Corporatizing JDWNRH: Weigh the pros & cons


A high-level committee has been ordered to look into and submit a proposal for the corporatization of the Jigme Dorji Wangchuck National Referral Hospital (JDWNRH).

The opposition is claiming that this is unconstitutional because it supposedly goes against the constitutional mandate of providing free healthcare to all citizens.

It also said the move will pave the way to privatize public services widening the poor-rich divide.

We know that the health ministry is concerned because of medical specialists’ attrition rate and the fact that the vacuum will not be filled any time soon. We also know that the ministry wants to address the issue therefore it is trying to find a way to increase specialists’ payment through additional allowances facilitated by corporatization.

Though civil service rules do have allowance provisions for civil servants, the aim is to pay specialists more. But going by present rules, specialists alone cannot benefit from the provision otherwise there will be widespread discontent.

At first glance, the issue appears simple: corporatize the hospital and retain the specialists. But there are underlying issues that would merit attention if JDWNRH is to be corporatized.

First is the issue of constitutionality. This really is a no-brainer. A difference exists between corporatization and privatization. While corporatization entails being exposed to market pressures, the organization is parastatal and functions with social objectives.

This means people need not necessarily pay for healthcare. Quite opposite to this is privatization, where a public enterprise is entirely transferred into private ownership and the organization can be for profit or nonprofit but is vastly revenue-driven. And opposition claims that corporatization will lead to privatization cannot be pre-empted thus it can be treated as mere assumption.

Hence, the question of sick and poor people not getting access to free healthcare from JDWNRH seems a bit farfetched if we have a government in its right senses which would not dare to violate the Constitution.

What then would change if JDWNRH is corporatized?

Under corporatization, managerial autonomy would become stronger giving managers control over all issues related to services production, which means the hospital would be monitored by a board of directors who would also be accountable for administration, inputs and lapses.

Additionally, the hospital’s independent status would include a tight budget floor below which it cannot function to make it fully accountable for its financial performance. Market pressure would act as an important source of incentives including competition.

While some have observed that despite being corporatized, the hospital and especially the specialists would be paid from government budget, it can be argued that the reliance on market pressures to earn revenue has forced governments elsewhere to make direct payments or fund transfers to reimburse the hospital for costs of pursuing non-commercial objectives. This includes making up for subsidies to the poor.

In a corporatized hospital, the onus is sometimes on the board members who are fully accountable to the responsible minister to pull up operations to world-class standards.If we consider services betterment, maybe the government is headed in the right direction. However, research has shown that corporatization provides mixed results with regard to commercial and infrastructure enterprises.

In some cases, the entity’s performance has improved but most often this could not be sustained. In other cases, failure to implement key aspects of the model has led to poor results. A major problem with corporatization is the failure to effectively depoliticize decision making: the management is often not held responsible to fulfill a clear cut set of goals and objectives.

Also, corporatization might entail reshuffling of the present lot of medical staff and fixing of salary based on the board’s discretion, which could expose the hospital to corrupt practices.

While these could be some points the authorities could mull over, observers have noted that allowances for specilaists would be peanuts compared to what they could earn through private practice, which though forbidden in the country, could be pursued in neighboring Indian states.

However, specialists already get 40% allowance, so benefits accrued from additional allowance would depend on individual salaries. In fact, this could widen pay scale disparity among hospital staff fanning disharmony.

Right now, though, we are at the stage of deliberating the proceedings. The government would do well to tread cautiously: weigh the pros and cons before sealing the decision.