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Outsourcing and benchmarking in a rural public hospital : does economic theory provide the complete answer?

journal contribution
posted on 2003-01-01, 00:00 authored by Suzanne Young
INTRODUCTION: The ideology and pronouncements of the Australian Government in introducing 'competitive neutrality' to the public sector has improved efficiency and resource usage. In the health sector, the Human Services Department directed that non-clinical and clinical areas be market tested through benchmarking services against the private sector, with the possibility of outsourcing. These services included car parking, computing, laundry, engineering, cleaning, catering, medical imaging (radiology), pathology, pharmacy, allied health and general practice. Managers, when they choose between outsourcing, and internal servicing and production, would thus ideally base their decision on economic principles. Williamson's transaction cost theory studies the governance mechanisms that can be used to achieve economic efficiency and proposes that the optimal organisation structure is that which minimises transaction costs or the costs of exchange. Williamson proposes that four variables will affect such costs, namely: (i) frequency of exchange; (ii) asset specificity; (iii) environmental uncertainty; and (iv) threat of opportunism. This paper provides evidence from a rural public hospital and examines whether Williamson's transaction cost theory is applicable. d into an analysis that relies solely on transaction

History

Journal

Rural and remote health

Volume

3

Issue

1

Pagination

124 - 138

Publisher

Australian Rural Health Education Network

Location

Deakin West, A.C.T.

Language

eng

Publication classification

C1 Refereed article in a scholarly journal

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