western

Australias third largest hospital (MNL, 1996). Mayne

Healths Joondalup Health Campus opened in March

1998.

In 1991, HCoA was successful in winning the tender

(from 54 bids) for the contract let by the NSW Liberal

Government to build, own and operate Port Macquarie

Base Hospital. The new 161 bed hi-tech privately

owned hospital was to replace the ageing public

hospital. The hospital operates under a 20 year Services

Agreement between HCoA (and now Mayne Health)

and the NSW Department of Health, which requires

HCoA to make 70% of the beds available to public

patients (Hannaford, 1992). The Services Agreement

species price and volumes of services and the para-

meters for the range, level, standard and quality of

services that are provided (MNL, 1999). At the

MNCAHS level management of the contract between

the parties has been conducted in a positive manner

(MNCAHS, 2000).

Under the contractual arrangement with HCoA, the

NSW Government expected to save $46 million over 20

years, and produce savings in capital and recurrent


expenditure through using the allegedly more efcient

private sector (Collyer, 1997). The NSW State Govern-

ment justied privatisation as a way to redress the

shortage in the availability of capital for the provision of

public infrastructure, and as a means to provide a more

timely upgrading of facilities and a more cost efcient

way of delivering services (Collyer, 1997). While the

restriction on capital expenditure was cited by the

Government as the main reason for seeking private

sector involvement, this was as much a political as a

scal strategy. The decision also centered on separating

the State governments role as a purchaser and regulator

of hospital services from its traditional role as a provider

of public hospital services.

The hospital, which opened in 1994, is a comprehen-

sive regional (base) referral hospital for public and

private patients from Port Macquarie and the surround-

ing central region. It provides services appropriate to a

country base hospital, including a range of general

medical, surgical, oncology, obstetric, neonatal, paedia-

trics and ancillary diagnostic and support services

(e.g. radiology, pathology, physiotherapy, occupational

therapy and pharmacy) in addition to a 24 h accident

and emergency service, intensive care unit, palliative,

rehabilitation and day hospital facilities, and mental

health services (MNL, 2001a). In 19992000, there were

a total of 10,118 admissions to Port Macquarie Base

Hospital, with a bed occupancy rate of 71.6%

(MNCAHS, 2000).

As stated above, this model has been applied by

Mayne Health to other privatepublic joint ventures as

well as being used by other corporate hospital providers

and in other States. Such contractual agreements have

been a part of Mayne Healths success. Management

and operating contracts with State Governments will

generate revenue in excess of $1 billion over next 20

years for the company. However, another motivating

force behind HCoAs investment in Port Macquarie

Base Hospital was their desire to limit competition to

protect their existing 84 bed private hospital already

established in Port Macquarie. The Port Macquarie

model has been met with mixed consumer reaction,

particularly given the hospital will transfer back to

Mayne Health on the termination of the contract with

the consequent withdrawal of public hospital services.

In the interim, Mayne Health argues that the appoint-

ment of a new Director of Medical Services for

Port Macquarie Base Hospital demonstrates the

commitment of Port Macquarie Base Hospital continu-

ing to serve the local community by providing high

quality clinical outcomes (MNL, 2001c). Further, the

appointment is consistent with Mayne Healths

approach to ensuring that the focus at the individual

hospital level is one of clinical quality and patient

outcomes, rather than a focus on administrative matters

(MNL, 2001c).

Discussion and conclusions

The trend of increasing private sector involvement,

especially investor-owned corporate chains, in the

provision of hospital care in Australia is not likely to

abate in the near future. Although hospital prot

margins have decreased in the last 2 years, as companies

like Mayne Health show, the health sector is still ripe

for investment. Further hospital acquisitions and

mergers will occur, and importantly, as companies

realise the apparent economic advantages of joint

publicprivate partnerships, co-location and private

management and operation of public hospitals will be

actively pursued.

In this paper, we were concerned with the empirical

reality of hospital co-location as one element of

increasing corporatisation. Co-location of public and

private hospitals challenges our perceptions of hospital

space, and our conceptions of public and private.

Built environments are physically created but they are

socially constructed. Cultural geographers (e.g. Soja,

1989; Anderson & Gayle, 1992; Gregory, 1994) argue

that the built environment is not something we simply

describe without reference to the social relations and

ideologies which are reected in it. Co-located public

and private hospitals are embedded in a hybrid

corporate-public (neo-liberal) political economy that

encourages, supports and promotes capital accumula-

tionin this case the ongoing commodication of

health and health care. Thus, hospital landscapes, as

illustrated in the four case studies, are not neutralthey

reect changes in the underlying power relations and

economic-social matrix of Australian society.

For-prot private hospitals have become increasingly

visible in Australia through their growth in numbers and

strategic locational decision-making. However, contem-

poraneously and seemingly contradictorily, as this paper

has shown, the continuum between traditional concep-

tualisations and representations of public and private

hospital space is contracting. As the case studies show,

there is a blurring and merging of the produced space.

Sutherland Hospital and Kareena Private Hospital

represent the traditional privatepublic landscape. The

purity of the binary is reected in the physical separation

of the two hospitals. St. George Hospital and St. George

Private, and Prince of Wales and Prince of Wales

Private, represent increasing blending and blurring with

increasing loss of duality as co-location moves from a

shared campus to a shared building. Finally, Port

Macquarie Base Hospital, its role more an outcome of

privatisation than co-location, denes a new hybrid

BOO hospital space where a public fa@ade is projectedonto a private empirical entity. To some degree, each

hospital space is historically and place specic, the

current landscape reecting remnant spaces and past

processes.


However, in all cases, the private hospitals had the

same corporate owner, Mayne Health, and three of the

four public hospitals were administered by the same area

health authority. Thus, in general, the hospitals were

exposed to the same corporate culture and contextual

inuences. The marketing corporate rhetoric of Mayne

Healthaffordability, quality, prestige, medical exper-

tise and excellencewas for example common to each of

its individual hospitals as evidenced by their business

operations, strategies and image making. The difference

in the case studies was the evolution and physical

expression of co-location, the fundamental economic

and political processes driving the transformation of

space being the same.

To understand such a transformation we need to

understand how both private sector managers and

policy makers themselves viewed co-location with its

attendant benets and risks. The fact that co-location

has become the preferred form of private sector

participation in hospital care in Australia suggests the

general appeal of this new publicprivate mix. For

private hospitals co-location provides distinct advan-

tages including (i) afliation with a prestigious public

institution (ii) a likelihood of greater nancial returns

arising from access to referring doctors and private

patients who may have been treated in the public

hospitals and (iii) access to complementary and im-

portant backup services, such as high technology

intensive care at public hospitals (Bloom, 2000). All of

these factors improve the market position of co-located

private hospitals, not only in terms of attracting internal

patients but also external ones as well who might have

been treated at other private hospitals.

However, such benets are not guaranteed and thus

this is why the symbolism or messages conveyed by co-

location are so important. Co-location not only provides

increased visibility for private hospitals, but it also

conveys certain messages regarding the quality of

facilities, of the availability and reliability of private

sector procedures, and, above all, the juxtaposition of

public and private conveys a certain legitimacy and

concern with the public good. Although we cannot

conrm the latter, the former messages were certainly

evident in the St. George and Prince of Wales case

studies. Thus in some respects our ndings are similar to

those of Moon and Brown (2001) and Kearns and

Barnett (2003) ndings regarding the way in which both

public and private hospitals powerfully deployed lan-

guage to construct themselves and their achievements in

the public imagination.

It is also evident that in order to minimise any

nancial risks, private providers will seek the most

desirable form of co-location. Thus it comes as no

surprise that our case studies reveal a tendency for

Mayne Health to progressively adopt more integrated

forms, both spatially and functionally, of co-location

over time. In 1991 the traditional model involved

separate locations and no functional integration. By

1995 this had evolved to a new form evident in the

companys involvement in the shared St. George

Hospital Campus and by 1997 to a new form again in

the shared Randwick Campus. With each change came

both greater spatial and functional integration, minimal

at rst, but eventually resulting, at Randwick, in a much

more complex partnership arrangement between Mayne

Health, a public hospital and state medical and research

institutions. We interpret these changes as a key

response by Mayne Health to the decline of private

health insurance in Australia (Industry Commission,

1997) and the search for alternative sources of private

patients and revenue. However, the extent to which such

changes are typical of other private providers in

Australia is unknown.

The above trends raise the question of whether co-

location has had any detrimental effects upon the public

sector? Both private hospital operators and State

governments regard co-location as advantageous, but

nancial and other benets may be less than expected.

While co-locations have enabled public hospitals have to

raise badly needed revenue (e.g. from the sale of surplus

land), have enhanced the range and quality of services

offered, and assisted with the retention of staff by

providing extra opportunities for private practice, they

also carry signicant risks (Bloom, 2000). Co-located

public hospitals may actually lose revenue from the loss

of private patients that would have otherwise been

treated within the public sector. For instance, Foley

(2000), while not directly addressing the issue of co-

location, note that the growth in capacity of the private

sector has gone hand in hand with a reduction in private

patient numbers in public hospitals. Further, the

Commonwealths (Federal) exposure to cost-shifting

may be increased if services previously provided to

public patients in public hospitals, at the expense of

State governments, are provided after co-location by the

private hospital with some of the cost for medical care

being transferred to the Federal Government (Produc-

tivity Commission, 1999). And while co-location may

result in certain savings for capital costs on the part of

state governments, such moves may be cancelled out by

the greater reliance on private hospitals. In the absence

of managed care volume contracts between insurers and

hospitals (Scott, 2001), it is likely that increased

privatisation, as a result of co-location, will increase

overall health costs both to the Commonwealth, insurers

and private patients. This has certainly been the

experience of PFI in the United Kingdom. PFI deals

have often been accompanied by signicant increases in

capital costs, been accompanied by staff reductions and

more rapid hospital throughput (Mohan, 2002) and, in

some cases, have resulted in design blunders in the form

of substandard public facilities (The Observer, 2002).


However, there have been varying interpretations on

the effects of co-location on the public sector. Bloom

(2000, p. 241), for instance, suggests that co-location

may be considered to be an insurance policy against

closure of public hospitals. On the other hand, full

privatisation may be the end point of the co-location

process and thus co-location may be a form of

privatisation by stealth. Despite considerable debate

about the extent to which private organisations should

provide public healthcare services (Ovretveit, 1996;

Mohan, 2002), it could be argued that current govern-

ment policy in support of co-location in Australia is

simply a covert means of downsizing and eventually

closing public hospitals. Co-location may simply be a

transition point or half-way house of privatisation

especially if BOO hospitals, along the lines of the UK

PFI initiative are the eventual goal of hospital policy in

Australia.

On a more conceptual level we argue that while

narratives of puritypublic, privatehave their uses, a

different type of conceptualisation is perhaps needed to

adequately describe and understand

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